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Restaurant Brands Aims to Expand Restaurant Base Globally

Zacks Equity Research

Restaurant Brands International Inc. QSR, in its first investor day, announced certain long-term expansion plans. The company declared that it is planning to take its restaurant count to more than 40,000 over the next eight to 10 years. Currently, the chain has 26,000 restaurants in its portfolio. With the proposed expansion, Restaurant Brands is aiming to become one of the largest restaurant companies in the world.

In the quick-service restaurant space, the global burger market is expected to grow 5% annually over the next five years. Global coffee and chicken markets are expected to witness 6% growth, each, annually. Keeping this outlook in mind, Restaurant Brands is focusing on expansion and is leveraging the power of its three iconic brands to capture a greater share of the quick-service restaurant market.

Backed by strong brand presence, shares of Restaurant Brands have gained 27.6% so far this year, outperforming the industry’s 16% rally.

Expansion Efforts — Key Growth Driver

Restaurant Brands believes that there is an attractive opportunity to grow all its brands around the world by expanding its presence in existing markets as well as entering new markets. It continues to evaluate opportunities to speed up international development of all the three brands by establishing master franchisees, with exclusive development rights as well as joint ventures with new and existing franchisees.

In fact, over the past few years, Restaurant Brands’ master franchisee efforts have resulted in the expansion of its restaurant base from roughly 12,000 in 2010 to nearly 26,000 at present. System-wide sales also grew from $15 billion to $32 billion in the same period.

The company is encouraged by the long-term growth prospects of the Tim Hortons brand and remains committed to delivering on its international growth strategy of expanding the brand around the world. In this regard, it recently formed master franchise joint venture partnerships (MFJVs) for the brand in Mexico and Spain. Moreover, the company is optimistic about the major expansion opportunity that lies ahead for the brand in the United States. The regions, where the company has signed development agreements, include Cincinnati, Columbus, Indianapolis, Minneapolis, Cleveland and Youngstown.

As part of its international growth strategy for Burger King, the company created master franchise joint ventures in various markets across Europe, the Middle East and Africa (“EMEA”), the Asia Pacific (“APAC”), and Latin America and the Caribbean (“LAC”). It also received a meaningful minority equity stake in each joint venture. It has also entered master franchise and development agreements in a number of markets across these regions, including Japan, France, Russia, Brazil, Spain, Belgium, China, Turkey and Korea.

Zacks Rank & Stocks to Consider

Restaurant Brands currently carries a Zacks Rank #4 (Sell). A few better-ranked stocks in the restaurant industry are Yum China YUMC, Noodles & Company NDLS, and Habit Restaurants HABT, each currently carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Yum China, and Noodles & Company’s earnings for 2019 are expected to increase 9.8% and 700%, respectively. Habit Restaurants’ long-term EPS growth rate is pegged at 20%.

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Restaurant Brands International Inc. (QSR) : Free Stock Analysis Report
The Habit Restaurants, Inc. (HABT) : Free Stock Analysis Report
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