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    QSR
    Earnings call· Jun 2025(Q2 FY25)

    Restaurant Brands International Q2 FY25 earnings call QSR

    Aug 7, 2025 Source

    Executive summary

    Restaurant Brands International Q2 FY25 — Strong Performance in Tim Hortons and International, Carrols Outperformance

    Restaurant Brands International delivered a solid second quarter, driven by robust performance in its Tim Hortons and International segments. The company is making progress on simplifying its business model, including accelerating Carrols refranchising and seeking a new partner for Burger King China. Management expressed confidence in achieving its full-year organic adjusted operating income growth target, despite a dynamic consumer environment and commodity cost pressures.

    Highlights

    5

    • Global comparable sales accelerated to 2.4% year-over-year.

    • Organic adjusted operating income grew 5.7%, outpacing system-wide sales growth.

    • Tim Hortons Canada achieved its 17th consecutive quarter of positive comparable sales, accelerating to 3.6%.

    • International segment delivered nearly 10% system-wide sales growth and 4.2% comparable sales.

    • Adjusted EPS increased to $0.94 per share, representing 9.2% nominal growth.

    Concerns

    5

    • Bad debt expenses were $9 million this quarter, compared to a net recovery of $6 million in the prior year.

    • Burger King China's classification as held for sale resulted in a $10 million year-over-year revenue and AOI headwind in Q2.

    • Beef prices were up high teens year-over-year in H1 FY25, leading to a mid-single-digit increase in Burger King U.S. commodity basket for the full year.

    • Second half restaurant level margins at Burger King Carrols restaurants are expected to compress by approximately 100 basis points year-over-year from 12.3%.

    • Popeyes and Firehouse Subs in the U.S. experienced comparable sales declines of 0.9% and 0.8% respectively.

    Guidance & targets

    12
    CategoryTargetConfidence
    Organic Adjusted Operating Income Growth
    at least 8%
    high materiality
    High
    Adjusted Net Interest Expense
    around $520 million
    medium materiality
    High
    Capital Expenditures and Cash Inducements (CapEx)
    between $400 million to $450 million
    medium materiality
    High
    Dividend per share
    $2.48 per share
    medium materiality
    High
    Net Restaurant Growth
    around 3%
    medium materiality
    High
    Tim Hortons Supply Chain Gross Margin
    roughly 19%
    medium materiality
    High
    Segment G&A (excluding Restaurant Holdings)
    $600 million to $620 million
    medium materiality
    High
    Restaurant Level Margins (Burger King Carrols)
    compress by approximately 100 basis points
    medium materiality
    Medium
    AOI Loss (Popeyes China and Firehouse Brazil)
    around $15 million
    low materiality
    Medium
    Adjusted Effective Tax Rate
    18% to 19%
    medium materiality
    High
    Burger King China Revenue Impact (Full Year)
    $37 million headwind
    medium materiality
    High
    Burger King China AOI Impact (Full Year)
    $19 million headwind
    medium materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Tim Hortons Canada
    Achieved 17th consecutive quarter of positive comparable sales. Growth balanced between check and traffic. Strong marketing execution and operational improvements.
    Breakfast food sales growth: >10%Morning daypart growth: 5%Beverage sales growth: 4%Guest satisfaction increase: 4 pointsNet restaurant growth: modest positive (on track for 2025)
    		—3.6%——
    International
    Key growth engine, outpacing many global peers. Strong performance in UK, Spain, Australia, Germany. Burger King China comparable sales turned positive in Q2. Popeyes International showing strong growth.
    System-wide sales growth: ~10%Net restaurant growth: 5.4%Burger King Japan same-store sales growth (2024): ~20%Popeyes Brazil same-store sales growth (2024): double-digitPopeyes Brazil same-store sales growth (YTD): mid-teensPopeyes system sales (outside US/Canada, Q2): >$400M
    		—4.2%——
    Burger King U.S.
    Modestly outperformed the burger QSR segment. Focused on family relevance, core equities, and value. Carrols restaurants outperformed the broader BK system. Refranchising process for Carrols began ahead of schedule.
    Operating satisfaction for lunch and dinner increase: 4 pointsRestaurants extending late-night hours: ~1,200Carrols restaurants same-store sales growth: ~3%Remodels completed (FY25 target): ~400Average sales uplifts from remodels: mid-teens net of controlModern image reimage target: 85-90% by 2028
    		—1.5%——
    Popeyes U.S.
    Sequential improvement in comparable sales driven by pickle menu and $3.99 wraps. Focused on enhancing operations and disciplined development.
    System-wide sales growth: 1.9%Net restaurant growth: 2.1%
    		—-0.9%——
    Firehouse Subs U.S.
    Encouraged by momentum and quality of development, with new restaurant openings performing above system average.
    System-wide sales growth: 6.3%Net restaurant growth: 6.4%
    		—-0.8%——

    Operational metrics

    25
    Global Comparable Sales
    2.4%YoY
    Q2 FY25

    Accelerated year-over-year.

    System-Wide Sales Growth
    5.3%
    Q2 FY25

    Driven by comp sales and net restaurant growth.

    Organic Adjusted Operating Income Growth
    5.7%
    Q2 FY25

    Combined with disciplined cost management, outpacing system-wide sales growth.

    Adjusted EPS
    $0.94up 9.2% YoY
    Q2 FY25

    Nominal growth driven by AOI performance and decreased net interest expense.

    Bad Debt Expenses
    $9 millionvs net recovery of $6M in prior year
    Q2 FY25

    Primarily tied to International business, with a discrete situation at Burger King U.S. resolved in June.

    Segment G&A Reduction
    $15 million
    Q2 FY25

    Reduction in segment G&A contributed to AOI growth.

    Fuel the Flame Ad Fund Contribution Tailwind
    $6 million
    Q2 FY25

    Tailwind from lapping last year's ad fund contribution.

    Burger King China Revenue Headwind
    $10 millionYoY
    Q2 FY25

    Due to classification as held for sale and results recorded in discontinued operations.

    Burger King China AOI Headwind
    $10 millionYoY
    Q2 FY25

    Due to classification as held for sale and results recorded in discontinued operations.

    Adjusted Net Interest Expense
    $131 milliondown $12M YoY
    Q2 FY25

    Reflecting benefits of upsized cross-currency swaps and interest rate swaps.

    Capital Expenditures and Cash Inducements
    $68 million
    Q2 FY25

    Allocated to key strategic priorities.

    Burger King China Capitalization
    $30 million
    Q2 FY25

    To support operations, build local team, and fund marketing.

    Capital Returned to Shareholders (Dividend)
    $282 million
    Q2 FY25

    Dividend declared for Q3 at $0.62 per common share and unit.

    Total Liquidity
    $2.3 billion
    Q2 FY25

    Includes cash and other liquid assets.

    Net Leverage Ratio
    4.6x
    Q2 FY25

    Company's net debt to EBITDA ratio.

    Beef Price Inflation
    high teensYoY
    H1 FY25

    Expected to translate into mid-single-digit increase in total commodity basket for Burger King U.S. for FY25.

    Coffee Commodity Basket Share
    15%
    Q2 FY25

    Coffee accounts for around 15% of the commodity basket for Tim Hortons.

    Burger King Fuel the Flame Ad Fund Expense
    $41 million
    Q4 FY24

    To be lapped in Q4 FY25, contributing to AOI growth weighting towards Q4.

    Net Bad Debt Expenses
    $20 million
    Q4 FY24

    To be lapped in Q4 FY25, contributing to AOI growth weighting towards Q4.

    Restaurant Level Margin
    12.3%
    H2 FY24

    Baseline for expected 100 bps compression in H2 FY25.

    AOI Loss
    $9 million
    H1 FY25

    Combined loss from early-stage businesses.

    Smile Cookie Week Funds Raised
    $23 millionrecord-breaking
    April 2025

    Raised for charities across Canada and the U.S.

    Camp Day Funds Raised
    $13 million
    July 2025

    Raised for the Tim Hortons Foundation camps.

    Burger King U.S. Modern Image Reimage Target
    85%
    by 2028

    Goal to have 85% to 90% of restaurants reimaged by 2028.

    Carrols Refranchisings
    50-100
    FY25

    Expected number of refranchisings this year, ahead of schedule.

    Industry KPIs

    3
    MetricValueDetails
    Comparable sales comps2.4%%
    Global system wide sales5.3%%
    Net unit growth development pipeline2.9%%

    Deals & partnerships

    4
    Burger King China joint venture partnersAcquired substantially all remaining equity interest in Burger King China.

    Acquisition completed on February 14, 2025. Burger King China is now classified as held for sale as RBI seeks a new controlling shareholder.

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

    Actively working with Morgan Stanley to find a partner who can build on early progress and unlock growth for the brand in China.

    Ryan ReynoldsPartnership for Tim Hortons Scrambled Eggs Loaded Breakfast Box.

    Launched in April, featuring 100% Canadian farm-certified eggs, bringing a unique voice to the breakfast business.

    How to Train Your DragonMarketing partnership for Burger King U.S.

    Brought flame-grilled burgers into a popular franchise, building family engagement.

    Risks & headwinds

    6
    Dynamic Consumer EnvironmentCurrent

    Discussed, not quantified directly as a headwind, but acknowledged as a backdrop.

    Mitigation: Focusing on fundamentals: quality, service, convenience; disciplined marketing; elevating restaurant operations; efficient business management.

    Bad Debt ExpensesQ2 FY25

    $9 million in Q2 FY25, compared to a net recovery of $6 million in prior year.

    Mitigation: Actively engaged with partners to collect on revenues; discrete situation at Burger King U.S. resolved in June.

    Burger King China Classification as Held for SaleQ2 FY25 and FY25

    $10 million year-over-year revenue and AOI headwind in Q2 FY25. Full-year FY25 expected impact: $37 million revenue headwind, $19 million AOI headwind.

    Mitigation: Actively working to identify a new controlling shareholder; moved quickly to put in place local leadership, sharpen marketing, and reestablish operational focus.

    Beef Price InflationH1 FY25 and FY25

    High teens year-over-year in H1 FY25, expected to translate into mid-single-digit increase in total commodity basket at Burger King U.S. for FY25.

    Mitigation: Expect prices to normalize over time due to cyclical nature of U.S. herd rebuilding; scouring P&L for opportunities in other cost line items.

    Restaurant Level Margin Compression (Burger King Carrols)H2 FY25

    Expected compression of approximately 100 basis points year-over-year in H2 FY25 from 12.3% in H2 FY24.

    Mitigation: Offset by positive AOI contribution from BK Carrols restaurants; expectation that commodity cycle will reverse.

    Early-Stage Business Losses (Popeyes China and Firehouse Brazil)H1 FY25 and H2 FY25

    Combined AOI loss of $9 million in H1 FY25, expected to increase to around $15 million in H2 FY25.

    Mitigation: Building teams and development pipelines; these losses should be more than offset by positive AOI contribution from BK Carrols restaurants.

    What to watch in Q3 FY25

    5

    Burger King China Partner Identification

    Next quarter / H2 FY25
    CurrentActively working with Morgan Stanley to identify a new partner.
    TargetProgress or announcement of a new controlling shareholder.

    Why it matters

    Securing the right partner is crucial for unlocking the long-term growth potential and strategic simplification of the Burger King China business.

    We're actively working with Morgan Stanley to identify that partner, someone who can build on our early progress and unlock the next chapter of growth for the brand in China.

    Q&A highlights

    7

    What drove the Carrols restaurants' outperformance, and what does 'ahead of schedule' mean for refranchising?

    Carrols' outperformance is due to high operational levels, great restaurant managers, and significant investment in remodels. Refranchising started earlier than the initial 3-7 year timeline, with plans to move at a reasonable pace, ensuring restaurants go to excellent local operators.

    “I think if you go back to when we first acquired Carrols, we said that we were going to do the refranchising between years 3 and 7. And we've obviously started that early, and we're working on plans to kind of move that ahead at a reasonable pace.”

    asked by Brian Bittner · answered by Joshua Kobza

    2 min read6 chapters

    Detailed Narrative

    01

    Tim Hortons Canada Momentum

    Tim Hortons Canada delivered its 17th consecutive quarter of positive comparable sales, accelerating to 3.6%. Growth was balanced between check and traffic, with 5% growth in the morning daypart. Marketing initiatives like the Scrambled Eggs Loaded Breakfast Box (driving over 10% growth in breakfast food sales) and the return of filled Timbits contributed to this success. Guest satisfaction rose over 4 points year-over-year to its highest level since 2018, and the brand is on track for modest net restaurant growth in Canada in 2025.

    02

    International Segment Outperformance

    The International segment continued to be a key growth engine, achieving nearly 10% system-wide sales growth and 4.2% comparable sales, outpacing many global peers. This performance was driven by strong execution in markets like the U.K., Spain, Australia, and Germany. Burger King India, Turkey, and Japan were recognized for their strong performance, with Japan delivering nearly 20% same-store sales growth in 2024. Popeyes Brazil also showed strong growth with mid-teens same-store sales growth so far this year.

    03

    Burger King U.S. Progress and Refranchising

    Burger King U.S. comparable sales grew 1.5%, modestly outperforming the burger QSR segment. The brand focused on reestablishing relevance with families (e.g., How to Train Your Dragon partnership driving highest King Junior meal incidents in over a decade), reinforcing core equities like the Whopper, and maintaining a barbell value approach. Operating satisfaction for lunch and dinner rose 4 points year-over-year. The refranchising process for Carrols restaurants began ahead of schedule, with 5 candidates for the Crown Your Career program already signed, aiming to place restaurants with highly engaged operators.

    04

    Burger King China Turnaround

    Burger King China, classified as held for sale, delivered results ahead of expectations, with comparable sales turning positive in Q2. Since assuming control in February, RBI implemented a seasoned local leadership team, sharpened marketing on core burger and chicken offerings, and reestablished operational focus. Unit economics improved meaningfully quarter-over-quarter, reinforcing conviction in the long-term opportunity with a new local partner.

    05

    Commodity Headwinds and Tailwinds

    Beef prices were up high teens year-over-year in the first half of 2025, impacting Burger King U.S. with an expected mid-single-digit increase in the total commodity basket for the full year. Conversely, coffee prices have normalized after historic highs, which is positive for Tim Hortons. Due to forward buying strategies, lower coffee costs are expected to flow through in mid- to late 2026, benefiting franchisee profitability.

    06

    Operational Efficiency and Digital Focus

    The company is focused on improving operational efficiency across its brands. Tim Hortons saw speed of service improvements and guest satisfaction increases. Burger King U.S. saw 1,200 restaurants extend late-night hours. Patrick Doyle highlighted excitement about leveraging AI in restaurants to improve customer experience, operational efficiency, and effectiveness, with more details to be shared as initiatives roll out.

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