Restaurant Brands used smart strategies to support its many businesses during the pandemic. Now it’s trading not far off all-time highs for our subscribers—and we think there are still further gains ahead.
The firm aims to reach 40,000 restaurants by 2028 by focusing on average annual net restaurant growth of over 5% with an accompanying system-wide sales growth of over 8%. An efficient flow-through is expected to deliver income growth of over 8% as well.
That and a fair valuation (the stock trades at 21.5 times the company’s 2024 earnings forecast) make it a top pick for the long run.
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RESTAURANT BRANDS INTERNATIONAL INC. (Toronto symbol QSR; www.rbi.com) gives you exposure to the world’s third-largest fast-food operator. That’s after McDonald’s (No. 1) and Yum Brands (No. 2). The company has 30,125 outlets in over 100 countries: 18,935 Burger King, 5,662 Tim Hortons (coffee and donuts), 4,269 Popeyes Louisiana Kitchen (fried chicken) and 1,259 Firehouse Subs.
The fast food operator is now buying Carrols Restaurant Group (Nasdaq symbol TAST), Burger King’s largest U.S. franchisee, for $1 billion U.S. Carrols operates 1,022 Burger King restaurants in 23 states, which brought in approximately $1.8 billion of system sales in 2023, as well as 60 Popeyes restaurants in six U.S. states.
The move by Restaurant Brands is part of Burger King’s “Reclaim the Flame” plan. That’s a program to move away from larger franchisees and toward local franchisees. The strategy is to revamp the Burger King brand in America, refurbish restaurant locations and draw in younger customers.
It will also invest about $500 million U.S. to modernize 600 of Carrols’ 1,022 restaurants over the next five years or so.
Growth Stocks: Restaurant Brands’ robust sales expansion looks even better with a higher dividend
Going forward, the acquired restaurants will be put back into the hands of motivated, local franchisees. Restaurant Brands plans to increase the number of Burger King U.S. franchisees to about 400 to 500 in the next five years from the roughly 300 today.
Restaurant Brands’ overall sales in the quarter ended December 31, 2023, rose 7.8%, to $1.82 billion from $1.69 billion a year earlier (all amounts except share price and market cap in U.S. dollars). Same-store sales rose 8.4% at Tim Hortons, 6.3% at Burger King, 5.5% at Popeyes, and 3.5% at Firehouse Subs. The company earned $0.75 a share before one-time items in the quarter, up 4.2% from $0.72.
The company raised your quarterly dividend by 5.5% with the April 2024 payment, to $0.58 U.S. a share from $0.55 U.S. The new annual rate of $2.32 U.S. yields 3.1%.
The stock also trades at a reasonable 21.5 times the projected 2024 earnings of $3.44 a share.
Recommendation in The Successful Investor: Restaurant Brands Int’l Inc. is a buy.
