Yahoo Finance Tim Hortons' parent company names new CEO amid franchise profitability slump
Joshua Kobza replaces Jose Cil, who first stepped into the role in January 2019
The parent company of Tim Hortons has named a new chief executive officer, as the fast food chain seeks to accelerate growth amid a slump in franchise profitability.
Restaurant Brands International (QSR)(QSR.TO) – which operates the Tim Hortons, Burger King, Popeyes and Firehouse Subs brands – announced its chief operating officer Joshua Kobza will be taking over as CEO on March 1. Kobza replaces current CEO Jose Cil, who first stepped into the role in January 2019. Cil will stay on as an advisor for one year to assist in the transition.
The leadership change comes three months after RBI's appointment of industry veteran Patrick Doyle to the role of executive chairman. Doyle, who spearheaded a turnaround at Domino's Pizza when he was CEO of the chain between 2010 and 2018, said on Tuesday that Kobza's appointment "is about setting ourselves up for an accelerated pace of growth for the next five to ten years."
"The board of directors has been disciplined about succession planning. We have an exceptional leader with all the relevant experience we need here in Josh and he's ready to drive what we believe will be a new era of growth for the company," Doyle said on a conference call with analysts following the release of fourth-quarter results.
"We built ambitious plans that we believe in. We have talented teams. The job now is to accelerate the speed and quality of execution, focusing on some big bets and deliver exceptional results."
RBI saw sales increase in the three-month period ending Dec. 31, with total sales rising 9 per cent in the quarter while net income climbed 28 per cent. The company, which reports earnings in U.S. dollars, says its net profit hit $336 million in the quarter, or 74 cents per diluted share, compared to $262 million during the same time last year, or 57 cents per diluted share. Total revenue reached $1.69 billion in the quarter.
Tim Hortons' comparable sales, a key metric in the retail industry that excludes recently opened locations, increased by nearly 9 per cent compared to 2019 before the COVID-19 pandemic struck. Comparable sales at what RBI calls "super urban locations" – stores located in downtown cores – increased 2 per cent compared to 2019, the first positive quarterly result since the pandemic brought downtown traffic to a halt.
While sales were up at RBI this year, Doyle noted on the conference call that franchise profitability is down from the last time the company disclosed the figures at its 2019 Investor Day. Tim Hortons franchisees saw earnings before interest, taxes, depreciation, and amortization (EBITDA) reach an average of $220,000 per location, down from $320,000 in 2018. Burger King's EBITDA was $140,000, down from $180,000 in 2018, while Popeyes EBITDA was $210,000, down from $230,000.
"The reasons are well-known to most of you: recovering traffic post-pandemic, all-time high commodity cost increases, generationally high inflation and so on," Doyle said, adding that the long-term growth as a company is tied to the growth of franchisee profitability.
"You'll see us do our part in menu innovation marketing, restaurant design, technology and digital and we'll work closely with franchisees who need to do their own part to improve their profitability, particularly delivering excellent and consistent execution and a positive team member and guest environment in their restaurants."
RBI has previously had a tumultuous relationship with some of its franchisees. The company settled two class-action lawsuits with the Great White North Franchisee Association, a group initially formed in 2017 to represent Tim Hortons franchise owners "in the face of new corporate ownership evolution of our business model." In 2020, the group rebranded and is now known as the Alliance of Canadian Franchisees.
RBI will host a meeting with Doyle next Wednesday to provide an update on his first 100 days at the company.
Shares of RBI were down nearly 3 per cent on the Toronto Stock Exchange as at 3:30 p.m. ET on Tuesday, trading at $88.74 per share.
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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