Restaurant Brands International Inc. Introduces Five-Year Growth Outlook
- Strong growth projections with 40,000 restaurants, $60B in sales, and $3.2B in income by 2028.
- Average annual 3%+ sales growth with a focus on efficient capital allocation and dividend growth.
- Strategic plans for Tim Hortons, Burger King, Popeyes, and Firehouse Subs to drive growth.
- Tim Hortons to expand menu offerings, focus on digital growth, and target 1,000 restaurants in the US by 2028.
- International expansion plans to open 7,000 new restaurants in over 120 markets.
- Burger King to modernize restaurants, accelerate image transformation, and improve guest experience.
- Popeyes to expand menu offerings, attract profitable digital guests, and increase restaurant base to over 4,200 by 2028.
- Firehouse Subs to scale digital channels, accelerate net restaurant growth, and target 800 new units by 2028.
- Commitment to balanced capital allocation, dividend growth, share repurchases, and strategic opportunities.
- None.
Insights
Restaurant Brands International Inc.'s ambitious growth targets, including a projected increase in system-wide sales to $60B and an Adjusted Operating Income of $3.2B by 2028, signal a confident outlook for the company's expansion. The commitment to an average annual Adjusted Operating Income growth of 8%+ is particularly noteworthy, as it suggests a robust flow-through from revenue to income—a key metric for assessing operational efficiency and profitability.
The planned capital allocation strategy, maintaining a balance between reinvestment in growth and shareholder returns, demonstrates a disciplined approach to financial management. The targeted dividend payout ratio of 50-60% alongside consistent dividend growth aligns with shareholder expectations for steady income streams, while share repurchases reflect a proactive approach to capital management, potentially signaling undervaluation to investors.
The emphasis on digital transformation, particularly through Tim Hortons' leading food and beverage app in Canada, is a strategic move to capitalize on the increasing consumer preference for convenience and personalization. Digital engagement can drive higher spending, as evidenced by the reported 5x higher average spend of digital customers. Moreover, the international expansion strategy, with a goal of opening 7,000 new restaurants, taps into emerging market potential and diversifies the company's geographic footprint.
Within the competitive landscape of quick-service restaurants (QSR), RBI's focus on brand-specific growth drivers such as Burger King's flame-grilled differentiation, Popeyes' emphasis on authentic flavors and Firehouse Subs' community engagement, positions each brand to capitalize on their unique market niches and customer loyalty.
RBI's strategic focus on operational excellence, such as Popeyes' Easy to Run kitchens and equipment innovation at Firehouse Subs, underscores the importance of efficiency in the QSR sector. Streamlining operations can lead to faster service, reduced costs and improved customer satisfaction—critical factors for success in a highly competitive industry.
The company's co-investment with franchisees to modernize Burger King's image in the U.S. reflects an understanding of the importance of brand perception and the customer experience. The reimaging and refranchising plan could rejuvenate the brand, potentially driving incremental sales and attracting new franchise partners.
Outlook delivers 40,000 restaurants,
Average annual
Efficient flow through expected to result in average annual Adjusted Operating Income growth of
Efficient capital allocation with a focus on high return business investments and consistent dividend growth
Mr. Kobza provided guidance for investors that the company expects to achieve a minimum of 40,000 restaurants,
"We're proud of the work our franchisees and their teams are doing to deliver quality food, excellent service and convenience to guests," said Josh Kobza, CEO. "Our four iconic brands have strong restaurant fundamentals and clear runways for growth. Our long-term investment horizon should result in compelling business performance and drive at least low double digit annual total shareholder returns over the next 5 years."
"When you add up the sum of the parts of our company, we have a pretty remarkable combination of growth drivers," said Patrick Doyle, Executive Chairman. "The outlook we are sharing for growth is really the lowest average performance that we expect over the next five-years, with real upside potential from there."
Mr. Kobza summarized the strong fundamentals and growth drivers for each of the Company's five business segments and provided an update on the Company's capital allocation priorities.
Tim Hortons has a strong foundation, particularly in
Looking ahead to 2028, Tim Hortons will focus on growing the PM daypart beyond its
Tim Hortons US business is expected to be the largest contributor of net restaurant growth in its home markets, with an aspiration to reach 1,000 restaurants by 2028.
International growth will be driven by our strong network of well-capitalized master franchisee partners, with proven restaurant experience and commitment to growing the Company's brands in over 120 markets and territories.
Despite its successful historical growth and substantial global footprint, with each of its four brands in a different stage of development, the business still has a substantial opportunity for new country expansion and increasing penetration of strong and established existing markets around the world.
The Company sees a path towards opening at least 7,000 new restaurants in international markets over the 5-year outlook period.
The foundational strength of Burger King's brand is the Whopper, which is frequently cited as the most loved burger in the big burger QSR segment, and clear differentiation through flame grilling and customization of our guests' orders.
The Company has made a substantial financial commitment to co-invest with franchisees to accelerate modern image in the
Looking ahead to 2028, major growth drivers in the business include accelerating to get
Popeyes, the number two player in chicken quick service restaurants, has a strong history as a taste leader rooted in the brand's authentic
Looking ahead to 2028, the brand will continue daypart and occasion expansion of its menu, in line with recent examples of the Chicken Sandwich and Wings and focus on attracting more profitable digital guests and increasing its digital mix of sales. The brand will accelerate its emphasis on improving restaurant operations through its Easy to Run kitchens. Popeyes expects to grow its
Firehouse Subs is consistently named by consumers as #1 in food quality, #1 in food taste and flavor, and #1 brand that supports local, community activities through our Firehouse Foundation.
Looking ahead to 2028, Firehouse Subs is expected to contribute to our broader outlook by rapidly scaling its digital channels to
The Company reiterated its commitment to a balanced capital allocation framework throughout the outlook period, including continuing to invest behind high-return growth opportunities across its brands, targeting a 50
Restaurant Brands International Inc. is one of the world's largest quick service restaurant companies with over
This press release contains certain forward-looking statements and information, which reflect management's current beliefs and expectations regarding future events and operating performance and speak only as of the date hereof. These forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties. These forward-looking statements include statements about our expectations regarding: (1) restaurant growth and expansion opportunities for RBI's five segments; (2) system-wide sales growth over the next five years ; (3) Adjusted Operating Income growth through 2028 and achieving efficient flow through from sales; (4) achieving target proportion of modern image for Burger King
We evaluate our restaurants and assess our business based on the following operating metrics.
System-wide sales growth refers to the percentage change in sales at all franchised restaurants and Company restaurants (referred to as system-wide sales) in one period from the same period in the prior year. Comparable sales refers to the percentage change in restaurant sales in one period from the same prior year period for restaurants that have been open for 13 months or longer for Tim Hortons, Burger King and Firehouse Subs and 17 months or longer for Popeyes Louisiana Kitchen. Additionally, if a restaurant is closed for a significant portion of a month (such as during a renovation), the restaurant is excluded from the monthly comparable sales calculation. System-wide sales growth and comparable sales are measured on a constant currency basis, which means that results exclude the effect of foreign currency translation ("FX Impact") and are calculated by translating prior year results at current year monthly average exchange rates. We analyze key operating metrics on a constant currency basis as this helps identify underlying business trends, without distortion from the effects of currency movements.
System-wide sales represent sales at all franchise restaurants and company-owned restaurants. We do not record franchise sales as revenues; however, our royalty revenues and advertising fund contributions are calculated based on a percentage of franchise sales.
Net restaurant growth refers to the net increase in restaurant count (openings, net of permanent closures) over a trailing twelve-month period, divided by the restaurant count at the beginning of the trailing twelve-month period. In determining whether a restaurant meets our definition of a restaurant and will be included in our NRG, we consider factors such as scope of operations, format and image, separate franchise agreement, and minimum sales thresholds. We refer to restaurants that do not meet our definition as "alternative formats."
These metrics are important indicators of the overall direction of our business, including trends in sales and the effectiveness of each brand's marketing, operations and growth initiatives.
Below, we define the non-GAAP financial measures included in the trending schedules and recast financial statements. In addition, we discuss the reasons why we believe this information is useful to management and may be useful to investors. These measures do not have standardized meanings under GAAP and may differ from similarly captioned measures of other companies in our industry.
To supplement our condensed consolidated financial statements presented on a GAAP basis, RBI reports the following non-GAAP financial measures: Adjusted Operating Income ("AOI"), EBITDA, Adjusted EBITDA, LTM Adjusted EBITDA, Adjusted EBITDA Net Leverage, and Free Cash Flow. We believe that these non-GAAP measures are useful to investors in assessing our operating performance or liquidity, as they provide them with the same tools that management uses to evaluate our performance or liquidity and are responsive to questions we receive from both investors and analysts. By disclosing these non-GAAP measures, we intend to provide investors with a consistent comparison of our operating results and trends for the periods presented.
Adjusted Operating Income ("AOI") represents income from operations adjusted to exclude (i) franchise agreement amortization ("FAA") as a result of acquisition accounting, (ii) (income) loss from equity method investments, net of cash distributions received from equity method investments, (iii) other operating expenses (income), net and, (iv) income/expenses from non-recurring projects and non-operating activities. For the periods referenced in the following financial results, income/expenses from non-recurring projects and non-operating activities included (i) non-recurring fees and expense incurred in connection with the Firehouse Acquisition consisting of professional fees, compensation-related expenses and integration costs ("FHS Transaction costs"); and (ii) non-operating costs from professional advisory and consulting services associated with certain transformational corporate restructuring initiatives that rationalize our structure and optimize cash movements as well as services related to significant tax reform legislation and regulations ("Corporate restructuring and advisory fees"). Management believes that these types of expenses are either not related to our underlying profitability drivers or not likely to re-occur in the foreseeable future and the varied timing, size and nature of these projects may cause volatility in our results unrelated to the performance of our core business that does not reflect trends of our core operations. AOI is used by management to measure operating performance of the business, excluding these other specifically identified items that management believes are not relevant to management's assessment of our operating performance. AOI, as defined above, also represents our measure of segment income for each of our five operating segments. There are important components of operating income that we have not determined and therefore, a reconciliation of estimated AOI to operating income cannot be provided at this time. A full reconciliation of AOI to operating income will be provided when actual results are released.
EBITDA is defined as earnings (net income or loss) before interest expense, net, (gain) loss on early extinguishment of debt, income tax (benefit) expense, and depreciation and amortization and is used by management to measure operating performance of the business. Adjusted EBITDA is defined as EBITDA excluding (i) the non-cash impact of share-based compensation and non-cash incentive compensation expense, (ii) (income) loss from equity method investments, net of cash distributions received from equity method investments, (iii) other operating expenses (income), net, and (iv) income or expense from non-recurring projects and non-operating activities (as described above).
LTM Adjusted EBITDA is defined as Adjusted EBITDA for the last twelve-month period to the date reported.
Adjusted EBITDA Net Leverage is defined as net debt (total debt less cash and cash equivalents) divided by Adjusted EBITDA.
Free Cash Flow is the total of Net cash provided by operating activities minus Payments for property and equipment. Free Cash Flow is a liquidity measure used by management as one factor in determining the amount of cash that is available for working capital needs or other uses of cash, however, it does not represent residual cash flows available for discretionary expenditures.
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SOURCE Restaurant Brands International Inc.
FAQ
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