Restaurant Brands International to Revamp 600 Carrols’ Burger King Locations by 2029
Restaurant Brands International Inc. (RBI), a franchisor of several fast-food brands, announced Tuesday that it will buy Carrols Restaurant Group, the largest U.S. Burger King franchisee, for about $1 billion in cash. Restaurant Brands plans to purchase all of the issued and outstanding shares of Carrols Restaurant Group Inc. that it doesn’t already hold for $9.55 per share, the Associated Press reported. The deal will be financed with cash on hand, The Wall Street Journal reported.
The market size of the burger restaurant industry in the United States was approximately $170.1 billion last year, Ibis World estimated. McDonald’s dominates the market, with Burger King and Wendy’s rounding out the top three players.
Statement from Carrols
“Today’s announcement is a testament to our more than 24,000 Carrols team members who have helped drive the company to record levels of profitability over the past 12 months,” Carrols CEO Deborah Derby said in a statement. Carrols’ stock was the best-performing restaurant stock in 2023, with its valuation rising almost 500%, Restaurant Business said in a report about the transaction.
Carrols operates 1,022 Burger King units, AP reported. Carrols’ existing operations team will run the restaurants, Restaurant Business reported. Carrols operates about 15% of the roughly 6,770 Burger Kings, Bloomberg reported Tuesday.
Looking to Revitalize
The acquisition of Carrols, which operates franchises in about two dozen states, reflects a temporary alteration of strategy for Burger King. The fast-food burger brand’s restaurants have been almost entirely franchised for about 10 years, with only 75 corporate-owned locations, a CNBC report stated.
About a year ago, Toronto-based RBI took the wraps off a $400 million plan to revitalize sales in American Burger Kings, which had been overtaken by Wendy’s as the second-largest fast-food burger brand based on U.S. sales. The revival focuses on the remodeling of restaurants and aggressive advertising as part of its Reclaim the Flame initiative announced in 2022.
Ambitious Renovation Plans
RBI plans to remodel 600 of Carrols’ Burger King locations by early 2029 and then sell them to franchisees, Tom Curtis, president of Burger King U.S. and Canada, said in a statement. “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,” Curtis added.
To finance the renovations, RBI will invest about $500 million; that money will come from Carrols’ operating cash flow. Other major RBI brands include Popeyes, Firehouse Subs and Tim Hortons; Carrols also operates about 60 Popeyes units.
Wanted: Smaller BK Franchisees
In a conference call on Tuesday, CNBC reported that RBI CEO Josh Kobza told investors that the Carrols purchase “will allow us to really focus our attention on accelerating remodels and being thoughtful about how to refranchise this restaurant network into smaller packages, with new and existing franchisees who live close to the communities where they own the restaurants.” Burger King anticipates the refranchising of the acquired restaurants being completed in five to seven years, AP said in its article.
RBI will maintain ownership of roughly 200 Burger Kings for “strategic innovation, training, and operator development purposes,” CNBC stated.
Details of the Deal
The deal is expected to close by the end of the second quarter. But the transaction does include a 30-day “go shop” period during which Carrols can solicit alternative proposals from interested parties, the AP report indicated.
RBI stated that the purchase price for Carrols represented a 23% premium on the franchisee’s 30-day volume weighted average price as of Jan. 12 and a 13.4% premium on the Jan. 12 closing price, according to The Wall Street Journal report. The purchase by RBI requires approval from those that hold a majority of common stock held by Carrols stockholders excluding shares held by RBI and its affiliates and by Carrols officers, according to AP. The deal also will need approval from those that hold a majority of Carrols’ outstanding common stock, AP said.
