Company continues its “Reclaim the Flame” investments and looks toward refranchising after impending Carrol’s acquisition in Q2
Restaurant Brands International Inc., parent to Burger King, Tim Hortons and other quick-service brands, continues to emphasize franchisee profitability, including investments in its “Reclaim the Flame” plan and impending acquisition of its largest U.S. franchise group.
Toronto-based Restaurant Brands, which also owns the Popeyes Louisiana Kitchen and Firehouse Subs concepts, released earnings Tuesday for the fourth quarter and entire year 2024.
By the end of the second quarter 2024, RBI expects to close on its Jan. 16-announced $1 billion acquisition of Carrols Restaurant Group Inc., which operates more than 1,000 Burger King and Popeyes units. As of Feb. 13, Burger King had a company restaurant portfolio of 176 following the acquisition of 38 company restaurants on Jan. 17.
“This acquisition offers a compelling strategic opportunity to accelerate our modern-image efforts with a clear path to 75% modern image by 2028 to be funded entirely by Carrols’ operating cash flows,” said Josh Kobza, RBI CEO, in a fourth-quarter earnings call.
The company expects to refranchise the restaurants eventually, including many in the new Sizzle prototype.
“Importantly,” Kobza said, “the acquisition also enables us to refranchising restaurants into the hands of local strong owner operators, many of whom we plan to develop within the existing operator network.
“We see first-hand the benefits of being a smaller operator,” he said. “The numbers speak for themselves. Operators with less than 50 restaurants have 51% modern image and delivered average franchisee profitability of $15,000 per store above that of franchisees in the 50-plus restaurant group in 2023. Not surprisingly, they're also generally better capitalized.”
J. Patrick Doyle, RBI’s executive chairman, added: “While our franchisees are responsible for being great operators and stewards of our brands, as their franchisor we are responsible for giving our franchisees the opportunity to generate compelling financial returns. If we can deliver great returns for our franchisees, the entire flywheel of future reinvestments moves much more smoothly.”
Doyle said Burger King U.S. saw average annual restaurant profitability of more than $205,000 in 2023, representing nearly 50% growth from $140,000 a year ago “and putting us well ahead of the 2024 Fuel the Flame threshold of $175,000,” he said.
Burger King continues to parcel out its two-year “Reclaim the Flame” $400 million investment, announced initially in September 2022.
During the fourth quarter, Burger King funded about $40 million toward the Fuel the Flame investments, including $37 million toward support behind the Burger King US advertising fund, and $16 million toward the Royal Reset investments, including $8 million toward remodels. As of 2023, Burger King had funded a total of $73 million toward the Fuel the Flame investments and $61 million toward its Royal Reset investments. The investments were aimed at remodels and relocations, restaurant technology, kitchen equipment, and building enhancements.
For the fourth quarter ended Dec. 31, RBI posted net income of $726 million, or $1.60 a share, compared to $336 million, or 74 cents share, in the prior-year quarter. Revenues rose to $1.820 billion compared to $1.689 billion in the same quarter last year. For all of 2023, RBI’s net Income was $1,718 million, compared to $1,482 million in the prior year.
Consolidated RBI same-store sales were 5.8% in the quarter, including increases of 8.4% at Tim Hortons, 6.3% at Burger King, 5.5% at Popeyes, 3.5% at Firehouse Subs, and 4.6% in international restaurants, a category now that includes restaurants outside the U.S. and Canada that is reported separately.
As of Dec. 31, Restaurant Brands International had more 31,070 restaurants, including 4,525 Tim Hortons in the United States and Canada, 7,144 Burger Kings, 3,394 Popeyes, 1,265 Firehouse Subs and 14,742 locations in its global division.
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