Restaurant Brands International (RBI) is investing $45 million to jumpstart growth of its Popeyes and Tim Hortons brands in China, the company said on Monday.
The Toronto-based fast-food chain operator said that it is paying $15 million to acquire Popeyes China from Tims China, the operator of both Popeyes and Tim Hortons in the country.
RBI is also investing $30 million into Tims China, using debt to do so. Cartesian Capital, a founding shareholder of the operator, is investing another $20 million into the company.
The investments are a signal of faith in the country by RBI, which has thrived growing its brands outside the U.S. but has been dissatisfied with its rate of growth in China.
At the same time, it’s a symbol of the challenges many restaurant chains are having in China right now. Consumers in the country are struggling with a real estate crisis and are either cutting back on dining or shifting to cheaper brands or menu items.
“There’s no debating, it is a tough macro environment in China right now,” Sami Siddiqui, CFO of RBI, which also owns Burger King and Firehouse Subs, said at an investor conference last month.
Tims China opened the first Tim Hortons location in the country in 2019 and has grown rapidly in the years since then. It now operates about 900 locations, both through corporate and franchised units.
The company continued to grow quickly last year, as Tims China grew revenue 30% in 2023. But RBI executives have expressed concern with the speed of overall unit development in China in recent months.
In February, the company cut back on its global development projections, largely citing slower-than-expected development in China.
“On the Tims business, we believe our partner is going to need to commit more capital to grow that business in an exciting way, and we believe it’s critical that they do so,” RBI CEO Josh Kobza said in February, adding that the company was working with Tims China on the topic.
The $50 million that RBI and Cartesian are investing in Tims China is through three-year convertible notes, or debt that can be later converted into equity in the business. RBI could ultimately own up to 18% of Tims China and can appoint two members of the franchisee’s board of directors.
RBI’s acquisition of the Popeyes business in China will also free Tims China to focus on the one brand, at least for the short-term. Popeyes now operates 14 restaurants in Shanghai, and RBI said that the deal will lead to more growth in the country through investments in local teams and more development.
Over the long-term, however, RBI said it plans to bring in local partners to operate as a traditional master franchisee, similar to what it does in other international markets.
“China is one of the most compelling long-term market opportunities for both our Popeyes and Tim Hortons brands,” Rafael Odorizzi, RBI’s president of Asia Pacific, said in a statement. He added that the announcement allows Tims China to focus on Tim Hortons.
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