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    QSR
    Earnings call· Mar 2025(Q1 FY25)

    Restaurant Brands International Q1 FY25 earnings call QSR

    May 8, 2025 Source

    Executive summary

    Restaurant Brands International Q1 FY25 — Soft Start, Confident Outlook & Strategic Cleanup

    Restaurant Brands International navigated a dynamic macro environment in Q1 FY25, experiencing a softer start to the year with modest comparable sales growth, though April showed improved momentum. The company remains confident in achieving its full-year organic adjusted operating income growth target of at least 8%, driven by strategic initiatives like the Burger King U.S. Reclaim the Flame plan, international expansion, and a focus on operational efficiency and capital discipline. A significant portfolio cleanup and refranchising effort is underway for Burger King China and Carrols, aiming to simplify the business and reduce future capital commitments.

    Highlights

    5

    • Consolidated comparable sales were 0.1%, or over 1% excluding Leap Day impact, with net restaurant growth of 3.3%.

    • International segment delivered 2.6% comparable sales (3.7% excluding Leap Day) and 8.6% system-wide sales growth, with strong performance in the U.K., Germany, Brazil, Japan, and Australia.

    • Burger King U.S. continued to outperform the broader burger QSR category, reflecting progress in the Reclaim the Flame plan.

    • Adjusted EPS increased to $0.75 per share from $0.73 per share last year, representing 9.9% organic growth excluding Restaurant Holdings and FX impact.

    • Full-year 2025 segment G&A guidance (excluding RH) was reduced to $600 million-$620 million from $650 million-$670 million, reflecting efficiency gains.

    Concerns

    5

    • First quarter consolidated comparable sales were 0.1%, making it the softest quarter of the year, impacted by macro noise and Leap Day.

    • Net restaurant growth expectations for 2025 were updated to +/- 3%, down from mid-3% in 2024, primarily due to Burger King China's portfolio cleanup.

    • Popeyes U.S. and Canada comparable sales declined 4%, or roughly 2.9% adjusted for Leap Day, following a strong prior-year comparison.

    • Burger King China will undergo a portfolio cleanup, closing unprofitable restaurants, though the impact to system-wide sales is expected to be limited due to low average sales volume (<$300,000).

    • Q1 free cash flow was impacted by $77 million in cash tax payments, largely related to new EIFEL Canadian interest tax deductibility rules.

    Guidance & targets

    18
    CategoryTargetConfidence
    Organic adjusted operating income growth
    at least 8%
    high materiality
    High
    Comparable sales growth
    3%-plus
    high materiality
    High
    Organic adjusted operating income growth
    8% plus
    high materiality
    High
    Total reported Net Restaurant Growth (NRG)
    plus or minus 3% unit growth range
    high materiality
    Medium
    Global Net Restaurant Growth (NRG)
    5% (approx. 1,800 net new restaurants per year)
    high materiality
    High
    Home market Net Restaurant Growth (NRG)
    roughly 400 net restaurants per year
    medium materiality
    High
    International Net Restaurant Growth (NRG)
    about 1,400 net units per year
    medium materiality
    High
    EMEA Net Restaurant Growth (NRG)
    roughly 600 net units
    low materiality
    High
    APAC (outside of China) Net Restaurant Growth (NRG)
    around 300
    low materiality
    High
    LATAM Net Restaurant Growth (NRG)
    roughly 200 per year
    low materiality
    High
    China Net Restaurant Growth (NRG)
    300 units
    medium materiality
    Medium
    Adjusted net interest expense
    $500 million to $520 million range
    medium materiality
    High
    Adjusted effective tax rate
    18% to 19% range
    medium materiality
    High
    CapEx and cash inducements
    $400 million to $450 million range
    medium materiality
    High
    CapEx and cash inducements
    $350 million to $400 million range
    medium materiality
    High
    CapEx and cash inducements
    around $300 million
    medium materiality
    High
    Segment G&A (excluding RH)
    $600 million to $620 million range
    medium materiality
    High
    FX headwind
    $15 million
    low materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Tim Hortons Canada
    Experienced relatively flat comparable sales, but the underlying plan is working. Improved sales momentum in April. On track to return to positive net unit growth in 2025, focusing on underpenetrated regions like Western Canada.
    Comparable sales (excluding Leap Day): approx. 1.2%Average morning drive-through times: improving YoY for 9 consecutive quartersGuest satisfaction levels: highest of all time in Q1
    		—0.1%——
    International
    Solid growth in many largest markets including the U.K., Germany, Brazil, Japan, and Australia. Burger King China classified as held for sale, with early signs of progress in comparable sales after taking over the business. Popeyes International system-wide sales growth was 35% in Q1 FY25.
    Comparable sales (excluding Leap Day): roughly 3.7%System-wide sales growth: 8.6%Burger King India restaurants: crossed 500 milestonePopeyes International restaurants: approx. 1,500
    		—2.6%——
    Burger King U.S.
    Continued to outperform the broader burger QSR category. Strong value offerings and premium innovation contributed. Making progress on operations and transitioning restaurants to more engaged operators. Average sales uplifts from remodels are holding in the mid-teens net of control.
    Comparable sales (excluding Leap Day): relatively flatRemodels expected in 2025: 400Modern image by end of 2028: over 85%
    		—-1.1%——
    Popeyes U.S. and Canada
    Softer results followed a strong prior-year comparison. Focused on the 'Easy to Love' strategy, including increased national advertising spend starting April, rolling out easy-to-run kitchen upgrades, and prioritizing operational consistency.
    Net restaurant growth: 3%Comparable sales (excluding Leap Day): down roughly 2.9%Remodeled A-grade restaurants profitability: 30% higher than system averageConsistent modern image target: by 2030Company and restaurant portfolio: expanded to approx. 100 locations
    		—-4%——
    Firehouse Subs U.S. and Canada
    Continued to outperform the broader sub sandwich category. Building on momentum from 2024 with hundreds of new store commitments, leading to confidence in improved unit growth in 2025.
    Comparable sales (excluding Leap Day): nearly 2%Net restaurant growth: 5.9%System-wide sales: 7.3%Digital mix: over 45%
    		—0.6%——

    Operational metrics

    28
    Consolidated comparable sales
    0.1%
    Q1 FY25

    Softest quarter of the year, impacted by macro noise.

    Net restaurant growth
    3.3%
    Q1 FY25

    Reflects overall unit expansion.

    System-wide sales growth
    2.8%
    Q1 FY25

    Overall sales performance across all brands.

    Organic adjusted operating income growth
    2.6%
    Q1 FY25

    Excludes results from the Restaurant Holdings segment.

    Adjusted EPS
    $0.75up from $0.73 YoY
    Q1 FY25

    Increase primarily due to a decrease in adjusted net interest expense.

    Adjusted net interest expense decrease
    $11 millionYoY
    Q1 FY25

    Reflecting benefits from upsized cross-currency swaps, 2024 refinancings, and interest rate swaps.

    Adjusted effective tax rate
    16.5%
    Q1 FY25

    Included a one-time benefit from discrete noncash tax items.

    Cash tax payments
    $77 million
    Q1 FY25

    Largely related to new EIFEL Canadian interest tax deductibility rules.

    Capital returned to shareholders (dividend)
    $262 million
    Q1 FY25

    Represents dividend payments during the quarter.

    Reclaim the Flame related investments
    $10 million
    Q1 FY25

    Investments made as part of the Burger King U.S. plan.

    Liquidity
    $2.1 billion
    end Q1 FY25

    Total available liquidity at the end of the quarter.

    Leverage ratio
    4.7x
    end Q1 FY25

    Net debt to adjusted EBITDA ratio.

    CapEx and cash inducements
    $300 million
    after 2028

    Expected long-term run rate after Reclaim the Flame and Carrols refranchising are complete.

    FX headwind
    $15 millionimproved from $45 million
    FY25

    Based on current rates, an improvement from previous expectations.

    Tariff impact (COGS)
    around 100 bps or less
    future

    Preliminary view on potential impact, assuming localization efforts pan out.

    Segment G&A (excluding RH)
    $600 million to $620 milliondown from $650 million to $670 million
    FY25

    Reflects identified opportunities to run the business more efficiently.

    Organic gross profit dollar growth (Tims supply chain)
    $10 million
    Q1 FY25

    Growth in the Tims supply chain business.

    Net bad debt expenses
    $7.5 millionin line with prior year
    Q1 FY25

    Primarily related to international royalties and cost of sales within the Tims supply chain business.

    Burger King US modern image percentage
    50%
    current

    Current percentage of restaurants with modern image.

    Burger King US remodels
    400
    FY25

    Expected number of remodels for the year.

    Popeyes International system-wide sales growth
    35%50% in 2024, 60% in 2023
    Q1 FY25

    Strong growth trajectory for Popeyes internationally.

    Tim Hortons Canada hot brewed coffee dollar share
    grew
    YoY

    Indicates strong performance in a key category.

    Tim Hortons Canada PM food share
    increased
    Q1 FY25

    Driven by flatbreads and loaded offerings.

    Burger King China revenue headwind
    $9 millionYoY
    Q1 FY25

    Due to BK China being classified as held for sale and not recognizing revenue until a new partner is in place.

    Burger King China AOI headwind
    $9 millionYoY
    Q1 FY25

    Due to BK China being classified as held for sale and not recognizing revenue until a new partner is in place.

    Burger King China full-year revenue impact
    $37 millionYoY
    FY25

    Expected full-year impact assuming no change in ownership.

    Burger King China full-year AOI impact
    $19 millionYoY
    FY25

    Expected full-year impact, considering bad debt expenses recorded in 2024.

    Segment G&A reduction
    $7 million
    Q1 FY25

    Reduction in segment G&A, offsetting some headwinds.

    Industry KPIs

    3
    MetricValueDetails
    Comparable sales comps0.1%%
    Global system wide sales2.8%%
    Net unit growth development pipeline3.3%%

    Product announcements

    17
    ProductTypeDetails
    100% Canadian freshly-cracked scrambled eggslaunch
    $1 donut with a coffee promotionlaunch
    Physical roll-up rim cupslaunch
    Scrambled eggs loaded breakfast box (with Ryan Reynolds)launch
    Hat-trick pizzalaunch
    Frozen quencherslaunch
    New espresso machineslaunch
    Memphis BBQ King Doublelaunch
    New tortilla platformlaunch
    $5 Duoslaunch
    $7 Trioslaunch
    Steakhouse Bacon Whopperlaunch
    New family activationlaunch
    Pickle menulaunch
    Don Julio collaborationlaunch
    French Dip sublaunch
    Hot Ones collaborationlaunch

    Deals & partnerships

    4
    Carrols Restaurant GroupAcquisition of Carrols Restaurant Group

    Closed on May 16, 2024. Introduced a sixth reportable segment, Restaurant Holdings, comprising Carrols restaurants.

    Popeyes ChinaAcquisition of Popeyes China business

    Closed on June 28, 2024. Introduced a sixth reportable segment, Restaurant Holdings, comprising Popeyes China business.

    Burger King ChinaAcquired substantially all remaining equity interest in Burger King China from former joint venture partners.roughly $150 million

    Acquisition closed on February 14, 2025. BK China has been classified as held for sale and reported as discontinued operations as the company actively works to identify a new controlling shareholder.

    Morgan StanleyEngaged to help find a new local partner for Burger King China.

    Actively working to secure a new local partner for Burger King China following the acquisition of remaining equity interest.

    Risks & headwinds

    8
    Dynamic macro backdropQ1 FY25

    Q1 consolidated comparable sales 0.1%

    Mitigation: Focused on improving value proposition, operational excellence, and cost discipline; seeing improved sales momentum in April.

    Softer Q1 performanceQ1 FY25

    Q1 was the softest quarter of the year

    Mitigation: Confident in delivering at least 8% organic adjusted operating income growth in 2025; seeing stronger start to Q2.

    Canadian consumer confidence challengedQ1 FY25

    Canadian Consumer Confidence Index dipped from Q4 to Q1

    Mitigation: Trends have improved in April; strong marketing calendar and continued operational improvements at Tim Hortons Canada.

    Burger King China portfolio cleanupnext 12 months

    Expect to close a number of unprofitable restaurants; average sales volume for these restaurants less than $300,000

    Mitigation: Viewed as a critical step to reposition the business for long-term success; impact to system-wide sales will be limited. Actively working to secure a new local partner.

    Popeyes U.S. and Canada competitive chicken QSR segmentQ1 FY25

    Comparable sales declined 4% (down roughly 2.9% ex-Leap Day)

    Mitigation: Implementing 'Easy to Love' strategy: increased national advertising spend (started April), easy-to-run kitchen upgrades, remodels for consistent modern image by 2030, raising operating standards.

    Q1 free cash flow impact from cash tax paymentsQ1 FY25

    $77 million cash tax payments

    Mitigation: Q1 is typically the smallest cash flow quarter; these payments were largely related to new EIFEL Canadian interest tax deductibility rules.

    FX headwindFY25

    $15 million

    Mitigation: Improved from previous expectation of $45 million based on current rates; company uses cross-currency swaps and interest rate swaps to manage FX exposure.

    Tariff impact on COGSfuture

    around 100 basis points or less in most cases

    Mitigation: Working closely with suppliers and franchisees to localize inputs; this is a point-in-time estimate.

    What to watch in Q2 FY25

    5

    Tim Hortons Canada sales momentum

    next quarter
    CurrentImproved in April
    TargetContinued improvement and normalization of year-over-year comparisons

    Why it matters

    Tim Hortons is a key brand, and sustained sales momentum is crucial for overall company performance and confidence in the 'back-to-basics' strategy.

    Importantly, although Canadian consumer confidence remains challenged, trends have improved in April as year-over-year comparisons normalize, and we build momentum with a strong marketing calendar and continued operational improvements.

    Q&A highlights

    8

    How much is Tim Hortons Canada impacted by the macro environment, and what are expectations for its resiliency and value proposition given the 'back-to-basics' strategy?

    Management acknowledged a dip in Canadian consumer confidence in Q1, correlating with market softness, but noted improved sales trends in April and a rebound in consumer confidence. They expressed strong confidence in the 'back-to-basics' plan, highlighting new product launches and operational improvements as drivers of continued strong performance.

    “In Q1, I think we had more of an in-line quarter with the other big brands in the market. And I think to your point, we did see a little bit of a dip in consumer confidence, if you look at the Canadian Consumer Confidence Index. But importantly, we've seen that come back in the second quarter to date so far.”

    asked by Dennis Geiger · answered by Joshua Kobza

    2 min read5 chapters

    Detailed Narrative

    01

    Macro Environment and Q1 Performance

    Restaurant Brands International navigated a highly dynamic macro backdrop in Q1 FY25, which evolved differently across key markets. Consolidated comparable sales were 0.1%, or just over 1% excluding Leap Day, making it the softest quarter of the year. Despite this, the company believes it performed reasonably well compared to global peers and saw improved sales momentum in April, contributing to confidence in delivering at least 8% organic adjusted operating income growth for the full year.

    02

    Strategic Focus on Fundamentals and Operational Excellence

    Management emphasized a focus on improving the value proposition for guests across all brands, prioritizing quality, service, and convenience at a fair price. This includes newly remodeled restaurants at Burger King and Popeyes, improved service standards at Tim Hortons, and continued innovation in menu offerings. The company is also taking steps to transition restaurants to more engaged operators and raise operational standards across the system, which is expected to drive stronger unit economics for franchisees.

    03

    Burger King China Transition and Portfolio Cleanup

    Following the acquisition of substantially all remaining equity in Burger King China in February 2025, the business has been classified as held for sale. The company is actively working to identify a new controlling shareholder and has engaged Morgan Stanley for this process. In the interim, a portfolio cleanup is underway, with plans to close a number of unprofitable restaurants over the next 12 months to establish a more sustainable base for future growth, with limited impact on system-wide sales due to the low average sales volume of these locations.

    04

    Capital Intensity and Operating Efficiency

    RBI provided long-term guidance on capital expenditures and cash inducements, expecting $400 million-$450 million for 2025-2026, stepping down to $350 million-$400 million in 2027-2028, and settling around $300 million after 2028. This reduction in capital intensity is anticipated as strategic initiatives like Reclaim the Flame and refranchising efforts are completed. The company also reduced its 2025 segment G&A guidance to $600 million-$620 million, reflecting identified opportunities for efficiency and driving operating leverage.

    05

    Refranchising Carrols and Partner Strategy

    The refranchising efforts for Carrols Restaurant Group are underway, with a focus on placing restaurants with engaged, smaller owner-operators, including high-performing existing franchisees, new entrants, or internal talent. This process is expected to take several years, but the company's owned restaurant count will begin to decline this year. This strategy, along with changes in Burger King China, aims to simplify the business and ensure restaurants are in the hands of partners committed to strong operational execution.

    AI-generated summary of the company’s earnings call. Not investment advice.