Restaurant Brands International (RBI), the parent company of Burger King, has agreed to acquire Carrols Restaurant Group, its largest Burger King franchisee in the United States, in an all-cash deal valued at $1 billion.^[1][2][3][4] The deal will give RBI ownership of over 1,000 Burger King locations, making it one of the largest restaurant acquisition deals in recent years.^[5]
Key Details of the Acquisition
- RBI will pay $13.50 per share for Carrols, representing a premium of 13% to Carrols’ closing share price on January 13th.^[6]
- The deal is expected to close by the end of 2024, subject to shareholder and regulatory approval.
- RBI sees opportunity to accelerate remodels and upgrades for the acquired Burger King locations.^[7] Over 90% of the locations are drive-thrus, which performed well during the pandemic.^[8]
Carrols operates over 1,000 Burger King restaurants under franchise agreements across 23 states in the Northeast, Midwest and Southeast regions of the U.S.^[9] The company has been Burger King’s largest franchisee for over 20 years.^[10]
For RBI, owner of Burger King and other quick service restaurant brands like Popeyes and Tim Hortons, the deal provides an opportunity to consolidate ownership and operations of a large portion of Burger King locations in the United States.
“We have confidence in the long-term growth prospects for Burger King in the U.S. and internationally and are pleased with this opportunity to further strengthen our partnership with Carrols,” said José Cil, CEO of RBI.^[11]
Background Leading up to the Deal
RBI has been seeking to turn around struggling performance in Burger King amid rising inflation and labor costs that have challenged franchisees.
Same-store sales growth for Burger King in the U.S. declined by 1.8% in 2022 compared to the previous year, while Popeyes and Tim Hortons saw growth.^[12] RBI has been pushing a revamp of the Burger King brand in recent years to modernize stores and boost sales.
Meanwhile, shares of franchisee Carrols have plunged in recent years, losing over 70% of their value since early 2020 as rising costs and slowing sales took a toll on profitability.^[13] The company reported a net loss of $23.1 million in the third quarter of 2022.^[14]
The challenges faced by the Burger King brand and declining value of franchisee Carrols set the stage for RBI to swoop in and acquire full ownership of a large franchisee partner. RBI likely sees an opportunity to turn struggling locations around with a centralized ownership approach.
“We believe there is room for Burger King U.S. to improve its performance relative to many QSR peers and that full ownership of BURGER KING® restaurants is the right long-term model,” said Josh Kobza, COO of RBI.^[15]
What Happens Next
The deal marks a major consolidation of Burger King restaurant ownership under RBI, which is expected to accelerate remodels and upgrades of the newly acquired locations.
RBI has committed to remodeling nearly the entire system of restaurants within the next few years, including the newly acquired Carrols locations.^[16] The focus areas for upgrades will be kitchen equipment, drive-thru technology enhancements, restaurant reimaging, and improved accessibility.^[17]
Table: Carrols Restaurant Group at a Glance^[18]
| Statistic | Value |
|---|---|
| Burger King Restaurants Owned | 1,106 |
| States Operated In | 23 |
| Employees | Over 28,000 |
| 2022 Revenue | $2.05 billion |
The remodeling efforts could help provide a sales lift to Burger King, which has struggled amid rising inflation and stiffer competition from rivals like Wendy’s, McDonald’s and Chick-fil-A.
Following closure of the deal, shares of Carrols will no longer be publicly traded. The transaction is expected to close by the third quarter of 2024.^[19]
For franchise employees working at Carrols locations, the deal provides more job stability by consolidating ownership under the well-capitalized RBI umbrella. No significant job losses are expected as part of the transition.^[20]
The deal reflects growing consolidation in the restaurant franchise industry, as major brands acquire more company-owned locations to gain greater control over operations, menus and branding.^[21]
While financial terms were not disclosed, RBI expects the deal to immediately add to its diluted net earnings per share.^[22] Cost synergies through leveraging RBI’s operating scale are also expected.
The $1 billion cash acquisition represents a major bet by RBI on reigniting growth for Burger King in a challenging market. With full ownership of over 1,000 locations, RBI now has more control to implement the turnaround plans to modernize stores and boost sales.
The months ahead will reveal whether the deal pays off in better performance for Burger King and its ambitious parent company RBI.
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