Big fast food chains, including McDonald’s and KFC owner Yum Brands, have been aggressively expanding their international operations to counter slowing growth in the U.S.

Toronto-based Restaurant Brands, the owner of Burger King, Tim Hortons and Popeyes Louisiana Kitchen, has been looking to boost its businesses by deploying various initiatives that range from app-based ordering to loyalty programs for its customers.

The company, which held its first-ever investor day on Wednesday, did not immediately respond to a request for investment details of its expansion program.

Restaurant Brands, which has been hit by a slowdown at its three iconic brands, hopes to grow its coffee, burger and chicken markets by five to six per cent annually over the next five years.

Last month, the company reported a 0.6 per cent drop in comparable sales at Tim Hortons for the quarter ended March 31, while same-store sales at Burger King grew 2.2 per cent, down from 3.8 per cent a year earlier.

The announcement of the ambitious expansion plan comes just months after Jose Cil took the helm at the company, after having headed its Burger King unit.

Rival Yum Brands opened 372 new KFC outlets in 46 countries in the first quarter ended March, while McDonald’s plans on opening roughly 1,200 restaurants worldwide this year.

Tim Hortons, Restaurant Brands’ coffee and doughnut chain, also said it would introduce three new sandwiches using the vegan burger maker Beyond Meat’s plant-based sausages as demand for vegan alternatives grows in the country.

Shares of Restaurant Brands, which have risen nearly 26 per cent this year, were up marginally at $89.67 on the TSX late Friday afternoon.

— Reporting for Reuters by Shradha Singh in Bangalore.

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The deal, which will likely value Popeyes at more than US$1.7 billion, is a bet by Oakville, Ont.-based Restaurant Brands that it can use its international reach to introduce Popeyes’ Louisiana-style fried chicken and buttermilk biscuits to more diners globally.

It also represents a small consolation prize for Restaurant Brands shareholder 3G Capital, which lost a US$143 billion bid this week to merge its biggest holding, food conglomerate Kraft Heinz, with consumer products firm Unilever.

A deal could be announced as early as this week, the people said, asking not to be identified because the negotiations are confidential. Restaurant Brands did not respond immediately to a request for comment, while Popeyes decline to comment.

Popeyes, whose fans include pop singer Beyonce, began 45 years ago as a Southern-fried “Chicken on the Run” restaurant in a New Orleans suburb. It has since expanded to more than 2,000 restaurants, of which 1,600 are in the U.S.

In Canada, Popeyes operates about 100 outlets, nearly all in Ontario, and began expanding last fall into the Edmonton and Calgary markets.

The company has benefited from strong customer loyalty, as well as from a restaurant refurbishment program.

Chicken accounts for about 10 per cent of the fast-food industry, according to data service IBISWorld, and Popeyes’ market share is growing. The largest brands in the sector include privately held Chick-fil-A and Yum! Brands’ KFC.

Private equity firm 3G Capital, which is controlled by Brazilian billionaire Jorge Paulo Lemann, owns about 43 per cent of the voting shares in Restaurant Brands. 3G Capital has made a name by acquiring major U.S. consumer companies including Kraft Heinz.

Restaurant Brands was formed in 2014, when 3G Capital-backed Burger King acquired Canadian coffee and doughnut chain Tim Hortons Inc for US$11 billion.

3G Capital’s long-time partner, Warren Buffett’s Berkshire Hathaway, committed US$3 billion of preferred equity to finance that deal.

— Reporting for Reuters by Lauren Hirsch and Greg Roumeliotis.

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The company’s U.S.-listed shares, which had risen about 26 per cent this year up to Friday’s close, fell as much as three per cent despite a better-than-expected third-quarter profit.

Total comparable sales at Burger King rose 1.7 per cent in the quarter ended Sept. 30, far less than the 6.2 per cent rise a year earlier. Comparable sales in the U.S. and Canada fell 0.5 per cent.

McDonald’s Corp. raised expectations across the fast-food industry last week after posting a better-than-expected 1.3 per cent rise in U.S. restaurants.

“In light of McDonald’s more robust numbers, it is disappointing that Burger King did not push into positive territory,” Neil Saunders, CEO of retail research firm Conlumino, wrote in a note.

U.S. burger chains, including McDonald’s, Burger King and Wendy’s, are battling intense competition from upstart chains and meal-kit sellers.

The sector is also under pressure from a drop in grocery prices, a trend that is encouraging more people to eat at home.

Burger King introduced new menu items such as Whopperrito, a burger-burrito mash-up, and Cheetos Chicken Fries, but the launches failed to attract more customers.

“Burger King has more work to do to increase its appeal – including focusing on core lines and the overall restaurant experience,” Saunders wrote.

Total comparable sales at Tim Hortons, which operates mainly in Canada, rose two per cent in the third quarter, compared with a growth of 5.3 per cent last year, when new lunchtime offers boosted growth.

Restaurant Brands’ net profit attributable to shareholders rose to $86.3 million, or 36 cents per share, from $49.6 million, or 24 cents per share, a year earlier (all figures US$).

Total costs and expenses fell three per cent to $655.2 million.

Excluding items, the company earned 43 cents per share, beating the analysts’ average estimate of 40 cents, according to Thomson Reuters I/B/E/S.

Stephens analyst Will Slabaugh said the quarter’s performance was “sufficient.”

“QSR remains one of the few restaurants where investors can easily draw a multi-year path to margin improvement and earnings upside.”

Oakville, Ont.-based Restaurant Brands’ revenue rose 5.5 per cent to $1.08 billion, beating analysts’ estimate of $1.06 billion.

The company raised its quarterly dividend to 17 cents per share from 16 cents.

U.S.-listed shares of Restaurant Brands were down 2.1 per cent at $46.01 in early trading. The stock was down 1.96 per cent at C$61.38 in Toronto.

— Reporting for Reuters by Anet Josline Pinto in Bangalore.

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Most of Restaurant Brands outlets are in the U.S. and Canada. But the company has been opening new restaurants in France, Brazil, Russia and India, following its peers such as Starbucks, Krispy Kreme, McDonald’s and Yum Brands.

Oakville, Ont.-based Restaurant Brands said China, where it has a relatively smaller presence than its peers, is one of its fastest growing markets.

Burger King opened in India last year and the company may launch its coffee and doughnut chain Tim Hortons in the country, chief financial officer Joshua Kobza told Reuters.

Starbucks, Krispy Kreme and Dunkin’ Donuts have been expanding in the fast-growing India market, while Cafe Coffee Day, the country’s biggest coffee chain, is going public.

Breakfast demand

Tim Hortons’ comparable sales increased 5.3 per cent in the third quarter, helped by the launch of new breakfast items, lunch wraps and continued demand for beverages.

Breakfast is the only U.S. restaurant meal time seeing an uptick in customer visits and Burger King was the No. 4 choice for “Breakfastarians”, according to recent survey.

Burger King’s comparable sales increased 6.2 per cent, helped by new menu items such as Fiery Chicken Fries and the Extra Long Jalapeño Cheeseburger. Burger King opened 141 new restaurants during the three months ended Sept. 30.

The company, posting third-quarter results for the first time, said total operating costs and expenses declined about nine per cent to $675.7 million (all figures US$).

Net profit attributable to shareholders soared to $49.6 million, or 24 cents per share, in the third quarter, from $9.6 million, or five cents per share, in the second quarter.

On an adjusted basis, Restaurant Brands earned 34 cents per share, beating analysts average estimate of 28 cents per share, according to Thomson Reuters I/B/E/S.

The company’s quarterly revenue fell two per cent to $1.02 billion, slightly missing analysts’ estimate of $1.04 billion.

Restaurant Brands’ stock had risen a little more than 10 per cent this year through Monday.

— Reporting for Reuters by Anet Josline Pinto, Sneha Banerjee and Manish Parashar in Bangalore.

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The company’s stock rose more than three per cent in early trading but later pared gains.

U.S. chain Burger King bought Tim Hortons for $12.64 billion in August, creating the world’s third-largest fast-food restaurant group. The two chains are managed as separate brands under parent Restaurant Brands.

Tim Hortons, which had struggled with its U.S. expansion in previous years, is still looking to carve out new U.S. and global markets, Restaurant Brands said.

“There’s no shortage of interest or partners around the world in… expanding Tim’s,” CEO Daniel Schwartz told analysts in a conference call.

“We have big goals for Tim Hortons both here and the U.S. and internationally, and we look forward to talking more about it in the coming quarters.”

Stores at Tim Hortons open for 13 months or longer rose 5.3 per cent during the quarter, the company said, driven by its dark roast coffee and crispy chicken club sandwiches as well as its new Philly steak and cheese panini.

This was Tim’s best quarterly comparable store sales in three years.

At Burger King, it rose 4.6 per cent, the best performance in nearly seven years. Sales were helped in part by the chain’s “2 for $5” promotion and its spicy BLT whopper sandwich. Better U.S. weather compared to a year ago also drew more customers, executives said.

System-wide sales rose 8.1 per cent at Tim Hortons and 9.6 per cent at Burger King, on a constant currency basis.

Restaurant Brands, which has more than $1 billion in cash, said it was looking to pay down some of its debt in the coming quarters.

The company posted a net loss attributable to shareholders of $8.1 million for the three months ended March 31, compared with a loss of $514.2 million in the fourth quarter.

On an adjusted basis, the company reported a profit of 18 cents per share. Quarterly revenue more than doubled to $932 million from $416.3 million in the fourth quarter.

Shares have soared some 50 per cent in Toronto since listing in December and was trading at $51.58 around noon.

— Reporting for Reuters by Solarina Ho in Toronto and Anet Josline Pinto in Bangalore.

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