Burger King's Big Move (1/19 Newsletter)
Happy Friday!
The Bear took home a bunch of Emmys on Monday, including a well-deserved win for Outstanding Comedy Series.
Here’s a hunch: The fact that you’re reading this email means you probably care about restaurants — which also means there’s an extremely good chance you’ll love The Bear. Watch it!
3 NUMBERS
$530 million
One-time, non-cash impairment charge Red Lobster owner Thai Union has recorded on its investment in the business . (Impairment charges are used by businesses to permanently write off assets that have dropped in value.) Thai Union — which originally bought a 25% stake in Red Lobster in 2016 for $575 million, before later acquiring a controlling stake for an undisclosed sum in 2020 — is now looking to exit the business, citing “prolonged negative financial contributions” to its shareholders.
$1 billion
Amount paid by 7-Eleven for 204 Stripes convenience stores and Laredo Taco Company restaurants. The deal gives 7-Eleven complete ownership of all Stripes -Laredo Taco Company locations across the U.S.
$1.1 billion
Amount Uber paid in 2021 for alcohol-delivery service Drizly , which will be making its final delivery in March. Uber bought Drizly during the height of pandemic-era alcohol delivery sales, but home-delivered booze never quite took off from there. Uber says it will refocus on its core Uber Eats platform, which, like DoorDash, is expanding beyond food to deliver items like groceries and booze.
Burger King’s big-time purchase
Burger King took literally the New Year’s resolution to “invest in yourself”… to the tune of $1.5 billion.
BK parent company Restaurant Brands International (RBI) announced this week that it’s buying its largest franchisee , 1,022-unit Carrols Restaurant Group, for $1 billion, with plans to spend an additional $500 million remodeling roughly 600 of the newly-purchased locations.
RBI says it will complete the remodels by 2028, using cash generated by the Carrols’ locations to finance the work. Afterwards, RBI plans on refranchising many of the restaurants, selling them to local operators of 50 or less locations. It will retain “several hundred” units as corporately-run stores.
In other words, RBI is staking its future success on a system of franchisees that bear little resemblance to Carrols, which owned 15% of all Burger King’s U.S. locations at the time of this deal. After years of encouraging large operators like Carrols to grow their store counts, last year the company signaled that it would begin favoring smaller operators who are regularly in their stores .
The shift in strategy makes sense: Getting big typically means adding on debt, and we’re no longer in a low-interest rate world. There is some evidence too that locally-based franchisees have a tighter grip on store operations, which is an area of emphasis for Burger King (and, really, everyone) in 2024.
That said: a round of applause for Carrols, which deserves credit for an all-time run in the lead-up to this transaction.
In 2022, its debt was downgraded amid overall brand profitability challenges, and it closed the year with a stock price of $1.36. But thanks to strong traffic numbers and a markedly improved EBITDA, Carrols saw its share price rise over 300% in 2023 (making it the best performing restaurant stock for the year). This week, RBI bought the company at a 23% premium over its share price. Kingly.
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Quick Hits
Name That Chain!
You get three guesses to name this week’s mystery chain:
Stay tuned… the answer will be in the next issue of the newsletter.
Last issue’s answer: Chipotle
#Content Recs
International Corner!
In an attempt to spur the imaginations of fast-food R&D departments across America, each week I’ll highlight an international item that should warrant menu consideration in the States.
This week: ARBY’S POTATO CAKES
“In case you don’t remember, Arby’s Potato Cakes are those triangle-shaped cakes made of shredded potato, fried until the outside is a crispy golden brown and the insides are soft and pillowy. They’re similar to the Hash Browns on the?McDonald’s breakfast menu.
“Arby’s Potato Cakes were discontinued in 2021 to make room for?the new addition of crinkle-cut fries. Why you’d order anything but Arby’s?marvelous curly fries?is beyond us, but Arby’s apparently had some evidence that the crinkle fries would do well enough to replace an entire potato offering, so the Potato Cakes got the axe.
“The news of Arby’s Potato Cakes returning to the Canadian market was quietly tucked into a?recent press release, alongside the announcement of other limited-time offers including a butterscotch milkshake and a BLT-inspired roast beef sandwich.”
Arby’s Potato Cakes were a criminally underrated side item. As The Takeout mentioned, they were similar to the GOAT fast-food breakfast item (the McDonald’s hashbrown), with the added benefit of being available at 9 p.m.
No word yet on whether these little beauties will ever make it back to the States.
Director National Accounts Food Service North America-Diversey a Solenis Company
10 个月Great read Andy. Hope you are well.