Top 5 of 2024: #5: Alex Behring, Daniel Schwartz - EP.384

We're counting down the top 5 episodes of 2024. Coming in at number five is Episode 384 with Alex Behring and Daniel Schwartz of 3G Capital, discussing their unique private equity organization and their wildly successful purchase of Burger King. Take Capital Allocator's Audience Engagement Survey https://www.capitalallocators.com/annual-survey/ Learn More Follow Capital Allocators at @tseides https://twitter.com/tseides?lang=en or LinkedIn https://www.linkedin.com/in/tedseides/ Subscribe to the mailing list https://capitalallocators.com/ Access transcript with Premium Membership https://capitalallocators.com/signup

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Ted Seides?

  We're counting down the top five episodes of 2024 as measured from Thanksgiving to Thanksgiving by your engagement and downloads. Coming in at number five is episode 384 with Alex Baring and Daniel Schwartz of 3G Capital, discussing their unique private equity organization and their wildly successful purchase of Burger King. Please enjoy this replay of my conversation with Alex Baring and Daniel Schwartz.

• 0:31Speaker 01

  Before we get going, I want to tell you about our year-end raffle. To enter the raffle, you'll need to complete our annual audience engagement survey. Your responses to this survey really do help shape some of the decisions we make at Capital Allocators, and we thought we'd provide a little incentive. Completed surveys give you an entry into this giveaway. Duplicate entries are disqualified, so one per person, and we're giving away one of three prizes. The first prize, some new Capital Allocator swag, just placed a order of some of the softest hoodies you've ever worn and some Patagonia vests. The second prize, Ted's latest book, Private Equity Deals. In fact, let's make it a signed copy of Ted's latest book. And third, free admission to Capital Allocators University hosted in 2025.

• 1:16Speaker 01

  So if you're an LP, you'll gain free admission to Capital Allocators University for allocators. If you're a manager, you'll gain free admission to Capital Allocators University for investor relations professionals. If you're not an investor relations professional, you can tap a peer or a colleague and you will be a great friend. You can find the survey in the show notes of this episode and episodes for the next few months, or go to capitalallocators.com/annual-survey. That's capitalallocators.com/annual-survey. Thanks so much for spreading the word about Capital Allocators and our audience engagement survey.

• 1:59Ted Seides?

  Hello, I'm Ted Seides, and this is Capital Allocators. This show is an open exploration of the people and process behind capital allocation. Through conversations with leaders in the money game, we learn how these Holders of the keys to the kingdom allocate their time and their capital. You can join our mailing list and access premium content at capitalallocators.com.

• 2:26Speaker 02

  All opinions expressed by TED and podcast guests are solely their own opinions and do not reflect the opinion of capital allocators or their firms. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of capital allocators or podcast guests may maintain positions in securities discussed on this podcast.

• 2:45Ted Seides?

  3G Capital's buyout of Burger King may be the most successful private equity deal you've never heard about. Over the last 14 years, or the length of a typical private equity fund, 3G turned a $1 billion investment into $28 billion in value. The annual dividends from the investment accruing to 3G today are around 70% of its invested capital. The deal is one of the highest-earning buyouts ever. 3G is an organization with a storied history. Founded by Jorge Paulo Le Man, Carlos Alberto Cicupira, and Marcel Hermann Telles, the group created an owner-operated model of investing.

• 3:30Ted Seides?

  They rose to prominence through building the largest beer company in the world, initially buying local brewer Brahma in 1989, expanding it and merging with a competitor to become Ambev in 1999, merging with Interbrew to become Imbev in 2004, and taking over Anheuser-Busch in 2008 to become AB Imbev. 20 years ago, Alex Baring, a young star on their team, moved to the US to form 3G Capital and take the approach abroad. Burger King was the second-largest hamburger fast-food chain after McDonald's in 2010, when 3G took it private. What it accomplished since then has been extraordinary.

• 4:14Ted Seides?

  My guests on today's show to discuss 3G and the deal are Alex Baring and Daniel Schwartz, co-managing partners of 3G Capital. Our conversation covers the history of 3G, Alex's journey to form 3G Capital, and the 3G playbook. We then dive into the deal, covering the sourcing and deal dynamics, improving operations, growing the business, taking the company public unexpectedly, and reloading to buy Tim Hortons, Popeyes, and Firehouse subs. Today's Burger King is part of Restaurant Brands International, a public company with the ticker QSR, with a $32 billion market cap and $50 billion

• 4:58Ted Seides?

  enterprise value. This classic deal will widen your aperture on what's possible with the long-term compounding holding period and operational excellence. Please enjoy my conversation with Alex Baring and Daniel Schwartz.

• 5:14Speaker 01

  Alex, Daniel, thanks so much for joining me.

• 5:16Speaker 03

  It's a pleasure.

• 5:18Ted Seides?

  Alex, why don't we start with a full background of 3G?

• 5:23Speaker 03

  So Ted, we started 20 years ago, originally as a family office of my co-founders, so just House Capital. And what we intended to do originally was to replicate this approach of being long-term operating owners of good businesses, a model that was originally developed in Brazil. And it was subsequently, companies took it all over the world. And then we wanted to attempt to do that outside of Brazil. And that was sort of the inspiration to set up 3G Capital in New York City at the time.

• 6:01Speaker 01

  And how did you come to join the organization?

• 6:04Speaker 03

  So I had joined the organization approximately a little less than eight years or nine years before, out of the Harvard Business School. I joined out of school in the predecessor private equity firm they were starting in Brazil. And initially, I started as an analyst. I evolved to become a partner. And most of my time there, I spent running one of the portfolio companies. This company, there was a result of multiple railroad privatizations in Brazil.

• 6:39Speaker 03

  And that was a continuation of the model that had worked so far. To the extent that the partners were able to acquire a good business, one of the partners would take a CEO role in that business. So I was a continuation of that approach. And I ran the company all the way to taking it public in early 2004, transitioned to a board role and moved my young family to New York City to start TruG Capital.

• 7:08Ted Seides?

  This owner-operator playbook, what does that mean?

• 7:14Speaker 03

  It ultimately means that we get very, very hands-on in the business, that we attempt to chart a path of value creation in the business that essentially typically has three phases to it. It does have an initial phase where we try to put together a team that combines some people that understand our ways of doing things, usually frankly on back-end leadership like CEO, and then back-end positions, CFO, purchasing and things like that. And we try to combine that with people from the business

• 7:57Speaker 03

  on the sales, marketing, front-of-the-house jobs. And we try to initially make this first phase, the business, more efficient. That frees up cash flow, it frees up focus to enhance or resume, however the case may be, organic growth. And hopefully by the time we've established the basis of a culture and the business is clicking, we are able to source inorganic M&A growth opportunities. So that is the process we typically go through.

• 8:33Ted Seides?

  About our way of doing business and driving efficiencies. 3G has been well known for a long time for this concept of zero based budgeting. Would love to hear how that actually works when you first step into a company.

• 8:47Speaker 03

  Yeah, I mean, Ted, I probably should preface this by saying we had this big returns in companies like RBI. And where I think we made 28 times the original billion plus capital we put in. And we had a 30% IRR in 14 years and all and things like that. And in spite of all the publicity that zero based budget gets, the portion of that value creation that is directly associated with the efficiencies and therefore with the zero based budget is small. I mean, frankly, the majority of that growth came from, again, the organic and the inorganic growth. But having said that, as a means of introduction to your question,

• 9:27Speaker 03

  the zero based budgeting process essentially attempts to look at the expense and the capital expenditure base without for a moment abstracting yourself from the existing numbers and from the peers. As if you were starting the business at that moment, what would you need? And then, of course, you're going to have to compare that with what you have, what the peers have to make sense of it and derive actions and so on. But it's an approach where you take an intellectually honest grassroots view of cost.

• 9:57Speaker 04

  It brings ownership and accountability to cost. It's about looking at costs as if you are the owners of the business as opposed to just the employees who are fine spending whatever budget is set for them.

• 10:11Ted Seides?

  If you look at the history of the deals you've done, you're buying what you think is a good business to begin with. And then you're applying this lens of efficiency. What are some examples of things that you've found that you were able to, let's just say, take some costs out or drive efficiency that you might think from the outside, well, it's a good business, it's already run well.

• 10:33Speaker 04

  I differently characterize it by saying we're trying to bring an owner operator approach to all facets of the business, be it cost or growth. You look at Burger King, this is a business that was operating at the time we bought it in 80 plus countries that had a 50 ish year history of successfully expanding into the second largest fast food hamburger chain in the world. Yet, when we looked at it, it wasn't operating as profitably as its peers and it wasn't growing as fast. And so, coming in, having a new, refreshed team with goals around cost management, goals around capital management, goals around growth in terms of the number

• 11:15Speaker 04

  of restaurants that this business should be opening each year, and setting these bold, ambitious goals and hiring the right people and empowering the right people at the company to achieve them, kind of allowed us to catapult the business to that next level.

• 11:30Ted Seides?

  Before we dive into Burger King, I'd love to hear the broader history of the investments you've made at 3G Capital. It's quite a different model when people think about a private equity organization.

• 11:43Speaker 03

  If you were to compare and contrast the approach at 3G Capital with a more traditional private equity approach, I think the three main points I would make is, one, we are the largest investors. We, the partners and affiliated entities, are the largest investors on these vehicles that do the deals, number one. Number two, each vehicle is deployed entirely in one situation. So it's 100% concentration. And thirdly, the intent with this business is always to be there for the long, long term. My co-founders have been investors of AB and Bev now coming on 35 years. We investors in RBI for 14 years now and

• 12:27Speaker 03

  counting. And in terms of your question on the sequencing, we had an investment in CSX, which was a railroad, which was our first way of getting our, say, toes in the water by virtue of not being involved in management, just at the board. It was quite a successful investment for us, multiple times our money on a declining market in the mid 2000s. And so, there was a crisis, which by the way, favored people to focus on efficiencies and things that we could have, provide ideas. And so that was a good investment, but also it reinforced to us that the end game was to control something and be involved in management.

• 13:10Speaker 03

  And that, in fact, happened at Burger King in 2010 and its subsequent acquisitions of another three brands in the course of the last many years. Then, we had an acquisition of Heinz. The Heinz investment was successful. We made several times our money on the big private of Heinz. Then we had the Kraft investment, which was merged with the Heinz investment, but it was a totally separate vehicle. That investment, we just basically got our money back. Wasn't a successful investment, but it validated a fundamental premise of ours, which is we were not a venture capital. For the downside case must be capital return or capital preservation like return of sorts.

• 13:53Speaker 03

  And of course, that's one of the key things that drives business selection, business quality, it drives capital structure decisions. For example, the next fund was the fund that bought Hunter Douglas, in which we only leveraged the business four times. So that's part of the approach again that we have. And then we have, of course, the ability to do another deal. So that's sort of the sequence.

• 14:15Ted Seides?

  In this model where you're putting all your resources into a deal at a time, what does your team look like to execute this?

• 14:23Speaker 03

  Leadership that comes from someone that's a partner here typically, meaning CEO, sometimes CFO. Some backend functions with people that have experience in our system, that worked in different deals with us. People from the business that have experience and knowledge. And by the way, people that will take advantage of a great opportunity to invest themselves or to roll their equity or to get more equity in the deal into the front of the house roles. And then over time, we bring a lot of young talent in so that the company breeds its culture and breeds its talent over time. And you can see the result of that in the company like RBI,

• 15:03Speaker 03

  where today 80% of the leadership team is people that are grown into the company.

• 15:09Ted Seides?

  How do you think about the type of culture you'd like your portfolio companies to breed?

• 15:15Speaker 04

  Not to sound repetitive, but it's culture that if there's one word I could use, it would really be ownership. People who genuinely care and act like owners of the business that they're running. And so there's this line that sometimes there's a delineation in our organizations. We don't like to think of that being delineation between ownership and management. And like the people who are running the company are the people who own the company. And I think it results in them being more entrepreneurial. It results in them bringing this owner's lens to the business, thinking about what's in the best interest of the company, which is also what's in the best interest of the shareholders as opposed to think, oh, what's in the best interest of the management. In our world, we like

• 15:57Speaker 04

  those to be blended together. And I think the reason it's compelling, if you look at the history of restaurant brands and Burger King, I'd say we're willing to give people a shot, maybe a little bit earlier than they get a shot elsewhere. And I think that allowed us over the history of the company to attract very talented, very ambitious people who, as Alex mentioned, are frankly, the folks who are running the business today.

• 16:23Ted Seides?

  There's probably no better way of getting a feel for this than diving into one of these companies. So let's do that with Burger King. And Daniel, maybe the place to start is when you're bringing this approach to really taking over a company and running it, how do you go about finding a business like Burger King to buy?

• 16:43Speaker 04

  We were looking at businesses to buy. This was back in 2009. We're looking at all sorts of different companies and we found Burger King. One of the regular screening exercises that we do of consumer businesses that are trading below a certain multiple, below a certain total enterprise value. And we saw it. We did a whole bunch of outside in research on the business and we developed a thesis basically around the company that looked something like the following. Great business, great business model. I think we were probably early to have an appreciation of the fully franchised business model and

• 17:28Speaker 04

  the value of the franchise business model. We felt that it was an iconic brand that had been around 50 plus years. Actually, we spent a lot of time studying the history of the business from the start, from the 1950s. And if you went back in time, you'd learn that the business after being founded by McLemore and Edgerton was subsequently sold several times between the 1950s and early 2000s. And that resulted in a series of management changes over the years. And what we found interesting was that notwithstanding this frequent changing in

• 18:08Speaker 04

  ownership and management, the company flourished into the second largest fast food hamburger restaurant chain globally. At the time, around 12,000 restaurants, 80-plus countries. And to replicate something like that, it just felt like it would be really, really hard to do. And so I felt like it was a very good business, operating on a really good business model. And when we compared its organizational structure, cost structure, growth profile relative to its peers and to other companies that we were familiar with, we felt like there would be an opportunity if we were to take this business over to run it better. I remember we did some initial work, and Alex shared it with you.

• 18:52Speaker 04

  And you grew up in Brazil, and you told me not to understand. I'm very, very familiar with Burger King, which I was surprised at the time.

• 18:58Speaker 03

  Yeah, I mean, I first came to the US in the early 70s to Miami. I had family living there, and I used to eat at Burger King every day. There was the store on 41st Street in Miami, which we still own. It's a company store, and I used to go there every day. And then, of course, after the deal became successful, there was some degree of suspicion, even amongst my dear partners, whether that story was true or not. And ultimately, several years later, my mom passed. She had the habit of keeping everything. So I found this letter at her home from me and... January 16th of 1975, basically describing, I went to Burger King and ate Whoppers every single day.

• 19:42Speaker 03

  I never liked to go to McDonald's. I was a hardcore Burger King fan. And it was interesting to see because as one of the outputs of the analysis was ultimately that the business of Burger King was significantly smaller than the brand. It turned out that I wasn't alone. So the brand was a much bigger thing than the business, which is a great opportunity. Meaning, of course, there is growth of the brand, but growing the business to become the size of the brand is a better proposition.

• 20:15Speaker 04

  And while it didn't make the investment memo, the enterprise value of the deal was around $4 billion. It was just over $1 billion in change of equity to buy the company. I had asked my then fiance and who's a physician and my mom, who's an attorney. So look, McDonald's is around $80 billion or so. Yum, I think at the time is $30 billion. What do you think Burger King is worth? And so for us, it was that billion of equity. You know, the typical answer was, I don't know, half. McDonald's is worth 80, maybe Burger King's worth 40.

• 20:47Speaker 03

  Or 20.

• 20:48Speaker 04

  Or 20, yeah. It met the smell test.

• 20:50Speaker 03

  Not one.

• 20:50Speaker 04

  Not one, not one and change of equity capital required to do a take private. So before you try to take the business private, how do you go about the depth of work required that gets you comfortable that this is something that you should spend your time going after? Many months of intense, in-depth research, studying the industry, studying the history of the company, studying the company, studying its peers, spending a lot of time visiting restaurants, both of the company and the peers. I remember Alex and I developed relationships with several franchisees.

• 21:32Speaker 04

  We toured the country and developing relationships with people and just learning and asking questions about how the business is being run and how it could be run better. Detailed benchmarking around the number of restaurants that the brand had in certain countries compared to what the peers had, understanding those underlying unit economics of how profitable the Burger King restaurants were compared to the peers in certain countries. Ultimately, getting comfortable that, I know it sounds cliche, but with any investment, making sure that there is a large enough margin of safety, if you will, the pro forma entry multiple was low enough that even folks like us probably wouldn't mess it up.

• 22:16Ted Seides?

  So you're doing all this work before you even try to buy it. And I'm curious, in your research process, how many different types of projects or different companies are you studying with that intensity to decide, okay, that's the one you're going to go, knowing from the beginning, you may or may not be able to buy any one in the public markets that you like?

• 22:35Speaker 04

  Probably the best way to explain it is, we'll only buy one business every few years, but we study a lot of them. A mutual friend of ours asked, didn't Daniel bring you the Burger King idea? And he said, yeah, but you should have seen the 100 other that he brought me. We look at a lot of different businesses. We go pretty deep in many of them. I'd say we definitely went deeper in Burger King than anything else at the time because of how excited we were.

• 23:04Speaker 03

  Also, we had the sense of actionability at Burger King, which sometimes you can see something that's very interesting, but you don't see a path to completion. And in Burger King, we saw that path because it was a company that had been taken private years before. It was a successful LBO, had been taken back to the public markets, and the sponsors were in the process of sequentially exiting the business through blocks.

• 23:32Speaker 03

  We couldn't really see any strategic buyer for the business. So we figured that they might be amenable to an approach for someone that wanted to pay a premium to market and take the company private again.

• 23:44Speaker 04

  It's probably worth also adding a couple of things. One, it was a very good deal for the prior owners. They had made several times their money. And two, at the time, the business was struggling objectively. It wasn't growing all that much. I think the trailing growth rate for restaurants was around one and change percent.

• 24:01Speaker 03

  It wasn't opening that many restaurants at all, almost 100 restaurants or so.

• 24:04Speaker 04

  There was a big issue with the franchisees and the franchisor, the parent company in the US at the time. There were multiple ongoing lawsuits.

• 24:13Speaker 03

  Were centered around a dollar double cheeseburger sandwich that was a money loser for franchisees, which is one of the key things in this business is it's a great business to have a fully franchised brand, but it needs to be very good for everyone to be sustainable. Meaning your franchisees making money is left, right and center of this business. So this was a real problem. People were very disgruntled as a function of that. They were suing the company. I think what we were able to do is we're able to separate the short-term issues and the short-term noise associated with those issues from the fundamental promising long-term tenets of the business.

• 24:57Speaker 03

  I think that's one of the key things on investment analysis. Usually things are depressed, valuation of things is depressed for a reason. And again, that reason may or may not be structural and sometimes it's hard to differentiate that. And I think we're lucky that in this case, our analysis helped us. And Dan did great work on this and the team that was working on this deal to really give us comfort around the nature of the structural advantages of the business and the short-term nature of the issues.

• 25:26Speaker 04

  Yeah, I'd say earlier today, we were talking about in hindsight, things look quite obvious.

• 25:31Speaker 03

  They always do.

• 25:31Speaker 04

  But at the time, it was a really complicated situation. No one else showed up to buy it. And I'd say the headlines were generally that we either overpaid or we didn't know what we bought.

• 25:43Speaker 03

  One of the very reasonable pushbacks that we got, as we discussed this in committee, was the owners of these businesses were some really respectable private equity firms, ultra-successful ones, which had made a lot of money, by the way. So what was it that we saw that we wanted to pay up? I think at the time in Norfolk, 40% premium to market to take this thing private. What was it that we're thinking that we could accomplish that would justify that?

• 26:13Ted Seides?

  As you go to get ready to make a bid, and a lot of times companies, you've got embedded constituents. So you do have the private equity owners who may want to be exiting, but you also have a management team who has their jobs. How did you decide how to go about the approach to make the bid for the company?

• 26:32Speaker 03

  I had a good relationship with one of the three private equity owners. I called the managing partner there and then he was a bit surprised,

• 26:47Speaker 03

  but amenable to a conversation, introduced me to the chairman and CEO at the time. I traveled to Miami, had lunch with him. I think he was properly incentivized. He had been in position for many years, had done a good job because I mean, the payback for everybody was happy. And of course, that meant he was also a meaningful equity holder at the business. So they were amenable on both sides, both management and the anchor shareholders were interested in the conversation.

• 27:18Ted Seides?

  What was the process from that initial overture to getting the deal done?

• 27:22Speaker 03

  Six months of conversations back and forth.

• 27:26Ted Seides?

  I think it's worth just maybe giving some context. This is 2010. This was just post global financial crisis. There weren't all that many deals, let alone large deals.

• 27:37Speaker 03

  It's interesting. And one of the conversations you would have at that time after the great financial crisis was basically convincing the sellers in that case that you would have financing. Because it's hard even to conceive of that today. But a $4 billion LBO in 2010 was by far the largest deal after the crisis. I needed a long road show. That was a long process. And also after the financial crisis, there was still significant volatility to markets and to stock prices, which further complicated matters.

• 28:12Ted Seides?

  There were periods from when we started the negotiation to when we signed the transaction, where I'd say that lever debt capital markets were soft, if you will, temporarily closed.

• 28:24Ted Seides?

  The company play out.

• 28:26Speaker 03

  So we ended up in a very similar point to where we started. We started at 24, but then the markets became very different and the leveraged markets became very different and the equity markets corrected a lot. We went down our offer, which is not the usual intuitive path. We're bidding against ourselves though. And then we went back up, but the stock was down. So anyway, so it was a long convoluted, volatile process that ended up in a similar place.

• 28:58Ted Seides?

  And what was Burger King when you bought it in terms of number of stores in the footprint?

• 29:03Speaker 04

  I think it was around 12,000 stores operating in around 80 plus countries. But I think what was interesting about the time is that it wasn't growing all that much. It was growing, I don't know, one and a half, two, growing a couple hundred units on a base of 12,000 and our competitors were growing a whole lot more. We paid around $4 billion and it was doing around $450 million or so of EBITDA, maybe $150, $175 million of trailing CapEx at the time. So high 200s, 300 ish of unlevered free cash flow. And that's what the business looked like at the time.

• 29:45Ted Seides?

  So, once you have control over it, you now are going to start operating this company. What are those first steps that you took over the first, say, six months or year to bring in your people and start to make changes happen?

• 29:59Speaker 03

  The first two steps we took was the composition of the team and subsequently addressing the efficiencies.

• 30:07Speaker 04

  We had a new leadership team, which was a combination of folks from 3G. I joined as CFO. One of our partners joined as CEO. We elevated a couple really good people within the company, brought in someone from the beer business that Alex mentioned earlier to help out in terms of people and reorganization. We set a bold, ambitious goal for the business of trying to be the best and the fastest growing restaurant company globally. We tried to create a more entrepreneurial atmosphere, right? We took down all of the offices, we took down the walls and we created an open floor plan so everyone could have a more collaborative environment.

• 30:47Speaker 04

  As part of setting this bold, ambitious goal, we copied a lot of what Alex did so successfully at the railroad company in terms of the management style to achieve a long-term, bold, ambitious goal. It happens one year at a time. So we set goals for the organization around the number of units that we'd want to open, the sales growth that we'd have, the capital returns that we'd have. And we posted those goals all around the organization to give everyone visibility on how we were doing. So behind people's desks, you'd see their goals for the year, red, yellow, and green metrics to create a lot of transparency and visibility within the organization of where it is that we were taking the business and how we were progressing.

• 31:30Speaker 04

  And then, as Alex said, we felt that there was an opportunity to run the business more efficiently. And so as part of the zero-based budgeting effort, we kind of compartmentalized costs around the organization and made groups accountable for what it is that they were going to spend. We gave people budgets and we tried to benchmark inside and outside. And so if one group was spending X dollars a year on travel per person, then the other group should try to match that. Little things like this, it wasn't overly complicated.

• 32:01Speaker 03

  But as a result of that, we probably, as a result of that first phase, we ended up owning the business of a price to earnings ratio of five, four?

• 32:12Speaker 04

  Yeah, it was like a 25% free cash flow yield within the first year or so on our equity.

• 32:16Speaker 03

  Which gave a lot of margin of safety to the investment.

• 32:20Speaker 04

  What was so great about this business is that it was a mature business in a sense that it had a 50-year history, but there was so much opportunity to make it way, way bigger. And so after making the business more efficient, we really set our sights on how do we make this the fastest-growing restaurant company globally? And we noticed in certain countries, the brand was stronger than in other countries, depending on how we'd go to market. And we, as a team and board, developed a view that we should have large, well-capitalized, master franchise partners.

• 32:57Speaker 04

  With great local operating expertise in some of the bigger markets. So then we set our sights on creating these partnerships around the world. And in the first couple of years, we created partnerships in Brazil, in China, in France. As an anecdote, I mean, when we bought the business in France, there were no Burger King restaurants in France. It's one of our competitors' more profitable markets globally. But I think we crossed $2 billion in France.

• 33:28Speaker 03

  Biggest market for the Burger King brand other than the United States.

• 33:31Speaker 04

  Yeah. The seeds that were planted led to a decade plus of growth and it's still compounding. As we talked about earlier, that's really what allowed this to become such a large company.

• 33:44Ted Seides?

  Could you break down those two aspects of that initial goal setting? So the first is efficiencies and the second is growth. As you describe it, it sounds really simple. Put a bunch of goals in place that are tied to these financial metrics and then it happens. What are the aspects of driving what seems like a very simple way of improving efficiencies? And actually making that happen at the company?

• 34:11Speaker 03

  Daniel's being humble about the zero-based budget that was done there. I mean, there were some real opportunities in the near term to increase a bit. There was a lot of money being spent away from the business, meaning on more bureaucratic corporate layers and things that really had little impact on sales and little impact on opening restaurants. There were some meaningful dollars there.

• 34:34Speaker 04

  Nearly 50% growth in the EBITDA.

• 34:36Speaker 03

  Yeah.

• 34:36Speaker 04

  What are some examples of those types of expenses that have been in place? One example, many multimillion dollar FedEx budget that 90% of it converted to email instead. Coming in with a fresh set of eyes, making those hard decisions is easier said than done.

• 34:51Speaker 03

  On the growth side, I think one interesting thing, I think, is this investment horizon difference that we have. Because do I think we are any smarter than any of the prior owners, for example, of this business? There's no way. I mean, there's some of the smartest people that exist in this industry. That's not the case. I think we did have a very different time horizon. And then, for example, some of these expansion opportunities that Dan alluded to. We're talking about France. France became a big deal, but that's now 14 years to the making. But he had to spend a lot of money and attention and focus and actions. First, to source the right master franchisee, then to make sure, organize the capitalization of that franchisee and help him with that.

• 35:35Speaker 03

  Then local sourcing of ingredients, customization of menu. Then slowly real estate. If you want to get quality locations that can be done overnight. So a lot of actions that do create a lot of value, but on a longer horizon. Same thing that I said about France, I could have said about China or Brazil. So I think the horizon was an important enabler of us to make some of the decisions that we made.

• 36:03Speaker 04

  The other way we got the organization excited about the direction we were taking the company in is frankly through the equity ownership that we brought to the company. Just like you did for the railroad. We had this philosophy that for people who acted like owners and really held themselves accountable and cared. We wanted to make them owners in the business. And so we granted sizable stock options to top 150 people in the organization to become owners of the business. We also let folks who, you know, received proceeds as part of the Burger King take private transaction. We let them reinvest those proceeds into the company and we levered them.

• 36:46Speaker 04

  We gave them a multiple times matching. And the other piece that we did each year, we allowed the top couple, few hundred people in the business.

• 36:58Speaker 04

  To take a portion of their bonus and if they wanted to, they could buy stock in what was then private Burger King and we would match them as well. We'd essentially give them leverage. And so we really created this cultural alignment within the organization that we were all on the same team. We were all shareholders. We were all owners of this business that yeah, we'll have to make some tough decisions and we're going to have to do certain things differently if we want the next five years or 10 years to look a little bit different than the last five. But I think everyone was aligned. Everyone was in the same boat with respect to where we needed to take the company.

• 37:41Ted Seides?

  As you're working through that and buying the existing company and really starting a more rapid expansion, it's hard to get all those people decisions right. Love to hear how you thought about assessing people along the way.

• 37:54Speaker 03

  I think this goal system that we have is a great facilitator of that. Evaluating people will never be 100% objective, but we had at least an objective basis to start from in terms of the goals for the year and how did that person stack up against those goals and not only if they achieved them or not, but what is it exactly that they did or didn't do. So we had a system to do this quarterly and at the end of the year it became apparent, I would say in 80% of the cases, it was pretty easy to differentiate who was doing more and deserved more responsibility and deserved more equity versus who didn't.

• 38:36Speaker 04

  And we were fortunate. There were a lot of great people at the business in 2010 who'd meet with these people and we'd ask them, say, what do you think we could do better? And there was no shortage of great ideas and there were a lot of people who were promoted, who really bought into what we were trying to do and. And they had both the knowledge and experience in the business and the ambition. I'd say we also spent a lot of time recruiting folks out of business school. I would make regular trips to business schools, get the resume books in advance and cold email folks who I thought had impressive resumes. And if you get an email from, say, cold email CEO or CFO of this company, I'm on campus

• 39:19Speaker 04

  and you want to meet, I got a nice response for it. And for people who seemed really ambitious and wanted to do something big, something maybe different, we would make offers on the spot and we hired a lot of great people.

• 39:31Speaker 03

  As a result of that, you look today, our CEO is 37.

• 39:35Speaker 04

  Our CFO was hired out of HBS.

• 39:37Speaker 03

  Oh, the semi now.

• 39:39Speaker 04

  Mid 30s. President of International was also hired out of MBA program. These people have all been with us, decade plus. But it goes back to what Alex is saying. I think that speaks to the long-term ownership horizon. The folks we hired, it's 2024. A lot of these folks we hired, we hired 2012, 2013, 2014. They grew up throughout in the organization and we knew that a decade in, they had an incredible amount of value, but you have to make a long-term bet on these folks.

• 40:05Ted Seides?

  How far along in the trajectory of changing the business, did you start thinking about acquisitions?

• 40:12Speaker 03

  That's a great question. The first thing that needed to change for us to do that was our balance sheet. We leveraged what, was I seven times, six and a half times off the gates? And we were a few years into this process, back to two and change or three or not even three. So balance sheet first. So that was the first enabler. The second is we felt the first green shoots of what we're doing in terms of international restaurant growth expansion, in terms of turning the corner on the same store sales into the domestic system. So we saw the green shoots on the organic side coming up and we had the balance sheet and we had the people.

• 40:54Speaker 03

  So we started to have some bandwidth in terms of people to do more. That got us again back on the hunt.

• 41:01Speaker 04

  And kind of comfortable with the business because we hadn't owned a restaurant company.

• 41:05Speaker 03

  Few years into the business, we liked it a lot more even than we did at the start.

• 41:10Ted Seides?

  So where did you turn? At that point in time.

• 41:13Speaker 03

  We ended up going public in 2012, a year and a half into this, mid 12. And this was a late 2010 closing. And between the dividend that was paid and the proceeds of selling quarter of the business, or whatever that was, we returned 130% of capital, give or take. Everybody was made whole and we owned 70% of the business, which was at the time. I think our IPO valuation implied 4 or 5x multiple, the original notional investment, which was in and of itself returned.

• 41:49Ted Seides?

  Why'd you decide to turn around and go public so quickly after turning it around?

• 41:55Speaker 03

  We didn't.

• 41:58Speaker 03

  We were approached by a SPAC and that was basically run by people that we respected and knew. And they wanted to do a deal with us by virtue of which we would have become a public company. And of course, that was a process in terms of discussing valuation and discussing how to deal with some of the incentives and things that are typically associated with SPACs, for which there was a limited space here, given the size of the deal. But that negotiation went well. The valuation was compelling enough. We respected the people that had the SPAC. We thought they would be good shareholders and good partners. And then we decided to proceed. So we weren't thinking about it.

• 42:42Ted Seides?

  So now you're accidentally a public company.

• 42:44Speaker 03

  We were a year or two away from it.

• 42:46Ted Seides?

  And then Daniel said, so that plays out first and then you start looking at expansion.

• 42:51Speaker 04

  Yeah, that helped the balance sheet. We were around a $5 billion market cap company and then we continued to grow quite nicely. We continued to grow our system wide sales at attractive rates. We continued to grow our EBITDA, our cash flow. I think we probably reached around a $10 billion or so market cap company. And as Alex said, we liked the industry. We liked the franchise business model even more than we did prior to becoming owners and operators of the company. And we looked around the world, around different franchised restaurant concepts. And I think at some point, we came across Tim Hortons and felt that it was one of the

• 43:34Speaker 04

  most special businesses and brands in any market, in any category we've seen anywhere. And Josh Cobza, our now CEO, led the work on that together with me and Alex and the team here at 3G. And we pursued the acquisition or combination together of Burger King and Tim Hortons. This would have been 2014, 2015 timeframe.

• 44:00Speaker 03

  The more we learned about the Tim Hortons business, the more excited we were. I mean, Tim Hortons was a franchisor of excellence, incredible franchisee community. It had most of the real estate in these deals. It manufactured and distributed the products. It was incredible business. It has an unparalleled brand. And I was able to do a common friend to schedule a dinner with the CEO of the business in Toronto. We really hit it off. And he was amenable to a proposal from us. Then, as we looked through the numbers, we needed financing, not just debt financing, but to make the numbers work properly in

• 44:41Speaker 03

  the right risk-adjusted basis. We needed a few billion of preferred equity. At that point, we had developed a good relationship with Warren Buffett. He was good friends with one of my co-founders, George Lemah, for many years, had teamed up with us on the Heinz deal that happened in 2013. And we were able to approach Warren, show him the deal. He liked the brand. He liked the Tim Hortons brand. He was very enthusiastic to participate in financing. So we had all the financing lined up. And then the challenge really became one of reaching agreement with Tim Hortons. The process that took several months and back and forths of proposals. I think the first proposal that we sent them

• 45:26Speaker 03

  took six weeks to get a response with absolute radio silence. Response had half a paragraph. Where it politely wished us luck, future endeavors. And then in each case, we presented a second proposal, which was responded in three hours with the exact same half paragraph letter. We later learned of the boardroom dynamics there, where there were people in favor, people against, but ultimately were able to navigate that successfully to an announcement. I think we started in March and by late August, we were announcing a deal. It was quite an interesting thing because Tim Hortons in Canada is a gigantic thing.

• 46:06Speaker 03

  I don't know that there is a consumer brand in this country that has the same amount of equity and weight. So it's something you had to talk to the prime minister about. It had to undergo a government review process and make a variety of commitments. It was quite the process.

• 46:23Speaker 04

  For context, this was at the time for us already a home run of a deal. We had returned 130% of the capital. It was paying a nice dividend. I think it was 10-ish billion dollar company. It was a home run in all respects. And again, I think it comes back to the long-term nature of how we operate. And even we said to ourselves at the time, most rational private equity firms would have sold.

• 46:48Speaker 03

  Versus re-levering.

• 46:49Speaker 04

  And betting everything.

• 46:50Speaker 03

  Re-levering and re-betting, re-upping everything.

• 46:53Speaker 04

  I remember this is summer I'd called you. I was the CEO at the time and I said to Alex, I really feel strongly, we should bet the firm, we should bet the business on this. To Alex's credit, I mean, he believed in it. He was willing to make the bet on the team running the combined business at that point, which in hindsight, it's like, oh, it was really obvious that Tim Hortons EBITDA is now 80% higher or whatever it is, and the cash flow doubled. We've expanded it globally.

• 47:18Speaker 03

  It was such a good business that even us and our team, we couldn't mask it up. When a company twice has said, uh, no thanks, and they tell you next

• 47:27Speaker 04

  To nothing in a small paragraph. How do you take it from there to a few months later, getting a deal done?

• 47:32Speaker 03

  So we found that we spoke to a lot, try to find channels into the board. And then, of course, through those channels, gain insight into what was going on. To understand, was this a unanimous, basically no? Where no and we never would do a deal and everybody agrees? Or is it something where there is some level of discussion? And different views and it turned out to be the latter. And we felt that the business was good enough and that we had enough financial wherewithal to make a better offer

• 48:13Speaker 03

  that potentially would enable that side of the argument to prevail. And then we felt that there were concerns about us and about basically that Tim Hortons in the past had been sold by the founders to Wendy's. And from Tim Hortons' perspective, they didn't feel that this had been a great development for them. And they were able, over time, to be spun off of Wendy's and they were independent again. The resistance to the deal was a thought process of, do we need to be owned by a US burger chain again? And this burger chains sometimes could be maybe short term. Maybe they won't focus on Tim Hortons, it would be an afterthought.

• 48:58Speaker 03

  And we felt all the opposite of that. We felt it was a great business. We wanted to own it and then develop long term. We wanted to take it to the world. And we felt that we could help take Tim's global. And so we felt that if we were granted the light of day in terms of going and talking to people at the board, that they would understand that. And hopefully that's what happened. And that helped the board then evolve from a little bit of a situation where this is diverging points of view to a more consensual position.

• 49:27Speaker 04

  It didn't help that in the summer of 2014.

• 49:30Speaker 03

  Right in the middle.

• 49:31Speaker 04

  Right in the middle of this. I'll never forget, I was traveling in India, touring restaurants. That Bloomberg Business Week had been trying to write a story about us, about our management team at Burger King. Spare the details, the title of the story was Burger King is Run By Children. Deep dived into all of our ages and backgrounds. I was a CEO at the time for Josh Cobbs, our now CEO, was our CFO. He was 27. Our head of North America is 39. So it didn't help our cause, but I think, as Alex said, eventually when we all met and we talked to them about

• 50:11Speaker 04

  the plans that we had for the business and our global growth trajectory, not just for Burger King, but for Tim Hortons, it all worked out.

• 50:20Ted Seides?

  Once you bought that brand, you have these two Evers of driving efficiency and growth. How did you think about Tim Hortons?

• 50:27Speaker 04

  As is in the case with Burger King, there was initial opportunity to run the business more efficiently.

• 50:33Speaker 03

  Also, the combination of two distinct public entities always creates synergies. There were real synergies there.

• 50:40Speaker 04

  But ultimately, what's driven and what's driving the value is the global growth of Tim Hortons. And so now throughout Europe, Latin America, Asia, you can go to a lot of countries that at the time of the acquisition, you couldn't have a cup of Tim's today. And speaking to the long-term nature of our plans and our ownership here, that'll continue to pay dividends and grow for decades.

• 51:03Speaker 03

  Also, there was a big opportunity on the Tim's business on a consumer CPG level. Tim's went from being at retail, other than the stores where we have a 75% share of coffee out of home in Canada. But we were not the leading brand on home consumption. And so that was a big opportunity. Of course, it required agreement with the franchisees on how to go about that. But today, I mean, that business quadrupled in terms of a bit now or something over the years. And we are the number one brand in Canada.

• 51:35Ted Seides?

  As you look at the real estate footprint as you're growing, you've got Burger King internationally. You now have Tim Hortons you're bringing out. Thinking of Yum! Brands where they've put the Pizza Hut alongside their other brands, how did you think about the real estate footprint of these two?

• 51:51Speaker 04

  While there would be back of the house synergies in terms of finance, procurement, supply chain, legal, we actually felt it was very important for the brands to maintain their own distinct brand identity and brand management. Part of that is real estate development and marketing. I think it's very important that each of these brands has their separate management, separate go to market. It'd be seen differently in the eyes of the consumers.

• 52:21Ted Seides?

  So, once you have these two, and you've got them humming the way you want, you continue growth, how do you think about continuing to expand from there?

• 52:29Speaker 04

  So, a couple of years later, I'd say like second half of 2016, we began studying-

• 52:36Ted Seides?

  Ballash, you delevered something.

• 52:39Speaker 04

  We were delevering and we began studying some of the other categories. And at that point, we were in coffee, in burgers. One of the fastest growing categories, both in the US and globally, is chicken. And we felt that we ought to have a presence in chicken. We identified Popeyes as a natural potential addition to the portfolio. And we did quite a bit of work on that business, understanding it, understanding its growth potential. It would be a very different transaction than Burger King and Tim's because it was much smaller. At that point, we're, you know, north of a $25, $30 billion company.

• 53:21Speaker 04

  This was going to be a sub $2 billion acquisition. And I think we felt that there would be a lot of growth potential, both in terms of expanding the unit base domestically.

• 53:35Speaker 04

  And globally.

• 53:36Speaker 03

  Look at it backwards now, seven years of ownership. And it's a great case in point to illustrate that the system in play. So you initially had a significant gain in EBITDA by virtue of the backend synergies. Popeyes was if you were the subscale public company, so there were a lot of costs that could come out by virtue of being a part of restaurant brands international.

• 54:02Speaker 04

  Maybe just to double click on that, it's 18 times acquisition buys down to about 12 times, rough math.

• 54:07Speaker 03

  Just by virtue of doing that. Then you fast forward to today, own a company three times as big in sales than what we bought. And then again, a function of fast international and domestic expansion or restaurant count. And basically launching a boneless product, which is a chicken sandwich.

• 54:26Speaker 04

  Restaurant count's up 70%, AUV's up 30%.

• 54:30Ted Seides?

  You mentioned that the franchise business at the original Burger King you earned was even better than you thought. After you're doing this now, the third time, what is it that makes it such a special business?

• 54:44Speaker 03

  The franchise business basically is a business where you partner with people that put their own capital and they're entrepreneurs. Entrepreneurs, they're excellent operators in their parts of the world. They have the ability to identify real estate. They have the ability to attract and train good managers. And then you bring a brand that has great awareness, great preference to the table. And that really enables them to win in such a way that from your standpoint, your P and L is mostly comprised of royalties and franchise fees. So it's very, very capital efficient and has a lot of room for it to naturally grow

• 55:25Speaker 03

  as long as you don't lose the focus that your business is to make sure that this franchisees make money. That is your business and that they have great returns on capital. You have to always keep line of sight that that's the goal of the business.

• 55:40Ted Seides?

  So the other aspect of that is now doing this the third time, it sounds like it works beautifully, but there's always bumps in the road. So what were some of the things you learned from going through it, either at Burger King, or then at Tim Hortons, and now at Popeyes, that you got more efficient at over time?

• 55:58Speaker 04

  One of the most important avenues for us is making sure that when we buy one of these businesses, or when we own one of these businesses, that we have great partners developing the brand in their home markets, that they're well-capitalized, great local partners with incredibly strong unit economics. And naturally, you're not going to have 100% success, or you're going to have bumps along the road. And I think with us, it's always learning from the mistakes that you make along the way with certain partners, making sure you have the right local partner that's well-capitalized, with the right operating capabilities. Maybe in the early days with certain brands,

• 56:41Speaker 04

  maybe we went to a country too soon or too quickly, or we picked a partner who had a lot on his or her plate with other businesses or other brands. And I think any one of those factors can play in. That's when you don't grow as quickly as you can. It sounds pretty simple, but just making sure that we are delivering a great brand with great unit economics to a partner that is ready to be successful in that market, that's when the magic happens. In the case of India, for instance, we didn't rush in. We jointly developed a localized menu with our partner, I think, over the course of a year before we opened our first restaurant. And so making sure you take all the steps necessary,

• 57:25Speaker 04

  both on the company's side and the franchisee's side, to ensure success is probably one of the most important things we can do.

• 57:32Ted Seides?

  And once you have Popeyes coming, this playbook now is so obvious to Just rinse and repeat. So where did you step in after that?

• 57:41Speaker 04

  The latest acquisition that we did was a company called Firehouse Subs. This is in the end of 2021. And so that's the fourth leg. We think about that. It's a large category, the subs category. And there are several smaller brands, Firehouse being one of them, that are growing at really, really attractive rates of return. We have an incredible product. The brand stands for something that is incredibly important in the communities in which it operates, in terms of giving back. And we see room to grow this business domestically and globally for decades. I think we opened up the first international restaurant.

• 58:23Speaker 04

  It was under our ownership in Switzerland, and we have ambitions to bring that all around the world. And there's an example of a large sub company that has quite a big global presence. And we think that there's plenty of room to have many, many more Firehouse Subs.

• 58:37Ted Seides?

  So as you look at all of this today, what are the quantitative metrics of the number of stores or franchises across the brands that are part of RBI?

• 58:47Speaker 04

  Have 30,000 restaurants, north of 40 billion in sales, 50 billion plus or minus total enterprise value. The company recently had put out that it hopes to go to 60 billion in the next five or so years. We became a real big business.

• 59:02Ted Seides?

  You're 14 years in. Do you start to think about an exit? Or is this something you're planning to own for another 21 years?

• 59:09Speaker 03

  We love the business. We, I think, at the moment are so excited, first of all, with the team that we have in place. And we have this combination of talent that grew up in the business. We have had the fortune of finally, because we had conversations with our common friend, Patrick Doyle, for quite some time. Patrick really hit it out of the park in his tenure at Domino's. It's a landmark in this industry, and we're so fortunate to have him as our partner. And the combination of Patrick and the young team that we have there that came up through the business. I think we feel very, very good about people first.

• 59:49Speaker 03

  We feel very, very good about the continuation of the opportunity to open restaurants around the world and to grow same-store sales in all four brands still. So as a combination of those two things, I think this is as the company has publicly guided, it can grow high, single-digit same-system-wide sales for a long time. And the cash conversion of that, given the nature of the fully franchised business, is one in which the company pays a lot of dividends today, by the way. We receive two-thirds of our notional equity check a year. So it's very cash flowing and it has a great compounding line of sight ahead of us, a great team. So we're super excited to own it for many years.

• 1:00:34Ted Seides?

  How do you think about the competition for your own capital between keeping it in a business that doing nicely and you see a lot of visibility compared to the kind of inflection you've been able to create in a new business?

• 1:00:48Speaker 03

  We think that between the liquidity that we have from these different investments over the years, we do have the capital every several years to try to start a new one of these. We're very excited about Hunter Douglas that we started two years ago in partnership of the Sonnenberg family. We think we can do both as long as we don't get out of the discipline of only starting a new thing every several years, when we have people and when we have time to focus and so on.

• 1:01:19Speaker 04

  Yeah, how often do you get to be a part of a great business led by a great team of people who you've worked with for a long time and have developed trust and respect for over their successful tenure in the business? We had Patrick and Josh and folks involved there. And so we're excited about the long-term outlook for the business.

• 1:01:42Ted Seides?

  Alex, you mentioned just a tiny bit at the beginning that you do have another vehicle, that you're looking at buying another business.

• 1:01:52Speaker 04

  Where are you in that process?

• 1:01:54Speaker 03

  I don't know that we at the moment have anything where we are really, really ready to pull the trigger on. I mean, we do have some pretty interesting proprietary situations in which we have been able to get close and get engaged and to work on, although there's nothing that's really mature to pull the trigger on.

• 1:02:21Speaker 04

  Trying to find the next Burger King, Ted.

• 1:02:23Ted Seides?

  How do you think about what industries you'd be interested in looking at?

• 1:02:28Speaker 04

  Maybe a way to answer that is what industries would we not want to look at? We want to own fundamentally good, but somewhat reasonably easy to understand business. And so you could think about what that knocks out. And ideally, a business that has a good moat, a long operating history, that's not likely to be disrupted or disintermediated anytime remotely soon. And ideally, businesses that aren't overly cyclical. So it's not like we're working so hard to run the business better and we just get the cycle wrong in place for too long. And those are some of the criteria that we look at.

• 1:03:10Speaker 04

  And maybe that's why we ended up owning some of these consumer businesses in the past, because they fall into that bucket of somewhat easy to understand, been around for a long time, most likely not going to get disintermediated or disrupted. Try not to overcomplicate things on our end.

• 1:03:28Speaker 03

  Incidentally, that's one of the things that's so great about this fully franchised brick service restaurant businesses, which is they're really not cyclical at all. Meaning on downturns, people trade down. Look at what happened to the EBITDA of McDonald's or Burger King or Domino's or all these brands in the great financial crisis. And the answer is not much, in most cases, it grew. So they're very resilient in that way, which is a very positive trait of this kind of business.

• 1:04:00Ted Seides?

  What have been your biggest lessons learned from this deal over this 14-year run?

• 1:04:05Speaker 04

  For me, it was my first deal. It was my first time running a company. And I'll apologize in advance for my lesson not seeming overly insightful. But frankly, it was just the importance of having a great team, which, again, as the 29-year-old who was doing the analysis on the deal after we bought the business and Alex came to me and said, we need to assemble the team. Just understanding the overall importance on having A++ people involved in the organization who are fully committed to making it a world-class success. Until you're part of it, I didn't fully appreciate how important it was to have an incredibly talented team running the business.

• 1:04:50Speaker 03

  Everything that has happened that has enabled us 28 times returning our notional capital in this timeframe and how much more we expect to achieve with this business. So much of it has to do also with having entered a high-quality, great business. There is no substitute for that, particularly if you're going to hold it for a long, long, multi-decade period. It needs to be a good business. I don't know that we are one of these people, like a Steve Jobs or someone that's really, really smart and the genius that will be able to convert our so-so or a bad business into a great business. So we need to find great businesses. And sometimes the greatness will be obfuscated by everything that's going on short-term

• 1:05:34Speaker 03

  and the noise associated with these things going on short-term. The fact that the business is a great business is no small part of what happened here.

• 1:05:43Ted Seides?

  What's both your favorite aspects?

• 1:05:45Speaker 04

  Of doing deals and investing. We're not a conventional investment firm. My favorite aspect really centers around the people. I had this opportunity to go initially as CFO and then became CEO and ran the company, both from the financial side and CEO side for nearly a decade. My favorite part of the whole process was getting to recruit, develop, train some incredibly talented, special people who are now today running the organization. It's extremely fulfilling. The people's cycle from hire to train, to grow, to lead, to be able to be part of this and part of someone else's success.

• 1:06:30Speaker 04

  It's extremely fulfilling. And so for me, that's been far and away, no close second, the most fun part of the job.

• 1:06:39Speaker 03

  For me, really is creating 3G Capital was probably the most important thing I've been able to get involved in in my career. And I would love this to perpetuate the firm. And I think that my co-founders have been a great inspiration that way their whole lives and careers in giving people opportunity, allowing them to chart their own path, allowing them to have the results and benefits and the wealth creation associated with creating their own path. And I would love that to continue here at 3G Capital. Well, I'd love to ask you both a couple of fun closing questions. What is your favorite hobby or activity outside of work and family? Alex, why don't you go first?

• 1:07:24Speaker 03

  I love spearfishing, which is some combination of fishing and freediving. And probably contrary to what we do here, it's probably the most inefficient way of fishing.

• 1:07:40Speaker 03

  But it's a lot of fun. We go to nice places. So I spend a lot of time doing that.

• 1:07:46Speaker 04

  Outside of work and family, exercise and probably in order of most frequent but least enjoyable, I run, play tennis and play basketball in that frequency and my enjoyment is probably the inverse.

• 1:08:01Ted Seides?

  Daniel, what's one fact that you find interesting that most people don't know about you?

• 1:08:07Speaker 04

  I'd say I'm definitely more introvert than extrovert, which probably isn't so common for former public company CEOs.

• 1:08:16Ted Seides?

  Alex?

• 1:08:17Speaker 03

  I recently got quite involved with philanthropy. It's recent. Very few people know about it. Our foundation has only three years. My wife's very involved with me. We were lucky to recruit this gentleman. There was an MBA at Stanford. Went down to Brazil. It's basically education for young people and mostly digital education, meaning programming, computer engineering, all the way from basic programming to college to masters to PhD programs. Have about 100 scholars now. It's small, but we have big dreams for it and it's a lot of fun. Hopefully in time we'll become better known.

• 1:08:56Ted Seides?

  What's your biggest pet peeve?

• 1:08:58Speaker 04

  I'd say one of the things that probably bothers me is if people aren't working at 110% or giving something their all. We never really cared if we're the smartest people, but always at least wanted people who are working at 100% and giving the project their everything. Being short of that, that always bothered me.

• 1:09:16Ted Seides?

  Daniel, which two people have had the biggest impact on your professional life?

• 1:09:21Speaker 04

  Well, number one, Alex. He gave me a shot at something way, way earlier than I probably deserved. Certainly at a time maybe when others wouldn't give me a shot. And then our three co-founders as well.

• 1:09:36Ted Seides?

  Alex?

• 1:09:38Speaker 03

  Look, my three co-founders, I mean, had a huge impact in my life as well. They found me in this MBA program, our alma mater, and took big bets on me. This, one of them, particularly this guy, took huge bets on me on a railroad and really believed in me and became a close personal friend. And Marcel, Georgia, they really took huge bets here when it came to build through G Capital and I'm forever grateful for that.

• 1:10:05Ted Seides?

  Alex, what's the best advice you ever received?

• 1:10:10Speaker 03

  When you get into a new situation or a new business, try to find good common sense things to do and don't make huge business decisions about strategic things before you take the time to understand the business. Well, I think to an extent, we applied that at Burger King and I think it's something that really prevents big mistakes. And usually by focusing on the common sense things, there are opportunities to be harvested while you're learning about the business.

• 1:10:47Speaker 04

  Someone once told me, work really hard to put yourself in a position to get lucky. There's a little bit of luck involved in everything, but you up your odds, you up your chances through your controllable lever of hard work.

• 1:11:00Ted Seides?

  All right, guys, last one. What life lesson have you learned that you wish you knew a lot earlier in life? Daniel, why don't you go ahead?

• 1:11:07Speaker 04

  Don't be afraid to make a big bet on someone if you really believe in that person. Even if maybe that person isn't 100% ready at the time, don't be afraid, make the bet.

• 1:11:17Ted Seides?

  Alex?

• 1:11:18Speaker 03

  Yeah, something that I've come to appreciate at this stage of my career I'm at now is to focus your time on the things that make the most difference. Because the amount of noise in your day to day, be it on your personal life at times, be it at your work, is high.

• 1:11:38Ted Seides?

  Alex, Daniel, thanks so much for sharing this incredible story about 3G and Burger King.

• 1:11:44Speaker 03

  Thank you for having us.

• 1:11:44Speaker 04

  Thanks for having us, Ted.

• 1:11:47Ted Seides?

  Thanks for listening to the show. To learn more, hop on our website at capitalallocators.com where you can join our mailing list, access past shows, learn about our gatherings, and sign up for premium content, including podcast transcripts, my investment portfolio, and a lot more. Have a good one and see you next time.