Burger King is in talks to buy Canadian coffee chain Tim Hortons, and shares are going crazy.
The acquisition would create the third largest fast food company in the world and allow Burger King to move its headquarters to Canada, which would shave a couple percentage points off its corporate tax rate.
The move isn’t surprising considering the recent shift in Burger King’s strategy since its new CEO took over last year.
Daniel Schwartz, 33, had a background in private equity — not fast food — when he took the helm at Burger King in June 2013.
After surrounding himself with a young management team — including a 28-year-old chief financial officer — Schwartz began implementing deep cost-cutting measures to help the struggling burger chain generate more cash.
Under the direction of Burger King’s parent company, 3G Capital, Schwartz has helped reduce Burger King’s corporate headcount from 38,884 to 2,425 by refranchising restaurants, meaning those workers now report to franchise owners.
He has axed many executive perks, including lavish offices that employees called “Mahogany Row” and a $US1 million annual party at a chateau in Italy, according to Businessweek.
Schwartz has also negotiated deals with restaurant operators in Brazil, China, and Russia, which have helped grow the number of Burger Kings worldwide by 12% to 13,667 over the past year. A merger with Tim Hortons will help both chains grow faster worldwide.
Under Schwartz, in the first quarter of this year, Burger King’s same-store sales increased 2% and net income nearly doubled to $US60.4 million.
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