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Tim Hortons parent company Restaurant Brands International Inc. is adding another fast-food brand to its roster, with a US$1-billion all-cash deal to buy Florida-based sandwich chain Firehouse Subs.

Toronto-based RBI, which also owns Burger King and Popeyes, announced the deal on Monday. The company plans to fund the acquisition with a combination of debt and cash on hand.

Firehouse Restaurant Group Inc. will be the smallest brand in RBI’s portfolio, with about 1,200 locations in the United States, Canada and Puerto Rico – compared with Burger King’s global total of 18,900, Tim Hortons with 5,100 restaurants and Popeyes with 3,600. Firehouse has tripled its number of locations since 2010, and part of RBI’s plans will be to grow that number, especially in North America, RBI chief executive officer Jose Cil said in an interview.

In Canada, the chain has just 47 restaurants, but prospective franchisees have expressed interest, Mr. Cil said. And RBI also eventually plans to expand Firehouse globally, with particular focus on countries where it has existing relationships with franchisees.

“We have strength in those markets with our brands. … We’re in a pretty good position to be able to capture that potential,” Mr. Cil said. “But it’s early days. We just signed this last night at 11:54. So we haven’t fully digested it.”

The COVID-19 pandemic has dealt a severe blow to the restaurant industry. Restrictions on indoor dining in many jurisdictions were more damaging to full-service restaurants than to quick-service locations already set up for takeout. But chains including Tim Hortons, which depends heavily on office commuters grabbing coffee, breakfast and lunch on the go, have still felt the effects. Firehouse Subs is more concentrated in suburban areas. CEO Don Fox said in an interview that the chain had 10 weeks of sales declines, but has otherwise grown its business during the pandemic.

Year-to-date, the company’s same-store sales have risen by 20 per cent compared with two years ago – a metric that tracks growth not affected by new store openings.

Mr. Fox said that before the pandemic, customers were less likely to consider Firehouse for takeout orders – “especially because we serve hot subs, and that lends itself traditionally to a little bit more dine-in,” he said. But since restrictions related to COVID-19 forced diners to try something different, Firehouse has seen a shift. “Not only have we held that business, we have doubled down,” he said.

RBI says it expects Firehouse to generate about US$1.1-billion in system-wide sales this year. (System-wide sales are the total sales recorded at both company-owned and franchised restaurants, and the company’s royalty revenues from franchisees are calculated based on a percentage of those sales.) Ninety-seven per cent of its locations are franchises.

RBI also plans to build up the chain’s digital capabilities. Firehouse already offers mobile ordering and payment, and has a loyalty program with almost 3.5-million members. Mr. Cil noted that Tim Hortons has also done significant work to offer rewards to encourage customers to use its mobile app.

“The opportunity that exists between Firehouse Subs’ brand and their digital business, and the work that we’ve done – we think it’s one of the biggest opportunities to accelerate the brand that Firehouse Subs has today,” Mr. Cil said.

Firehouse Subs was founded in 1994 by brothers Chris and Robin Sorensen, both former firefighters. Mr. Fox and chief financial officer Vincent Burchianti will remain with Firehouse Subs after the deal, and the company will continue to be based in Jacksonville, Fla. It was important to the founders to find “good stewards” of the brand that would also help it grow, Mr. Fox said. He added that under new ownership, the chain is not planning to change its products.

“We are so committed to the quality component,” Mr. Fox said. “... We don’t want to tinker with that.”

RBI said on Monday that the deal is expected to close in the coming months pending regulatory approvals.

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