Fast food Burger King with menu and customers.
Jeff Greenberg | Universal Images Group | Getty Images
Brands International Restaurant buys Carrols Restaurant Groupthe largest Burger King franchisee in the US, for about $1 billion in cash.
Restaurant Brands will pay $9.55 per share to acquire Carrols, which operates more than 1,000 Burger King restaurants and 60 Popeyes locations. Carrols stock closed at $8.42 on Friday, giving it a market value of $459 million. The company’s shares jumped more than 12% in premarket trading on Tuesday.
The deal is expected to close by the second quarter of 2024.
The acquisition, announced Tuesday, is a shift in strategy for Burger King. Its restaurants have been almost entirely franchised over the past decade, and the company currently has only 175 corporate locations.
It comes more than a year after Restaurant Brands unveiled a $400 million plan to revive Burger King’s U.S. business. Burger King’s sales had lagged behind the competition and Wendy’s it surpassed it as the second largest selling burger chain in the US. The turnaround strategy focuses on investing in restaurant renovations and advertising to increase demand and boost franchisees’ profits.
Restaurant Brands plans to quickly remodel 600 Carrols Burger King locations over the next five years and then sell them back to franchisees, said Tom Curtis, president of Burger King U.S. and Canada.
“This will allow us to really focus our attention on accelerating renovations and thinking about how to rebuild this chain of restaurants into smaller packages, with new and existing franchisees living close to the communities where they own the restaurants,” Josh Kobza, CEO of Restaurant Brands. he told investors on a conference call on Tuesday.
The company will invest about $500 million, funded by Carrols’ operating cash flow, to pay for the renovations.
“I’ve always been a big believer in network effects, reshaping an entire portfolio,” Curtis told CNBC. “I think when consumers see that across the market consistently, it helps with recruiting, it helps with restaurant staffing, it helps with the overall image and perception of the brand.”
He said Burger King’s development team plans to meet with Carrols as soon as Wednesday to discuss how the chain can remodel 120 restaurants a year — doubling Carrols’ goal of renovations by 2024.
After selling most of the Carrols locations in five to seven years, Burger King plans to retain a few hundred restaurants for “strategic purposes, operator training and development.”
Earlier this month, Carrols announced fourth-quarter results, sharing that same-store sales for its Burger King locations rose 7.2%, while traffic rose 2.9%. The franchisee typically outperforms the rest of the Burger King system in the US.
Correction: Restaurant Brands International currently owns 175 Burger King locations. An earlier version of this story misstated that number.
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