Burger King Owner RBI Looking to Buy Big Fast-Food Chain, Analyst Says

• Mark Kalinowski, an industry analyst, says restaurant stocks have been “beaten down” lately.
• He said the owner of Burger King and Popeyes is on the hunt to buy a big fast-food brand.
• Here are three acquisition targets he thinks would make sense for Restaurant Brands International.

The owner of Burger King, which bought Firehouse Subs in late 2021 for $1 billion, is on the hunt for another fast-food brand, a veteran analyst said.

Mark Kalinowski, the founder of Kalinowski Equity Research, said Restaurant Brands International is looking for “something larger, ideally meaningfully larger” than the 1,200-unit sandwich chain.

Kalinowski said the timing is right for RBI — which owns about 29,400 Burger King, Popeyes, Tim Horton’s, and Firehouse restaurants — to be scouting for a new brand. The stock market is volatile, and shares of publicly traded restaurant companies have been particularly “beaten down,” he said.

“You could probably buy a concept more cheaply today than six or nine months ago,” Kalinowski said in an interview with Insider.

Kalinowski identified three chains that would fill holes in RBI’s portfolio: Marco’s Pizza, Papa Johns, and Qdoba.

Getting a foothold in those two fast-food categories — pizza and Mexican food — would allow RBI to compete with Domino’s Pizza, Pizza Hut, Chipotle, and Taco Bell.

Kalinowski wrote in a note in March that both Papa Johns and Marco’s Pizza would also bring “digital/tech capabilities that might prove useful to Restaurant Brands’ current concepts.”

Last year, reports suggested that RBI was looking to buy Subway, whose US store count has diminished year over year.

Kalinowski said Subway’s asking price was too high. He told Insider that RBI is “very disciplined on expenses, and they don’t want to overpay for anything.”

A spokesperson for RBI said the company does not comment on market speculation or rumors.

Kalinowski broke down for Insider why he thinks Marco’s Pizza, Papa Johns, or Qdoba would be a good fit for RBI. (Unit and revenue information for Marco’s Pizza and Qdoba is from the “Firefly 500+” report from Datassential.)

Papa Johns

Total units: 5,650

2021 revenue: $2.1 billion

Kalinowski’s take: “It’s not like there’s a billion large pizza concepts out there. But clearly one that is probably big enough to matter but small enough where it isn’t going to break your bank to acquire is Papa Johns,” he said. “Papa Johns’ stock is down about 24% year-to-date. So the first thing I’m thinking is, if I’m an acquirer — and maybe that’s Restaurant Brands, or maybe that’s Roark Capital, or maybe that somebody else — I like to buy things when they’re on deep discount.”

Papa Johns has some added benefits. It’s headquartered in Atlanta — not too far from Miami, where Burger King is based. It has delivery and carryout technology that RBI’s other brands could leverage. Kalinowski said Papa Johns, which rebranded last year, is also part of a “nicely growing category in the US.”

“When you look at who’s giving up market share in the pizza category, a fair amount of it tends to be independents or small regional chains. It’s a very fragmented category,” he said. “So the opportunity for market-share gains in the US is big for the right concept.”

Marco’s Pizza

Marco’s Pizza

Total units: 1,002

2021 revenue: $898.6 million

Kalinowski’s take: “Marco’s Pizza, I believe, is the fifth-biggest pizza company in the segment right now. It’s fairly similarly sized to Firehouse Subs. So maybe they’ll acquire Marco’s,” he said.

“It’s a nice concept, a growing concept. Their pizza tastes good. They do some things that some of the larger pizza companies either don’t do or do on a very limited basis, like the old-style pepperoni. If you look at the pizza category, in general they’ve tended to be the technology leaders, because they’ve had to have the technology for delivery and carryout. So there’s a good way to leverage that technology if you acquire a leading pizza brand.”

He said RBI has also been showing a “big interest in taking concepts that they own” and growing them internationally, and acquiring either Papa Johns or Marco’s would check that box.

“They believe they have a platform that lends itself to growth and, in particular, international growth,” he said. “Pizza is pretty universal. It’s hard to find something that translates as well into as many cultures as pizza does.”

Qdoba

Total units: 752

2021 revenue: $865.8 million

Kalinowski’s take: Kalinowski said that if RBI wanted to play in the Mexican-food space, Qdoba would be the only likely candidate. Taco Bell, the largest, is owned by Yum Brands. “Chipotle Mexican Grill is second largest, and Chipotle’s

market cap

is over $43 billion. I don’t think they’re going to acquire Chipotle,” he said. “And then Del Taco just got acquired by Jack in the Box. Moe’s Southwest Grill is owned by Roark Capital. That kind of leaves Qdoba. It is the only one of any reasonable size at all that might be acquired. The options seem very limited.”

But would Qdoba, which went private after Jack in the Box sold it in 2017 to the private-equity firm Apollo Global Management, want to sell?

“If Restaurant Brands is willing to pay a pretty penny for them, the owners may sell,” Kalinowski said. “It’s just that simple.”

Kalinowski said RBI could also copy a Roark Capital strategy by acquiring a chain in the same sector as one of its current brands. Roark owns the burger brands Carl’s Jr., Hardee’s, and Sonic.

But a move like that “does risk relations with your current franchisees,” he said.

“We’ve seen Roark Capital do that with a fairly big degree of success,” he added. “So you can’t 100% rule that out, but it seems unlikely.”