José Cil’s great-aunt was a seamstress. One of his well-known lines was: “measure twice and cut once”. The CEO of Restaurant Brands International recently shared this anecdote with franchisees. Calls had started pouring in to Cil and the company’s international president, David Shear. The operators wanted a piece of Firehouse Subs.
In mid-November, the owner of Burger King, Tim Hortons and Popeyes announced that it had agreed to acquire the 1,200-unit sandwich chain for $1 billion in an all-cash transaction. On the face of it, the move, which ended December, added a puzzle piece so often coveted by restaurant conglomerates. That gave RBI an emerging, growth-ready player in the $30 billion U.S. quick-serve sandwich category to join strongholds in chicken, burgers and drinks. For its part, Firehouse approached the M&A table after tripling its number of units since 2010. Founded by brothers and former firefighters Chris and Robin Sorensen, it was privately held since the first unit in Jacksonville, Florida, until she joined RBI.
The brand’s history has not been marked by leadership setbacks and upheavals over the decades; he was simply ready for his next act. And RBI franchisees were eager to add a chain whose national same-store sales climbed 21% in 2021 and 20.6% year-over-year. Firehouse’s record average unit volumes of $900,000 drove system-wide sales north of $1.1 billion, which reached $872 million in 2020. Twenty-seven percent of business traveled through digital channels. AUVs in the first quarter of 2022 increased further to $920,000 year-over-year.
But Cil’s message was clear. While the Firehouse lead is undeniable, there are more opportunities than a first glance might reveal.
“We spend time measuring and making sure we have the right place to cut just once,” Cil explains.
The deal between RBI and Firehouse began on common ground. Firehouse CEO Don Fox spent 23 years at Burger King, from 1980 to 2003. Three of those – 2000–2003 – overlapped with Cil. Although they didn’t cross paths (Fox was in field operations and Cil in legal), their shared history offered a starting point.
About six weeks before the deal was announced, Fox and Cil met. Fox says there was “an instant chemistry and energy” that frankly wouldn’t have been possible with anyone else.
Cil, by then, knew Firehouse better as a consumer. In the years he traveled to Florida to visit the pads of Burger King, and the 10 months he worked as a regional general manager for Walmart, he often found himself eating at the online locations that have sparked the growth of Firehouse.
“And that’s how I got to know the brand and fell in love with it,” Cil says, “because the product was great and the service was great, and that resonated with me.”
Cil and Fox simply had a lot to talk about.
But back to that white space
One of the defining features of RBI since its inception following an $11 billion takeover of Tim Hortons in 2014, has been the expansion of net units. Burger King was growing about 170 units a year when 3G Capital spent $1.56 billion and took control 11 years ago. Before COVID, Burger King pushed about 1,000 locations every turn of the schedule. Popeyes opened 216 restaurants the year before RBI intervened and there were 2,725 stores as of December 31, 2016. Today there are around 3,851 worldwide and Popeyes, in 2021, had the most large number of openings since RBI bought it in 2017 – unit growth of 7.4%, representing a network of 254 stores. The chain, for which RBI paid $1.8 billion, expects to eclipse the 200 figure again this year.
Firehouse currently operates in three countries and territories. Burger King has over 120, Tim Hortons over 10 and Popeyes 30.
There are 47 Firehouse Subs in Canada – the first one opened in 2015 in Ontario – and the AUVs, in general, perform above the company’s system average.
Just for context, Subway has nearly 3,000 stores in this market. RBI? More than 4,500 across its three brands. Cil says 80 per cent of Canadians visit the more than 3,900 Tim Hortons locations each month.
If you take a top-level view, RBI’s footprint sits close to 29,747 restaurants and about 18,000 operate outside of the United States. By November, it had more than 500 outposts in China (1,620), Brazil (928), Spain (897) and Russia. (792), Germany (744) and United Kingdom (538); and more than 400 in Mexico (450), Australia (443), South Korea (425) and France (416).
Firehouse has no restaurants in any of these locations. There are 52 international fire stations, if you count Puerto Rico. And to kick off an even more alluring point, outside of Spain, where there are only 50, a sandwich chain not named Firehouse boasts at least 384 locations in each. Australia (1,221), the United Kingdom (2,211) and Brazil (1,641) have large bases.
The American image is not to be neglected either. Subway has shrunk by 3,651 stores since 2019. Large national sandwich market at the end of 2021: Subway, 21,147 locations; Arby’s, 3,409; Jimmy John’s, 2,657; Jersey Mike’s, 2,100; Panera, 2,080; fire station, 1,044; McAlister’s 505.
“You have this underlying mechanism and culture of growth that will then trickle down to our brand,” Fox says. “If I’m a potential franchisee, I only think about the power and level of experience behind it. …I’ve been in the industry for many years and I’m pretty well known, but if you think about the ownership of Firehouse, it’s not in and of itself. So that really changes the dynamic a bit, I think, for any potential franchisee looking to invest.