Burger King’s parent company is buying its largest U.S. franchisee for about $1 billion
Burger King’s parent company is buying its largest U.S. franchisee for nearly $1 billion and will renovate hundreds of its locations.
Restaurant Brands International Inc. will acquire on all issued and outstanding shares of Carrols Restaurant Group Inc. Which you don’t already own for $9.55 per share.
Carroll’s, based in Syracuse, New York, operates 1,022 Burger King restaurants in 23 states, or about 15% of all Burger King locations in the United States. It also owns and operates 60 Popeyes restaurants.
“We will rapidly redesign these restaurants over the next five years or so, putting them back in the hands of passionate local franchisees to create amazing experiences for our guests,” Tom Curtis, Burger King’s president of the U.S. and Canada, said Tuesday. In a prepared statement.
Restaurant Brands plans to invest approximately $500 million, funded by Carrols’ operating cash flow, to redesign approximately 600 of the acquired Carrols restaurants.
Burger King expects that the refranchising of the acquired restaurants will be completed within five to seven years. The brand plans to retain a few hundred restaurants in the company’s restaurant portfolio.
Carol’s is a premium franchise whose sales have historically outpaced Burger King’s overall U.S. system, said Andrew Charles, an analyst at TD Cowen investment bank. But the deal will help Restaurant Brands accelerate the revamp of its Burger King locations.
Restaurant Brands has been making efforts for years to modernize its U.S. restaurants in an effort to catch up with competitors. McDonald’s announced a $6 billion plan to redesign its U.S. restaurants in 2018, for example.
“We need pretty much every Burger King restaurant across the country to be modern, convenient and competitive with all the other concepts out there that have new, modern buildings,” Joshua Kobza, CEO of Restaurant Brands, said during a conference call with investors in August. .
In 2022, the company announced that it would spend $400 million over two years to renovate US stores and boost advertising. It’s adding digital menu boards and new kitchen equipment, among other changes. In the fall, it unveiled a prototype of a new restaurant with less seating and more aisles and pickup areas for mobile orders.
Charles estimates that about 40% of Burger King locations in the United States have been updated, and another 10% are being renovated. The Carrolls acquisition could help increase that to 60%, he said.
The deal includes a 30-day “Go Shop” period where Carrolls can solicit alternative proposals from interested parties.
The deal is expected to close in the second quarter. It still requires approval from those who own a majority of the common shares held by Carrols shareholders excluding shares held by RBI, its affiliates and Carrols officers. It also requires the approval of those who own a majority of the outstanding common shares of Carrols.
Toronto-based Restaurant Brands reports full-year 2023 earnings next month. In the third quarter, same-store sales at Burger King’s U.S. locations increased 6.6% compared to the previous year. But that led to a lag in sales growth of 8.1% at McDonald’s U.S. locations.
Shares of restaurant brands were flat in Tuesday afternoon trading. Shares of Carrols Restaurant Group Inc. rose. By 12%.