This is an English adaptation of a FoodBud historical article originally published on August 20, 2022.
In August 2022, as Chinese media focused on Popeyes store closures in China, the larger issue was a change in the brand's China operating rights. The dispute involved three parties: Restaurant Brands International (RBI), the parent company of Burger King and Popeyes; TAB Food Investments (TFI), the Turkey-based operator holding China rights for Burger King and Popeyes; and Cartesian Capital, the major shareholder behind Tims China.
TFI had previously planned a U.S. listing. At that time, disclosures indicated it also intended to obtain Popeyes' China rights. After the IPO plan stalled, the China-rights plan also slowed.
Popeyes officially entered China in 2020. By the end of June 2022, it had opened only 9 stores in the market.
Earlier in 2022, RBI disclosed that it would pay USD 100 million to TFI in connection with a dispute over Popeyes' China rights. TFI had obtained those rights in 2019, with a plan to open 1,500 Popeyes stores in China within 10 years.
From the current situation, RBI appeared dissatisfied with the pace of Popeyes China development under TFI. Against that backdrop, Cartesian Capital taking over the rights was a logical possibility. Tims China, backed by Cartesian Capital, had entered China in 2019 and already exceeded 400 stores.
The disagreement also reflected different views on China between Cartesian Capital and TFI. The two sides had previously diverged over whether Burger King China should pursue a listing.
Cartesian Capital and TFI had a deep relationship, especially through Burger King China. Their cooperation also extended to companies in TFI's broader ecosystem, including TAB Gida and Ekmed.
For Burger King China, Cartesian Capital and TFI first formed a joint venture, Pangaea Foods, with Cartesian holding 31% and TFI holding 69%. Pangaea Foods then formed another joint venture with RBI, Pangaea Foods (China), in which RBI held 27.5%.
TFI obtained Burger King China's 20-year operating rights in 2012, covering the period from 2012 to 2032.
In 2017, TFI prepared for a U.S. IPO, but abandoned the plan in 2018. Its prospectus discussed whether Burger King China should list separately. Cartesian Capital supported a listing, while TFI worried that a listing would distract the China team.
In 2019, there were still reports that Burger King China planned a Hong Kong listing, but nothing came of them.
Also in 2019, Cartesian Capital began a separate China venture with the Tims coffee rights. This time it did not bring in TFI, instead introducing local capital partners including Tencent, Sequoia Capital and Zhongding Capital. In just over three years, Tims China was steered toward the U.S. capital market, a notably fast pace.
TFI is Burger King's largest franchisee globally.
As of the end of June 2022, TFI operated the following in Turkey:
That gave TFI 1,336 stores in Turkey. In China, its remaining major business was Burger King China, with 1,337 stores. TFI's total store count was 2,682.
Subway had also recently entered Turkey through a new franchise agreement with TFI, effective October 1, 2022. The agreement called for Subway to expand from 80 stores to 400 stores in Turkey within 7 years.
TFI was built through Burger King. Key milestones included:
According to 2017 disclosures, 76% of TFI's stores were company-operated and 24% were franchised. Among franchised stores, 40% were in China.
TFI's system expanded from 155 stores in 2006 to 2,682 stores in 2022.
In 2017, TFI estimated Burger King China's potential at 2,500 stores. FoodBud viewed that as conservative, noting that KFC already had more than 8,000 stores in China and McDonald's China had more than 4,700.
FoodBud also observed that Burger King's China performance had not been especially strong, and that poor service had become a common consumer complaint.
TFI also built a supporting ecosystem from the time it began operating Burger King in 1995. Fasdat, one of its earliest companies, became one of Turkey's largest cold-chain logistics operators. TFI-system restaurants sourced ingredients from Fasdat. The group also included frozen dough, meat processing, potato supply and marketing companies. Fiyuu combined a delivery app, call center and delivery-staff system to handle delivery operations.
TFI's Burger King China agreement with RBI granted exclusive rights for 20 years, from June 15, 2012 to June 15, 2032.
If store-count targets were not met, RBI had the right to terminate the rights, though some shortfalls had been waived.
When TFI obtained Burger King China rights in 2012, its joint venture with Cartesian Capital was required to provide USD 150 million in cash to Burger King China. According to a 2019 public interview, TFI said its total investment in China had reached USD 500 million.
For new Burger King China stores, TFI had to pay RBI an initial fee of USD 50,000. Any initial fees charged to sub-franchisees also had to be passed to RBI, and China initial franchise fees could not exceed USD 50,000.
RBI also collected 3% to 5% of sales on a recurring basis. Advertising fees were collected monthly from sales at no less than 5% and placed into a marketing fund.
Default provisions included, for example, failure by TFI to pay amounts due to RBI exceeding USD 25,000, if not corrected after written notice.
For Popeyes Turkey, TFI's exclusive agreement specified annual store-opening requirements, with progress to be reviewed each year on December 15. Popeyes required TFI to pay RBI USD 100,000 in total franchise fees per year, 3.5% of store sales as royalties, and 2.5% of sales as marketing fees.
Compared with RBI brands, TFI's Sbarro Turkey rights carried lower fees. A new Sbarro store required a USD 5,000 franchise fee; after 100 stores, the one-time fee fell by USD 1,000. Royalties were 3.5% of sales.
For Arby's, TFI committed to reach at least 108 stores by the end of 2022. The one-time franchise fee was USD 100,000. From January 2016, TFI paid an annual non-refundable franchise fee of USD 50,000; from January 2018, that annual fee rose to USD 100,000. Store-level royalties were 3% of sales, and marketing fees were at least 4% of sales.
Note: IPO references, store targets, rights timelines and forward-looking figures are historical as of the original August 20, 2022 article.