Restaurant Brands International Posts Modest 3.2% Growth in Q3

RBI reported consolidated sales growth of 3.2% in Q3 2024, with net income stable at $357 million and diluted EPS unchanged at $0.79.
Acquisitions of Carrols Restaurant Group and Popeyes China contributed to revenue, but Burger King and Popeyes U.S. faced declining sales, affecting overall comparable sales, which rose only 0.3%.
RBI reiterated its 8%+ adjusted operating income growth target and maintained a dividend of $0.58 per share, signaling stability in shareholder returns.

Quarterly Financial Overview

Restaurant Brands International (TSX:QSR)(NYSE:QSR) reported total Q3 revenue of $2.29 billion, up from $1.84 billion in Q3 2023, boosted by acquisitions in the U.S. and China, which formed a new “Restaurant Holdings” segment. Adjusted operating income rose 6.1% to $652 million, supporting a modest 4.6% increase in adjusted diluted EPS to $0.93, reflecting stable performance across its key brands.

However, while overall sales rose, segment performance varied. Tim Hortons, RBI’s strongest brand, posted a 2.8% sales growth, and international operations saw an 8% rise. In contrast, Burger King U.S. and Popeyes saw a slowdown, with sales declines of 1.5% and 0.6%, respectively, and comparable sales falling 0.7% for Burger King and 4% for Popeyes. Firehouse Subs also reported a 1.3% decline in system-wide sales, contributing to RBI’s slower growth trajectory for the quarter.

Strategic Acquisitions and New Segment Formation

RBI’s acquisitions of Carrols Restaurant Group and Popeyes China, finalized in May and June, respectively, added significantly to revenue through company-owned locations, especially in Burger King and Popeyes. The new Restaurant Holdings (RH) segment is responsible for managing these locations, contributing $16 million in operating income for Q3. RBI plans to refranchise the majority of these U.S.-based Burger King restaurants, aiming to streamline operations and focus on its franchise model.

Burger King’s U.S. growth plan, “Reclaim the Flame,” continued this quarter, with $24 million invested in digital, advertising, and restaurant renovations. The company aims to modernize 85-90% of its Burger King locations by 2028, seeking to rejuvenate sales in the U.S. market.

Segment Highlights and Operational Metrics

Tim Hortons (TH): Tim Hortons saw a stable Q3 performance, with comparable sales up 2.3% and system-wide sales at $1.95 billion, benefiting from growth in Canada.
Burger King (BK): Burger King’s U.S. locations faced challenges with comparable sales down 0.7%. However, international sales growth helped mitigate the impact, raising system-wide sales for BK International by 8%.
Popeyes (PLK): Popeyes struggled with a 4.0% drop in comparable sales in the U.S., despite overall growth of 4.1% in store count.
Firehouse Subs (FHS): Firehouse Subs reported declining sales of 1.3%, though net restaurant growth reached 3.9%.
International (INTL): RBI’s international footprint expanded by 7.6%, primarily through Burger King, highlighting strong brand performance outside North America.

Debt and Dividend Outlook

RBI declared a Q4 dividend of $0.58 per share, maintaining shareholder returns even as net debt increased to $13.0 billion due to recent acquisitions. The company also issued $500 million in secured notes, retiring earlier debt and pushing major debt maturities out to 2028, thereby reducing near-term financial pressure. Currently the stock yields 3.4%.

Investor Takeaway

RBI’s acquisitions, coupled with stable revenue from Tim Hortons and international Burger King locations, support its long-term growth outlook. However, the weakness in Burger King and Popeyes U.S. sales suggests RBI may face near-term challenges in achieving its 8% adjusted operating income growth target. Dividend-focused investors may appreciate RBI’s stable payout and international growth, though continued recovery in U.S. segments remains essential for robust future performance.