Restaurant Brands International (QSR) released its fourth-quarter results on Tuesday, February 13, posting earnings per share (EPS) of $0.75 topping analyst estimates. Notable brands, and major contributors to revenue, Tim Hortons and Burger King, saw same-store sales increase 8.4% and 6.3%, respectively.
Restaurant Brands International CEO Josh Kobza and Executive Chairman Patrick Doyle speak with Yahoo Finance Executive Editor Brian Sozzi to discuss the performance of the business and they plan on growing it moving forward.
Kobza explains what the biggest driver for his business: "I think the biggest driver is the sales growth. That makes everything easier in our business. The good news is our sales were up really healthy levels over the past year. That's what's allowed us to drive and improve profits alongside some moderating costs. The great news about that, that's what allows our franchisees to reinvest in the business. It allows them to staff the businesses better It allows us to upgrade technology and equipment and ultimately remodel and improve our assets. Those are the things that kick the flywheel in the right direction and allow us to keep improving the business."
Watch the video above to hear how the company plans to light a fire under its Burger King business.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Nicholas Jacobino
Video Transcript
BRIAN SOZZI: All right. Welcome back to Yahoo Finance. Busy day down at the New York Stock Exchange for Restaurant Brands. Of course, that is the company owns Burger King and many other chains. And I should have mentioned Tim Hortons as well. Let's bring in the two stars of the hour down here. That's Executive Chairman, Patrick Doyle. And Josh Kobza. The CEO of Restaurant Brands. Good to see you both. Pretty packed house. Turnout. Right. Upstairs here. What did investors want to hear from you, Patrick?
PATRICK DOYLE: They want to hear about our future plans. So we laid out today was our long term growth algorithm for the business. What we think we can achieve across the four brands and our five business segments. And hopefully, they're excited about it.
BRIAN SOZZI: Do you think they're excited about it?
JOSH KOBZA: I think people are pretty excited about the outlook. We just announced our earnings a couple of days ago. And I think we've made tremendous progress on sales. And perhaps most importantly on franchisee profitability. Across all of our home markets, our franchisee profitability was up over 30% in the last year. And I think that's the underpinning of our future growth. If our franchisees are doing well, we're operating our brands well, we're going to grow all around the world. And that's what has us and our investors excited.
BRIAN SOZZI: Patrick, how does this dynamic work? Executive chairman. CEO. Past your one year mark? So how does this work? Is it coaching? I mean, how do you work in close concert?
PATRICK DOYLE: He does all the work.
BRIAN SOZZI: He does all the work. That sounds like executive chairman.
PATRICK DOYLE: I just lob in ideas. He does all the hard work.
BRIAN SOZZI: He does all the hard work. One thing that stood out to me, reported earnings earlier this week, Josh, there seems to be a turnaround happening in Burger King US. Now I know this has been a long undertaking to get down to this path. But why do you think the brand is in fact starting to turn?
JOSH KOBZA: Yeah. So I think Tom Curtis who runs the Burger King business in the US and Canada and the rest of his team have done an incredible job. They've put in place the Reclaim the Flame plan just about 18 months ago. And we're making big investments in the brand, in the infrastructure, alongside our franchisees. Those investments are really starting to show results. We saw big improvements in sales. We had our first quarter of positive traffic. We saw operations improve. And our franchisees profits were actually up about 50% year on year.
So all those things are sort of moving in the right direction and reinforcing each other. Tom calls it progress, not success. I think we have a long and bright future for Burger King. And we're going to keep at it.
BRIAN SOZZI: What is the driver between that franchisee profitability? Now I talked to a lot of folks ahead of this interview on the street. And they all pointed out higher profits for those franchisees. It took a lot of folks by surprise. Can you point to is it better menu items? Is it better operations? Or have costs just come down?
JOSH KOBZA: Yeah. I think the biggest driver is the sales growth. That makes everything easier in our business. And the good news is our sales were up really healthy levels over the past year. That's what's allowed us to drive improved profits alongside some moderating costs. The great news about that is that that's what allows our franchisees to reinvest in the business. It allows them to staff the businesses better. It allows us to upgrade technology and equipment. And ultimately, to remodel and improve our assets. Those are the things that kind of kick the flywheel in the right direction and allow us to keep improving the business.
BRIAN SOZZI: A lot of focus, Patrick, made a big bet on Carol's. In the process of acquiring that business. We'll get to have a lot more restaurants in the chain. What will that let you do in terms of bringing the business to the next level?
PATRICK DOYLE: There are really a couple of reasons why we did it. And so, ultimately, Carol's a very good operator of Burger Kings. They also own some Popeyes as well. They're very good operators. They've got great people in there who know how to run the restaurants. So what we're doing is we're going to buy Carol's. It's still a pending acquisition. We are going to reimage all those stores. So 600 out of the 1,000, we're going to remodel. Make them look great. And then we're going to give opportunities to the people within Carol's who are strong operators to become franchisees. Some of them we may sell to some existing franchisees. But the idea is we'll have great looking restaurants. We'll accelerate the progress there. And then we'll split them up into a lot of local owner operators, who we think are going to do an even better job of running them over the long term.
BRIAN SOZZI: Our first conversation, Patrick, was in 2014. I was at a different publication. You were the CEO of Domino's. But you turned around Domino's. Can you point to some similarities with Restaurant Brands? Where is this company in its turnaround?
PATRICK DOYLE: I didn't turn around Domino's. A lot of people there did amazing work, including Russell who is still running it. But the basics work in this business. I mean, it's what gives me confidence. If you're making great food consistently, if you're giving people good value, if you're giving them fast, friendly service, the restaurants look great, you're going to be successful. Everybody knows that. The issue is do you do it. Do you actually wake up in the morning and say that is the minimum that is acceptable for us in our brands? And when you do that consistently, you're actually going to be better than most out there. And that's going to generate growth.
BRIAN SOZZI: And I should note, you put your money where your mouth is. We talked about it. You're $30 million in what five years? Over five years? Are you putting more money in? Are you that-- remain a big believer in the brand?
PATRICK DOYLE: So I locked up. So I cannot sell anything for five years. I am all in. I look at it as a terrific opportunity from an investment standpoint. But also, I'm excited to help Josh and the whole team to figure out how do you do this. What are the places that maybe digital can be brought to bear to accelerate the growth. To generate better profits for the franchisees. I'm very excited about the progress we're making. And even more excited about what we can do over the course of the next five years.
BRIAN SOZZI: Josh, I'll tell you this. I'm still remain obsessed with reading earnings calls. Now one of your competitors, Wendy's, came out this morning and said we're investing $50 million more into breakfast. And maybe that's going to lead to more discounting in the breakfast category. How do you respond? Because that's a lot of money by a key competitor.
JOSH KOBZA: Yeah. So what I think we need to be focused on is really our core business. And that's what you've seen us doing. Whether that was at Tim Hortons, focusing on improving the quality of our core and investing to tell people about that in Canada a few years ago. Or what we're doing now with Burger King. We're focusing on our core equities. Flame grilling, the Whopper, have it your way. We're putting all of our money behind the core. I think that's the best way and the strongest way to take these businesses forward. And so that's where we're going to put our investment. And I think that's what's paying dividends so far.
BRIAN SOZZI: Real quickly. Favorite item on the menu?
JOSH KOBZA: Probably the Popeyes chicken sandwich from Popeyes. Burger King has to be a Whopper. I love the Tim Hortons cold brew. And Firehouse, a Hook and Ladder.
BRIAN SOZZI: Don't tell me Whopper.
PATRICK DOYLE: Whopper.
BRIAN SOZZI: The Whopper.
PATRICK DOYLE: With cheese.
BRIAN SOZZI: With cheese. Fair enough. All right.
PATRICK DOYLE: Spicy chicken sandwich at Popeyes. Although the new wings are amazing.
BRIAN SOZZI: All right. You still got it, Patrick. All right. Patrick Doyle, always good to see you. Josh Kobza, good to see you in person. All right. Julie. Josh. Back to you. Hope you're hungry.
