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Restaurant Brands International Inc.
Consumer Cyclical | Restaurants
⚡ Executive Summary
📊 THE BOTTOM LINE
Restaurant Brands International (QSR) is a well-established global quick-service restaurant company with a diversified portfolio of iconic brands including Tim Hortons, Burger King, Popeyes, and Firehouse Subs. Its asset-light franchise model generates stable, high-margin revenue streams. The business demonstrates strong operational fundamentals, with growth initiatives focused on international expansion and brand revitalization.
⚖️ RISK VS REWARD
At its current price of US$73.54, QSR trades below the average analyst target of US$77.93, indicating potential upside. While the company faces competitive pressures and carries a substantial debt load, its diversified revenue base and ongoing growth strategies present a favorable risk-reward profile for long-term investors seeking exposure to the global quick-service restaurant market.
🚀 WHY QSR COULD SOAR
- • International expansion, notably in markets like China through strategic joint ventures, offers significant untapped growth potential for QSR's brands.
- • The highly franchised business model provides stable, recurring royalty revenues and enables capital-efficient global expansion, enhancing profitability and free cash flow generation.
- • Continued brand revitalization and menu innovation across core brands (Burger King, Tim Hortons) could drive increased customer traffic and same-store sales growth.
⚠️ WHAT COULD GO WRONG
- • High levels of outstanding debt, with a debt-to-equity ratio of over 300%, could limit financial flexibility and increase sensitivity to rising interest rates.
- • Intense competition within the global quick-service restaurant industry may lead to market share erosion and pricing pressures across QSR's brand portfolio.
- • Economic downturns or shifts in consumer spending habits could negatively impact customer traffic and average transaction values, affecting overall revenue and profitability.
🏢 Company Overview
💰 How QSR Makes Money
- • Restaurant Brands International primarily generates revenue through its global portfolio of quick-service restaurant brands: Tim Hortons, Burger King, Popeyes Louisiana Kitchen, and Firehouse Subs.
- • The company largely operates an asset-light franchise model, collecting royalty fees and lease income from its vast network of over 31,000 franchised restaurants worldwide.
- • Additional revenue stems from retail sales at company-owned restaurants and operations related to the Tim Hortons supply chain, providing diverse income streams.
- • QSR focuses on driving system-wide sales growth through brand expansion, menu innovation, and enhancing customer experience across its established and acquired brands.
Revenue Breakdown
Tim Hortons
47%
Coffee and baked goods, a dominant brand in Canada.
Burger King
30%
Global quick-service hamburger chain, second largest worldwide.
Popeyes Louisiana Kitchen
10%
Quick-service chicken concept with a Louisiana-style menu.
Firehouse Subs
5%
Fast-food chain offering a variety of hot and cold subs.
Other/International
8%
Includes residual revenues and income from international operations.
🎯 WHY THIS MATTERS
This diversified revenue model reduces reliance on any single brand or market, providing resilience and broad exposure across different fast-food segments. The high proportion of franchised units translates into predictable, high-margin cash flows, supporting sustainable growth and shareholder returns.
⭐ Competitive Advantage: What Makes QSR Special
1. Diversified Global Brand Portfolio
QSR owns and operates a unique collection of strong, globally recognized quick-service restaurant brands, each commanding a distinct market position. This diversification across coffee, burgers, fried chicken, and subs mitigates risks associated with changing consumer preferences in any single category and provides multiple avenues for growth and market penetration across different demographics and geographies.
2. Asset-Light Franchise Model
With approximately 95% of its 31,000+ restaurants franchised, QSR benefits from an asset-light business model. This approach minimizes capital expenditure, transfers operational risks to franchisees, and generates highly predictable and stable royalty and rental income. This enables rapid, capital-efficient expansion globally, driving strong free cash flow and high returns on invested capital for the parent company.
3. Significant International Scale and Reach
QSR's extensive international presence, with brands operating in over 100 countries and 44% of its revenue derived from international markets, provides a substantial competitive advantage. This global scale allows for economies of scale in sourcing, strengthens brand recognition worldwide, and offers significant growth opportunities, particularly in emerging markets with rising disposable incomes and increasing demand for convenient food options.
🎯 WHY THIS MATTERS
These core competitive advantages — brand diversity, an asset-light model, and global scale — create a robust and resilient business. They allow QSR to navigate market shifts, expand efficiently, and generate consistent, high-margin cash flows, underpinning its long-term profitability and market leadership in the quick-service restaurant sector.
👔 Who's Running The Show
Joshua Kobza
Chief Executive Officer
Joshua Kobza was appointed CEO of Restaurant Brands International in March 2023, following his tenure as Chief Operating Officer since January 2019. His extensive operational background is critical for managing QSR's vast, multi-brand quick-service restaurant portfolio and driving strategic growth initiatives.
⚔️ What's The Competition
The quick-service restaurant (QSR) industry is intensely competitive, characterized by established global players and regional chains vying for consumer preference through menu innovation, pricing strategies, and service quality. Dominant forces like McDonald's and Yum! Brands represent significant competition. The market, while consolidated at the top, remains fragmented by numerous smaller operators and independent establishments, with digital transformation becoming a key battleground.
📊 Market Context
- Total Addressable Market - The global fast-food market was estimated between US$741B and US$902B in 2024, projected to grow significantly due to urbanization and convenience.
- Key Trend - Digitalization, including online ordering, mobile apps, and delivery services, is reshaping customer engagement and operational efficiency across the QSR sector.
Competitor
Description
vs QSR
McDonald's Corporation
The world's largest fast-food chain, known for its extensive global presence and iconic hamburger menu.
McDonald's has a significantly larger market capitalization and higher operating margins, but QSR offers a more diversified brand portfolio beyond just burgers.
Yum! Brands, Inc.
Operates leading quick-service brands like KFC, Pizza Hut, and Taco Bell, with a strong international footprint.
Yum! Brands also boasts a multi-brand strategy, but QSR's Tim Hortons offers a strong breakfast and coffee focus, differentiating its portfolio.
The Wendy's Company
A major hamburger fast-food chain, distinguished by its 'fresh, never frozen' beef and diverse menu offerings.
Wendy's operates on a smaller scale than QSR and its main focus is on burgers, lacking the brand diversity that QSR benefits from.
Market Share - Global Quick Service Restaurant Market
McDonald's
25%
Yum! Brands
15%
Restaurant Brands International
10%
Others
50%
📊 Valuation & Analysis
📈 Wall Street Summary
Analyst Rating Distribution - 1 Strong Sell, 12 Hold, 16 Buy, 4 Strong Buy
1
12
16
4
12-Month Price Target Range
Low Target
US$65
-12%
Average Target
US$78
+6%
High Target
US$96
+31%
Current: US$73.54
🚀 The Bull Case - Upside to US$96
1. Accelerated International Expansion
High Probability
QSR's strategic international joint ventures and continued expansion in high-growth markets, particularly in Asia, could significantly boost system-wide sales and royalty revenues. Penetrating new regions with brands like Burger King and Popeyes could add billions in annual revenue, leveraging global demand for quick-service food.
2. Successful Brand Revitalization and Innovation
Medium Probability
Ongoing efforts to innovate menus, enhance digital capabilities, and refresh marketing for core brands like Burger King and Tim Hortons could drive increased customer traffic and higher average checks. This can lead to sustained same-store sales growth, improving franchisee profitability and increasing QSR's royalty income streams.
3. Synergistic Growth from Acquisitions
Medium Probability
The successful integration and expansion of recently acquired brands, such as Firehouse Subs, can contribute meaningfully to overall revenue and profitability. Leveraging QSR's operational expertise and global supply chain to scale these brands could unlock significant synergies and expand QSR's market reach into new fast-casual segments.
🐻 The Bear Case - Downside to US$65
1. Intensifying Competition and Market Share Loss
Medium Probability
The highly competitive QSR landscape means aggressive pricing, new product launches, or enhanced marketing from rivals could lead to market share erosion for QSR's brands. This could result in slower revenue growth, reduced pricing power, and pressure on profit margins across its diverse portfolio.
2. High Leverage and Interest Rate Sensitivity
High Probability
QSR's substantial total debt of US$15.84 billion and a high debt-to-equity ratio (306.72%) expose it to interest rate fluctuations. Rising rates could significantly increase debt servicing costs, thereby reducing net income, limiting capital for growth initiatives, and potentially constraining dividend payments.
3. Adverse Economic Conditions and Consumer Spending Shifts
Medium Probability
A significant economic downturn, characterized by reduced consumer disposable income or changes in discretionary spending, could lead to decreased foot traffic and lower average check sizes across QSR's restaurants. This sensitivity to macroeconomic shifts directly impacts sales volume and profitability, potentially hindering growth targets.
🔮 Final thought: Is this a long term relationship?
QSR's long-term appeal lies in its diversified, global quick-service restaurant brands and its resilient, asset-light franchise model, which provides a durable moat in the food service industry. However, its significant debt burden is a key concern that could impact financial flexibility over a decade. Successful long-term ownership hinges on management's ability to drive sustained international growth, effectively navigate intense competition, and deleverage over time, ensuring the brands remain relevant and profitable amidst evolving consumer trends.
📋 Appendix
Financial Performance
Metric
FY 2022
FY 2023
FY 2024
FY 2025 (Est)
FY 2026 (Est)
Income Statement
Revenue
US$6.50B
US$7.02B
US$8.41B
US$9.26B
US$9.90B
Gross Profit
US$2.60B
US$2.80B
US$3.02B
US$3.11B
US$3.32B
Operating Income
US$2.02B
US$2.14B
US$2.32B
US$2.40B
US$2.75B
Net Income
US$1.01B
US$1.19B
US$1.02B
US$0.92B
US$2.44B
EPS (Diluted)
3.25
3.76
3.18
2.80
5.36
Balance Sheet
Cash & Equivalents
US$1.18B
US$1.14B
US$1.33B
US$1.21B
US$1.50B
Total Assets
US$22.75B
US$23.39B
US$24.63B
US$25.67B
US$27.44B
Total Debt
US$14.49B
US$14.52B
US$15.96B
US$15.87B
US$15.80B
Shareholders' Equity
US$2.50B
US$2.87B
US$3.11B
US$3.38B
US$3.71B
Key Ratios
Gross Margin
39.9%
39.9%
36.0%
33.5%
33.5%
Operating Margin
31.1%
30.4%
27.6%
27.7%
27.7%
Debt to Equity
40.34
41.52
32.83
306.72
425.76
Valuation Ratios
| Metric | Value | Description |
|---|---|---|
| P/E Ratio (TTM) | 26.08 | Measures the current share price relative to its trailing twelve-month earnings per share, indicating how much investors are willing to pay for each dollar of earnings. |
| Forward P/E | 13.72 | Calculates the price-to-earnings ratio using estimated future earnings, offering insight into expected valuation based on future profitability. |
| PEG Ratio | N/A | Compares the P/E ratio to the earnings per share growth rate, providing a more complete picture of valuation by accounting for growth. |
| Price/Sales (TTM) | 3.63 | Evaluates the company's market capitalization against its trailing twelve-month revenue, useful for valuing companies with inconsistent earnings. |
| Price/Book (MRQ) | 6.91 | Measures how much investors are willing to pay for each dollar of book value, indicating premium valuation relative to net assets. |
| EV/EBITDA | 14.77 | Compares the enterprise value to earnings before interest, taxes, depreciation, and amortization, providing a comprehensive valuation metric that accounts for debt. |
| Return on Equity (TTM) | 25.25 | Measures the profitability in relation to shareholders' equity, indicating how efficiently the company generates profits from investors' money. |
| Operating Margin | 27.73 | Indicates the percentage of revenue remaining after paying for operating expenses, showing the efficiency of core business operations. |
Peer Comparison
| Company | Market Cap (B) | P/E Ratio | P/B Ratio | Revenue Growth (%) | Operating Margin (%) |
|---|---|---|---|---|---|
| Restaurant Brands International (Target) | 33.61 | 26.08 | 6.91 | 6.9% | 27.7% |
| McDonald's Corporation | 221.64 | 26.54 | -103.00 | 6.0% | 40.6% |
| Yum! Brands, Inc. | 36.60 | 28.20 | -5.67 | 10.0% | 24.8% |
| The Wendy's Company | 1.76 | 8.72 | 14.90 | -2.6% | 12.0% |
| Sector Average | — | 21.15 | -31.22 | 4.5% | 25.8% |