Restaurant Brands International: Stock of the Week

How Tim Hortons is taking the torch as Burger King’s flame-grilled reign cools.

Andrew Willis 23 May, 2023 | 4:12AM
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Andrew Willis: Among the family of fast food chains that make up Restaurant Brands International (QSR), Tim Hortons must be the favourite sibling.

And I’m not just saying that as a Canadian. The turnaround at Tims we’ve seen recently is a shining glimmer of hope after owners 3G Capital had been struggling to accelerate growth. There’d been cost-cutting, franchisee angst, and negative annual sales growth in the three years before the pandemic…  

But a well-placed 80 million bucks in 2021 towards marketing, and revamped coffee, sandwich and breakfast offerings have improved franchisee relationships. Tims is now management now targets annual sales growth in the positive 2-3% range.     

Meanwhile, at Burger King, the whopper has been having some trouble standing its ground against both Mcdonald’s and Wendy’s in domestic markets. In response, management at RBI launched a 400 million dollar “Reclaim the Flame” initiative. Equity analyst Sean Dunlop says the company may have found the conviction to do so after the Tim Hortons turnaround success, but maintains that the BK ship’s domestic decline is largely irreversible at this point.

Burger King does have better sales internationally, but Tims and Popeye’s locations abroad now make up nearly a fifth of RBI’s entire systemwide sales. Lastly, this brings us to a rising star in the RBI family with Popeye’s and potentially over 8,200 global restaurants in the next decade, all serving “the sandwich” as it’s known now.

For Morningstar, I’m Andrew Willis.


bulls Bulls Say

  • Burger King’s international portability, strong cash-on-cash returns abroad, and relationships with franchise partners should drive mid- to high-single-digit system sales growth through 2027.
  • Tim Hortons traction in Asia-Pacific could allow RBI to push unit growth beyond Canada, unlocking value that likely represented a key rationale for the 2014 acquisition.
  • Propelled by the Chicken Sandwich, Popeyes has established a viable route to becoming a mainstream brand in the crowded domestic market.

bears Bears Say

  • The Burger King U.S. business (about 40% of segment EBITDA) remains in trouble, with two recent franchisee bankruptcies in the U.S. posing questions about the viability of that brand's economic model in its home market.
  • Burger King’s reliance on less profitable value-oriented customers and discounting could stymie growth in average check as customers trade down the menu.
  • RBI may struggle to pass through elevated technology investment costs to franchisees as restaurant margin and franchisee EBITDA remains tighter than at QSR competitors.


Editor's Note: All images are courtesy of and AP Images. 

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Restaurant Brands International Inc95.13 CAD0.51Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar Canada. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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