Summary of QSR 10k 2023

These are some of the basic notes after reading QSR's (Restaurant Brand International's) 10k 2023. This is not detailed analysis but basic info based on the public filing. This focused more on fundamental analysis.

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• Owns Tim Hortons, Burger King, Popeyes and Firehouse Subs. 
• Over $40 bil system wide sale, 120 countries, over 30,000 restaurants at the end of Dec 31, 2023. 
• Trades as QSR in NYSE and TSX

• Tim Hortons (TH):      
  • Founded 1964. Coffee, tea, bakery, donuts, sandwich. 
  • Only for this franchise, allows company to acquire location under certain circumstances. 
  • Generally 3.0% to 4.5% of gross sales for franchise fee. If location is leased then it will be additional 8.5% or 10% gross sales. If location is owned by franchisee or leased with third party then that 3 to 4.5% can increase. 
  • Generally 10yr agreement in Canada and 20yr in US. 
  • For US and Canada Has coffee operating plant in Rochester, NY, Ancaster, Ontario and Oakville, Ontario (for fondant). 
  • For International, it uses foreign third party suppliers. 
  • Cost of green coffee (un-roasted coffee) can impact the finance of the company. 
  • QSR acts as distributor to Tim Hortons. Has 9 distribution (5 of them owned) in US and Canada. 

• Burger King (BK):     
  • Founded 1954
  • Second largest hamburger (by number of location. 
  • Provides right to first refusal when franchisee wants to sell. 
  • Typically 20yr lease for both US and Canada. 
  • Most new locations have 4.5% gross sales franchise fee.
  • Right now providing matching fund to franchisee for certain restaurant upgrades.  
  • QSR does not have active assets like it does with Tim Hortons but does get rebates based on items purchased by franchisee. 
  • In Dec 31 2023, it has supply agreement with (10yr) Coca Cola and Dr. Pepper/Snapple Inc. It states certain volume commitment. Company expects to meet volume for Coca Cola in four years and Dr. Pepper/Snapple in ten. 

• Popeyes(PLK):    
  • Founded in 1972
  • Second largest chicken (by number of location)
  • Provides right to first refusal when franchisee wants to sell.
  • Typically 20yr in both US and Canada. 
  • Typically 5% of gross sales as franchise fee. 

• Firehouse Subs(FHS):   
  • Founded 1994. Sandwich brand. 
  • Provides right to first refusal when franchisee wants to sell.
  • Typically 10yr term. 
  • Typically 6% gross sales as franchise fee. 
  • Bought in Dec 15, 2021 for $1.016 billion

• International:    
  • In 2023 entered master franchise agreement for Popeyes in Romania and China, for Tim Hortons South Korea, Singapore and Malaysia, for Firehouse Subs UAE and Oman, for Burger King Reunion Island. 
  • Also developmental brand for all brands in multiple different countries. 
  • Master franchise is responsible for selecting suppliers, negotiating price. In some market QSR is responsible for choosing suppliers. 
  • (pg 34) Looks like Tim Hortons division is the biggest sales growth compared to other division. 

- For reporting segments they have five different ones, one for each brand and one for international. 

• By taking over Carrolls Corp they will get 1,020 Burger King location and 60 Popeyes location. 
• Recently they acquired 125 Burger King franchise. 34 of which was in Jan 2024. 

• In international markets they have multiple master franchise agreement. They also created joint venture in certain markets with meaningful minority ownership. 
• Franchisee report monthly/weekly sales and pay royalties based on gross sales. 

• Leases
  • Leased or subleased 3,541 properties for TH, 1,299 for BK, 93 for PK, 8 for INTL. 
  • Land are leased in triple-net basis. 

• Ads / Promotions
  • In US and Canada: Company manages ads. Spent C$80 mil for Tim Hortons for ads expense, On Sep 2022 announces will pay $120 mil for BK US advertising expense over two years. Already spent $63 mil by end of Dec 31 2023. 
  • In INTL: In most area it’s managed by master franchisee. 

• Seasonality:     
  • Typically higher in spring and summer, lowest during winter months. 

• Human Capital:   
  • ~9,000 employees, (~2,200 corporate employees in restaurant support center and serving franchisees from the field. !1,300 in distribution center and manufacturing plants, ~5,500 in company restaurant. )                                

• Properties:   
  • Principal exec office: 130 King Street West, Suite 300, Toronto, Ontario M5X 1E1 Canada
  • It owns total of 1,480 restaurant locations (pg. 27 for division), five distribution centers, two manufacturing plant. 
  • Both owned distribution centers and manufacturing plants are under TH division.   

• Liquidity and Capital Resources:    
  • At Dec 31, 2023 had cash and cash equivalent of $1.139 billion and borrowing ability of $1.248 billion. 
  • Debt Instrument:
    • Interest of 3.87% First Lien Senior Notes due 2028,   5.575% First Lien Senior Notes due 2025,  3.5% First Lien Senior Notes due 2029,  4.375 Second Lien Senior Notes due  2028, 4.0% Second Lien Senior Notes due 2030. 
  • Credit Facilities:
    • As of Dec 31 2023, average interest of 7.41% and total of $6.450 billion outstanding principal amount. 
  • Revolving Credit Facilities:
    • As of Dec 31 2023, no outstanding amount in revolving credit. 
    • Has $125 mil letter of credit sublimit. Interest rate applicable is 0.75% and 1.50% depending on net first lien leverage ratio. 
    • Each of it’s divisions seems to have their own revolving credit.