Burger King-parent Restaurant Brands International Inc (QSR.TO) said on Monday it would buy Firehouse Subs for $1 billion, at a time when its popular brands are struggling due to increased competition from rivals launching new menu items.
Analysts have said fried chicken sandwich pioneer Popeyes, owned by Restaurant Brands, has been hurt by McDonald’s Corp (MCD.N) and Yum Brands Inc’s (YUM.N) KFC launching similar items, while Burger King has underperformed in recent months on weak demand for its lower-priced menu items.
U.S. comparable sales at Burger King declined 1.6%, and slipped 4.5% at Popeyes in the third quarter ended Sept. 30.
Firehouse Subs, in comparison, reported U.S. same-store sales growth of 20% from pre-pandemic levels between January and October, Restaurant Brands said.
U.S.-listed shares of the company, which also owns Tim Hortons, rose marginally after it said the deal would immediately add to its earnings once it closes in the coming months. It also said it will fund the acquisition through cash on hand and debt.
“(We) have kept an eye on it (Firehouse Subs) from a distance over the years,” Restaurant Brands Chief Executive Officer Jose Cil said.
Firehouse Subs’ franchisees own and operate 97% of its 1,200 restaurants across 46 U.S. States, Canada and Puerto Rico. Restaurant Brands has about 27,000 stores in over 100 countries.
“There’s a tonne of room for growth here in the U.S. and Canada, and all around the world,” Cil said about Firehouse Subs, which is popular for its “Hook & Ladder” sub.
Firehouse Subs’ loyalty program has 3.5 million subscribers, and is adding around 50,000 more customers per month, said Restaurant Brands, which earlier this year saw Burger King and Popeyes launch similar programs.
Firehouse Subs Chief Executive Officer Don Fox and finance head Vincent Burchianti will manage its day-to-day operations.