In a significant move that marks a shift in strategy for Burger King, Restaurant Brands International has announced its acquisition of Carrols Restaurant Group, the largest Burger King franchisee in the U.S., for approximately $1 billion in cash. The deal, which is expected to be completed by the second quarter of 2024, will see Restaurant Brands paying $9.55 per share to acquire Carrols. This acquisition is a departure from Burger King’s historically franchised model, as the company seeks to regain market share and revitalize its U.S. business.
Burger King has faced stiff competition in recent years, with Wendy’s surpassing it as the second-largest burger chain in the U.S. by sales. To combat this decline, Restaurant Brands unveiled a $400 million plan aimed at reinvigorating Burger King’s U.S. operations. The strategy centers around investing in restaurant remodels and ramping up advertising efforts to drive consumer demand and increase franchisee profitability.
As part of the revival plan, Restaurant Brands intends to rapidly remodel 600 of Carrols’ Burger King locations within the next five years. Following the remodels, these restaurants will be sold back to franchisees. Tom Curtis, President of Burger King U.S. and Canada, explained that this approach allows the company to concentrate on accelerating remodels and strategically refranchise the restaurant network into smaller packages. The goal is to partner with new and existing franchisees who are closely connected to the communities they serve.
According to Curtis, the remodeling strategy is driven by the belief in network effects and the impact of consistent remodeling across the market. By ensuring that consumers consistently encounter refreshed and modernized Burger King locations, the brand aims to enhance recruitment, staffing, and overall brand perception. Curtis further revealed that Burger King’s development team will hold a meeting with Carrols to discuss remodeling plans, with a target of doubling Carrols’ projections for 2024 renovations, aiming for 120 restaurant remodels per year.
While the majority of Carrols’ locations will be sold off in the next five to seven years, Burger King intends to retain a couple of hundred restaurants for “strategic innovation, training, and operator development purposes.” This implies that Burger King sees long-term value in maintaining direct ownership of a select number of locations, potentially to showcase innovative concepts and further improve operational standards.
Carrols Restaurant Group, as the largest Burger King franchisee in the U.S., has consistently outperformed the rest of Burger King’s domestic system. In its preannounced fourth-quarter results, Carrols reported a 7.2% increase in same-store sales for its Burger King locations and a 2.9% rise in traffic. These positive figures provide promising prospects for the future success of Burger King under Restaurant Brands’ management.
Ultimately, Restaurant Brands International’s acquisition of Carrols Restaurant Group showcases a transformative move for Burger King as it seeks to revitalize its U.S. business and reclaim its standing in the competitive fast-food landscape. This strategic shift, with a focus on remodeling and franchising, highlights the company’s commitment to improving customer experience, supporting franchisees, and driving long-term growth in the years to come.
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