Burger King on Tuesday morning shared better-than-forecasted sales as Q1 comps rose 3.8 percent on top of an 8.7 percent result from a year ago. Restaurant Brands International, which also owns Firehouse Subs, Popeyes, and Tim Hortons, posted revenue of $1.74 billion, which topped Wall Street predictions of $1.7 billion.
One of the lead drivers—Burger King’s September 2022 launched “Reclaim the Flame” plan—supplied $6 million (Fuel the Flame, including $5 million toward Burger King’s U.S. advertising plan), and $19 million (Royal Reset, including $9 million for remodels) worth of investments in the three-month period that ended March 31. As of that date, Burger King had funded a total of $79 million for “Fuel the Flame” and $81 million for “Royal Reset.”
And that’s about to accelerate.
Burger King announced, along with the sales figures, a plan to extend its “Long-Term Royal Reset Program” with an additional $300 million designed to speed “the modernization of Burger King restaurants across the U.S.”
As noted, it follows Burger King’s initial call to spend $250 million on a modern image, tech, and new kitchen equipment (what’s called Royal Reset), and an additional $500 million to hasten the reimaging of more than 600 Carrols Restaurant Group owned Burger Kings following the pending acquisition. Burger King in mid-January shared plans to buy the chain’s largest operator for $1 billion—a deal that would fold in north of 1,000 stores that earned a combined $1.8 billion in systemwide sales during the 12 months ending September 30. Burger King said at the time it would drop about $500 million of capital funded by Carrols’ operating cashflow to redesign those 600 stores not currently considered “modern image.” The company also expects to refranchise “substantially all” of the Carrols portfolio to smaller, local operators within three to seven years.
Factoring in Tuesday’s announcement, RBI has about $2.2 billion earmarked to reface Burger King’s domestic operations. The path would take the brand to 85–90 percent modern image by 2028. There were 6,778 U.S. Burger King’s at year-end 2023. So it’s roughly a 6,000-store blueprint.
Burger King’s “Fuel the Flame” sets aside $150 million in incremental digital and media investments, followed by an agreement with franchisees to increase their investments in advertising from 2025–2028, should certain profitability metrics be hit.
The brand said Tuesday results back its extra push. U.S. franchisee profitability reached record averages in 2023, up nearly 50 percent from $140,000 to more than $205,000. It also reported low-single-digit traffic growth in Q4, which was the first green lift since Q2 2021. For 2023, U.S. same-store sales hiked 7.5 percent, rolling over 2.2 percent in 2022.
While Burger King didn’t break out specifics, it noted Tuesday it’s seen “strong sales uplifts” from the 100 Royal Reset remodels that have been completed and reopened for at least six months. Burger King’s systemwide sales average at traditional units last year was $1.559 million, up from $1.508 million in 2022.
The brand did share splits in its recent FDD for remodeled restaurants overall, which includes a pool of 724 locations where the existing structure was maintained, while the interior and exterior was upgraded to modern image standards. Thirty more were scrape and rebuilds (site demolished and rebuilt on the same dirt).
For the full 754 units, the average sales uplift was 11.9 percent—24.4 percent for scrape and rebuilds and 11.3 percent for full. Traffic climbed an average of 10.7 percent (23.7 percent at scrape and rebuilds and 10.1 percent for others).
There were 338 remodels above the average traffic lift.
Burger King also said 234 restaurants underwent a conversion from a single drive-thru to a double-lane setup. The units that added a lane reported average sales increased of 14.8 percent and higher traffic of 13 percent.
Additionally, there were 608 Burger Kings in 2023 that underwent a remodel to the modern image standards from legacy image types. Legacy image refers to stores that prior to remodel had 1999, ROC, or other similar designs. And 135 units flipped to modern image from Burger King’s “20/20 Light,” “20/20 Standard,” “20/20 Hybrid,” or similar builds.
The legacy to modern images stores appreciated 13 percent higher sales on average and 11.7 percent better traffic. The other bucket reported 7.2 and 6.5 percent growth from the change, respectively.
The overall point being, Burger King has clear sight of a need to update the fleet.
RBI said Tuesday the $300 million investment will launch an expanded co-investment program called, “Royal Reset 2.0,” which builds on the initial success of the existing Royal Reset modern image investments. The program will provide cash incentives to top performing and committed operators, RBI said, to support remodels and rebuilds, and “unlocks the opportunity to complete approximately 1,100 additional remodels through 2028.”
RBI does not expect to deploy any additional capital toward co-investment remodel programs once these efforts are complete.
“We are committed to giving our guests the very best experience in all our restaurants and that includes a modern, exciting restaurant image and digital experience that exceeds their expectations,” Burger King president of North America Tom Curtis said in a statement. “We are working in close partnership with our franchisees to transform our restaurant footprint across the country and reclaim our flame as a leader in the [quick-service] industry.”
Central to the modernization is Burger King’s next-generation “Sizzle’ design, which features a format enabled to allow for flexibility in model approach, with an emphasis on digital, pickup, and drive-thru, including kiosks. Remodel projects in the Royal Reset 2.0 investment will feature the Sizzle build.
Franchisees will have until October 31 to opt-in to Royal Reset 2.0.
RBI’s systemwide sales lifted 8.1 percent, year-over-year, in Q1 as income from operations came in at $544 million versus $447 million. Net income was $328 million over $277 million in Q1 2023 and blended comp sales rose 4.6 percent. Tim Hortons led the way at 6.9 percent same-store sales growth, year-over-year, followed by Popeyes (5.7 percent), Burger King (3.8 percent), and Firehouse (0.3 percent). The international business watched its comps climb 4.2 percent on top of 12.6 percent growth from the year-ago quarter.
