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Burger King is now its own biggest operator, for now

The fast-food chain has completed its acquisition of Carrols Restaurant Group, its largest franchisee. The deal will help the brand speed remodels and change its model of franchisee ownership.
Burger King
Burger King will remodel 600 of Carrols' 1,000 locations. | Photo courtesy of Burger King.

Burger King on Thursday said it completed its acquisition of Carrols Restaurant Group, the publicly traded franchisee that operates one out of every seven of the chain’s units in the U.S.

In the process, Burger King jump-started efforts to remake its franchising strategy. Assuming all goes to plan, by the time the company is done it will have a lot more locations under the brand’s latest image. And the structure of its franchisees will be completely different.

The $1 billion deal in the short-term makes the Miami-based chain the largest operator of its own restaurants, upending a decade-long decision to focus largely on franchising. Yet for the company, the move has deeper meaning.

By acquiring those restaurants, Burger King will be able to more directly speed the remodeling of a large swath of locations. The company will spruce up 600 restaurants in the coming years.

That will assist in the brand’s effort to make more of its restaurants look a lot nicer. In the view of Executive Chairman Patrick Doyle, ensuring that its restaurants look better will give the brand a better reputation in the eyes of more consumers.

“Going to a great-looking Burger King, but driving past another one that doesn’t look great, is not ideal,” he told analysts last month.

When those remodels are complete, Burger King plans to sell those restaurants to other franchisees. But it will not sell them in one fell swoop.

The company has been clear over the past 18 months that smaller franchisees will be better over the long term.

Burger King plans to refranchise these restaurants in smaller chunks, no more than 50 locations per time.

That move alone will reshape the company’s franchising strategy. Once dominated by large-scale operators, Burger King is moving toward smaller franchisees. The goal, executives have said, is to ensure operators are in their restaurants more often.

With the Carrols acquisition, coupled with investments in marketing and incentives to encourage operators to remodel, RBI will spend more than $2 billion total to overhaul Burger King in the U.S.

“I shared with you all in New York a few months ago that you shouldn’t question our commitment to getting the brand right in the U.S.,” Doyle said.

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