TORONTO — Burger King's parent company has signed a US$1 billion deal to buy the brand's largest U.S. franchisee.
Restaurant Brands International Inc. announced Tuesday that it will purchase Carrols Restaurant Group Inc., which has 1,022 Burger King restaurants in 23 states as well as 60 Popeyes Louisiana Kitchen restaurants in six states. Carrols owns at least 15 per cent of Burger King's U.S. network.
Under the deal, RBI, which also owns Tim Hortons and Popeyes, will pay US$9.55 per share in cash to acquire all of Carrols' issued and outstanding shares that are not already held by RBI or its affiliates.
Burger King plans to invest around US$500 million on remodelling about 600 of the newly acquired restaurants over the next five years, giving them a more modern look.
They will later refranchise the Burger King locations to smaller franchisee groups "at a market price," said RBI chief executive Josh Kobza on a Tuesday call with analysts.
"This will allow us to really focus our attention on accelerating remodels and being thoughtful about how to refranchise this restaurant network into smaller packages with new and existing franchisees, who live close to the communities where they own the restaurants," he said.
The transaction is part of Burger King's ongoing Reclaim the Flame plan, which aims to accelerate sales growth and drive franchisee profitability. The plan emerged after Burger King made a US$400 million investment in 2022 in remodels and improving operations by enhancing marketing and the brand's technology.
"We are willing to do what it takes to set this brand, system and its franchisees up for the long term," RBI executive chairman Patrick Doyle said on the Tuesday call.
"Last year, that included helping some large franchisees to exit the system, knowing it required tough conversations and would result in some ugly headlines."
Carrols, which is Syracuse-based, already has about 400 Burger King locations that feature a modern design, Tom Curtis, president of Burger King U.S. and Canada, added on the same call.
Of the restaurants that will get a revamp, he said, "Some need a little bit less work and some need a little bit more work."
Deborah Derby, chief executive of Carrols, said she was enticed by RBI because she saw the deal as a way to drive "substantial" value and returns for shareholders. It could also create career opportunities for team members, especially long-term managers who may want to become franchisees themselves, she said.
The deal must meet closing conditions, including getting shareholder approval and passing a waiting period under U.S. antitrust laws.
RBI said it expects the transaction to be complete in the second quarter of 2024.
Even after it refranchises some of its revamped restaurants, Burger King will keep a couple hundred restaurants under corporate ownership for strategic innovation, training and operator development purposes.
This report by The Canadian Press was first published Jan. 16, 2024.
Companies in this story: (TSX:QSR)
Tara Deschamps, The Canadian Press
