Q1 2023 Domino's Pizza Inc Earnings Call

April 27, 2023

Question and answer session to ask a question. During this session you will need to press star one on your telephone to remove yourself from the queue simply press Star One again as a reminder, today's program is being recorded and now I'd like to introduce your host for today's program, Mr. Ryan <unk> Vice President.

Finance Investor Relations. Please go ahead Sir.

Thank you and good morning, everyone. Thank you for joining us today for our conversation regarding the results for the first quarter of 2023.

Today's call will feature commentary from Chief Executive Officer, Russell, Leaner, and Chief Financial Officer, Andy Brett.

As of cost primarily for our investor audience.

All members of the media and others to be in a listen only mode.

I want to remind everyone that the forward looking statements in this morning's earnings release and 10-Q also apply to our comments on the call today.

Both of those documents are available on our website.

Actual results or trends could differ materially from our forecast.

For more information please refer to the risk factors discussed in our filings with the SEC.

In addition, please refer to the 8-K earnings release to find disclosures and reconciliations of non-GAAP financial measures that may be referenced on today's call.

A request of our coverage analysts we wanted to do our best this morning to accommodate as many of your questions as time permits.

As such we encourage you to ask only one one part question on this call.

Today's call is being webcast and is also being recorded for replay via our website.

With that I'd like to turn the call over to our Chief Executive Officer Russell Weiner.

Thank you Ryan and good morning, everybody. Thanks for joining us on today's call.

Like to start this call, where we finished our last one looking back on what we said we were going to do.

Im really proud of the actions that our team and our franchisees have taken and the positive results that they delivered.

You'll recall that there were three themes, we discussed last quarter. The first one was the continued evolution of the Domino's brand from a U S delivery business to a global Pizza company with leadership in both delivery and Carryout. We continue this progress since our last call.

Let me start off with China, we're proud to welcome our partners DPC Dash, our master franchisee there to the growing list of public companies that are developing and operating Domino's pizza stores across the globe.

On March 28th CEO , <unk>, Wang and her team completed their IPO in the Hong Kong stock exchange, we have got tremendous potential in China, where the das team believes they have just scratched the surface of their total opportunity with stores operating at only 17 cities in China.

Now speaking of public companies as of the end of Q1 2023 six of the top 20 public <unk> in the world as measured by market cap are part of the Domino's family.

<unk> has joined by our Master franchisees Jubilant food works Domino's Pizza Enterprises, I'll say, Domino's Pizza group and Alomar, all in the top 20.

This exemplifies an important strength of our brand we've.

We've got a diverse portfolio of more than 90 markets around the world.

So our international business has both scale and balance.

And with this affords us is the ability to weather any short term headwinds in certain markets as they come up.

We've seen this dynamic play out in Q1 with markets performing exceptionally well balancing out others that are facing more pressures.

All of this resulted in positive international same store sales growth for the first quarter.

Now onto the U S.

In the U S. We believe that the <unk> pizza delivery and Carryout businesses continue to be incremental to each other with limited overlap.

We're number one in both segments and believe we've strengthened our position during the first quarter.

The balance we have in our stores with carryout contributing around half the orders in 40% of sales has allowed us to mitigate the more recent macro headwinds and the delivery category.

Okay.

The second thing we discussed on our last call was the need to maintain value in what is a competitive marketplace, where our customers decide everyday where to spend their hard earned dollars.

Value has to do with the right balance of price and service.

Our U S business delivered on both of these things in Q1 and I'll start with pricing.

On pricing I mentioned that we and our franchisees have got to be mindful that value on our menu exist outside of our national offers.

Menu prices and delivery fees were relatively stable throughout Q1 that means most of the menu pricing increase we saw in the first quarter versus prior year was carryover from changes that were made in 2022.

On servicing capacity, our stores and our franchisees continue to make progress on both fronts.

Estimated average delivery times in the first quarter were over a minute better than the first quarter of 2022.

While our goal is to get back to and improve on our delivery service levels from 2019, I'm really encouraged by the continued improvement we and our franchisees have made in this critical measure.

Our system understands that to be the best you need to beat the best even when the best may be yourself.

That's why we're launching an important initiative, we're calling it our summer of service training program.

We're inviting all of our U S franchisees to come to Ann Arbor to be part of one of the largest.

System training efforts in our history.

Look we've driven significant improvements in our back of house technology in our circle of operations over the last few years that we've got more coming.

The summer of service program will allow us to share best practices with our franchisees, who we expect will leave Ann Arbor with specific plans that they create.

Positively impact service for every one of their stores.

I think these changes will also improve the experience for our customers and our team members.

Our corporate and franchise stores.

Our third theme from the last call was around the need to drive more innovation.

New products are certainly one way to do that our brand has a history of bringing news to all aspects of the business.

We dialed up innovation over the last few months and anticipate this will continue throughout the year and into the future.

Let's start with product innovation on the product side, we're really pleased with the launch of our loaded tops.

For consumers loaded tops offer a craveable potato side that delivers extraordinarily well.

They also fit nicely into our mix and match menu, providing great value and even more variety when consumers build their orders.

For franchisees top drive healthy ticket, given they've been largely incremental and have a strong margin profile.

Early signs point to load a top performing even better than our last two product launches disinterest in the chicken Taco and cheeseburger specialty pizzas.

The drive news and ordering convenience in our Carryout business, we launched a convenient way for consumers to place their orders while they are on the go with Apple car play this.

This innovation allows customers to place and track their orders on car play via our iOS App.

Car play ordering is a great alternative to drive through because it allows customers to avoid long lines by placing their orders while they are on the go so their food is hot and fresh and ready when they arrive at their local dominoes.

As important as the ordering platform itself car play ordering will help drive what we call our equity <unk>.

Short for technology equity.

A history of leveraging technology to improve customer experiences and Domino's car play ordering continues that tradition.

On the delivery innovation side Dominoes fleet of electric vehicles has been expanding we announced on our last calls it the initial order by our corporate stores and franchisees made us the largest electric fleet of pizza delivery vehicles in the country with 800 cars.

Today, Domino's has committed to over a 1000 evs and counting.

The EV fleet is great for our stores and the environment.

All while growing the potential pool of drivers by offering opportunities to individuals'. They may not have access to a car.

All of this news contributed to positive U S same store sales growth in Q1 and will provide momentum for domino's into the future.

Now for more detail on the quarter I'd like to turn it over to our CFO Sandeep Reddy Sandeep.

Thank you Russell and good morning to everyone on the call.

I'll begin my remarks with updates on the actions I have previously outlined to improve our long term profitability.

First on pricing architecture.

During the first quarter the average year over year price increase that was realized across our U S system or six 2%.

This included the year over year benefit of National pricing changes made in 2022.

As a reminder, delivery mix and match was updated was 679 in March of last year with carryover to mix and match updated in October .

As we have lapped the delivery mix and match national pricing update in March we expect our second quarter realized year over year pricing impact to moderate.

Second.

Efficiencies in our cost structure as we continue to drive recovery in margin.

We saw year over year improvement in our operating income margin, which grew by 100 basis points versus Q1 2022.

This was despite foreign exchange rates, having a negative year over year impact on operating income margin of approximately 40 basis points during the quarter.

Third we had positive same store sales growth, excluding foreign currency impact in both our U S and international businesses for the second consecutive quarter, which also contributed to improving the operating income leverage.

Now for our financial results for the quarter in more detail.

When excluding the negative impact of foreign currency global retail sales grew five 9% due to positive sales comps and global net store growth over the trailing four quarters lapping three 6% global retail sales growth, excluding FX for Q1 2022.

Breaking down global retail sales growth U S retail sales increased five 1% rolling over a prior year decrease of one 4%.

International retail sales, excluding the negative impact of foreign currency grew six 5% rolling over the prior year increase of eight 4%.

Turning to comps.

During Q1 same store sales for the U S business increased three 6%.

Rolling over a prior decrease of three 6%.

The increase in U S same store sales in Q1 was driven by an increase in ticket, which included the six 2% and pricing actions I mentioned earlier, partially offset by a decline in order comes.

The Q1 comps were aided by the omicron overlap from 2022.

As well as the benefit from a boost week in 2023 that we did not run in Q1 last year.

Neither of these tail winds will aid us for the balance of year as Omar Khan receded as headwind and rerun boost weeks every quarter last year starting in Q2.

Now I'll share a few thoughts specifically about the U S carryout and delivery businesses.

The carrier business was strong in Q1 with the U S same store sales $13, 4% positive compared to Q1 2022.

Rolling over prior year increase of 11, 3%.

We are very pleased with the strength of our carrier business.

But we do expect a moderation in growth rates for the balance will be as we map accelerating growth in 2022.

The delivery business remains more present.

Q1 delivery same store sales declined by two 1% relative to Q1, 2022% rolling over a prior decline of 10, 7%.

The delivery business is still challenged by two factors that we discussed in our last call.

Post migration of demand from the delivery channel into the <unk> channel.

The reversion to pre pandemic consumer behavior continues.

Second constrained.

Constrained budgets for households, with relatively lower disposable income, particularly when factoring fees and tips, prompting prompting them to shift the delivery occasion to cooking at home.

We are closely monitoring the evolution of growth and real personal consumption expenditures as it is a consistent inflection in that trend could result in relief on the second headwind to our delivery business.

Shifting to unit count.

We and our franchisees added 22, net new stores to the U S. During Q1.

Consisting of 25 store openings and three closures, bringing our U S systems store count to 6700 <unk> stores at the end of the quarter, which brought our full quarter net store growth rate in the U S to one 7%.

As mentioned on our last call we expected the U S store development pipeline will continue to be pressured by permitting and store construction supply chain challenges.

Before seeing a gradual recovery starting in the second half of the year.

Marked by stabilization post before an inflection in trends.

Domino's unit economics remained strong relative to the many pressures faced throughout the year, including staffing challenges in a high inflationary environment for food and labor.

We have completed our analysis of estimated average U S franchisees store profitability.

With the final amount coming in at $139000 for 2022.

Up from the $137000 estimate provided on our last call.

As previously mentioned estimated average store profitability was higher in Q4 2022, and then Q4 2019 as franchisees are seeing the flow through benefits of the mix-and-match natural pricing increases for both delivery and carryout.

We expect this improvement in profitability to continue into 2023 with the margin flow through from loaded towards being an additional tailwind during the first quarter.

We will need further time to evaluate a motive Todd will provide an incremental margin dollars lift over the course of the year.

Also as we have completed our analysis on 2022 build cost for stores relative to our average <unk> costs. In 2019, we saw an approximate build cost increase of 20% in 2022.

Even with these increased build costs franchisees are looking at roughly three year paybacks on new store openings for 2023 and beyond.

Before we transition to discussing our international business.

Would like to briefly touch on our technology costs.

To fund additional investments in technology innovation, including a redesign of our E Commerce platform.

The technology of transaction fees charged to U S franchisees.

We will be increased to $39 five from 31 <unk>.

The beginning of the second quarter.

The technology of transaction fee increase covers investments split roughly evenly between G&A and capital expenditures.

These investments are included in the annual guidance measures of $425 million to $435 million in G&A spend and $90 million to $100 million.

Capital expenditures for fiscal year 2023.

At the same time, a 25 basis points of temporary reduction on contributions to the National advertising Fund will go into go into effect.

The net impact of these two changes on the increase in technology fee and the 25 basis point reduction of franchise advertising contributions should be relatively neutral to the estimated average U S franchise franchisee store profitability in 2023.

Turning to our international business same store sales, excluding foreign currency impact for our international business increased one 2%.

Rolling over the prior increase of one 2%.

We've continued to face the headwind of the negative year over year impact of the exploration of the 2021 <unk> relief in the UK.

Largest international market by retail sales.

This was the last full quarter of the negative year over year impact with the UK Vap relief program being in place through March 31 2022.

Our international business added 106, net new stores in Q1 comprised of 143 store openings and 37 closings.

Our closures were driven by another round of closures in Brazil.

As a master franchisee continues its work to optimize the store base in that market as.

As well as some closures in Russia.

International store openings in the first quarter were also impacted for the timing of fiscal periods of some of our master franchisees that caused a significant number of openings to shift into the first week of our second quarter.

These additional 106 net stores brought our current trailing four quarter net store growth rate in international to six 7%.

When combined with our U S store growth.

Trailing full quarter global net store growth rate was 5%.

Turning to EPS.

Our diluted EPS in Q1 was $2 93 versus $2 50 in.

In Q1 2022.

Breaking down the 43 <unk> increase in our diluted EPS.

Our operating results benefited us by 36.

Changes in foreign currency exchange rates negatively impacted us by <unk> <unk>.

A lower effective tax rate positively impacted us by <unk> <unk>.

Lower net interest expense benefited us by <unk> <unk>.

And a lower diluted share count driven by share repurchases over the trailing 12 months benefited us by <unk>.

We continued to generate sizable free cash flow.

During the first quarter, we generated net cash provided by operating activities of approximately $115 million.

After deducting for capital expenditures of approximately $19 million.

With consisted of investments in our technology initiatives and supply chain centers, we generated free cash flow of approximately $96 million.

Free cash flow increased $29 million from the first quarter of 2022, primarily due to the positive impact of changes in working capital and higher net income.

During the quarter, we returned over $30 million to shareholders through share repurchases.

As of the end of the quarter, we had approximately $380 million remaining under our board authorization for share repurchases.

In the first quarter the allocation methodologies for certain costs with support internally developed software was updated on a prospective basis.

The change in allocation methodology resulted in an estimated increase in U S stores segment income of $10 million and an estimated increase in international franchise segment income of $2 million fully offset by a decrease of other segment income of $12 million.

Finally, I would like to provide an update on a few of our annual guidance measures that we previously communicated.

We expect the year over year market basket increase of 3% to 5% in 2023.

Changes in foreign currency rates could have a 2 million to $6 million negative impact on international going through revenues in 2023.

And our tax rate, excluding the impact of equity based compensation is expected to range from 22% to 24% in 2023.

Based on current trends, we expect each of these measures will come in towards the low end of their respective ranges.

Additionally, we continue to expect our global retail sales growth and global unit growth in 2023 to.

To trend to the low end of our unchanged two to three year outlook.

Thank you all for joining the call today and now I'll turn the call back to Russell.

Thanks Sandeep.

Before we close out the call I want to touch on a couple of areas that are important as we as we move forward in 2023. The first one is store growth.

As Sandeep mentioned in his comments, we expect that the U S store development pipeline will continue to be pressured by permitting and store construction supply chain challenges before seeing a gradual recovery beginning in the second half of the year.

In my conversations with franchisees and discussions with our team on new commitments to store growth by our system I am confident that we will see an inflection in trends towards the end of the year and into 2004.

Domino's franchisees came out of a challenging 2022 with estimated store EBITDA of almost $140000.

This proves to me and more importantly to them that building a domino's store remains one of the best investments in the restaurant industry.

The second point I want to highlight is innovation, giving you a little bit of insight into our E Commerce pipeline.

Not a comprehensive list, but it should help you understand that we're bringing news to our customers. While also improving our ability to drive loyalty and a more personalized experience leveraging our robust customer database.

As I mentioned on our last call, we will be refreshing and improving our piece of the pie loyalty program.

When we launched it back in 2015, we were more of a delivery company with our Carryout business still gaining momentum. So naturally our loyalty program was designed more around the delivery customer.

One of the key objectives of the refreshed piece of the Pie program will be to explicitly cater to the carryout customer in addition to the delivery customer.

We're excited to add more value and rewards for everybody.

We've also started to work on a redesign and rewrite of our entire E Commerce platform.

This work will continue into 2024, and we will update you on progress along the way.

Our digital ordering clients and tech stack has been a huge part of our strategy and a competitive advantage for us over time, so we need to invest in these plants to ensure we remain in a leadership position.

In closing when I look back on the first quarter I can't help but be encouraged by the resilience of our business model and the competitive advantage that our franchisees and team members bring to Domino's pizza.

I remain bullish on our future and look forward to telling you more of our story and our long term strategy at our Investor day, which will be held in late Q4.

With that we'll open the call to questions.

Certainly one moment for our first question.

And our first question comes from the line of Brian Bittner from Oppenheimer. Your question. Please.

Thank you. Good morning, just first a clarification question from you Sandeep.

As it relates to your outlook in 2023 for total retail sales to be at the lower end of the 44% to 8% range can you.

Talk to us about what the implied same store sales outlook embedded in this guidance.

And then Russell My main question to you just as it relates to delivery and the ongoing weakness in this segment I appreciate the macro pressures that you outlined during this call and previous calls but.

What are you are you currently taking market share and can you just further elaborate on actions that you're taking inside the company to improve your competitive advantage within delivery is set that business up for a strong turn when these macro pressures recede.

So good morning, Brian and thank you for the question I'll take the first piece and I think Russell will cover the second piece of your us. So in terms of the outlook. I think you were asking about the global retail sales outlook of 4% to 8%.

Terrific reiterating that still expected to be at the low end for 2023.

And I think when we go back to what we said last time and again, what Youre, saying this time.

What really is changing the narrative about you said drove that adjustment in the first phase, which was the challenges that we're seeing in the U S delivery business was the primary driver of the of the load.

Estimation of the global retail sales outlook. So we.

We feel very confident.

More broadly about the business because the carrier business has been great International business as you just heard from Russell did extremely well as well notwithstanding the UK vap impact that would be rolling over.

So we feel really good about the overall business, but I think until week or comes through the delivery challenges and that's what you're asking about.

We basically believe that the outlook is appropriate.

Thanks, Sandeep good morning, Brian .

The delivery side.

Really as to answer your question relates to in two parts first we.

<unk> grew delivery <unk> pizza market share last year, we're continuing to do that in Q1 and so the point that you ask is what can we do in addition to to drive that and it's kind of the same basic things we outlined on the same call. It's driving value delivery service, we're a minute better than we were a year.

Year ago.

Innovation in all areas not just product, but we have actually delivery innovation out there now with the electric vehicles were up to 5000 vehicles.

This new loyalty program is going to do a really good job in driving transactions and then the majority of our delivery customers order online and so I think what what Youre hearing and we're talking about redoing our e-commerce platforms, that's certainly going to help there as well.

Thank you.

Thank you one moment for our next question.

Yes.

And our next question comes from the line of Peter Saleh from <unk>. Your question. Please.

Great. Thanks.

Russell I wanted to ask about the decision to reduce the marketing spend.

By 25 basis points I understand it's a pretty much an offset to the raising the digital fees, but can you just give us a sense on how much.

Total impressions would be down this year with that reduction in spend.

Sure.

Point at the end of the day as we take a holistic look at the Franchisees' P&L and we just think that this is a better investment over the course of the next year.

Because of where we are in our marketing budget. So I don't expect an impression decline.

That this is a great overall use of.

Their money for the year.

And Peter are I'll, just add a little bit to that because I think it's very important to think about this strategically and holders victory for both the financial standpoint, and kind of won't be looking at and we were engaged in deep discussions with our franchisees before we actually made this move and I think over the course of the pandemic, we've actually built up the the AD Fund reserve to.

A point, where we believe that the resources that are MDI fund are more than enough to cover the demands that we have from an advertising standpoint this year.

At the same time as we looked at the innovation and the need to invest in technology, our franchisees and US believe that this was the right way to redeploy investment and so we've done it very clearly with a view to the long term and this is as we said.

One adjustment that we've made so we'll take a look at it in one year assignment decided what to do.

Great. Thank you very much.

Thank you one moment for our next question.

And our next question comes from the line of Sara Senatore from Bank of America. Your question. Please.

Great. Thank you a question and a quick follow up and you said the 33.

It won't be continued cowen and any outlook on same store sales in general.

A note of caution I was wondering if you can quantify what you think that Cowen wise I'm, just trying to understand what the underlying run rate might be or what the drivers that Russ highlighted.

The magnitude of that might look like as we go forward and then just quick follow up on the comment about.

Shifting back to dine in.

Livery across the industry is a lot higher than it was as sure sales pre COVID-19. So.

Do you have any thoughts on how long the shifts might last I would expect diamond pathologically and jeopardize a lower share of the total next but China again I understand yes.

How long that headwind persisting here. Thanks.

Hi, Sarah.

Quite a few questions in there, but I'll take them all right I'll take them in sequence. So I think your first talking about.

Some of the things that I pointed out during the prepared remarks on the benefits that we got in the first quarter on the call from the tailwind that we had from lapping omicron.

And also the fact that we had a booth speak in 'twenty three because we didn't have in 'twenty two.

I'm not going to unpack the details of exactly how much that was but definitely those are our two tailwind and pedestrian third tailwind also if I think about it because.

We have now lapped the.

The national pricing update on on delivery and I think we definitely got that benefit of that pricing impact that actually it was embedded in ticket as well. So so when you think about all these different elements there is going to be.

An expectation that there will be some deceleration relative to that because those were tailwind that we had uniquely in the first quarter.

And that's why we actually appointed goes out.

And then I think.

The broader topic of shifting to dine and I think our point, where we actually did the Q4 call was.

We'd seen throughout 2022, a shift back into diamond.

And I think when we.

We looked at the where the values of weather Diamond had reached we were still well below 2019 levels for diamond and.

And so the expectation that we had when we set up our our outlook for the two to three year timeframe is and particularly on 2023 was to continue to see that shift happening over the course of 2023.

Thank you.

Thank you one moment for our next question.

And our next question comes from the line of Dennis Geiger from UBS. Your question. Please.

Thank you Russell you spoke to stepping up the pace of innovation and you gave some good examples just wondering if you could touch a little bit more on what that means perhaps how long it takes to kind of get innovation going to where it was a few years back and anything more you can share in thinking about innovation across menu and.

Technology, and if I could slip.

A related part and there is there any update with respect to how you think about third party aggregator relationships as we think about technology and evolution of the brand. Thank you.

Hey, Dennis good morning.

Let me maybe take the first the second question first just talk a little bit about third party.

$1 billion business.

Internationally with Aggregators and we're learning every day and I think the number one thing that.

That we've learned is.

However, you work with or whoever you compete with Domino's is better when we are stickier brand when we have more to make consumers when they decide where they're going to order to order from us and stickiness is getting the value right is getting a service right.

You talked about innovation, so I'll get to that in a second.

A related part and there is there any update with respect to how you think about <unk>.

Stickiness is also this new loyalty program the updated loyalty program will make us stickier as well as recognizing that it is time to upgrade our E Commerce site and so if we're a stickier Domino's pizza no matter, who we compete with or work with here will be in a place that we can win.

Third party aggregator relationships as we think about technology and evolution of the brand. Thank you.

Hey, guys good morning.

Secondly, the ore firstly, I guess would be your first question.

We've got a $1 billion business.

Internationally with Aggregators and we're learning there every day and I think the number one thing that.

Question on innovation.

Really ask.

That folks take a broad definition of innovation and thats not a couch and say, we're not going to be doing a lot of product innovation and stepping up at and we're not going to be doing carryout or delivery innovation.

That we've learned is.

Let me give you an example of something that people maybe it wouldn't think of it is innovation, which is carryout tips.

The majority of companies what they call. It is a bounce back coupon.

And what our marketing people did a great job and they said you know what if.

Instead of calling it a $3 bounce back coupon, where a delivery company in this case customers are delivering our pizza, let's call it a tip.

They get to $3.

Next week and its an incremental purchase and that's an innovation.

So I think you've got product innovation with tops.

Value innovation I don't think anyone talks about value innovation the way we do.

Apple car play the Carryout innovation. The cars are EV is delivery innovation all of those types of innovations or things you should see on a quarterly basis I expect to be able to.

Let me give you an example of something that people maybe it wouldn't think of it is innovation, which is carryout tips.

Update and update you on these calls thanks.

Okay.

<unk> the majority of companies, where they call. It is a bounce back coupons.

Thank you one moment for our next question.

Okay.

And what our marketing people did a great job and they said you know what.

And our next question comes from the line of Gregory Frankfurt from Guggenheim. Your question. Please.

Instead of calling it a $3 bounce back coupons, where a delivery company in this case customers are delivering our pizza, let's call it a tip.

Hey.

Excuse me Russell just just can you talk about what you think the competitive differentiation is of the Domino's business today, and if that's changed from four or five years ago I think aggregators.

They get to $3.

Next week and its an incremental purchase and that's an innovation.

So I think you've got product innovation with tops.

Value innovation I don't think anyone talks about value innovation the way we do.

Figured out the profitability a little bit better, but can you maybe help us understand.

Apple car play as a carryout innovation. The cars are EV is delivery innovation all of those types of innovations or things you should see on a quarterly basis I expect to be able to.

The reasons for why you have.

Kind of competitive differentiation versus those platforms.

If that changed in the last four or five years or not thanks.

Yes, sure good morning, and thanks for the question.

<unk> update you on these calls thanks.

Actually I think when we talk about broad broadness and competitiveness, but I'd like to start out with is carryout.

Okay.

Thank you one moment for our next question.

We talk a lot about the fact that there is not a lot of overlap between delivery and carryout historically about 15%.

Okay.

And our next question comes from the line of Gregory Frankfurt from Guggenheim. Your question. Please.

And so if you look back at the last three years on our U S carrier business was up almost 30% in same store sales so to think that thats, a very incremental piece.

Hey.

Excuse me Russell.

Just just can you talk about what you think the competitive differentiation is of the Domino's business today, and if that's changed from four or five years ago I think aggregators.

Piece of growth for our business.

Should hopefully help you understand how we think about diversifying and differentiating and growing ourselves as not only a pizza delivery company, but as a total restaurant.

I figured out the profitability a little bit better, but can you maybe help us understand.

And I think on the delivery piece again, I will point to we're growing pizza delivery market share, but we but we think we can do more and a lot of it is because certainly the competition is different but I think we've learned a lot Craig over the last few years.

The reasons for why you have.

Kind of competitive differentiation versus those platforms.

And if that's changed for the last four or five years or not thanks.

Yes, sure good morning, and thanks for the question actually I think when we talk about broad broadness and competitiveness, but I'd like to start out with is carryout.

You think of.

What we learned through Covid, we went through some capacity constraints, we went through driver availability issues and they say necessity is the mother of invention.

We talk a lot about the fact that there is not a lot of overlap between delivery and carryout historically about 15%.

And Thats why were doing this summer of service program here, we're inviting our franchisees out because we've made significant improvements and innovations because of all of this learning we will now be better and our circle of operations in our in our technology and these are substantial enough that it's not something that we can train people in a video every single Domino's.

And so if you look back at the last three years on our U S carrier business was up almost 30% in same store sales so to think that thats, a very incremental piece.

Piece of growth for our business.

Should hopefully help you understand how we think about diversifying and differentiating and growing ourselves of not only our pizza delivery company, but as a total restaurants.

U S franchisee is coming up here the Ann Arbor.

For this training and they will leave with individual plans that they are putting together for their stores when they go back and at the end of the day in order to really step change ourselves. When these macro things go away, it's going to be stepping up service and I think.

You think of what we.

Hopefully this is an example of how we're leaning in there.

We learned through Covid, we went through some capacity constraints, we went through driver availability issues.

Thank you one moment for our next question.

I say necessity is the mother of invention.

And our next question comes from the line of Chris <unk> from RBC capital markets. Your question. Please.

Hi.

Hey, good morning so.

Pricing and Sandeep, you noted the lapping of delivery mix and match pricing in March.

And with that pricing should moderate here in the 10-Q, but appreciating your continued focus on value here at transactions, where there remains stable or potentially improve how open are you to taking further pricing, particularly if you do see those service levels.

U S franchisee is coming up here the Ann Arbor.

To improve with all the initiatives you have in place. Thanks.

Alright, great. Thanks.

Thanks for the question I think when we talk about pricing options and value I think thats a constant.

It's not this last year, it's been over the last decade or more.

Thank you one moment for our next question.

<unk> been doing this and so we will continue to evaluate our pricing relative to competition.

And our next question comes from the line of Chris <unk> from RBC capital markets. Your question. Please.

What are the macro environment will actually yield from a from.

Hi.

From a demand standpoint because.

Thanks, and good morning so.

We always are going to do the work.

Pricing Sandeep, you noted the lapping of delivery mix and match pricing in March.

I don't think we are.

Particularly and trying to say, what we're going to do or not going to do because there's going to be the outcome of the work.

And with that pricing should moderate here in the Q, but appreciating your continued focus on value here if transactions were to remain stable or potentially improve how open are you to taking further pricing, particularly if you do see those service levels.

Okay.

Thank you one moment for our next question.

And our next question comes from the line of Brian Heartburn from Morgan Stanley . Your question. Please.

To improve with all the initiatives you have in place. Thanks.

Alright. Thanks.

Yes, Thank you and good morning.

Thanks for the question I think when we talk about pricing options and value I think thats a constant.

The thing I was curious about just talking about innovation is could you talk about your market share a different day parts.

It's not this last year, it's been over the last decade or more.

And whether you think that there's specific opportunities to lean into one or one or two of those were you perhaps don't have as much share as the others can that be a source of product innovation perhaps.

We've been doing this and so we will continue to evaluate.

Pricing relative to competition.

What are the macro environment will actually yield from a from.

From a demand standpoint because.

We always are going to do the work.

I was curious just about if you could talk about day parts and.

I don't think we are.

Particularly and trying to say, what we're going to do on Ocwen to do because there's going to be the outcome of the work.

Higher market share might differ by day, part and whether you think that.

It's kind of an innovation opportunity as well too.

Yeah.

Okay.

Target different day parts differently.

Thank you one moment for our next question.

I don't think we're going to go into by the way sorry, good morning.

And our next question comes from the line of Brian Heartburn from Morgan Stanley . Your question. Please.

I don't think were going to go into the detail of it.

The specific numbers of our day parts, but your answer is.

Yes.

You're caught the answer your question is absolutely.

Yes, Thank you and good morning.

Finding incremental drill sites has been key for this brand I remember when I joined in 2008, the majority of our stores weren't open for lunch.

One thing I was curious about just talking about innovation is could you talk about your market share a different day parts.

And whether you think that there is.

Specific opportunities to to lean into one or one or two of those were you perhaps don't have as much share as the.

We gave them a product with with sandwiches and then later pasta.

Now that's a pretty significant piece of our business.

Others can that be a source of product innovation, perhaps.

We also werent, a big Carryout company, and obviously now carry outs half of the orders that come through dominos.

So what we're what our job is to do every day is to find incremental drill sites and day parts are absolutely one of those areas that we look.

Thank you.

Okay.

Thank you one moment for our next question.

Okay.

Brian are you on there.

And our next question comes from the line of David Palmer from Evercore ISI. Your question. Please.

Yes, Hello can you hear me yes.

Yeah, and I'm, sorry, we had a blip on Gaba Nordstrom question do you mind repeating the question.

Sorry about that I was curious just about.

Thanks, just just a follow up on the previous question about third party sites and marketing and collecting orders from those in the U S. You noted how you do it overseas.

You could talk about day parts and.

Higher market share might differ by day, part and whether you think that that.

It's kind of an innovation opportunity as well too.

Your previous answer you said Youre looking for stickier sales or you can he found that those have the highest value is that.

Target different day parts differently.

I don't think we're going to go into by the way sorry, good morning.

Your way of saying you're kind of closing the book on this and that you've kind of made up your mind.

I don't think were going to go into the detail of the specific numbers of our day parts, but your answer is are your at your court. The answer your question is absolutely.

Or are you evaluating this still and if you are evaluating it still.

What sort of factors and timing.

Finding incremental drill sites has been key for this brand I remember when I joined in 2008, the majority of our stores weren't open for lunch.

We'd be thinking about that you're thinking about thanks, so much.

Yes, I think maybe the way to.

We gave them a product with with sandwiches and a later pasta and now that that's a pretty significant piece of our business.

Interpret what I said before is there are opportunities and there are also potential issues with <unk>.

We also werent, a big Carryout company, and obviously now carry outs half of the orders that come through dominos.

Competing with folks or working with folks.

And we're not going to.

Think about going into anything unless were our best Domino's.

What we're what our job is to do every day is to find incremental drill sites and day parts are absolutely one of those areas that we look.

And the best Domino's, we're getting there every day, we're improving our service and we talked about some of the tech and loyalty pieces.

And then we'll be in a better place.

Thank you.

Compete with or work with anybody.

Thank you one moment for our next question.

Anybody.

So this is something you havent closed the book on but perhaps some changes that youre, making might enable you to pursue that path.

And our next question comes from the line of David Palmer from Evercore ISI. Your question. Please.

Not that youre committing at this point, but.

Thanks, just a just a follow up on the previous question about third party sites and marketing and collecting orders from those in the U S. You noted how you do it overseas.

It's something that you haven't closed the book on.

Maybe I'll refer back to the prior question. We're always looking for drill sites. There are incremental drill site that are smart for us and this is one of them you are never going to hear that this team closes the book on thing right now we're focused on making ourselves a better domino's.

But your previous answer you said youre looking for stickier sales or you can you've found that those have the highest value.

Your way of saying you're kind of closing the book on this and that you've kind of made up your mind.

Okay. Thank you.

Thank you one moment for our next question.

Or are you evaluating this still and if you are evaluating it still.

And our next question comes from the line of Joshua Long from Stephens. Your question. Please.

What sort of factors.

And timing should we be thinking about that you're thinking about thanks. So much.

Great. Thanks for taking my question excited to hear more about the <unk> service program understanding that all of the franchisees are going to be walking away with an individualized plan.

Yes.

Maybe the way to interpret what I said before is.

That is certainly exciting, but curious if you could talk a little bit more about soon.

There are opportunities and there are also potential issues with competing.

The big pieces that have either already been at test, maybe what you've learned from that.

Just help.

Competing with folks or working with folks.

Help us kind of contextualize what frankly.

And we're not going to.

Frankly, it would be walking away with as they all come up to Anr for later this year.

Think about going into anything unless were our best Domino's.

And the best Domino's, we're getting their everyday we're improving our service and we talked about some of the tech and loyalty pieces.

Good morning, Josh I think the best way to answer that question is to invite you to come up and join us for our Investor day in Q4.

And then we'll be in a better place to compete with or work with.

We are really excited too.

<unk>, what we show our franchisees which are <unk>.

Anybody.

Takeaways on the things that we've learned through some of these <unk>.

So this is something you haven't closed the book on but perhaps some changes that youre, making might enable you to pursue that path.

Capacity issues driver availability issues and then more importantly, how.

How that is leading to ideas to reinvent our circle of operations and improved technology to help circle of operations, but also.

Not that you're committing at this point, but its.

It's something that you haven't closed the book on.

At the end of the day the product the customer gets to be as hard as it can be and also improve.

I would like to work at a Domino's pizza.

Maybe if there were videos and I'd be able to show you a step a little bit more but this is the old school phone call and so you have to come up to Ann Arbor, and we look forward to see.

Great. Thank you.

Thank you one moment for our next question.

Understood. Thank you.

And our next question comes from the line of Joshua Long from Stephens. Your question. Please.

Thank you one moment for our next question.

Great. Thank you for taking my question.

Added to hear more about the summer service program understanding that all the franchisees are going to be walking away with an individualized plan.

Okay.

And our next question comes from the line of Chris <unk>.

From Stifel. Your question please.

That is certainly exciting, but curious if you could talk a little bit more about some of the big pieces that have either already been in test, maybe what you've learned from that and just.

Thanks, Good morning, guys Sandeep.

Sandeep you mentioned comparison benefits in the first quarter that will benefit the second quarter, but I was under the impression that transaction declines were also just as weak in the second quarter last year, implying the comparison should continue to be favorable and I'm. Just wondering if that was true and then if you could just help us understand how meaningful the ticket.

Help us kind of contextualize what frankly.

Frankly, it would be walking away with as they all come up to Ann Arbor later this year.

Good morning, Josh I think the best way to answer that question is to invite you to come up and join us for our Investor day in AR in Q4.

Growth should slow in the second quarter that would also be helpful. Thank you.

We are really excited to us.

<unk>, what we show our franchisees which are <unk>.

Yeah, So so Chris.

Takeaways on the things that we've learned through some of these.

Right.

<unk> did decline last year in the second quarter Enzo.

Capacity issues driver availability issues and then more importantly.

So I think that pieces consistent between Q1 and Q2, what is not necessarily consistent is the fact that we had the omicron tailwind we had one boost weak in Q1 of this year, which was not there in Q1 of last year and I think you asked the second part of your question was about pricing international pricing, we're not going to.

How that is leading to ideas to reinvent our circle of operations.

And improved technology to help circle of operations, but also how.

At the end of the day the product the customer gets to be as hot as it can be and also improve.

I'd like to work at a Domino's pizza. So maybe if there were videos and I'd be able to show you a step a little bit more but this is the old school phone call and so you'll have to come up to Ann Arbor, and we look forward to seeing.

Really get into the detail at this point, but clearly it was a pretty significant increase of $6 89 from 599. So you can do the math and then.

Understood. Thank you.

And look for how much that's going to be but but I think it is enough.

Yeah.

Yes.

Often impactful me to call it out.

Thank you one moment for our next question.

In terms of that being moderating in Q2.

Okay.

And our next question comes from the line of Chris <unk> from Stifel. Your question. Please.

Okay.

Thank you one moment for our next question.

Thanks, Good morning, guys.

Sandeep you mentioned comparison benefits in the first quarter that won't benefit the second quarter, but I was under the impression that transaction declines were also just as weak in the second quarter last year.

And our next question comes from the line of Andrew Charles from Cowen Your question. Please.

Great. Thank you.

Encouraging to hear you guys talk about confidence in the U S performance, but perhaps just from the outside it looks like trends did deteriorate on a full year basis by about 200 basis points in <unk> and you guys are also talking about the low end of long term retail sales growth guidance. In 2023. So can you just help contextualize, what's driving encouraging that externally may not perhaps.

Playing the comparison should continue to be favorable and I'm. Just wondering if that was true and then if you could just help us understand how meaningful that ticket growth should slow in the second quarter that would also be helpful. Thank you.

Yeah, So Chris.

You are right.

Yes.

Conversions did decline last year in the second quarter as well.

Yes, sure so Andrew I think but thanks for the question and like I said on the last call, we're not going to look at stacks.

As a way of measuring our business and I think it's fair enough that you can actually asked the question, but really what we want to look at it is some things that are more near term and that's why we've already talked about the current care comp and the comparison that we're overlapping so what we really see is a.

And I think you asked the second part of your question was about pricing international pricing lab, we're not going to really get into the detail at this point, but clearly it was a pretty significant increase to decline from 599. So you can do the math and look for how much that's going to be but but I think it is enough of an <unk>.

Terrific Carryout business, a really terrific carryout business and.

And to basically be lapping an 11% last year that would be putting 5% a 13, 4%. This year was a great result for us.

<unk> for me to call it out in <unk>.

Delivery there is a number of things that are working on you heard all about the initiatives on on value and service and innovation that we're working on so we are doing everything within our control to drive an improvement in the performance on that on that part of the business and even bad look sequentially have improved from minus six 6% in Q4 to a minus two one.

So that'd be moderating in Q2.

Okay.

Thank you one moment for our next question.

And our next question comes from the line of Andrew Charles from Cowen Your question. Please.

In Q1, we're not happy with negative comps, we wanted to actually inflect to positive comps. So we're going to keep on working on that.

Great. Thank you.

It's very encouraging to hear you guys talk about confidence in the U S performance, but perhaps just from the outside it looks like trends did deteriorate on a full year basis by about 200 basis points in <unk> and you guys are also talking about the low end of long term retail sales growth guidance. In 2023. So can you just help contextualize, what's driving encouraging in that externally may not perhaps.

I have talked about the macro it's not going away and that is impacting us to some extent, but we don't want to keep making excuses about the macro we want to focus on what's in our control and Thats why we are really putting our foot forward and actually driving all of those initiatives to get to the outcome that we need so super bullish on the long term.

It's obvious.

I think we just have to work through some of these short term issues.

Yes, sure so Andrew I think thanks for the question and like I said on the last call, we're not going to look at stacks as well as a way of measuring our business and I think it's fair enough. Because you can actually asked the question, but really what we want to look at as some things that are more near term and that's why we've really talked about the current care comp.

Thank you one moment for our next question.

And our next question comes from the line of Lauren Lieberman from Credit Suisse. Your question. Please.

Thank you.

And the comparison that we're overlapping so what we really see is a terrific carryon business, a really terrific carry out their mission and to basically be lapping 11% last year that would be doing that in the half percent or 13, 4%. This year was a great result for us and look delivery there is a number of things.

In the past.

And then the hit then delivery Carryout mix and differences in performance between the channel can you just help us understand the differences in average order size as well as profitability per order between thank you and then more recently have you seen any changes in check management across either of the channel. Thank you.

Yes.

They are working on you heard all about the initiatives on on value and service and innovation that we're working on so we are doing everything within our control to drive an improvement in the performance on that on that part of the business and even better look sequentially have improved from minus six 6% in Q4 to a minus two 1% in <unk> and <unk>.

Hello, and thanks for the question I think on the delivery Carryout business. They are both really good businesses with different margin profiles, but very good businesses.

And I think when we look at the profitability to the franchisees.

We're both very very accretive to their profits and I think that's why when we actually look at the shift that's occurring between delivery and Carryout. The franchisee profit is not impacted in a significant way because of just the shift.

One we're not happy with negative comps, we wanted to actually inflect to positive comps. So we're going to keep on working on that and we have talked about the macro its not gone away and that is impacting us to some extent, but we don't want to keep making excuses about the macro we want to focus on what's in our control and that's why we are really putting our foot forward and actually driving all of those initiatives to get to.

Businesses are super important so you don't want to actually decline in delivery. Unfortunately, we did last year, but I think overall from a check size I'm not going to quantify.

The outcome that we need so super bullish on the mantra.

How big the ticket is on average for delivery versus carrier, but typically delivery ticket is going to be higher than carrier, but I think the cost of delivery is a little bit more labor intensive for obvious reasons, because you have a driver cost in particular.

I think we just have to work through some of these short term issues.

Okay.

One moment for our next question.

So the flow through on that in terms of dollars is good but I think the.

And our next question comes from the line of Laurent <unk> from Credit Suisse. Your question. Please.

The cost profile is higher and therefore, the margins are smaller on delivery transaction versus the carrier transaction.

Thank you and over the past few years has been the shift in delivery Carryout mix and differences in performance between the channel can you just help us understand the differences in average order size as well as profitability per order between the two and then more recently have you seen any changes in check management across either of the channel. Thank you.

Thank you one moment for our next question.

And our next question comes from the line of Suraj go clean from J P. Morgan Your question. Please.

Yes sure.

Hello, and thanks for the message for the question I think on the delivery Carryout business, they're both really good businesses with different margin profiles, but very good businesses and I think when we look at the profitability to the franchisees, they're both very very accretive to their profits and I think that's why when we actually look at the <unk>.

Hi, Thank you it's John <unk>.

In the spirit of innovation, one asked about where we are in the personalization journey, it's something we've been hearing about.

The better data driven company that what you are certainly the top of the ability to customize promotions the customers truly elicit a specific behavior. So where are we in that journey is there any kind of significant functionality that can come as part of your new loyalty program, maybe some backend work that youre doing.

That's occurring between delivery and Carryout. The franchisee profit is not impacted in a significant way because of just the shift.

Businesses are super important so you don't want to actually decline in delivery like Unfortunately, we did last year.

<unk> pulse 2.0, just give us a sense of where you are and where you think youll will go in the relatively near to medium term. Thanks.

But I think overall from a check size I'm not going to quantify.

Hey, John It's a great question.

We are making improvements in call that kind of the.

Tweaking of it through AB testing multi variant testing things like that I think the reason, we're leaning into a new loyalty program and a redo.

The flow through on that in terms of dollars is good but I think.

And a redo of our E. Commerce business is there are certain things that we want to be able to do that we're not doing right now and this will really lead us leaning into personalization in a much bigger way so great question and the timing is perfect.

The cost profile is higher and therefore, the margins are smaller on a delivery transaction versus accounting transaction.

Thank you one moment for our next question.

Okay.

Thank you one moment for our next question.

And our next question comes from the line of Suraj go claims from J P. Morgan Your question. Please.

And our next question comes from the line of Zack <unk> from Wells Fargo. Your question. Please.

Hi, Thank you, it's John Ivan co.

I did it in the spirit of innovation, one asked about where we are in the personalization journey, it's something we've been hearing about.

Hey, Good morning, guys. This is John Park on for Zach. Thanks for taking my question I guess again, you guys talked about the lower income demo kind of shying away from delivery a bit given the macro pressures can you just provide some color on how that different income cohorts kind of performed within delivery versus takeout.

Better data driven company that which you are certainly the top of the you know the ability to customize promotions.

The customers truly elicit a specific behavior, so where are we in that journey is there any kind of significant functionality that can come as part of your new loyalty program, maybe some backend work that youre doing around pulse 2.0, you know just give us a sense of where you are and where you think youll will go in the relative.

Yes.

On this.

But what we pointed out from a macro standpoint.

Last call more particularly than this call but.

We will be also noted if you go back to my prepared remarks, I did say that we're going to have to continue to monitor real disposable income and the trends in that and kind of how that's evolving because what you're seeing right now is <unk>.

<unk> near to medium term thanks.

Hey, John It's a great question.

We are making improvements in call it kind of the <unk>.

Inflation is on a downward trend, but wage growth seems to be holding up in the U S economy, but I think it cuts a little bit differently, depending on income strategy. So so I think over time, you're going to basically see.

Tweaking of it through a b testing multivariate testing things like that I think the reason, we're leaning into a new loyalty program and a redo I don't think I know.

And a redo of our ecommerce business is there are certain things that we want to be able to do that we're not doing right now and this will really let us lean into personalization in a much bigger way so great question and the timing is perfect.

Potentially a change in the dynamic but as as of now we still see this as being a pressure point.

And I think I would I would add to that as you know.

A lot of times, we're asked on these calls.

Do you see any trade down from delivery to Carryout I talked earlier about how there's really little overlap between the two we're seeing a lot of trade out from non Domino's carryout into Domino's, Carryout and I think thats those consumers, we're talking about so certainly from a delivery standpoint, there are macro pressures, but I think.

Okay.

Thank you one moment for our next question.

And our next question comes from the line of Zack <unk> from Wells Fargo. Your question. Please.

That's actually an advantage for us on the carry outside.

Thank you.

For our next question.

Yes, so I think on this.

And our final question for today comes from the line of Todd Brooks from Benchmark. Your question. Please.

The what we pointed out from a macro standpoint was on the last call more particularly than this call, but what we will be also noted if you. If you go back to my prepared remarks, I did say that we're going to have to continue to monitor real disposable income and the trends in back end and kind of how that's evolving because what you.

Hey, Thanks for squeezing me in just on the unit growth side I know Sandeep you talked about.

Just timing.

Fiscal quarter and versus.

Some international openings is there any way you could maybe size.

How many of those openings did occur in the first couple of weeks of the quarter here any commentary about what gives you confidence that the frictions on the U S. Construction side will ease in the second half and then.

Seeing right now is.

Inflation is on a downward trend, but wage growth seems to be holding up in the U S economy, but I think it cuts a little bit differently, depending on income striving. So so I think over time, you're going to basically see.

Do you continue to be comfortable with at least reaching that low end of that five 7% unit growth guidance.

Potentially a change in that dynamic.

As as of now we still see this as being a pressure point.

Sure.

Do things that I want to unpack, there and your questions and I think let's start with the international unit growth question that you had.

I think I would I would add to that is you know a lot of times. We're asked on these calls.

Do you see any trade down from delivery to Carryout I talked earlier about how there's really little.

There was.

Pretty much a timing issue between our fiscal calendar and our master franchisees.

Overlap between the two we're seeing a lot of trade out from non Domino's carryout into Domino's Carryout and I think it's those consumers. We're talking about so certainly from a delivery standpoint, there are macro pressures, but I think that's actually an advantage for us on the carry outside.

Which is going to be a nice factor frankly.

Many quarters, you can see quarter to quarter noise, but I think overall when we look at the pipeline of where our master franchisees are projecting the unit openings are going to be.

Feel pretty good that we're on track for a full year basis, and Thats really incorporated into our global unit growth.

Thank you.

Estimation.

For our next question.

So I think then.

And our final question for today comes from the line of Todd Brooks from Benchmark. Your question. Please.

We will talk about the U S.

Our store growth in particular.

Hey, Thanks for squeezing me in just on the unit growth side I know Sandeep you talked about.

Just timing of fiscal quarter and versus.

HUD restaurant's training themselves, which is we've been talking to the system. We've been talking to franchisees, we've been talking to Ireland internal teams really digging in and because of <unk>.

Some international openings is there any way that you could maybe size.

<unk> is.

A very robust.

And frankly the.

The appetite for store openings is very strong and that's why we feel that yes.

Do you continue to be comfortable with at least reaching that low end of that five 7% unit growth guidance. Thanks.

So, let's we'll see a bit of a stabilization in the second half and then youre going to see that inflection and as Russell centers into 2024, because we have a pipeline that goes beyond 'twenty three right now and Thats why we have so much confidence.

Sure.

Do things that went on factor in your questions and I think let's start with the international unit growth question that you had.

And then I wanted to actually break into another piece, which you didn't ask but I'm going to say that this is a very critical element.

There was.

Pretty much a timing issue between our fiscal calendar and our master franchisees.

Talked about the inflection in profits for the franchisees in the fourth quarter.

If anything that inflection is accelerating right now based on our first quarter results.

Which is going to be a nice factor frankly for the <unk>.

Many quarters, you can see quarter to quarter noise, but I think overall when we look at the pipeline of where our master franchisees are projecting their unit openings are going to be we feel pretty good that we're on track for a full year basis, and Thats really incorporated into our global unit growth.

And if you look carefully at the food basket guidance, we're now going towards the low end of that flows through.

And I think overall the franchisees are in a very good place from a profit standpoint.

How they started off Q1 of last year. So.

Estimation.

There's a number of tailwind stood Ashley will reinforce our confidence in the system is showing in our unit growth protections.

So I think then.

We will talk about the U S.

Store growth in particular.

Look I mean, we've been saying since the beginning of the year that we expected to see the first half to be pressured by the same issues, which is plummeting supply chain construction broad challenges that youre getting youre going to get through but you heard rustling save himself, which as we've been talking to the system. We've been talking to franchisees, we've been talking to our own internal teams.

Thank you.

Alright, well, we'd like to thank everyone for joining us. This morning, and we look forward to speaking you to you in July to discuss our Q2 results until then.

Hum.

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.

Really digging in because our pipeline is.

Very robust.

And frankly, the appetite for store openings is very strong and that's why we feel that yes, plus we'll see a bit of a stabilization in the second half and then we're going to see that inflection and as Russell centers into 2024, because we have a pipeline that goes beyond 'twenty three right now and that's why we have so much confidence and I'm on.

To actually break into another piece, which you didn't ask but I'm going to say that this is a very critical element I talked about the inflection in profits for the franchisees in the fourth quarter.

Anything that inflection is accelerating right now based on our first quarter results.

And if you look carefully at the food basket guidance, we're now going towards the low end of that flows through.

And I think overall the franchisees are in a very good place from a profit standpoint relative to how they started off Q1 of last year. So there's a number of <unk>.

<unk>.

We'll reinforce our confidence in the system is showing in our unit growth projections.

Thank you.

Well, we'd like to thank everyone for joining us this morning, and we look forward to speaking you to you in July to discuss our Q2 results until then okay. Soon.

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.

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Yes.

Thanks.

Sure.

Yes.

Okay.

Yes.

No.

Yes.

Thank you.

Okay.

Yes.

Sure.

You bet.

Yes.

Okay.

[music].

Okay.

Thanks.

Okay.

Thank you.

Okay.

Thanks.

Yes.

Okay.

[music].

Okay.

Yes.

Okay.

Yes.

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Yes.

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Yes.

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[music].

Okay.

Thanks.

Okay.

Sure.

<unk>.

Okay.

Yes.

Okay.

Yes.

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Yes.

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Yes.

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Yes.

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Yes.

Right.

Yes.

Thank you.

Okay.

[music].

Hum.

Okay.

[music].

Okay.

Yes.

Thank you.

Okay.

Yes.

Thank you.

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Thank you.

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Yeah.

Sure.

[music].

Right.

Yes.

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Yes.

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[music].

Yes.

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Yes.

[music].

Yes.

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Yeah.

[music].

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Yes.

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Yes.

[music].

Sure.

Okay.

Yes.

Okay.

Thank you.

Yes.

Okay.

Yes.

[music].

Yes.

[music].

Yes.

[music].

Yeah.

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