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QSR is on the Hedgeye Restaurants bench as a SHORT. 

Trading at 12.3x EV / NTM EBITDA the stock is fully valued.  The company’s robust development momentum is a clear positive; the shift in the development strategy at Tim Hortons is still an unproven business model.  BK USA will have a very challenging time growing same-store sales as MCD recuperates.  It will be critical to watch how MCDs new value platform rollout unfolds.  As MCD reclaims a portion of the value focused customer base, BK will relinquish the biggest market share in the industry. 


  • QSR reported adjusted EBITDA of $441 million (up 23% YoY excluding the impact of FX) and adjusted diluted EPS of $0.34 per share
  • The company reported net restaurant growth of 210 units or 5.2% growth on a trailing 12-month basis.



  • Tim Hortons same-store sales grew by 5.3%
  • For 3Q15, TH system-wide sales growth was 8.2%
  • Same-store sales performance was primarily driven by the launch of breakfast and lunch wraps and continued strength in beverages - dark roast
  • Same-store sales in Canada were 5.4% and 4.3% in the U.S.
  • Lapping of last year's Dark Roast coffee launch
  • Other product introductions - grilled breakfast; lunch wraps and the Creamy Chocolate Chill


  • Net restaurant growth of 69 at Tim Hortons
  • Development was primarily driven by restaurant openings in Canada
  • QSR announced the aggressive franchise-led development strategy for Tim Hortons USA.  Under the terms of the agreement, franchise partners will look to develop more than 150 Tim Hortons restaurants over the next 10 years in the Cincinnati area
  • The deal underscores two key points: 1. Commitment to expand Tim's presence in the U.S.; and 2. Highlights the franchisee-led expansion model we intend to use in the U.S. to increase our pace of development
  • The goal is to grow our market share in Canada while meaningfully accelerating the pace of expansion in the U.S. and around the world
  • Trying to increase restaurant penetration in urban markets, primarily through non-traditional formats




  • In 3Q15 Burger King same-store sales grew by 6.2%
  • In 3Q15, system-wide sales growth was 11.2%
  • Burger King same-store sales growth was strong across all markets with US&C, EMEA, APAC and LAC reporting comparable sales growth of more than 5%
  • The U.S. was strong despite lapping last year's re-launch of Chicken Fries with same-store sales growth of 5.1%
  • Comparable sales were also up by 7.3% in EMEA this quarter - attributable to strength in Turkey, Russia and Spain
  • In APAC, the outperformance was primarily driven by top line strength in China
  • LAC comparable sales growth increased by 11.4% with good results in both Brazil and Mexico
  • The focus is on the four-pillar strategy menu, marketing, image, and operations in the United States and Canada.
  • Value, the 2 For $5 platform, including the Extra Long Jalapeño Cheeseburger and chicken fries all contributed to our positive same-store sales
  • LTO of Fiery Chicken Fries


  • Burger King achieved net restaurant growth of 141 this quarter
  • As of September 30, there were over 14,600 Burger King restaurants in approximately 100 countries and territories
  • Opened 2,000 restaurants since 2011 - 325 restaurants in China, 300 restaurants in Russia, 275 in Turkey and over 350 restaurants in Brazil



  • Burger King re-entered France in 2013 through a master franchise joint venture agreement forming Burger King France. As of September 30, 2015, there were 30 restaurants in France with a total of 50 restaurants by year-end
  • AUVs of approximately €5 million, some of the highest in the world
  • Partnering with Groupe Bertrand to further accelerate the expansion of the BK brand
  • Over time, BKF plans to convert restaurants in France to the Burger King brand under a similar economic model used in other markets around the world


  • Adjusted net income for the third quarter was $163 million or adjusted diluted EPS of $0.34
  • Year-to-date free cash flow is $831 million and ended the quarter with $976 million in cash
  • As of September 30, 2015 pro forma LTM adjusted EBITDA basis net leverage of 4.9x was down 0.6x year-to-date
  • The reduction in net leverage highlights the commitment to reduce debt load over time
  • QSR Board of Directors declared a dividend of $0.13 per share

Please call or e-mail with any questions.

Howard Penney

Managing Director

Shayne Laidlaw