Burger King® Announces Additional Investment to Achieve 85%-90% Modern Image in U.S. Restaurants by 2028

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Burger King Company announced an additional $300M investment to accelerate the modernization of Burger King® restaurants in the U.S. The investment aims to achieve a 85%-90% modern image in U.S. restaurants by 2028. This investment builds on previous initiatives like the 'Royal Reset' plan and the acquisition of Carrols Restaurant Group. Burger King has seen early positive results from its investments, including record franchisee profitability and strong sales uplifts. The additional investment will launch 'Royal Reset 2.0', providing cash incentives to operators for remodels and rebuilds. The brand expects to achieve its modernization goal by 2028, reinforcing its commitment to enhancing guest experience.

Positive

• Burger King's additional $300M investment aims to accelerate the modernization of its restaurants, driving strong early results and record franchisee profitability.

• The 'Royal Reset 2.0' program will provide cash incentives to top performing operators, supporting quality remodels and rebuilds to enhance guest experience.

• The brand's commitment to achieve 85%-90% modern image in U.S. restaurants by 2028 demonstrates a clear path towards transforming its restaurant footprint and reclaiming its position in the QSR industry.

Negative

• The brand does not expect to deploy any additional capital towards co-investment remodel programs once current programs are complete, raising questions about future growth strategies.

• The investment may pose financial risks or challenges if the expected results are not achieved or if franchisee profitability metrics are not met, impacting the brand's turnaround plans.

Market Research Analyst

By announcing an ambitious co-investment strategy, Burger King is effectively leveraging its franchise model to rapidly modernize its infrastructure. Understanding the correlation between updated facilities and customer retention is pivotal in the fast-food industry, where brand image and customer experience directly influence sales. Retail investors should pay attention to the projected sales uplifts from remodeled locations, which indicate potential for increased revenue streams. The initiative's success may hinge on franchisee participation and the brand's ability to maintain its projected profitability metrics.

Financial Analyst

The commitment of $300 million to the 'Royal Reset 2.0' program represents a significant capital allocation which, when linked with the previous investments and the Carrols acquisition, paints a picture of a company heavily investing in its future growth. The financial implications here include the potential for improved margins from increased efficiencies and the customer draw of a modernized setting. However, investors should remain cautious about the long-term impact on cash flows and the execution risk associated with such a broad transformational strategy.

Franchise Business Consultant

The decision to remodel using 'Sizzle', the next-generation restaurant design, is a strategic move aimed at enhancing customer experience primarily through digital, pick-up and drive-thru services. The opt-in nature of the 'Royal Reset 2.0' program for franchisees indicates a collaborative effort towards a cohesive brand image. Retail investors should consider the franchisor-franchisee dynamics and how the opt-in model and profitability thresholds will affect the overall cohesion and speed of the modernization process.

$300M new co-investment with Franchisees to deliver modern restaurant image in 85%-90% of U.S. Burger King® restaurants by 2028

MIAMI, April 30, 2024 /PRNewswire/ - Burger King Company LLC ("Burger King", "BK", "Company") today announced an additional $300M investment to accelerate the modernization of Burger King® restaurants across the U.S. This comes after BK announced $250M in modern image, technology and new kitchen equipment ("Royal Reset") in September 2022 as part of its Reclaim the Flame plan, and a further $500M to accelerate the reimaging of more than 600 Carrols Restaurant Group ("Carrols") owned Burger King restaurants following the pending acquisition of Carrols. 

The September 2022 Reclaim the Flame plan also included $150M in incremental digital and media investments through 2024 ("Fuel the Flame") followed by an agreement with franchisees to increase their investments in advertising from 2025-2028 should certain franchisee profitability metrics be achieved.

The Brand's Reclaim the Flame investments have driven strong early results, including record average U.S. Franchisee profitability in 2023, on the path to our publicly stated goal of achieving $300,000 in average EBITDA in our BK US restaurants, as well as strong sales uplifts from the 100 Royal Reset remodels that have been completed and reopened for at least six months.

In January, Burger King announced plans to acquire Carrols, the brand's largest U.S. Franchisee, for an enterprise value of approximately $1B. To further accelerate the brand's turnaround, this was coupled with a plan to remodel approximately 600 of the over 1,000 acquired Burger King restaurants utilizing the operating cash flows of Carrols and bringing the Carrols portfolio to fully modern image by 2028. The Company expects to refranchise substantially all of the Carrols portfolio to smaller, local operators within 3 to 7 years after completion of the acquisition.

The additional $300M investment will launch an expanded co-investment program, "Royal Reset 2.0", which builds on the initial success of the existing Royal Reset modern image investments. The program will provide cash incentives to top performing and committed operators to support quality remodels and rebuilds and unlocks the opportunity to complete approximately 1,100 additional remodels through 2028.

As a result of the Royal Reset programs and planned Carrols remodels, Burger King now has a clear path to achieve 85%-90% modern image by 2028. The brand does not expect to deploy any additional capital towards co-investment remodel programs once these programs are complete. 

Tom Curtis, President of Burger King North America, commented, "We are committed to giving our Guests the very best experience in all our restaurants and that includes a modern, exciting restaurant image and digital experience that exceeds their expectations.  We are working in close partnership with our Franchisees to transform our restaurant footprint across the country and reclaim our flame as a leader in the QSR industry."

As part of the commitment to modernize restaurants across the U.S., seven months ago, BK revealed its next generation restaurant design – "Sizzle". The new design is a reimagined format grounded in all aspects of the Guest and Team Member experience and allows for flexibility to evolve the design based on new Guest service modes – with an emphasis on the digital, pick-up and drive-thru experience. Remodel projects as part of the Royal Reset 2.0 investment will feature the new Sizzle design.

Franchisees will have until October 31, 2024, to opt-in to Royal Reset 2.0 with the collective goal of modernizing the brand's image to elevate the Guest experience in Burger King restaurants across the U.S.

History of Announced Burger King Investment in the U.S. System:

Timeframe	Name	Focus	Cumulative % Modern Image 2028	Investment
Q4'22-2025	Royal Reset Refresh	Equipment, technology and building enhancements (>6,000 restaurants)	N/A	$100M
Q4'22-2024	Fuel the Flame*	Digital and advertising	N/A	$150M
Q2'24	Carrols Acquisition	Acquiring ~1,000 BK restaurants and refranchising vast majority to smaller Owner/Operators over 3 to 7 years	N/A	$1,000M
Q4'22-2025	Royal Reset Remodel	>600 high-quality remodels	~65%	$150M
2024-2028	Carrols Remodels	Remodel ~600 Carrols BK restaurants	~75%	$500M
2025-2028	Royal Reset 2.0	Remodel ~1,100 non-Carrols BK restaurants	85% to 90%	$300M

*Participating Franchisees (~96% of system) have agreed to increase their advertising fund contributions by 50 basis points through 2028 if certain profitability thresholds are met (>$175,000 average trailing twelve-month franchise profitability at year-end 2024 and >$230,000 at year-end 2026).

Supplemental Accounting Information

Royal Reset 2.0 will be accounted for in the same manner as the initial Royal Reset remodel program. A royalty credit will be recognized over the franchise agreement period of up to 20-years as a contra-revenue in the "Franchise and property revenues" line of the income statement. The remodel investment will appear on the cash flow statement as a change in "Other long-term assets and liabilities" under "Cash flows from operating activities" at the time of remodel completion.

Franchisees participating in the program may elect for an increased royalty rate in exchange for a larger capital contribution which, all else being equal, would result in increased Franchise and property revenue.

ABOUT BURGER KING^®

Founded in 1954, the Burger King® brand is a global quick service hamburger chain known for food quality and value and as the only place guests can get the iconic flame-grilled Whopper® sandwich. The Burger King system operates more than 19,000 locations in more than 100 countries and U.S. territories. Almost 100 percent of Burger King restaurants are owned and operated by independent franchisees, many of them family-owned operations that have been in business for decades. To learn more about the Burger King brand, please visit the official brand website at www.bk.com or the newsroom at news.bk.com, and follow us on Facebook,  Instagram and TikTok.

About Restaurant Brands International Inc.

Restaurant Brands International Inc. is one of the world's largest quick service restaurant companies with over $40 billion in annual system-wide sales and over 30,000 restaurants in more than 120 countries and territories. RBI owns four of the world's most prominent and iconic quick service restaurant brands – TIM HORTONS®, BURGER KING®, POPEYES®, and FIREHOUSE SUBS®. These independently operated brands have been serving their respective guests, franchisees and communities for decades. Through its Restaurant Brands for Good framework, RBI is improving sustainable outcomes related to its food, the planet, and people and communities. To learn more about RBI, please visit the company's website at www.rbi.com. 

Forward-Looking Statements

This press release includes forward-looking statements, which are often identified by the words "may," "might," "believes," "thinks," "anticipates," "plans," "expects," "intends" or similar expressions and reflect management's expectations regarding future events and operating performance and speak only as of the date hereof. These forward-looking statements include statements regarding: (i) the amount, timing and use of the additional investments related to remodels as well as digital, advertising and restaurant enhancements into the Burger King U.S. system; (ii) the expected financial impacts of the Reclaim the Flame investments on RBI's results of operations, including our expectations regarding the timing of the investments by BK; (iii) our expectations regarding the amount and timing of Franchisee co-investments in the Reclaim the Flame program; (iv) the completion of the acquisition of Carrols on the anticipated terms and timing, including obtaining required stockholder approval by Carrols' stockholders and the satisfaction of other conditions to the completion of the acquisition; (v) our ability to refranchise substantially all of the Carrols portfolio to smaller, local operators within 3 to 7 years; (vi) the percentage of modern image that will be achieved by the described initiatives; (vii) our expectation regarding not deploying additional capital toward remodels following these programs; and (viii) the anticipated accounting treatment of the investments associated with the investment program.

The factors that could cause actual results to differ materially from our expectations are detailed in filings of RBI with the U.S. Securities and Exchange Commission and with the securities regulatory authorities in each province and territory of Canada, such as its annual and quarterly reports and current reports on Form 8-K and include the following: (1) risks related to RBI's ability to successfully implement the investment plans and the ability of participating Franchisees to meet the profitability thresholds; (2) risks related to the franchised business model; (3) risks related to technology and the ability to successfully implement digital initiatives; (4) risks related to ownership and leasing of properties by us and our Franchisees; (5) risks related to our Franchisees financial stability and their ability and willingness to access and maintain the liquidity necessary to co-invest in the restaurant modernization initiatives; (6) risks related to the ability of the Burger King Franchisees to compete in an intensely competitive industry; and (7) changes in accounting, tax and other laws and regulations or interpretations thereof. Other than as required under U.S. federal securities laws or Canadian securities laws, we do not assume a duty to update these forward-looking statements, whether as a result of new information, subsequent events or circumstances, change in expectations or otherwise.

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SOURCE Restaurant Brands International Inc.

FAQ

What is the additional investment announced by Burger King?

Burger King announced an additional $300M investment to accelerate the modernization of its U.S. restaurants.

What is the goal of the investment in Burger King restaurants?

The goal of the investment is to achieve a modern image in 85%-90% of U.S. Burger King restaurants by 2028.

What are some of the positive outcomes from Burger King's investments?

Burger King has seen record average franchisee profitability and strong sales uplifts from its investments.

What is the 'Royal Reset 2.0' program?

'Royal Reset 2.0' is a program that provides cash incentives to top performing operators for remodels and rebuilds in Burger King restaurants.

What is Burger King's commitment to modernization?

Burger King aims to achieve 85%-90% modern image in U.S. restaurants by 2028, transforming its restaurant footprint and enhancing guest experience.