Food & Drink

Restaurant M&A Activity Continues As Burger King Parent Adds Firehouse Subs In $1 Billion Deal

Restaurant Business International, parent company of Burger King, Popeyes and Tim Hortons, announced the acquisition of 1,200-unit Firehouse Subs Monday in a $1 billion, all-cash deal. The acquisition supports RBI’s goal of reaching 40,000 restaurants globally.

The deal is the largest in the restaurant industry this year–a worthy footnote given the red-hot mergers and acquisitions market, which has been driven by pent-up demand, low interest rates and the industry’s continued recovery.

It’s also driven by the need to maximize resources and efficiencies and strive for economies of scale–a solid business plan made more appealing by the crisis environment. A quick summary of the most recent round of earnings proves the big have gotten bigger in the past year and, as a result, they have been relatively insulated from current challenges like labor and commodity inflation versus their smaller peers.

Firehouse is likely to also benefit from folding into a major, multi-brand company with vast resources and technology infrastructure. In a release, the company stated the transaction will “augment Firehouse Subs’ capabilities by leveraging RBI’s in-house tech-stack, engineers and continued investments in digital and technology to accelerate the brand’s digital transaction.”

During RBI’s Q3 earnings call Oct. 25, CEO José Cil said the company is experiencing “robust free cash flow” that is being used to invest in the creation of in-house technology and digital teams. This effort will no doubt boost Firehouse’s digital presence, which currently includes a 3.5-million member loyalty program representing over 10% of its transactions.

RBI also notes the acquisition offers “significant long-term growth potential to drive attractive returns” and is expected to be “immediately accretive” to the company’s diluted net earnings per share. This is likely welcomed news as RBI’s Burger King simply hasn’t performed to the level of its burger peers throughout the past year-plus. The chain’s Q3 same-store sales were down by 1.6%, for example, compared to a positive 9.6% for McDonald’s and a positive 2.1% for Wendy’s. This is despite the launch of an upgraded yet differentiated chicken sandwich–a tactic that has clearly worked for its sister chain Popeyes throughout the past two years.

In fact, at some point in the past year and a half, Wendy’s surpassed Burger King as the No. 2 burger chain in the industry and the company has experienced a carousel of executives leaving as well, including president Chris Finazzo and CMO Ellie Doty.

Firehouse has been around since 1994 and has steadily grown since through a 97%-franchised system. Since 2010, it has tripled its unit count and is expected to yield about $1.1 billion in systemwide sales this year. It’s also fared relatively well on this side of the pandemic, with comp sales up 20% since 2019.

In a statement, Cil said, “Firehouse Subs is a special brand with a talented team, impressive culture and community focus that resonates with guests and closely aligns with our core values at RBI. We see tremendous potential to accelerate U.S. and international growth at Firehouse Subs with RBI’s development expertise, global franchisee network and digital capabilities.”

Notably, Firehouse Subs is differentiated from RBI’s other three concepts as part of the sandwich category, which is expected to grow by 3% through 2024. This diversification of RBI’s roster allows its franchisees to grow without potentially cannibalizing competitive concepts, and also enables the company to cater to shifting consumer tastes.

RBI expects the deal to close within the next few months. Firehouse’s headquarters will remain in Jacksonville, Florida, and CEO Don Fox and CFO Vincent Burchianti are expected to stay on board.


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