Restaurant Brands (QSR) Invests to Boost Presence in China

Zacks Equity Research

2 July 2024 at 0:04 pm·3-min read

Restaurant Brands International Inc. QSR has announced two significant transactions aimed at bolstering its presence in China. These strategic moves reflect QSR's confidence in China as a pivotal market and its commitment to driving regional growth.

The company has acquired the Popeyes China business from TH International Limited (Tims China) for an enterprise value of $15 million on a cash-free, debt-free basis. This acquisition allows QSR to directly own and operate Popeyes China, which has seen promising growth since opening its first restaurant in Shanghai in August 2023. Currently, there are 14 Popeyes outlets in Shanghai and the company plans to ramp up the pace of restaurant development through local team investments and infrastructure enhancements. In the long term, QSR aims to bring on local partners to establish a master franchise model similar to other international Popeyes markets.

In a parallel move, Restaurant Brands and Cartesian Capital have co-invested up to $50 million into Tims China through three-year convertible notes. This investment includes an initial $40 million issuance at closing, with the remaining $10 million to be funded in the next seven months, contingent on certain operational and financial conditions. Of the total investment, $20 million is from Cartesian Capital and remaining $30 million is from QSR, including $20 million issued at closing. As a result of this investment, QSR will gain the right to appoint two directors to the Tims China Board and increase its equity ownership in Tims China up to 18% on an as-converted basis.

Strategic Investments to Drive Growth

These strategic investments underscore the company’s focus on leveraging the growth potential of the Chinese market for its Popeyes and Tim Hortons brands. With Popeyes China showing strong early performance, the company is poised to unlock significant development potential in one of the world’s largest chicken quick service restaurant markets. Additionally, the investment in Tims China aligns with the company’s goal of capitalizing on the rapid expansion of the Chinese coffee market, enhancing its footprint and consumer offerings.

QSR’s strategic investments in Popeyes China and Tims China demonstrate a robust commitment to harnessing the significant market opportunities in China. These moves are poised to strengthen Restaurant Brands’ market position and foster substantial growth for its flagship brands in one of the most dynamic fast-food markets globally.

Shares of this Zacks Rank #3 (Hold) company have lost 10% so far this year compared with the industry’s decline of 5.3%.

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Wingstop Inc. WING sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

It has a trailing four-quarter negative earnings surprise of 21.4%, on average. The stock has surged 112% in the past year. The Zacks Consensus Estimate for WING’s 2024 sales and earnings per share (EPS) indicates a rise of 27.5% and 36.7%, respectively, from the year-ago levels.

Brinker International, Inc. EAT currently carries a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 213.4%, on average. EAT’s shares have risen 85.4% in the past year.

The Zacks Consensus Estimate for EAT’s 2024 sales and EPS indicates 5% and 41.3% growth, respectively, from the year-earlier actuals.

El Pollo Loco Holdings, Inc. LOCO currently carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 19.4%, on average. LOCO’s shares have risen 5.2% in the past year.

The Zacks Consensus Estimate for LOCO’s 2025 sales and EPS indicates 3.8% and 9.9% growth, respectively, from the prior-year figures.

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Restaurant Brands (QSR) Invests to Boost Presence in China

Strategic Investments to Drive Growth

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