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Press Release Burger King France Announces Acquisitions And

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Press Release Burger King France Announces Acquisitions And PRESS RELEASE BURGER KING FRANCE ANNOUNCES ACQUISITIONS AND UPDATES CERTAIN FINANCIAL INFORMATION Saint-Denis, France — December 6, 2017, 8:00 am. Burger King France (the “Company” and, together with its subsidiaries, the “Group”) announced today that its wholly owned subsidiary, Burger King Restauration (“BKRO”) has entered into a put option agreement (the “Put Option Agreement”) with OB Holding, a subsidiary of Groupe Bertrand, pursuant to which BKRO has irrevocably committed to consummate the acquisition of BDBK, the largest franchisee of the Group, subject to standard terms and conditions (the “BDBK Acquisition”). The Company further announced that it intends to acquire interests from certain of its affiliates in certain investment vehicles (the “Investment Vehicles” and, together with BDBK, the “Targets”) which hold interests in Burger King and Quick franchises in France (such acquisitions, the “Investment Vehicle Acquisitions” and, together with the BDBK Acquisition, the “Acquisitions”). In connection with its announcement regarding the Acquisitions, the Company is providing certain updated financial information. This press release constitutes a public disclosure of inside information by the Company under Regulation (EU) 596/2014 (16 April 2014) and Implementing Regulation (EU) No 2016/1055 (10 June 2016). The Acquisitions BDBK is a company indirectly wholly owned by Groupe Bertrand, the Company’s controlling shareholder, and is a franchisee of the Group. BDBK is the Group’s largest franchisee, operating 21 restaurants, of which 18 were Burger King restaurants and three were Quick restaurants. The Investment Vehicles are special purpose vehicles that are owned in part by Mr. Olivier Bertrand, RMM and OG Holding and that own and operate restaurants in the Group’s network, either as a franchisee of the Group or by acting as lessor under a franchise with lease management arrangement with BDBK. As of September 30, 2017, the Investment Vehicles directly operated seven restaurants, of which five were Burger King restaurants and two were Quick restaurants (one of which has subsequently been converted into a Burger King restaurant). Additionally, the Investment Vehicles own four Burger King restaurants that are leased to BDBK. The Acquisitions are intended to centralize the operation of Groupe Bertrand’s Burger King and Quick restaurants within a discrete group of entities. The Group intends to derive several benefits from the Acquisitions. First, the Acquisitions will allow the Group to own outright the valuable business assets rights (fonds de commerce) that BDBK and the certain of the Investment Vehicles own in most of the restaurants they operate. Further, the Group expects that the Acquisitions will increase the Group’s EBITDA margin. As the Group’s largest franchisee, BDBK has negotiated lower royalty rates, which cover mainly its pro rata share of the royalty payments due under the Group’s Master Franchise Agreement. As a result, BDBK’s restaurants do not currently contribute to the Group’s EBITDA margin. As of September 30, 2017 and prior to the Acquisitions, 28% of the Group’s restaurants were operated as Company Restaurants, 55% were operated as Franchises with Lease Management and 16% were operated as Pure Franchise Restaurants. Following the Acquisitions, 34% of the Group’s restaurants will be operated as Company Restaurants, 55% will be operated as Franchises with Lease Management and 11% will be operated as Pure Franchise Restaurants. Following the Acquisitions, the restaurants owned by the Targets will be operated as Company Restaurants and will be managed over time consistently with BKF’s strategy. Based on preliminary unaudited management accounts provided by the respective sellers of the Targets, for the twelve months ended September 30, 2017, the Targets generated an aggregate of approximately €80.4 million in revenue (of which BDBK generated €64.2 million and the Investment Vehicles generated €16.3 million) (for the nine months ended September 30, 2017 for the Investment Vehicles) and approximately €10.3 million in EBITDA (of which BDBK generated €8.2 million and the Investment Vehicles generated €2.1 million) (for the nine months BURGER KING® FRANCE SAS au capital de 11.503 € 50 Av. Président Wilson – Parc des Portes de Paris, Bât 123 93214 LA PLAINE SAINT DENIS RCS BOBIGNY 797 882 867 www.burgerking.fr ended September 30, 2017 for the Investment Vehicles). This information has not been audited, reviewed or verified, and no procedures have been performed by the Company’s independent auditors or any other independent accounting firm with respect to the accompanying financial data. Furthermore, the EBITDA of the Targets is not directly comparable to the Group’s EBITDA. This information is inherently subject to risks and uncertainties and undue reliance should not be placed upon it when evaluating an investment decision. The terms of the Put Option Agreement provide that before any exercise of the option granted by BKRO pursuant thereto (the “Put Option”) by the beneficiaries thereof, the management of BDBK must complete an information and consultation process with respect to the BDBK Acquisition (the “BDBK Consultation Process”) with the works council of BDBK. The BDBK Consultation Process shall be deemed to have been completed in relation to the BDBK Acquisition if either (i) the works council has issued an opinion, whether positive or negative, with respect to the BDBK Acquisition; or (ii) the works council is deemed to have issued an opinion in accordance with French law. The beneficiaries of the Put Option may exercise the Put Option during a period ending on the earlier of ten business days after the BDBK Consultation Process has been completed as described above and December 31, 2017. The consummation of the BDBK Acquisition pursuant to the acquisition agreement related thereto to be entered into upon exercise of the Put Option is subject to customary closing conditions, including, among others, the availability of financing for the BDBK Acquisition. The Group does not intend to acquire any of the Investment Vehicles simultaneously with the BDBK Acquisition and neither the Company nor any of its subsidiaries has signed a put option agreement or acquisition agreement with respect thereto. Average Restaurant Sales Average Restaurant Sales (“ARS”) refers to the annualized monthly average sales (excluding VAT) recorded per restaurant for the given sample size calculated by: (i) adding all monthly sales generated for the restaurant sample, but excluding the month in which the opening of any restaurant occurred (as applicable); (ii) dividing by the number of restaurant months to attain the ARS per month; and (iii) multiplying the ARS per month by 12 to annualize it. ARS is largely driven by footfall, which is in turn generated by a variety of factors, including but not limited to, location of the restaurants, product attractiveness, brand equity, consumer preferences, societal trends, general economic conditions, consumer sentiment, weather, opening hours, marketing, digital presence and promotional activity and limited time offers. The Group uses ARS to assess and compare the performance of restaurants by type and brand across periods. ARS is also used as a benchmark to compute the variable compensation component for restaurant directors, restaurant managers and team leaders if the relevant Company Restaurant out-performs. The Group tracks ARS for both Quick and Burger King restaurants, though the Group uses it predominantly as a key performance indicator for the Burger King network and to reduce the impact of the novelty effect in the Group’s internal reporting. The Group’s management believes that ARS is the most useful indicator to assess the sales generation of the Burger King network. The table below sets forth the ARS evolution for Burger King and Quick for the twelve months ended September 30, 2017. Twelve months ended September 30, Average restaurant sales (ARS) 2017 (in € millions) Burger King ........................................................................... 3,596 Quick (mainland France only) ............................................... 1,950 As the Group progresses in its conversion efforts, the weight of pre-existing Burger King restaurants will increase in its calculation of ARS, and due to the waning of the novelty effect as to those restaurants, the ARS for the Group’s Burger King restaurants as a whole may decrease, as it did for the twelve months ended September 30, BURGER KING® FRANCE SAS au capital de 11.503 € 50 Av. Président Wilson – Parc des Portes de Paris, Bât 123 93214 LA PLAINE SAINT DENIS RCS BOBIGNY 797 882 867 www.burgerking.fr 2017 compared with the year ended December 31, 2016. On the other hand, as the Group has optimized its network of Quick restaurants, their ARS has improved. Adjusted Run-rate EBITDA The Group uses Adjusted Run-rate EBITDA as a key performance indicator to measure operating performance. Adjusted Run-rate EBITDA is calculated as the EBITDA that the Group would have generated during the twelve months ended September 30, 2017 excluding pre-opening costs incurred prior to the commencement of operations of new Company Restaurants and Franchise with Lease Management Restaurants (minus the EBITDA generated by restaurants in the French overseas department of Réunion and French overseas collectivity of New Caledonia whose operations were sold to an affiliate of Burger King Corporation in December 2016 (the “Southern Territories Divestment”) if all
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