Popeyes and Tim Hortons Parent Unveils $45M Investment to Build in China

RBI Acquires Popeyes' China Operations for $15 Million: What It Means for the Market

Interesting news out of China with RBI's purchase of Popeye's China restaurants from Tim's China for $I5 Million.

RBI is also partnering with Cartesian Capital Group to pour an additional $50 Million into the beverage business. In the very long term, this may make some sense but the results to date are not encouraging and look more and more like a financial play similar to BK India and BK China.

Tim's China SPAC has been a disappointment to retail investors and with over 900 locations to date, the business is barely breaking even. From where I sit, I cannot understand why anyone would continue to invest in a business that cannot generate returns after 900 locations opened and operating in a massive red ocean of low-price competition from Chinese coffee brands. I doubt that Popeye's China prospects are much more encouraging unless RBI sees a way to monetize the "China Dream" with retail investors.

A smarter course of action in my view would be for RBI to look for local acquisitions in China that do not compete with the likes of YUM and have defensible niches in the marketplace that are not subject to aggressive price competition. Private Equity is full of portfolio companies they would like to unload and are willing to deal on valuation.

Jollibee's acquisition of Highland Coffee (Vietnam) and the recent majority investment in Compose Coffee (Korea) make far more sense to me.

After almost 25 years actively involved in the China restaurant and retail markets, I look back at 2016 as the peak for store-level margins. I doubt we will revisit that era for quite some time.

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