Burger King Owner to Acquire Largest US Franchisee for $1 Billion

Burger King’s parent company, Restaurant Brands International Inc., is poised to acquire Carrols Restaurant Group Inc., its largest US franchisee, in a deal estimated at approximately $1 billion.

The deal involves purchasing all outstanding shares of Carrols for $9.55 per share, a move aimed at renovating and revamping hundreds of Burger King locations.

Carrols, based in Syracuse, New York, currently operates 1,022 Burger King restaurants in 23 states, covering approximately 15% of all US Burger King locations. 

Additionally, it owns and manages 60 Popeyes restaurants. Burger King plans to swiftly remodel these establishments over the next five years and return them to local franchisees, enhancing customer experiences.

With a strategic investment of approximately $500 million, funded by Carrols’ operating cash flow, Restaurant Brands intends to renovate roughly 600 acquired Carrols restaurants. 

The refranchising process is expected to conclude within five to seven years, while retaining a couple of hundred restaurants in Burger King’s corporate portfolio.

Tom Curtis, President of Burger King US and Canada, expressed the company’s commitment to creating outstanding guest experiences through the rapid remodeling initiative. 

The move is part of Restaurant Brands’ broader effort to modernize its US restaurants, aligning itself with industry rivals like McDonald’s, which announced a $6 billion plan to remodel its US restaurants in 2018.

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Burger King CEO Stresses Market Competitiveness

Burger King’s parent company, Restaurant Brands International Inc., is poised to acquire Carrols Restaurant Group Inc., its largest US franchisee, in a deal estimated at approximately $1 billion.

Burger King’s strong franchise operation, noted for consistently surpassing the broader U.S. Burger King system in sales, was underscored by analyst Andrew Charles of TD Cowen investment bank.

The acquisition is expected to expedite the renovation of Burger King locations, contributing to Restaurant Brands’ ongoing modernization strategy.

As part of its modernization plan, Restaurant Brands has been investing significantly in its U.S. restaurants, allocating $400 million over two years for store revamps and increased advertising. 

Initiatives include the introduction of digital menu boards, new kitchen equipment, and prototype restaurants featuring enhanced drive-thru capabilities.

CEO Joshua Kobza emphasized the need for all Burger King locations to be modern, convenient, and competitive in the market. 

The Carrols acquisition is anticipated to contribute to achieving this goal, potentially increasing the percentage of modernized Burger King locations from 40% to 60%, according to analyst estimates.

The transaction includes a 30-day “go shop” period, during which Carrols can explore alternative proposals from interested parties. 

The deal is set to close in the second quarter, pending approval from a majority of common stockholders and outstanding common stockholders of Carrols, excluding shares held by RBI and its affiliates and Carrols’ officers.

Toronto-based Restaurant Brands is expected to announce full-year earnings for 2023 next month. In the third quarter, US Burger King same-store sales recorded a 6.6% increase over the prior year, although it trailed the 8.1% growth at US McDonald’s locations. 

The stock performance of Restaurant Brands remained flat, while shares of Carrols Restaurant Group Inc. surged by 12% during Tuesday afternoon trading.

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