The Exchanges

Q And how did you come to join the organization?

A So I had joined the organization approximately a little less than eight years or nine years before out of the Harvard Business School. I joined out of school in the predecessor private equity firm they were starting in Brazil. And initially I started as an analyst. I evolved to become a partner, and most of my time there, I spent running one of the portfolio companies. At this company, there was a result of multiple railroad privatizations in Brazil. And that was a continuation of the model that had worked so far. To the extent that the partners were able to acquire a good business, one of the partners would take a CEO role in that business. So I was a continuation of that approach, and I ran the company all the way to taking it public in early 2004. Transitioned to a board role and moved my young family to New York City to start through G Capital.

AI assessment note: “I joined out of school in the predecessor private equity firm they were starting”

Q Before we dive into Burger King, I'd love to hear the broader history of the investments you've made at Three G Capital. Is it quite a different model when people think about a private equity organization?

A If you were to compare and contrast the approach at Three G Capital with a more traditional private equity, Approach. I think the three main points I would make is one, we are the largest investors. We, the partners and affiliated entities are the largest investors on this vehicles that do the deals. Number one. Number two, each vehicle is deployed entirely in one situation. So it's a hundred percent concentration. And thirdly, the intent with this business is always to be there for the long, long term. My co-founders have been investors of AB InBev now coming on 35 years. We investors in RBI for 14 years now and counting. And in terms of your question on the sequencing, we had an investment in CSX, which was a railroad, which was our first way of getting our, say, tolls in the water by virtue of not being involved in management just at the board. It was quite a successful investment for us. Multiple times our money on a declining market in the mid 2000. And so there was a crisis, which by the way, favored people to focus on efficiencies and things that we could have provide ideas. And that was a good investment, but also it reinforced it to us that the end game was to control something and be involved in management. And that in fact happened at Burger King. In 2010, and it's subsequent acquisitions of another three brands in the course of the last many years. Then we had an ac…

AI assessment note: “in terms of your question on the sequencing, we had an investment in CSX”

Q In this model where you're putting all your resources into a deal at a time, what does your team look like to execute this?

A Leadership that comes from someone that's a partner here, typically, meaning CEO, sometimes CFO, some backend functions with people that have experience in our system that worked in different deals with us, people from the business that have experience and knowledge, and by the way, people that will take advantage of a great opportunity to invest themselves or to roll their equity or to get more equity in the deal into the front of the house rolls. And then over time, we bring a lot of young talent in so that the company breeds its culture and breeds its talent over time, and you can see the result of that in a company like RBI, where today, 80% of the leadership team is people that are grown into the company.

AI assessment note: “Leadership that comes from someone that's a partner here, typically, meaning CEO, sometimes CFO”

Q When a company twice has said, uh, no thanks, and they tell you next to nothing in a small paragraph, how do you take it from there to a few months later getting a deal done?

A So we found that we spoke to a lot, try to find channels into the board, and then of course through those channels gain insight into what was going on to understand was this a unanimous basically no Where no one, we never would do a deal and everybody agrees, or is it something where there is some level of discussion and different views, and it turned out to be the latter. And we felt that the business was good enough and that we had enough financial wherewithal to make a better offer that potentially would enable that side of the argument to prevail. And then we felt that there were concerns about us and about basically that Tim Hortons in the past had been sold By the founders to Wendy's. And from Tim Horton's perspective, they didn't feel that this had been a great development for them. And they were able over time to be spun off of Wendy's, and they were independent again. The resistance to the deal was a thought process of, do we need to be owned by a U.S. burger chain again? And these burger chains, and sometimes it could be maybe short term, maybe they won't Focus on Team Horatis. We've got an afterthought, and we felt all the opposite of that. We thought it was a great business. We wanted to own it and develop long-term. We wanted to take it to the world, and we felt that we could help take Tim's Global, and so we felt that if we were granted the light of day in terms o…

AI assessment note: “try to find channels into the board, and then of course through those channels gain insight”

Q This owner operator playbook, what does that mean?

A It ultimately means that we get very, very hands-on in the business that we attempt to chart a path of value creation in the business that essentially typically has three phases to it. It does have an initial phase. Where we try to put together a team that combines some people that understand our ways of doing things, usually, frankly, on back-end leadership, like CEO, and then back-end positions, CFO, purchasing, and things like that. And we try to combine that with people from the business on the sales, marketing, front of the house jobs. And we try to initially make this first phase the business more efficient. That frees up cash flow. It frees up focus to enhance or resume, however the case may be, organic growth. And hopefully by the time we've established the basis of a culture and the business is clicking, we are able to source inorganic M&A Growth opportunities. So that is the process we typically go through.

AI assessment note: “It ultimately means that we get very, very hands-on in the business”

Q How far along in the trajectory of changing the business did you start thinking about acquisitions?

A That's a great question. The first thing that needed to change for us to do that was our balance sheet. We levered, what, quasi seven times, six and a half times off the gates. And we were a few years into this process back to two and change, or three, or not even three. So balance sheet first. So that was the first enabler. The second is we felt the first green shoots of what we're doing in terms of international restaurant growth expansion, in terms of turning the corner. On the same store sales into the domestic system. So we saw the green shoots on the organic side coming up, and we had the balance sheet, and we had the people. So we started to have some bandwidth in terms of people to do more. That got us again back on the hunt.

AI assessment note: “we were a few years into this process back to two and change”

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A We didn't. We were approached by a SPAC and that was basically run by people that we respected and knew, and they wanted to do a deal with us by virtue of which we would have become a public company. And of course, that was a process in terms of discussing valuation, And discussing how to deal with some of the incentives and things that are typically associated with SPACs, for which there was a limited space here, given the size of the deal. But that negotiation went well. The valuation was compelling enough. We respected the people that had the SPAC. We thought there would be good shareholders and good partners, and then we decided to proceed. So we weren't thinking about it.

AI assessment note: “We didn't. We were approached by a SPAC”

Q You're 14 years in. Do you start to think about an exit, or is this something you're planning to own for another 21 years?

A We love the business. We, I think, at the moment are so excited, first of all, with the team that we have in place. We have this combination of talent that grew up in the business. We have had the fortune of, finally, because we had conversations with our common friend, Patrick Doyle, for quite some time. Patrick really hit it out of the park in his tenure at Domino's. It's a landmark in this industry, and we're so fortunate to have him as our partner. And the combination of Patrick and the young team that we have there that came up through the business, I think we feel very, very good about people first. We feel very, very good about the continuation of the opportunity to open restaurants around the world. And to grow same store sales in the, all four brands still. So as a combination of those two things, I think this is as the company has publicly guided, they can grow high single digit same system wide sales for a long time. And the cash conversion of that, given the nature of the fully franchised business is one in which the company pays a lot of dividends today, by the way, we receive two thirds of our notional equity check a year. So it's very cash flowing and it has a great compounding line of sight ahead of us. Great team. So we're super excited to own it for many years.

AI assessment note: “So we're super excited to own it for many years.”