Thanks for highlighting differences, i also see this as unique franchisee where parent has significant equity…what I did not know is that burger king is not doing business in India as a franchisee but rather a JV…
In this context, could you pls help understand above difference of why a JV earns only royalty and another JV earns both royalty and profits?
To me - it should be either a royalty or profits (except of course a royalty + dividend in case parent holds equity in its franchisee)
I was thinking over this equity dilution in quick time and regularly so far in case of burger king and one reason could be that their contract demands significant expansion without ever increasing debt equity ratio beyond 2…it currently stands at around 1…so as a safeguard and prudent management, it makes sense to dilute equity to fuel expansion (in this case even foreign acquisition) via equity when markets are doing good…
However, I would be fine if such dilution is for indian expansion but if it is for acquisition, then you don’t know when this cycle would end and as small investors we would always be guessing what acquisition next…would be great to know your thoughts on this important aspect…
Lastly, since I see you have so beautifully explained different type of QSR model in India - I do not understand why would RB parent would go on a contract with itself? (As RBA is in essence its own subsidiary via significant equity and if they would share profits as well)…a contract with itself does not make sense to me …
Thanks
Disc. Same as above