RBI also implemented bi-weekly all-franchisee calls to discuss the status of its “Winning Together” initiatives. “This improved frequency and quality of communication with our franchisees has helped to further bolster support within the Tim Hortons system. This quarter, Alex and his team also did several interviews with the media to provide updates on some of the great initiatives that we've been working on with our franchisees,” Schwartz said, adding that each month RBI meets with its Tim Hortons franchisee advisory board, comprised of 38 peer-selected franchisees, to discuss the business.
“Every fall, an open nomination process allows all franchisees the opportunity to seek election to our franchisee advisory board and a secret ballot vote is held annually where franchisees elect their representatives to our advisory board the outcome of which is determined by a majority vote,” he said. “These elected representatives of the franchisee community each give us hundreds of hours of their time every year and I think we haven't done enough talking about their important contributions to our business.”
Tim Hortons is also investing $100 million Canadian (about $767,000 U.S.) to strengthen its supply chain, including building two new distribution centers in Alberta and British Columbia and expanding its existing facility in Nova Scotia. The brand is working on a kids menu and ways to integrate loyalty, card-based and app-based, into its system as well.
Overall, the Tim Hortons news was more appealing to Wall Street than RBI’s other results. The company’s adjust earnings of 66 cents per share beat Thomson Reuters’ call of 63 cents. But revenue of $1.14 billion missed estimates of $1.37 billion.
Burger King, which achieved same-store sales gains of 3.8 percent in Q1, slowed to 1.8 percent growth in Q2, year-over-year. Popeyes’ comps hiked 2.9 percent off last year’s decline of 2.7 percent.
Schwartz said Burger King’s long-term sales story will generate some quarters stronger than others. But if you look back and ahead, it’s a powerful picture that doesn’t trail off. In the past seven years in the U.S., Burger King has increased its average-unit volume from $1.1 million to $1.4 million, “dramatically improving franchisee profitability,” along the way.
“We did it by renovating restaurants, improving operations, communicating to our guests through some award winning marketing and innovating and offering great products at affordable prices,” Schwartz said. “We continued to grow our business in the second quarter. We've always said that some quarters will be a little bit little stronger than others, and when we look out for the long run, we're confident that seven years from now or pick a time that we'll be able to kind of make similar statements that we'll be able to have grown our business significantly.”
Burger King lifted its systemwide sales 8 percent in the quarter driven by net restaurant growth of just over 6 percent and the positive comps. Growth in the topline resulted in Burger King recording adjusted EBITDA of $236 million for the second quarter or $232 million under prior accounting standards, a year-on-year organic increase of more than 6 percent. In the last eight years, RBI has increased Burger King’s systemwide sales by more than 40 percent from $14.8 billion in 2010 to $21.2 billion on a trailing 12-month basis.
On the evolving delivery topic, Schwartz said, “thousands of restaurants in the Burger King system all around the world [are] doing delivery now, and we’ve made that a major priority for us to increase that number. We have been increasing across a number of partners in the U.S. more recently and we’re continuing to expand the size of that test.”
In regards to Popeyes: “Popeyes' restaurants testing delivery in the U.S. have performed particularly well and we intend to further expand the number of restaurants offering delivery throughout the balance of the year,” he added.
Popeyes’ systemwide sales grew roughly 11 percent alongside 8 percent net restaurant growth and the 2.9 percent same-store sales gains. U.S. sales were up 1.8 percent. Popeyes had adjusted EBITDA of $40 million or $43 million, up 28 percent versus the prior-year period.
This was RBI’s first quarter where it lapped the revised G&A structure owner new ownership, since it purchased Popeyes at the end of Q1 2017. “We continue to see significant growth potential for the brand for many, many years to come, which will be driven by accelerated systemwide sales growth,” Schwartz said.
RBI also released two new point-of-sale register solutions to Popeyes’ franchisees, who have, for several years, “operated on a very antiquated point of sale technology with upwards of more than 40 different cash registers in operation across the U.S.,” Schwartz said.