Franchise Operations - As of December 31, 2024, the company leased or subleased approximately 4,600 properties, primarily to Tim Hortons and Burger King franchisees[35]. - Franchise agreements in the U.S. and Canada typically have a term of 10 to 20 years, with royalties ranging from 3.0% to 6.0% of gross sales[33]. - In 2024, the company entered into master franchise agreements for Popeyes in Italy, Tim Hortons in Indonesia, and Firehouse Subs in Brazil[34]. - As of December 31, 2024, approximately 95% of the company's restaurants are owned and operated by franchisees, indicating a heavy reliance on franchisee performance for future prospects[106]. - The company's operating results are closely tied to the success of independent franchisees, and any decline in franchisee sales could lead to reduced royalty revenues[112]. - The company may encounter challenges in receiving timely financial and operational results from franchisees, which could impair management's ability to react quickly[107]. - The reliance on franchisees for operational consistency poses risks, as any shortcomings could damage the brand's reputation and affect overall revenues[113]. Employee and Labor Matters - Approximately 37,600 employees were reported as of December 31, 2024, with about 34,800 located in the United States[57]. - RBI hired approximately 800 new corporate employees, 53,100 new restaurant employees, and 200 new distribution and manufacturing employees in 2024[61]. - Labor challenges, including a new California minimum wage of 20perhoureffectiveApril2024,couldincreaselaborcostsandimpactprofitabilityforbothfranchiseesandcompany−operatedrestaurants[114].−Thecompanyemphasizescontinuoustraininganddevelopmentforemployeestoenhancetalentandoperationaleffectiveness[61].FinancialPerformance−Totalrevenuesfor2024reached8,406 million, up from 7,022millionin2023,representinganincreaseofabout19.61,021 million, a decrease from 1,190millionin2023,whichisadeclineofapproximately14.23.21 in 2024 from 3.82in2023,reflectingadeclineofabout15.95,987 million in 2024, compared to 4,971millionin2023,indicatinganincreaseofapproximately20.4636 million, down from 1,181millionin2023,adecreaseofapproximately46.313,455 million in 2024 from 12,854millionin2023,anincreaseofabout4.71,860 million in 2024 from 1,599millionin2023,reflectingagrowthofapproximately16.31,503 million in 2024 from 1,323millionin2023,reflectingagrowthof13.6133 million impact on income from operations during 2024[315]. Sustainability and Community Engagement - The company is committed to sustainability, focusing on reducing its environmental footprint and supporting communities[54]. - The Tim Hortons Foundation's annual Camp Day has sent thousands of youth to a multi-year camp-based program through December 31, 2024[60]. - The Popeyes Foundation has provided millions of meals to children in local communities since 2018[63]. - The Tim Hortons annual Smile Cookie initiative has raised millions for local charities since its inception in 1996[60]. Risks and Compliance - The company may face reputational harm and financial penalties if it fails to comply with privacy and data protection laws, especially as it expands its digital platforms[120]. - The company is subject to income and other taxes in Canada, the U.S., and various foreign jurisdictions, which may lead to unanticipated tax liabilities affecting profitability[135]. - Future changes in tax laws, including the OECD's global minimum tax of 15%, could adversely impact the company's effective tax rate and financial results starting January 1, 2024[142]. - The company faces evolving requirements regarding social and environmental sustainability, which could lead to increased costs and risks if not managed effectively[104]. - Outsourcing certain functions to third-party vendors introduces risks related to performance failures, which could disrupt operations and incur additional costs[105]. Acquisitions and Investments - The acquisition of Carrols Restaurant Group Inc. was completed on May 16, 2024, with the company acquiring 85% of the outstanding shares for a total of 1,988millioninconsolidatedtotalassetsand1,171 million in consolidated total revenues[344]. - The fair value of acquired operating lease assets was determined to be 705million,whileoperatingleaseliabilitieswerevaluedat684 million, and reacquired franchise rights at 363million[354].−Thecompanyrecordedanindefinite−livedintangibleassetfortheFirehouseSubsbrandvaluedat816 million as of December 31, 2024[357]. - The Carrols Acquisition in 2024 increased the number of employees by approximately 24,000, leading to additional liabilities and costs related to labor and regulatory compliance[95]. - The company plans to refranchise the majority of the acquired Carrols restaurants over the next several years, dependent on sourcing qualified franchisees and financing[96]. Financial Instruments and Hedging - The company has cross-currency rate swaps with a notional value of 5,700millionbetweenCanadiandollarsandU.S.dollars,and2,750 million between Euros and U.S. dollars, to hedge against foreign currency exchange rate volatility[313]. - The company has entered into interest rate swaps with a total notional value of 4,120milliontohedgeagainstinterestratechangesonitsTermLoanFacilities[316].−Ahypothetical1.0020 million[317]. - The company does not use financial instruments to hedge commodity prices, which may lead to higher costs depending on market conditions[320]. Internal Controls and Audits - The effectiveness of internal control over financial reporting was assessed as effective as of December 31, 2024, based on criteria established by COSO[343]. - The company’s internal control over financial reporting was audited and found to be effective, with no material weaknesses identified[363]. - The company’s financial statements were audited and presented fairly in all material respects, conforming to U.S. generally accepted accounting principles[349].
Restaurant Brands International(QSR)2025-02-21 20:57