Burger King showing ‘exciting momentum’ internationally: Restaurant Brands CEO

Restaurant Brands International CEO Jose Cil joins Yahoo Finance to discuss the company's latest earnings, international sales for Burger King, competition, and the outlook for growth.

Video transcript

BRIAN SOZZI: Burger King sales are still lukewarm in the US, but the brand is delivering Whopper-sized gains overseas, as key markets recover from the depths of the pandemic. Sprinkle in another comeback quarter for coffee chain Tim Hortons, and you have the better than expected performance from Restaurant Brands seen in the first quarter. Restaurant Brands CEO José Cil joins us now. Jose, good to see you as always. Let's start on Burger King overseas. Why is the brand hot over there?

JOSE CIL: Hey, Brian. Great to see you. Great to see the whole team. Yeah, Burger King internationally has been doing fantastically well. We had a really good quarter this first quarter. What we've seen is strong performance across all of our regions. Europe, Middle East, Africa, Asia, as well in Latin America, picking up quite a bit. And what's happening, to kind of simplify for everyone, we've got really good-- our teams are doing a good job on the marketing plans, on the menu innovation. Digital has been a really big driver of growth.

And during the pandemic, we saw an increase in our off-premise capabilities and our business. So drive-throughs, delivery, digital rewards, that loyalty. This is all quite strong during the pandemic. That stuck. And what we've seen come back quite a bit with the easing of restrictions and mobility picking up is the on-premise business, so dine-in getting stronger. And so the combination of the two has driven really significant growth, plus 20% for the international business in same store sales and north of 30% from a system sales standpoint. So exciting momentum in international business.

BRIAN SOZZI: I'd say a little bit of a change of tone, José, on Burger King in the US from you and the team. You noted you are chipping away at competition at Burger King in the US. What are you doing specifically to take the fight to McDonald's and other brands?

JOSE CIL: Yeah, so that was-- look, it's not a victory lap. For us, growth and leading the industry is the goal. We want to create gaps, not close them. But it's a starting point of the turn, and that's why I thought it was important to share that yesterday at earnings that we're making progress. We made progress in the fourth quarter and continuing to make progress here in the first quarter of '22.

And what we're doing is we're really focusing on the core iconic flagship product of Burger King, which is the Whopper. We removed it from our core discount platform, the two for six. We brought in new items into that platform, reduced the price to two for five, and then really highlighted the Whopper as it should be, as a core iconic flagship product of Burger King. We also brought in Whopper Melts and are limiting our messaging to fewer, but more impactful messages and promotions.

And so that's just the starting point. We've also gone through an agency review and made changes on our creative agency and others as well. And we think, over time, the menu work, the marketing work, the communication work, the brand work will be a key driver of growth, in addition to operations, our digital improvements, and some of the work we're doing on image.

BRAD SMITH: Within the work on Popeyes Louisiana Kitchen, noticing particularly that there's a little bit of a deceleration in the growth there. The chicken sandwich wars we had seen that, of course, generate a ton of fanfare, go viral. Are we seeing that start to decline and pull back a little bit? And what does that mean in terms of the investments within that brand, too?

JOSE CIL: Yeah, Popeye's has had a great run for quite some time. We shared yesterday that since the acquisition in 2017, we've added nearly 50% or just over 50% system wide sales. Unit growth has been tremendously strong, and top line and unit economics have improved tremendously. And in fact, the first quarter of 2022 was the strongest quarter ever for the-- the strongest start to the year ever for the Popeyes brand in the US from a development standpoint.

That said, we did have some headwinds from a sales-- same store sales standpoint. And part of it has been, as I've mentioned, we've had some challenges from a staffing standpoint. Hours of operation have been somewhat impacted. We're getting a little bit better on that. And our franchisees are doing a good job of continuing to staff their restaurants and be open more hours to drive and address more consumer demands.

The other piece is, there's been a lot of competition coming over the last year on the chicken sandwich side from chicken players, as well as broader QSR players. We think we have the best in class product, not because I say it, but because our consumers say it. And this week, we launched the Buffalo Ranch Chicken Sandwich to remind folks how great the Popeyes chicken sandwich is. And we're excited about the start of that promotion.

JULIE HYMAN: Hey, José, it's Julie. I want to ask you a little bit more about that staffing issue. I mean, we just heard from Starbucks and Howard Schultz, who is the interim CEO, talking about $17 an hour an average pay. Now I know the majority of your restaurants are franchisees. They're not owned, so you don't have as much control over what they're paying folks. But what are you seeing out there in terms of pay? How much is it going up? What is the average pay? And how are they attracting and retaining people to keep those Popeyes open as much and as long as possible?

JOSE CIL: Well, we've seen increases in wages, really, throughout the country. It's the same here in Canada, which is where I'm at today. And so I think that there's a balanced approach here for improving staffing and hours of operation. I think the key is ensuring you have a really good employee value proposition, and it's one of the things we're working with our owners across the US. Our franchisees are coming together with our teams and building and sharing best practices and building game plans based on things they're doing in their restaurants to hire better, to have the right level of benefits for their employees, to create the right culture in their restaurants.

And the combination of wages plus benefits plus the right environment and the right culture, these are things that attract people to store-- to restaurants, and these are things that help folks retain talent and hopefully start growing their business that way. So it's a full court press in terms of being able to drive the right environment in the restaurants. And our franchisees are doing a good job. And we think, over time, we'll be able to address this and continue to grow the business through better staffing and better hours of operation.

BRIAN SOZZI: José, Julie briefly mentioned Starbucks. And they came out last night, and they said we're going to open up a lot more drive-throughs. That's your turf and the turf of your rivals. How do you think about Starbucks as a competitor? And because of their impending arrival even more into the drive-through, do you see yourself making a bigger play in coffee?

JOSE CIL: Look, everybody's a competitor in my vantage point, right? If you're not part of the RBI family, you're a competitor. And certainly, drive-throughs, we've seen in the US and Canada and throughout the globe, have become that much more important in light of the off-premise growth in the business through digital and also through the pandemic over the last 24 months. We have a really strong and ubiquitous presence in the US with drive-throughs at Burger King. Popeyes is growing.

With Tim Hortons, we have over 650 locations, one of the largest coffee chains in the country. We think we can be bigger. We've created a new platform for Tim's here in the US from a drive-through standpoint. So we've got our own growth plans for all three brands and Firehouse as well. We've added drive-throughs as well for Firehouse. There's about 50 or 60 of them in the US that have drive-throughs.

So it's a strong and important part of the business. It's something that we do quite well. Our franchisees are really capable at that in terms of finding locations and developing directed locations throughout the country. And we'll continue to grow, using that platform and many others as well.

BRIAN SOZZI: Well, as you know, just like Justin Bieber, I am very much a Timbits fan. We'll leave it there. Restaurant Brands CEO José Cil, always good to get some time with you. We'll talk to you soon.