RBI agrees to acquire Firehouse Subs in $1B all-cash transaction

Firehouse Subs to become RBI’s first fast-casual restaurant brand

Restaurant Brands International (RBI) agreed to acquire the Firehouse Subs operator for $1B in cash. The agreement to purchase Firehouse Restaurant Group signals the optimism RBI has on the long-term, global potential of the brand due to the chain’s strong economics. This is the first fast-casual restaurant brand that RBI will have in its portfolio as it continues to grow its Tim Hortons, Burger King and Popeyes brands—all fast-food chains.

“Firehouse Subs is a special brand with a talented team, impressive culture and community focus that resonates with guests and closely aligns with our core values at RBI,” said José Cil, chief executive of RBI. “We see tremendous potential to accelerate US and international growth at Firehouse Subs with RBI’s development expertise, global franchisee network and digital capabilities. We are excited to welcome the Firehouse Subs team to the RBI family and to continue our ambitious dream of building the world’s most loved restaurant brands.”

Firehouse Subs acquisition rationale

Approximately 97% of the Firehouse Subs system is franchised. Its franchise partners are a solid, savvy group, operating restaurants in 46 states, Canada and Puerto Rico. Since 2010, the brand has increased its unit count by 200% to 1,200 locations and sales to about $1.1B this year. Firehouse Subs’ comp(arable) restaurant sales increased 20% from 2019 levels.

RBI projects that Firehouse Subs will produce approximately $50M in adjusted EBITDA in 2021. The transaction will be fully accretive to diluted net earnings per share of RBI. The chain has developed a strong brand affinity with customers and is ranked #1 in food quality in the sandwich QSR category, notes RBI.

In Firehouse Subs key, RBI finds key appealing features and a strong value proposition:

  • A purpose-driven brand, supporting local, public safety organizations through its Firehouse Subs Public Safety Foundation, has donated $62.5M to those charitable partners
  • The chain has earned high quality food and food taste and flavor among QSRs in several surveys and premium brand positioning. Its steamed meats are served on toasted bread and the menu includes fan favorites, such as the Hook & Ladder
  • An experienced Firehouse Subs leadership team, with a proven track record, is supported by industry veterans in several competencies, including operations, marketing, and development, with a keen focus on franchisee profitability. The current management team at Firehouse Subs will continue to lead day-to-day operations after the acquisition, confirmed RBI executives, tapping RBI’s global scale, resources and digital infrastructure to continue to growth the brand
  • For stakeholders, the brand has impressive economics. It generates franchisee payback within three and a half years of investment, and Firehouse Subs stores post strong comp sales, including 2021’s growth of 20% versus 2019
  • The chain is already a strong brand. By combining with RBI’s robust franchisee network, development expertise and ability to grow internationally, Firehouse will unlock further development as a global brand, adding to its expansion in Canada, where its AUVs have been impressive—stronger than system averages
  • “Firehouse Subs has a solid digital foundation with a mobile app including mobile order and pay and loyalty capabilities, in addition to a strong delivery sales mix,” observed RBI. The established platform bodes well for continued digital expansion as the brand’s loyalty program has nearly 3.5 million subscribers, enrolling approximately 50 thousand additional customers per month. Business from loyalty members accounts for over 10% of transactions

Next steps

Don Fox, chief executive of Firehouse Subs, commented, “At Firehouse Subs we are united in our commitment to and passion for hearty and flavorful food, heartfelt service, and public safety. Joining the RBI family of brands provides an energizing opportunity to assist more communities, not only across America and Canada, but around the globe. The donations we generate for our Foundation through our restaurants means changing and saving lives, so we can’t wait to accelerate our journey at home and around the world.”

The parties expect the transaction to close in the upcoming months subject to customary closing conditions and regulatory approvals. RBI will use available cash on hand and debt to fund the transaction. The Firehoue Subs will continue to be based in Jacksonville, Fla. CEO Don Fox and CFO Vincent Burchianti will continue to lead the brand after the closing.

BofA Securities, Inc. and J.P. Morgan Securities LLC served as financial advisors and Paul, Weiss, Rifkind, Wharton & Garrison provided legal advisory services to RBI. TD Securities and Latham and Watkins.advised Firehouse Subs.


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