Restaurant Brands CEO on inflation: ‘There is pressure in the consumer’

Restaurant Brands CEO Jose Cil joins Yahoo Finance Live to discuss earnings, restaurant growth, consumer spending amid inflation, and the outlook for value deals.

Video Transcript

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BRIAN SOZZI: Checking in on the King, the Burger King that is. Parent company Restaurant Brands saw global same store sales climb 9%, led by a 10% rise at Burger King and strong international growth. Restaurant Brands CEO Jose Cil is fresh with us off his earnings call. Jose, Happy National Sandwich day to you, my friend.

We were talking earlier on in the show why a lot of companies like yours, the burger players, are doing better than the pizza guys. Why do you think that's the case?

JOSE CIL: Well, Brian, thanks for having me. Great to be here, especially on National Sandwich Day, also on our earnings day. By the way, we have a Popeye's buy one, get one free chicken sandwich during this important national holiday. Look, we're excited obviously with the momentum in our brands in our business. And we saw some really strong performance in the quarter that we shared earlier in earnings.

I think our brands are well positioned in all moments in time, right? We have great food, great beverages at Burger King, Tim's, Popeyes, and Firehouse. And we provide great experiences. Digital's become a bigger part of our business. We have various service modes, delivery, drive-through, dine in, curbside in some restaurants. And we do so with our digital capabilities at a great value. So it's a compelling offer. It's why we grow on frequency.

And it's kind of the core element of our business model that's so exciting. And we do so in good times and especially in certainly during challenging times. So I think we're well positioned to kind of benefit from tailwinds in difficult moments because of the business model, the great franchisees that we have, and the amazing food and beverages that we serve in our brands.

- Even as your customer base might be looking for value within this kind of era, this environment right now, where do you still need to, or have you had to pass through price increases to customers that are looking for not just a good meal but also a good price steal, if you will?

JOSE CIL: Look, I think you have to start with the acknowledgment that consumers are generally value driven. Value for money has always been a key driver of decision making in our category and the quick service or limited service restaurant space. That doesn't mean discounting necessarily. But they're always looking for good value, which means they're looking for taste, quality, sometimes quantity, and overall experience for what they pay.

And I think we're very well positioned, as I mentioned earlier, to deliver consistently on those expectations from consumers. Today, consumers-- and it's slightly different in the US and Canada, Europe, and elsewhere. But broadly speaking, there's a ton of concern around the macro, right? Inflation, food at home, grocery prices are kind of outpacing inflation away from home in the food category.

Gas prices are up. Energy prices, especially in Europe, are quite steeply increasing. We haven't seen any trade down or trade out of our category. But we know that there is pressure in the consumer. And our business does well-- our brands do well when we serve great tasting products, great beverages at a good price, even if we're having to raise prices to address some inflation.

And what we do on that is that we make sure we understand CPI. And we know for the US, it's been around 8%. For Canada, it's just under 7% and slowing down a bit. And we look at food away from home and at home inflation we look at a number of different data points. We talk to consumers, and then take price to address input cost. But we do so in a way that's measured to ensure that we don't chase away are very important customers that are the key to our success alongside our franchisees.

BRIAN SOZZI: Jose, just given those pressures on consumers, do you need a six item dollar menu?

JOSE CIL: Well, look, I think having value and having a balanced menu is always important, Brian. 1 have a core offering, which is fundamental to success. That's why people come to Burger King, Popeyes, Tim's, and Firehouse. They know those core items, and they're there consistently for those core items. We have premium offerings, which allow for indulgence and for those treats from time to time. And then we have value as an everyday proposition in each of our brands.

We've had dollar menus or kind of entry level a la carte menus. I don't know if dollar is any longer the relevant price point. But having an everyday entry level price point product that consumers can go to a la carte and/or to bundle, I think is an important aspect of being a broad-based and very thoughtful restaurant business. And that's something that we continue to explore and look at. Our teams are working on quality and product offerings at the right price that allows for customers to come in more frequently and enjoy our brands day in and day out.

- There's 2 and 1/2% net restaurant growth. When you think about the franchisees, what are you hearing from franchisees right now, and even potential franchisees in different markets and how they're potentially looking to get into business with Restaurant Brands?

JOSE CIL: Yeah, we have a lot of excitement around growth in our business. And fundamentally, Restaurant Brands and our four amazing, iconic brands are growth brands and growth businesses. We've got a lot of room for growth internationally for all four of our brands. Even Burger King that has North of 12,000 restaurants in international markets, we've got a lot of room for growth. We think domestically with Firehouse with Popeyes, Tim's in the US is beginning to rev up their engines from a growth standpoint. And obviously, Firehouse has a huge runway domestically as well.

Franchisees are excited. They're obviously concerned in the near term with the impacts that we're seeing in inflation, commodity costs. That's all-- that translates not only to food costs, but also to construction cost. There's always a challenge around getting permitting and the process of getting approvals to move forward with new restaurant sites. But we have a healthy pipeline. We have a lot of interest from existing franchisees as well as new franchisees to develop our brands domestically and internationally. And we continue to work with our partners to move those pipelines along and continue to grow our businesses. And over time, we think we're going-- we're on our way to our 40,000 restaurant goal with Restaurant Brands over the next several years.

BRIAN SOZZI: Jose, I have 10 seconds left, and this is National Sandwich day. Subway has been up and they've been out there touting their sales gains. Any smack talk for them?

JOSE CIL: Look, our brands are awesome. We have Firehouse, Burger King, Tim's, and Popeyes. I think they're the best in each of their categories in burger, chicken, coffee, and sandwich. And I'll let the customers decide who the best brands are. My focus is building a great team, working with our franchisees, and delivering profitable opportunities for growth across our four brands.

BRIAN SOZZI: You're too nice, Jose. You're too nice.

JOSE CIL: [LAUGHS]

BRIAN SOZZI: Just too nice. Just too nice.

- Jose, as a customer of Popeyes, I can say on this Sandwich Day that, that chicken sandwich is family. Thank you so much for joining us here on the show. Restaurant Brands International-- Yeah.

JOSE CIL: I was just going to say make sure you try the blackened chicken sandwich, which is coming out on national TV on the 7th of November. Awesome sandwich, really cool experience. It's a flavor of New Orleans all around the country.

- All right. Sozzi put it in his notes, so we're going to have to do it. We're going to do it. Restaurant Brands International CEO, Jose Cil. Jose, thanks so much as always.

JOSE CIL: Thanks a lot.