Burger King CEO: We will be 'much bigger'

Worry about what McDonald’s is doing with fresh beef? If only Daniel Schwartz, the CEO of Restaurant Brands International, which owns Burger King, had a spare minute to give it serious thought.

Since Schwartz, 38, became CEO of Restaurant Brands (QSR), also the parent of Popeyes and Tim Horton’s, in December 2014, he’s been traveling the world to ensure things are up to snuff at the company’s more than 24,000 restaurants.

Schwartz’s freakish work pace and the long-term mindset of private-equity firm and major shareholder 3G Capital (Schwartz joined 3G Capital in 2005 and managed its private equity arm until 2010; the firm holds 43% of RBI’s voting power) has mostly paid off for Restaurant Brands. The company has focused on opening new restaurants at an aggressive pace and controlling costs. Shares have gained about 66% since Schwartz took the top job, outperforming the S&P 500’s 44% increase for the same period.

But the competition is fierce in the fast-food space. Sales growth at Burger King has slowed with rival McDonald’s (MCD) moving aggressively with delivery, digital ordering and restaurant remodels. Coffee and donut chain Tim Horton’s has seen its fair share of struggles in the past year in its home market of Canada. Meanwhile, the brand has been unable to gain a true foothold in the U.S. amid tough competition from bigger foes Dunkin’ Brands and Starbucks.

Popeyes Louisiana Kitchen, which Restaurant Brands bought in 2017 for $1.8 billion, has been a recent success story amid a push into delivery and the release of new products.

Despite the challenges in two of its key businesses, Schwartz – a onetime M&A analyst at Credit Suisse – hasn’t lost Wall Street’s support. Of the 21 analysts who cover Restaurant Brands, 77% rate the stock a buy, according to Bloomberg data. The company received two bullish initiations within the last month (from Baird and KeyBank).

Restaurant Brands is a “compelling buying opportunity,” UBS analyst Dennis Geiger wrote in a recent note. It makes sense: Restaurant Brands is opening a new location about every six hours around the world, equating to roughly 1,300 new sites this year. The idea is: more locations, more sales, greater profits.

Yahoo Finance spoke with Schwartz about what else he has planned for Restaurant Brands. What follows is an edited and condensed version of the interview.

Yahoo Finance: How big can Burger King still be?

Schwartz: Much bigger. Today, the Burger King system sales is $20 billion. But if you look at the brand’s presence in many countries, we are still at the beginnings. Even in the U.S., we are opening more Burger King’s here than any other quick-service restaurant brand.

If you look at what we did with Burger King, and when we do that with Popeye’s and Tim Horton’s, it will be even more growth. What’s nice is how we are structured. In addition to a nice team we get to collaborate with, we have incredible partners all around the world.

Take France, I don’t think we as a corporation could have created what our partners have created in France over the past few years. In 2013, we didn’t have a single restaurant in France, but today we have a couple hundred and by next year, we think we will cross $1 billion in sales from France.

Yahoo Finance: Does what McDonald’s is doing with fresh beef, delivery and mobile ordering keep you up at night?

Schwartz: We obviously look at everything going on in the industry. But at the end of the day, we look at how our guests are behaving. If you look at delivery, we were early on delivery at Burger King back in 2012. And it’s rare that we are early on something, by the way.

In China and Turkey, a good percentage of our business is delivery. It’s our responsibility to be where our guests want to be. So we are improving our food across all three brands and coming up with great marketing initiatives. It’s incredibly creative stuff.

Yahoo Finance: Where does the Burger King brand fit in the future of fast food?

Schwartz: When you look at the size of our brand today, if we continue the great marketing work we are doing and we continue to improve food quality and launch new products people love, I think you will see a lot more people going to Burger King. I don’t know what the size will be, but we will be a bigger play in an industry that will continue to grow.

Yahoo Finance: There has been a shake-out in the restaurant space in terms of stock prices. Anything catching your eye?

Schwartz: We do not do much M&A. People like to think we are big on M&A, but in the scheme of things we have only done three in eight years. We have three iconic brands and we have said that if someday we can have another iconic brand that can grow a whole lot that would be great, and we would inspire to do more.

But we have so much on our plate with just the three brands. We feel like we have barely scratched the surface with these brands, especially with the recent acquisitions of Tim Horton’s and Popeye’s.

Yahoo Finance: Don’t you feel like you are missing out on deals? Look what Inspire Brands has been up to, they just bought Sonic.

Schwartz: No. We think we can grow the size of our business organically for many, many years to come. These things kind of move in waves and in the long run you do what you think is right.

Yahoo Finance: Tim Horton’s performance has been a bit sporadic since you bought the chain. How are you trying to fix this?

Schwartz: We are in a much better place today than even three or four months ago. We are in an incredibly better position than we were in nine months ago. We have made significant changes to the team, and the team and the franchisees have put together a strong plan the system has bought into. So the results are getting better.

We are focused on improving the product, the restaurant experience and communications. We have launched breakfast anytime, we are about to launch a kid’s program. We are testing different things on loyalty. If you look at the news on the brand the last few months, it has been less bad.

Yahoo Finance: Does Tim Horton’s have any chance of cracking the U.S. when Dunkin’ and Starbucks are so dominant?

Schwartz: We didn’t make as much progress in the past few years as we would have liked to, so we are adjusting the plans. We are still optimistic about the long-term potential for the brand in the U.S.

Yahoo Finance: Why not just keep Tim Horton’s in Canada and go out and buy Dunkin’ to gain a strong place in the U.S. coffee market?

Schwartz: Tim Horton’s is more than just Canada. We already have a U.S. presence around 700 locations, with the potential to be even bigger. We have taken Tim Horton’s global, opening in the Philippines, U.K., Mexico, Spain and we have announced openings in China.

So we have big ambitions for the brand.

Yahoo Finance: Is Popeyes Louisiana Kitchen turning around? It was struggling when you bought the chain.

Schwartz: Popeyes is really special. The chicken category is growing a ton. Just in the short while we have owned it, we have accelerated the growth of the brand in the U.S. We have signed agreements to open Popeyes in the Philippines and in Brazil.

Yahoo Finance: Popeyes is now doing delivery?

Schwartz: Delivery has been good for us at Popeyes. Chicken travels really well.

Yahoo Finance: Are you making a delivery push more broadly?

Schwartz: Several thousand Burger Kings do delivery in the U.S. At Popeyes, we are rolling out delivery. We are piloting delivery at Tim Horton’s.

Yahoo Finance: You are still pretty young at 38, what else do you want to do in your career over the next 25 years?

Schwartz: I don’t know. If you ask me a decade ago what I would be doing now I would have been 100% wrong. I don’t feel like we are near complete with what we are working on here. It’s hard to see myself doing anything differently. We feel like a startup here, it feels like we are just getting started.

Yahoo Finance: What’s the difference between 38-year-old CEO Daniel Schwartz and 34-year-old CEO Daniel Schwartz, when you started at Restaurant Brands?

Schwartz: Just the appreciation for the people piece of the business, which is why I am saying I still have a lot to learn. Anytime something is not moving in the right direction or moving too slowly you can always chalk it up to who is the owner of this project, is it the right person? Taking action on people and making sure people are in the right places is something I have improved on.

Yahoo Finance: What do you tell someone who is 21 and wants to be the CEO of a publicly traded company by 34 like you?

Schwartz: Hard work and luck. You have to work hard to put yourself in the position to get lucky. Do good work, and at the right time the right opportunity will come up. Sometimes it takes longer for some people.

Brian Sozzi is an editor-at-large at Yahoo Finance. Follow him on Twitter @BrianSozzi

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