US Markets
Tuesday, January 16th, 2024 3:14 pm EDT
Key Points
- Strategic Acquisition by Restaurant Brands International: Restaurant Brands International (RBI) is acquiring Carrols Restaurant Group, the largest Burger King franchisee in the U.S., in a significant cash deal valued at about $1 billion. The acquisition involves RBI paying $9.55 per share for Carrols, which operates over 1,000 Burger King restaurants and 60 Popeyes locations. The deal marks a departure from Burger King’s previous franchising-focused strategy, as the majority of its restaurants have been franchised over the last decade. The move is part of RBI’s broader strategy to reshape its footprint and reinvigorate Burger King’s position in the competitive fast-food market.
- Revitalization Plan for Burger King’s U.S. Business: The acquisition comes over a year after Restaurant Brands unveiled a $400 million plan to revive Burger King’s U.S. business. This move is a response to lagging sales and increased competition, particularly with Wendy’s overtaking Burger King as the second-largest burger chain by U.S. sales. The revitalization strategy involves substantial investments in restaurant remodels and advertising to drive demand and enhance franchisee profits. As part of the plan, Restaurant Brands intends to remodel 600 of Carrols’ Burger King locations rapidly over the next five years and then sell them back to franchisees, with an investment of about $500 million funded by Carrols’ operating cash flow.
- Strategic Refranchising and Future Plans: Following the remodeling and sale of the majority of Carrols’ locations in the next five to seven years, Burger King plans to retain a couple of hundred restaurants for strategic innovation, training, and operator development purposes. The refranchising strategy emphasizes a focus on smaller packages and involvement of both new and existing franchisees who are closely connected to the communities where they own the restaurants. The completion of the deal is expected in the second quarter of 2024. Carrols’ robust financial performance was highlighted, with preannounced fourth-quarter results indicating a 7.2% increase in same-store sales for its Burger King locations and a 2.9% rise in traffic, showcasing its consistent outperformance compared to the broader Burger King U.S. system.
Restaurant Brands International is set to acquire Carrols Restaurant Group, the largest Burger King franchisee in the U.S., in a deal valued at about $1 billion in cash. The acquisition, announced on Tuesday, represents a notable shift in strategy for Burger King, which has predominantly operated as a franchised model over the past decade. Carrols, which currently manages over 1,000 Burger King restaurants and 60 Popeyes locations, will be purchased by Restaurant Brands for $9.55 per share, a premium to its closing stock price of $8.42 on Friday. The market reacted positively to the news, with Carrols’ shares surging over 12% in premarket trading on Tuesday.
The move comes more than a year after Restaurant Brands unveiled a $400 million plan to revitalize Burger King’s U.S. business, aiming to address lagging sales and competition challenges, with Wendy’s surpassing it as the second-largest burger chain by U.S. sales. The revitalization strategy focuses on substantial investments in restaurant remodels and advertising to drive demand and enhance franchisee profits. Currently, Burger King only owns 75 corporate-owned locations, making the acquisition of Carrols a significant departure from its franchising-focused approach.
As part of the deal, Restaurant Brands intends to rapidly remodel 600 of Carrols’ Burger King locations over the next five years and subsequently sell them back to franchisees. The company plans to invest approximately $500 million, funded by Carrols’ operating cash flow, for these renovations. CEO Josh Kobza emphasized the strategy’s intention to accelerate remodels and strategically refranchise the restaurant network into smaller packages, involving both new and existing franchisees with a local community focus. After selling off the majority of Carrols’ locations in five to seven years, Burger King aims to retain a couple of hundred restaurants for purposes such as strategic innovation, training, and operator development.
Carrols’ strong performance was highlighted earlier in the month when it preannounced its fourth-quarter results. Notably, same-store sales for its Burger King locations experienced a 7.2% increase, and traffic rose by 2.9%, outperforming the broader Burger King U.S. system. The acquisition is anticipated to be completed by the second quarter of 2024, signifying a strategic move by Restaurant Brands International to reshape its footprint and reinvigorate Burger King’s position in the competitive fast-food landscape.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/01/16/burger-king-owner-restaurant-brands-buys-carrols-largest-us-franchisee.html
