José Cil’s great aunt was a seamstress. One of her well-worn lines was, “measure twice so you only have to cut once.” The CEO of Restaurant Brands International shared this anecdote recently with franchisees. Calls had started to pour in to Cil and the company’s president of international, David Shear. Operators wanted a piece of Firehouse Subs.

In mid-November, the Burger King, Tim Hortons, and Popeyes owner announced it agreed to acquire the 1,200-unit sandwich chain for $1 billion in an all-cash deal. On its surface, the move, which closed December, added a jigsaw piece so often coveted by restaurant conglomerates. It gave RBI an emerging, growth-ready player in America’s $30 billion quick-service sandwich category to join chicken, burger, and beverage strongholds. For its part, Firehouse approached the M&A table having tripled its unit count since 2010. Founded by brothers and former firefighters Chris and Robin Sorensen, it was a privately held company since unit one in Jacksonville, Florida, to the moment it joined RBI.

The brand’s history wasn’t pitted by setbacks and leadership shakeups over the decades; it was merely ready for its next act. And RBI franchisees were eager to add a chain that’s domestic same-store sales rocketed 21 percent in 2021 and 20.6 percent across two years. Firehouse’s record-high $900,000 average-unit volumes drove systemwide sales north of $1.1 billion, which sailed 2020’s $872 million. Twenty-seven percent of the business flowed through digital channels. AUVs in Q1 2022 inched even higher to $920,000 on a trailing 12-month basis.

But Cil’s message was clear. While Firehouse’s runway is undeniable, there’s more opportunity than a first look-over might uncover.

“We’re spending time doing the measuring and making sure we have the right place so we only have to cut once,” Cil says.

The deal between RBI and Firehouse began on common ground. Firehouse CEO Don Fox spent 23 years at Burger King, from 1980–2003. Three of those—2000–2003—overlapped with Cil. Although they didn’t cross paths (Fox was in field ops and Cil in legal) their shared history offered a starting point.

About six weeks before the deal was announced, Fox and Cil met. Fox says there was “instant chemistry and energy” that, frankly, wouldn’t have been possible with anybody else.

Cil, to that point, knew Firehouse best as a consumer. In the years he traveled Florida visiting Burger King pads, and the 10 months he worked as a regional general manager for Walmart, he often found himself eating at the inline locations that sparked Firehouse’s growth.

“And that’s how I got to know the brand and fall in love with it,” Cil says, “because the product was great and the service was great, and it resonated with me.”

Cil and Fox simply had a lot to talk about.

But back to that whitespace

One of RBI’s defining traits since forming in the wake of a 2014, $11 billion takeover of Tim Hortons, has been net-unit expansion. Burger King was growing by roughly 170 units per year when 3G Capital spent $1.56 billion and grabbed control 11 years ago. Ahead of COVID, Burger King pushed about 1,000 locations each calendar turn. Popeyes opened 216 restaurants the year before RBI jumped in and there were 2,725 stores on December 31, 2016. Today, there are about 3,851 globally and Popeyes, in 2021, experienced the highest number of openings since RBI bought it in 2017—unit growth of 7.4 percent, or a net of 254 stores. The chain, which RBI forked up $1.8 billion for, expects to eclipse the 200 figure again this year.

Firehouse presently operates in three countries and territories. Burger King is in more than 120, Tim Hortons over 10, and Popeyes clear of 30.

There are 47 Firehouse Subs in Canada—the first opened 2015 in Ontario—and AUVs, generally, perform above the company’s system average.

Just for context, Subway boasts close to 3,000 stores in that market. RBI? More than 4,500 across its three brands. Cil says 80 percent of Canadians visit Tim Hortons’ 3,900 or so venues every month.

If you take a higher-level view, RBI’s footprint sits near 29,747 restaurants, and roughly 18,000 operate outside the U.S. As of November, it had more than 500 outposts in China (1,620), Brazil (928), Spain (897), Russia (792), Germany (744), and the U.K. (538); and more than 400 in Mexico (450), Australia (443), South Korea (425), and France (416).

Firehouse has zero restaurants in any of those spots. There are 52 international Firehouses, if you count Puerto Rico. And to toss an even more alluring point forward, outside of Spain, where there are only 50, a sandwich chain not named Firehouse touts at least 384 locations in every one. Australia (1,221), the U.K. (2,211), and Brazil (1,641) feature significant bases.

The U.S. picture isn’t one to gloss over, either. Subway has retracted by 3,651 stores since 2019. The broad, year-end 2021 domestic sandwich field: Subway, 21,147 locations; Arby’s, 3,409; Jimmy John’s, 2,657; Jersey Mike’s, 2,100; Panera, 2,080; Firehouse, 1,044; McAlister’s 505.

“You have this underlying mechanism and culture of growth that then will carry over into our brand,” Fox says. “If I’m a potential franchisee, I’m just thinking about the horsepower and the level of experience that’s behind that. … I’ve been in the industry for many years and I’m fairly well known, but if you think about the ownership of Firehouse, it’s not per se. So it really changes the dynamic quite a bit, I think, for any potential franchisee looking to invest.”

“It’s so energizing when you know you’ve got these great, great assets that consumers love,” Fox says. “And know it’s more like fine tuning, with the technical side of the business to really unleash it.”

In February, Firehouse added a new member to its C-suite for the first time in 11 years (the position sat vacant since 2009 when Fox was promoted to CEO). Mike Hancock, a 6-foot-7 former defensive end who played in the CFL with the Toronto Argonauts, joined as chief operating officer. The nine-year RBI vet held the same post at Tim Hortons. Before, he clocked five years at Burger King directing operations across North America, Southern Europe, Turkey, and Africa.

The move wasn’t a cryptic one—it was a signal sender. “That just adds great firepower to an already great team,” Fox says.

“He’s been operating in an arena where we aspire to go,” he adds of Tim Hortons. “So that real-world experience is of incredible value. And again, I’ve been in the industry for 48 years, but I haven’t operated at a level with a 5,000-unit brand.”

Bringing Firehouse On

Since close, Cil says RBI worked to integrate and elevate Firehouse. On the back-end, it’s connected the chain to RBI’s infrastructure—accounting, IT, and financial systems.

RBI has more than 200 engineers working through tech. The company created an in-house stack, including loyalty programs and a CRM engine. It’s also invested in white-label delivery alongside aggregator partnerships and continues to update menuboards to dynamic digital formats across the system, with an added focus on suggestive sell capabilities.

Firehouse already had a mobile app complete with order and pay and loyalty capabilities, as well as more than 3.5 million members. In 2021, 2 to 2.5X more dollars came via off-premises channels than pre-COVID-19. That October, 14 percent of sales owed to delivery alone. Rewards grew at a clip of 50,000 users per month and reached 10 percent of Firehouse’s total transactions.

“It’s so energizing when you know you’ve got these great, great assets that consumers love,” Fox says. “And know it’s more like fine tuning, with the technical side of the business to really unleash it.”

Cil says the more important integration piece, perhaps, is the “business standpoint mindset.”

With Fox now in the fold, RBI has a team of four presidents running each brand. They meet once a week and chat about performance and perspectives. Cil calls it a “sharing of best practices” that’s gone both ways since Firehouse arrived.

It extends from HQ analytics to site selection to format innovation and franchise recruitment. Yet it rests on economics, Cil says. “There’s no gaming that,” he notes. “You’ve got to have strong revenues, strong profitability, a good return on investment for a franchisee to invest and grow. And we think we have a great case here, and Mike and Don and the rest of the team will help accelerate that in years to come.”

One element Cil believes RBI can learn from Firehouse is its Public Safety Foundation. The program awarded $69 million over the years to “hometown heroes” and benefitted 5,700-plus organizations. Recently, RBI hosted its first Firehouse Public Safety Foundation event after it donated 17 automatic external defibrillators—good for $25,000—to the West Miami Police Department. The chief, major, and newly appointed mayor showed up. A speaker shared how a previously donated defibrillator saved a life in the last year.

“That’s pretty tangible,” Cil says. “And very direct and super powerful message for all of us. And for our team as well.”

At Tim Hortons, more than $27 million (cad) was raised in 2021 and early 2022 for the chain’s “Foundation Camps” and other initiatives. Burger King has provided nearly $55 million in scholarships to high school seniors and corporate and franchisee employees since 2002. The Popeyes foundation donated over $1.2 million to Support No Kid Hungry as of March.

So it’s yet another synergy RBI wants to build on, Cil says.

Returning to growth

Cil adds RBI isn’t in a hurry to open Firehouse units just because it can. “What we’re doing now is taking time to do the research, to understand what consumers expect from the sandwich category in these markets that we think have the potential for growth,” Cil says. “We’re doing research on product; on taste; on naming conventions for products. We’re thinking about what types of formats; how does technology fit in; what’s the right price and menu architecture to consider; and format innovation.”

Just like its expansion prospects in general, Firehouse has ample room to maneuver here, too. Through the first four weeks of the pandemic, Firehouse’s sales plunged 45 percent, year-over-year. The Monday of COVID’s “official” landing (March 16), it stopped collecting royalties. A day later, Firehouse did the same for ad fees. In fact, it would be months before the brand asked operators for either, and even then, it came as deferred payments.

The goal, Fox says, was to keep cash in the wallets of franchisees and provide them with ammo for whatever twist came next. However, what ended up happening was a return to prior-year levels after only 10 weeks. Come summer, Firehouse forgave deferred royalties and surged ahead.

“For us, what was very compelling was that the pandemic, and the initial stage of it, produced an environment where people in increasing numbers used us in a way that was perhaps different than they considered using us before,” Fox says.

But the positive spin was Firehouse had already begun to consider this. COVID didn’t invent off-premises realities as much as it provided kindling. The brand completed digital and packaging work pre-2020.

In 2012, Firehouse’s dine-in business accounted for 52.4 percent of sales (unusual for a sandwich shop, as most of its rivals were predominantly takeout, Fox notes). During succeeding years, the contribution from dine-in began to decline. In 2014, it dropped narrowly below 50 percent. Two years later, dine-in mixed just 46.5 percent. Fast forward to 2019 and it was down to 38 percent.

This was hardly a Firehouse-specific tale. From 2012–2019, fast casual showed a 5 percentage-point decline in dine-in. And more telling during the same span—a drop of 17 percentage points for a hefty collection of quick-service brands.

Close to 90 percent of Firehouse’s sales in 2012 came from a customer placing an order with a cashier at the point of sale. In 2019, the share of what the chain considered its “traditional channel of trade,” slid to 75.3 percent. Meanwhile, looking at 2012–2019, catering, online ordering, third-party delivery, drive-thru, and even phone orders, all grew.

Traditional ordering dropped below 40 percent of sales during COVID depths. It returned to 56 percent by year’s close.

The key here, Fox says, is Firehouse had assets in place. It only had to lay into advertising and promotion to jumpstart awareness. RBI can help with that.

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“And that traffic that we’ve picked up has been lasting,” he says. “People are continuing to use us in that off-premises experience.”

Firehouse’s “Rapid Rescue,” or internal online ordering, plus third-party delivery, remains double what it was in 2019. “It has created a fundamental shift in how the consumer uses us,” Fox says. “I get so excited by the fact that RBI’s strategy was already in line with that in terms of the embracing of digital in particular. … Being able to leverage those resources, it’ll be much more impactful than if I had been left to my own devices under private ownership for the foreseeable future.”

Fox says RBI’s tools will help the company anticipate further change as the sector’s recovery marches on. In particular, the deal instantly gave Firehouse a drive-thru playbook that stems from operating more than 12,000 across North America.

Firehouse has nearly 70 today and they’re over-indexing sales in most cases, Fox says. The sandwich industry, in general, is not rife with windows like, say burgers are, which is one reason the category rebounded slower. “The vast majority of the system is in traditional in-line units, but in every instance where the business case is strong to look for drive-thru locations we’ve leaned into that,” Fox says.

As noted before, RBI spent the last 12–18 months modernizing its drive-thru fleet. Namely around digital menuboards. Those learnings are going to cascade to Firehouse.

“We think there’s an opportunity there to share best practices and you can basically cut to the chase versus iterate, which many of us have had to do over the past five, six years,” Cil says.

Adds Fox, who pushed “more Whoppers out windows than I can ever count,” in his 23 years with Burger King: “RBI can quickly make us better drive-thru operators. We are a great sandwich brand. We know how to make the best food. Do we have opportunity to learn how to serve it better?”

All told, Fox says, there are clear, myriad ways to grow Firehouse and generate more transactions. But it’s going to start with guest experience.

What he wants to bring to the portfolio from Firehouse “is that love of Firehouse.” RBI’s value core of “building the most-loved restaurant brands in the world,” is a vision Fox feels the chain fits right into.

“The thing is, we just have to make more customers aware of us so even more people can love us,” he says.

Business Advice, Customer Experience, Fast Casual, Fast Food, Finance, Franchising, Restaurant Operations, Special Reports, Firehouse Subs