Transaction Details and Strategic Cooperation
The “new owner” of Burger King’s China business has been finalized. On November 10th, a reporter from The Paper learned from Burger King China that CPE Source Peak announced a strategic cooperation with the Burger King brand, which is fully owned by Restaurant Brands International (RBI). The two parties will establish a joint venture (“Burger King China”) to kick off the next phase of growth for Burger King in the Chinese market.
CPE Source Peak will inject an initial capital of $350 million into Burger King China to support the expansion of its restaurant stores, marketing efforts, menu innovation, and operational capability enhancement, so as to seize the opportunities in China, one of the world’s fastest-growing consumer markets. In this transaction, a wholly-owned affiliated enterprise under Burger King China will sign a 20-year master development agreement, which will grant it the exclusive right to develop the Burger King brand in China. Upon the completion of the transaction, CPE Source Peak will hold approximately 83% of the equity in Burger King China, while RBI will retain about 17%.
CPE Source Peak is an asset management institution rooted in China with a global perspective. It is reported that since its establishment, CPE Source Peak has continuously deeply engaged in the chain consumer service sector, with a cumulative investment amount of approximately RMB 10 billion in related fields. It has successively invested in a number of industry-leading enterprises, including Mixue Bingcheng, Aier Eye Hospital, Laopu Gold, Pop Mart, Beauty Farm, Yonghe Hair Transplant, and Siyu Hair Care. In the future, after the investment, CPE Source Peak will fully empower Burger King China, focusing on key operational links such as product upgrading and iteration, brand marketing upgrading, offline store expansion, online channel restructuring, digital system construction, and financial optimization. According to the overall plan, the two parties aim to expand the number of Burger King stores in the Chinese market from the current approximately 1,250 to over 4,000 by 2035 and achieve sustainable same-store growth.
Joshua Kobza, CEO of RBI, stated: “China remains one of the most attractive long-term growth markets for Burger King worldwide. The recent investment and the joint venture established this time demonstrate our confidence in the Chinese market. CPE Source Peak has strong capital strength and rich experience, not only possessing outstanding leadership but also accumulating profound expertise in the consumer and catering fields. It is an ideal partner to help Burger King China start a new chapter. By combining Burger King’s brand advantages and global scale with CPE Source Peak’s local market resources and operational expertise, we believe this cooperation will fully unlock the growth potential of the Chinese business.”
On February 18th this year, RBI Group, the owner of the Burger King brand, announced that after completing the transaction with TFI Asia Holdings BV (“TFI”) and Pangaea Two Acquisition Holdings XXIII Limited (“Descartes Capital”), a subsidiary of RBI now holds nearly 100% of the equity in Burger King China. RBI has been seeking a new local partner to invest in and operate this business, that is, to cooperate with experienced local catering operators around the world while maintaining a business model dominated by franchising.
On June 12th this year, on the 20th anniversary of Burger King’s entry into China, its parent company RBI Group announced the launch of a series of result-oriented strategic initiatives to further deepen its firm commitment to the Chinese market. These initiatives include building a capable local leadership team, optimizing development strategies, promoting effective marketing, and focusing on core brand assets (including its iconic product, the Whopper). Currently, these initiatives have shown positive initial progress. Danny Tan, a senior executive with decades of experience in the Chinese catering industry, has been appointed as Deputy CEO and concurrently serves as Chief Supply Chain Officer. Charles Xue has taken up the newly established position of Chief Transformation Officer at Burger King China.
In addition, as part of the optimized development strategy, Burger King China will conduct a comprehensive assessment of its restaurant store layout and close some stores with poor locations and operations. This adjustment is expected to lead to a decline in the total number of Burger King China stores in 2025. To offset part of this impact, Burger King China plans to open 40 to 60 new restaurants simultaneously. The new stores will be strategically located in core business districts of first- and second-tier cities where the brand has a solid foundation and clear growth momentum.
Trend of Foreign Consumer Brands Adjusting Their Chinese Business Layout
Notably, in recent years, many foreign consumer brands have sold part of the equity of their Chinese businesses to Chinese capital for “management”, further strengthening localization. At the same time, introducing Chinese investors is also conducive to risk diversification.
On November 4th, Starbucks Coffee Company announced a strategic cooperation with Boyu Investment, a Chinese alternative asset management company. The two parties will establish a joint venture to jointly operate Starbucks’ retail business in the Chinese market. According to the agreement, Boyu will hold up to 60% of the equity in the joint venture, while Starbucks will retain 40% and will continue to be the owner and licensor of the Starbucks brand and intellectual property rights, authorizing the newly established joint venture. Based on an enterprise value of approximately $4 billion (excluding cash and debt), Boyu will obtain its corresponding equity interests. Starbucks expects the total value of its Chinese retail business to exceed $13 billion, which consists of three parts: the proceeds from transferring the controlling stake in the joint venture to Boyu, the value of the equity interest retained by Starbucks in the joint venture, and the continuous licensing income to be paid to Starbucks over the next decade or more. The two parties are committed to gradually expanding the number of Starbucks stores in China to 20,000 in the future.
In terms of other fast-food brands, in August 2017, McDonald’s China completed its equity transformation and promoted its business development through franchising, officially entering the “Golden Arches” era. Currently, the CITIC Capital consortium is the controlling shareholder of McDonald’s China. Since entering the Golden Arches era, McDonald’s China has become the market with the second-largest number of McDonald’s stores globally and also the fastest-growing one. Approximately half of the newly opened McDonald’s restaurants worldwide are in China.
In 2016, before Yum China was spun off and listed independently, it also introduced two Chinese shareholders: Primavera Capital Group and Ant Group. Yum China is the largest catering company in China. It was independently listed on the New York Stock Exchange on November 1, 2016, and listed on the Hong Kong Stock Exchange on September 10, 2020. Yum China holds the exclusive operation and licensing rights for three brands – KFC, Pizza Hut, and Taco Bell – in the Chinese market. It also fully owns the chain restaurant brands Little Sheep and Huang Jihuang, and has cooperated with Lavazza to explore and develop Lavazza coffee shops in China.