Toss some lighter fluid on the performance of the flame-grilling, Whopper-focused Burger King.
After years of misfires, it appears Restaurant Brands International (QSR) is finally turning the corner at its most iconic brand, amid a series of investments.
Moments after the company capped off an investor day at the New York Stock Exchange on Thursday, Restaurant Brands CEO Josh Kobza told Yahoo Finance Live that BK’s comeback is real — and better operations are a huge ingredient.
The proof of the turn is in the special sauce — or results — of the company’s latest quarter.
Burger King US saw a 6.4% same-store sales growth in the fourth quarter, compared to a 5% increase a year ago. The Whopper maker also boasted an increase in customers for the first time since Q2 2021.
For all of 2023, Burger King’s US same-store sales rose 7.5%, versus a mere 2.2% gain the year prior. Perhaps more importantly, Burger King US grew its franchisee profitability by nearly 50% as underperforming restaurants were closed and traffic trends improved.
Execs credit the improvement at BK to several factors.
First, aggressive marketing efforts around new menu items such as the Royal Crispy Wrap. The company also launched a catchy campaign this month to award a contestant $1 million for creating the next take on the Whopper.
Secondly, early benefits from millions of dollars being spent to support remodeled, more futuristic-looking restaurants.
And lastly, less discounting on the famed Whopper.
Collectively, the initiatives are referred to internally as Reclaim the Flame.
“The strong performance in BK’s franchisee profitability (up ~46% [year over year]) validates our hypothesis that the Reclaim the Flame acceleration is gaining momentum,” Bernstein analyst Danilo Gargiulo told Yahoo Finance.
Burger King is Restaurant Brands’ largest chain in the US at 6,778 locations, followed by Popeyes and Firehouse Subs. The franchise is also the largest for the company overseas at 12,240 sites, far ahead of Tim Horton’s, with 1,308 locations in its home market of Canada.
As a sign of confidence, Restaurant Brands announced in mid-January it would buy Carrols Restaurant Group (TAST) for about $1 billion in cash. Carrols owns about 1,022 Burger King restaurants across 23 states, as well as 60 Popeyes stores.
Ownership of Carrols should allow Restaurant Brands to more directly invest in important initiatives such as remodels, Restaurant Brands executive chairman Patrick Doyle told Yahoo Finance Live.
The quarterly results from Burger King US come as the company noted sales gains across its portfolio.
Despite the progress, Restaurant Brands shares have continued to underperform the broader market. Over the past year, its shares are up 14%, compared to a 23% gain for the S&P 500.
Wall Street would like to see several boxes checked by Restaurant Brands before getting more bullish, Gargiulo says.
That includes picking up the pace of growth overseas and improving BK’s performance in the key market of China.
Another factor is uncertainty on the speed of Burger King’s remodels in the US, “with the shift in Reclaim the Flame budget from remodels to refresh potentially signaling lower appetite from franchisees to remodel,” Gargiulo added.
Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on Twitter/X @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email [email protected].
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