Burger King Worldwide Inc
Tiger Global reduces position in Hertz Global Holdings
Hertz Global Holdings owes in excess of $700,000 in unpaid taxes as well as interest and penalties.
Tiger Global Management exits position in Burger King Worldwide
Tiger Global Management has sold shares worth over $220 million in Burger King Worldwide, which represented 2.93% of the fund’s total portfolio in the third quarter.
Highlights of Tiger Global Management’s 4Q14 13F holdings
Tiger Global Management is a US-based hedge fund founded in 2001 that invests in public equity as well as fixed income markets.
Analyzing Texas Roadhouse’s Key Operating Costs
Operating costs include rent, utilities, advertising, property tax, repairs and maintenance, credit card fees, and supplies. These costs have been falling.
Speculation that Ackman is urging a McDonald’s REIT spinoff
Even if a McDonald’s REIT spinoff is not in the cards, an activist investor who might push for a restructuring could be the catalyst McDonald’s needs.
Shares up for McDonald’s stock on rumors of Ackman’s interest
Ackman’s fund owned a stake in McDonald’s from 2005 to 2007. He urged McDonald’s to restructure itself. McDonald’s stock almost doubled during that time.
Limited risk of Herbalife stock price increase, Ackman believes
Ackman believes there’s little chance of an Herbalife stock price increase and said Herbalife’s stock price is down almost 50%.
Starbucks Adds 1,600 Units in 2014
In the fiscal year ending in 2014, SBUX added 1,599 units. This was 8% unit growth year-over-year, or YoY. The most units were added in the China and Asia-Pacific, or CAP, market.
Starbucks Gets Help From Its Rewards Program
One of the ways a customer can become a My Starbucks Rewards member is by using the My Starbucks Rewards card. The card is available at the checkout counter.
Food Inflation On Meat Eases In November
Food inflation Food cost is one of the important operating costs for a restaurant. In the McDonald’s (MCD) overview series, we learned that food and paper costs can be as much as 34% of sales. Food inflation can cause a restaurant’s operating margins to squeeze, but a restaurant like Chipotle Mexican Grill (CMG) can adjust its […]
Six-Month Expansion Outlook Positive for Restaurant Operators
The six-month outlook for capital expenditure plans as of October 2014 was 101.8, which has been above 100 levels for the past 12 months.
Farallon Capital initiates position in Tim Hortons
Farallon Capital Management started a new position in Tim Hortons Inc. (THI) during the third quarter of 2014. The position accounted for 2.62% of the fund’s 3Q14 portfolio.
McDonald’s List Of Initiatives That Will Bring A Turnaround
McDonald’s list of initiatives includes simplifying its menu and possibly offering locally relevant menu items. This could be quite a gamble.
Downward trend: McDonald’s November Same-Store Sales
McDonald’s November same-store sales indicate a continued slide in all segments. Tensions between Russia and Ukraine are partially to blame.
Pershing Square takes on Zoetis, adds to Canadian Pacific in 3Q14
Activist hedge fund manager William Ackman’s Pershing Square Capital Holdings filed its third quarter 13F last month. The fund’s year-to-date returns as of October 31, 2014, net of fees, was 35.0%.
Tim Hortons’ year-to-date returns as of November 2014
As of November 2014, Tim Hortons’ (THI) year-to-date (or YTD) returns were 54.3%. The S&P 500 had returns of 10.9%. The restaurant industry had returns of 9.1%.
Tim Hortons faced a higher effective tax rate in 3Q14
THI had an effective tax rate of 34% in the third quarter. Its tax rate increased from 28.3% in the same quarter last year. The increase was due to the company’s favorable tax impact last year.
Why restaurants are remodeling their stores
Several restaurants are focusing on changing their restaurants’ images by remodeling their existing stores. For example, Burger King’s (BKW) already re-imaged stores have boosted sales by 10% to 15%.
The state of fast-food restaurants
Fast-food restaurants, as the name suggests, specialize in serving food they can prepare and serve quickly. The fast-food industry has reached its mature stage in the United States, and several fast-food chains are already focusing on international expansion.
What is a limited-service restaurant?
Limited-service restaurants can be classified into fast food or quick service, fast-casual restaurants, pizza restaurants, and cafés.
Pilgrim’s Pride Corporation’s three customer categories
Pilgrim’s customer base is spread across 100 countries, including the US and Mexico, which together contributed ~92% of the company’s revenues as of 2013 year-end.
Why fuel prices affect restaurants
Higher fuel costs put pressure on operating costs, and can squeeze profit margins. The demand side also takes a hit. When gas prices are high, consumers tend to economize on transit by eliminating unnecessary trips.
Rising food costs hit the restaurant industry
In September 2014, the price index for meat stood at 267.7 compared to 264.3 in August. This index has been increasing sharply since the beginning of 2014.
Restaurant industry capital expenditure trends
The six-month outlook for capital expenditures as of August 2014 was 100.7, and has been above the 100 level for the past twelve months. If this is true, the restaurant industry is on an uptrend.
Why Burger King’s revenues increased in 3Q14
BKW reported revenues of $278.9 million in the third quarter. Revenues grew 1.4% year-over-year (or YoY) from $275.1 million—compared to the same quarter last year.
Why Burger King has long-term initiatives
Management stated that Burger King is on track to change the image of 40% of its stores in the US by the end of 2015. it’s on track to achieve this target.
Why Burger King brought back Chicken Fries
During the quarter, Burger King relaunched Chicken Fries. The item was suspended in 2012. It had been replaced with other chicken items.
Why Dunkin’ Brands saw strong unit growth in 3Q14
Baskin-Robbins U.S. added six new restaurants during the quarter compared to one in the corresponding quarter a year ago. Meanwhile,it added 61 net new restaurants internationally compared to 73 over the same period a year ago.
Must-know: McDonald’s year to date performance
As of October 25, 2014, McDonald’s (MCD) year-to-date (or YTD) return was -2.8%—compared to returns of 8.3% on the S&P 500 Index and 19.3% on the casual restaurant segment.
Why McDonald’s net profit and margins declined in 3Q14
McDonald’s (MCD) reported a net income of $1.07 billion. It declined 30%—compared to $1.5 billion in 3Q13. The net profit margins were also down to 15.3%—from 20.8% in 3Q13.
Why McDonald’s took a big hit in China
China is part of the APMEA region. Same-store sales were down 22.7%. Approximately 5,000 restaurants were affected when McDonald’s suspended its meat supplier.
Why McDonald’s same-store sales declined
McDonald’s (MCD) revenues declined 4.5% YoY. Revenues in the restaurant industry are mainly driven by same-store sales and unit growth. The global same-stores sales were down to -3.3% YoY.
Why McDonald’s 3Q14 earnings were disappointing
In the third quarter earnings, McDonald’s reported a diluted EPS of $1.09. It declined by 28%—compared to an EPS of $1.52 in the same quarter last year.
Must-know: Chipotle Mexican Grill’s food costs
CMG reported $372 million in food costs in 3Q14. Food costs accounted for 34.3% of the revenue. It was an increase of 70 basis points year-over-year (or YoY).
Why Chipotle has two new concept restaurants
ShopHouse serves southeast Asian cuisine. It uses the same format as Chipotle Mexican Grill (CMG). Customers will see a resemblance in the assembly line style.
Domino’s management guidance on food costs, capex, and more
Management anticipates the effective tax rate to be in the range of 37% to 38% for the “foreseeable future.” Corporate tax rates in the U.S. are high, and force some companies to move their headquarters to countries offering lower tax rates.
Why savings rate and disposable income impact restaurants
The savings rate is the amount expressed as a percentage of disposable income that hasn’t been spent by a consumer.
Why retail food service sales are restaurant indicators
The restaurant industry is a part of the Consumer Discretionary sector. This sector does well when the economy is expanding. It doesn’t do well when the economy is contracting.
Why you should watch Yum! Brands’ stock returns over 5 years
At the end of 2013, Yum! Brands had a total debt of $2.99 billion. The debt or equity ratio is calculated as total debt over total equity.
Overview: Yum! Brands’ costs of operations
In a company-owned restaurant, Yum! Brands (YUM) keeps all the revenues. However, it also has the cost of running the restaurant. Any changes in these costs can impact operating profit margins.
Must-know: Yum! Brands’ Taco Bell business
Taco Bell opened in 1962. It’s a fast food or quick service restaurant. About 15% of Yum! Brands’ (YUM) total restaurant units were in the Taco Bell division at the end of 2013.
Why Yum! Brands’ division in China is important
Yum! Brands’ (YUM) division in China includes its business in mainland China. It’s the combined revenues from all the brands—KFC, Pizza Hut, East Dawning, and the Little Sheep.
Must-know: Yum! Brands’ segments by business models
For six months ending June 2014, China’s division reported revenue of $3 billion, or 52% of Yum! revenues. China only represents 15% of the more than 40,000 Yum! restaurant units.
Why is Yum! Brands focused on China’s market?
Yum! Brands China only had ~6,300 restaurants, or 15% of total restaurant units, as of June 2014. However, it contributed to a major share of the revenues.
Why Yum! Brands’ restaurants have grown globally
Yum! Brands plans to open new locations in certain countries. Growing restaurant units is the first step to capturing customers in a market.
Must-know: Why Chili’s same-store sales increased
For the restaurant industry, one of the key drivers is same-store sales earnings. Brinker International (EAT) reported a same-store sales growth of 2.5% for Chili’s—compared to -0.6% in the same quarter last year.
Darden’s food costs, labor costs, and selling and general expenses
Darden Restaurants’ (DRI) food and beverage costs were 1.8% higher as a percentage of sales compared to the corresponding quarter a year ago. Higher beef, seafood, and dairy costs primarily drove up the food costs. Food costs also increased due to core menu enhancements made last year by the company.
Why leveraged loan deals are seeing a strong calendar
Leveraged loans are commercial loans. They’re provided by a group of lenders. The loan is usually secured. It’s structured, arranged, and administered by investment and commercial banks—the arrangers. An example of an arranger is JPMorgan (JPM). Then, the loan is syndicated to other banks or institutional investors.
Why Panera Bread Company desperately needs to innovate its menu
People can have many reasons to visit a restaurant. But one of the most critical reasons is the menu. With customers’ constantly changing tastes and preferences, a restaurant needs to innovate and be in sync with its demographic.
Must-know: What strategies are driving Dunkin’ Brands?
Same-store sales are driven by two components—transaction and traffic. Transaction is driven by pricing and products offered to the customer—or mix. For Dunkin’ Brands (DNKN), transaction contributed to more than half of same-store sales growth. To increase the traffic, the company introduced new items and offers.
Must-know: The key drivers in the leveraged loans markets
A leveraged loan is a commercial loan provided by a group of lenders. Typically secured, the loan is structured, arranged, and administered by investment and commercial banks (or the arrangers) like Goldman Sachs (GS).
Tim Hortons’ effective tax rates and the Burger King merger
Burger King (BKW) recently announced that it will acquire Tim Hortons (THI). In our acquisition series, we explained that this deal was structured as a tax inversion deal. Let’s take a look at what Tim Hortons’ effective tax rate has been over years.
Why Tim Hortons introduced a mobile app and loyalty cards
Along with introducing new products like those we discussed in the previous part of this series, Tim Hortons (THI) is also testing different revenue channels and payment methods.
Why Tim Hortons’ same-store sales grew through menu innovation
Restaurants often introduce new products in their menu and use promotional campaigns to drive customers into the restaurants.
Why Tim Hortons’ same-store sales are an important value driver
Tim Hortons (THI) had a total of 4,546 restaurants as of the second quarter’s end. About 79%, or 3,630, of Tim Hortons restaurants are in Canada. About 19%, or 866, restaurants are in the U.S.
Why Burger King shares traded sideways after its earnings report
Burger King (BKW) reported its earnings on August 1 before the market opened. After the market opened, shares began trading at $26.7—which was 2% up from the previous day’s closing of $26.3.
Why Burger King’s restaurant visit program is so important
Burger King (BKW) opened a net of 131 new restaurants in the second quarter, making for a total net new restaurant count of 682 restaurants in the past 12 months.
Why Burger King is improving its traffic through product innovation
Burger King (BKW) introduced premium products internationally that should complement its menu. It launched a Hashbrown Whopper in Korea, a Barbecue Bacon Whopper in the U.S., and a Mexican Whopper in Spain.
Burger King’s effective tax rates and the Tim Hortons acquisition
Burger King’s (BKW) acquisition of Tim Hortons (THI) will make it the third-largest restaurant chain in terms of market capitalization, after McDonald’s (MCD) and Yum! Brands (YUM).
Burger King’s 2nd quarter 2014 tax rates and profit margins
Net income is used to calculate earnings per share (net income over weighted average shares outstanding). It improves based on an improved cost metric. Let’s see how Burger King’s (BKW) net income has done over the year.
Why Burger King’s operating expenses are declining
Burger King’s (BKW) improvement in operating margins was aided by a reduction in operating expenses as a percentage of sales.
Analyzing Burger King’s shifting business model focus in 2Q14
Franchise revenues include royalties and franchise fees. Royalties are calculated as a percentage of franchise restaurant revenues, which are driven by same-store sales.
Must-know: Analyzing Burger King’s 2Q14 performance by segment
Burger King Worldwide, Inc., (BKW) operates over 13,000 restaurants in 100 countries and reports its global income in four segments.
Why investors should look at Burger King’s same-store sales first
Same-store sales drive revenues. Burger King (BKW) reported global same-store sales growth of 1% in the second quarter.
How Burger King is financing its Tim Hortons acquisition
The Tim Hortons (THI) acquisition’s value of about $12.5 billion is more than Burger King’s (BKW) market capitalization of $10.9 billion as of August 26.
Must-know: Management’s outlook for 2014 and beyond
The management has given an operating profit margin guidance of more than 10% for 2014—due to the poor performance of Pizza Hut in the U.S., the management has cut its full-year earnings guidance.
Why management is focusing on the breakfast menu for Taco Bell
The breakfast menu was introduced in a Taco Bell in March, 2014—as the quarter ended in June, 2014, the breakfast menu was introduced in 20% of the locations, which was 229 restaurants.
Must-know: The costs of McDonalds’ key metrics
Franchise margins declined by 0.6% to 82.2% in 2Q14 due to an increase in rents and depreciation expense along with franchising—company operated margins also declined by 0.6% to 17.1% over the same period.
Must-know: Key metrics in McDonalds’ quarterly earnings
McDonald’s reported flat global comparable sales and negative comparable guest count for 2Q14, which is concerning from a long-term income growth perspective.
Why did Ackman’s Pershing Square exit General Growth Properties?
Last week, Pershing Square exited its entire stake in General Growth Properties.
Why did Ackman trim Pershing Square’s Procter & Gamble stake?
Pershing Square has sold off most of its stake in Procter & Gamble the size of the position reduced to 739,605 last quarter.
Why Pershing Square increased its stake in Air Products and Chemicals
Pershing Square increased its position in Air Products and Chemicals, Inc. from 21.31% in 3Q 2013 to 27.91% in 4Q 2013.
Pershing Square Capital Management’s positions in 4Q 2013
Bill Ackman’s Pershing Square Capital Management did not initiate new stakes in 4Q 2013.
Why Pershing Square bought stake in Platform Specialty Products
In a 13G filed last week, Bill Ackman’s Pershing Square disclosed a position in Platform Specialty Products Corporation (PAH).
Why time favors fast food business owners during strikes
The restaurant industry’s high employee turnover also makes it harder for fast food companies to unionize. Even within the restaurant industry, quick service shows the highest turnover.
Must-know: Majority of fast food workers “not” above 25 years old
Why the unionization of all fast food workers, which would increase the bargaining power of employees and possibly lead to higher wages, in quite unlikely.
Why do most workers at McDonald’s work part-time?
Part-time work is most likely an industry-wide characteristic within the food retail business.
Why fast food business owners can’t offer $15 per hour
From a business perspective, restaurant owners can’t possibly increase wages to $15 per hour.
Must-know: Minimum wage of $7.25 isn’t as low as people may think
A slight increase in wages can erase profits for these companies. To protect profits, prices will have to rise.
Walkouts and strikes are gaining momentum beyond McDonald’s (MCD)
Nationwide walkouts appear to be gaining momentum, calling for action to increase the federal minimum wage that has remained stagnant since 2009.