Shares of Restaurant Brands International (TSX: QSR) have been making progress so far this year, gaining close to 5% year to date, outpacing the S&P, but still trading close to 10% below the all-time highs hit at the start of 2024. Undoubtedly, the fast food industry has been in a rather challenging spot in recent years due to higher costs and food inflation. For the most part, though, Restaurant Brands has done a relatively decent job of managing through such costs to provide more value for its customers.
As the company looks to invest in its brands, most notably Burger King, Tim Hortons, and Popeye’s Louisiana Kitchen, I think the right pieces are in place for a breakout. Now, the fast-food industry is fiercely competitive, but with a careful plan and a more recent track record of execution, I think the company has what it takes to scale and take share internationally in an industry climate that might be harsher for rivals.
At the firm’s latest Investor Day, there were a number of moves outlined by management as potential levers to power that “growth algorithm.” If you’re in the wait-and-see camp, though, you’re definitely not alone. Restaurant Brands has had a number of years to get on the high-growth track. And the lack of results has made for a rather unrewarding stock. Either way, I don’t think now is a good time to give up on QSR stock, especially after a decent quarter and signs that the firm can actually change for the better in an environment that might be getting less rocky.
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Restaurant Brands has a plan to grow, and it’s working
Whether we’re talking about the next phase of the plan to bring out the best in Burger King (the Reclaim the Flame initiative) or the plan over at Tim Hortons, it’s apparent that modernization, menu refresh, and driving loyalty are key to growth. Personally, I think modernization efforts, while expensive, could be key to fuelling next-level growth. Also, menu innovation and refreshes, I think, are an easy way to draw rather large crowds.
Who doesn’t want to try a new burger before anyone else, especially if it’s only going to be around for a limited time?
That sense of FOMO can really apply in the fast-food world, especially given the tasty experiments that the broad fast-food scene has been more open with in recent years to get customers coming back despite the higher prices. Perhaps the biggest driver over at Burger King, I think, lies in its new-and-improved Whopper.
It has a new bun, better mayo, and new packaging, among other changes that seem to have been well-received by customers. Undoubtedly, Burger King seems to be on the right track as it looks to up the quality factor and reinvent the biggest item on its menu. In any case, Restaurant Brands seems to have gotten the message that a better in-store experience and improved food are key to growth.
The bottom line
As the firm expands its footprint, I think the drivers are there for a breakout in the stock. Add the Tim Hortons U.S. expansion into the equation, as well as food items meant for the afternoon crowd, and I must say I’m a huge fan of where the Canadian icon is headed and the value to be had on shares at under $100. With a 3.6% dividend yield, QSR investors will be paid quite well to wait for the much-anticipated breakout moment.
