Burger King owner makes $1 billion cash acquisition
Restaurant Brands International is buying the largest Burger King franchisee in the United States in a move that will accelerate restaurant remodels.
The company had entered into a deal to acquire Carrols Restaurant Group for $9.55 per share in an all cash transaction, for a total enterprise value of approximately $1.0 billion. The deal is expected to close by the second quarter of 2024.
Carrols is the largest Burger King franchisee in the United States, operating 1,022 Burger King restaurants in 23 states that generated approximately $1.8 billion of system sales during the twelve-months ended September 30, 2023. The company also owns and operates 60 Popeyes restaurants in six states.
The transaction is part of Restaurant Brands’ multi-point rejuvenation effort, called “Reclaim the Flame,” to accelerate sales growth and drive franchisee profitability. Launched in September 2022, the plan includes a $250 million investment for a "Royal Reset" modernization program, which includes remodels of approximately 800 locations to a more modern image.
Restaurant Brands expects to significantly accelerate Carrols' current rate of remodels. The company plans to invest approximately $500 million, funded by Carrols’ operating cash flow, to remodel about 600 of the acquired restaurants that are not currently considered “modern image” and then sell most of the acquired locations to local franchise groups.
“This acquisition is an exciting accelerator to our Reclaim the Flame plan that is focused on relentlessly pursuing a better experience for our guests,” said Tom Curtis, president of Burger King U.S. and Canada. “We are going to rapidly remodel these restaurants over the next five years or so and put them back into the hands of motivated, local franchisees to create amazing experiences for our guests."
Following the refranchising of the acquired restaurants, which is expected to be completed in five to seven years, Burger King will maintain a company restaurant portfolio of a couple of hundred restaurants for “strategic innovation, training, and operator development purposes.”
"This is a terrific example of our commitment to put our capital to work to accelerate growth and support Tom and his team in their broader efforts to have a more competitive Burger King restaurant base,” said Josh Kobza, CEO of Restaurant Brands. “The strategic merits of this acquisition are very compelling and consistent with our objective to invest our capital in long-term, high-return opportunities."
Founded in 1954, the Burger King brand is the second largest fast food hamburger chain in the world. The Burger King system operates more than 19,000 locations in more than 100 countries and U.S. territories. Almost 100% of Burger King restaurants are owned and operated by independent franchisees.
J.P. Morgan acted as financial advisor and Paul, Weiss, Rifkind, Wharton & Garrison acted as legal advisors to RBI. Jefferies LLC acted as financial advisor and Milbank LLP acted as legal advisor to the Special Committee of the Carrols board of directors.