Why Burger King and Tim Hortons customers shouldn’t dread a merger

Market Realist

Burger King and Tim Hortons investors react to acquisition news (Part 5 of 6)

(Continued from Part 4)

What happens to both brands after the acquisition?

The Burger King (BKW) and Tim Hortons (THI) brands will each be managed independently and will also operate as standalone brands. The company also assured investors that Tim Hortons will retain its name, core values, and employee franchisee relationship following this deal. Everything will remain unchanged at Burger King as well.

Tim Hortons franchisee and employment relationship

Almost 99% of Tim Hortons restaurants are owned by franchise and the rest are company-operated. Burger King, too, has 99% of its restaurants under the franchise model. Click on this link to learn more about these two business models.

Tim Hortons’ royalty structure, rents, Franchise Advisory Board, customer facing program, and franchisee-facing resources will remain unchanged. The company also assures investors that restaurant-level employment will remain unchanged.

So if everything else seems like it will remain unchanged, let’s see what the new ownership will look like.

The ownership structure

Both brands will be under the common ownership of the new parent company. 3G Capital will own 51% of the new company, thus also commanding management and operational control.

Berkshire Hathaway will only be providing financing to this acquisition, with no participation in the management and operations of the new company. Berkshire Hathaway believes in investing in companies with good management, which is in line with this new deal.

Tim Hortons community involvement

Tim Hortons’ involvement in the community, such as the Tim Horton’s Children’s Foundation, Tim Hortons Coffee Partnership and its related programs, and TimBits Minor Sport Program, won’t be affected by this acquisition.

If you want to wait and see how this acquisition plays out, you can invest in a more diversified portfolio through ETFs like the Consumer Discretionary Select Sector SPDR Fund (XLY) and the PowerSharesDynamic Food & Beverage ETF (PBJ). These ETFs include McDonald’s (MCD) and Burger King, respectively.

Continue to Part 6

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