- Burger King's owner is buying the chain's largest franchisee in a deal valued at $1 billion.
- Restaurant Brands International plans to invest $500 million remodeling 600 Burger Kings.
- The move comes as Burger King has pushed for remodels of top outlets while closing others.
Burger King's owner is going into the flipping business.
Restaurant Brands International, the parent company of Burger King and Popeyes, announced plans Tuesday to buy more than 1,000 fast-food restaurants from its largest Burger King franchisee.
The deal with New York-based Carrols Restaurant Group, which also includes 60 Popeyes restaurants, is valued at $1 billion.
RBI said it plans to invest $500 million in modernizing roughly 600 Burger King restaurants. After rapidly remodeling the stores over the next five years, the company plans to "put them back into the hands of motivated, local franchisees," Tom Curtis, president of Burger King US and Canada, said in a statement.
RBI said the acquisition and flipping of the Burger King restaurants are an "exciting accelerator" to its overall "Reclaim the Flame" plan. The $400 million turnaround plan, first introduced in September 2022, calls for upgrading 800 of the company's top fast-food restaurants.
At the time, the company said it would earmark $250 million for remodeling restaurants owned by Burger King franchisees "in good standing." The operators also agreed to increase their royalty rate in exchange for receiving capital.
With the Carrols acquisition, RBI said it "expects to significantly accelerate" the rate of remodels at Carrols restaurants from 45 planned in 2024 to 120 per year over the next five years.
RBI said in a Tuesday conference call with investors that the strategy is to sell a smaller number of remodeled restaurants to new or existing Burger King franchisees who live close to the communities where the stores operate. New operators would own 50 restaurants or fewer.
The company said the remodeled Carrols restaurants will
lead by example" as the goal is to fully modernize all restaurants by around 2028.
As of September 30, 2023, RBI has funded a total of $45 million in high-quality remodels and relocations, restaurant technology, kitchen equipment, and building enhancements, according to a regulatory filing.
Stephens analyst Joshua Long said the acquisition "makes sense" for RBI as the "Carrols organization is viewed as a strong operator."
"We believe this transaction supports the broader Reclaim the Flame plan by accelerating the brand revitalization efforts already underway while also filling the Burger King remodel pipeline with stores that offer strong and improving operations," Long wrote in a note.
The acquisition comes as Burger King has struggled with relevancy while rivals such as McDonald's and Wendy's have made gains with consumers through nostalgic marketing campaigns and the introduction of breakfast, respectively.
Burger King has been trying to refresh the brand for a few years. In 2021, the chain overhauled logos and branding for the first time in 20 years, returning to a classic look that emphasized the Whopper and natural colors.
The chain spent much of 2022 paring down menus to simplify operations and give customers a better ordering experience. Last year, the chain also introduced chicken wraps.
In May 2023, Kobza said the chain would close up to 300 to 400 restaurants during the fiscal year. He said that would equal the number of closures the chain closed during the pandemic. Last year, Burger King operators closed dozens of restaurants in Florida, New York, Nebraska, Utah, and Minnesota.
Are you a fast-food insider with insight to share? Got a tip? Contact this reporter via email at [email protected] or via Signal encrypted at 714-875-6218.
