Burger King, Tim Hortons parent reports loss on deal costs

AP News
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Posted: Feb 17, 2015 10:26 AM
Burger King, Tim Hortons parent reports loss on deal costs

NEW YORK (AP) — Burger King and Tim Hortons parent company Restaurant Brands International reported a quarterly loss Tuesday, dragged down by costs related to the deal to combine the two chains, but said key sales figures rose.

Whoppers and Timbits may not seem to have a lot in common, but Restaurant Brands sees in both chains the potential to expand well-known names outside their home markets. By striking franchising deals to open more Burger King and Tim Hortons locations around the world, the company can drive up revenue from fees without the risks that come with operating restaurants.

During the quarter, for instance, Restaurant Brands CEO Daniel Schwartz noted the number of Burger King's international locations surpassed the chain's U.S. locations for the first time.

"Over time, you'll see that ratio grow," Schwartz said.

Meanwhile, the vast majority of Tim Hortons' more than 4,600 locations are in Canada and the U.S. as well, meaning the company sees big runway for international growth. The chain's sales rose 4.1 percent at established locations during the quarter.

Restaurants Brands is about 51 percent-owned by investment firm 3G Capital, which bought Burger King in 2010 and took it public again in 2012. The company then announced plans to buy Tim Hortons last year, with the deal closing in December. 3G is known for its cost cutting and in January announced about 350 job would be eliminated in Tim Hortons corporate operations.

For the quarter ending Dec. 31, Burger King's global sales rose 3 percent at established locations, including a 4.2 percent increase in the U.S. and Canada. The company did not disclose how much of the increase was the result of higher spending per visit, compared with an uptick in customer visits. But the increase comes as McDonald's has struggled to hold onto customers.

In a conference call after earnings results were released, Schwartz stressed that there are no plans to combine the menus or real estate of the two chains, which he said will continue to have their own management teams. But Schwartz noted there would be "back of house" savings, such as in legal, finance and IT functions. When combining its two chains, Restaurant Brands has more than 19,000 locations around the world.

Restaurant Brands International Inc. said it lost $514.2 million, or $2.52 per share, during the period. A year ago, it earned $66.8 million, or 19 cents per share.

Revenue was $416.3 million, boosted by new locations and sales gains at established restaurants for both Burger King and Tim Hortons. A year ago, revenue was $265.2 million.

Shares of Restaurant Brands rose 7 percent to $41.47.