Restaurant Brands International's owner of the Burger King brand is making a significant move in the fast-food industry. The company has announced its plan to purchase Carrols Restaurant Group, the largest Burger King franchisee in the United States, in a deal valued at about $1 billion.
This acquisition, which involves a cash transaction of $9.55 per share, aims to speed up the renovation of Burger King restaurants across the country. The transaction is slated to be completed by the second quarter of 2024.
This strategic move by Restaurant Brands International is set to reshape the Burger King landscape in the U.S., marking a notable development in the fast-food sector.
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Burger King Owner's Bold Shift: Revamping U.S. Strategy for Growth
In a notable change of direction, Burger King is adjusting its business approach. For the past ten years, the fast-food giant has operated primarily through franchises, with only 175 locations under direct corporate ownership. This strategy is set for a major overhaul following Tuesday's announcement of a new acquisition.
The move comes as a part of Restaurant Brands International's ambitious plan to rejuvenate Burger King's presence in the U.S. This $400 million initiative was unveiled over a year ago in response to Burger King's declining sales and its fall to third place in the U.S. burger chain rankings, behind Wendy's.
The revival strategy is centered on significant investments in remodeling restaurants and enhancing advertising efforts to stimulate demand and increase profits for franchisees.
A key part of this strategy involves Restaurant Brands' plan to rapidly remodel 600 Burger King locations owned by Carrols Restaurant Group within the next five years.
Subsequently, these locations will be sold back to franchisees. Tom Curtis, the president of Burger King in the U.S. and Canada, underscores this approach.
Restaurant Brands CEO Josh Kobza elaborated on the strategy during a conference call with investors. He emphasized accelerating the remodeling process and the thoughtful approach to franchising the network.
Kobza highlighted the aim to create smaller, community-focused franchise packages to be managed by new and existing franchisees closely connected to their communities. This strategic shift marks a significant step in Burger King's efforts to reclaim its position in the competitive U.S. fast-food market.
Burger King's $500 Million Renovation Plan
Through its largest franchisee, Carrols Restaurant Group, Burger King is investing approximately $500 million in a major renovation initiative. This plan, funded by Carrols' operational cash flow, aims to revamp numerous Burger King locations.
Tom Curtis from Burger King highlighted the importance of uniform upgrades across the franchise network to CNBC. He believes consistent remodeling efforts across the market can positively impact the brand's reputation, staff recruitment, and overall customer perception.
The development team is set to meet with Carrols as early as Wednesday to strategize on accelerating the renovation pace to 120 restaurants per year, doubling Carrols' 2024 target.
In a long-term strategy, Burger King intends to sell most of Carrols' locations within five to seven years while keeping some for innovation, training, and development purposes. Carrols' recent performance, with a 7.2% increase in same-store sales, underscores the potential effectiveness of this renovation plan.
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