RBI International CEO Josh Kobza had plenty of positive remarks on Burger King’s performance internationally.
He recalled a recent trip to Japan, where he firsthand saw “dramatically” improved performance and the brand’s designation as the “clear winner for best burgers in the market.” There are now almost 250 stores in the country, with growth coming at 40 to 50 units per year. The company also saw notable growth in Australia, Spain, South Korea, and the U.K. Each of these markets saw acceleration compared to Q2.
But then there is China.
The chain has struggled so much that it recently sent termination notices to China master franchisee BK China. The operator apparently disputed these notices, and the two sides are in a “dispute resolution process,” Kobza said.
“We are in active discussions with the master franchise in an effort to reach an amicable solution,” the CEO said during RBI’s Q3 earnings call. “We believe this is a short-term situation, and we are committed to the long-term success of the business in China.”
RBI said Tuesday that it expects net restaurant growth in the mid-3 percent range for 2024, below its long-term target of 5 percent. About 100 basis points of the shortfall are due to Burger King China, which is experiencing a “significant year-over-year deceleration,” according to CFO Sami Siddiqui.
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Earlier in the year, RBI expected net restaurant growth in the mid-4 percent range, again, due to insufficient investment from Chinese partners. At the time, Kobza told investors there was some “question on the outlook and kind of appetite and alignment for growth” within the country.
The CEO remains optimistic about Burger King’s prospects in China.
“I would tell you that the business performance there has been challenging in the short run, but I tell you, we are all very committed and very excited about the long-term prospects for the Burger King business and all of our businesses, frankly in China,” Kobza said. “It’s the number two QSR market in the world. We think we have brands that have every right to win in that market and we’re going to make the right decisions to support that long-term growth.”
While Burger King China is struggling, RBI has made progress on boosting Popeyes and Tim Hortons. In July, the company announced a $45 million investment to grow in China, including a $15 million purchase of Popeyes China and pouring $30 million into developing Tim Hortons China.
As of June 30, there were 907 Tim Hortons shops in China, up from 700 stores last year. However, same-store sales fell 14.6 percent in Q2 after falling 13.6 percent in Q1. There were 21.4 million loyalty club members as of June 30, an increase from 14.7 million members a year ago. Popeyes entered China in August 2023 and had 14 restaurants in Shanghai by July.
RBI chairman Patrick Doyle said that relatively speaking, Burger King, Tims, and Popeyes are early in their journey in China. He called out Starbucks, McDonald’s, Domino’s, and Yum! Brands as the biggest competitors, all of which are at a point where cash flow is enough to manage day-to-day operations and fuel growth. Meanwhile, RBI’s concepts still need fresh capital to spark development and reach long-term scale.
“We are very bullish on the medium and long term, but we’ve got some things that we’ve got to work through, and it still requires some capital,” Doyle said. “So I wish right now, as China became more complicated, that we were a little bit further along on that journey, but we’re committed to getting there and we’re going to work through it. And one of the things I believe in strongly on everything is we’re not just going to talk about the things that are going well in our business. We’re going to talk to you about the things where we think we need to make improvements. And that’s not only important for you to know, but it’s important for franchisees and team members who are listening to this call to know that we talk about things we need to get better at. We’re serious about it, and we’re going to talk to you the same way we talk to everybody else about where we need to make improvements.”
Here’s how RBI’s other key business segments performed in Q3:
Popeyes U.S.
Same-Store Sales: Declined by 3.8 percent.
Key Developments:
- Introduced a $5 three-piece chicken deal and a $6 Big Box in September and October to better meet consumer value demands.
- Digital sales grew by 21 percent year-over-year, representing 28 percent of total sales.
- Continued focus on simplifying kitchen operations and exploring new formats to improve accessibility.
- 3,107 stores in the U.S.; 1,352 internationally.
Tim Hortons Canada:
Same-Store Sales: Increased by 2.7 percent, primarily driven by traffic growth.
Key Developments:
- Expanded its afternoon food offerings with flatbread pizzas and “Anytime Snacker,” driving a 5.2 percent year-over-year growth in afternoon food sales.
- Cold beverage sales rose 7 percent year-over-year, boosted by popular offerings like Nutella-flavored drinks.
- Drive-thru operations improved with faster service times.
- 3,861 stores in Canada; 1,374 internationally
Firehouse Subs:
Same-Store Sales: Declined by 4.8 percent.
Key Developments:
- Brought back the fan-favorite Hot Sauce Bar in September to boost the guest experience.
- Net restaurant growth reached 3.9 percent year-over-year with 49 new units, marking a 60 percent increase from last year
- Focused on expanding unit development, preparing for accelerated growth in 2025.
- 1,211 stores in the U.S.; 21 internationally.
