QSR Q1 Earnings Call: Restaurant Brands Misses Expectations but Highlights Operational Initiatives

Fast-food company Restaurant Brands (NYSE:QSR) missed Wall Street’s revenue expectations in Q1 CY2025, but sales rose 21.3% year on year to $2.11 billion. Its non-GAAP EPS of $0.75 per share was 4.1% below analysts’ consensus estimates.

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StockStory’s Take

Restaurant Brands’ first quarter results were shaped by ongoing challenges in consumer demand and varied performance across its global markets. CEO Josh Kobza noted that flat comparable sales reflected a tough macroeconomic environment, with the company experiencing limited momentum in North America while maintaining relative outperformance against peers. Management emphasized the role of ongoing operational improvements, such as restaurant remodels at Burger King and Popeyes and menu innovation at Tim Hortons, in supporting system-wide sales growth. CFO Sami Siddiqui pointed to the impact of calendar timing and the transition of the Burger King China business as additional headwinds. Despite these pressures, management credited disciplined cost control and targeted investments in digital and supply chain initiatives for offsetting some of the quarter’s softness.

Looking ahead, Restaurant Brands’ forward guidance centers on operational execution, continued investment in restaurant modernization, and disciplined cost management to drive improved profitability. CEO Josh Kobza expressed confidence in delivering at least 8% organic adjusted operating income growth for the year, supported by early signs of sales momentum in the second quarter. Management highlighted plans to accelerate remodels, particularly at Burger King U.S., and to expand new menu platforms and marketing initiatives at Tim Hortons and Popeyes. CFO Sami Siddiqui indicated that cost efficiencies—including a reduction in segment G&A—are expected to provide operating leverage, while portfolio adjustments in China and refranchising efforts are designed to simplify the business. However, the company flagged ongoing macroeconomic uncertainty as a persistent risk to achieving its targets.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to mixed consumer demand, operational investments, and ongoing portfolio adjustments, while pointing to early progress in cost containment and restaurant upgrades.

• Operational investments underway: Management cited ongoing upgrades at Burger King and Popeyes, including over 400 planned remodels this year at Burger King U.S., as a key driver of future sales and guest experience. CEO Josh Kobza explained that remodeled restaurants are achieving mid-teens percentage sales uplifts, though the full financial impact will materialize over time.
• Menu innovation at Tim Hortons: The Tim Hortons team launched new breakfast and PM (afternoon/evening) menu items, such as the loaded scrambled eggs box and Hat-Trick Pizza, aiming to capture additional daypart share. Management also highlighted new beverage innovations to sustain engagement, with a summer campaign focused on cold beverages and the rollout of new espresso machines later in the year.
• International market resilience: The company saw relative strength in key international markets, including the UK, Germany, Brazil, Japan, and Australia, supported by localized menu offerings, modern restaurant images, and digital ordering capabilities. CEO Kobza noted that while some markets like France underperformed, local teams are taking corrective action.
• Portfolio simplification and refranchising: Restaurant Brands began refranchising company-owned Burger King restaurants acquired via Carrols, targeting more engaged and operationally focused franchisees. The company is also seeking a new partner for Burger King China following its recent acquisition, with a portfolio cleanup underway to close underperforming locations.
• Cost discipline and G&A reductions: CFO Sami Siddiqui detailed a $20 million year-over-year reduction in segment G&A, achieved through headcount adjustments and renegotiated contracts. These efforts are part of a broader initiative to streamline the organization and create a more stable cost structure, supporting the goal of sustained operating income growth.

Drivers of Future Performance

Restaurant Brands’ outlook is driven by accelerating operational upgrades, product innovation, and disciplined expense management amid ongoing macroeconomic uncertainty.

• Accelerated remodels and portfolio shifts: Management expects the pace of Burger King U.S. remodels to increase, targeting 85% modern image by 2028, while refranchising and the China portfolio cleanup are expected to reduce capital intensity and improve franchisee economics in the long term.
• Menu and marketing initiatives: Tim Hortons will focus on new product launches across breakfast, beverages, and PM food, while Burger King and Popeyes plan refreshed value offers and expanded marketing. These initiatives are intended to drive traffic and support same-store sales recovery, though management acknowledged that consumer demand remains sensitive to value and service.
• Expense control and operating leverage: The company’s plan to reduce segment G&A and benefit from lower advertising costs at Burger King U.S. is expected to help achieve at least 8% organic adjusted operating income growth. Management also noted potential headwinds from foreign exchange rates and tariffs, but believes most cost impacts will be manageable through local sourcing strategies.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be monitoring (1) the pace and impact of Burger King and Popeyes remodels on guest experience and sales, (2) progress in refranchising company-owned locations and simplifying the portfolio, particularly in China, and (3) the effectiveness of new menu initiatives and marketing campaigns at Tim Hortons and across the portfolio. Execution on cost savings and local sourcing strategies will also be critical to achieving operating income targets.

Restaurant Brands currently trades at a forward P/E ratio of 18.9×. At this valuation, is it a buy or sell post earnings? Find out in our full research report (it’s free).

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