Burger King firm to buy Popeyes

Aim after $1.8B sale is to speed chicken chain’s growth

A Popeyes fast food restaurant stands next door to a McDonald’s in the Brooklyn borough of New York earlier this month. Restaurant Brands International, the parent company of Burger King and Tim Hortons, is buying Popeyes.
A Popeyes fast food restaurant stands next door to a McDonald’s in the Brooklyn borough of New York earlier this month. Restaurant Brands International, the parent company of Burger King and Tim Hortons, is buying Popeyes.

NEW YORK -- The parent company of Burger King and Tim Hortons is buying Popeyes for $1.8 billion, with plans to accelerate the growth of the fried-chicken chain.

Such a move fits Restaurant Brands International's strategy of taking over well-known fast-food chains that it believes have the potential for wider expansion. While Popeyes has a presence in almost every state, its locations now are concentrated in the eastern half of the continental U.S.

"We get to add another iconic, incredible brand with this really rich Louisiana heritage," Restaurant Brands Chief Executive Officer Daniel Schwartz said in an interview. "We see it resonating with guests all around the world, and we see an opportunity to massively accelerate the growth."

Josh Kobza, Restaurant Brands' chief financial officer, said Tuesday that the company plans to speed up Popeyes' expansion, as it has done with Burger King.

Restaurant Brands was created after Burger King, controlled by Brazilian investment firm 3G Capital, bought Tim Hortons in 2014. The corporate name it took signaled the company's aim of expanding its stable of fast-food chains. In the meantime, Restaurant Brands has been striking deals with local operators to open additional Burger Kings around the world.

However, Cowen Group analyst Andrew Charles said last week that the company has not yet accomplished its goal of expanding Tim Hortons internationally. Although Tim Hortons has signed three master franchise development agreements in the Philippines, the United Kingdom and Mexico, Charles noted no stores have yet opened under those deals.

Stephen Anderson, a Maxim Group analyst, noted last week that Popeyes has had stronger sales performance worldwide in the past two years compared to Burger King and Tim Hortons.

The deal gives shareholders of Popeyes Louisiana Kitchen Inc. $79 per share, a 19 percent premium from its closing price on Friday.

Restaurant Brands International Inc., based in suburban Toronto, has more than 20,000 locations globally, and Popeyes would give it about 2,600 more.

By comparison, McDonald's Corp. had more than 36,800 locations around the world at the end of 2016. Yum Brands, which owns KFC, Pizza Hut and Taco Bell, has more than 43,600.

Popeyes has done "pretty well since they've re-branded," said Darren Tristano, president at industry researcher Technomic. "They've been very effective with advertising. They've also been pretty innovative."

The chain's same-store sales gained 1.8 percent in the third quarter as most U.S. restaurants endured a slump. The company will file its annual report today.

Restaurant Brands makes money from fees it charges franchisees who operate Burger King and Tim Hortons restaurants.

Restaurant Brands' managers have long said they would consider taking over other brands, where they could drive up profits by cutting costs and selling locations to franchisees. Restaurant Brands also may look to expand the chain abroad.

"Restaurant Brands may be able to cut selling, general and administrative expenses in half in the next two years, and its private equity partners can boost international expansion as spicy flavors, chicken and rice tend to travel well," said Michael Halen, an analyst at Bloomberg Intelligence. "It fits right into the 3G playbook."

Information for this article was contributed by The Associated Press; and by Leslie Patton and Craig Giammona of Bloomberg News.

Business on 02/22/2017

Upcoming Events