New Post: Burger King splashes out $1 billion for its largest franchisee in an attempt to ‘Reclaim the Flame’ after lagging during COVID - Burger King’s owner, Restaurant Brands International (RBI), just spent $1 billion to acquire its largest franchisee, Carrols Restaurant Group, in an attempt to speed up its modernization plan. It’s a big gamble from the international fast food giant, but it may be necessary if it hopes to compete with top burger chain McDonald’s, which spent roughly $6 billion to modernize more than 8,700 restaurants beginning in 2018.
“Burger King U.S. has been a laggard in terms of guest experience, and just how modern their franchise locations are relative to their peers,” CFRA research analyst Siye Desta told Fortune. Indeed, Burger King U.S. executives have previously lamented the chain’s lagging customer numbers, admitting to CNN they fell behind competitors during the pandemic and sometimes overcomplicated the ordering experience. In 2020, Burger King dropped behind Wendy’s into third place on the list of America’s best-selling fast-food burger chains and still hasn’t reclaimed its previous second-place standing.
However, the company has seen “some positive signs with their Reclaim the Flame plan,” a bid to modernize its footprint. Those early positive signs may have prompted this acquisition of Carrols to accelerate the plan, Desta said. “They would just like to give Burger King U.S.’s restaurant portfolio more of a modern image, given the amount of remodels their competitors, like McDonald’s, have done already,” he argued.
That’s where Carrols comes in. BK’s largest franchisee has consistently had better foot traffic than its parent company. RBI’s foot traffic was flat for the third quarter of last year (the most recent figures available), while Carrols’ posted rising traffic for its last two quarters. Andrew Charles, an analyst with TD Cowen investment bank, told the Associated Press that Carrols is a superior operator with sales that have historically outperformed Burger King overall.
Buying Carrols’ is a bid to speed up the modernization efforts, which so far have only revamped 40% of Burger King restaurants, with another 10% currently being renovated, according to the AP.
More than half of Carrols’ locations are up for a remodel under the plan. After completing the acquisition in the second quarter of this year, RBI plans to remodel 600 of the franchisee’s 1,022 Burger King locations across 23 states in order to give the restaurants a more “modern image.”
Tom Curtis, president of Burger King U.S. and Canada, called the acquisition “an exciting accelerator” to the modernization plan in a statement. In a twist, the parent company will only hold to the location for a few years. Curtis pledged to remodel Carrols’ restaurants over the next five years “or so” and then refranchise them, putting them “back into the hands of motivated,
