Restaurant Brands International completes its purchase of Firehouse Subs

The $1 billion deal gives the owner of Burger King, Tim Hortons and Popeyes its fourth brand. RBI is using a combination of cash and new debt to fund the purchase.
RBI-Firehouse Subs
Photograph: Shutterstock

Restaurant Brands International on Wednesday said that has completed its $1 billion acquisition of Firehouse Subs.

The deal gives the Toronto-based fast-food chain operator its fourth brand, to go along with Burger King, Tim Hortons and Popeyes.

RBI will use a combination of cash on hand and funds from an increase in borrowing under its existing loan, the company said.

In dollar terms, RBI’s acquisition of Firehouse is the year’s biggest in the restaurant industry—though one that is considerably smaller than each of its previous two deals. Still, it gives the company a consistently growing sandwich chain and one that could be expanded quickly in international markets.

It is also one of the more valuable deals of the year when calculated as a multiple of the company’s earnings. RBI is paying a multiple of 20 times earnings before interest, taxes, depreciation and amortization, or EBITDA.

By contrast, Jack in the Box is acquiring Del Taco—a similar size chain and one with drive-thrus—for a multiple of less than half that.

Still, privately-held growth chains that have demonstrated strength during the pandemic can be expensive. RBI has paid such multiples for its acquisitions before, notably Popeyes, which it acquired at a multiple of 21. Acquirers of growth concepts must pay enough to convince the owners to forgo the money they would make in the future by keeping ownership.

“They’ve done a great job with the brand,” RBI CEO Jose Cil said in an interview after the deal was announced. “In the last 11 years they’ve tripled their restaurant count and quadrupled systemwide sales while growing their digital presence.”

“The business volumes in Canada,” he added, “they exceed the U.S. volumes. They’re already good and compelling.”

For such a price to work for RBI, however, and satisfy the company’s investors, Firehouse will need to demonstrate growth.

Firehouse will keep its Jacksonville, Fla.-based headquarters and its CEO, Don Fox, will remain with the brand.

Firehouse has about 1,200 U.S. locations. It is the fourth biggest sub sandwich chain in the U.S., but has plenty of room to grow domestically. Yet much of its growth post-RBI acquisition will come in international markets.

RBI has the talent on supply chain and franchise sales that would take Firehouse years to acquire on its own.

“This is a great accelerant for us,” Fox said last month. “We have a lot of white space to develop in the U.S. But internationally, if not for this partnership, international development would be much farther down the road.”

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