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Restaurant Brands International to Acquire Carrols Restaurant for $1B

Vice President: Leonardo Bassino 

Analysts: Joshua Cayaban, Raashi Parekh, Heehun Seol, Shagun Shrivastava, Darrel Tan

Deal Overview 

Acquirer: Restaurant Brands International 

Acquiree: Carrols Restaurant Group 

Deal size: $1.0 billion 

Buy Side Advisors: J.P Morgan (financial) and Paul, Weiss, Rifkind, Wharton & Garrison (legal) Sell Side Advisors: Jefferies LLC (financial) and Milbank LLP (legal)


Restaurant Brands International Inc. (RBI) has announced the acquisition of Carrols Restaurant Group, Inc.  (Carrols), in a deal valued at $1.0 billion, aiming to revitalise Burger King's presence in the fast-food market.  Carrols, the largest Burger King franchisee in the U.S., operates over 1,000 restaurants and is set to undergo a  comprehensive remodelling effort over the next five years. Led by RBI's "Reclaim the Flame" strategy, this  acquisition seeks to modernise Carrols' establishments, with an investment of $500 million, while emphasising  a shift towards local franchisee ownership to enhance community engagement. 

This strategic move not only signifies RBI's commitment to elevating the Burger King brand but also  underscores its dedication to local entrepreneurship. By fast-tracking the renovation of Carrols' restaurants  and subsequently re-franchising them to smaller franchisee groups, RBI aims to revitalise the guest experience  while fostering economic growth within local communities. Through this acquisition, RBI is poised to reshape  the fast-food landscape, leveraging its resources to drive innovation, profitability, and sustainable growth  across its expanded portfolio of restaurants.

Deal Structure

Under the terms of the merger agreement, Restaurant Brands International Inc. (RBI) will undertake the  acquisition of Carrols Restaurant Group, Inc. (Carrols) in a transformative all-cash transaction. RBI, along  with its affiliates, currently holds approximately 15% of Carrols' outstanding equity. The acquisition will be  executed for $9.55 per share, reflecting a substantial 23% premium over Carrols' 30 trading-day volume weighted average price as of January 12, 2024, and amounting to an aggregate enterprise value of  approximately $1.0 billion. 

To ensure a rigorous evaluation process, a Special Committee of Carrols' Board of Directors, comprising  independent directors not affiliated with RBI, has been established. Advised by independent legal and financial  experts, this committee conducted thorough negotiations and unanimously recommended the merger  agreement. Following this, the Carrols Board of Directors, excluding those affiliated with RBI, also  unanimously approved the agreement, urging Carrols shareholders to adopt it. Notably, a 30-day "go shop"  period allows Carrols to solicit alternative proposals, ensuring the transaction's robustness. 

Completion of the transaction, slated for the second quarter of 2024, is contingent upon customary closing  conditions, including approval by the majority of Carrols' common stockholders, excluding those affiliated  with RBI, and compliance with regulatory requirements, such as the Hart-Scott-Rodino Antitrust  Improvements Act of 1976. Financing for the acquisition will be sourced from cash reserves and term loan  debt, for which RBI has secured a financing commitment. Affiliates of Cambridge Franchise Holdings, LLC,  representing a significant portion of Carrols' outstanding shares, have entered into a voting agreement in favour  of the transaction, further cementing its viability and potential for shareholder value creation. 

Restaurant Brands International Overview 

Restaurant Brands International Inc. (RBI) is a dominant force in the global quick-service restaurant industry,  boasting a robust portfolio of iconic brands such as Tim Hortons, Burger King, Popeyes, and Firehouse Subs.  With annual system-wide sales exceeding $40 billion and a network of over 30,000 restaurants spanning more  than 100 countries, RBI is committed to fostering sustainable outcomes through its innovative "Restaurant  Brands for Good" framework. Founded in 2014 through the merger of Burger King and Tim Hortons, RBI  expanded its reach with the acquisition of Popeyes in 2017. Headquartered in Toronto, Canada, RBI operates  alongside Tim Hortons, with Burger King and Popeyes maintaining individual operations in Miami. Notably,  3G Restaurant Brands Holdings LP holds a significant stake in RBI, further reinforcing its position as a global  leader in the industry. 

Under the leadership of CEO Joshua Kobza, who assumed the role in March 2023, RBI continues to drive  innovation and growth, leveraging its global scale and shared best practices to nurture the development of its  brands. Publicly traded on both the New York Stock Exchange and the Toronto Stock Exchange, RBI remains  committed to upholding its core values, fostering strong employee and franchisee relationships, and making a  positive impact on local communities worldwide.

Carrols Restaurant Group Overview

Carrols Restaurant Group, Inc. stands as a prominent American franchisee company and holds the  distinguished title of being the largest Burger King franchisee globally. With a rich history dating back to  1976, Carrols has carved a niche for itself, owning and operating over 1,000 Burger King restaurants across  23 U.S. states, along with 55 Popeyes establishments. The company traces its origins to the Carrols hamburger  restaurant chain, which flourished in the early 1960s before transitioning to Burger King franchises in 1975.  Founded by Herb Slotnick, Carrols expanded its footprint throughout New York State, embodying a legacy of  culinary excellence and community engagement. 

Over the years, Carrols has navigated various transformations and expansions, including the acquisition of  Burger King locations from Burger King Corporation in 2012, strategic divestments, such as the spin-off of  Taco Cabana and Pollo Tropical in 2011 and finally its merger with Cambridge Franchise Holdings LLC in  2019. 

Industry Overview 

The retail industry, particularly the fast-food sector, has witnessed a significant surge in M&A activity in  recent years. To understand the suitability of the RBI-Carrols acquisition within the broader retail M&A  landscape, one needs to delve into the industry dynamics and examine its rationale. The fast-food industry has  been characterized by intense competition, evolving consumer preferences, and changing market dynamics.  Amidst these challenges, companies like Burger King have sought growth opportunities through strategic  acquisitions. RBI's acquisition of Carrols Restaurant Group in January 2024 marks a significant move to  bolster its market presence and streamline operations in the highly competitive fast-food market. 

In assessing the suitability of this acquisition, it is crucial to consider metrics and projections. The deal valued  at $1 billion positions RBI as a dominant player in the fast-food segment, with Burger King poised for  expansion and enhanced operational efficiency. Moreover, Reuters reports that RBI anticipates significant cost  synergies and operational efficiencies through the integration of Carrols' extensive network of Burger King  franchises. One key metric to consider in evaluating the suitability of this acquisition is projected free cash  flow. By acquiring Carrols, RBI gains access to a larger revenue base and economies of scale, which could  potentially drive higher free cash flow generation. This increased cash flow can provide RBI with the financial flexibility to invest in innovation, expansion initiatives, or shareholder returns, thus creating value for  stakeholders. 

With Carrols' extensive franchise network, RBI stands to benefit from increased sales volume and revenue  growth, particularly in the US market where Carrols operates. This growth trajectory aligns with RBI's  strategic objectives of expanding its market share and driving top-line growth. Additionally, the synergies  arising from the acquisition could lead to operational efficiencies and cost savings. By consolidating  operations, streamlining supply chains, and leveraging shared resources, RBI can optimize its cost structure  and enhance profitability. These synergies are critical in a competitive industry landscape where margins are  often under pressure.

The current financial landscape, particularly in the fast-food sector, presents lucrative opportunities for  strategic acquisitions aimed at driving growth and enhancing market position. With a focus on leveraging  synergies, optimizing operations, and driving top-line growth, RBI's acquisition of Carrols is poised to create  significant value for stakeholders and solidify its position as a leading player in the fast-food industry. 

Financial Analysis 

Discounted Cash Flows Analysis - Carrols Restaurant Group

Deal Rationale and Synergies 

The acquisition of Carrols Restaurant Group by Restaurant Brands International (RBI) is a significant strategic  step, indicative of RBI's commitment to reinvigorate the Burger King brand within the highly competitive  U.S. fast-food market. This move aligns perfectly with RBI's "Reclaim the Flame" plan, which is a  comprehensive strategy designed to remodel and modernize Burger King outlets, with an emphasis on  attracting a younger demographic and enhancing the overall customer experience. This plan is not just about  physical refurbishment; it's about redefining the brand's appeal in a market that is increasingly driven by digital  innovation and consumer trends favouring more contemporary dining experiences. 

The synergies from this acquisition are multifaceted. Firstly, there's a clear operational synergy. By acquiring  Carrols, RBI gains direct control over a significant number of its outlets, allowing for a more consistent and  controlled rollout of its new branding and operational strategies. This control is crucial in ensuring a cohesive  brand experience across a large network of restaurants. Secondly, the financial investment of approximately  $500 million in remodelling about 600 restaurants suggests a focus on long-term asset value creation. These  modernized outlets are expected to attract more customers and potentially generate higher revenues per outlet.  Thirdly, the expansion of the franchisee base is a strategic move towards a more localized, community-focused  business model. This approach could foster stronger ties with local markets and create a more personalized  customer experience. Lastly, there are marketing synergies. The revamp is likely to reposition the Burger King  brand in the public's perception, making it more relevant and appealing to younger consumers who are  increasingly influenced by brand image and digital presence. 


The acquisition carries several risks. The integration of Carrols’ operations into RBI's existing framework  presents a significant challenge. It involves aligning different corporate cultures, systems, and operational  standards. RBI will need to manage this integration carefully to prevent disruption in operations and maintain  employee morale and productivity. 

The financial risk associated with the substantial investment in modernization is also noteworthy. If the  remodelled restaurants do not yield the expected increase in customer traffic and revenue, the ROI on this  investment could be lower than anticipated. RBI might need to explore additional revenue streams or more  efficient operational models to mitigate this risk. Market response and competition in the fast-food industry  are unpredictable. While the rebranding and modernization efforts are designed to attract a younger  demographic, there's no guarantee that these efforts will resonate with the intended audience. Continuous  market research and flexibility in marketing strategies could be key to adapting to consumer preferences. 

Regulatory approvals and shareholder support are critical for the completion of the acquisition. To navigate  this, RBI must ensure transparent communication and demonstrate the long-term value of the acquisition to  all stakeholders. Litigation risks, common in such large-scale corporate transactions, must be anticipated and  managed. RBI should have a robust legal strategy in place to address any potential legal challenges that might  arise during or after the acquisition process. Lastly, operational risks stemming from the management of a larger portfolio of company-owned restaurants are significant. RBI will need to strengthen its operational  frameworks and perhaps leverage technology and data analytics to manage these complexities efficiently. 

In conclusion, while the acquisition of Carrols Restaurant Group presents a promising opportunity for RBI to  revitalize and grow the Burger King brand, careful navigation of the associated risks and strategic execution  of the plan will be crucial for its success. 


The intensively competitive, ever-changing and dynamic fast-food industry is an ideal environment in which  companies seeking strategic acquisitions can thrive, synergising on cross-selling and up-selling opportunities  are continuously born. Restaurant Brands International is an already predominant force in the global quick service restaurant industry. RBI is the archetype of a firm that managed to successfully leverage the fast-food  industry’s opportunities and is now boasting a robust portfolio comprising brands such as Burger King, Tim  Hortons, Popeyes, and Firehouse Subs. 

RBI expects further enhancements in its competitive edge in the market through the acquisition of Carrols  Restaurant Group. Carrol’s extensive network is a great asset for RBI, and will likely allow for the expansion  of the buyer’s operational scope. The combination of RBI's global presence and Carrols' established market  dominance in the U.S. creates a formidable entity poised for sustainable growth and continued success in the  dynamic landscape of the quick-service restaurant industry. With this strategic acquisition, RBI cements its  status as a leader in the fast-food world, ready to meet future challenges and seize new opportunities in this  industry’s ever-evolving landscape.


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The opinions expressed in the reports are those of the members of the Junior IB team and are not affiliated with any university or institution. The financial recommendations provided are for educational purposes only and the Junior IB team takes no responsibility for any losses that may occur from implementing any ideas presented in the reports. The Junior IB team is not authorized to provide investment advice. The information, opinions, and estimates presented in the reports reflect the Junior IB team's judgment at the time of publication and are subject to change without notice. The price, value, and income of any securities or financial instruments mentioned in the reports may fluctuate. The Junior IB team has no business relationship with any of the companies mentioned in the reports  and does not receive any compensation for their inclusion. 

Copyright © April 2024 | The Junior IB.


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