Morgan Stanley says this 'underappreciated' restaurant brand is about to explode
The third-largest fast-food chain in the world is blowing up — and no one is paying attention.
A recent Morgan Stanley report called the parent company of Burger King and Tim Hortons, Restaurant Brands International, an "underappreciated story" that most people are misunderstanding.
The company's success goes beyond what is on the menu at both chains — though that certainly helps.
Burger King's US sales may make headlines the most frequently, but they only represent one-third of the business.
Here are four key strategies that are driving Restaurant Brands International's success.
1. Give Tim Hortons Burger King's playbook
"To grow our presence globally with Tim's, we'll continue to work with our existing partners as well as new partners to expand all around the world, similar to how we've scaled our Burger King brand over the last few years," CEO Daniel Schwartz said in the company's third-quarter earnings call in October.
Burger King's $11 billion acquisition of Tim Hortons has not resulted in any menu crossovers. Instead, it has provided the chance to share strategies between the brands, to the benefit of Tim Hortons, which has struggled with international expansion in the past.
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2. Go international
Both Burger King and Tim Hortons are on major expansion sprees.
In late 2015, Tim Hortons announced plans to open more than 150 Tim Hortons locations in the Cincinnati area in the next decade, as part of its global expansion plan. Burger King is currently planning hundreds of new locations in countries including France, India, the Ivory Coast, and Morocco.
3. Trust franchisees
Both brands' international expansion plans are through partnerships with franchisees. Almost 100% of Burger King locations are owned by franchisees, a model that Tim Hortons is planning to follow.
4. Give customers the spice they crave
Burger King adopted a strategy two years ago to launch fewer, more impactful products, as opposed to continually cycling through limited-time offerings.
Two of these super successful introductions in 2015 were Fiery Chicken Fries and the Extra Long Jalapeno Cheeseburger, which the company reported helped drive sales growth. By focusing on what the company knows customers want, Restaurant Brands International has managed to cut costs and introduce offerings that get results.
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