Restaurant Brands (“QSR”) (QSR, Financial)
QSR’s franchised business model is a high-quality, capital-light, growing annuity that generates high-margin brand royalty fees from now four leading brands: Burger King, Tim Hortons, Popeyes and recently acquired Firehouse Subs.
During the past two years, the company took a number of steps to accelerate its digital investments. The expansion of the company’s delivery footprint, modernization of its drive-thru experience, increases in mobile ordering adoption, and improvement in its loyalty programs have helped drive digital sales and the company’s recovery.
Burger King’s international business and Popeyes have returned to strong same-store sales growth relative to pre-COVID-19 levels, whereas Burger King in the U.S. and Tim Hortons in Canada are still below 2019 levels. Burger King U.S. is now under new leadership, and we are optimistic about the new management team and their efforts to return the brand to sustainable growth. Tim Hortons’ recovery in Canada is tied to mobility, showing significant improvement each month during the last quarter, culminating with December improving to low-single digit growth relative to 2019 levels before the impact of Omicron.
As the company returns to sustainable growth, management continues to take important steps to position the company for long-term success. The company announced several new markets for the Tim Hortons and Popeyes brand, and returned to its historical mid-single-digit unit growth last year. QSR also closed its acquisition of Firehouse Subs for $1 billion in December. We expect the company to accelerate the Firehouse’s unit growth in the coming years.
As underlying sales trends recover, we expect QSR’s share price will more accurately reflect our view of its business fundamentals over time. In the meantime, the company recently initiated a share repurchase program and is currently buying back stock at what we believe to be a low valuation.
From Bill Ackman (Trades, Portfolio)'s Pershing Square 2021 annual letter.
