November 13, 2020 - 3:33pm EST by
2020 2021
Price: 56.00 EPS 0 0
Shares Out. (in M): 469 P/E 0 0
Market Cap (in $M): 26,264 P/FCF 0 0
Net Debt (in $M): 10 EBIT 0 0
TEV ($): 36 TEV/EBIT 0 0

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We believe that shares of Restaurant Brands International (RBI) represent a compelling value in the current market. RBI is a franchisor of three large quick service restaurant chains - Burger King, Tim Horton's and Popeye's Louisiana Kitchen. The company is also the de factor QSR investment vehicle of 3G Capital. 

We invite readers to peruse an exhaustive writeup of the investment opportunity via this link: QSR VIC Writeup. Our memo was finished prior to the Q3 earnings report, which was a relative non-event for both the thesis and the stock. In an nutshell, our thesis is as follows:

  • Burger King (67% of system-wide sales, 43% of EBITDA) is a moderate to high growth concept with a large runway for international expansion (international unit growth was >10% over the last 3 years.) 
  • Popeyes (13% sales, 8% EBITDA) is a high growth concept. Recent SSS comps of 20%+ driven by the introduction of their chicken sandwich, coupled with potential for attractive door growth) make this an exciting growth engine for the company.
  • Tim Hortons (20% sales, 49% EBITDA growth) is a mature concept and a leading Canadian QSR with emphasis on coffee and breakfast sales. Hortons has suffered from management mis-steps in recent years, including menu problems and the botched roll out of a customer loyalty program. QSR concepts are prone to these types of occasional issues (both MCD and SBUX experienced them - and recovered nicely - in recent years) and we believe the problems are now solved under new division leadership. Covid has impacted Hortons more than most QSRs due to their focus on coffee and breakfast.

The combination of past mis-steps at Hortons coupled with Covid slowdown in this part of the business is the primary driver of the opportunity to purchase shares of QSR at attractive levels today. And as the world returns to normal, we believe outperformANCE in this division will drive upside to the stock. As illustrated below, RBI trades at meaningful discount to its peers on a growth adjusted basis:

As Burger King returns to steady growth, Popeyes continues its impressive growth trajectory and performance improves at Tim Hortons, we model a high teens multi-year IRR in our base case, with upside potential from additional M&A should management add another concept to the RBI family of brands. Risks emanate primarily from further managerial mis-steps at Hortons, a slowdown at Popeyes and further lock-downs associated with C19 that impede consumer traffic. 



I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise do not hold a material investment in the issuer's securities.


Improving SSS trends at Hortons

Unit growth at BK and PLK

Incremental M&A

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