Back to Portfolio
QSR

Restaurant Brands International

$67 30.6B market cap February 1, 2026
Restaurant Brands International Inc QSR BUFFETT / MUNGER / KLARMAN SUMMARY
1 SNAPSHOT
Price$67
Market Cap30.6B
2 BUSINESS

Restaurant Brands International is a global franchisor operating four iconic QSR brands generating $1.3B annual free cash flow through a capital-light 99%+ franchised model. The superinvestor signal (Klarman 11.1% + Ackman 10%) validates the thesis that improving franchisee economics, Burger King turnaround progress, and Tim Hortons traffic leadership create durable value. At ~$67 with 25.3% ROE and 3.7% dividend yield, the stock trades 10-15% below fair value of $75-82. The primary risk is execution uncertainty at Burger King US, offset by Tim Hortons stability and international growth momentum. Patient investors accumulating below $63 can expect 10-12% annual returns through FCF yield, dividend growth, and modest multiple expansion as turnaround evidence accumulates.

3 MOAT WIDE

Four iconic QSR brands (Tim Hortons #1 Canada, Burger King #2 global burger, Popeyes fastest-growing chicken, Firehouse premium subs). 30,000+ restaurants globally creating scale economics. 99%+ franchised model = asset-light royalty stream. Tim Hortons 15 consecutive quarters positive traffic. Evidence: 8%+ organic AOI growth, improving franchisee profitability.

4 MANAGEMENT
CEO: Josh Kobza

Good - Prioritizing dividend growth, debt reduction, and strategic reinvestment (Reclaim the Flame, Carrols acquisition). Avoided dilutive M&A. Targeting mid-4x leverage.

5 ECONOMICS
28.8% Op Margin
15% ROIC
25.3% ROE
24x P/E
1.3B FCF
520% Debt/EBITDA
6 VALUATION
FCF Yield4.3%
DCF Range75 - 82

Undervalued by 10-15%

7 MUNGER INVERSION
Kill Event Severity P() E[Loss]
Burger King US turnaround execution failure HIGH - -
Debt refinancing risk in elevated rate environment MED - -
8 KLARMAN LENS
Downside Case

Burger King US turnaround execution failure

Why Market Right

Recession causing QSR traffic decline; Beef/coffee commodity inflation squeezing franchisee margins; CAD/USD weakness impacting Tim Hortons contribution

Catalysts

Burger King US modern image reaches 85%+ (2028 target); Tim Hortons Canada returns to positive net unit growth (2025); International system-wide sales growth 8%+ continuing; Debt reduction to mid-4x leverage; China resolution unlocks uncertainty overhang

9 VERDICT ACCUMULATE
A- Quality Moderate - High leverage (6.4x D/E) but manageable with $1.3B FCF and asset-light model
Strong Buy$56
Buy$63
Fair Value$82

Begin building at $67, add aggressively below $63, full position below $56

🧠 ULTRATHINK Deep Philosophical Analysis

QSR - Ultrathink Analysis

Deep philosophical reflection on Restaurant Brands International through the Buffett/Munger/Klarman lens

The Real Question

What problem are we actually solving by investing here?

Not "should we buy fast food stocks." The real question is: Can we own perpetual royalty rights on global QSR consumption for the next 20 years?

Restaurant Brands International isn't really in the burger and chicken business. They're in the royalty extraction business. Every time someone orders a Whopper in Germany, a coffee in Toronto, or fried chicken in London, QSR collects 4-5.5% - regardless of whether that store is profitable, regardless of labor costs, regardless of ingredient prices. The franchisee bears the capital risk. QSR collects the toll.

This is the Buffett playbook executed across four iconic brands in 100+ countries. Find the toll booth. Buy the royalty stream. Let compounding work.

But here's the twist: two of the sharpest value investors in the world - Seth Klarman and Bill Ackman - have independently reached the same conclusion. Combined 21%+ ownership. Different investment philosophies. Same target. That's not coincidence. That's signal.

The question isn't about hamburgers. It's about whether this collection of toll booths has durable pricing power, whether management can execute the turnaround at Burger King, and whether we're getting a good deal on perpetual royalty rights.

Hidden Assumptions

Assumption 1: The franchise model is indestructible The market assumes 30,000+ franchisees are permanently locked in. But what if delivery aggregators (DoorDash, Uber Eats) become the primary customer interface? What if ghost kitchens unbundle the brand from the real estate? The franchise lock-in assumes the physical restaurant remains the locus of value creation.

Assumption 2: Tim Hortons is Canada forever 43% of AOI from one country. Canada loves Tim Hortons today, but cultural preferences shift. Starbucks is premium positioning. McDonald's is value. What happens when Gen Z prefers plant-based bowls to donuts and double-doubles? The Tim Hortons moat is deep but geographically concentrated.

Assumption 3: Burger King can be fixed The Reclaim the Flame plan assumes the brand isn't structurally disadvantaged versus McDonald's. But McDonald's has better real estate, stronger franchisees, superior technology, and deeper pockets. Can Burger King ever win, or just survive? The market may be right to discount BK more than management acknowledges.

Assumption 4: China will work out The current dispute with Burger King China's master franchisee could resolve cleanly or could become a multi-year legal battle that damages the brand. China disputes have destroyed value for many Western companies. Is this priced in?

The Hidden Bet: This investment assumes franchise economics remain compelling, Tim Hortons maintains cultural relevance, Burger King execution improves, and international expansion continues. Each assumption deserves skepticism.

The Contrarian View

What would have to be true for the bears to be right?

  1. Franchise economics deteriorate. If labor costs, food inflation, and rent pressure franchisee margins, store closures accelerate. 4-wall EBITDA of $205K at Burger King US sounds fine until you realize that's 8-10 year payback on a million-dollar investment. Rising costs could tip the math negative.

  2. Tim Hortons loses Canada. Traffic growth has been positive for 15 quarters, but what if that's the peak? If younger Canadians prefer premium coffee or plant-based alternatives, market share erodes slowly but permanently.

  3. The leverage becomes fatal. 6.4x debt-to-equity works when rates are low and FCF is stable. What if a recession hits, same-store sales decline 10%, and refinancing comes due at 8%? The entire equity value could be wiped out in a bad scenario.

  4. Superinvestors are wrong. Klarman and Ackman are exceptional, but not infallible. Ackman was wrong on Valeant. Klarman has had losers. The presence of smart money doesn't guarantee success.

The bear case is internally consistent. It's not crazy. It's possible. The leverage creates genuine downside risk that the bulls may be minimizing.

Simplest Thesis

QSR is four toll booths on global quick-service restaurant consumption, and two of the world's best value investors think we can buy them at a discount.

One sentence. That's the bet. Either you believe the toll booths endure and the superinvestors are right, or you don't.

Why This Opportunity Exists

The deeper truth about QSR's pricing:

  1. Turnaround skepticism: Burger King has been "turning around" for a decade. The market has heard the story before. Credibility must be earned with results, not promises.

  2. Leverage aversion: Post-2008, leverage is viewed skeptically. Conservative investors see 6.4x D/E and pass immediately. This creates artificial selling pressure.

  3. Canada concentration: 43% of AOI from one country. Global investors see geographic concentration as risk. Tim Hortons' Canada dominance looks fragile to outsiders who don't understand the brand's cultural position.

  4. 3G Capital baggage: The 3G Capital reputation for aggressive cost-cutting created franchisee antagonism. The brand-building investments of the past two years haven't fully overcome this perception.

  5. Boring sector: QSR franchising isn't AI, isn't healthcare, isn't energy transition. It doesn't fit any narrative. Institutional investors allocating to themes overlook it.

The opportunity exists because QSR falls between categories. Growth investors want faster expansion. Value investors want lower leverage. Quality investors want stronger ROE. Thematic investors want a story.

Klarman and Ackman see what category-constrained investors miss: a durable royalty stream at a reasonable price with competent management.

What Would Change My Mind

Specific evidence that would invalidate this thesis:

  1. Tim Hortons Canada negative traffic for 3 consecutive quarters -> The crown jewel is losing its shine. Core thesis broken. Sell.

  2. Average franchisee 4-wall EBITDA declines 20%+ across any brand -> Economic model deteriorating. Investigate immediately. Likely sell.

  3. Patrick Doyle departure without clear turnaround progress -> The operator who gives me confidence leaves. Reassess entirely.

  4. Net Debt/EBITDA exceeds 6.0x -> Refinancing risk becomes existential. Likely sell regardless of price.

  5. Dividend cut -> Management admitting FCF inadequacy. Signal of deeper problems. Sell.

  6. Klarman or Ackman exit positions -> The superinvestors who gave me conviction abandon ship. Investigate why. Likely follow.

The falsifiability test: If after 3 years, Burger King US same-store sales remain flat, Tim Hortons traffic turns negative, and leverage hasn't declined, I was wrong about the turnaround thesis. Admit it and move on.

The Soul of This Business

What makes QSR's competitive position inevitable or fragile?

The Inevitable Part:

Tim Hortons is woven into Canadian identity. Burger King is the #2 burger globally with 70+ years of brand building. Popeyes has the best chicken in QSR (try it - the product quality is real). These brands took decades to build. They cannot be replicated.

The franchise model creates locked-in capital. 30,000+ franchisees have invested billions. They have no alternative but to make it work. This isn't an app that can be deleted - it's life savings deployed in physical locations.

The infrastructure is irreplaceable. Drive-through locations, supply chains, training systems, technology platforms - these took 50+ years to build. A new entrant cannot catch up.

The Fragile Part:

The model depends on brand relevance. If consumers become indifferent to Burger King versus Five Guys versus Shake Shack, pricing power erodes. The toll booth only works if people specifically want to drive on your road.

Tim Hortons' Canada concentration means one country's preferences can swing 43% of earnings. That's fragility masquerading as dominance.

The leverage creates path dependency. A bad recession at the wrong time could force dilutive capital raises or asset sales.

The Soul Truth:

QSR is a collection of toll booths with different durabilities. Tim Hortons is a fortress in Canada but vulnerable to generational shift. Burger King is a turnaround story requiring execution. Popeyes has product quality but operational challenges. Firehouse is a development story needing scale.

The portfolio diversification is a strength, but each toll booth needs maintenance. Management's job is to keep all four roads in good repair. Patrick Doyle knows how - he fixed Domino's. Whether he can fix all four simultaneously is the bet.

The Superinvestor Question

Why do Klarman and Ackman both own 10%+?

They see different things, but the same opportunity:

Klarman (Baupost) - The ultimate margin of safety investor. He sees:

  • Royalty stream with downside protection
  • Leverage creating opportunity for equity holders
  • Brands that will exist in 20 years
  • Catalyst from turnaround execution

Ackman (Pershing Square) - The operational improvement activist. He sees:

  • Management quality (Patrick Doyle track record)
  • Simple, understandable business
  • Concentrated bet on proven playbook
  • Potential for board influence if needed

The convergence is remarkable. Two investors with different philosophies, different risk tolerances, and different approaches independently reached 10%+ positions. This isn't style box allocation - this is conviction.

When Klarman (loss-avoidance focused) and Ackman (returns-focused) agree, pay attention.

The Buffett Test

"If this dropped 50% tomorrow, would I buy more or panic?"

At $67 -> Mild concern, but hold. Current price assumes reasonable execution. A 50% drop signals something broke.

At $50 -> Investigate intensely. If fundamentals intact, back up the truck.

At $35 -> Euphoria. Generational opportunity if thesis holds.

At $100 -> Trim. Thesis playing out, but price ahead of fundamentals.

The key question: Would Klarman and Ackman add at lower prices? Almost certainly yes. Follow the smart money.

The Patient Investor's Path

QSR is not a quick trade. This is a 3-5 year minimum holding period investment.

Year 1-2: Accumulate on weakness, monitor Burger King progress Year 3-4: Harvest turnaround benefits, assess dividend growth Year 5+: Reassess whether to hold as compounder or trim into strength

The 3.7% dividend yield provides payment to wait. The superinvestor backing provides confidence. The improving fundamentals provide direction.

The Setup: Buy toll booth rights on four global brands at reasonable prices while two of the world's best investors provide validation.

The Execution: Accumulate below fair value, hold patiently, let compounding work.

The Exit: When the thesis plays out (sell into strength) or breaks (sell into weakness). No rush either way.

"The stock market is designed to transfer money from the Active to the Patient." - Warren Buffett

"Patience is the key to success in investing." - Seth Klarman

"We try to find a few great companies and sit on our ass." - Charlie Munger

QSR is a sitting-on-your-ass investment. Four toll booths. Two superinvestors. One patient path forward.

We accumulate and wait.

Executive Summary

Investment Thesis (3 Sentences)

Restaurant Brands International is a global franchisor operating four iconic QSR brands (Tim Hortons, Burger King, Popeyes, Firehouse Subs) with 30,000+ restaurants worldwide, generating $1.3B annual free cash flow through a capital-light 99%+ franchised model. The company combines 3G Capital's operational efficiency DNA with superinvestor backing (Klarman + Ackman at 21%+ combined ownership), offering a royalty stream business with improving franchisee economics and substantial global expansion runway. At ~$67 with 25.3% ROE and 3.7% dividend yield, the stock offers compelling value for patient investors willing to accept turnaround execution risk at Burger King US.

Key Metrics Dashboard

Metric Value Assessment
Market Cap $30.6B Large-cap, liquid
P/E (TTM) 24x Reasonable for quality
Forward P/E 12x Attractive
EV/EBITDA 15x Fair for franchise model
FCF Yield 4.3% Solid
Operating Margin 28.8% Excellent
ROE (TTM) 25.3% Passes Buffett test
ROE (5yr Avg) 34.9% Exceptional
Net Debt/EBITDA ~5.9x Elevated but manageable
Dividend Yield 3.7% Growing

Decision Summary

Price Level Action Notes
Current (~$67) ACCUMULATE 15% below fair value, superinvestor signal
Strong Buy (<$56) BUY AGGRESSIVELY 25%+ margin of safety
Accumulate (<$63) BUILD POSITION 20% margin of safety
Sell (>$85) TRIM 20%+ above fair value

PHASE 0: Opportunity Identification (Klarman)

Why Does This Opportunity Exist?

Primary Reason: Superinvestor Accumulation + Execution Uncertainty

  1. Superinvestor Signal: Seth Klarman (Baupost) holds 11.1% and Bill Ackman (Pershing Square) holds 10% - two of the most successful value investors with combined 21%+ ownership. This is exceptionally rare alignment.

  2. Burger King US Turnaround Uncertainty: The "Reclaim the Flame" plan requires multi-year execution. Markets discount turnaround stories until evidence accumulates.

  3. Leverage Concerns: 6.4x debt-to-equity creates headline risk for conservative investors.

  4. China Issues: Burger King China disputes and Popeyes China acquisitions create short-term noise that obscures long-term value.

  5. Boring Business Perception: Franchised QSR lacks the excitement of tech, creating valuation discount.

Verdict: Solid opportunity at current prices. Superinvestors see durable royalty stream + improving execution. Market focuses on near-term noise.

PHASE 1: Risk Analysis (Inversion Thinking)

"How Could This Investment Lose 50% Permanently?"

Risk Event P(Event) Impact Expected Loss
Burger King US Failure 15% -30% -4.5%
Debt Refinancing Crisis 5% -50% -2.5%
Tim Hortons Canada Decline 5% -40% -2.0%
Franchisee Economic Distress 10% -25% -2.5%
Brand/Food Safety Crisis 3% -35% -1.1%
Total Expected Downside - - -12.6%

Top 3 Ways This Could Fail

  1. Burger King US Stagnation: Despite "Reclaim the Flame," same-store sales remain flat, franchisees exit, modern image investments don't drive returns. BK US represents 18% of AOI - persistent underperformance drags the whole company.

  2. Debt Burden in Rising Rates: $16B total debt at 6.4x D/E. If refinancing rates spike and FCF can't cover interest + dividends, forced equity raise or dividend cut triggers multiple compression.

  3. Tim Hortons Brand Erosion: Tim Hortons Canada (43% of AOI) depends on brand love and traffic growth. If premium coffee competition (Starbucks, McDonald's) erodes market share, the crown jewel loses its shine.

Bear Case Summary

"I'm short QSR because it's an over-levered fast food conglomerate running four brands with different problems. Burger King US has been 'turning around' for a decade. Tim Hortons is a Canadian national treasure with no growth. Popeyes execution is inconsistent. The 3G Capital cost-cutting playbook created franchisee antagonism. At 24x earnings with 6x leverage, any stumble means 50%+ downside."

Pre-Defined Sell Triggers

  1. Thesis Break: Tim Hortons Canada negative traffic for 3+ consecutive quarters
  2. Moat Erosion: Average franchisee 4-wall EBITDA declines 20%+ across any brand
  3. Management Failure: Patrick Doyle or Josh Kobza departure without succession
  4. Financial Distress: Net Debt/EBITDA exceeds 6.0x
  5. Dividend Cut: Signal of FCF inadequacy

PHASE 2: Financial Analysis

Income Statement Trends (5 Years)

Year Revenue ($B) Op Income ($B) Net Income ($B) Op Margin
2020 $4.97 $1.42 $0.49 28.6%
2021 $5.74 $1.88 $0.84 32.7%
2022 $6.50 $1.90 $1.01 29.2%
2023 $7.02 $2.05 $1.19 29.2%
2024 $8.41 $2.42 $1.02 28.8%
CAGR 11.1% 14.2% 20.2% Expanding

Assessment: Strong revenue growth driven by Carrols acquisition and system-wide sales expansion. Operating margin consistently above 28% demonstrates franchise model efficiency. 2024 net income decline reflects one-time acquisition-related items.

Balance Sheet Reality

Metric 2024 Assessment
Total Assets $24.6B Brand-heavy (goodwill + intangibles)
Total Liabilities $19.8B Significant debt load
Shareholders' Equity $3.1B Improving (was $2.2B in 2020)
Cash $1.3B Adequate liquidity
Total Debt $16.0B Manageable with FCF
Debt/Equity 6.36x High but stable
Goodwill + Intangibles $16.9B Reflects brand value

Why High Leverage Isn't Fatal:

  • This is a franchise royalty model - minimal capital required
  • Debt is secured by predictable franchise fee streams
  • Interest coverage remains healthy (~3x)
  • Equity improving year-over-year
  • Similar to MCD, YUM, DPZ capital structures

Cash Flow Analysis (The Real Story)

Year OCF ($B) CapEx ($B) FCF ($B) Dividends ($B)
2020 $0.92 $0.12 $0.80 $0.96
2021 $1.73 $0.11 $1.62 $0.97
2022 $1.49 $0.10 $1.39 $0.97
2023 $1.32 $0.12 $1.20 $0.99
2024 $1.50 $0.20 $1.30 $1.03
5yr Avg $1.39 $0.13 $1.26 $0.98

Key Insight: QSR generates ~$1.3B FCF consistently - this is what superinvestors see:

  • 99%+ franchised = minimal CapEx requirements
  • FCF conversion from operating income is excellent
  • Dividends growing steadily (currently $2.48/share annually)
  • Free cash available for debt reduction and strategic investments

Valuation Analysis

Owner Earnings Calculation:

Net Income (2024):            $1,021M
+ Depreciation:               $264M
- Maintenance CapEx:          ($100M est.)
- Working Capital Changes:    $0 (stable)
= Owner Earnings:             $1,185M

Per Share: $1,185M / 345M shares = $3.43/share

Valuation Methods:

Method Value/Share Current Price Margin of Safety
Owner Earnings x 15x $51.50 $67 -30% (overvalued)
Owner Earnings x 20x $68.60 $67 +2%
Owner Earnings x 25x $85.80 $67 +22%
DCF (9% discount, 6% growth) $82 $67 +18%
EV/EBITDA @ 14x $73 $67 +8%
P/E @ 20x (historical avg) $68 $67 +1%

Intrinsic Value Estimate: $75 - $82 (weighted average)

Verdict: At ~$67, QSR trades at 10-15% discount to fair value. With superinvestor backing and improving fundamentals, this represents an accumulation opportunity.

PHASE 3: Moat Analysis

Moat Sources

Moat Type Evidence Strength Durability
Brand Portfolio 4 iconic brands: Tim Hortons #1 Canada, BK #2 global burger, Popeyes fastest-growing chicken, Firehouse premium subs Strong 15+ years
Scale 30,000+ restaurants globally, $42B+ system-wide sales Very Strong 20+ years
Franchise Economics Asset-light royalty model with 99%+ franchised Very Strong Perpetual
Global Infrastructure Shared services across 100+ countries Moderate 10+ years
Switching Costs Franchisee capital investments, training, systems Strong 15+ years

Moat Evidence from Earnings Calls

  1. Tim Hortons Traffic Leadership: "15th consecutive quarter of positive traffic growth" - only brand in Canada consistently growing traffic (Q4 2024)

  2. Franchisee Profitability: "Tim's Canada 4-wall EBITDA exceeded CAD305,000, up from CAD280,000. Popeyes US increased to $255,000 from $245,000" - profitability improvement drives franchisee engagement

  3. International Outperformance: "4.7% international comparable sales growth in Q4, outperforming most global QSR peers" - brand strength translates globally

  4. Digital Leadership: "Digital sales nearly 20% at BK US" - technology investment creating customer stickiness

  5. AOI Guidance: "Confident we will deliver 8%+ organic AOI growth" - management visibility into earnings trajectory

Moat Durability Assessment

Forces of Erosion:

Threat Severity Timeline Mitigation
QSR competitive intensity 3/5 Ongoing Brand innovation, value offers
Labor cost inflation 3/5 2-3 years Franchisee burden, automation
Consumer health trends 2/5 5+ years Menu evolution, quality focus
Aggregator disruption 2/5 3-5 years Own digital channels

Overall Moat Grade: WIDE - 15+ year durability

PHASE 4: Brand Analysis

Tim Hortons (43% of AOI)

Position: #1 coffee and baked goods in Canada, cultural icon Strengths:

  • Brand love and market share dominance
  • 15 consecutive quarters positive traffic
  • 28-second drive-through times (industry leading)
  • CAD305,000 4-wall EBITDA Challenges: Canada-focused, limited international success Verdict: Crown jewel delivering predictable, growing AOI

Burger King (18% of AOI)

Position: #2 global burger chain Strengths:

  • Reclaim the Flame progress: $205K franchisee EBITDA (up significantly)
  • 51% modern image (target 85% by 2028)
  • Whopper brand recognition
  • Strong A-operators earning $275K+ Challenges: Turnaround execution, franchisee transition Verdict: Execution risk, but progress evident

International (25% of AOI)

Position: 15,600+ restaurants across 100+ markets Strengths:

  • 10% system-wide sales growth 2024
  • France BK at $3.8M ARS, 10% NRG
  • Popeyes UK 65+ stores, $3M ARS
  • Japan BK doubling (40-50 new stores/year) Challenges: China resolution needed, geopolitical risk Verdict: Growth engine with substantial runway

Popeyes (Included in various segments)

Position: #2 US chicken QSR, fastest-growing internationally Strengths:

  • Louisiana chicken differentiation
  • 85% franchisee alignment on Easy to Love plan
  • $255,000 US 4-wall EBITDA
  • International expansion 500 to 1,500 stores Challenges: Operations consistency, value perception Verdict: High potential, execution improving

Firehouse Subs

Position: Premium sub sandwich chain Strengths:

  • 6%+ NRG acceleration
  • Strong pipeline for 2025
  • Hot sauce bar differentiation Challenges: $90K 4-wall EBITDA, category headwinds Verdict: Development-driven value creation

PHASE 5: Management Assessment

Executive Team

Patrick Doyle (Executive Chairman)

  • Former Domino's CEO who transformed that company
  • Joined 2022, now Executive Chairman
  • Brings turnaround expertise
  • Grade: A

Josh Kobza (CEO)

  • 3 years in role
  • Background: CFO under 3G Capital
  • Operational focus, franchisee relationships
  • Grade: A-

Sami Siddiqui (CFO)

  • Strong capital allocation track record
  • Proactive debt management
  • Clear communication
  • Grade: A-

Capital Allocation (5 Years)

Use of Cash Assessment
Dividends Growing steadily ($2.32 to $2.48/share)
Acquisitions Carrols strategic for BK modern image
Debt Reduction Priority - targeting mid-4x leverage
CapEx Disciplined, franchisees fund growth
Buybacks Limited, appropriate with leverage

Grade: B+ - Dividend-focused, deleveraging priority, strategic acquisitions

Owner-Operator Culture

  • 3G Capital DNA: operational excellence, zero-based budgeting
  • Patrick Doyle: proven turnaround operator
  • Franchisee profitability as stated priority
  • Transparent reporting of 4-wall EBITDA by brand

PHASE 6: Superinvestor Analysis

Seth Klarman (Baupost Group) - 11.1%

Why Klarman Likes QSR:

  1. Margin of safety through royalty model stability
  2. Hidden value in brand portfolio
  3. Management with operational expertise
  4. Debt-financed capital structure creates opportunity for equity holders

Klarman's Typical Criteria:

  • Catalyst for value realization: Turnaround progress
  • Downside protection: Asset-light model, essential brands
  • Absolute returns focus: 8%+ AOI growth + dividend yield

Bill Ackman (Pershing Square) - 10%

Why Ackman Likes QSR:

  1. Simple, understandable business
  2. Strong brands with pricing power
  3. Management quality (Patrick Doyle track record)
  4. Concentrated high-conviction bet

Ackman's Typical Approach:

  • Operational improvement thesis
  • Long-term holder willing to be patient
  • Activist potential if needed (but not expected)

Combined Signal

21%+ superinvestor ownership is exceptional. Both Klarman and Ackman are:

  • Value-focused (not momentum)
  • Long-term holders (5+ year horizons)
  • Successful track records (top-tier)
  • Different approaches (validates thesis from multiple angles)

PHASE 7: Catalysts

Positive Catalysts (12-24 months)

  1. Burger King US Turnaround Acceleration

    • Modern image reaches 85%+ by 2028
    • Franchisee profitability improvement
    • Same-store sales outperformance

  2. Tim Hortons Canada NRG Return

    • First positive net unit growth in years
    • Western Canada expansion
    • Compelling unit economics attract development

  3. International Momentum

    • China resolution
    • Popeyes international expansion
    • High-ARS market focus (France, Australia, UK)

  4. Debt Reduction

    • Target mid-4x leverage achievable
    • Interest expense reduction
    • Multiple expansion potential

  5. Dividend Growth

    • Currently $2.48/share (3.7% yield)
    • Growing at 5-7% annually
    • Attracts income investors

Negative Catalysts

  1. Recession Impact: Consumer trade-down accelerates, traffic declines
  2. Commodity Inflation: Beef, coffee costs pressure franchisee margins
  3. FX Headwinds: CAD/USD weakness impacts Tim Hortons contribution
  4. China Resolution Failure: Prolonged dispute creates uncertainty

PHASE 8: Position Sizing

Entry Strategy

Price Action Position Size Rationale
$67 ACCUMULATE 1.5% Below fair value, begin building
$63 ADD 2.5% 20% margin of safety
$56 STRONG BUY 4% 25%+ margin of safety, full position

Risk-Adjusted Return Potential

Scenario Probability 3-Year Return Expected Value
Bull (BK turnaround + expansion) 30% +60% +18%
Base (Steady execution) 50% +35% +17.5%
Bear (Execution failure) 20% -20% -4%
Weighted Expected Return - - +31.5%

Conclusion

Investment Verdict: ACCUMULATE

Restaurant Brands International represents a compelling opportunity for patient investors. The combination of:

  1. Superinvestor Validation: 21%+ ownership by Klarman + Ackman
  2. Quality Metrics: 25.3% ROE, $1.3B FCF, 28.8% operating margin
  3. Reasonable Valuation: ~24x P/E, 3.7% dividend yield, 10-15% below fair value
  4. Clear Path Forward: Turnaround progress, international growth, debt reduction

Offsets the risks of:

  • High leverage (6.4x D/E)
  • Execution uncertainty at Burger King US
  • China dispute resolution

Action: Begin accumulating at current prices (~$67). Add aggressively below $63. Full position below $56.

Target Allocation: 2-4% of portfolio

Time Horizon: 3-5 years minimum

"The big money is not in the buying or selling, but in the waiting." - Charlie Munger

QSR requires patience. The superinvestors have signaled confidence. The fundamentals support the thesis. We accumulate and wait.