Q3 2020 Papa John's International Inc Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to the Papa Johns third quarter 2020 conference call.
At this time, all participants are in listen only mode.
After the speaker presentations, there will be a question and answer session.
To ask a question during the session you would need to press star one on your telephone.
If you require any further assistance please press star zero.
I would now like to hand, the conference over to your speaker today to Mr., Steve Koch Vice President Investor Relations and strategy. Thank you. Please go ahead.
Thank you and good morning.
Joining me on the call today are president and CEO, Rob Lynch, and our CFO and good Gino right.
Robin and will comment on our business and provide a financial update after.
After the prepared remarks, both will be available for Q and a.
Our discussion today will contain forward looking statements involving risks that could cause actual results to differ materially from these statements forward looking statements should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our SEC filings.
Please refer to our earnings release in the Investor Relations section of our website for a reconciliation of non-GAAP financial measures discussed on this call.
Finally, we ask any members of the media to be in a listen only mode.
Now I'd like to turn the call over to Rob Lynch for his comments Rob.
Thank you, Steve and good morning, everyone.
I'd like to begin by saying that I hope everyone in this call and their loved ones are healthy and safe.
It has been and continues to be a difficult time for many in the communities we serve across this country and across the globe.
Throughout the pandemic, we at Papa John's have work to do our part by delivering safe high quality food.
Protecting the health and safety of our team members and customers and supporting our neighbors.
Thanks to our focus on our core values and strategic priorities and the dedication of our team members and franchisees.
Last quarter, Papa John's sustained its momentum and delivered double digit comparable sales growth higher earnings and robust free cash flow.
As I'm sure. You also saw this morning, we announced a new $75 million share repurchase program.
Fact is through the end of 2021.
We're certainly pleased with our business momentum and the continuing cash build.
We look forward to continuing to balance the best uses of cash as we invest in our future and enhance shareholder returns.
This morning, I'd like to cover three things.
First our outstanding results, both domestically and internationally.
Second our progress against our strategic priorities, which is driving both top and bottom line growth.
And third our business is outlook to continue growing and creating shareholder value now and into the future.
But first I'd like to introduce Papa John's New CFO, Anca, Gino, who joined our team last month.
Her appointment concluded a comprehensive search process for a CFO, who not only had the highest document and best experience, but who also shared our beliefs and values someone who would not only make our business better but could also make our company better.
And meets those qualifications and then some.
She also completes one of the most capable and diverse leadership teams in our industry something I'm very proud of.
Our team comprises an unparalleled mix of Papa John's pizza delivery experience complemented by proven leaders from QSR retail and consumer sectors.
The diversity of backgrounds viewpoints and strengths sets.
Sets the foundation for Papa John's long term success.
Most recently and with senior Vice President financial planning and analysis, that's the target Corporation.
Providing overall strategy guidance and direction in the development and execution of targets planning analysis and capital investment.
Her experience to the consumer and retail sector, including her work driving long term growth and profitability across digital and traditional channels a target that's highly transferable to our business.
I'm expecting it to be instrumental in helping Papa John's achieved industry, leading profitability free cash flow generation and long term shareholder returns.
Papa John's is fortunate to already have a top notch finance team and I want to express my deep thanks for their hard work dedication and diligence since the beginning of the year.
I, especially want to thank Steve Cole, our VP of Investor Relations and strategic planning.
Who stepped up as our interim principal financial officer to lead the team with professionalism and commitment through an unprecedented period we.
We wouldn't be here today announcing these incredible results without Steve.
So now to discuss the outstanding quarter that we just completed.
As we reported North America same store comp sales rose, 24% in Q3.
Reflecting millions of new and returning Papa John's customers, who continue to rely on Papa Johns to safely deliver high quality delicious food.
A good balance of transactions and ticket growth drove these results.
As I'll discuss in a moment strong performance of pop ideas and other ticket add ons. The success of the chaperoning pizza charitable promotion and more targeted and productive discounting all contributed to growing customer ticket and gross margins.
Transaction volumes also grew reflecting broader growth in the delivery sector driven by changes in consumer behavior are expanding partnerships with aggregators and the rising effectiveness of our media spend and marketing.
Internationally comp sales rose, 21% in the third quarter, our strength across the globe driven by accelerating growth in the UK Korea, and China far exceeded our expectations. We also continued to reopen stores that had temporarily closed due to local restrictions and curfews.
Of our approximately 2100 international franchise stores at quarter end 90 were temporarily closed as a result of COVID-19 down from two to 225 a quarter ago.
Strong topline growth enhanced by operating leverage and cost discipline generated much higher earnings operating income and free cash flow in the quarter in spite of higher commodity costs and the investments, we're making to take care of our team members and customers during the pandemic.
As a result, we ended the quarter with our strongest balance sheet in terms of our debt to EBITDA leverage ratio in nearly three years.
Our strong financial condition and confidence and Papa John's future make possible the 75 million share buyback authorization, we announced this morning and.
In a moment and we'll discuss our Q3 results.
Strong top and bottom line results and Q3 are an outcome of our consistent execution against our strategic priorities. This year.
Let me begin by addressing how our actions to reestablish the superiority of Papa John's products through innovation have driven Papa John's share gains in outperformance, including last quarter.
Beginning in Q4 of last year and accelerating since a new culture of innovation has delivered multiple product technology and marketing successes from garlic, parmesan crusted, two entirely new platforms like pop ideas.
Well, we had to adjust or innovation calendar at the onset of the pandemic, we were able to accelerate the launch of new products in Q3.
We've successfully done so loves while carefully managing our operations and supply chain, despite big increases in demand and an unprecedented new operating environment.
Highlights from Q3 was the shack are running pizza launch as part of a fund raiser for the Papa Johns Foundation.
This promotion significantly exceeded our expectations and.
In partnership with our franchisees, we sold over 3 million pizzas, raising more than $3 million for communities to support COVID-19 relief. The fight against racial injustice boys and girls clubs of America, United Negro College Fun and general community involvement.
The shack erroneous success really checks all the boxes of our innovation strategy.
It was a differentiated high value product that didn't create operational complexity for our stores. It had a differentiated marketing message with a charitable component that supported highly meaningful Cogs is aligned with the brand values and finally, we launched it with a unique marketing platform leveraging our board member and Storeowner Shaquille O'neal.
Very authentic way.
In late August we also launched the Buffalo Chicken pop idea a tasty easy to eat addition to our winning property as platform, which continues to be a customer favorite.
This new flavor was received enthusiastically quickly became our number two pop idea.
Given its strong results, we expect Buffalo chicken will become a permanent menu item expanding the top of the line from four to five items.
Poverty has continued to be a major component of the growth we're seeing in our ticket size at $6. They drive incremental value in sales as additions to orders without cannibalizing our pizza sales.
Continuing the menu innovation late last month, we brought back fan favorite double cheeseburger pizza, along with new double cheeseburger pop idea.
Consistent with the brand and our focus on food these items high quality ingredients and taste differentiate them from any other product in the market.
They feature a huge portion of season beef melty cheese, Dusty pickles and signature Burger sauce, all held together by Papa John's fresh never frozen six ingredient, though.
Wow isn't lunchtime yet.
We're very optimistic they will that they will be a big hit.
Next I'd like to turn to our progress against driving superior unit profitability across our system.
As I've said before profitable stores and franchisees are the absolute foundation for a strong brand and long term growth.
Driven by double digit comp sales growth and despite record cheese prices third quarter, North America median unit profits rose to the second highest level that we have seen in several years surpassed only by the previous quarter.
This was great news for our franchisees and for our company owned stores contribution to our bottom line.
I want to emphasize that from the beginning of the pandemic, we have made investments and taken decisive actions to protect our team members and customers, including quickly reengineering, our ordering and delivery process. These adult in technology to integrate no contact delivery into our channels and customer experience.
It was these actions and the perseverance of our team members and franchisees that build trust with our customers and team members and enabled our corporate and franchise stores to stay open and serve our communities.
Turning to technology.
One of our competitive advantages is that at our core Papa John's is an E. Commerce first business with approximately 70% of our orders placed over digital channels and mobile ordering being our fastest growing platform.
One key aspect of our growth strategy is our partnerships and technology integrations with three of the four top delivery aggregators.
Year to date, our sales through Aggregators have grown by a factor of over three times, which contributed to our industry outperformance in Q3.
[noise] Aggregators continue to be a big part of our profitable growth story and we are excited to be one of the largest qs brands on their platforms.
Our loyal loyalty and one to one marketing platform is also a growth driver and strategic technology priority for us and.
In our more active segments in particular, they drive outsized revenue compared to non loyalty customers.
The leverage this we continue to scale our efforts for greater personalization, all with the goal of unlocking greater customer lifetime value.
Next I would like to discuss unit growth and new store development.
No new store openings were mostly pause in Q3 as expected with permitting still delayed by most local governments Papa John's improved franchisee investment proposition and new development team to support it are beginning to bear long term for it.
Last quarter, we saw an uptick in interest from potential and existing franchisees, who are attracted to the branch growth and profitability resilient delivery model and the potential for new retail real estate opportunities opening in the months ahead.
Weve made good progress ramping up our development efforts to match that interest with new leadership and resources and early results show it.
Last quarter, we signed the largest traditional store development agreement North America and over 20 years.
This deal will accelerate our growth in the important Philadelphia, Philadelphia in Southern New Jersey market.
Under the agreement H.B. restaurant group, who joined the Papa Johns system in 2019 and already owns 43 restaurants in the mid Atlantic area opened 49, new stores between 2021 and 2028.
We're thrilled to see such a committed franchisee expanding within the Papa Johns system and look forward to growing with them and many more new and existing franchisees over the coming years.
Lastly, I'd like to address the transformation of our organization and brand over the past quarter and year as we build our commitment to diversity inclusion and winning.
In September we announced another big step forward against the strategic priority, we announced that we will open a second headquarters in the Atlanta area to complement our existing headquarters in Louisville, and our international headquarters and Milton Keynes UK outside of London.
Our new hub based organization, which is the outcome of a process. We began in late 2019 is an investment in our long term growth as well as in our ability to efficiently deliver on the company's purpose values and strategic business priorities.
We're excited to be expanding in Atlanta, and energetic diverse global city, where we already have a significant presence it.
It is our largest corporate owned restaurant market and the location of our newest and most sophisticated Q C C.
[noise] Atlanta is the home of a large number of consumer and QSR brands and provide provides great access for us to a deep talent pool.
Atlanta is world Class Airport will also connect us to the domestic and international markets that are key to our branch future.
Our Louisville headquarters home for 36 years remains essential to our long term success.
Under the new organizational structure the majority of our corporate staff will continue to be located in Louisville there.
Their experience and dedication providing essential support and managing key infrastructure for our franchisees and customers will continue to be a bedrock of our business.
The third element of our new hub design will be in international headquarters based in our current UK office.
Consolidating our international operations in the UK allows for greater collaboration and best practice sharing reduces travel overheads and Leverages, our significant resources located there across our international portfolio.
We expect to open our new office in Atlanta in the summer of 2021.
I look forward to providing updates as we move forward with our plans.
Now that I've discussed our strong Q3 results and how progress against our strategic priorities contributed to them.
Our new CFO and for Gino will address the quarter's financial results in more detail before I return to discuss our outlook.
And.
Thank you Rob I'm excited to be here. This morning, and look forward to partnering with you and the outstanding Papa Johns team, it's unique for Papa John's through its value led transformation and innovation. The company is emerging as a leader in its category opening enormous opportunities not only domestically, but around the world.
I want to thank Steve Coke and my new colleagues in Papa John's finance team for their warm welcome over the past month, the extra effort they've made during the transition and most importantly, the high quality work they've been doing over the past nine months, which has allowed the company to reach this point I'm, so very proud to be part of the team.
And my role as CFO My top priorities include driving profitable growth setting a long term plan to maximize our potential and managing our balance sheet and capital to create value for the benefit of our shareholders franchisees team members and all stakeholders.
Addressing our investors and analysts on this call I'd like to say that as CFO I believe its unique privilege to be able to engage with investors and analysts in a two way dialogue on the one hand communicating the companys results strategy and potential and on the other hand listening and learning from your perspective.
In my experience this active conversation and engagement with shareholders. It's absolutely essential to a company is long term success.
Working with Rob and the team I look forward to continuing to build this relationship with you over the coming months.
Now, let me turn to our financial results, which mirrored our outstanding operational progress during the quarter. There are four highlights I'd like to call out in particular.
First a 22% rise in global restaurant sales last quarter yielded a 10 fold increase in adjusted operating income clearly demonstrating the businesses operating leverage cost discipline and earnings potential.
I know we achieved these superior results in spite of higher commodity prices and the investments we are making it to protect and support our team members.
Second we produced 134 million in free cash flow defined as cash flow from operations less capital expenditures and dividends paid to preferred shareholders through the end of Q3. This.
This is a reflection of the strong cash generation capabilities of our operating model.
Long-term capital allocation strategy for the future.
Now I'd like to turn to our queue three resolved.
I will then address some specific points around our outlook, including expected one time costs associated with our corporate realignments.
And the third quarter, we reported earnings per diluted share on a GAAP basis of 35 cents compared to a loss of 10 a year ago.
Excluding a <unk> net impact from special charges in the prior year adjusted earnings per diluted share rose from a loss of seven cents a year ago to 35 cents this year.
The 42 year over year increase reflects a 44 positive benefit from improved operating results, primarily driven by our continuing impressive North America comparable sales.
This was slightly offset by a <unk> negative impact from the allocation of undistributed earnings to participating securities primarily the series be preferred shareholders.
Her gap, we compute earnings per common share using the two class method. This means that in addition to preferred stock dividends an accretion a portion of undistributed earnings that would be attributable to participating securities on and as converted basis is also deducted from net income at.
The company level to determine earnings per common share.
Note because the company did not have undistributed earnings before Q2 of this year that is our net income did not exceed or comment in preferred dividend payments. We had not recorded this deduction to common earnings per share.
To clear up any potential confusion about this accounting treatment. We have provided an additional table in this morning's earnings press release.
Turning now back to Q3 results in the quarter, we provided $13.5 million of support to franchisees under the we went together program our last quarter as I mentioned compared to a total of 11.4 million and support a year ago.
On a per share basis. This amounted to approximately 31 for the quarter compared to 28 cents a year ago.
In the third quarter of 2020 pretax income on a gap basis was $29 million compared to approximately 700002 thousand 19.
Consolidated third quarter revenues rose, 17.1% to $472 9 million.
Excluding the impact of Refranchising 46, domestic restaurants in 2019 consolidated revenues increased approximately 20% the.
The increase was primarily due to strong comparable sales as we've described which drove higher North America commissary revenues sales for domestic company owned restaurants, North America franchisee royalties and international revenues.
Now turning to cash as I previously described free cash flow was 134 million in the first nine months of 2020 compared to $15.8 million a year ago.
$118 million increase was driven by higher net income as well as favorable changes in working capital items, including the timing of payments associated with our marketing fund.
We paid a cash dividend of $10.8 million for a common and preferred shareholders during the third quarter of 2020.
Subsequent to the third quarter on October 30th 2020, our board of directors declared fourthquarter cash dividends of approximately $10.8 million to be paid to comment in preferred shareholders.
The fourth quarter common stock cash dividends will be 22, five cents per common sure.
The new 75 million share repurchase authorization is an additional option, we are making a available on top of our dividend to enhance shareholder value.
With this buyback our intent is to opportunistically repurchase shares in the open market.
The buyback is the logical outcome of our healthy cash position and confidence and Papa Johns near and longer term prospects I want to emphasize however that we see the buyback as one piece of a larger multifaceted long-term capital allocation in return strategy I look for.
<unk> to providing more color in the future.
Now turning to restaurant development during the third quarter, we opened 14 restaurants in North America and closed 12 restaurants for a net increase of two restaurants inter.
Internationally, we opened 40 restaurants and closed 29 restaurants for an increase of 11 restaurants.
These changes in our unit count exclude any temporary closures as a result of the COVID-19 pandemic.
As you know we withdrew our 2020 guidance at the start of the pandemic given the volatility and business uncertainty, we have faced and have not replaced it.
However, I would like to address three specific items related to our outlook and reporting.
First to reiterate my prior comments, we will continue to record an expense for the allocation of undistributed earnings to participating securities whenever net income exceeds common and preferred dividend.
This means that hypothetically speaking if fourthquarter net income attributable to the company comes in the same as Q3, we will again incur to sense of expense for the allocation of undistributed earnings to participating securities.
Second we expect to incur approximately 15 to 20 million and one times sevren relocation and other expenses through fiscal 2021 related to a corporate realignment and new Atlanta office plans.
Of this amount approximately four to 5 million or nine to 12 per share of one time expense is expected during the fourth quarter of 2020.
As Rob discussed we see these expenses as an investment in both the company is innovation and top line growth as well as in our efficiencies and commitment to reduce overhead.
Third I'd like to comment on our reporting.
As you are probably aware when the pandemic first triggered shutdowns across North America in March creating extraordinary conditions for the country and our business Papa Johns began to provide monthly updates on comparable sales. In addition to a normal quarterly reporting we've continued to do so with the goal of providing investor.
Additional transparency during a period of suddenly higher volatility and uncertainty.
Though there remains uncertainty and volatility around the impact of the pandemic going forward on a relative basis, the sudden increase in uncertainty and volatility that initially led us to Institute monthly sales reporting has passed for that reason, we will return to our quarterly reporting frequency going forward.
Third in line with our industry peers.
As always we will continue to evaluate our reporting procedures and disclosures based on business conditions and disclosure best practices.
I will now turn the call back over to Rob to discuss our outlook Rob.
Thanks Man.
Congratulations on your amazing started CFO, we're so thankful and happy to have you as part of our team.
I'd like to conclude by discussing how Papa Johns disposition for the short and long term.
Papa Johns is on a growth trajectory, having now achieve positive North America and international Cop sales for five and six consecutive quarters respectively.
It's so far in 2020, we have delivered record results and I'll pull for the overall pizza delivery market every quarter this year.
As we look to the future.
We expect the underlying factors that have contributed to our performance year to gate to continue to benefit us in the longer term.
We have built a scalable sustainable innovation process that is producing winning <unk> new menu items backed by a highly effective marketing model that makes our food the hero and has driven new levels of consumer awareness in favor ability.
We're just beginning to realize the benefits of these changes looking ahead in queue for an end of 2021, we have an exciting pipeline of opportunity to be blind up across pizza pop ideas and new platforms, which we look forward to telling you about in the near future.
The growth in our business. This year has connected millions of new customers with our branch, including over 8 million across our digital channels alone.
These new customers are showing great promise with a higher portion purchasing multiple times shortly after their first purchase a strong indicator of their stickiness.
Additionally, Papa Johns franchisee investment proposition of development capabilities are more compelling today than ever we.
We also have more domestic and international development White space the other top pizza breath.
Together. These factors indicate are great to cancel for long term unit growth. In addition to continued called sales growth.
So the summer Papa Johns, we're working hard to take care of our team members and customers deliver great pizza and realize a tremendous potential today and in the future.
I'd like to thank our shareholders and everyone on this call for the interest in our company and for their continued support.
With that I'll turn the call over to the operator for Q&A.
Thank you Sir.
As a reminder to ask a question you would need to press star one on your telephone.
Which are your question. Please first the pound key.
Due to the essence of time, we ask that you. Please limit yourself to one question and one follow up.
Please stand by while we compiled acuity roster.
I'll show. Our first question comes from the line of Peter Sally from B T. I G. Please go ahead.
[noise] good morning, and Rob Thanks for making me hungry this morning as well.
I I just wanted to ask <unk> I know you guys aren't really providing a ton of detail on a go forward cause but any qualitative <unk> you guys care to make.
I'm in October and maybe just circling back I think in the past you talked about.
Maybe half of the comp coming from pandemic tailwind and maybe the other half from some of your initiatives. You think that's still holds or just any more detailed around that'd be helpful.
Hi, Peter upgraded here from Ya Yeah.
We are very excited about.
Or.
As we mentioned, we launched double cheeseburger pop, India being received extremely well better than than we had even expected and we've got a whole pipeline of innovation is ready to roll and we're kind of back into our our in our operating model is you know, we kind of pulled back a little bit at the beginning of the pandemic to make sure we could execute.
Our operations seamlessly and the new operating environment, and we were able to accomplish that and be able to support those restaurants with.
15% transaction growth, but now we've got that nailed and we're ready to move forward with our plan that would put back and put put in place back in.
2019, so our plan hasn't changed it's just accelerated we've got a much stronger foundation on which to bill.
Internationally as you know our international business is 100% franchise. So those will all be franchise. It domestically we are looking to build some company restaurants next year.
That's really a commitment to the kind of operating margins that we're seeing and we feel that we can we can benefit from that and deploy some of our cash flow that and highlighted back into the organic growth of our business, but even with that.
The disproportionate amount of new bills will come from franchisees. So overtime, our system will will definitely move more towards the franchise owners ownership that versus company ownership. Despite the fact that we are planning for the first time in a long time to have some company building going on next.
Year.
Thank you.
Question that company in in the line of Alex Lego from Jeffrey. Please go ahead.
Okay. Thanks, good morning, congrats on the corner and and welcome aboard.
Uhm I appreciate it if you you don't want to you want to keep this high level at this point just with the buyback authorization in place and Wonder if you could provide a little more on your your capital allocation priorities heading into 21 between Reacceleration company development the headquarters changes some potential that pain.
Down and now the buyback and I.
I also know that you had accelerated you're you're volumes have really grown significantly this year and playing six or any growth next year. So if you could touch on the opportunity.
One the processing and distribution centers, if you're in good shape, there and it doesn't seem like you'd grown too many of them in the past, but whether that's something on the and the plans for the next couple of years.
Hi, Alex outlet and speak to some of the specifics I know she is excited about the plans that were just starting to formulate but in general what I can tell you that this this business is transforming right now after a year and a half.
Of helping franchisees get through some tough times.
We are now ready to turn the capital.
Onto the capital back into our invested capital back into our business and we have a lot of opportunity to do that through both new store development as well as technology investment as well as investments in productivity in a restaurant. So there's all we're we're right now heading out of hold it any of opportunity.
<unk> to drive operating income growth and accelerate operating income growth, but even with those investments which are plentiful and robust.
We still anticipate having a lot of cash from operations and a lot of cash on the balance sheet. So we're looking at ways that we can deploy that capital in the most efficient and productive way and how we can make sure that we're driving shareholder returns as we do that so with that I'll just I'll turn.
It over to and she could talk about the planning process of the capital allocation plant that we're putting in place yeah. Good morning, Alex So I'm. So excited about about the outlook, we have an incredibly strong balance sheet.
Provide optionality insecurity, Rob talked about the business model with a strong fundamental cashflow generation capabilities and talk.
Talk a little bit about not only for business continue to generate strong cash flows with a significant cash no longer required for the we went together program just leave Papa Johns and an even better position to drive earnings and free cash flow. So clearly there are opportunities to.
Please go ahead.
Great takes so much and that's in the corner just wanted to ask you know on the unit girlfriend, you know cause a hard question, obviously, it's a tough environment get permits and all of that you know due to covid, but you know how soon do you think that will you know kind of ramp up you know here in the U S. Anyway next year is it you know it first half of story or is it more of that cat.
One story as as you sit here today.
L. I wish I had a definitive answer for you on that we absolutely thought that that we were gonna be back that building restaurants, a scale in early 2021.
And now everyone's talking about the second wave of Corona and you know as you as you know the UK right now as as in a shut down and and you know if that if that moves on to other markets. It's it's going to delay the development process. The flip side of that is going to continue to provide.
Hi, additional tailwind for our business above and beyond organic growth. So we are ready we are prepared we have the infrastructure in place. We've already had a lot of the conversations with the franchisees who want to open up these markets and continue to grow these market. It really is a macroeconomics.
What we're finding is that a lot of them are coming in through our loyalty channels and a lot of them have higher frequency and higher ticket averages in the customers prior to the pandemic. So that gives us a lot of confidence that they have come in they are enjoying their experience and they're coming back it's not a one and done since.
Mario for the most part so we think the stickiness of those customers will help us support these aav's moving forward. The other pieces on the ticket side on the ticket side apathy has been a grand plan. We launched property is because we wanted to expand our lunch date part and then we started to see some progress there back in February and this pandemic hit in the.
Shooting and work outside the home.
Kind of crash what happened was we saw property is starting to show up.
Significant number of our pizza orders so they become additional items on our current pizza orders, which is actually a bigger value for us as a company bigger contributor for us as a company then even though lunch day part so.
We continue to see that and we continue to see the mix on property is grow we continue to see ticket growth and.
Programs like Chaperoning, a $12 pizza it sounds like a discounted pieces actually higher than our average pizza.
A price on a ticket so we're we're without taking pricing, we're increasing our ticket averages through innovation.
And that coupled with the new customer stickiness gives us a ton of confidence that we're going to be able to maintain these these types of aves moving forward.
Thank you.
I am showing next question comes from the line of Crusoe Cool from Stifel. Please go ahead.
Yeah, Good morning, Robyn will command Uhm.
Just as a follow up to that question. The prior question I'm wondering what you think of the primary reasons the rate of growth has been slowing the the last few periods.
I think that in the industry in general.
People have gotten a little bit more comfortable.
Leaving their homes and we all anticipated that right. We've all expected that that happened I mean, the rate of growth that we were delivering our company, 28% in Q2 and now 24% in Q3, I mean, it would be crazy for me to tell you that that's going to continue on in perpetuity, It's just not.
What I mean, so there is at some point going to be a deceleration in.
Brown dramatically over the last 12 months and that gives us the ability to go in and talk with people, who have you know investors and franchise perspective franchisees, who have a lot of alternative uses for the capital and make the case that we are great investment opportunity I mean.
Our return on investment in our paybacks are as good as pretty much anybody in the industry.
We havent a lot more development space than most of our primary competitors, who have significantly more restaurants already in the ground. So when you're somebody who who upscale who has capital and wants to come in and have a significant size opportunity don't just want to come in for 10 or 15 restaurants want to come in.
For 100 restaurants, we are ones that we have more white space opportunity for them to come in and make that type of investment and have that type of scale in our system.
Thank you.
And obviously they want to come in and have a.
Have a scale have some scale out of the gate so that they can be.
Bill Trump and we have 600 company restaurants that provide that opportunity for the right partner and so we have a lot of those conversations going right now with external partners, who would want to come in and buy a number of restaurants and then build on top of that so we anticipate that being our growth model of domestic.
Sickly internationally. It's wide open we are in 47 countries. Our competitors were in twice that we've got a lot of white space, yes. It would be develop and we still have a lot of white space in markets that we currently compete Amelia up 200 restaurants in China.
That's less than 20%.
And yet in the other piece like non organic piece that I would talk to is our partnership with the Aggregators. I mean, you guys know their business is growing at a 100% and were a big part of that.
For a piece of that and their piece of our business and we've gone from 2% of our sales with Aggregators up to 6% of our sales with Aggregators and just the last six months.
And we're finding that to be very incremental and as weve highlighted before very profitable for us and so those partnerships have been really strong and we continue to build both distribution and number of stores that are signed up with the aggregators as well as the profitability of those transactions as we build scale and mitigate some of the fee.
Why that has been a strong rebound.
They've opened back up Korea continues to be a very strong market for us chalet, which is one of our largest and most profitable.
International market is open fully back up and we're seeing strength there in the UK. The UK is the bright spot of the whole world for US this year the team over there because it's unbelievable work and continues to not just drive right sales games, but share basis, I mean that business is on fire and and as you know they.
Just went on lockdown today, I believe and we're seeing.
We're anticipating some continued acceleration in that business as a result of that.
Thank you I'm sure I'm next question comes from the line of Lawrence Doberman from Credit Suisse. Please go ahead.
And and congratulations on the role so just to start with the international Uniparous pipeline you have nearly 2100 internecine is currently I recognize as wide variability across the market that the average a V. There about 50 to 55 per cent of what you see in North America. So can you give any color on where you sign development agreement in international markets and examples of.
Where do you see the most meaningful opportunities and then any color and how you're thinking about the composition of North America first International Neenah, Wisconsin word.
Sure I Laura.
Yes, as I imagine China is a huge opportunity for us we actually a strong adv's there and only 200 restaurants, we see significant development opportunity there the middle East performs extremely well for us in the middle East has been a tough market during covid a lot of it has been shut down.
Multiple long term period, and and we've just kind of reconfigured some of our franchise.
I V as in that in that region, and we feel like we are stronger and better prepared to grow they're coming out of this in Russia is continue to be a strong.
Market for us.
The pandemic has impacted that market differently than a lot of other markets. It has not experienced that kind of.
What you need to invest in structurally within the box how can how are you going to manage costs.
What kind of obviously won't be financial support for what kind of.
Operational and strategic support are you going to integrate to the franchise system. Thanks.
That's a great question and you know we had started some of these initiatives Brett prior to the pandemic we had.
Been working with the Aggregators and they are integrating them into our systems. The aggregators increase our capacity in our number one bottleneck frankly as drivers and adding a significant number of drivers through models like door Dash drive helps us in a big way even more so than.
It helps us manage our labor, but also helps us manage our throughput as they can show up and take delivery, but we've also made some infrastructure investments. We we invested as we called out I think a couple of quarters ago, and a new call Center platform, we call pop call.
Which eliminates the need for our stores to answer phones, and if you think about how distracting.
The phones can be especially on a Friday or Saturday night, when you're cracking in doing huge volumes.
And then also the labor opportunity right you don't need somebody to open or answer the phone. So you can either redeploy that labor to accelerate your throughput on your baseline, which is where we make pieces that go into that entity oven or you can bring another driver in so that that type of investment as bill has paid big dividends we have.
Throughout our.