It is something of a truism these days that the food in a fast food company’s advertising does not look like the food in their restaurants. It was a plot point in the 1993 film Falling Down, after all. But now, the courts are taking notice, particularly when it comes to restaurant conglomerate Restaurant Brands International (QSR) and its Burger King brand. Investors shrugged the problem off, and shares added around 1.5% in Tuesday afternoon’s trading.
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United States District Judge Roy Altman, operating out of Miami, declared that it was reasonable that “some” reasonable consumers might be deceived by Burger King advertising. At issue here was not the classic issue of carefully-styled foodstuffs, but rather, over the sheer size of the items in question. The advertising portrays a hamburger that “overflow(s)” the bun, and the Whopper itself appears around 35% larger than the reality, with double the meat presented.
Burger King, for its part, acknowledged that it goes out of its way to “style…sandwiches more beautifully” than the workers in its restaurants do. And it asserted—in something of a slap to customers’ faces—that customers already knew that the sandwich in the ad would not be the sandwich they got in reality. But Altman shot this down, declaring that Burger King’s ads “…go beyond mere exaggeration or puffery.” Worse, it has apparently been doing so since somewhere around 2017.
Still an Attractive Buy
While Burger King is coming under fire for the presentation of its burgers, reports still note that Restaurant Brands International is a good play, value-wise. Why? Because of its sheer and remarkable diversity. Restaurant Brands not only has Burger King locations—just over 7,000 of same—but also has over 4,500 Tim Horton’s locations, over 3,500 Popeye’s Louisiana Kitchen locations, and nearly 1,350 Firehouse Subs locations.
It has also been seen keeping up with the times and bringing in things customers want, like loyalty programs, digital ordering mechanisms, and more. This should provide the best resistance it can get to economic downturn, and also allow its consolidated earnings to mount over the next several years, according to reports from Morningstar analysts.
Is Restaurant Brands International a Good Stock to Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on QSR stock based on 12 Buys, five Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After an 5.78% loss in its share price over the past year, the average QSR price target of $77.247 per share implies 14.4% upside potential.
