Why Burger King Is Now Warren Buffett’s Favorite Franchise
The octogenarian billionaire Warren Buffett is often photographed enjoying a Dairy Queen Blizzard at a local Omaha DQ. At the Berkshire Hathaway annual investor meeting each spring, Buffett makes a point to eat a Dilly Bar before the formal meeting gets underway. Buffett promotes Dairy Queen for a reason. Berkshire Hathaway acquired the franchisor, International Dairy Queen, back in 1997 for $585 million in cash and stock.
Berkshire also invested $3 billion in 2014 in Restaurant Brands International (NYSE-QSR)—a merger of the fast food giants Burger King and Tim Hortons. The investment was a special issue of preferred stock that pays a 9% annual dividend. That’s $270 million per year to Berkshire. In addition, Berkshire received 8,438,225 common shares of Restaurant Brands as a kicker. Those shares now trade for roughly $35 a share and are worth $300 million.
In his annual letter to Berkshire shareholders released last weekend, Buffett sang the praises of Jorge Paulo Lemann and his 3G Capital Partners, the architects of the Burger King and Tim Hortons merger, and the Heinz buyout, which Buffett also financed.
“They could not be better partners. We share with them a passion to buy, build and hold large businesses that satisfy basic needs and desires,” said Buffett.
International Dairy Queen has been no slouch in filling Buffett’s coffers, especially since John Gainor became CEO in 2008. In 2014, the last year financial statements are available for the treats chain, it paid $50 million in cash dividends to Berkshire.