everstone: Everstone Capital in talks to offload Burger King stake

Private equity firm Everstone Capital is in talks with General Atlantic to sell its stake in the India master franchise of American fast-food restaurant chain Burger King, people directly aware of the matter said.

Everstone Capital, through its investment vehicle QSR Asia Pte Ltd, holds a 40.9% stake in Restaurant Brands, which holds the licence to operate Burger King restaurants in India.

Everstone-backed companies also run sandwich and salad chain Subway and Lavazza in India under licence from their American and Italian parents. “Everstone, which has been operating Burger King in India since 2013, wants to exit its stake in the quick service restaurant chain,” one of the people said. “Talks with General Atlantic and a few other PE funds are on, but General Atlantic is the front-runner as of now.”

Email queries sent to the offices of Everstone Capital and General Atlantic remained unanswered as of press time on Thursday.

Everstone Capital, the private equity arm of Everstone Group, has a large exposure to businesses focused on India and Southeast Asia. General Atlantic has interests in technology, financial services, retail and consumer businesses, with previous investments include edtech company Byju’s and Reliance Retail.

Burger King competes with larger brands like McDonald’s and KFC in India for a share in the quick service restaurant space, a highly competitive and capital-intensive market.

Restaurant Brands Asia was set up in 2013, with Everstone and Burger King entering a partnership to launch the latter’s fast-food business in India. As of December 2022, Restaurant Brands Asia had a store count of 379 stores in India. The company said in an earnings statement that it set up 72 Burger King cafes in the quarter ended December 31, when it reported a consolidated net loss of ₹50.4 crore on revenue of ₹526.3 crore. It operates Burger King restaurants in India and Indonesia.

“Tapering down of same-store sales growth in India over the last three quarters despite accelerated penetration of BK Cafe and incremental premium launches has been concerning,” ICICI Securities wrote in a report last month on the company.

After a sharp revival after the pandemic, business for QSR chains slowed in the December quarter, with steep food inflation leading to weak consumer spending.

“The QSR business comes with risks. Cost inflation, shift in consumption patterns to premium dining are key challenges,” said one of the people mentioned earlier.

In the October-December 2022 quarter, Pizza Hut reported a sequential sales decline. Same-store sales growth of Sapphire Foods India, which operates Yum Brands-owned Pizza Hut and KFC, declined 4% in the quarter, while Jubilant FoodWorks-run Domino’s reported flat growth.

Food search and delivery platform Zomato, too, reported a slowdown after October. Growth in food delivery in the December quarter was 0.7% sequentially.