RBI isn’t satisfied with its growth pace in China, one of the hottest markets for the quick-service industry.

The company expected to reach 5-plus net restaurant growth in 2024, and that was based on an assumption that development in China would accelerate this year compared to 2023. RBI is now less confident in that projection and updated its outlook to the mid-4 percent range.

The main culprit for this lower guidance is an inadequate investment by Chinese franchise partners. RBI Josh Kobza said, “There is some question on the outlook and kind of appetite and alignment for growth [in China].”

“In the U.S., we have demonstrated our willingness to do what it takes to succeed, particularly as it relates to our Burger King business in the past 18 months,” the CEO said during RBI’s Q4 earnings call. “And in the U.S., we entirely control menu innovation and advertising spending and have demonstrated our willingness to invest significantly behind each of our businesses. In China, we rely on our master franchisees for that level of commitment.”

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Several giants in the fast-food space are going after market share in China. Last year, McDonald’s announced that it increased its stake in its China business from 20 percent to 48 percent. The burger brand ended 2023 with 2,982 restaurants in the country, a net gain of 14 year-over-year. Yum! China crossed 10,000 KFC stores in Q4, with nearly 40 percent of them built in the past three years. At Starbucks, the 6,795-unit China market opened 169 net new stores and entered 28 new county cities during its fiscal Q1. The goal is to reach 9,000 shops by 2025.

Burger King China opened a net of 176 restaurants in 2023 and has nearly 1,600 stores in the country. RBI CEO Josh Kobza said it’s a profitable business, but that “we’re going to need to grow further to compete effectively with the largest players in this market.” The same goes for Tims China, which is competing with the likes of Starbucks and Luckin Coffee. Kobza said the company must “commit more capital to grow that business in an exciting way and we believe it’s critical that they do.” He added that RBI is working with Tims China to lay a foundation to “meet the growth aspirations we know we’re capable of.”

“We have a strong belief in China as an attractive growth market for our brands, given the incredible geographic scope and population of the market,” Kobza said. “Success that requires a serious long-term capital commitment from our partners, a long-term time horizon, and a commitment to grow the brand in the face of tough competition.”

In terms of RBI’s overall international business, it opened 695 net new units in Q4 and 1,168 for 2023. That resulted in net restaurant growth of 3.9 percent. The segment finished 2023 with more than 14,700 stores and over $17 billion in systemwide sales, a 17.6 percent bump compared to 2022.

Same-store sales grew by 4.6 percent but were pulled down by softening performance in China and certain Western European markets and the impact of the Israel-Palestine war. Around a dozen countries were impacted by the Middle East conflict. RBI estimates that it resulted in a 1.5-point headwind to comp sales and a three-point effect on traffic during the fourth quarter. The company wouldn’t speculate how long the dragging sales may last.

Fast Food, Finance, Franchising, Growth, Story, Burger King, Firehouse Subs, Popeyes, Tim Hortons