Executive Summary / Key Takeaways

• Restaurant Brands International ($QSR) is navigating a dynamic QSR landscape by leveraging its diversified multi-brand portfolio (Tim Hortons, Burger King, Popeyes, Firehouse Subs) and primarily franchised model, which provides resilience and strong free cash flow generation.
• Despite a softer start to 2025 influenced by macro pressures and calendar shifts, the company remains confident in achieving at least 8% organic adjusted operating income (AOI) growth for the year, driven by cost discipline, operational improvements, and strategic investments.
• Key strategic initiatives like Burger King's "Reclaim the Flame" (focused on remodels and operational excellence) and Popeyes' "Easy to Love" (enhancing consistency and image) are foundational to improving franchisee profitability and driving long-term sales momentum, supported by significant capital commitments.
• Near-term net restaurant growth (NRG) is expected to be tempered (+/- 3% in 2025) primarily due to the strategic cleanup and planned re-partnering of the acquired Burger King China business, but RBI targets ramping back to 5%+ global NRG towards the end of its 2028 algorithm period.
• Investments in technology, from digital platforms to kitchen equipment and espresso machines, are critical differentiators aimed at enhancing guest experience, improving operational efficiency, and boosting franchisee unit economics, contributing directly to competitive positioning and profitability targets.

The Global Quick-Service Arena: A Multi-Brand Approach to Growth

Restaurant Brands International stands as a formidable player in the global quick-service restaurant industry, commanding a vast network of over 32,000 restaurants across more than 120 countries and territories as of March 31, 2025. At its core, RBI operates through a highly franchised model, with over 90% of its system-wide restaurants owned and operated by independent franchisees. This asset-light structure is a fundamental aspect of its business model, contributing to strong cash flow generation and providing a degree of resilience against direct operational costs.

The company's strength lies in its portfolio of four iconic brands: Tim Hortons, Burger King, Popeyes, and Firehouse Subs. Each brand occupies a distinct niche within the QSR market, offering complementary daypart mixes and product platforms that benefit from RBI's global scale and shared best practices. This multi-brand approach allows RBI to target diverse consumer preferences and occasions, from Tim Hortons' dominance in coffee and baked goods in Canada to Burger King's global presence in the burger segment, Popeyes' rapidly expanding footprint in fried chicken, and Firehouse Subs' growing presence in the sandwich category.

RBI's strategic journey over recent years has been marked by significant initiatives aimed at revitalizing its core brands and expanding its global reach. The acquisition of Popeyes in 2017 signaled a push into the competitive chicken segment, followed by a focused international expansion that has seen the brand grow significantly outside the U.S. and Canada. More recently, the "Reclaim the Flame" plan for Burger King U.S., launched in 2022, and the acquisition of its largest franchisee, Carrols Restaurant Group, in 2024, underscore a commitment to accelerating remodels and operational improvements in a key market. Strategic moves in China, including acquiring Popeyes China and consolidating ownership of Burger King China in early 2025, highlight the company's intent to build a stronger presence in large, high-potential international markets, albeit with near-term complexities. These historical steps and ongoing strategies form the backdrop against which RBI's current performance and future outlook must be assessed.

In the competitive landscape, RBI faces off against global giants like McDonald's (MCD), Yum! Brands (YUM), and Starbucks (SBUX), as well as regional players like Wendy's (WEN). While McDonald's boasts superior scale and profitability with higher margins (MCD's net margin around 33% vs. QSR's TTM 10.83%) and stronger return on invested capital (MCD's ROIC around 35% vs. QSR's TTM 10.83%), RBI's brand diversity offers a differentiated approach. Tim Hortons, for instance, consistently outperforms major peers in Canada, demonstrating strong traffic growth even in a challenging macro environment. Burger King U.S., despite recent comparable sales declines (down 1.1% in Q1 2025), has shown relative outperformance against the broader burger QSR category. Popeyes is actively working to expand its share in the increasingly competitive chicken segment, while Firehouse Subs continues to outperform the sub sandwich category. RBI's strategy of focusing on brand fundamentals, improving franchisee profitability, and leveraging its global procurement capabilities aims to narrow the efficiency and profitability gaps with larger rivals and enhance its competitive standing.

A critical component of RBI's strategy and competitive differentiation lies in its investment in technology. Across its brands, technology is being leveraged to enhance guest experience, streamline operations, and boost unit economics for franchisees. Digital platforms, including mobile ordering, payment, and loyalty programs, are driving a significant portion of sales, with Firehouse Subs boasting a digital mix over 45% in Q1 2025, the highest among RBI's home market brands. These digital channels not only offer convenience but also provide valuable data for targeted marketing and personalized offers.

Beyond the front-end, RBI is investing in back-of-house technology. Popeyes' "Easy to Run" initiative, rolling out system-wide by the end of 2026, aims to standardize processes and enhance technology in the kitchen with cloud-based POS systems, digital drop charts, sticky label printers, order ready boards, kiosks, and upgraded equipment like auto batter makers and improved hot holding units. While specific quantitative benefits across the entire system are still emerging, early tests have shown improvements in order accuracy and driver wait times. Similarly, Tim Hortons Canada plans to roll out new espresso machines in 2025 to elevate beverage quality, building on operational improvements that have already resulted in faster drive-thru times, a key metric where even small improvements can translate to meaningful incremental sales per restaurant. These technological advancements are designed to improve throughput, reduce complexity for team members, ensure product consistency, and ultimately contribute to higher sales and profitability at the restaurant level, reinforcing the competitive moat built around operational excellence and guest satisfaction.

Performance Under Pressure: Navigating Macro Headwinds and Strategic Shifts

The first quarter of 2025 presented a mixed picture for RBI, reflecting the complexities of the current operating environment and the impact of strategic transitions. Consolidated comparable sales were nearly flat at 0.1%, although adjusting for the Leap Day impact from the prior year brings this figure to just over 1%. System-wide sales growth was 2.8%. While these top-line results were softer than anticipated, management had signaled that Q1 would likely be the weakest quarter of the year, partly due to macro noise and challenging year-over-year comparisons. Encouragingly, sales momentum showed improvement in April 2025.

The financial results for the quarter underscore the impact of both organic performance and strategic acquisitions. Total revenues increased to $2,109 million in Q1 2025 from $1,739 million in Q1 2024, primarily driven by the inclusion of results from restaurants acquired from franchisees, notably the Carrols acquisition. However, Income from operations decreased to $435 million from $544 million, influenced by an unfavorable change in Other operating expenses income, net (which included $75 million in net losses on foreign exchange in Q1 2025 compared to $23 million in Q1 2024) and an unfavorable FX impact, partially offset by an increase in Tim Hortons segment income (excluding FX). Net income from continuing operations also saw a decrease, falling to $223 million from $328 million, primarily due to the lower operating income and higher income tax expense, partially offset by a decrease in interest expense.

Despite the top-line softness and some P&L pressures, RBI's focus on cost discipline and driving operating leverage is evident in its adjusted operating income performance. Organic adjusted operating income grew 2.6% in Q1 2025. This bottom-line resilience is a key theme, building on the 9% organic AOI growth achieved in the full year 2024, which exceeded the company's target despite system-wide sales growth coming in below the long-term algorithm. This ability to deliver strong bottom-line growth even with tempered top-line performance highlights the effectiveness of cost management initiatives and the inherent leverage in the franchised business model.

Liquidity remains robust, providing a solid foundation for ongoing investments and capital return. As of March 31, 2025, RBI held $899 million in cash and cash equivalents and had $1,248 million available under its Revolving Credit Facility. Total debt stood at $13,624 million net. Management believes current liquidity, combined with cash flow from operations, is sufficient to cover obligations, debt service, and capital spending over the next twelve months. The company's capital allocation priorities remain consistent: investing in the business (particularly strategic initiatives like Reclaim the Flame remodels), maintaining a healthy dividend (target total of $2.48 per share/unit for 2025), and prioritizing deleveraging, especially following recent acquisition-related debt.

Strategic Trajectory and Outlook: Building for Long-Term Growth

Looking ahead, RBI is focused on executing its multi-year strategic plans to drive sustainable growth and enhance shareholder value. The company has reiterated its long-term algorithm targeting, on average through 2028, 3%+ comparable sales growth, 5%+ net restaurant growth, 8%+ system-wide sales growth, and 8%+ organic adjusted operating income growth.

While confident in the long-term targets, RBI has adjusted its near-term outlook for net restaurant growth. Total reported NRG growth for 2025 is expected to be slightly down from 2024 (mid-3% range), landing in the +/- 3% range. This tempering is primarily attributed to the Burger King China business, which was acquired in February 2025 and classified as held for sale. RBI plans to close a number of unprofitable BK China restaurants over the next 12 months as part of a portfolio cleanup necessary to establish a sustainable base for future growth under a new partner. Once this transition is complete, RBI is confident in its ability to ramp global NRG back up towards the 5% target, aiming for around 1,800 net new restaurants per year towards the end of the algorithm period. This growth is expected to be driven by approximately 400 net restaurants per year from North America (Tim Hortons Canada returning to positive growth, Burger King U.S. stabilizing/modestly growing, Popeyes steady, Firehouse accelerating) and 1,400 net units per year internationally (excluding China), with around 300 units eventually coming from China across all brands.

Capital expenditures are expected to be elevated in the near term to support strategic investments. Total CapEx, tenant inducements, and remodel incentives are guided to be in the $400 million to $450 million range for both 2025 and 2026. This increase from 2024 levels (over $330 million) is primarily driven by accelerating modern image investments at Burger King U.S. (targeting about 400 remodels in 2025) and increased development at Tim Hortons Canada and Popeyes China. Capital intensity is expected to step down to $350 million to $400 million from 2027-2028 and settle around $300 million after 2028 as major modernization efforts conclude and acquired portfolios are refranchised, providing a future tailwind to free cash flow.

Cost discipline remains a key focus to drive bottom-line growth. RBI has lowered its guidance for 2025 segment G&A (excluding RH) to the $600 million to $620 million range, down from previous expectations. This reflects ongoing efforts to run the business more efficiently and drive operating leverage. Adjusted net interest expense for 2025 is expected to be in the $500 million to $520 million range, benefiting from prior year refinancings and FX/interest rate hedges. The effective tax rate is anticipated to be in the 18% to 19% range.

While the outlook is positive for bottom-line growth and long-term development, risks persist. The dynamic macro backdrop, varying consumer confidence levels across markets, and intense competition in segments like chicken QSR could continue to pressure top-line performance. The transition of Burger King China carries execution risk, and geopolitical events could impact international growth. However, RBI's strategic focus on improving fundamentals, enhancing value propositions, leveraging technology, and strengthening franchisee partnerships are key mitigation strategies aimed at navigating these challenges and positioning the company for sustained success.

Conclusion

Restaurant Brands International is executing a multi-faceted strategy centered on leveraging its diverse brand portfolio, strengthening its franchise system, and investing in operational and technological enhancements to drive long-term growth. While the company is currently navigating macro headwinds and the complexities of integrating recent acquisitions and addressing underperforming markets like Burger King China, management remains confident in its ability to deliver robust bottom-line expansion, targeting at least 8% organic adjusted operating income growth in 2025 and beyond. Strategic investments in remodels, particularly for Burger King U.S., and the rollout of new kitchen technologies at Popeyes are expected to improve unit economics and guest experience, reinforcing competitive positioning against rivals. Although near-term unit growth is tempered by the necessary cleanup in China, the long-term trajectory aims for accelerated development across the global system. For investors, the thesis hinges on RBI's ability to successfully execute its turnaround and growth initiatives, translating operational improvements and strategic investments into sustainable top-line momentum and continued profitable growth, ultimately unlocking the full potential of its iconic brands in a competitive global market.