Q4 2019 Earnings Call
[music].
Hello, and welcome to the restaurant brands International fourth quarter 2019 earnings Conference call.
All participants will be in listen only mode should you need assistance. Please said no contract specialist I personally starkey followed by zero.
After today's presentation, there will be an opportunity to ask questions.
To ask a question in my Press Star then one on your telephone keypad, you'll hear accounts confirm that youre in the queue to accept the questions. You May Press Star then to.
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I'd now like to turn the conference over to CRISPR. They are be ice head of Investor Relations Mr. Brig be. Please go ahead. Thank you operator.
Good morning, everyone and welcome to restaurant brands International earnings call for the fourth quarter and full year ended December 30, Onest 2019.
As a reminder, a live broadcast of this call may be accessed through the Investor Relations Web page at Investor Dot RV, I Dot com and recording will be available for replay.
Joining me on the call today, our restaurant brands International CEO, Jose Sill, COO, Josh Kobza, and CFO, Matt Dhane again.
Today's earnings call contains forward looking statements, which are subject to various risks set forth in the press release issued this morning and in our SEC filings. In addition, this earnings call include non-GAAP financial measures reconciliations of non-GAAP financial measures are included in the press release available on our website.
Let's quickly review the agenda for todays call.
Lets say, we'll start with some opening remarks and highlights for the fourth quarter and then discuss our performance at Tim Hortons Burger King and Popeye's, Josh will then provide an update on technology at RV I, both as a review of what we've accomplished thus far and a frame for key areas of focus moving forward.
To conclude Matt will review, our financial results before opening the call up for QNX.
I'd now like to turn the call over to Jose.
Thanks, Chris and good morning, everyone. Thank you for joining us on todays call I'll begin my remarks today with a summary of our performance in 2019, which reflected the underlying strengths of our global business and the power of our growth algorithm.
I will then share my views on the key drivers of our performance last year as well as our specific plans and priorities for 2020.
On a consolidated basis, we delivered strong results in 2019, our system wide sales grew over 8% to $34 billion for the full year and nearly 10% to approximately 9 billion in the fourth quarter or 8% system wide sales growth in 2019 included 5% unit growth to over 27000 restaurants worldwide.
And with over 3% consolidated global comparable sales growth our unit growth. This year represents a solid continuation of growth relative to the goal. We shared with you at our Investor day in May of reaching 40000 restaurants in eight to 10 years as we grew our global unit count by over 5% for the third year in a row.
The consolidated system, one sales growth of over 8% that we delivered in 2019 was driven primarily by Burger King where system wide sales increase over 9% and popeye's where system wide sales grew over 18%.
Tim Hortons system wide sales dropped slightly in 2019 as our performance in Canada came in below our expectations.
Despite our challenge is a tim's we were able to achieve system wide sales growth in the high single digits on a consolidated basis, reflecting an important advantage of our scale and diversified model.
Within our 8% consolidated system wide sales growth, we generated consolidated comparable sales growth of over 3%, which reflected a very healthy contribution from Burger King were comparable sales grew approximately 3.5% and an especially strong contribution from popeye's, where comparable sales grew over 12% for the full year.
At Popeye's comparable sales growth accelerated to over 34% in the fourth quarter driven by the relaunch of the chicken Sandwich in November which led to nearly 38% growth in the U.S.
This has been a very exciting time for the popeye's team and in fact has been an exciting time for all of US who spent a long time in QSR and have never seen the kind of guest response for a single product launch like the one we had for our popeye's chicken sandwich.
At Tims comparable sales of negative, 1.5% again, primarily reflected week topline performance in Canada and represented a drag on our otherwise healthy consolidated growth rate.
Comparable sales at Sam's included a meaningful deceleration in the fourth quarter to negative 4.3% globally and negative 4.6% in Canada on top of our consolidated comparable sales growth in 2019, we delivered over 5% growth in net units across our brands.
At Burger King, we expanded our network by nearly 6% while it popeye's, we delivered unit growth of nearly 7%.
At Tims unit growth was approximately 2%.
And for both Popeye's and Tim's our unit growth in 2019 reflected the very early stages of several recent and significant international development deals in key Asian markets.
Turning to franchisee profitability, we saw a slight year over year drop at Burger King in the U.S. due to 60 high commodity prices, but unit economics remained at a very healthy level as we close out the year.
This is true, especially for our new developments, which have sales averaging over 60% higher than those at the legacy restaurants in the closure program that we discussed at our Investor day at Popeyes franchisee profitability increased substantially on top of an already strong baseline boosted by the incredibly strong launch of our chicken sandwich and finally at tims.
Lower sales combined with some pressure from labor cost in parts of Canada resulted in lower franchisee profitability year over year. However, franchisee profitability remains very healthy it seems in Canada and the related unit economics are still some of the very best in the industry I'm going to start my brand commentary with Tim Hortons. This morning.
Our approach the product innovation and promotions over the last couple of years has led us to disappointing results for the quarter and the year.
Theres clearly a sizable gap between what this brand is capable of and the performance we've delivered.
I'm going to spend some time this morning sharing what we're doing now to return the business to the growth track it should be on given the strength of the assets. We have our year on year decline and comparable sales of negative 4.6 in Canada was primarily driven by the investments in our rewards program, we're making to attract millions of Canadian to join and participate in our Tim's loyalty program.
Each contributed approximately negative 3% to a reported comparable sales figure our pursuit of a best in class loyalty program is focused on increasing the already exceptionally high level of engagement deep relationship and personalized connectivity with our guests.
Given tim's existing dominant market leadership position in brewed coffee. We believe this powerful marketing tool has the ability to not only help us defend but continue to grow market share over time.
We're building a platform that understands what our guests want and engages and rewards our guests for their loyalty with exciting offers and great value for money.
We think this platform will help us deliver continued long term growth for the brand by driving incremental traffic and increased check average in our restaurants.
Our loyalty journey involves two important phases are first phase is seen as attract more than 7.5 million active loyalty members and for the last 10 month, they've been receiving a simple and compelling offer that provides a free coffee or bake. Good after seven visits to a restaurant.
As we have previously noted we've attracted far more guests to our loyalty program far more quickly than we had planned and we currently have about 25% of these guests who have registered and shared their contact information with us.
Our second phase of loyalty will encourage much higher levels of registration by making most of the menu accessible for redemptions and adding exciting tailored offers based on your purchase history.
We're shifting from a visits program to a points program, where each purchase occasion earns you points that you can redeem for most of our menu items, our central priority in the second phase is to drive digital registration and unlock powerful tools like sales intelligence and one to one marketing that we'll use the developed stronger relationships with our guests and drive incremental sale.
As overtime.
Our extensive research with guest indicates that a large majority of our guest will register overtime to take advantage of our great offers and fuller menu of rewards.
This will in turn allow us to evolve the program into an engine that delivers incremental value to guests, while generating incremental sales for the system.
Guess, who choose not to register will shift from a free reward after seven visits to a free reward after 12 visits.
The timing of the shift to this second phase is now.
Last Friday, we initiated a major shift in our marketing around the program designed to communicate simple ways to register via mobile or on the web and also highlight the extra benefits available when you Register.
We expect that loyalty, we'll continue to be a drag on sales for the coming several quarters as we convert loyalty guests to registered loyalty guests and start deploying incremental offers at scale.
We'll be delivering a more personalized experience to our guests the should bring more benefits and generate incremental sales in the latter part of 2020 and beyond.
In addition to the impact of loyalty our comparable sales in Q4 also reflected softness in lunch food, which contributed approximately negative 1% to a reported comparable sales figure.
Or weakness in this area is attributable primarily to the sandwich and wrap category where offerings. This year did not match strong sales from our crispy chicken wrap in 2018.
Over the past several months I've made Tim Hortons in Canada, My top priority and have examined our performance and processes in detail.
The team has spent months defecting every part of the business conducting extensive new research spending considerable time with a restaurant owners identifying the underlying causes of our weak performance and zeroing in on the large areas of opportunity to drive sustained long term improvements in the business.
After several months of hard work our team has emerged with a clear view of what we need to do to accelerate growth and profitability for owners and for the brand.
It's useful to start by acknowledging what made Tim Hortons, the dominant brand and market leader in Canada, Tim Hortons had five informal founding values that we have spent quite a bit of time thinking about each value has been key to our success in Canada over decades and remains relevant today, albeit in a refreshed and modernize way.
When Tim's was founded back in 1964, these values and bodies ethos of a brands that would grow over decades to become one of Canada's most loved.
First Tim has always been obsessed with freshness and quality.
Second we made things simple for everyone third we offered great value for money fourth we believed personal relationships matter and fifth we've always given back to the communities where owners live and work in our review of our tactics going back several years, it's clear we strayed from these core values and we must now.
I would just our strategy to reconnect with them.
With that as a backdrop I'd like to now summarize our plans for 2020.
It starts with Reorienting and reinforcing our team under axle Schwan, who many of you have not had a chance to meet yet but has tremendous experience having served as global CMO of Burger King and more recently as global CMO of Tim's, where he's led the development of our fresh Brewers welcome 2020, and the innovation cafe axle and I've been working shoulder to shoulder.
Focused on building an experienced team of Canadian that have deep expertise in the most critical areas of the restaurant business in Canada in North America.
We've announced a number of meaningful changes, including recently the appointment of a Canadian industry veteran as chief sales and marketing Officer. In addition to well established Canadian experts to lead our development restaurant technology and communications efforts.
I've been working hard with the full team to put together a roadmap for 2020. Our plan reflects a return to tim's founding values and is designed to reinforce the core product categories that have made us famous over the years.
There is no catchy name to the plan, reflecting our mentality to simplify the business as we returned to being the best at our basics and embracing our heritage all while infusing some more modern features as we move forward, we focused our efforts around three key principles.
First elevating the quality of our core categories second innovating for growth from our core categories and third continuing to invest in modernizing the brand.
Within this framework, we've identified initiatives to support each of our principles some of which we've already seen progress against during the first quarter of 2020.
Let's go through each one by one.
Elevating court quality is about reinforcing the most fundamental elements of our menu and raising the standard for products that bring millions of guests into Tim Hortons everyday.
Coffee sits at the very heart of Tim's identity and is one of the most important contributors to sales.
Breakfast food is another huge part of our business and has been one of our strongest growing categories for the past five years.
While we already have a market leading position in both areas. We plan to build on this leadership by committing ourselves to serving the absolute best products in Canada.
In coffee Tim's has an incredibly rich history as Canada is local coffee shop, and our cup is unambiguously the category benchmark.
On the supply side, we truly have some of the best sourcing blending and roasting capabilities in the world.
We source, a 100% premium arabica beans, which adhere to strict standards for great and taste and have a long standing in house team of coffee experts that carefully monitors are roasting and grinding to ensure we meet the high standard of quality, while we have meaningfully differentiate ourselves in this respect we've continued to use decades old brewing technology, while the IND.
History has evolved in ways that both enhanced consumer taste and improve efficiency in restaurant.
We're addressing this opportunity head on with the rollout of fresh Brewers and water filtration systems at every store across Canada, which we began towards the end of 2019, but as accelerating in 2020 compared with the coffee prepared in a traditional glass pots. Our guest have told us that the quality of coffee from our fresh Brewers is significantly better and more consistent on me.
Multiple dimensions, the fresh brew system is already in place at over 2000 restaurants, and we expect to complete the accelerated rollout in the first half of this year.
In parallel we will be on air across Canada, with TV digital and other marketing that highlights our leadership in coffee quality in a way at the Canadian public hasn't seen or heard for many years.
Taking coffee prep a step further we also need to respond to changes and consumers taste preferences overtime.
Based on our research the substantial percentage of Canadian consumers prefer skim milk with their coffee and a growing percentage, particularly among younger guests preferred nondairy alternatives like almond milk.
Up to this point, we have not offered these options or guests and have lagged behind competitors.
We are working quickly to address this and are launching these alternative dairy options into the market. This spring.
These adjustments may seem basic but that's the point being the absolute best at the basics that were already famous for.
You've already seen progress around several initiatives to bolster our brewed coffee platform, including last year's packaging update you will see considerably more progress as we move through 2020.
Improving our brewing technology in store enhancing options to customize and putting coffee front and center in our brand messaging or among our most important near term areas of focus and there's more to come.
Let's talk about breakfast, which has been a core strength for us for many years.
While our research has demonstrated our unequivocal leadership and suite Foods does also pointed to an opportunity to improve our savory offerings and we're moving quickly to execute against it.
In core offerings like our Bacon breakfast Sandwich for example, we're working to enhance the taste texture and overall quality of our Bacon, which has a headline ingredient must be outstanding. Similarly, we're moving to significantly improve the bread carriers for a breakfast sandwiches, which are testing has indicated represents a key opportunity to make or savory breakfast food more satisfying.
And craveable.
The second pillar of our plan is innovating for growth in our core categories.
As I mentioned earlier, it's clear to us that are recent approached innovation has lacked the focus necessary to resonate with guests.
In 2019, we launched nearly 60, ltos three times or level from 2017, which added complexity to our restaurants cluttered, our menu and diluted on marketing communications.
Some new products over the last two years stray too far from our core categories that we've always been famous for.
Going forward, new launches will be more targeted and will build on our core categories.
Our recently launched stream bonus line is a great example of the type of innovation you will see more of.
We first tested this new line of elevated premium donuts at our innovation Cafe in Toronto.
Were generated strong and sustain sales at a premium price point of $1.99.
After its success at the innovation Cafe the line gain momentum in market tests and from an operational perspective fits seamlessly into our core baked goods assortment, we launched three dream Donuts flavors nationally in January and so far results have been encouraging.
And you will continue to see us drive innovation for growth from our other core categories.
For example, alongside our work on brewed coffee, we have an opportunity to enhance our cold beverage category through improvements to our ice coffee offering.
In recent years ice coffee has emerged as an increasingly important core growth category and we believe we're well positioned to build on top of already meaningful base. We've developed a new prep method that resulted in much more flavorful brew, which will be rolled out in coming months.
We will support the rollout where the marketing campaign that showcases our leadership in quality and believe this platform will be an important source of incremental growth.
The third pillar of our 2020 plan is to continue our investments to modernize the brand we've spoken recently about our growing digital capabilities that RV.
Which Josh will discuss later at Tims, we're moving this year to integrate technology into our most important touch points with guests.
Consider the drive through in the past five years growth in the drive through has outpaced growth, but the front counter and today, we generate more than half of our total sales in Canada from drives it or we believe we are uniquely well positioned to capitalize on growth in this channel given our network of over 2600 drives it locations across Canada.
Further our research has identified speed and reliability at to drive Hadoop as being especially important to our convenience oriented guests. Despite the increasing importance to the drive through however, our drive through experience hasn't seen a meaningful update in decades in 2020, we're moving forward with an important initiative to modernize or drive through experienced by deploying outdoor digital menu.
Towards to the majority of our drive to the locations.
Our current paper based menu boards cost millions of dollars each year to print and update and they required manual changes by team members multiple times per day.
Switching to digital menu boards in the drive through will free up time for team members to focused on serving guests.
While ensuring that the proper information is always on display. These outdoor digital menu boards will also allow us to tailor offerings, depending on location time of day weather and more we'll be able to offer complimentary products in combos to guests based on the items they've selected and at a future stage. We believe personalized offers will provide another important linear growth.
We've already installed outdoor digital menu boards and several hundred stores and consistent with prior funding structures. The Tim Hortons, Canada AD fund will invest over 100 million Canadian to complete the installation across most drive to the locations over the next 12 to 18 months.
Where we've installed the outdoor digital menu boards already we've started to see some benefits to sales even before considering the potential future benefits of future tailored offerings.
We've also seen at positive impact to speed of service and we know throughput is very important for sales given the heavy ticket volumes of our business on top of this investment to update or drive through experience will also continue to invest alongside our owners to modernize our restaurant network through Reimages in recent years, we have contributed to several hundred renovations per year at locations.
Where we own or Subleased to real estate, we expect to continue investing at a similarly healthy pace in 2020.
We've shared in the past or belief that cultivating digital relationships with guests will be critical differentiator going forward.
And all my initial comments on shifting into the second phase of our Tim's rewards loyalty program will sit at the center of our strategy to advance into this new age of digital engagement and personalize interaction with our guests across Canada.
Following the rollout of our new tends rewards program will also be updating our iconic roll up the rim program. When it returns in the coming weeks. This year's program will tie into our focus on digital and will be another valuable tool to help drive digital adoption and guest registration in the Tim's rewards program, we'll be announcing more details are in the program soon.
In Canada, Tim Hortons continues to have one of the strongest market positions in all QSR globally and some of the industry's best unit economics, but we cannot be complacent.
We have not performed to expectations and have not properly put the strength of the Tim Hortons brand to work.
Despite our recent results we have a clear plan and believe it's within our control to restore Tim Hortons to growth in Canada to do so we will embody the brands founding values and execute on each of our principles around elevating core quality innovating for growth and modernizing the brand.
Over the past two weeks I've traveled to seven cities across Canada with the entire Tim Hortons leadership team.
We've met with more than 1000 restaurant owners and have participated in more than 12 hours of collaborative and engaged opened format dialogue and today in each session. We've talked at length about their profitability our priorities for 2020, and our mutual commitment to providing guests with a great experience every time they visit Tim Hortons.
I also shared my commitment to work closely with our team and community of owners in Canada, as we execute against our plan.
Glad that coming out of these town hall meetings, we all share to sense of urgency and have rallied behind the plan to refocus on what May Tim's famous.
I'd like to turn now to Burger King, where our global business generated strong results in 2019, but before I do I wanted to quickly comment on the unfolding situation in China, our immediate focus as the health and wellbeing of our partners and guests and cooperating with local and government officials working to contain the Corona virus.
For reference in 2019, Burger King China accounted for approximately 2% of our consolidated system wide sales.
While it's too early to say how long the impact on our business. There will last we're monitoring the situation very closely.
Now back to our results at Burger King in 2019 system wide sales grew over 9% to nearly $23 billion, including comparable sales growth of over 3% and net restaurant growth of just under 6%.
Our results for the full year included another very strong contribution from our international business, where system wide sales expanded over 15% increasing over $1 billion year over year within that figure International unit growth reached almost 10% and propelled global unit growth to over 1000, net new restaurants for the third consecutive year. In addition.
One international comparable sales continued to grow at a strong pace of nearly 5%.
This growth was broad based but system wide sales growth was especially strong in markets like France, Spain, Korea, China, Brazil and Mexico.
As we outlined during our Investor day, we believe we have a great deal runway for Burger King around the globe, especially internationally.
In fact, we've seen that as our presence grows in different regions, our brand awareness and convenience increases well powering this virtuous growth cycle.
With system wide sales of nearly $13 billion up from $8 billion five years ago. Our international business now represents a majority of Burger King global sales.
And with double digit growth in each of the last three years across regions. We expect Burger King's International operations will continue to be a powerful engine of growth going forward in the fourth quarter, specifically international system wide sales at Burger King expanded almost 15% with strong growth across several markets in Asia fueled by comparable sales growth increased penetration did.
You'll channels and substantial unit growth in Europe, our partners in Spain, and France also delivered double digit system wide sales growth driven by healthy net unit additions and comparable sales performance I.
I highlight these large and fast growing markets, but again our growth for the full year and in the fourth quarter was broad based across regions.
In the U.S., we continued to see healthy momentum in our core offerings and strong performance from the impossible Whopper during 2019, our comparable sales increased 1.7% for the full year and we saw solid growth across our menu.
Digital sales also continued to increase at a healthy pace.
We now have over 4200 stores in the U.S. with delivery integrated directly into the POS and of these the majority offer delivery via multiple aggregators.
As I mentioned the impossible Whopper was a big highlight of 2019 and continued to be an important sales or every Q4 generating healthy levels of incrementality at a premium price point.
Given the sustained performance of impossible Whopper, we're confident that plant based foods represents a new platform for the brand and one that we can build into new occasions, dayparts products and proteins. We know that the premium price point has limited some gas from trying the impossible whopper. So in January we added the impossible whopper toward core to for six promotion.
The product clearly resonates with our guest and we plan to invest behind her leadership in the fast growing plant based segment, while we did see a deceleration in comparable sales growth in the us from the third into the fourth quarter. Our core business continues to perform well and absolute sales levels remains very healthy.
In the fourth quarter, we didnt run as many price oriented promotions as compared to last year like dollar Nuggets, and consequently saw softer year over year growth.
In the first quarter of 2020.
We're running several compelling offers including our five from four deal and our two for six deal with impossible Whopper that we believe will bolster our value layer.
Turning to development, our global net unit growth for Burger King was approximately 6%, which was driven primarily by our international operations, where we grew by nearly 10% and expanded our system by more than a thousand restaurants and nearly 11000 502020, we will continue working closely with our great network of partners in markets like space.
I mean, Russia, Korea, Brazil, China, and India to build our pipeline and opened new restaurants, it's worth noting that our net restaurant growth of 1042 stores for the year also reflected the impact of our US closures program. We discussed at Investor Day, which included about 200 plant closures in 2019 with a similar number expected into.
2020.
You may recall that we're targeting underperforming restaurants with average sales of about 850000 for closure and replacing them with brand New Burger King of Tomorrow restaurants, which have averaged over 1.4 million sales. While it's brought an uplift in sales. The program is also an important part of the evolution towards Burger King you image.
On that front in 2019, we delivered more than 800 restaurants in the Burger King of Tomorrow image slightly ahead of the target we shared at Investor day.
In short 2019 was another strong year for Burger King Distinguished by the continued performance of our large and rapidly growing international business, along with strong core sales and the launch of the brand new product platform at home in the U.S., which has brought many new guest with attractive demographics into a restaurants across the country.
Now, let's turn to Popeye's were in our view 2019 was a pivotal year for the brand.
Globally system wide sales grew over 18% for the full year and a remarkable 42% in the fourth quarter.
As you might expect a good deal at this growth was driven by the launch of the chicken sandwich, which surely ranks among the greatest product launches in the history of QSR.
In the U.S. comparable sales grew 13% in 2019 and nearly 38% in the fourth quarter largely driven by the relaunch of our chicken sandwich on November Threerd.
As we've shared in the past the chicken sandwich has been a great way to introduce many new guest of the brand and our research shows that popeye's often shoots the top of list in preference once it gets this tried our products. While we're very encouraged that the chicken sandwich was an important driver of sales in the fourth quarter. Our other core offerings also performed very well and for the.
Vast majority of our guest purchasing the sandwich, we saw that they actually spent more on other products and I'm, saying, which itself, resulting in very healthy check levels and incredibly valuable awareness and trial.
Also driving awareness and trial was the amazing reaction to the relaunch and social media through.
During the relaunch, we trended number one on Twitter and became the top search on Google. We also had billions of media impressions and generated earned media worth considerably more than the size of our entire annual us AD fund spend.
On development, our healthy unit growth of nearly 7% popeye's does not reflect the potential embedded in the unit economics of pop up stores in the U.S. Following the brand step change in 2019, nor does it reflect the impact of a recently announced major international agreements in key Asian markets in the U.S., we've seen a significant increase in interest for new Popeyes restaurants follow.
The brands remarkable success in 2019.
As I noted earlier the increase in sales across categories helped drive a material improvement in franchisee profitability and we believe the brands highly attractive unit economics will support a long runway for growth across the US you may recall that our pipeline for new restaurants follows a longer 12 to 18 month cycle. So we expect development agreements, we put in place last year to.
Begin delivering units this year and next.
In the coming years, we see a huge opportunity for popeye's to grow from a brand with cult status into a true mainstream player in the U.S., all while maintaining its unique Louisiana heritage.
On the international side, we made good progress in 2019 ramping up the popeye's brand in Southeast Asia, particularly in Vietnam and the Philippines.
The strong sales performance, we've seen so far tells us that the brand resonates in the region.
We also signed the key agreement to bring popeye's to China. This past year with our existing partners for Burger King in the country and spent a great deal of time preparing for the launch, which we expect an in coming months.
With a target to build 1500 restaurants in the next 10 years we.
We believe popeye's, China has massive potential our partners have nearly achieved this market Burger King in China in just the past eight years and last year opened over 300, Burger Kings and the country. We're confident they are the right partners to establish popeye's is a serious player in the world's largest chicken market.
In conclusion, our results in 2019 were solid on a consolidated basis and consistent with the growth algorithm, we presented at our Investor day, even with one of our brands underperforming.
Tim is remains our key point of focus in 2020, and we're committed to delivering stronger results. It's been an exciting first year at the helm for me full of learning, but also with many accomplishments that we will build on moving forward.
As a team we're excited about the outlook for three iconic brands and are confident that we have all the resources and capabilities needed to realize their potential for growth all around the world.
With that I'll hand, it over to Josh to provide some more color on our technology initiatives.
Thanks, Jose and good morning, everyone. We Havent had a dedicated section on technology in the past, but we think it's appropriate to share some thoughts with you today, given what an important priority technology represents for us and the significant progress we've achieved.
We started about two years ago on a new journey to make technology, a core competency at our via digital adoption in the restaurant space is very advanced in Asia as accelerating now in the U.S. and other parts of the world.
It is our view that in order to be successful as our industry evolves, we must offer industry, leading digital experiences integrated with our physical restaurants and technology in order to win with guess going forward.
Today I'll share a brief update on what we've accomplished so far and where we're going in 2020.
Over these past two years, we've made significant progress to catch up with key competitors in core technology offerings, and I'll break down our efforts into fourq initiatives.
First we have built a strong team led by our CIO frankly appirio.
Who has over 20 years experience overseeing some of the largest global restaurant technology networks, and who joined our team in 2019 as well as steady Cheryl our CTO, who joined in late 2018. After building an educational technology from he co founded and who currently leads software development of our guest facing platforms.
Together with Frank and Teddy we've recruited from leading tech companies to build out Miami and Toronto based teams and engineering product and design as well as digital teams within the brands to drive guest experience in new digital sales channels.
Second we have made and continue to make investments in core infrastructure improvements to enable the future of digital ordering and ecommerce.
The consolidation of the Popeye's Pos system from about 40 system down to two was a great example of this initiative.
Without which delivery and online ordering would have been impossible.
We also launched a new and more modern front end code base that replaced many of our legacy mobile apps and websites.
Allowing us to move faster going forward and have end to end control over our digital interface with guess, particularly in our home markets.
Finally, we integrated delivery into our Pos systems across brands.
Which has greatly improved in store order fulfillment and helped accelerate growth.
Many more of these projects related to Pos modernization.
Network upgrades and systems reliability, our ongoing.
Third we enable digital delivery for guests across all three of our brands.
Today, there are more than 4200, Burger king restaurants, offering delivery in the U.S. and over 9000 globally.
Representing a run rate business over $1 billion on an annualized basis.
Popeye's has also ramped up delivery significantly in the U.S. to over 1600 restaurants.
And drove its strong increase in sales this year, especially following our highly successful me goes promotion.
Today delivery of popeye's unless represents about a $250 million business on an annualized basis.
Fourth we have used delivery, our mobile apps, new websites loyalty programs kiosks and other channels to drive digital engagement and digital sales.
At the end of 2019 digital sales at became Popeye's, we're in the high single digits as a percentage of system wide sales in the U.S. and at tims, they represent more than 10% of sales in Canada.
Looking ahead to 2020, there are four core priorities that our teams will be focused on all of which are centered on guest experience.
The first is driving amazing end to end guest experience and our proprietary digital channels.
We now have mobile apps web ordering and white label delivery services with these white label delivery services now, allowing our guest to order food directly through our app with delivery fulfillment from one of our aggregator partners.
We've made many other digital experiences available through our guests as well and we're quickly bringing focus on refining both the software experience and integration with our restaurants. So that we are confident that we are able to deliver a reliable unpleasant experience every time.
The second initiative for 2020 is to revolutionize the drive through experience at Burger King and Tim Hortons through the rollout of outdoor digital menu boards on an expedited basis.
This year, we plan to complete the rollout to approximately half of Burger King locations in the U.S. and the majority of the Tim Hortons system in Canada.
Our teams are already running tests with dynamic content to offer guests more location or situationally appropriate many suggestions.
As well as personalized offers.
We expect to deploy this layer of technology as we complete the hardware rollout.
Third we plan to deploy an intelligence platform behind each of our digital guest experiences the allows us to capitalize on the system. We've built over the past two years.
We now have the backbone of customized and algorithm based offers in 2020, we expect to rollout personalized one to one marketing across all brands and touch points.
As Jose mentioned this is especially relevant for Tim Hortons as we transition to the second phase of the Tim's rewards program in the coming weeks.
All of these initiatives ladder up to our big priority, which is to drive the penetration of digital sales across each of our brands.
It's our view that future success in our space will be increasingly dependent on digital capabilities and platforms.
So it's critical to establish our brands as leaders in their segments, particularly with younger guests as we navigate digital transformation of QSR.
This list is just a subset of many projects that we're making progress on but I think it provides useful context around what we are working hard to achieve and technology.
I look forward to sharing more developments in the future and I'd now like to turn the call over to Matt.
Thanks, Josh as you may recall during our Investor day, we set up a simple historical growth algorithm that laid out the key components of our business growth.
In the algorithm, we shared our historical template of 2% to 3% consolidated comparable sales growth combined with approximately 5% Global unit growth has historically produce system wide sales growth of about 7%.
And after normalizing for the impact of acquisitions.
The sales growth has translated into mid to high single digit organic EBITDA growth.
This year, even despite seeing some softness in our sales at Tim Hortons, we were able to deliver results very much in line with this framework.
In 2019, our system wide sales growth of 8.3% led to consolidated adjusted EBITDA of $2.304 billion.
Up 6.5% organically year over year ended the fourth quarter consolidated adjusted EBITDA grew 7.8% on an organic basis, representing our highest growth rate in eight quarters dating back to 2017, primarily attributable to healthy year over year sales growth at Burger King and popeye's.
In our view this demonstrates both the underlying strength and consistency of our business model as well as he added benefit from diversification that we get from having a multi brand model with significant operations in all regions around the world.
At the segment level, Tim Hortons 2019, adjusted EBITDA was $1.122 billion, which represents a 1.5% organic increase year over year.
This growth was driven primarily by an increase in supply chain sales the biggest drivers of which were shifts in product mix growth in our retail business and growth in equipment sales.
In addition, our EBITDA growth also reflected lower segment DNA expenses year over year.
In the fourth quarter, Tim Hortons, adjusted EBITDA was $297 million, representing a decrease of 0.2% year over year.
This variation was driven primarily by a decrease in global comparable sales, which was partially offset by the same factors I just mentioned for the full year.
At Burger King 2019, adjusted EBITDA was $994 million, which represents a double digit organic increase of over 10% year over year. This increase was driven primarily by strong system wide sales growth of over 9% with continued momentum in global net restaurant growth of nearly 6% including.
Almost 10% internationally.
And global comparable sales growth of nearly 3.5%.
In the fourth quarter Burger King adjusted EBITDA was $266 million, representing an increase of over 9% year over year.
This increase was driven primarily by global system wide sales growth of 8.4%, including comparable sales growth of nearly 3% and net restaurant growth of nearly 6%.
Finally at Popeyes 2019, adjusted EBITDA was $188 million, which represents an organic increase of over 20% year over year.
This increase was driven primarily by strong system wide sales growth of over 18%.
Among the brand strongest growth rates in the past few decades.
The system wide sales growth included net restaurant growth of nearly 7% and global comparable sales growth of over 12%.
In the fourth quarter Popeye's, adjusted EBITDA was $59 million.
Representing an organic increase of nearly 63% year over year.
This increase was driven primarily by global system wide sales growth of over 42%, including comparable sales growth of nearly 35% and net restaurant growth of almost 7%.
Our full year adjusted net income was approximately $1.27 billion.
Which compares to prior results of $1.24 billion.
This year over year increase of 3% was driven primarily by adjusted EBITDA growth and additional benefit from the reduction to interest expense from our refinancing transactions, which was partially offset by an increase in stock based compensation and a sizable impact from unfavorable FX movements.
In addition, our adjusted effective tax rate was slightly higher year over year at nearly 20%, but came in a bit better than the low 20% range. We shared at the beginning of last year, which we believe remains the appropriate expectation for 2020, our full year adjusted diluted EPS was $2.72.
Compared to $2.63 in the prior year.
Representing growth of 4%. This increase includes a significant headwind from unfavorable foreign exchange rate movements, which reduced our adjusted EPS growth rate by approximately three percentage points.
Now, let's discuss our cash generation and capital allocation for the year.
We generated over $1.4 billion of free cash flow in 2019.
Calculated is the sum of cash lives from operating activities, let's payments for property and equipment.
In 2019, we also paid a total of over $900 million in common dividends and partnership exchangeable unit distributions.
In addition to this we continued to make progress on key investment projects, including the expansion of our Tim Hortons supply chain that working Canada as well as our previously announced remodel programs at both Tim Hortons at Burger King.
In 2020, we will continue to invest in support of these initiatives, which we believe reinforce the long term house and growth potential of our business.
After making considerable progress on the Buildout of our Canadian distribution centers last year, we expect to finish the project in the second half of this year.
Once the project is complete our distribution coverage will increase from about 75% to nearly 90% of total delivered cases, which we believe will help us meaningfully improve service levels to owners by reducing complexity through fewer deliveries per week and improving delivery times.
In terms of restaurant Reimaging, we expect to maintain a similar path of investment as 2019 in which we contributed to several hundred Burger King of Tomorrow, and Tim Hortons Welcome renovations as Jose mentioned earlier over the next 12 to 18 months. Our owners will also invest over 100 million Canadian dollars to revolutionize the driver Ics.
Variants through the deployment of outdoor digital menu boards technology at Tim Hortons drive through locations across Canada.
This investment will be funded by the Tim Hortons, Canada advertising fund similar to how our indoor digital menu Board initiative was funded several years ago.
Now turning to the capital structure as of December 30, Onest 2019, our total debt outstanding was $12.3 billion, our net debt calculated as total debt less cash and cash equivalents of $1.5 billion was $10.8 billion and our net debt to adjusted EBITDA leverage ratio decreased.
Further to 4.7 times.
In October we took advantage of favorable market conditions to execute our second refinancing of the year through which we reduced the size of our $6 billion term loan b to $5.4 billion extended our maturity by over two years to 2026 and reduced our interest rate from LIBOR, plus 225 basis points.
To LIBOR, plus 175 basis points.
We funded the transaction by issuing $750 million of secondly notes due 2028, which price tightly behind our recent first lien bond issuance at an interest rate of 4.375%.
Additionally, we are able to extend our floating to fixed interest rate hedges locking in favorable rates through 2026.
Through these transactions, we generated significant interest savings extended our maturities and further improved our flexibility going forward.
Altogether. These fourth quarter transactions are expected to generate approximately $25 million of run rate interest savings and when combined with our third quarter refinancing initiatives add up to approximately $50 million of estimated runrate benefits.
Some of which we started to see flow through our results in the fourth quarter.
In addition, we were also pleased to receive upgrades on our corporate credit rating from both S&P and Moody's to double B and be Athree on account of continued improvement in our business leverage profile and free cash flow generation.
2019 also represented the continuation of a strong multiyear period of capital allocation and ongoing reduction of leverage driven by our highly capital efficient growth model.
Over the past five years, we've generated almost $9 billion in total unlevered free cash flow.
Allowing for considerable reduction in our net leverage from 7.5 times to 4.7 times adjusted EBITDA.
Along with continued and meaningful reinvestment in key business initiatives, such as Remodels alongside a restaurant owners and the buildout of our digital capabilities.
We've also been able to deploy our cash flow to returned over $3 billion in cash common dividends invest over $1 billion in cash for share repurchases.
And acquire another iconic brand and popeye's for $1.8 billion in cash.
As we shared in the past, we will maintain a balanced approach to capital allocation allocating excess capital, where we believe it will create the most incremental long term shareholder value.
Currently our capital structure affords a significant financial flexibility and Optionality to drive meaningful long term shareholder value creation. This morning, We also announced that the RV I Board of directors declared a dividend of 52 cents per common share and partnership exchangeable unit of our VIP payable on April Threerd 2020.
Okay, and a target of $2.08 in total dividends to be declared in 2020.
This announcement represents a 4% year on year increase in declared cash dividends and our eighth consecutive annual dividend increase.
Since we first paid a dividend 2012, our quarterly dividend has increased by 13 times its original level, reflecting our commitment to maintaining a balanced approach to capital allocation as we've grown.
Thank you everyone for joining us on the call. This morning and for the continued support I'd now like to open the call for questions operator.
Q.
We will now begin the question and answer session to ask a question you May Press Star then one that's downtown.
Using a speakerphone please pick up your handset before press in.
You withdraw your question. Please press Star then Chad.
Please please ask that you limit yourself to one question.
First question today comes from Dennis Sky There.
Please go ahead.
Morning, Thank you Jose Thanks for all the insights on the go.
Builds on on Tim Hortons, just wondering if you could talk a bit more about the changes made to the to the loyalty program specifically, maybe if you could highlight different customer behaviors. The fund that you may you may be able to effect.
Financial impact from the adjustments.
I'll focus on App download and utilization is clear, but maybe just anything that you look for from the tiered loyalty system benefits there across day parts, whether the recent drag that you've seen from the program changes some anything else on your research and testing of the program. Thank you.
Hey, Dennis Thanks for the question I'm going to have Josh walk you through some of those details.
Yeah, Hey, Dennis good morning, and.
Thanks, a lot.
So we've done a lot of work thinking about where we were we take loyalty program next and we're very excited about the changes that are coming up here just in a few weeks actually and I think if you. If you go back we're really pleased with them with initial adoption loyalty program as we've talked about a bunch.
Huge reaction from market I think there were really pleased with their awards that we were able to bring them and now I think we're ready to take our next steps.
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In the new year here, we did a lot of research together with their guests and with some of.
The best experts across the loyalty industry.
And spent a lot of looking at some of our peers both here in Canada and.
In other geographies.
I think true where we should take the program next really with a big focus on our guest.
We take the business for the best way and the long run I think some of the exciting things. Some of the key features about where we're going to take loyalty. Our one we're going to be able to open up the menu and bring bringing awards across a number of additional menu items that was one of the big pieces that feedback that we heard is that we have many guests who want to be able to.
We are awarded across many other categories and our menu and one of the great features a new program is that we'll be able to offer awards in terms of food items in terms of donuts in terms of ice cat. So we'll really be able to broaden their award that we can you give.
Okay. The other really big feature that we're going to everyone to enable with new version of rewards is that it's going to become a much more digital program. So we're going to strongly encourage our guests to register with that program and we're going to provide a lot of encouragement.
Hey, guys to interact with us on on the mobile App, adding that's going to allow us to better understand our guests interacted with our branding and use our brand and I think also allow us to provide even better benefits as we understand how I guess interacts their brand and provide more personalized benefits to those guests. So I think those are some of the most exciting things.
For us in terms of what we're going to change if you think about the underlying mechanics of it and underlying awards, it's not really going to change very much we're going to keep the underlying benefits to I guess pretty similar.
For the most part it's really a evolving to allow more options to the guests into make the program more digital and I think as you think about it as we go in a further into this year, especially in the back half.
That's where we see a big opportunity for the program. If we can make the program a lot better for our guests open up more of the menu and be able to bringing more personalized offers to our guests over over time, that's where we see the big opportunity to really bring a big bend it business benefit.
From the from Tim's rewards.
The later into this year and as we've gone into future years.
Next question comes from Nicole Miller with Piper Sandler. Please go ahead.
Good morning, and thanks for the uptake.
I would ask about Tim Hortons and a couple of things first how is Canada over Alogent region. Our superior performance there, even if you know it better the same whereas context would be helpful.
Second I want to simplify that dollars going into the plan. So the 100 dollar excuse me hundred million.
Add funds does that recuse other aspects of advertising I, just wanted to understand that or other financial means to support the plant and then just fair and I'm sorry, it's a little higher stock apologize, but I was trying to compare income chassis is coming back to the analysts scaling and you know there was commentary at the end of the prepared remarks today.
About things generally being the same from that plan, but if that's the case I mean, why now on Kansas is going to work I'm, assuming there's going to be some elements that are being reprioritized again, it just essentially saying what do you want us to expect it's OK, yes, you're going to buy comp through loyalty this way on to get.
Data, but then we should be understanding that maybe this quarter as an anomaly in terms of same store sales. Thank you very much.
Hey, Nicole Thanks for the question.
I think I'll start with that.
Kind of the third and fourth questions around around the Tim for the third and fourth sub questions Tim.
Plan and what we shared in May and.
As I mentioned I've spent probably 60, 70% of my time in Canada since since October.
Working closely with with axle and the team to to address some of the gaps that we have in the plan and the team.
We've hired a lot a number of strong leaders Canadians with expertise in key areas of the business, including marketing loyalty rewards real estate development restaurant technology as well as communications and a few other areas and we've also over the last 60 days conducted the biggest consumer research study that.
Tim has done in nearly two decades.
Which has helped us understand better how Canadians are deciding where to spend their money.
Where to go where they go when they won't brewed coffee or specialty coffee or where they where they go when they want to breakfast sandwich versus a sweet baked goods and what's important about this and when we're this is.
Creating an important pivot for us from a from a strategic standpoint.
Is that the research confirms first and foremost that Canadians absolutely love, Tim Hortons and Additionally, it's helped US sharpens the lenses and focus on a plan with a heavy heavy emphasis.
On the core being greatest to things that May Tim's incredible brand. It is today I think it's a bit different.
Quite different from where we were a few months ago. When I think I mentioned in my prepared remarks and that the brand.
And the business in Canada has has spent quite a bit of energy on on limited time offer is we've introduced a more than 60 limited time offers in in the in the year 2019, which is nearly three X. What we've done in the past I'm not sure with the right number of LTL is but we know with certainty.
See that that what we need to be doing is focusing on the fundamentals that created.
Amazing brand and business in Canada, and what I touched on in my prepared remarks is what we're focused on today and we'll be focused on going forward elevating core quality innovating for growth and modernizing the brands. So.
For us. This this pivot as an important one as a leadership team and it's important one that we've shared and aligned with our owners across Canada I spent a long with the team has spent the last two weeks.
Adding.
Seven cities and talking to more than.
I was in owners about the plan about the direction of the business until about our focus on on what made Tim Hortons famous in Canada, and there's a lot of excitement lot of work to do for sure, but but we feel confident that if we put all of our energy resources behind this plan, we're going to be we're going to get the business and this great brands back.
On track from a growth standpoint, I think you touched on you asked about.
Canadian peer performance.
We don't comment on on.
On others in these or any other.
Discussions but.
Obviously the market, we feel very good about the market and the long term prospects of growth in Canada, and we continue to focus over energies on on driving growth here for the long term.
As it relates to capital and kind of the uses of add on to that helped drive the initiatives and drive through a lot I will have Matt answer that question, yes, Nicole its matter.
In terms of the capital investment I think it's Jose mentioned, we think this is important part of the overall plan it Jim.
To drive sales over the long term and the right place to invest resources and so with the 100 million Canadian dollar investment that will be made over time over the next five to six years.
And as a result of that I think we'll also see.
Some pretty significant savings within the AD fund.
Saving millions of dollars per year on menu printing and delivery. So overall, we don't really expect a material impact on AD fund spending.
And just to come back to your final question on on.
Formans.
As you know we don't provide guidance.
But that said, we see no there's been no material change in initiatives or performance.
Q1 to date versus Q4.
Things, we've talked about our structural changes and investments, we're making around coffee breakfast loyalty 2.0 drive through outdoor digital menu boards coffee communication all the time and these initiatives are aimed at providing layers of of sales growth over time.
About the year and beyond and we're confident that these will have an impact on the topline.
In the coming you kind of years. Thank you so much.
Next question comes from Jeffrey Bernstein with Barclays. Please go ahead.
Great. Thank you very much.
Another question on.
James.
Jose Im just wondering if whether you could talk about.
Franchise relations sounds like you've met with like you said 1000 plus owners in recent weeks I'm just wondering how you describe that today and whether or not the recent comp headwind.
Mike You said the profitability down this year has kind of over road. The prior successful efforts it seemed like in improving relations with franchisees.
And on the base of that just can you provide us percentages in terms of the percentage of the system that like you said invest to modernize but where the system is in terms of.
Remodeling the entire units and whether the franchisees in your discussions or are keen to invest on that or.
Whether they'd be a little bit more hesitant to do so ahead of their required a remodel cycle. Thank you.
Great. Thanks, Jeff.
Yes look despite our recent performance relationships with our owners continue to improve in Canada, and we're communicating with them more than ever and as I mentioned just last week I finished traveling the country. It was in Vancouver, Calgary, Toronto, London, Ottawa, Montreal, and I went all the way east to to Halifax, and we shared our plan.
With over 1000 owners that at these town hall meetings that we hosted.
Our tim's owners, there super passionate about their amazing Tim's brand and not surprisingly they have and as they should they have high expectations of us as leaders of the Tim's brand and business and Thats, what I love about our owners.
We did engagement ops simplification.
You are more impactful new products shopper brand communications and of course restaurant profitability. These are top of mind and our priorities for owners in Canada.
I'll tell you they voice support for the plan to refocus our efforts on the core into reconnect Tim's with its roots with what makes him famous and they also share our sense of urgency and we look forward to working closely with them.
Out the year as we implement our plan in 2020.
We have confidence that if we as I said earlier and response Nicole's question. If we focus on these core elements of the business the basics and things that mates importance famous and made the brand. It is today and I were confident that our owners are going to be successful and our guests are going to be happy I'm going to continue to grow this great brand in Canada as it relates to.
Renovations are remodels in.
In Canada.
We have made some progress with the evolution of our welcome image. We had a we've written 2018 29 versions of it and now we've evolved to a 2020.
Image welcome image package, which takes.
Forward some of the ideas and innovations that we saw at the innovation Cafe.
As a it's got a sharper image and really a modern look and feel we've opened the first one in the west coast of.
Canada, and we've seen some some good results and some encouraging feedback from our owners.
We feel good about the potential of this image package and there's engagement and support from the owners.
Around continued investment in remodel so we don't expect any.
Any shifts or changes in in the progress, we're making on renovating the fleet. Thanks, so much.
Next question comes from Patricia Baker with Scotia Bank. Please go ahead.
Thank you very much and good morning, everyone not surprisingly I'm also going to ask a question on Tim. So you may have partially answered yet, but I'm still going to ask it I really appreciate all the color you provided on what your plan is for 2020 try and close the gap.
Now on teams performed current performance and where you think it will go to in 2018, you launched leaning together plan I'm. Just curious you know looking back would be obvious I think that were Tim just performing now is not where you thought it would be when you launch that we need to gather plan. So can you talk about.
The we need to get their plan what worked what Didnt work and when you kind of take a look backwards. You know should you should you have included more than.
That focused on the core when you did the windy together plan.
Thanks, Patricia Yes, I think I touched on on our strategy in our game plan going forward and some of the reflection.
After a few months of assessment of our current performance and our and kind of our history over the last several years I think I've touched on the things that we.
Identified as opportunities and how we're going to move forward I think that.
The key for US is that we're we're a famous.
Incredibly well penetrated brand in Canada people Love This brand they love the experiences they have their and and consider it a second home in many cases and I think what we didnt do well in the past and the recent passes that we spent too much time trying to add to create initiatives on the.
Fringes that were not initiatives or limited time offers or innovations that that's supported the core of our business around coffee.
That is expanding definition of what coffee is around breakfast and around baked goods and so we feel that the initiatives and the plan that we have around elevating our core focusing on innovating for growth in our core and modernizing the brand with a with loyalty 2.0, as well as enhancing the drive through experience.
Which is a big and growing part of our business, which really hasn't been touched in decades, we think the initiatives that we have in in in our sites that were focused on.
And we're moving everything else from the periphery is going to allow us to to drive growth in this great brand for for years to come. Thank you.
Your next question comes from David Palmer with Evercore ISI. Please Scott.
Thanks, Good morning, and thanks for that commentary on Tim's question on that brand. It as you reposition the loyalty program. How confident are you in the testing of that phase two loyalty and how are you doing that differently than the previous version and related Lee I would assume the loyalty shift will help franchisees were gain some.
Gross margin from phase one but is it also fair to say there will be some sales sacrifices initially as you push consumers who are mobile relationship just some of these consumers will be less keen to make the leap to the phone and then lastly, as you think about that three point drag from phase one rewards do you think that could become a 10.
Ill wind.
By the second half the year, maybe making positive comps more likely in that second half. Thank you.
Hey, Dave It's a it's Josh thanks for further questions.
So as we noted a little bit earlier, we think that loyalty is contributing right now about negative 3% to to our overall comp and as we think about.
It's going to happen with the next phase.
Loyalty.
The goal is really about driving that about two things as I said earlier right one is.
Being able to open up the menu and get more options and the other thing it's about moving more into a digital AD format of the program.
So we have done a lot of rate of research I mentioned earlier, we've done research both with our guests and.
A lot with experts in the industry. So we think we've done as much researches and as we can do try to make sure that we have the right form of the program going forward that our guests are going to respond well to and that we had pretty good understanding.
Our guests are likely to respond to the program.
There's always uncertainty with with these programs about how exactly though.
Fund.
Yes, I'd say, we don't.
We don't expect to see a material change as I mentioned earlier in terms of bill.
Our overall investment and rewards as as we move forward into the next phase of the program.
Intense and thats not our expectation.
But as you think about how about how is the impact of the program is likely to evolve as you move through through the rest of the year, obviously in Q1 of the year.
Nothing will have changed too much but as we move into Q twos.
You will be lapping the prior year. When we had we had the existing version of the program in place, but we had a bit of attracted benefit due to the initial excitement in Q2 of 29 team that said it was more sales neutral and we think that.
As you get into the second half of 2019.
As we are lapping that as we got farther into the second half of 2019, we think some of that incremental traffic.
As it faded away as some of the excitement came off so as we get into the second half of 2020.
We think that some of the year on year investment.
Good farther into the second averaged 2020 and start to become somewhat less of a headwind and we hope that some of our initiatives around personalization and trying to make that program or incremental to start to becomes more of a benefit. So hopefully that helps to think through as how we think about the program and how it could evolve as we move through as it.
After 2020.
Next question comes from Sarah Sen with Bernstein. Please go ahead.
Good morning. This is actually larger for sure. So just a quick one on BK.
I think you mentioned that the impossible offers stayed strong but also that you saw strength across core menu, but the comps are still soft so it seems like the lift from the impossible's.
Quickly dissipated can you just talk about that and then also the competitive environment in general thanks.
Yes, Thanks Alija.
Our sales levels in Q4 at Burger King in the U.S. were very healthy and in line with with what we saw in in Q3, we continue to do well in the premium segment.
However, we were lapping as I mentioned in my prepared remarks, we were lapping strong traffic to the same period in 2018.
Driven by by dollar Nuggets, King box and also any nights and pancake promotion.
We feel really good about our plan at Burger King in the U.S. long term, we have a strong core offering it as it.
Addition of impossible whopper through the two for six platform gives us an opportunity to address one of the points of feedback received from from any gas, which is the price point was a little.
Hi for for the QSR consumer so having having it available in the two for six platform gives folks more access to it.
Which is a which is really exciting and we're seeing.
Thats to be an important point for consumers long term. We also have initiatives around breakfast, we have initiatives around value long term. So we feel good about the business plan for for became the U.S. and look forward to keep you posted on our progress in the coming quarters.
Your next question comes from Brian Bittner with Oppenheimer. Please go ahead.
Thanks, Good morning.
For Popeye's I think this is the first time ever that Popeye's is opened over 100 units in a single quarter.
You talked in your prepared remarks that the backlog is really going to start unlocking maybe this year next year in the year after.
You know how do you want to thinking about Popeye's unit growth in 2020, and what portion of your new openings is going to come from the U.S. versus an international over the next couple of years.
Hey, Thanks Ryan.
We don't breakout on a go forward basis, where the developments going to come from but obviously the performance in the U.S. of the comp buys business.
As we shared for for Q4 for the full year has created a lot of excitement with our existing franchise partners here in the U.S.
As well as with the new prospective investors that are very interested in being part of this the system, which.
Is quickly becoming one of the more exciting franchise business models in all QSR in the U.S. So we think long term there is a lot of room for growth for buys in the U.S., Yes, obviously internationally, we think theres a tremendous opportunity for growth.
Clearly at Asia. The is is a place where fried chicken and chicken in general does quite well and we think we can be a really a compelling second offer.
In the in the region, we have a huge size gap or penetration gap versus the market leader in Asia, and we think we have a really compelling offer from a product standpoint to do some some important growth there in years to come in but it's not just Asia in the U.S.. We think Europe is a is an exciting and.
Doing market, we've opened in Spain, we have other markets as well in Europe that have potential for growth Latin America.
As a market were fried chicken does quite well and and we've we've opened in Brazil and had a really exciting.
Growth rate in 2019 and think it's just the beginning of growth for the pump as Brent.
In America in Europe and Asia.
And especially in the U.S. as well so we're excited about the prospects and we're working hard to build our teams capabilities from a from a development standpoint, and working with our partners to to ramp up growth over time. Thank you so much.
Your next question comes from Peter Sklar with the amount of capital markets. Please go ahead.
You're in late this year in terms of calendar the roll up to win promotion at Tim Hortons you indicated in your commentary that you will be proceeding with it just wondering why your late and especially in the context one of your principal competitors I believe started with their dollar coffee promotion today. So the concern would be.
You are going to lose some momentum this quarter because you are Lee with the program.
Hey theater, it's Josh Orient. Thank you for the question.
The phasing of of roll up is is mostly due to making sure that we have the right timing with respect to the next phase of Tim's Award as then bringing in roll up after that so okay, well have news on unroll up to come.
And the quite near future and you just want to make sure that we give time charter gets to do you have things in a proper order in kind of understand and each of each of those new pieces of news.
Next question comes from David Tarantino with Baird. Please go ahead.
Hi, Good morning, Mike My questions on Popeye's and.
Just wondering if you could help us understand the very impressive comp performance that you had in the fourth quarter and how much of that was maybe trial around the relaunch of the chicken sandwich versus maybe a sustainable improvement and traffic or or customer counts.
And I'm, just asking and the nature of sort of level setting what we what we should be assuming.
Going forward and in terms of sustainability the trend you saw on the fourth quarter.
Thanks, David.
As they say a rising tide lifts all boats well in Q4, we saw the tide rises popeye's quite a bit and the traffic driven by the demand of the popeye's chicken sandwich helped drive growth in our entire menu in the quarter just to give you an idea about that following the launch of the of the chicken Sandwich in November only about 50% of totaled.
Tickets at Popeye's in Q4 contained.
Purchase of the of the chicken sandwich, which means a lot of the growth came from growth in other categories categories in our menu, which is quite exciting and we're also encouraged by the fact that on on a significant majority of the tickets with that included chicken Sandwich guest spent more on non sandwich items that under the chicken sandwich itself.
Which led obviously two very healthy ticket levels and growth across the menu, we're super excited and Super encouraged with the levels that we saw from the growth gross sales and levels of ER volumes that we saw from the chicken sandwich in Q4.
And throughout the quarter. We we think long term. This is obviously a platform that's going to give us an opportunity to engage more gas with top as we've mentioned several times.
In in past calls and other sessions that when people try that when guests try the coppiced product, whether its bone in chicken or boneless or even the sandwich.
The our rankings shoot up in terms of preference amongst all players in the in the chicken QSR space and the chicken Sandwich launch a relaunch in Q4 gave us an opportunity to engage more guests and and we saw the reaction was very positive. It's just the beginning we think this is a.
Great opportunity for us to continue to introduce the brand to so many consumers in the U.S. and across the globe and look forward to cuts to continue to share with you our progress on a on the brands. Thanks, So much for the question.
And and thanks, everyone overall as a as mentioned we had a strong 2019 with more than 8% system wide sales growth in adjusted EBITDA growth of about 6.5%.
While we have a lot of work to do at Tims, we saw the benefit of our diversified global business model with strong performance from Dk and an amazing Q4 in 2019 from Popeye's. We're excited for 2020 and look forward to sharing the progress of each of our iconic brands over the coming quarters. Thanks again to all of you for joining US This morning, and thank you again.
For your support have a great day.
This conference has now concluded. Thank you for attending today's presentation you may now disconnect.