Tim Hortons‘ parent company will start publicly releasing average earnings results for its restaurant brands going forward in a bid to visibly measure the success of its franchisees as a newly appointed chief executive steps in next month.

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'Holding ourselves accountable': Tim Hortons' parent RBI to start releasing earnings per restaurant Back to video

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Restaurant Brands International Inc. executives said this will help the predominantly franchised business know how franchisees are doing and be transparent to shareholders on what they’re investing in.

“We’re going to publicly release the EBITDA per restaurant of our (four) brands as a way of holding ourselves accountable for what is ultimately the most important measure of success,” Patrick Doyle, executive chairman of RBI’s board, told investors on Feb. 22.

The move, first announced during the company’s earnings call on Feb. 14, comes as Joshua Kobza, the current chief operating officer, is set to take over as chief executive officer on March 1. Kobza will take over from current chief executive José Cil and inherit day-to-day leadership of the company that also owns the Burger King, Popeyes Louisiana Kitchen and Firehouse Subs brands.

One of the first and biggest things the incoming chief executive said he will be focused on as he takes on his new role is giving the five business units’ presidents “a bit more autonomy” in decision making.

“As I reflect upon my new role, one of the things that I need to do is really empower the business unit leaders around the world to be as autonomous, fast moving as possible and be able to have full ownership of their P&L (profits and losses) and their business. That will be one of my first priorities,” Kobza said.

The announcement on earnings reporting per restaurant also comes as a group of franchisees decided to go public with complaints over cost increases for inputs such as coffee and sandwich ingredients that they are forced to purchase from head office. A spokesperson for RBI said there was no connection between the new disclosures and the group’s public complaints.

The Alliance of Canadian Franchisees told select news outlets earlier this month that its members’ profits had fallen to a “crisis point,” creating some drama ahead of the RBI’s quarterly earnings update.

Executive chairman Doyle had said the company now publicly reporting on franchisee profitability annually will “elevate our accountability to our franchisees even further.” He blamed the drop in profitability on commodity cost spikes, “generationally high inflation” and the lingering impacts of the pandemic on store traffic.

“That is ultimately what will drive the success of RBI. What’s going to drive returns for our shareholders is having businesses that are so compelling to our franchisees that they want to own more of them and they want to build more of them,” Doyle said on Wednesday.

The average Tim Hortons restaurant made $220,000 in annual earnings before interest, taxes, depreciation and amortization (EBITDA), the executive chair told analysts during last week’s earnings call. That’s about $100,000 less than in 2018, which is the last time RBI reported the metric, according to a transcript of the company’s 2019 investor day presentation.

Veritas Investment Research Corp. analysts Kathleen Wong and Maggie Wang said restaurant EBITDA is the best metric for investors to evaluate management’s execution on its strategy.

“EBITDA per restaurant for each of the four brands allows us to calculate the return on investment or cash-on-cash return for each brand,” Wong said in an email, noting that the investment cost at Tim Hortons is different than at Burger King or Popeyes.

The quickest way to turn around a restaurant at the bottom end of the performing curve is to sell it to a high-performing franchisee, the Veritas analysts said. They added that they expect to see some underperforming restaurants closed or sold to high-performing franchisees.

In a note to clients, Bank of America analyst Sara Senatore said Doyle’s impact since taking over as the board’s executive chair in November has shown across the changes in leadership, improved franchisee relations and better communication.

“CEO Jose Cil’s departure essentially confirms widespread view that Doyle is CEO in all but name,” Senatore wrote.

Doyle, a former chief executive of Domino’s Pizza, is a veteran in the restaurant industry. During his tenure there, home market franchisee profitability doubled.

With files from Jake Edmiston

• Email: dpaglinawan@postmedia.com | Twitter: denisepglnwn