Burger King parent company Restaurant Brands International will acquire Carrols Restaurant Group, its largest U.S. Burger King franchisee, the company announced Tuesday.
RBI is buying Carrols’ remaining shares for $9.55 a share using about $200 million in cash and about $750 million in debt, according to an RBI investors’ presentation Tuesday. The total enterprise value is about $1 billion. RBI already owns 15 percent of Carrols’ shares.
Carrols operates 1,022 Burger Kings in 23 states and another 60 Popeyes stores in six states. In the year ending September 30, systemwide sales topped $1.8 billion. Carrols’ operators will continue to run the company’s former restaurants in partnership with Burger Kings’ operations teams.
“I think this is a great transaction on many fronts,” Carrols CEO Deborah Derby said on the investor call January 16. She noted the benefit to stores getting remodeled faster than before and the return on investment for shareholders. “For our team, this is very exciting. We believe our team will have additional career opportunities as part of the greater RBI family.”
RBI intends to invest about $500 million, funded by Carrols’ cash flow, to remodel 600 of the newly acquired stores to a modern layout over the next five years, CEO Josh Kobza said in the investor call. The other 400 restaurants are already updated.
Kobza has worked with Carrols since starting at RBI, he said. “They have very impressive development, operations and support teams that have always done a great job prioritizing culture and training in their restaurants,” Kobza said on the call.
Ultimately, RBI plans to refranchise the Carrols’ stores to smaller, local franchisees, a transition it expects to complete in five to seven years. Burger King President Tom Curtis said the company is looking for franchisees with 50 stores or less, focusing on operators rather than just owners.
Prior to this acquisition, Burger King was operating about 175 corporate stores.
This deal is part of Burger King’s ongoing “Reclaim the Flame” initiative, announced in September 2022, to increase average unit volume and overall sales. The company initially invested $400 million in the effort to enhance marketing and operations.
“We’ve made very solid progress on all of these fronts,” Curtis said on the call. “Today’s investment in Carrols significantly accelerates our commitment to modernizing our entire fleet across the U.S.”
Carrols did not immediately respond to request for comment. Burger King declined additional comment.
Related: Burger King Franchisee Carrols Turns In Strong 2023
RBI Executive Chairman Doyle said this investment shows how successful the “Reclaim the Flame” initiative has been so far. He noted some major operators filed for Chapter 11 bankruptcy last year, “resulting in some ugly headlines.” He said these were part of an effort to help the franchisees—including TOMS King, Premier Kings and Meridian Restaurants Unlimited—exit the Burger King system.
The transaction is expected to be completed in the second quarter of 2024, following a 30-day “go shop” period that allows RBI to solicit alternative proposals.