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Add some lighter fluid to Burger King’s flame-grilled Whopper-centric performance.
After years of failure and amid a series of investments, Restaurant Brands International (QSR) finally appears to be turning a corner with its most iconic brand.
Shortly after the company concluded its investor day on the New York Stock Exchange on Thursday, Restaurant Brands CEO Josh Kobza told Yahoo Finance Live that BK’s resurgence is real and better operations are a big factor. he said.
Evidence of the turnaround lies in a special source, or result, of the company’s most recent quarter.
Burger King US’s same-store sales increased 6.4% in the fourth quarter (up 5% in the same period last year). The Whopper maker also boasted an increase in customer numbers for the first time since Q2 2021.
For all of 2023, Burger King’s U.S. same-store sales rose 7.5%, compared with just 2.2% a year earlier. Perhaps more importantly, Burger King US increased franchisee profitability by nearly 50% as underperforming restaurants closed and traffic trends improved.
Executives attribute BK’s improvement to several factors.
First, we are actively marketing activities centered on new menu items such as “Royal Crispy Wrap.” The company also launched a catchy campaign this month to award his $1 million to participants who create the next version of the Whopper.
Second, the initial profits from the millions of dollars spent supporting renovated, more futuristic-looking restaurants.
And finally, the discount rate on the famous Whopper goes down.
These efforts are collectively known internally as “Reclaim the Flame.”
“Profitability of BK franchisees is strong (up to 46% increase) [year over year]) Our hypothesis that Reclaim the Flame’s acceleration is gaining momentum is being verified. ” bernstein analyst Danilo Gargiulo told Yahoo Finance.
Burger King is the largest chain of restaurant brands in the United States with 6,778 locations, followed by Popeyes and Firehouse Subs. This franchise is also the company’s largest overseas, with 12,240 locations, far exceeding the 1,308 locations of Tim Hortons in its home base of Canada.
In a show of confidence, Restaurant Brands announced in mid-January that it would acquire Carroll’s Restaurant Group (TAST) for about $1 billion in cash. Carroll’s owns approximately 1,022 Burger King restaurants and 60 Popeyes in 23 states.
Ownership of Carroll’s should allow Restaurant Brands to invest more directly in important initiatives such as renovations, Restaurant Brands executive chairman Patrick Doyle said on Yahoo Finance Live.
Burger King US’s quarterly results come as the company posted increased sales across its portfolio.
Despite the progress, restaurant brands stocks continue to underperform the broader market. Over the past year, the company’s stock is up 14%, while the S&P 500’s stock is up 23%.
Gargiulo says Wall Street wants restaurant brands to check a few boxes before getting even more bullish.
This includes accelerating the pace of growth overseas and improving BK’s performance in its key market of China.
Another factor is uncertainty about the speed of Burger King’s renovations in the U.S., with “Reclaim the Flame’s budget shifting from renovations to refreshes, suggesting a decline in franchisees’ desire to remodel.” Gargiulo added:
Brian Sozzi I’m the executive editor of Yahoo Finance. Follow Sozzi on Twitter/X @BrianSozzi And even more linkedin. Have a tip about a deal, merger, activist situation, or more? Email brian.sozzi@yahoofinance.com.
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