Restaurant Brands International Inc. Third Quarter 2026 Earnings Call - RESTAURANT BRANDS INTERNATIONAL INC

Financial Performance:

• Q3 2026 same-store sales (SSS) grew 3.8% system-wide, with net restaurant growth of 3%, driving 6.2% system-wide sales growth.
• Organic Adjusted Operating Income (AOI) grew 6.7% on a constant currency basis, while nominal adjusted EPS grew 6.9% to $1.10.
• Year-to-date organic AOI growth reached 7.8%, and adjusted EPS grew 11.1% (8.6% ex-FX and restaurant holdings impacts).
• Generated over $500 million in Q3 free cash flow; returned $569 million to shareholders via dividends and $274 million in share repurchases.
• Year-to-date capital returns totaled $1.3 billion; full-year repurchase target remains ~$500 million.
• Net leverage ratio is 4.0x; liquidity stands at $2.2 billion; Moody's upgraded corporate rating to BA2.
• Excludes $11 million tariff refunds in Tim Hortons US CPG; segment G&A (excl. Restaurant Holdings) increased $10 million organically.

Guidance and Future Outlook:

• 2026 Segment G&A guidance maintained at $600M–$620M; net adjusted interest expense expected flat at $500M–$520M.
• 2026 CapEx and cash inducements forecast at ~$400 million; Tim Hortons supply chain margins expected to align with 2025.
• Total Restaurant Holdings (RH) AOI projected at $10M–$20M for the full year, with Q4 losses attributed to Carroll's re-franchising and international startup investments.
• Long-term goal to achieve investment-grade leverage by 2028; Restaurant Holdings segment to be sunsetted by end of 2027.
• Management expects Burger King China to return to positive net restaurant growth in 2026 following consecutive double-digit SSS growth.
• Popeyes SSS turnaround expected to take longer than anticipated; positive SSS likely to materialize later than previously guided.

Business Segments and Product Lines:

• Burger King: Reclaimed #2 U.S. burger market share; U.S. SSS +8.4%, system-wide sales +7.5%. Launched upgraded chicken nuggets, "Hello Kitty" kids meal, and Dragon Ball Z collaboration. Sizzle remodeled restaurants achieve >$2.2M AUV.
• Tim Hortons: Canada SSS +1.8% (improvement from Q2); international business (29% of profit) posted 3.9% SSS. Key growth drivers include Matcha (cold beverages +5%) and PM food innovation (Melts, Turkey Bacon Club). Partnerships launched with Canadian Tire (5M+ members potential) and WestJet.
• Popeyes: U.S. SSS -1.8% due to lower-incremental promotions and strategic wings menu reduction. Focus remains on core chicken items and operational execution. International SSS positive with 2,000+ global locations and $2B system-wide sales.
• Firehouse Subs: Delivered 1.5% SSS and 7.8% net restaurant growth; reached 1,500th North American location.
• International: Double-digit SSS growth in Japan, Korea, China, Germany, Brazil, and Scandinavia; 45% of international sales from outside top 10 markets.

Market and Competitive Landscape:

• Burger King widened the gap to U.S. QSR peers by nearly 10 percentage points; brand consideration rose from 70% to 78% over three years.
• International markets show strong share gains in tough macro environments (e.g., France) and robust growth in APAC (Japan, Korea, India).
• Popeyes International recognized as one of the fastest-growing Western QSR brands, with improving paybacks in markets like Brazil and India.
• Macro environment in Canada described as stable; gas price hikes impacting rural/long-drive markets slightly.
• Competitive strategy involves sharing successful global innovations (e.g., sliders, gourmet burgers) across markets to drive local relevance.

Risks and Challenges:

• Popeyes Performance: Current top-line results below expectations; wings reduction creates temporary sales pressure; SSS turnaround delayed.
• Beef Costs: Record high beef inflation continues to impact franchisee profitability, though relief is anticipated in 2027.
• Restaurant Holdings: Transitioning to sunset the segment creates Q4 AOI losses and short-term EPS dilution from re-franchising.
• Macro Headwinds: Potential inflation and interest rate fluctuations in Western Europe; gas price volatility in Canada affecting drive-thru traffic.

Management Commentary and Tone:

• Tone is confident and optimistic, emphasizing consistency and execution over one-off wins.
• Leadership highlighted a "Reclaim the Flame" success at Burger King and strong momentum in Tim Hortons and International.
• Acknowledged Popeyes' challenges but expressed firm belief in the long-term strategic pivot to core products.
• Management expressed pride in franchisee engagement, particularly regarding restaurant image investments and operational standards.

Analyst Questions and Answers:

• Burger King Momentum: Confirmed sustainability driven by multi-year remodel pipeline (60% complete, targeting 85%+ by 2028/29) and core menu elevation (nuggets, Whopper).
• International Visibility: China business described as "on the front foot" with improving unit economics; Popeyes international scaling rapidly with better paybacks.
• Tim Hortons Growth: Ambition to grow beyond 2% SSS via cold beverage innovation (Matcha, Monster Zero) and PM food expansion; cannibalization risks mitigated through rigorous location modeling.
• Unit Growth: International development accelerating, particularly in China; North America unit growth expected to soften slightly in Q4 due to timing but strong pipeline.
• Collaborations: IP partnerships (e.g., SpongeBob, Dragon Ball Z) viewed as effective for attracting lapsed guests and families, with improved retention rates noted.
• Financial Targets: 8% organic AOI growth target remains intact; re-franchising impacts excluded from core organic targets but noted for long-term EPS trajectory.

Other Key Points:

• Tribute paid to Chris Sorenson, co-founder of Firehouse Subs, and his contributions to the public safety foundation.
• Moody's rating upgrade (BA2) viewed as a strategic enabler for lower cost of capital and franchisee competitive advantage.
• Burger King U.S. AUVs currently 1.7-1.8M, with clear path to $2M+ via remodels and menu elevation.
• Management emphasized the "franchisor model" simplification, with Restaurant Holdings assets to be absorbed into brand P&Ls by 2028.