Restaurant Brands International (TSE:QSR) (NYSE:QSR) might not sound all that familiar until you realize it’s the brand behind Firehouse Subs, Popeye’s, Tim Horton’s, and Burger King. And soon, it’ll have more control over the Burger King brand thanks to its plans to acquire Burger King franchisee Carrols Restaurant Group (NASDAQ:TAST). The deal is expected to close in the second quarter. However, investors weren’t exactly pleased with the move, and shares were down over 1.5% in Tuesday morning’s trading.
The acquisition of Carrols will bring in the largest chain of Burger King restaurants not already owned by Restaurant Brands International and values Carrols at close to $1 billion. It’s part of a larger strategy shift that will see fewer larger-scale franchises and more local franchises. This move is also an attempt to bring in younger people to eat at Burger King locations. Ostensibly, the idea is that the local franchisees would know their individual markets best and, therefore, could tailor promotions accordingly.
Flipping More than Burgers
Restaurant Brands’ plan for Burger King outlets is pretty sweeping. It plans to quickly revamp 600 of the Carrols’ locations and immediately sell them off. This job will take about five years and cost Restaurant Brands about $500 million, all told. The good news is that Carrols’ current operating cash flow should be enough to pay for the job without Restaurant Brands having to put a lot of its own cash into anything more than actually buying Carrols itself. Restaurant Brands will also hold on to a “couple hundred” restaurants, which it will use for training, operator development, and what it calls “strategic innovation” purposes.
Is Restaurant Brands International a Good Stock to Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on QSR stock based on 15 Buys, five Holds, and two Sells assigned in the past three months, as indicated by the graphic below. After an 18.84% rally in its share price over the past year, the average QSR price target of C$109.07 per share implies 6.69% upside potential.
