Restaurant Brands International Inc. Introduces Five-Year Growth Outlook

Outlook delivers 40,000 restaurants, $60B in system-wide sales and $3.2B in Adjusted Operating Income by 2028
Average annual 3%+ comparable sales and 5%+ net restaurant growth to drive 8%+ system-wide sales growth
Efficient flow through expected to result in average annual Adjusted Operating Income growth of 8%+
Efficient capital allocation with a focus on high return business investments and consistent dividend growth

TORONTO, Feb. 15, 2024 /PRNewswire/ - Restaurant Brands International Inc. ("RBI", "Company") (TSX: QSR) (NYSE: QSR) (TSX: QSP) Chief Executive Officer, Josh Kobza, and Executive Chairman, Patrick Doyle, today shared their confidence in the long-term global growth outlook for Tim Hortons, Burger King, Popeyes and Firehouse Subs.

Mr. Kobza provided guidance for investors that the company expects to achieve a minimum of 40,000 restaurants, $60B in system-wide sales and $3.2B in Adjusted Operating Income by 2028 by delivering average annual results over the next five years of 3% plus comparable sales, 5% plus net restaurant growth and 8% plus system-wide sales growth translating to at least 8% Adjusted Operating Income growth.

"We're proud of the work our franchisees and their teams are doing to deliver quality food, excellent service and convenience to guests," said Josh Kobza, CEO. "Our four iconic brands have strong restaurant fundamentals and clear runways for growth. Our long-term investment horizon should result in compelling business performance and drive at least low double digit annual total shareholder returns over the next 5 years."

"When you add up the sum of the parts of our company, we have a pretty remarkable combination of growth drivers," said Patrick Doyle, Executive Chairman. "The outlook we are sharing for growth is really the lowest average performance that we expect over the next five-years, with real upside potential from there."

Mr. Kobza summarized the strong fundamentals and growth drivers for each of the Company's five business segments and provided an update on the Company's capital allocation priorities.

TIM HORTONS

Tim Hortons has a strong foundation, particularly in Canada, with market share of 70%+ in hot brewed coffee, 65%+ in baked goods and 60%+ in breakfast sandwiches and wraps in 2023. Tim Hortons restaurants have a history of strong operations, driven by dedicated restaurant owners who operate roughly 4 restaurants on average.

Looking ahead to 2028, Tim Hortons will focus on growing the PM daypart beyond its 9% market share for 2023 through wraps, bowls, savory pastries, snacking and new product innovation. Tim Hortons is also planning significant growth in cold beverages from its 25% market share for 2023, driven initially by cold brew, real fruit quenchers, specialty beverages and innovation around its iconic Iced Capp. Attracting more guests to use the brand's #1 food and beverage app in Canada will contribute meaningfully to growth, given digital guests spent 5 times more than non-digital guests on average in 2023.

Tim Hortons US business is expected to be the largest contributor of net restaurant growth in its home markets, with an aspiration to reach 1,000 restaurants by 2028.

INTERNATIONAL

International growth will be driven by our strong network of well-capitalized master franchisee partners, with proven restaurant experience and commitment to growing the Company's brands in over 120 markets and territories.

Despite its successful historical growth and substantial global footprint, with each of its four brands in a different stage of development, the business still has a substantial opportunity for new country expansion and increasing penetration of strong and established existing markets around the world.

The Company sees a path towards opening at least 7,000 new restaurants in international markets over the 5-year outlook period.

BURGER KING

The foundational strength of Burger King's brand is the Whopper, which is frequently cited as the most loved burger in the big burger QSR segment, and clear differentiation through flame grilling and customization of our guests' orders.

The Company has made a substantial financial commitment to co-invest with franchisees to accelerate modern image in the U.S. and shift the franchise system towards smaller operators who live close to their restaurants. This includes the pending acquisition of Carrols Restaurant Group and announced plan to fully modernize and then refranchise the vast majority of its portfolio of approximately 1,000 restaurants, which we expect to be completed within 5 to 7 years.

Looking ahead to 2028, major growth drivers in the business include accelerating to get 85% to 90% of the system to modern image, driving incremental sales through remodels and effective marketing, executing the Carrols reimaging and refranchising plan, and improving guest experience through training and operational excellence at the restaurant.

POPEYES

Popeyes, the number two player in chicken quick service restaurants, has a strong history as a taste leader rooted in the brand's authentic Louisiana heritage and high-quality menu, including 12-hour marination of our chicken which is then freshly battered, breaded and fried in the restaurant every day.

Looking ahead to 2028, the brand will continue daypart and occasion expansion of its menu, in line with recent examples of the Chicken Sandwich and Wings and focus on attracting more profitable digital guests and increasing its digital mix of sales. The brand will accelerate its emphasis on improving restaurant operations through its Easy to Run kitchens. Popeyes expects to grow its U.S. and Canada restaurant base with top restaurant operators from nearly 3,400 in 2023 to over 4,200 restaurants by 2028.

FIREHOUSE SUBS

Firehouse Subs is consistently named by consumers as #1 in food quality, #1 in food taste and flavor, and #1 brand that supports local, community activities through our Firehouse Foundation.

Looking ahead to 2028, Firehouse Subs is expected to contribute to our broader outlook by rapidly scaling its digital channels to 100% of sales over the next few years, improving speed of service through equipment innovation, and accelerating net restaurant growth in attractive and under-penetrated markets across the U.S. and Canada with a path to ramp its pace of development to 300 net new annual units over the next few years, resulting in 800 new units by 2028.

CAPITAL ALLOCATION PRIORITIES

The Company reiterated its commitment to a balanced capital allocation framework throughout the outlook period, including continuing to invest behind high-return growth opportunities across its brands, targeting a 50-60% long-term dividend payout ratio and consistently growing its dividend with earnings, maintaining net total leverage between 3x-5x, repurchasing shares at attractive valuations over time, and preserving balance sheet flexibility for potential strategic opportunities.

About Restaurant Brands International Inc.

Restaurant Brands International Inc. is one of the world's largest quick service restaurant companies with over $40 billion in annual system-wide sales and over 30,000 restaurants in more than 100 countries. RBI owns four of the world's most prominent and iconic quick service restaurant brands - TIM HORTONS ^®, BURGER KING^®, POPEYES^®, and FIREHOUSE SUBS^®. These independently operated brands have been serving their respective guests, franchisees and communities for decades. Through its Restaurant Brands for Good framework, RBI is improving sustainable outcomes related to its food, the planet, and people and communities. To learn more about RBI, please visit the company's website at www.rbi.com.

Forward-Looking Statements

This press release contains certain forward-looking statements and information, which reflect management's current beliefs and expectations regarding future events and operating performance and speak only as of the date hereof. These forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties. These forward-looking statements include statements about our expectations regarding: (1) restaurant growth and expansion opportunities for RBI's five segments; (2) system-wide sales growth over the next five years; (3) Adjusted Operating Income growth through 2028 and achieving efficient flow through from sales; (4) achieving target proportion of modern image for Burger King U.S. by end of 2028 with expected uplifts and shifting the system to smaller, local operators, including by closing the Carrols acquisition in the second quarter of 2024 and completing the remodels and refranchising of those restaurants within 5 to 7 years of transaction close; (5) digital sales growth; (6) consistently growing the Company's dividend until it reaches a specified payout ratio, then growing with earnings over time; (7) managing net leverage in the specified range over the long-term; (8) RBI's capital allocation priorities; (9) the ability to create value for its shareholders; (10) RBI's franchisees and strategic relationships; and (11) growth and competition in the markets RBI serves. The factors that could cause actual results to differ materially from RBI's expectations are detailed in filings of RBI with the Securities and Exchange Commission and applicable Canadian securities regulatory authorities, such as its annual and quarterly reports and current reports on Form 8-K, and include the following: risks related to RBI's ability to successfully implement its domestic and international growth strategy and risks related to its international operations; risks related to unforeseen events such as pandemics, geopolitical conflicts and macroeconomic conditions; risks related to RBI's ability to compete domestically and internationally in an intensely competitive industry; effectiveness of RBI's marketing and advertising programs and franchisee support of these programs; risks related to the supply chain; risks related to our franchisees financial stability and their ability to access and maintain the liquidity necessary to operate their business; risks related to our fully franchised business model; risks related to technology; evolving legislation and regulations in the area of franchise and labor and employment law; our ability to address environmental and social sustainability issues and changes in laws and regulations or interpretations thereof. Other than as required under U.S. federal securities laws or Canadian securities laws, we do not assume a duty to update these forward-looking statements, whether as a result of new information, subsequent events or circumstances, change in expectations or otherwise.

Key Operating Metrics

We evaluate our restaurants and assess our business based on the following operating metrics.

System-wide sales growth refers to the percentage change in sales at all franchised restaurants and Company restaurants (referred to as system-wide sales) in one period from the same period in the prior year. Comparable sales refers to the percentage change in restaurant sales in one period from the same prior year period for restaurants that have been open for 13 months or longer for Tim Hortons, Burger King and Firehouse Subs and 17 months or longer for Popeyes Louisiana Kitchen. Additionally, if a restaurant is closed for a significant portion of a month (such as during a renovation), the restaurant is excluded from the monthly comparable sales calculation. System-wide sales growth and comparable sales are measured on a constant currency basis, which means that results exclude the effect of foreign currency translation ("FX Impact") and are calculated by translating prior year results at current year monthly average exchange rates. We analyze key operating metrics on a constant currency basis as this helps identify underlying business trends, without distortion from the effects of currency movements.

System-wide sales represent sales at all franchise restaurants and company-owned restaurants. We do not record franchise sales as revenues; however, our royalty revenues and advertising fund contributions are calculated based on a percentage of franchise sales.

Net restaurant growth refers to the net increase in restaurant count (openings, net of permanent closures) over a trailing twelve-month period, divided by the restaurant count at the beginning of the trailing twelve-month period. In determining whether a restaurant meets our definition of a restaurant and will be included in our NRG, we consider factors such as scope of operations, format and image, separate franchise agreement, and minimum sales thresholds. We refer to restaurants that do not meet our definition as "alternative formats."

These metrics are important indicators of the overall direction of our business, including trends in sales and the effectiveness of each brand's marketing, operations and growth initiatives.

Non-GAAP Measures

Below, we define the non-GAAP financial measures included in the trending schedules and recast financial statements. In addition, we discuss the reasons why we believe this information is useful to management and may be useful to investors. These measures do not have standardized meanings under GAAP and may differ from similarly captioned measures of other companies in our industry.

To supplement our condensed consolidated financial statements presented on a GAAP basis, RBI reports the following non-GAAP financial measures: Adjusted Operating Income ("AOI"), EBITDA, Adjusted EBITDA, LTM Adjusted EBITDA, Adjusted EBITDA Net Leverage, and Free Cash Flow. We believe that these non-GAAP measures are useful to investors in assessing our operating performance or liquidity, as they provide them with the same tools that management uses to evaluate our performance or liquidity and are responsive to questions we receive from both investors and analysts. By disclosing these non-GAAP measures, we intend to provide investors with a consistent comparison of our operating results and trends for the periods presented.

Adjusted Operating Income ("AOI") represents income from operations adjusted to exclude (i) franchise agreement amortization ("FAA") as a result of acquisition accounting, (ii) (income) loss from equity method investments, net of cash distributions received from equity method investments, (iii) other operating expenses (income), net and, (iv) income/expenses from non-recurring projects and non-operating activities. For the periods referenced in the following financial results, income/expenses from non-recurring projects and non-operating activities included (i) non-recurring fees and expense incurred in connection with the Firehouse Acquisition consisting of professional fees, compensation-related expenses and integration costs ("FHS Transaction costs"); and (ii) non-operating costs from professional advisory and consulting services associated with certain transformational corporate restructuring initiatives that rationalize our structure and optimize cash movements as well as services related to significant tax reform legislation and regulations ("Corporate restructuring and advisory fees"). Management believes that these types of expenses are either not related to our underlying profitability drivers or not likely to re-occur in the foreseeable future and the varied timing, size and nature of these projects may cause volatility in our results unrelated to the performance of our core business that does not reflect trends of our core operations. AOI is used by management to measure operating performance of the business, excluding these other specifically identified items that management believes are not relevant to management's assessment of our operating performance. AOI, as defined above, also represents our measure of segment income for each of our five operating segments. There are important components of operating income that we have not determined and therefore, a reconciliation of estimated AOI to operating income cannot be provided at this time. A full reconciliation of AOI to operating income will be provided when actual results are released.

EBITDA is defined as earnings (net income or loss) before interest expense, net, (gain) loss on early extinguishment of debt, income tax (benefit) expense, and depreciation and amortization and is used by management to measure operating performance of the business. Adjusted EBITDA is defined as EBITDA excluding (i) the non-cash impact of share-based compensation and non-cash incentive compensation expense, (ii) (income) loss from equity method investments, net of cash distributions received from equity method investments, (iii) other operating expenses (income), net, and (iv) income or expense from non-recurring projects and non-operating activities (as described above).

LTM Adjusted EBITDA is defined as Adjusted EBITDA for the last twelve-month period to the date reported.

Adjusted EBITDA Net Leverage is defined as net debt (total debt less cash and cash equivalents) divided by Adjusted EBITDA.

Free Cash Flow is the total of Net cash provided by operating activities minus Payments for property and equipment. Free Cash Flow is a liquidity measure used by management as one factor in determining the amount of cash that is available for working capital needs or other uses of cash, however, it does not represent residual cash flows available for discretionary expenditures.

SOURCE Restaurant Brands International Inc.