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Acquiring Firehouse Subs was an ‘amazing opportunity,’ Restaurant Brands CEO says

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  • SHAK
  • MCD
  • CMG
  • QSR
  • YUM
  • WEN

Restaurant Brands International CEO José Cil joins Yahoo Finance Live to talk about the fast food dining corporation's recent acquisition of Firehouse Subs and his outlook on the industry and competition.

Video Transcript

BRIAN SOZZI: The king is getting a new family member. Burger King owner Restaurant Brands is buying Firehouse Subs for $1 billion in cold hard cash. This is the first big deal Restaurant Brands has made since CEO José Cil took over in 2019. The company's last acquisition came back in 2017 when it purchased Popeyes for $1.8 billion. And there's José Cil, Restaurant Brands CEO, on the screen. José, nice to see you. I'm not pulling any punches here. I mean, this is a strong brand, 1,200 stores, $1.1 billion in projected sales this year. Is this your play against the crumbling empire that is Subway?

JOSE CIL: Hey, Brian. Great to be here. Look, it's a great brand. Firehouse Subs is a brand we're super excited about. They've done a great job under Don Fox, who's been running the brand since 2009. I spent a lot of time with the co-founders and with Don. The brand has grown tremendously since 2010, three-fold in terms of restaurant count and four-fold in terms of systemwide sales. Differentiated and kind of purpose-driven brand, great products, really strong operations and service levels and a preferred brand when you compare it to others in the sub sandwich category.

And they have a really strong Public Safety Foundation that's kind of at the heart of the brand, giving back through life-saving equipment that they engage with and provide grants to local police departments and fire departments. So, all in all, amazing opportunity, amazing brand, and we think there's a lot of white space for growth in the US and Canada and internationally. So we're excited and looking forward to working with the team and supporting them as they continue on their journey for growth in the US and beyond.

BRIAN SOZZI: As someone who has spent many years in the restaurant industry, José, why is there a fascination with subs? We saw your competitor, Arby's, go out there about a year and a half ago, buy Jimmy John's. Now you're out there buying Firehouse. What do the margins look like? Why do people love subs?

JOSE CIL: Subs are great. I think they're a very comforting food, and people are, in the US and beyond, are very accustomed to them. It forms part of the daily routines of many Americans and many around the world. And so, it's a big category in the QSR space.

What's exciting to us about the Firehouse Subs brand is the quality of the food. I spent a lot of time with the co-founders, Robin Sorensen and his brother, Chris, and, you know, the focus of the brand since the beginning was quality. And so they have a great tasting product. Their portions are quite substantial. And the product quality is exceptional.

So we're really excited. We think it's a great product. And we think it's a category that we should be in, which is why we spend time really digging deep into Firehouse Subs and finally signed it, inked it at the end of the evening Sunday night, and announced it yesterday. So looking forward to get in there and working with the team and letting them continue to do what they've done well the last many years.

JULIE HYMAN: Everyone loves a substantial portion, don't they, especially right now in terms of pay more. You want to get more for your money for sure. José, forgive my sort of clueless question here. When you're rolling up different brands here, as you have done, and now do with Firehouse, what do you get from that in terms of synergies? And I hate to use sort of corporate speak like synergies, but in other words, there's not a lot of, say, ingredient overlap, so you're not necessarily, or are you, getting negotiating power when it comes to pricing. Like, where is the overlap? Where can you save?

JOSE CIL: Yeah, this is not about saving, Julie. This is about growth. And the reason we invested and we were really excited about Firehouse Subs is the opportunity for growth, similar to Popeyes, similar to Tim Hortons internationally. We saw there was a huge opportunity, and the same thing with Burger King as the initial investment thesis.

These brands, and in particular, Firehouse Subs, is a great opportunity from a growth standpoint. There's opportunities for sure to lean in on our technology capabilities. We've invested significantly in engineering and capital as well to ramp up our digital capabilities at the restaurant tech side, as well as in the consumer-facing tech side. We have an awesome network of master franchisees internationally that have built out Burger King. And now we're doing the same with Popeyes and Tim Hortons.

And we think that's a really strong opportunity for Firehouse Subs to leverage and to be able to drive growth as well. So this is all about growth. This is about finding ways to help accelerate the growth, but really leaning in on a category and on a brand that we firmly believe in and being able to be part of the growth that's in front of us for years and years to come.

BRIAN SOZZI: So José, I see Restaurant Brands getting larger. Arby's has been making its acquisitions. And well, Yum Brands bought Habit Grill to get even bigger just before the pandemic. What's the read here? If you're a smaller fast food player in this industry, is it time that either you have to add to your own portfolio or sell out to a company like yours?

JOSE CIL: Look, I'm not sure how others are thinking about it. The way we think about it is we've got a great platform with Restaurant Brands International. We've got great people. We have amazing brands and franchisees that are committed to developing these brands, in some cases, internationally, in some cases, here domestically. And so our aim is to build the best restaurant company in the world and to build the most loved restaurant brands in the world. And that's the focus we have.

And the portfolio of brands that we have are amazing in their own right. They all started-- Burger King in 1954, Tims in 1964, Popeyes in '72, and Firehouse Subs in 1994-- all started with this idea of delivering great food or beverages to their guests and doing it in a differentiated way with product quality and service, and in all cases as well with some level of community engagement. And so that's what we're doing here, is we're building an awesome company and with awesome brands. And we're really excited to continue on that journey and stay focused on delivering great experiences to our guests.

BRIAN SOZZI: Somebody who does love you guys, José, it's Justin Bieber. Have you seen a pickup in sales over at Tim Hortons because of your partnership?

JOSE CIL: Yeah, we'll have a lot to chat about after the next earnings, but the partnership there makes a lot of sense. It's a great collaboration. Justin, or maybe Mr. Bieber, is a big fan of Tim Hortons. He's been--

BRIAN SOZZI: It's Justin, José. No, come on. You know, he's not Mr. Bieber. Come on. So it's not.

JOSE CIL: I haven't met him yet, so-- and I know, I know. He's great. He's a big fan. He's been supportive of the brand. He gives us feedback as well sometimes on packaging and other things. So he's a true Tim Hortons fan and has done a great job, obviously, with his career, but we think he's a great ambassador for the brand. And we're really excited about the partnership and the collaboration.

BRIAN SOZZI: All right, we'll look forward to that sales update on your next earnings call with that Bieber collaboration. Restaurant Brands CEO José Cil, always good to see you. Congrats on the purchase.