Author: He Danlin (original)
Just now, US-listed Tims Tianhao China (Nasdaq: THCH) has released two blockbuster news in a row.
The restaurant company announced in an announcement that it has received a total of up to US$65 million (about 472 million yuan) in financing and additional funding from founding shareholders Cartesian Capital Group, LLC and international restaurant group RBI (NYSE: QSR).
At the same time, Tims Tianhao China announced in the above announcement that a subsidiary of RBI has acquired Popeyes China's business from Tims Tianhao China for an enterprise value of US$15 million. This means that Popeyes China traders will change from Tims Tianhao China to Popeyes' parent company RBI.
Below, the snack generation will take you to pay attention to it for the first time.
The coffee business raised nearly 500 million
In the current Chinese coffee market, this major financing undoubtedly provides Tims Tianhao China with more sufficient "ammunition".
According to the announcement, Tims Tianhao China has recently received a total of up to $65 million in financing and additional funding from founding shareholder Descartes Capital and parent company RBI. The financing consists of $50 million in convertible bonds, of which $40 million has been paid at closing, with the remainder to be paid over the next seven months, each subject to certain conditions.
The three-year bonds are convertible into new convertible preferred shares issued by Tims Tianhao China, which are convertible into ordinary shares based on 110% of the weighted average transaction price (VWAP) for the five trading days prior to the closing of the transaction.
According to the announcement, more details of the transaction will be filed with the SEC in a 6-K filing.
"We are pleased to announce this significant financing plan, which demonstrates the confidence of the founding shareholders in Tims' China business and the Chinese coffee market." Lu Yongchen, CEO of Tims Tianhao China, said in the announcement today.
He also noted that this year will be a pivotal year for Tims Tianhao China, "Optimizing our balance sheet is an important step in ensuring our long-term success in this highly competitive market. ”
It is worth noting that the two "big financiers" who have invested in Tims Tianhao China this time are not small and are not simple financial investors. In addition to the "money ability" that they have once again showcased, they also have rich experience and good strength in the field of catering, which is expected to continue to empower Tims.
Tim Hortons belongs to the RBI Group, which also owns a number of well-known restaurant chain brands such as Burger King and Popeyes. According to the financial report, in 2023, RBI's system-wide sales will be $42.9 billion, total revenue will be $7 billion, net profit will be $1.7 billion, and it will have 31,070 stores.
Tims China is a joint venture established by RBI and Descartes Capital in 2018, and its shareholder lineup also includes Tencent, Sequoia Capital, Bell Capital, etc. In 2019, Tim Hortons officially entered the Chinese market, and after just over 3 years, it was listed on the NASDAQ in September 2022.
The Canadian-founded coffee chain has Descartes behind its rapid growth in the Chinese market and its plans to go public in the United States. Peter Yu, Managing Partner of Descartes Capital Group, also serves as Chairman of the Board of Directors of Tims Tianhao China.
Since its inception in 2006, Descartes has managed more than $3 billion in capital for investors and committed more than $2.5 billion to more than 70 companies in more than 20 industries, including Burger King China and Tims China.
"Coffee" says goodbye to "fried chicken"
Today, while announcing the financing benefits, Tims Tianhao China also announced a rather surprising news: after a short period of "CP" for more than a year, the coffee chain brand Tim Hortons and the fried chicken chain brand Popeyes will each "fly solo".
According to the above announcement, a subsidiary of the international restaurant group RBI, on a cash-free and debt-free basis, acquired the business of Popeyes China from Tims Tianhao China for an enterprise value of US$15 million.
At the same time, Tims Tianhao China repaid the deferred consideration of Popeyes China's former shareholders by issuing a US$15 million convertible bond.
Xiaoshidai has introduced that in March 2023, through the all-stock acquisition, Tims Tianhao China officially obtained the exclusive rights and franchise rights of Popeyes in Chinese mainland and Macau, changing from a single-brand to a multi-brand catering platform. Now, Popeyes' China business is back in the hands of RBI.
"This transaction will drive our business growth, while also enabling us to focus and deepen our core business of Tims Tianhao Coffee." Lu Yongchen said in an announcement today.
The relevant person in charge of Tims Tianhao China pointed out to Xiaoshidai that this repurchase decision is the result of the "re-evaluation based on the strategic layout" of Tims Tianhao China and RBI, which can allow Tims Tianhao Coffee and Popeyes to "find a more suitable development model for themselves".
For Tims Tianhao China, with the divestment of the fried chicken business, it will be able to focus on the core coffee business, and go all out to fight its way out of the current abnormal "involution" coffee track.
"This strategic adjustment will help Tims optimize resource allocation and focus on its core business, making its organizational structure simpler, more efficient, more precise and pragmatic." The relevant person in charge of Tims Tianhao China told Xiaoshidai today that investing energy and money in the coffee business "is a decision with higher returns." ”
Specializing in coffee with all his might
The catering company, which relied on investors to "pull up blood bars" and began to specialize in coffee business, said that in the future, Tims Tianhao Coffee will mainly focus on three directions: further improving the profitability of stores, practicing the differentiated route of "coffee + warm food", and continuing to expand the store network.
First of all, after "making coffee with all its might", the pace of Tims Tianhao Coffee's store expansion is expected to accelerate.
As of March 31, 2024, the number of Tims Tianhao Coffee and Popeyes stores nationwide has reached 917 (including 14 Popeyes stores), covering 70 cities. According to the previous plan, the coffee company will open more than 2,750 profitable stores by 2026.
Xiaoshidai once introduced that since entering the Chinese market in 2019, Tims Tianhao Coffee has been mainly directly operated stores for a long time; Now, the franchise model has become one of the key strategies for accelerating the expansion of stores in the Chinese market, especially through the franchise strategy to increase the coverage of the sinking market.
At present, the company has a total of three models: "City Franchise", "KA Franchise" and "Partner Project". City franchise is to cooperate with local franchisees; KA franchise is to cooperate with large chain enterprises to open stores into gas stations, convenience stores, home appliance stores, etc., all of which are "shop-in-shop" models; The partnership project is the latest single franchise model opened in September last year.
"Through the combination of self-operation and a variety of franchise strategies, the company has increased the store density in existing cities, and at the same time expanded the coverage of new cities, and entered second- and third-tier cities such as Huzhou and Huizhou." When Tims Tianhao China released its quarterly report earlier this month, it pointed out that the first store in Huzhou was widely welcomed by local customers, and it increased the coverage of the sinking market through the franchise strategy and obtained market verification.
Second, the coffee chain is continuing to improve profitability. In the first quarter, Tims China's total revenue reached 346.8 million yuan, a year-on-year increase of 3.1%, and system sales reached 363.5 million yuan, a year-on-year increase of 7.1%; The company's adjusted EBITDA at the store level was 6.1 million yuan, up 2.0% year-over-year, achieving seven consecutive quarters of positive.
"In the future, we will continue to make efforts to improve quality and efficiency, and strive to achieve the goal of positive adjusted EBITDA at the corporate level this year." Lu Yongchen said earlier this month.
Finally, compared with other coffee chain brands, Tims Tianhao China has repeatedly stated that its differentiated competitive advantage lies in the characteristic combination of "coffee + warm food". It can be seen that after bidding farewell to the "fried chicken friends", Tims Tianhao Coffee will still promote the food route.
"In addition to providing freshly brewed coffee, we are committed to providing customers with freshly prepared warm food and bakery products in most of our stores, especially flagship and standard stores. Therefore, we are a warm food café, which is actually what distinguishes Tims from other brands in terms of business model. Lu Yongchen once pointed out to Xiaoshidai.
According to the first quarter report of 2024, the proportion of orders for Tims Tianhao coffee including food rose to 52.7%, an increase of 8.5 percentage points from 44.2% in the same period in 2023. "The combination of 'coffee + warm food' is constantly releasing market vitality, and at the same time bringing new notes to the innovation and development of China's coffee industry." Tims Tianhao China said.
Looking ahead, Lu Yongchen concluded that Tims China puts profitability at the core of its strategic priorities and is committed to further improving its supply chain capabilities and operational efficiency. At the same time, we will continue to enhance the product competitiveness of the "coffee + warm food" dual category; Further promote the franchise strategy, expand the scale advantage and brand influence.
Popeyes' China operations changed hands
As the "brother brand" of Burger King and Tim Hortons, Popeyes is one of the world's largest fried chicken fast food restaurants, which first entered the Chinese market in 1999, but has a tortuous history of development with several ins and exits, and has changed "traders" several times.
When the time came to 2023, Tims Tianhao China took over the business of this fried chicken brand in China. The "coffee + fried chicken" CP formed by Tims Tianhao Coffee and Popeyes was once considered to have a huge synergistic effect.
In February last year, when announcing the merger with Popeyes China, Tims said it expected its two brands to create significant synergies in the supply chain, operations and new restaurant development, with the two brands having a "natural fit, complementary products and exceptional growth potential".
In January this year, Tims Tianhao China told Xiaoshidai that the synergy effect of the two brands has been manifested in many aspects, including store development, supply chain management, space design, product research and development, logistics and transportation, digital construction, marketing interaction, etc. For example, half of the Popeyes stores are located in malls that also have Tims, which is a great help in negotiating lease terms.
Before Tims China took over, Popeyes had once again closed all of its stores in the Chinese market. After adjusting Popeyes' brand positioning, menu and store design, Tims China relaunched the brand.
For example, in terms of menus, the differentiating feature of the new Popeyes restaurant is to focus on "Cajun flavor", retaining the core and unique global best-selling products, while partially adjusting the sauce recipe, process, taste and other aspects to make it more suitable for the tastes of Chinese customers.
So far, Popeyes has opened a total of 14 stores. According to the previous plan, Popeyes plans to open 500 restaurants in the Chinese market in the next 5 years and expand to more than 1,700 restaurants in 10 years.
At this time, it is unclear how RBI will operate and expand Popeyes' China business in the future, and whether it will seek to re-establish new franchise partnerships.
However, it is worth noting that RBI has announced the appointment of Patrick Siewert, Carlyle's former Asia partner, as a senior advisor for the Asia Pacific region. He will be reported to advise on different aspects of RBI's business in the Asia Pacific region, including new master franchise partnerships. This may have an impact on the subsequent development of Popeyes' business in China.
What is certain is that China is undoubtedly one of the key markets for RBI's business expansion, regardless of the latest "lineup" of its three major F&B brands – Burger King, Tims and Popeyes.
As of December 31, 2023, Chinese mainland was RBI's third-largest market by number of stores, with a total of 2,325 restaurants, ranking behind the United States (11,655) and Canada (4,673). By continent, RBI has more than 4,500 restaurants in Asia, meaning more than half of them are in Chinese mainland.
"We strongly believe that China is an attractive growth market for our brand. Given the vast geographical scope and population size of the Chinese market, to be successful, our partners must make a long-term capital commitment, must have a long-term vision, and are committed to growing their brands in the face of fierce competition. Josh Kobza, who took over as CEO of RBI in March last year, said.
A few days ago, RBI Executive Chairman Patrick Doyle participated in Bernstein's fireside chat and said that in the next five years, RBI plans to build 3,000 new stores in the Asian market, half of which is expected to come from the Chinese market, "this is a market we have to win." "We're working with our partners to try to get our business on the right track." That's the focus of the work, he said.