Restaurant Brands International to acquire Firehouse Subs for $1B

Dive Brief:

Restaurant Brands International has entered into an agreement to acquire Firehouse Subs for $1 billion in an all-cash transaction, the company announced Monday. RBI will fund the transaction, which is expected to close in the coming months, with debt and cash on hand.
Florida-based Firehouse Subs has about 1,200 units and is expected to grow its systemwide sales to about $1.1 billion this year. October year-to-date comparable sales were up 20% compared to year-to-date sales in 2019.
This acquisition, which is the biggest restaurant transaction of the year, marks RBI's first since it bought Popeyes in 2017 for $1.8 billion.

Dive Insight:

Restaurant Brands International may not be as active a buyer as rival restaurant platforms, but when it does acquire, it goes big. The company's 2014 acquisition of Tim Hortons, for example, was worth over $11 billion. Its purchase of Firehouse Subs is a fraction of that cost, but the growing sandwich chain will complement its existing restaurant brands well.

Firehouse Subs' management team, including CEO Don Fox and CFO Vincent Burchianti, will continue to lead the brand's day-to-day operations. Under the new parent company, the sandwich chain is expected to benefit from RBI's robust franchisee network, development expertise and ability to accelerate global unit growth. Currently 97% of Firehouse Subs, which are located in 46 states, Canada and Puerto Rico, are franchised.

Firehouse Subs' digital and technology strategies appear to align with RBI's push to incorporate more digital channels in its system. Firehouse Sub will benefit from the holding company's in-house tech stack, as well as its team of engineers and ongoing tech investments.

Even before the pandemic hit, Firehouse Subs was in the midst of a full point-of-sales upgrade and was expanding its off-premise capabilities by testing a smaller store concept that had an area dedicated to takeout orders. The company worked with enterprise technology firm NCR to launch a new app and enhance its online ordering experience. Throughout the COVID-19 crisis, the chain also benefited from its drive-thrus at around 50 locations, which feature order confirmation technology that boosted accuracy. Firehouse Subs could benefit from RBI's suggestive selling technology at the drive-thru, which it has expanded across Burger King, Tim Hortons and Popeyes locations.

While Firehouse Subs' POS upgrade was put on hold in mid-March 2020, the chain quickly pivoted to improve its technology stack. The company's operations and IT teams worked on ways to better identify cars during curbside pickup, for example. The sandwich maker also partners with third-party delivery companies, and its delivery sales mix made up about 14% of sales as of October, according to an investor presentation.

In addition, Firehouse Subs' loyalty program has nearly 3.5 million subscribers, which represents about 10% of transactions. Around 50,000 new customers are added to the platform each month. The insights Firehouse Subs has gleaned through this program could help RBI build up its newly launched Burger King loyalty program as well.