Restaurant Brands International Inc. (QSR) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents mixed signals: solid adjusted EPS growth and strategic plans suggest potential, but challenges like franchisee profitability decline and unclear responses on Popeyes' U.S. strategy raise concerns. The Q&A highlights growth in international markets but also weather challenges and franchisee issues. The strategic plan shows confidence in organic growth and refranchising, yet beef costs pressure margins. The overall sentiment is balanced, with positive elements counteracted by risks, resulting in a neutral stock price prediction.
Key Financial Performance
Comparable Sales Growth 2.4% growth year-over-year. Reasons: Focus on basics, quality, service, and convenience to guests.
Net Restaurant Growth 2.9% growth year-over-year. Reasons: Targeted growth in suburban developments, capacity-constrained markets, and urban densification.
System-Wide Sales Growth 5.3% growth year-over-year. Reasons: Strong brand fundamentals and consistent execution.
Organic Adjusted Operating Income Growth 8.3% growth year-over-year. Reasons: Strong top-line results and disciplined cost management.
Adjusted EPS Growth 10.7% growth year-over-year. Reasons: AOI growth and reduced net interest expense.
Tim Hortons Franchisee Profitability Average 4-wall EBITDA approximately CAD 295,000. Reasons: Solid top-line sales performance offsetting tariffs and increased operating commodity costs.
Burger King Franchisee Profitability Approximately $185,000, down from $205,000 in 2024. Reasons: 20% increase in beef costs.
Popeyes Franchisee Profitability Approximately $235,000, down year-over-year. Reasons: Softer sales and competitive chicken category.
Firehouse Subs Franchisee Profitability Over $100,000, up year-over-year. Reasons: Steady progress and lower-cost in-line build model.
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Operating Highlights
Tim Hortons Breakfast Food Sales: Grew 3.5% supported by innovation like 100% Canadian freshly cracked scrambled eggs and core offerings such as Farmers Wrap.
Tim Hortons Cold Beverages: Grew 8.6% in Q4, reaching 27% of total beverage sales, driven by iced espresso-based beverages.
Burger King SpongeBob SquarePants Menu: Launched in December, featuring Krabby Whopper and other items, driving strong guest engagement and highest kids meal incidence in 10 years.
Burger King China Expansion: Joint venture with CPE to double restaurant footprint to at least 2,500 units by 2030, with $350 million injected for growth.
Tim Hortons U.S. Expansion: Achieved highest level of new restaurant openings in a decade, expanding in markets like Florida and Virginia.
Popeyes Turkey Growth: Doubled store count in the last 4 years, ending 2025 with nearly 500 restaurants.
Tim Hortons Digital Engagement: Reached all-time highs in Q4 with expanded kiosks and digital ordering.
Burger King Operations: Improved execution with Royal roundtables and operational focus, leading to profitability outperformance by top operators.
Popeyes Operational Focus: Increased field operations team by 75% and launched in-restaurant coaching visits to improve consistency.
Refranchising Efforts: Burger King U.S. began refranchising efforts 2 years ahead of schedule.
Simplification of Business Model: Focused on transitioning to a 99% franchise business model and refranchising 50-100 Burger King restaurants in 2025.
Burger King China Partnership: Transitioned majority ownership to CPE, a local partner, to strengthen operations and marketing.
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Risk or Challenges
Franchisee Profitability: Franchisee profitability was pressured in parts of the system in 2025, particularly at Burger King and Popeyes, due to elevated beef costs and softer sales, respectively. Burger King franchisee profitability declined to $185,000 from $205,000 in 2024, driven by over 20% inflation in beef costs. Popeyes franchisee profitability also declined to $235,000, reflecting operational inconsistencies and competitive pressures in the chicken category.
Commodity Costs: Elevated commodity costs, particularly coffee and beef, impacted profitability. Tim Hortons faced headwinds from increased coffee costs and tariffs, while Burger King U.S. experienced over 20% inflation in beef costs, significantly affecting franchisee profitability.
Operational Execution: Operational inconsistencies at Popeyes were highlighted as a major challenge, with a need for improved speed, accuracy, and reliability in restaurant-level execution. This has been identified as a key area for improvement to reengage core guests and drive sales.
Modernization Costs: The pace of remodel activity at Burger King has been influenced by the current cost environment, delaying the timeline to reach 85% modern image by 2028. This could impact the brand's ability to attract and retain customers.
Development and Growth: 2025 represented a low point for consolidated net restaurant growth, with challenges in accelerating development. Burger King China, for instance, is expected to see modestly positive net restaurant growth in 2026 after a portfolio cleanup.
Competitive Pressures: The chicken category remains highly competitive, impacting Popeyes' performance. The brand's sales declined by 3.2% for the year, underscoring the need for sharper product focus and operational improvements.
Economic and Consumer Backdrop: Macroeconomic uncertainty, elevated costs, and weaker consumer sentiment in key markets like Canada and the U.S. created a challenging environment for restaurant operators, impacting sales and profitability.
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Guidance & Outlook
Net Restaurant Growth (NRG): 2025 represented a low point for consolidated net restaurant growth. The company expects to reaccelerate growth in 2026, targeting 5% unit growth by the end of the long-term algorithm period. Modestly positive NRG is expected from Burger King China in 2026, following portfolio cleanup and transition to a new local partner.
Burger King China Expansion: The company plans to roughly double Burger King China's restaurant footprint to at least 2,500 units by 2030, supported by a $350 million capital injection from CPE.
Popeyes China Development: The company aims to accelerate development in 2026, focusing on scaling the business thoughtfully and eventually transitioning ownership to a long-term local operator.
Tim Hortons Development: Tim Hortons returned to net restaurant growth in Canada in 2025 and plans to accelerate development in 2026, supported by a strong pipeline. U.S. expansion also reached its highest level of new restaurant openings in the past decade.
Burger King U.S. Modernization: The company ended 2025 with 58% of Burger King U.S. restaurants having a modern image, up from 51% in 2024. While the target of 85% modern image by 2028 may take longer due to cost environment, steady progress is expected.
Franchisee Profitability: Burger King U.S. franchisee profitability was impacted by 20% inflation in beef costs in 2025. Profitability is expected to expand as beef costs normalize. Tim Hortons franchisee profitability remained resilient despite cost pressures, and Popeyes franchisee profitability is targeted for improvement through operational consistency and core product focus.
Capital Expenditures (CapEx): 2026 CapEx and cash inducements are expected to increase to approximately $400 million, up from $365 million in 2025. This increase is driven by Tim Hortons development and renovations, as well as acceleration in Carrols remodels.
Adjusted Operating Income (AOI) Growth: The company is committed to delivering a fourth consecutive year of 8% organic AOI growth in 2026, supported by strong top-line performance and continued flow-through to earnings.
Dividend Growth: The company increased its dividend target by approximately 5% to $2.60 per share for 2026, marking the 14th consecutive year of dividend growth.
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Shareholder Return Plan
Dividend Growth: For 2026, the company is increasing its dividend target by roughly 5% to $2.60 per share, marking the 14th consecutive year of dividend growth.
Share Repurchase: The company refranchised 50 to 100 Burger King restaurants in 2025, slightly exceeding its guidance, as part of its capital allocation strategy.
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Key Q&A
Q:How is the company thinking about comparable sales evolution and trajectory in 2026, particularly for Tim Hortons and Burger King?
A:The company expects a similar consumer environment in 2026 as in 2025 and plans to focus on building fundamentals. Weather challenges in early 2026 are noted but expected to normalize. For Tim Hortons, cold beverages have shown strong growth, and the company plans to introduce more innovations to drive PM food expansion, which is seen as a long-term initiative.
Q:What is driving the momentum in the International segment, particularly for Burger King and Popeyes?
A:Momentum is driven by a supportive structural market backdrop, including workforce growth, middle-class expansion, and restaurant formalization in markets like India. The brands are well-positioned with modern assets, digital enablement, and strong local operations. EMEA and Asia Pacific regions have shown consistent strength, with standout performances in markets like China, Japan, and Turkey. Popeyes' international system sales have grown significantly, reaching a $2 billion run rate.
Q:How does the company view the fast food market in Europe compared to the U.S. and Canada?
A:The company sees consistent positive performance in Western European markets like France, Spain, Germany, and Great Britain, with low to mid-single-digit growth. Turkey also showed strong growth. Canada, while a mature market, achieved around 3% same-store sales growth in Q4 2025, with broad-based positive sales across all dayparts and menu categories.
Q:What are the opportunities for growth and share gains for Burger King U.S. in 2026?
A:The company is focused on improving fundamentals, operations, and marketing. The success of the SpongeBob campaign highlighted the readiness to elevate the brand. Franchisee sentiment is positive, and refranchising efforts have exceeded expectations, with over 100 restaurants refranchised in the first year. The company plans to accelerate refranchising in 2026.
Q:What is the company's strategy for addressing challenges in Popeyes U.S.?
A:The company plans to focus on improving operational consistency and narrowing marketing and product focus to core items like bone-in chicken, tenders, and sandwiches. A leadership change has been made to drive these improvements. Despite a large franchisee bankruptcy, the overall franchise system is healthy, and growth is expected to continue.
Q:What progress has been made in speed of service and loyalty programs for Tim Hortons in Canada?
A:Significant progress has been made in speed of service, particularly in the morning drive-thru. Remodels and back-of-house rework are helping improve service speed. The loyalty program accounts for 33% of sales, with 7 million active members who spend more and visit more often. Partnerships like the one with Canadian Tire are expected to further drive loyalty program adoption.
Q:What is the company's confidence in achieving 8% AOI growth in 2026?
A:The company is confident in achieving 8% AOI growth, supported by a 3% same-store sales target, unit growth, disciplined G&A management, and the return of Burger King China royalties. System-wide sales growth is expected to be around 6%, with additional contributions from operating leverage and royalties.
Q:What are the company's plans for improving franchisee profitability and new unit paybacks?
A:The company is leveraging best practices across brands to improve franchisee profitability, focusing on procurement, digital contracts, and operational efficiencies. Beef price normalization is expected to improve profitability in the second half of 2026. New unit paybacks are strong for Tim Hortons in Canada (around 3 years) and Firehouse Subs (3-3.5 years). Burger King and Popeyes are focusing on driving sales to improve paybacks.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the question about whether new unit expansion for Popeyes U.S. should be paused or contracted due to franchisee challenges and slower performance. The response focused on leadership changes and operational improvements without directly addressing the potential need for contraction.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
China sale
Investor Day
KPIs
King marketing
NRG
PLs
QSR industry
RH AOI
Reclaim Flame
Sami
SpongeBob
algorithm
bacon tot
basic
burger QSR
commodity
consistency
core
engagement
family
field
franchisee profitability
inflation
manager
offering Biscoff
partner CPE
phase
portfolio visibility
profitability beef
record
resilience model
role
roundtable
royalty rate
sale restaurant
soda
strength durability
QSR Transcript
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The earnings call summary presents a balanced view, with positive aspects like growth in international sales and strategic initiatives, but also challenges like elevated beef costs and margin pressures. The Q&A reveals uncertainties in Argentina and U.S. rig count stability, and management's reluctance to provide specific guidance adds to the neutral sentiment. While there are growth opportunities and strategic plans, the lack of clear guidance and current margin pressures suggest a neutral stock price movement over the next two weeks.
Restaurant Brands International Inc. (QSR) Q4 2025 Earnings Call Transcript
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The earnings call presents mixed signals: solid adjusted EPS growth and strategic plans suggest potential, but challenges like franchisee profitability decline and unclear responses on Popeyes' U.S. strategy raise concerns. The Q&A highlights growth in international markets but also weather challenges and franchisee issues. The strategic plan shows confidence in organic growth and refranchising, yet beef costs pressure margins. The overall sentiment is balanced, with positive elements counteracted by risks, resulting in a neutral stock price prediction.
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The earnings call indicates positive growth trends: Firehouse Subs shows strong sales and net restaurant growth, Tim Hortons outperforms competitors, and Burger King sees international success. Despite high beef costs, management remains optimistic about relief and franchisee confidence. The Q&A section highlights strategic initiatives like remodeling and refranchising, which are progressing well. Although there were some evasive responses, the overall tone is positive, with management focusing on growth and profitability. Given these factors, a positive sentiment is justified, but not strong due to some uncertainties and high costs.
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