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For years, 3G has followed a certain playbook by trying to add value by restructuring companies after buying them and imposing a model that’s based on extreme efficiency. Implementing zero-based budgeting at BUD, QSR, and KHC has led to significant underperformance. That story of restructuring, efficiency, cutting costs, and not investing in brands led QSR (BUD & KHC) to underperform all its QSR peers except PZZA and the S&P 500 over the past 10 years. Was making Patrick Doyle a signal to the end of that era?
Patrick Doyle stepped down as CEO of Domino's in 2018 and is credited with one of the best turnarounds in restaurant history. He guided Domino's as it recovered from near bankruptcy to become one of the industry's most desirable brands. Patrick Doyle came out of retirement to join Restaurant Brands International as executive chairman. He invested $30 million of his own money into the company, purchasing 500,000 RBI shares, and received a package of stock and options that tied him to the company for five years. Patrick Doyle thinks the Whopper is the best burger in the business. Not only is it Burger King's biggest strength as the brand tackles sales and profit challenges in the U.S., but he believes it's the chain's critical competitive advantage as it goes up against McDonald's. "That is ultimately how we compete effectively with them: we've got great food. We need to do all the rest of those things as well as they do, and then I like our odds."
To be clear, Restaurant Brands is not in the same condition as DPZ was in 2010, and fixing Burger King will take time. RBI can clearly benefit from Mr. Doyle's leadership style and industry experience.
Restaurant Brands (QSR) Long THESIS:
- RBI Is Not Domino’s In 2010: Patrick Doyle stepped down as CEO of Domino's in 2018 and is credited with one of the best turnarounds in restaurant history. He guided Domino's as it recovered from near bankruptcy to become one of the industry's most desirable brands. Patrick Doyle came out of retirement to join Restaurant Brands International as executive chairman. He invested $30 million of his own money into the company, purchasing 500,000 RBI shares, and received a package of stock and options that tied him to the company for five years. RBI is not in as bad shape as DPZ was back in 2010. QSR unperformed nearly all if its restaurant peers since coming public on the heels of being miss managed by its primary shareholders.
- Can Burger King be fixed? The story of where Patrick Doyle can have the biggest impact is around Burger King. He thinks the Whopper is the best burger in the business. Not only does he think the Whopper Burger King's biggest strength, but he believes it's the chain's critical competitive advantage as it goes up against McDonald’s. "That is ultimately how we compete effectively with them: we've got great food. We need to do all the rest of those things as well as they do, and then I like our odds.“ This is not going ot happen over night and McDonald’s is a great competitior that have been excelling since before the pandemic and the pandemic made the company stronger. AN accelerations in BK sales and profitability suggest that MCD will slow.
- Getting past 3G & New Intangibles: There have been several significant changes at RBI in the last six months. Reclaim the Flame, Patrick Doyle; changes in the C-Suite; 3G sells a significant part of RBI. 3G still controls the board, but they are pulling back. Changes can bring on new challenges, but as we have seen with changes at PZZA and CMG, significant changes can also reward shareholders. What are the intangibles of the Patrick Doyle leadership style that made him so successful at DPZ? Will RBI’s new direction help motivate the system to improve operations? Can Burger Kink be fixed?
