Restaurant Brands at Bernstein Conference: Strategic Focus on Growth

On Thursday, 29 May 2025, Restaurant Brands International (NYSE:QSR) presented at the Bernstein 41st Annual Strategic Decisions Conference 2025. The company discussed its strategic initiatives, highlighting both progress and challenges. CEO Josh Kobza emphasized the company’s focus on simplifying its business model and enhancing franchisee profitability, while CFO Sami Siddiqui acknowledged the complexity from recent acquisitions but remained optimistic about future growth.

Key Takeaways

• Restaurant Brands International aims for 8%+ adjusted operating income growth in 2025.
• The company plans to return to a primarily franchised model by 2028-2029.
• Tim Hortons in Canada showed strong performance, with increased franchise profitability.
• RBI plans to open 300 restaurants in China by 2028, focusing on strategic international expansion.
• The company is addressing macroeconomic challenges and working on improving ROIC.

Financial Results

• RBI is on track to achieve an 8%+ growth in adjusted operating income this year.
• Franchise profitability at Tim Hortons increased by $25,000 per unit, reaching over $300,000 annually.
• Capital expenditures are expected to be in the $400-$450 million range for 2025 and 2026, decreasing to $300 million post-2029.

Operational Updates

• Burger King China: RBI has taken control to improve operations and advertising.
• Carrols Acquisition: The acquisition aims to enhance the franchise base with local owner operators.
• Burger King US: Notable improvements in digital sales, operations, and restaurant remodels.
• Popeyes China: New restaurants are performing well with favorable rent conditions.

Future Outlook

• RBI plans to revert to a primarily franchised model by 2028-2029 through refranchising efforts.
• The company targets opening 300 new restaurants in China by 2028.
• Focus areas for growth include cold beverages and PM food categories at Tim Hortons.

Q&A Highlights

• China Development: RBI is committed to expanding with 300 restaurants by 2028.
• Tim Hortons Canadian Growth: Opportunities exist to expand in Western Canada and Quebec.
• Burger King US: Continued improvements in sales, traffic, and restaurant remodels.
• ROIC Strategy: Simplifying operations through refranchising to improve returns.

Restaurant Brands International remains focused on executing its strategic initiatives to drive long-term value for shareholders. For more details, readers are encouraged to refer to the full transcript.

Full transcript - Bernstein 41st Annual Strategic Decisions Conference 2025:

Danielo Gargiuro, Restaurant Analyst, Bernstein: Alright. Good morning, everybody. My name is Danielo Gargiuro. I’m the restaurant analyst here at Bernstein, and thank you everybody for joining us. Before we start, I’d like to remind everybody that you can submit questions through Pigeonhole by either scanning the QR code shown on the screen, or in the company’s agenda or visiting pigeonhole.at and passcode s d c two thousand twenty five.

I’ll be monitoring the questions, so I’ll be asking them throughout this session as well. Very thrilled to have you back on stage. Restaurant Brands International is one of the world’s largest quick service restaurants with over 35,000,000,000 in annual system wide sales, approximately 30,000 restaurants worldwide in over hundred countries. They are leading four major brands, Tim Hortons, Burger King, Popeyes, and Firehouse Subs. And today with me, we have Josh Kobzab, the RBI CEO.

You’ve been at the company for, I think, thirteen years now, taking various leadership roles, you know, before becoming the CEO. Josh was also the CFO up until 02/2018, the chief technology officer and development officer until 2019, COO until 2023. So welcome back on stage. And then we’re very thrilled to have Sami here. Sami Siddiqui, CFO of RBI.

You’ve been at the firm also for quite some time, again, like, leading various roles, most recently leading the Popeyes brand. So welcome both, on stage. Before we get started, maybe, Josh, you this is the the second time you’re here as a CEO. What has changed in the past year, and how do you think about the overall business of Restaurant Brands International today?

Josh Kobza, CEO, Restaurant Brands International: Yeah. Well, thank you so much for having us, Delano. It’s a pleasure to be here. And thank you everybody for coming out for for the early session. We can’t tell, but I hope everybody’s had their coffee and and is ready

Danielo Gargiuro, Restaurant Analyst, Bernstein: for a good session here. Tim Hortons coffee.

Sami Siddiqui, CFO, Restaurant Brands International: Coffee we have.

Josh Kobza, CEO, Restaurant Brands International: Only. Exclusive. Hope you didn’t have any other coffees this morning. But it it’s certainly a a pleasure to be here, and thank you for for all the the introductions. As you mentioned, it’s it’s now my third year as CEO, and I’ve been working with Sammy for, I think, twelve of the thirteen years I’ve been here.

So we’re we’ve worked together for quite some time, and it’s always been a pleasure. You know, I I think we’ve been making a lot of progress over the the last few years. A a couple of the things that have that have probably been most impactful over the last twelve to eighteen months, So I think we took on a couple of the biggest challenges that that we had in the business that before that had been unaddressed. You know? So we acquired Carrols, about just over a year ago.

That was a huge step for us and really important part of our Burger King plan, especially on the the front of changing the landscape of the franchise base and moving to more local owner operators. So that was a huge unlock, but a lot I’d say a really important strategic decision, one that I think had certainly been contemplated probably the entire time I’ve been with the company. And I think even before, people have been asking kinda what do we do about this topic of the franchise composition and and Carol’s. So I think that was a really important, very decisive decision, a big capital allocation decision as well. And the other big thing that’s new is that we’ve taken over our Burger King business in China.

So we had been struggling there for quite some time, and it is, you know, it’s the second largest QSR market in the world, an incredibly important one. And and historically, it’d been a, you know, an important source of growth for us, but it’s a place where, we had had some challenges over the last few years. And I think we took a very important decision to take back that that franchise and are now in the process of working on improving the operations, putting in place an incredible local team, starting to ramp up advertising again, and I think setting the foundations to go back to developing that business again. So I think those are probably two of the biggest things that have changed. Any other ones you would add, Sammy, over the last year or so?

Sami Siddiqui, CFO, Restaurant Brands International: Oh, I think they’re in your phone.

Josh Kobza, CEO, Restaurant Brands International: Sammy said he was gonna struggle with the the handheld microphone, so playing out. Thank you.

Sami Siddiqui, CFO, Restaurant Brands International: I think that covers it. Just keep me on the mic. Alright.

Danielo Gargiuro, Restaurant Analyst, Bernstein: Alright. And maybe following back on on this question, Josh, looking beyond what happened last year, what are maybe the top three takeaways that you like investors to remember at the end of this conference for Restaurant Brands International?

Josh Kobza, CEO, Restaurant Brands International: Yeah. If I had to pick three, I would probably say kind of short term practical takeaway is that we’re on track to deliver our 8% plus adjusted operating income growth this year. It’s something we’ve talked a lot a lot about. That’s kind of the most fundamental part of of our long term algorithm, and and we’ve said that we’re on track to deliver that this year. So that’s a that’s a really important one.

I would say the the second thing, the longer term, and it goes back to what I just mentioned, I think we are taking on or have already taken on, I think, what are the hardest challenges in our our business. You know, things like turning around Burger King brand with all the capital that we’ve invested there and the wonderful work that Tom and the rest of the Burger King team are doing. We’ve taken on that challenge. We took on what do we do about Carol’s. We’ve we’ve taken on the challenges in our our China businesses, both Burger King, and we we’re now running Popeyes.

So I I think we’re going after every fundamental thing that we know we’ve gotta make progress on. All the hard problems, they’re out there. They’re on the table. We’re doing things actively to address them, make sure that we’ve got control of those topics. And and I think that that gives us more optimism about where we’re going in the future and our ability to, to control those outcomes.

I’d say the the third thing is that behind all of this, is building compelling business models at the restaurant level for our franchise partners around the world. We talk about this a lot. It’s it’s something we report on publicly. It’s something in our bonus port in our our bonus formulas for all of our teams around the world. But franchisee unit economics are really fundamental to to this business, And so we’re very focused on building sustainable and compelling business models for our franchisees all around the world.

Danielo Gargiuro, Restaurant Analyst, Bernstein: And, Sami, what do you think today is most misunderstood about the business? So what do you think is the catalyst for a reacceleration What do you think investors might be looking for in in RBI?

Sami Siddiqui, CFO, Restaurant Brands International: Yeah. I think it actually dovetails nicely with what what Josh was just talking about. I think, if you look at our business today, we’ve had a lot of change over the last couple years, and I I think that change and those investments, they were needed. Right? And and as you think about it, it’s you’ve we’ve actually changed our disclosure a little bit.

We’ve added a new segment called Restaurant Holdings, which holds our Carol’s restaurants as well as our Popeyes China restaurants and our Firehouse Brazil restaurants. I think, you know, investors, sometimes I get a lot of questions around, you know, the complexity of the business. And I think in certain instances, maybe there’s an under appreciation for we are at peak complexity right now in our business. We’re adding this disclosure. We’re making these investments primarily because we wanna build a stronger foundation for the business.

And I think if for investors who have patience, which I realize is not always the easiest thing to do, who can look through to 2028, ’20 ’20 ’9 when a lot of these things are off our balance sheet, when you’re starting to see the returns of some of these investments, when our foundations are even stronger than they are today, I think that can be really compelling. And I think, you know, we’ve tried to lay out a path for what a simpler business looks like. We really enjoy being a franchisor. We love being in the fully franchised or primarily franchised business, and we wanna get back to that point over time. And I think we see a pretty clear path to getting there.

Danielo Gargiuro, Restaurant Analyst, Bernstein: Yeah. So so what is the path to get, like, your ROIC back in line with peers? So what is the kind of the glide path and initiatives that you’re planning so that kind of the return on capital gets elevated once again?

Sami Siddiqui, CFO, Restaurant Brands International: Yeah. I I think ROIC is sort of an interesting metric to look at. So I I would say when you compare ROIC versus peers, it’s a little bit difficult. I think the unique circumstance for our business is that if you look at our balance sheet and and you kinda look at the left side of our balance sheet, you’ll see we have, call it, 25,000,000,000 or so of assets, and, 70% or 17,000,000,000 of that is intangibles. It’s brand value and goodwill.

That’s primarily a function of we’ve been an acquirer. We’ve acquired we’ve acquired a lot of businesses in a short period of time, large acquisitions. And so when you actually look at the way I look at ROIC is is sort of the tangible asset value. And if you actually look at the ROIC on a tangible basis, the tangible ROIC is actually very good. I I would argue it’s best in class for for our compared to our peers.

I think for us, the the path to sort of simplifying or or uncomplicating the business model a little bit will be very simple. It’s, you know, with the Carol’s restaurants, refranchising those restaurants, getting them off the balance sheet over time to small local owner operators, folks who are gonna run the restaurants really, really well, as Josh said. Two, it’s it’s refranchising or selling Burger King China. We’ve talked about our intention to do that over the next twelve months. Popeyes China, bit smaller, but over time, kinda get that get that down.

And then as you think about the CapEx cadence for the business, we’ve talked about ’25 and ’26 being peak CapEx years for us. So we think CapEx will be kind of in 400 to $450,000,000 range, which is significantly higher than we’ve we’ve been in the past. But over time, as we get to kinda 2029 and beyond, we think that steadies out at around $300,000,000 as well as with kind of a pretty stable g and a base that that we’ve already seen start to come down a little bit. So I think that’s the path to to simplification and and and maybe uncomplication. But we ultimately, we think all these investments have high ROIs, not only because, you know, in Excel, they have high ROIs, but they’re fundamentally good for our brand.

Danielo Gargiuro, Restaurant Analyst, Bernstein: And and to clarify, the 300,000,000 of CapEx, that would be inclusive of, essentially, any support for remodeling for Tim Hortons and potentially, like, people provide. Is that right?

Sami Siddiqui, CFO, Restaurant Brands International: Yeah. And that’s a good point. I think when we talk about CapEx, I I should clarify. It’s CapEx. It’s cash investments.

It’s anything that that’s viewed as kind of investment in our system. So as you talk about that 300,000,000, the bulk of it actually would be going into the Tim Hortons system where we have property control in almost 80% of the situations. And and, ultimately, we put in capital into those situations because the returns are phenomenal. Investing in real estate and remodels at Tim’s is one of the best places anyone can put their money.

Danielo Gargiuro, Restaurant Analyst, Bernstein: Great. Maybe, Josh, you you have visibility over potentially 100 countries where you’re operating, and the macro environment has been quite volatile in the past few years. I wonder if you can give a little bit of a highlight on where you see some incremental pockets of strength worldwide, where do you see some pockets of potential weakness, on a on a relative and sequential basis, and what do you expect the future to be looking like in terms of the resilience of Restaurant Brands International in light of the dynamics from a macro standpoint?

Josh Kobza, CEO, Restaurant Brands International: Yeah. So, as you as you point out, there’s a lot of different countries and each has its own dynamics. So it’s really hard to generalize on these. I I’ll I’ll try to break it into a few different pieces. You know, if we look at at The US and and Canada, I would tell you that one of the things I most look at is employment.

And the the reason for that is a lot of what our business is is people being out and about working and looking for a convenient and affordable meal. So when people are employed, when they they have income and they’re out and about and working, that is that tends to be one of the biggest drivers of people using using QSRs and coming to our restaurants. So it’s something we pay a lot of attention to. And I think despite some of the some of the fluctuations in consumer sentiment in The US and Canada, The US unemployment has actually been pretty stable. We’re actually in a pretty good place.

And so I think for me, that’s something that gives me a bit of confidence. We haven’t seen, like, a big fluctuation in in trends, and I think that’s probably due to to employment being, relatively stable. In Canada, a little bit different story. Unemployment there ticked up actually a fair bit over the last couple of years. Most of that happened through last year.

So I I wouldn’t say it’s happening incrementally as you’ve gone into 2025, but it it is a bit of a tougher environment from a from an employment standpoint when you look at the absolute unemployment levels in Canada. So I I don’t see big things changing as we’ve gone through 2025 aside from a bit of the noise we had in in, like, in the short term in the first quarter. So no no big changes there. You know, in places like like China, for example, where it had been a tough couple of years, we actually see some some things stabilizing there. So, again, some some challenges, but, like, not incremental challenges in terms of of the direction of overall consumer spending.

So I think that that’s a nice thing to see where it feels like you’re you’re seeing some stability. In Western Europe, it varies a bit by by country. So I think some of our performance is more the the aggregate performance is pretty pretty good. If you look at our our sales in our international business in in the first quarter, we’ve been pretty happy with those, and a big piece of that’s Western Europe. And then there are just pockets within there of countries that are doing better and worse.

That probably has more to do with, like, competitive dynamics and what’s working for us and competitors than anything else.

Danielo Gargiuro, Restaurant Analyst, Bernstein: Yeah. And can and can you comment maybe on the resilience of the brands in light of the macro volatility? So how is, for instance, Tim Hortons positioned in Canada, given the relative challenging environment?

Josh Kobza, CEO, Restaurant Brands International: Yeah. I I think to your point, think if you look at despite some, maybe some challenges in the Canadian macro, Tim’s has done really well over the last couple of years, and I think that has everything to do with what the brand delivers. It’s it’s an incredible brand. It has amazing everyday value. We don’t have it’s not a ton of discounting.

We just have really compelling everyday prices. If you look at the brand tracker for Tim’s, we have one and do win on best value for money. So I think we’re in exactly the right place, in in Canada with Tim’s for any kind of difficult, macro scenario, and I think you’ve seen that in the performance of the business.

Danielo Gargiuro, Restaurant Analyst, Bernstein: Great. You also mentioned China as being a place where the macro dynamics are stabilizing at least. How much of your development pipeline might be depending on China, and what are some of the puts and takes and opportunity to maybe offset the volatility in China with strength in other countries?

Josh Kobza, CEO, Restaurant Brands International: Yes. I think as as as Sammy’s Sammy’s kinda laid out what the path is back to 5% plus in terms of of net restaurant growth, Within that math, I think we’re counting on 300 restaurants in China. So I would say that it’s a relatively small contribution from China. You know, if you go back in time, we’ve done that with one of our our just one of our brands has developed 300 in a year. So I I think it’s a it’s a very conservative view of what’s possible if we deliver with with all three or four of our brands eventually in China.

And I think the numbers have been a little bit tougher in the near term. We’ve talked about we’ll take some closures at at BK China, but I think we’re setting the foundations to do much, much more in the future. The Burger King brand in China is actually very strong. If you look at any of our our brand trackers, it’s been very resilient, and we’re doing all the right things to make it a success in the future. There’s there aren’t that many kind of, like, marquee western brands in the in the QSR space in China, and Burger King is absolutely one of them.

And now that we’re controlling the business, we’re putting in place an incredible local management team. We’re spending money on advertising. We’re improving operations and quality. We’re fixing up the the base of stores, and then we can get back to growth, and and we’re working on finding a new partner to do that. So I think we’re doing all the right things there.

Our team has made tremendous progress in just a couple months. You know, we took over the business just a few months ago, and I would tell you they’re they’re pushing ahead very quickly on every single front that we wanted them to in the business. I’ve been really pleasantly surprised by by all of the work of our Asia teams and the local China teams. And I think that puts us on a good as good of a track as as we could’ve expected there. The the one other one I would I would flag for you within China is just Popeyes.

It it doesn’t get a lot of attention yet, but, you know, fried chicken in China has always been to us one of the biggest opportunities in our our entire world. And I I think our teams there are also doing a great job. We have a very strong local Chinese management team, and they’ve they’re both starting to improve the existing business, but they’re starting to build a bunch of restaurants this year. And those restaurants are performing well. So we’re seeing attractive things like rents are attractive again, and the sales are delivering what we expected to.

So I’ve been I’ve been pleased by the progress there. Still very early. The and, you know, going back to the beginning, we’re counting on 300 restaurants per year in 2028. So I I think I think we set that reasonably conservatively, and it gives us plenty of time to really work on the fundamentals and get to to the pace of growth we want to. And if if we do everything right, hopefully, overshoot that by a lot.

Danielo Gargiuro, Restaurant Analyst, Bernstein: And, strategically, what is new about these new Popeyes openings versus, you know, the the past attempts to be penetrating more in China? So why are you excited about this new wave of Popeyes opening up in China? Maybe, Sami, you can comment as well given your past history at at Popeyes.

Sami Siddiqui, CFO, Restaurant Brands International: I I would actually argue you know, so we entered China officially I think it was actually right around the time of the pandemic. So it was it was 2020. And so I I would argue the business never kind of got, you know, sort of the support that it needed in those couple years, particularly as as you all remember in in China, the pandemic and kind of the lockdowns, they they were sort of started and stopped and then started again. So it it it really did get delayed because of COVID. I think the really the really important thing is us taking control of the business last year.

And that when we took control of the business, I think we learned a couple things. I think, you know, number one is building a really, really strong and capable management team. I I don’t wanna say it’s easy, but there’s a lot of talent in in China, and there’s a lot of folks who have decades of QSR experience. They’ve built these brands with some of some of our other competitors, and and they’re willing to bring their know how and their their their experience over to to Popeyes. And there’s a there’s a there’s a ton of sort of fanfare around the brand.

We see this everywhere we go. Popeyes, sort of our reputation sort of precedes us. People people kind of heard about the sandwich, and they heard about all the buzz there, and and people in China have heard about it. And so that’s number one I think we’re learning. I I think number two is it’s been an opportune moment to invest in the market.

Right? As you think about taking control and and buying buying it back last year, it’s only about 20 restaurants. But at the same time, as we think about, you know, one of the most critical things to building a new brand in a new market is finding good rents. Right? Finding good sites with attractive rents where you can get the unit economics to work.

We’ve been able to do that at this sort of opportune moment. And I I think there’s a bunch of other factors that that we’re seeing that’s kinda contributing to getting Popeyes off the ground. It’s still early, but we think it could be a big contributor over over the long term. And we think now is the time to sort of make some of those bold moves, you know, sort of given the macro.

Danielo Gargiuro, Restaurant Analyst, Bernstein: Clearly, like, one spotlight in terms of international expansion has been the success story of Burger King, specifically in some countries where, you know, the market has increased in line with kind of your entry in the market more and more prominently as sometimes you’re also, like, taking market share from your largest peers. I mean, we have clear examples in in France and Spain. So what do you think sets Burger King apart in the journey of international expansion, and how much are you expecting the growth to be coming at the expense of other peers versus you offering a differentiating position that enables the category per se, to be more attractive versus maybe at home cooking or versus other kind of outside of burger peers?

Josh Kobza, CEO, Restaurant Brands International: Yeah. I think one of the ones you mentioned, Danilo, in Burger King France is a great example, and I I think you can use it to learn a lot of things that that are true in a lot of our other markets as well and are reflective of why Burger King’s been really successful in in a lot of these international markets around the world. You know, we came in a little bit later to the market, and that’s true in some other places too. But it meant we were able to be a new brand, a fresh brand, a young brand. And if you look at the case of France, we built really beautiful restaurants.

And I think that those restaurants shape a lot the impression that people have of a brand. Is it something that’s more elevated, more aspirational, higher quality? And I think the the France team did a really nice job of that. So you can be a newer brand with a little bit more of a challenger attitude with fresh new assets. Those assets are highly digital.

So if you go into any of our restaurants in France, you’ll see almost all of the the in restaurant transactions are happening through kiosk. So that makes you I think that gives you a perception of being a younger, younger, cooler, new brand. And the product quality is really good. I think the team in France has been, very, focused on making sure that they deliver the highest quality products, really high quality ingredients. In many cases, heavily locally sourced ingredients, is something they’re very proud of and people really care about in the market.

And I I think that allows you to position the brand really well, make it very attractive to customers of all age groups, and that’s allowed us to deliver really high sales per store and and good unit economics and, to your point, take a lot of market share.

Sami Siddiqui, CFO, Restaurant Brands International: Yeah. I would say I

Josh Kobza, CEO, Restaurant Brands International: I think in the good news in a lot of these international markets is that QSR is a growing category. You know, the the we are most of these international markets are much earlier in the formalization of the restaurant sector than The US is. And mostly what happens over time is you have more movement towards restaurant sector, more formalization of that sector, and more movement towards larger brands over time. And so I I think in so many of these markets, there’s space for a lot more. Many of them have just a couple of meaningful players.

And I I think that if you look forward ten years, you’ll have more players with more size and that those QSR markets are are going to grow. So we certainly we wanna grow. We wanna take market share. But I do think there there’s space for a number of players in in many of these markets.

Danielo Gargiuro, Restaurant Analyst, Bernstein: And how does your your answer, change, or is that the same for Tim Hortons potential expansion? I’m understanding that Tim Hortons is going to be, like, a smaller contributor to the international, like, you know, opportunity for for RBI, but how much do you think is about building the culture of coffee and creating kind of the same level of convenience you have in Canada, in other countries versus how much do you think it’s gonna be like a market share gain?

Sami Siddiqui, CFO, Restaurant Brands International: Yeah. I think there there are a

Josh Kobza, CEO, Restaurant Brands International: lot of markets, around the world where coffee consumption is still very I think we’re still in the early phases of of growth of coffee consumption. So I think in in many of those, especially, like, Asian countries in particular, there’s a I think there there are many, many years of growth in just the the custom of of drinking coffee. And I think a lot of people see that. So it is quite competitive in many of those markets, but I think there’s a a place for Tim’s. Our what we’re trying to be in the market is very straightforward.

We wanna be a very high quality product, especially we have probably the best coffee beans of anybody in the world, and we wanna offer that at a reasonable price paired with food. So it’s a pretty simple, kind of functional positioning that we’re going for, and I think that that’s the place that we’ve been most successful in Canada. And everywhere else that that we’ve been doing well, we’re doing a good version of that too.

Danielo Gargiuro, Restaurant Analyst, Bernstein: Great. And, Sammy, given given the, the volatility of the tariff environment, are you seeing any challenges on supply chain, especially in international markets?

Sami Siddiqui, CFO, Restaurant Brands International: Make sure this is on. Look. I think, you know, the really good thing and and, I guess, you know, it it happened it’s it’s been for a number of years, but we really reinforced our supply chains during COVID. And I think the the the great sort of factor about our supply chain is that most of everything that we sell locally, we source locally. So, you know, just in in food, like, it’s it’s generally a little bit harder to to sort of be shipping things from halfway across the world to to get them to restaurants on time.

So the vast majority in all of our markets around the world are it’s just sourced locally. There there’s there are always gonna be some things that that kinda have to cross borders. But, you know, fortunately, we’ve seen that impact as as relatively small on on most of our restaurants. You know? For example, you know, at Tim’s in Canada, you know, as you think about things that come from outside Canada, the vast vast majority of the supply chain comes locally from Canada, but you may have things like, you know, coffee beans, for example.

Coffee beans can’t be sourced in Canada. They come from abroad. You know, those types of things ultimately are are you know, we don’t have a ton of flexibility, but they’re also relatively small in the context of our p and l. So we’ve been able to manage through. I I’d say, you know, the headwind of of tariffs has been pretty muted

Danielo Gargiuro, Restaurant Analyst, Bernstein: And in light of tariffs, are you expecting to see franchisees maybe less inclined to be remodeling Burger King maybe because some of the equipment costs might be going up if there is some parts that are coming from China or some other places where the tariff has gone are going up? Do you see them maybe waiting for the tariff environment to stabilizing before making the decisions, or do you see a continuation of the progress that you have seen last year in remodeling, I think, 400 stores, you know, going forward as well?

Sami Siddiqui, CFO, Restaurant Brands International: Yeah. Look. I I I don’t think we’ve seen a slowdown in in franchisee interest and and ambition to remodel. I think, you know, you rightfully pointed out that the tariff impact on on remodels or even development, it’s sort of a derivative impact. Is it most of the most of the items for for remodels, new builds, construction are sourced locally.

There are component parts that may may come from China. I I I would say, you know, our we’ve been pretty pretty sort of steady in terms of, you know, kind of mid teen sales uplifts in our remodels. And the more and more data that we get to support that and all the data continues to support that, the more and more franchisees are excited to do the remodels. They see kind of their neighbor down the street doing it, or they may do it in one of their restaurants in a portfolio. They see the impact and then kind of are signing up.

I I I would I would also say, you know, for a lot of these remodels, there’s a lot of planning that goes into it. So the remodels that are happening this year, the franchisees committed to doing those remodels, let’s say, a year ago or or or sometimes even before that. So we’re building a pipeline. The pipeline is not not slowing down. I think, really, as long as we continue to deliver the right returns, I think franchisees are gonna continue to be excited to do the remodels, and and we’re excited because I think that’s great for the brand and and ultimately kind of what Burger King means in, in North America.

Danielo Gargiuro, Restaurant Analyst, Bernstein: And you also mentioned coffee prices. So have you seen any pressures on Tim Hortons restaurant level margin? Maybe I will expand this question also to kind of the the cash flow for for your franchisees. Have you seen any pressure given the elevated coffee prices? And how do you manage for coffee costs within your supply chain segment?

Sami Siddiqui, CFO, Restaurant Brands International: Yeah. It’s it’s a great question. I I think, you know, just to level set as you think about the Tim’s business. First off, it is a phenomenal business. I think, you know, franchise profitability, which which we disclosed, was over $300,000, annually per box last year, which I you know, just kinda getting above $300,000 threshold, I think, is is an awesome place to be.

It increased $25,000 in terms of profitability per per unit last year. Coffee, in terms of the the p and l, is actually a relatively small piece of the COGS. It’s only about 10% of the COGS. And so even though we are seeing historically elevated coffee prices, the impact again on on sort of the aggregate p and l is not is not sort of massive. I think the way we also buy coffee is is helpful for our franchisees.

What we do is we typically buy anywhere from nine to even eighteen months forward on coffee. So, we’re able to effectively smooth out some of the volatility in in the, the cost of coffee. We ultimately pass that through to the franchisees, but we’re able to give them ample visibility into when when those cost increases are coming. I I would add sort of a helpful offset, to coffee is we buy coffee in US dollars, and, the cat has strengthened versus the the dollar recently. And so that’s I mean, it doesn’t offset the the the increase in the green, but it helps a little bit mitigate it.

So anything to add?

Danielo Gargiuro, Restaurant Analyst, Bernstein: And and and speaking of your hedging practices on on the coffee, recently, a a larger, peer of yours has changed a bit the way that they’re thinking about the, the hedging. Right? So they they used to be doing a lot of forward buying of coffee, you know, at least nine months in advance, you know, nine to eighteen months in advance, and then they shift the strategy to be more thought market oriented, in expectations of potentially prices coming down. What’s your philosophy? Has your philosophy changed in terms of hedging practices?

And and what will it you know, what are the markers that you’re looking for for you to smoothen out the demands even further?

Sami Siddiqui, CFO, Restaurant Brands International: Yeah. I I think maybe we talk sort of macro about kind of our hedging philosophy, which is we typically we don’t pretend to be smarter than the markets. We don’t you know, I I we we have coffee experts, but, Kevin West, leads our coffee innovation, he is he is a bean expert. And, yes, he has views on the market, but we try not to take views on the market. And so the whole idea of forward buying is actually just to give visibility, number one, into the price, but but also equally important is continuity of supply.

Right? The the worst thing that could ever happen is that we’re not fully bought on coffee, which, you know, knock on wood, never happened. But but that that’s really how we think about hedging. So we’re not gonna change our hedging practices because we think, you know, green will come down. We we do have a little bit of latitude in terms of when I talk about hedging anywhere from nine to eighteen months out.

Maybe, you know, if there’s a particular period of volatility, we could relax that to eight months out, but we’ll never kind of, you know, sort of put risk in terms of our ability to secure the green coffee for for our franchisees.

Danielo Gargiuro, Restaurant Analyst, Bernstein: Excellent. Josh, in in 2022, Tim Hortons was disclosing long term algorithm of 2% same store sales. But, clearly, it has outperformed almost every single quarter, you know, over, you know, the past three years. So do you expect Tim Hortons to revert back to the long term algorithm of 2%, or are you expecting to see continued outperformance of the same store sales growth?

Josh Kobza, CEO, Restaurant Brands International: Yeah. I’m I’m very happy that we outperformed what what we put out there, and I I think it it’s it’s really all due to the, like, the work that Axel and the Tim Tim Hortons team did. I I think it’s one of the greatest stories that we have in our business about very consistently working on the fundamentals over time. They did all of the basics right and and did all of the hard work in the weeds to make that business better for our customers every day. They worked on improving product quality.

They worked with suppliers. They worked on specs, and they made sure that what we were delivering at the point of sale was something we were really proud of. They worked very hard on the level of service that we provide to our franchisees and have made consistent progress on op scores quarter in and quarter out for a long time. And they’ve been working on the restaurants, making sure that we’re building beautiful new restaurants. We’re remodeling our restaurants on time.

And those restaurants both look better, and they operate more efficiently and faster than than they did previously. So I I just I give a ton of credit to to Axel and the team for doing the hard work, doing it consistently over time. And I think when you work on those fundamentals like that and you make so much progress, that’s how you can outperform an industry and and produce the the kind of same store sales that they have. So I think what all we looking forward, what we need to do is keep doing that. We gotta keep the consistency on the team, keep doing the hard work.

They have a a wonderful plan. We’ve been talking about this plan, I think, since the 2022 time frame of focusing on on cold beverages and focusing on our our PM food business. So that I think you you keep hearing the same things. Maybe that’s boring. I think that’s a good thing.

And and all the stuff that you see coming out of that team is consistent with the the stated strategy. So I I think if we keep doing that kind of work, that’s how we could keep outperforming as you look forward. And that’s my hope for for the Tim’s business, and I know that’s what Axel’s working on.

Danielo Gargiuro, Restaurant Analyst, Bernstein: And what is the driver specifically? You mentioned the cold platform, the cold beverage, cold coffee, and cold beverages in general platform, as well as the PM food. What are the key unlocks and the key drivers for a continued expansion of that one? So is it coming more from awareness or making consumers much more aware of the compelling offering that you have? Is it about expansion of the menu?

So potentially finding, you know, areas where you’re probably under indexing today. So so can you help us elaborate a little bit more why there is potential outperformance again on these two subsegments?

Josh Kobza, CEO, Restaurant Brands International: It’s a great question. And let me try to address it in a couple of ways, and, Sammy, feel free to add if I I miss anything here. You know, when I look at at the cold beverage part of the market, it’s clear that the customer has moved in that direction. You saw it here in The US probably first, but, you know, if you look at at the consumption, especially of the younger generation of US consumers, we’ve moved a lot towards cold beverages, both in coffee and non coffee beverages in in in food service. And so I think we historically were a heavier hot brewed coffee business, so we knew we needed to move the portfolio to where our our guests were going.

And I think we’ve done that to some degree. So you’ve seen a lot of innovation that, you know, we started with cold brew and we did Tim Beeb’s and and some work with with Justin Bieber. But we’ve kept innovating on cold beverage. If you would if you were to look at sort of where our our beverage innovation has been, it’s largely been on cold bev. So we’re adding and enhancing that platform.

And I think you’ll see us keep doing that. You probably just saw recently we did some cold espresso based beverages that have been a big hit. So I I think working on on expanding that portfolio and enhancing the quality of every offering that we have on the cold bev side is fundamental. Even within that, you’ve you’ve seen us talk about enhancing the quality of our espresso based beverages. We have some new machines out there that really upgrade, the quality of the beverages that we’re we’re offering, and those are rolling out through the system.

So I I think you’ll see on the on the cold bev side, more innovation, more product enhancement, and then we’ll we’ll talk about it, obviously, as we do it. PM, maybe a a little bit different because I I don’t think we had it as compelling of offerings in the PM food space before, and you’ve seen us consistently go at what we think are the biggest opportunities there. We did it with our loaded wraps and bowls, with our flatbread pizzas. I think you’re gonna see some more innovation in the next couple of weeks and some of the other gaps, that that we see that are really important to guests at lunch and dinner. So I think there, it’s kind of it’s bringing a portfolio of of PM Foods, that’s really compelling and then bringing it to life, through our our communications.

Danielo Gargiuro, Restaurant Analyst, Bernstein: And and usually, investors tend to be wary of the potential implications from an operational standpoint, saying, well, you know, you’re adding complexity to the business, potentially even adding more labor hour throughout the day, which might be, you know, an impairment to the franchisee profitability going forward. So can you can you elaborate on how this innovation has been actually operationally efficient in a way that the franchisees are seeing incremental profit, incremental dollar flow through into their profit? And, you know, how do you plan the operational excellence to be a driver going forward?

Josh Kobza, CEO, Restaurant Brands International: Yeah. It’s a great question. It’s one we think about a lot, and it’s especially important when you’re doing the amount of business we do, particularly in the morning and kind of that six to 10AM breakfast window. If we lose a second, we lose a bunch of sales. So it this is incredibly front of mind for for our teams.

And I’ll I’ll give you a couple of different examples. Feel free to to add on any. Yep. A lot of it’s the way that we, that we do these innovations. And if you think about, innovations like our sparkling quenchers, we don’t have, like, a lot of customization that’s done around those.

The build of it is very simple, very fast, and quick to execute for our teams. So we don’t have things that’ll take you three minutes to make. They’re really quick, really easy, and and that was we made sure when we launched that product it was gonna be something that wasn’t gonna slow us down. Or, for example, we did the flatbread, pizzas. When we launched those, we actually took something else off the menu.

So we took our melts off, and, and the flatbread pizza is actually faster to make. So we sell more, but it’s faster to make than the thing that it replaced. So you have to have the discipline when you put something in, take something else off, and be conscious of the kind of the net change in in build times for the product. We’ll do some more of that in other parts of of our our lunch platform. So if we add a new sandwich, we’re gonna take something out.

So it’s that discipline to say, if I’m gonna add something, I need to take something else away. And if I’m going to add something, I need to be really sure that the build procedures of that product are are going to be as easy or easier than what it’s replacing. And I think I think, Tim’s team has done a really nice job of bringing that operational discipline to the product innovation process.

Sami Siddiqui, CFO, Restaurant Brands International: I’d I’d also add, when you think about where the innovation is coming, it’s coming in sort of historically underutilized or less utilized day parts in our business. So, it’s interesting. When you look at our morning day part, actually, we’ve continued to get faster because, you know, just operational efficiency and our and our restaurant owners are doing a fantastic job. But a lot of the, quote, unquote, complexity is actually coming in the lunch, the afternoon, and the dinner day parts, where, historically, our our restaurants, you know, do a lot you know, do the minority of their business. So I think the more we can effectively utilize the box, if you’re thinking about it sort of from a capacity perspective, that innovation is actually really accretive.

It drives sales. It drives profit, and it actually the franchisees wanna staff up because the ROI is there to, you know, build it differently.

Danielo Gargiuro, Restaurant Analyst, Bernstein: Yeah. And and let’s build on this, utilization of the box concept. So are you seeing any cannibalization between the morning day part with the kind of PM day part? Meaning, you know, one concern that sometimes we hear from investors is, well, a consumer may be coming in the morning, but if they come to Tim’s in the morning, they not they may not be coming in the afternoon. You know, the counter argument will be like, well, maybe you can see like, you can be reminded of Tim Hortons in

Sami Siddiqui, CFO, Restaurant Brands International: the morning and potentially can pass on some coupons and and trigger some incremental visit in the afternoon. So are you seeing any trade offs? Are you seeing any cannibalization between morning daypart and afternoon daypart? We’re not seeing that. And, I think Tim’s is just one of the most unique businesses in the world where as you think about the penetration that we have and sort of the convenience factor, for for many years, before we had, I would say, a more expansive kind of PM food menu, We have a good chunk of our guests that come twice a day.

And so you go in and you do your kind of morning coffee run, and I don’t know if we have any do we have any Canadians in the room? There see, I saw the Canadians nodding, so they understood. You you go to get your your morning Tim’s, and then, you know, you may stop by in the afternoon to get an afternoon coffee. It it may be a cold brew. It may be with a snack.

It may be an entirely sort of different kind of purchase, but it’s a second second visit in the day. So we we aren’t seeing any trade off.

Josh Kobza, CEO, Restaurant Brands International: And I think just the the most objective measure of that is if you look at the past year, we grew traffic. So we’re we’re getting people to come to the business more often. We’re not just trading them around between dayparts.

Danielo Gargiuro, Restaurant Analyst, Bernstein: Excellent. You hinted to, development in Canada as well. So and and recently, you just opened up, more teams in in Canada. So are you seeing any so what is the potential opportunity in terms of new units that Teams could be opening in Canada? Potentially, if you can elaborate also in which part of Canada are seeing some pockets of strength, given your probably under presence.

And then are you seeing or are you expecting to see any trade offs between sales growth and net unit growth?

Sami Siddiqui, CFO, Restaurant Brands International: I could take go for Yeah. So so number one, I think what’s really interesting, is when you actually look at kind of the macro of of Canada over the last decade, and and Josh and Patrick and I were looking at this not too long ago, it was you know, population growth in the last decade in Canada has been around 14% and which I think is one of the fastest of of any developed nations around the world. And you you actually look at our growth, our unit growth has been about 4% over that same time period. And so, naturally, even though, you know, Tim’s we have really great penetration rates is we are actually falling behind that penetration rate just mathematically. And so we think there is an opportunity to catch up a little bit, and, eventually, kind of once that’s the case, I think long term, we we think that we should grow units sort of in line with population growth so we can maintain our convenience factor.

Factor. I think, you know, where that growth comes from, I think, as we look across Canada, the the the regions where we’re where we see probably the most opportunity are Western Canada and Quebec. I’d say that’s where we see where we’re a little underpenetrated relative to kind of our business in Ontario. But I think fundamentally what drives new restaurant development with any brand anywhere in the world is, number one, is compelling unit economics and and equally important is great operators, folks who are ambitious and wanna develop the brand. And, you know, the beauty of in in Canada is is we have that.

Right? I think the paybacks on a new unit for a Tim’s are between three and four years. Average sales around kind of $2,400,000 Canadian. Average pro average profitability above $300,000. So really good unit economics.

And and the other thing I I think is worth calling out is it’s a relatively underlevered system. There’s not a ton of debt in our system. Our franchisees grow in a very sort of responsible way, and I think that gives them the flexibility that when there are opportunities like this for us to start to to really accelerate development a little bit.

Josh Kobza, CEO, Restaurant Brands International: Yep. If I can just add just a little bit the way things, I think, come to life, you know, in terms of the unit growth. As you’ve seen so much population growth, you’re having to build additional housing. So if you and and that’s been across a lot of different provinces. But if you look in Ontario and you go outside Toronto, they’re a bunch of new housing developments.

And each time a big housing development goes in, you’re gonna have some retail that’s built around it, and that retail needs a Tim’s. And so, you know, when we’re we’re seeing Maybe two. Maybe two. Better with two. But so as we’re seeing some of that development happening, which is a response to the population growth, that creates new places where we’re, of course, gonna wanna open a Tim’s.

And so that’s some of the nature of the opening opportunities we see as well as some of what Sammy referenced. You go out west, if you go to Alberta, if you go to BC, we’re underpenetrated relative to anywhere else in the country. So we’ve still got more spots that we can fill in there. And and I would tell you, the the cannibalization question is certainly on our minds. It’s in all the analytics we do when we look at a new site.

We’re we’re looking very carefully at what’s the net impact of opening the site, where do we think it might take from other other restaurants. And we’ve got clear thresholds of, like, what’s one that makes sense and one what what doesn’t make sense based on what the the cannibalization versus net new sales is gonna be. So that that’s very top of mind in any new site that we approve.

Danielo Gargiuro, Restaurant Analyst, Bernstein: Okay. Let’s let’s switch gears onto, in the remaining five minutes, onto Burger King US. Less than 17% of or 18% of the operating profit. So it has been quite a successful story also in The United States relatively speaking. Right?

You know, talking about, the relative outperformance versus peers. So what kind of steps do you think Burger King could take to maintain the outperforming industry outperformance in industry and capture incremental market share?

Josh Kobza, CEO, Restaurant Brands International: Yeah. I agree with what you said in that. I think the, the last few years of of Burger King have been a big change in in direction. I give a lot of credit to the team for a very thoughtful plan that they put together for making the all the right investments that that we needed to make in the business. And I think for bringing the franchise system along, I think we we dramatically changed the level of engagement and buy in from the the franchise system at Burger King in the last few years.

Tom deserves a a lot of credit for that. And I think, you know, when when we look at the metrics that tell us how are we doing, we see progress across the board. And that that can be same store sales and and traffic performance versus the competitors, but also all the other metrics. Are we making progress on digital our digital sales? Yes.

Are we making progress on operations? It’s been actually in incredible. We went from one of the the last, you know, worst performers in the pack to now we’re we’re kind of, like, middle of of the pack. That doesn’t happen very often in a big system like this, but there’s been consistent and really remarkable progress. And we’re making progress on modernizing the image of of our restaurants with good uplifts for the franchisees.

So all all of the basics are working. Think that’s one of the advantages that Burger King has versus some of the competitors is we still have a lot to do on all of those basics. We still have a lot of restaurants to remodel in front of us. We still have pockets and portfolios that are not operating the the way that we want to, where as we fix them, we should outperform and and and have better sales than than others have. So I think we have we have, in some way, the the benefits of progress still to to be made on on all of those fronts.

I know that’s very clear in in the team’s mind, and and they’re working against it. And I also think that as we make progress on some of those fundamentals, the operations are more consistent, the facilities are better maintained. I think that gives us more permission to go do other things, more interesting things. To do things like how to train your dragon and do a whopper that’s that’s got a flame on the on the bun and invite kids and families back into our restaurants and bring people back for dinner. You know, that it’s one of the things that it’s that’s interesting when we we look at our sizzle remodels that we’ve been doing.

The sales progress is not even across day parts and demographics. Actually, the biggest thing that we find is we’re seeing more families coming back and we’re seeing more people coming in for dinner because the dining rooms are beautiful and clean and inviting. And so I I think that as we’ve made progress on these fundamentals, it gives us permission to kind of go on the next phase a little bit more front footed about where we wanna take the brand. And you’re seeing us start to lean into some of those things. How to train your dragon’s a a really fun version of it, but we have more coming, in the in the next few years.

Danielo Gargiuro, Restaurant Analyst, Bernstein: Excellent. And and can you talk about how you’re thinking about maybe this is for you, Sami, like, you’re thinking about balancing improvement in franchisees’ profit versus investing in remodels or higher promotions to get back to, you know, even higher growth levels for for Burger King? And, specifically, what kind of feedback are you getting from franchisees regarding kind of your investment to support them?

Sami Siddiqui, CFO, Restaurant Brands International: Yeah. I I I don’t think they’re mutually exclusive. I actually think they’re quite intertwined. Right? I I think the the investments in whether it’s marketing or in the remodels or or what have you, they’re all designed to kind of strengthen the brand.

And I think, you know, what we’re seeing, and and I kind of alluded to this earlier, is when you think about, the investment in the remodels, both our investment and the franchisees’ investment, it it’s important that we deliver consistent compelling returns. And I think, you know, we’ve been able to deliver mid teen sales uplift pretty consistently on the on the reclaim the flame remodels. And and to Josh’s point, the sizzle remodels, which are kind of some of the more recent remodels, are doing even better. They’re they’re even outperforming that. And so as you look at some of the remodeled restaurants, profitability for those remodeled restaurants is approaching $300,000, which which is a really healthy level for our Burger King system.

It’s it’s where we wanna be long term for for the system, and franchisees are excited about that. They can see that the sales uplifts are flowing through into profit in a in a really healthy ROI. And, you know, for us, I think, you know, the ROI on our investment, there there’s certainly the Excel ROI. Right? And and we kind of view that as, you know, it’s probably high single digits on a simple return basis as you think about over a over a prolonged period of time, as you think about kind of the sales outperformance of remodeled restaurants, over over not remodeled restaurants, it’s probably low low double digits returns.

But I think what’s not factored into that analysis often is what is the opportunity cost of not doing the What is the opportunity cost of having a system that’s not modern? You’ve seen it time and time again in our industry when there you know, a lot of our peers or even our system when we haven’t remodeled, that can become a drag on the system. That can become an anchor as as Tom calls it, and and we have to address that. So I I I think remodeling, it’s it’s not a choice.

Danielo Gargiuro, Restaurant Analyst, Bernstein: And how I know we are almost at time. I’m gonna squeeze in two questions. So, digital. So how are you planning to leverage digital scale across your brands in personalizations and marketing? You know, where are you on your stage, and what’s the plan for the next five years?

Sami Siddiqui, CFO, Restaurant Brands International: Yeah. I would tell you, most

Josh Kobza, CEO, Restaurant Brands International: of our, our marketing and kind of customer activation is done at the the business unit level. So we we let that be run by each of of the brands. They get to decide how to interact with their customers. We do have a a technology team that, like, that sits across the the business, and they help to share best practices. They bring new ideas.

And so they help to kind of give people ideas or or share things that’s that are really working. But we haven’t tried to centralize all of that because we think it gets a bit clumsy, and we really want the brands to drive their customer interactions in whichever channel people are are going to interact with with each of our businesses. So that’s kind of been how we’ve decided to manage it.

Danielo Gargiuro, Restaurant Analyst, Bernstein: Excellent. And then how are you positioned on the trend of consumers looking for healthier products going forward? And then I will ask just differently, how is RBI going to be different in the next five years even outside of the health and wellness, orientation?

Josh Kobza, CEO, Restaurant Brands International: Yeah. On the first part, I think what people are are looking for I think have been looking for and are increasingly is just the quality of the products that that we’re providing. I think that’s, that is what I think our brands do best within their segments. I think what does if you were to say what ties all of our our brands together, I think we have the best quality products in each of our segments. And I think we should keep striving to make those products, our core products, even better every day.

I I think that is the most compelling response that we can have to where I see our our customers going and and what they want from us and what they want from all of of QSR. If I were to look forward, you know, a a few years and say, what would I like to see? I think where we wanna go, Sammy sort of referenced this, is we we wanna get back to being a closer to fully franchised, kind of a classical more franchised model, which means we’ll move the BK system and the Carol’s restaurants to more local owner operators and have our China businesses in the hands of incredible long term partners who are gonna help us realize the growth potential of of those businesses. And I I wanna see our brands consistently winning market share, being brands that are winning in the marketplace because we offer better products and better experiences to our guests every day. And I think in doing that, we’ll be able to deliver really compelling and consistent unit economics that make a lot of sense to our franchise partners around the world.

I think that that’s what we’re aspiring to, and that’s where we’re headed.

Danielo Gargiuro, Restaurant Analyst, Bernstein: Excellent. Josh, Tammy, thank you so much for joining, and thank you everybody for for caring.

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