Popeyes drives RBI's international push as unit growth set to outpace domestic by 350%

Restaurants are expected to grow around 3% to 4% this year.

Restaurant Brands International's (RBI) international operations are set to grow new restaurant units at approximately 350% the rate of the rest of its business over the next two to three years, with Popeyes emerging as a growing driver of that expansion as franchisees open an increasing proportion of locations outside North America, a report by S&P Global said.

The report said the international restaurants are primarily Burger King, but franchisees are opening an increasing proportion of Popeyes, which is growing revenue faster. The newness of the brands outside of North America and the localisation of the concepts provide a multi-year platform for organic growth.

S&P said Tim Hortons has opportunities to build on its strengths but has limited growth potential outside of Canada. The Canadian coffee chain accounted for 40% of RBI’s profit and is currently focused on improving afternoon traffic and selling more food items, which will help franchisees leverage fixed costs.

“The company is also looking to add more locations in Canada. We view these two growth avenues as stronger for Tim Hortons than international expansion because the brand is less well-known outside of Canada, and its concept and offerings are not meaningfully differentiated amongst an increasing number of competitors.” S&P said.

Meanwhile, Burger King is executing its turnaround well by remodelling its restaurants, increasing the quantity and quality of limited-time offerings (LTOs), and reestablishing its value proposition with customers.

Popeyes continues to lag in the U.S. with weaker comparable-sales growth, but has solid brand awareness. S&P believes it RBI could apply its successes in improving Burger King to Popeyes.

“The stable outlook reflects our expectation for adjusted debt to EBITDA in the low-4x area over the next 12 months. We think RBI will continue to perform solidly across its brands, including continued international expansion, resulting in consistent EBITDA growth and a financial policy that supports further deleveraging,” S&P said.