Q3 2023 McDonald's Corp Earnings Call

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Speaker 2: Hello and welcome to McDonald's third quarter 2023 investor conference call. At the request of McDonald's Corporation, this conference is being recorded.

Hello, and welcome to Mcdonalds third quarter 2023, Investor Conference call at the request of Mcdonald's Corporation. This conference is being recorded.

Speaker 2: Following today's presentation, there will be a question and answer session for investors.

Following today's presentation, there will be a question and answer session for investors.

Speaker 2: At that time, investors only may ask a question by pressing star 1 on their touch tone phone.

At that time investors only may ask a question by pressing star one on their touchtone phone.

Speaker 2: I would now like to turn the conference over to Mr. Mike Cplak, Investor Relations Officer for McDonald's Corporation.

I would now like to turn the conference over to Mr. Mike <unk> Investor Relations Officer for Mcdonald's Corporation. Mr. <unk> you may begin.

Speaker 3: Good morning everyone and thank you for joining us. With me on the call today, our president and chief executive officer, Chris Kymchinsky, and chief financial officer Ian Borden. As a reminder, the forward-looking statements in our earnings release in 8K filing also apply to our comments on the call today.

Everyone and thank you for joining us with me on the call today are president and Chief Executive Officer, Chris <unk>, and Chief Financial Officer, Ian Borden as.

As a reminder, the forward looking statements in our earnings release and 8-K filing also apply to our comments on the call today.

Speaker 3: Both of those documents are available on our website, as are reconciliations of any non-GAAP financial measures mentioned on today's call, along with their corresponding GAAP measures.

Both of those documents are available on our website as are reconciliations of any non-GAAP financial measures mentioned on today's call along with their corresponding GAAP measures.

Speaker 3: Following prepared remarks this morning, we will take your questions. Please limit yourself to one question and re-enter the queue for additional questions.

Our prepared remarks. This morning, we will take your questions. Please limit yourself to one question and then reenter the queue for additional questions.

Speaker 3: Just one other piece of housekeeping today before I turn it over to Chris. As many of you are aware, we'll host an investor update at our McDonald's headquarters on Wednesday, December 6th, where Chris and Ian will be joined by members of our senior leadership team to provide an update on our strategic priorities followed by a Q&A session.

Just one other piece of housekeeping today before I turn it over to Chris as many of you are aware, we will host an investor update it or Mcdonald's headquarters on Wednesday December six where Chris and Ian who will be joined by members of our senior leadership team to provide an update on our strategic priorities followed by a Q&A session.

Operator: Hello, and welcome to McDonald's third quarter 2023 investor conference call. At the request of McDonald's Corporation, this conference is being recorded. Following today's presentation, there will be a question and answer session for investors. At that time, investors only may ask a question by pressing star one on their touchtone phone.

Speaker 3: I ask that you please be mindful of this with your questions on the call today and focus questions on our quarterly results in the current year.

I ask that you. Please be mindful of this with your questions on the call today and focus questions on our quarterly results in the current year.

Mike Cieplak: I would now like to turn the conference over to Mr. Mike Cieplak, investor relations officer for McDonald's Corporation. Mr. Cieplak, you may begin. Good morning, everyone, and thank you for joining us. With me on the call today, our president and chief executive officer, Chris Kempczinski, and chief financial officer, Ian Borden. As a reminder, the forward-looking statements in our earnings release in 8K filing also apply to our comments on the call today.

Speaker 3: We'll spend more time on 2024 and our strategic priorities in December with plenty of time for Q&A on that day. Details for the event and how to tune in can be found on the investor events section of our website.

We will spend more time on 2024, and our strategic priorities in December with plenty of time for Q&A on that day.

Details for the event and how to tune and can be found on the investor events section of our website.

Speaker 3: today's conference calls being webcast and is also being recorded for replay the air website and now i'll turn over to christ thanks michen good morning over the past quarter we've seen yet again the broad-based momentum across the mcdonald's business despite continued headwinds and a challenging macro environment

Today's conference call is being webcast and is also being recorded for replay via our website and now I will turn it over to Chris Thanks, Mike and good morning over the past quarter, we've seen yet again, the broad based momentum across the Mcdonald's business, Despite continued headwinds and a challenging macro environment.

Mike Cieplak: Both of those documents are available on our website as our reconciliations of any non-gap financial measures mentioned on today's call, along with their corresponding gap measures. Following prepared remarks this morning, we will take your questions. Please let me yourself to one question and re-enter the queue for additional questions. Just one other piece of housekeeping today before I turn it over to Chris. As many of you are aware, we'll host an investor updated our McDonald's headquarters on Wednesday.

Speaker 3: Around the world, we're operating from a position of strength as the industry's market share leader. In Q3, we achieve comparable global sales of nearly 9%.

Around the World, we're operating from a position of strength as the industry's market share leader.

In Q3, we achieved comparable global sales of nearly 9%.

As we expected and as we mentioned in prior earnings calls our topline growth while strong across each of our segments and at an elevated level versus historical norms has continued to moderate.

Speaker 3: As we expected, as we mentioned in prior earnings calls, our top-line growth, while strong across each of our segments and at an elevated level versus historical norms, has continued to moderate.

Mike Cieplak: December 6th, where Chris and Ian will be joined by members of our senior leadership team to provide an update on our strategic priorities filed by a Q&A session. I ask that you please be mindful of this with your questions on the call today. And for the first time, we will focus questions on our quarterly results in the current year. We'll spend more time on 2024 and our strategic priorities in December with plenty of time for Q&A on that day. Details for the event and how to tune in can be found on the investor events section of our website. Today's conference calls being webcast and is also being recorded for replay via our website.

Speaker 3: However, we continue to outpace our competitors thanks to our system's outstanding execution of our exhilarating the Arches strategy.

However, we continue to outpace our competitors, thanks to our system's outstanding execution of our accelerating the artist strategy.

Over the past year, we've been more intentional about sharing and scaling world class ideas that drive impact globally.

Speaker 4: For the past year, we've been more intentional about sharing and scaling world class ideas that drive impact globally.

Central to our continued strength is how we maximize our marketing to stay relevant to customers.

Speaker 4: Central to our continued strength is how we maximize our marketing to stay relevant to customers.

Speaker 4: In August , we launched as featured in in over 100 markets, making it our largest global campaign today.

In August we launched as featured in an over 100 market, making it our largest global campaign to date.

The campaign celebrates the most memorable Mcdonald's references across the world of entertainment with over 20, Mcdonald's integrations that spanned across Hollywood Bollywood anime and independent film.

Speaker 4: The campaign celebrates the most memorable McDonald's references across the world of entertainment with over 20 McDonald's integrations that span across Hollywood, Bollywood, Anime, and independent film.

Chris Kempczinski: And now I'll turn over to Chris. Thanks, Mike, and good morning. Over the past quarter, we've seen yet again the broad base momentum across the McDonald's business despite continued headwinds and a challenging macro environment.

Speaker 4: It's also another proof point of the impact and power that a one-magnosed way approach to marketing can have to drive engagement, allowing our markets to remain globally consistent but locally relevant.

It's also another proof point of the impact in power that a when Mcdonald's way approach to marketing can have to drive engagement, allowing our markets to remain globally, consistent but locally relevant.

Chris Kempczinski: Around the world, we're operating from a position of strength as the industry's market share leader. In Q3, we achieved comparable global sales of nearly 9%. As we expected, as we mentioned in prior earnings calls, our top line growth, while strong across each of our segments and at an elevated level versus historical norms, has continued to moderate. However, we continue to outpace our competitors thanks to our systems outstanding execution of our exhilarating the artist strategy.

Speaker 4: Celebrating our core equities as featured in demonstrates that McDonald's and our iconic menu is a cultural touchstone that immediately connects fans to characters and stories with over 85% positive consumer sentiment and in the top 30% of campaigns for customer engagement.

Celebrating our core equities as featured and demonstrates that Mcdonald's and our iconic menu is a cultural touchstone that immediately connect fans to characters and stories with over 85% positive consumer sentiment and in the top 30% of campaigns for customer engagement.

Speaker 4: As I recently visited Australia, New Zealand, I was energized to see other examples of one McDonald's way in action, or one mock as way as our friends down under call it.

As I recently visited Australia, and New Zealand I was energized to see other examples of one Mcdonald's waiting action or one market way as our friends down under call. It.

Chris Kempczinski: For the past year, we've been more intentional about sharing and scaling world class ideas that drive impact globally. Central to our continued strength is how we maximize our marketing to stay relevant to customers. In August, we launched as featured in in over 100 markets, making it our largest global campaign to date. The campaign celebrates the most memorable McDonald's references across the world of entertainment with over 20 McDonald's integrations that span across Hollywood, Hollywood, anime, and independent film.

Speaker 4: It was clear that our continued menu discipline and reduced restaurant complexity cross these markets is driving operational improvement.

It was clear that our continued menu discipline and reduced restaurant complexity across these markets is driving operational improvements.

Speaker 4: By creating a one Maka's way approach to the crew experience by utilizing consistent comprehensive resources, we're creating a better customer experience as a result.

By creating a one Marcus way approach to the crew experienced by utilizing consistent comprehensive resources, we're creating a better customer experience as a result.

Speaker 4: Speaking of one McDonald's way, Australia was our first market to launch Best Burger and with resounding success.

Speaking of one Mcdonald's way, Australia was our first market to launch best Burger and with resounding success.

Speaker 4: Great tasting burger perceptions continue to grow and the Moccus team has reached an all time high in beef burger share.

Great tasting Burger perceptions continue to grow and the market team has reached an all time high in beef Burger share.

Chris Kempczinski: It's also another proof point of the impact and power that a one McDonald's way approach to marketing can have to drive engagement, allowing our markets to remain globally consistent but locally relevant. Open. Celebrating our core equities as featured in demonstrates that McDonald's and our iconic menu is a cultural touchstone that immediately connects fans to characters and stories with over 85% positive consumer sentiment, and in the top 30% of campaigns for customer engagement.

Speaker 4: And now, Best Burger has been scaled to over 70 markets around the world. Building on learning from the original

And now best Burger has been scaled to over 70 markets around the world.

Building on learnings from the original launch in Australia.

Australia is also a good example of a market that has room to grow through new restaurant openings.

Speaker 4: Australia is also a good example of a market that has room to grow through new restaurant opening.

Speaker 4: We expand our footprint in the market from a position of strength. We're also enhancing existing restaurant capacity by introducing delivery rooms and integrated Mccafe beverage cells that will allow us to better drive growth against our MCDs.

We expand our footprint in the market from a position of strength. We're also enhancing existing restaurant capacity by introducing delivery rooms, and integrated makeup a beverage cells that will allow us to better drive growth against our mcd's.

Chris Kempczinski: As I recently visited Australia New Zealand, I was energized to see other examples of one McDonald's way in action or one mock as way as our friends down under call it. It was clearer that our continued menu discipline and reduced restaurant complexity cross these markets is driving operational improvements. By creating a one mock as way approach to the crew experience by utilizing consistent comprehensive resources, we're creating a better customer experience as a result.

We'll share more details on our plans related to the fourth D development in December at our Investor update.

Speaker 4: We'll show more details on our plans related to the 4th the development in December at our investor update.

Speaker 4: McDonald's reliability value and feel good experiences continue to play a key role in connecting to our customers not just in Australia, but across all our markets, offering delicious food, at an affordable price, and at the convenience our customers have come to expect.

Mcdonald's reliability value and feel good experiences continue to play a key role in connecting to our customers not just in Australia, but across all our markets offering delicious food at an affordable price and at the convenience our customers have come to expect.

Speaker 4: It's promising that our market's continued to grow share despite the cost of living pressure.

It's promising that our markets continue to grow share despite the cost of living pressures.

Chris Kempczinski: Speaking of one McDonald's way, Australia was our first market to launch best burger and with resounding success. Great tasting burger perceptions continue to grow and the mock as team has reached an all time high in beef burger shares. And now best burger has been scaled to over 70 markets around the world. Building on learning from the original launch in Australia. Australia is also a good example of a market that has room to grow through new restaurant openings.

Speaker 4: As we had expected early in the year and have talked about on prior earnings calls, it's clear that consumers continue to be more discriminating about what and where they spent.

As we had expected early in the year and have talked about on prior earnings calls. It is clear that consumers continue to be more discriminating about what and where they spend.

Between inflation remaining high the elevated cost of fuel interest rates housing affordability pressures and more consumers all over the world are having to pay more and more for everyday goods and services proven time and time again in difficult economic times, the Mcdonald's brand and our positioning on value as an opportunity for us.

Speaker 4: between inflation remaining high, the elevated cost of fuel, interest rates, housing affordability pressures and more, consumers all over the world are having to pay more and more for everyday goods and services.

Speaker 4: Proving time and time again in difficult economic times, the McDonald's brand and our positioning on value is an opportunity for us.

Chris Kempczinski: We expand our footprint in the market from a position of strength. We're also enhancing existing restaurant capacity by introducing delivery rooms and integrated miccafe beverage cells that will allow us to better drive growth against our MCDs.

Speaker 4: Take your remedy for example. The team has delivered remarkable results for the launch of the Mix Smart menu earlier this year, offering smaller, wear affordable meals.

Take Germany for example.

The team has delivered remarkable results with the launch of the mixed smart menu earlier this year offering smaller more affordable meals.

Speaker 4: an incredible example of remaining agile and listening to our customers. Our German team heard from customers that they were craving these options and Mick Smart made our menu more accessible to them, contributing to out-performance and value perceptions when compared to the rest of the industry.

It's an incredible example of remaining agile and listening to our customers our German team heard from customers that they were creating these options and make smart made our menu more accessible to them contributing to outperformance and value perceptions when compared to the rest of the industry.

Chris Kempczinski: We'll show more details on our plans related to the 4th the development in December at our investor update. McDonald's reliability value and field good experiences continue to play a key role in connecting to our customers not just in Australia, but across all our markets offering delicious food at an affordable price and at the convenience our customers have come to expect. It's promising that our markets continue to grow share despite the cost of living pressures.

Speaker 4: and it was an important driver of delivering Germany's 10th quarter of double digit sales growth

And it was an important driver of delivering Germany's 10th quarter of double digit sales growth.

We're always pushing ourselves to stay one step ahead of the customer as we have throughout our history by innovating and reinventing ourselves even as we're operating from a position of strength.

Speaker 4: We're always pushing ourselves to stay one step ahead of the customer as we have throughout our history, by innovating and reinventing ourselves even as we're operating from a position of strength.

Chris Kempczinski: As we had expected early in the year and have talked about on prior earnings calls, it's clear that consumers continue to be more discriminating about what and where they spend. Between inflation remaining high, the elevated cost of fuel, interest rates, housing affordability pressures and more, consumers all over the world are having to pay more and more for everyday goods and services. Proven time and time again in difficult economic times, the McDonald's brand and our positioning on value is an opportunity for us.

Speaker 4: McDonald's is one of those consumer brands that has the permission and power to be part of people's everyday lives. And one of the great things about McDonald's is that we don't rest on our laurels.

Mcdonald's is one of those consumer brands that has the permission and power to be part of People's everyday lives and one of the great things about Mcdonald's is that we don't rest on our laurels.

Speaker 4: We continue to find new ways to earn customer visits and we believe the actions we've taken over the last several years have laid the foundation for our continued success.

We continue to find new ways to earn customer visits and we believe the actions we've taken over the last several years have laid the foundation for our continued success.

Speaker 4: This starts with strong local leadership and franchisee alignment.

This starts with strong local leadership and franchisee alignment.

Speaker 4: When we combine that with a fully modernized estate, a globally recognized brand, delicious food on our core menu and a high level of execution across our 4Ds, our competitive strength is on full display.

When we combine that with a fully modernized. This date a globally recognized brand delicious food on our core menu and a high level of execution across our four DS.

Chris Kempczinski: Take Germany for example, the team has delivered remarkable results for the launch of the McSmart menu earlier this year offering smaller, more affordable meals. It's an incredible example of remaining agile and listening to our customers. Our German team heard from customers that they were craving these options and McSmart made our menu more accessible to them contributing to outperformance and value perceptions when compared to the rest of the industry. And it was an important driver of delivering Germany's 10th quarter of double digit sales growth.

Our competitive strength is on full display.

And while the macro environment will remain uncertain, we believe our brand and our business are well positioned to win.

Speaker 4: And while the macro environment will remain uncertain, we believe our brand and our business are well positioned to win.

Speaker 4: This powerful combination of brand, physical advantages, and digital penetration has positioned us as an industry leader.

This powerful combination of brand physical advantages and digital penetration has positioned us as an industry leader.

Speaker 4: And as we continue to keep a constant pulse on what's top of mind for our customers, we believe that we'll maintain our leadership position and continue to connect our brand to consumers in a way that drives growth and momentum for the business.

And as we continue to keep a constant pulse on what's top of mind for our customers.

We believe that we will maintain our leadership position and continue to connect our brand to consumers in a way that drives growth and momentum for the business.

Chris Kempczinski: We're always pushing ourselves to stay one step ahead of the customer as we have throughout our history by innovating and reinventing ourselves even as we're operating from the position of strength. McDonald's is one of those consumer brands that has the permission and power to be part of people's everyday lives. And one of the great things about McDonald's is that we don't rest on our laurels. Service, we continue to find new ways to earn customer visits, and we believe the actions we've taken over the last several years have laid the foundation for our continued success.

Speaker 4: I remain confident in our accelerating the Arches strategy and the enduring strength of the McDonald's brand. I'll now turn it over to Ian.

I remain confident in our accelerating the <unk> strategy and the enduring strength of the Mcdonald's brand I'll now turn it over to Ian.

Thanks, Chris and good morning, our third quarter results, yet again demonstrates strong restaurant level execution across our accelerating the <unk> growth pillars with significant increases in customer satisfaction across most of our major markets.

Chris Kempczinski: This starts with strong local leadership and franchisee alignment. When we combine that with a fully modernized state, a globally recognized brand, delicious food on our core menu and a high level of execution across our four Ds, our competitive strength is on full display.

Our restaurants are offering customers, an affordable destination everyday for delicious food and great service driving nearly 9% global comp sales for the quarter.

Thanks to the tireless efforts of our entire Mcdonalds system, the Mcdonald's brand remains stronger than ever.

Speaker 3: Thanks to the tireless efforts of our entire McDonald's system, the McDonald's brand remains stronger than ever.

Chris Kempczinski: And while the macro environment will remain uncertain, we believe our brand and our business are well positioned to win. This powerful combination of brand, physical advantages, and digital penetration has positioned us as an industry leader. And as we continue to keep a constant pulse on what's top of mind for our customers, we believe that we'll maintain our leadership position and continue to connect our brand consumers in a way that drives growth and momentum for the business. I remain confident in our accelerating the arches strategy and the enduring strength of the McDonald's brand.

The resilience of our business is rooted in our ability to adapt to any environment is.

Speaker 4: The resilience of our business is rooted in our ability to adapt to any environment. As expected, challenging macro dynamics continue at this quarter, and consumer spending remained pressured.

As expected challenging macro dynamics continued this quarter and consumer spending remain pressured.

Speaker 5: And while top-line growth has continued to moderate in line with our expectations, we're outperforming the industry and we remain the leader in value and affordability perception across most of our largest markets.

And while topline growth has continued to moderate in line with our expectations. We are outperforming the industry and we remain the leader in value and affordability perception across most of our largest markets.

Speaker 5: Providing affordable options for our customers has always been core to McDonald's success.

Providing affordable options for our customers has always been core to Mcdonald's success.

Ian Borden: I'll now turn it over to Ian. Thanks Chris and good morning. Our third quarter results yet again demonstrate strong restaurant level execution across our accelerating the arches growth pillars with significant increases in customer satisfaction across most of our major markets. Our restaurants are offering customers an affordable destination every day for delicious food and great service, driving nearly 9% global comp fails for the quarter. Thanks to the tireless efforts of our entire McDonald's system, the McDonald's brand remains stronger than ever.

Speaker 5: and continuing to evolve these options as customer needs change remains critical. As Chris mentioned a few minutes ago, it's clear that our customers continue to seek reasonably priced meals as rising costs persist and our markets around the world continue to respond.

And continuing to evolve these options as customer needs change remains critical.

As Chris mentioned, a few minutes ago, it's clear that our customers continue to seek reasonably priced meals as rising costs persist in our markets around the world continue to respond.

Germany delivered its highest ever monthly sales performance by focusing on the evolving needs of our customers amid increasing macro pressures.

Speaker 5: Germany delivered its highest ever monthly sales performance by focusing on the evolving needs of our customers amid increasing macro pressures.

The market launched AUR remix your deal promotion exclusively in the app, allowing customers to build their own small bundles.

Speaker 5: The market launched a your remix your deal promotion exclusively in the app, allowing customers to build their own small bundles.

Ian Borden: The resilience of our business is rooted in our ability to adapt to any environment as expected, challenging macro dynamics continued this quarter and consumer spending remained pressured. And while top line growth is continued to moderate in line with our expectations, we're outperforming the industry and we remain the leader in value and affordability perception across most of our largest markets. Providing affordable options for our customers has always been core to McDonald's success and continuing to evolve these options as customer needs change remains critical. As Chris mentioned a few minutes ago, it's clear that our customers continue to seek reasonably priced meals as rising costs persist and our markets around the world continue to respond.

Speaker 5: Beyond affordability, this promotion offered the personalization our customers are looking for, and significantly increased customer engagement, which was evident in an additional 1 million 90 day active loyalty members in the third quarter.

And affordability. This promotion offered the personalization our customers are looking for and significantly increase customer engagement, which was evident in an additional $1 million 90 day active loyalty members in the third quarter.

Speaker 5: This approach of smaller, more affordable bundles, featuring our core menu favorites was first highlighted earlier this year in Germany and the UK. With the launch of new permanent value offerings, and has since been adapted locally in other markets.

This approach of smaller more affordable bundles, featuring our core menu favorites was first highlighted earlier this year in Germany, and the UK with the launch of new permanent value offerings and has since been adapted locally in other markets.

Speaker 5: In Canada, a highly competitive breakfast market, the team offered customers a more affordable option with a McMuffin and hot coffee pairing.

In Canada, our highly competitive breakfast market the team offered customers a more affordable option with our Mcmuffin and hot coffee pairing.

Speaker 5: By simply featuring our core products at a compelling price point during a critical day part, we drove market share gains in both breakfast and coffee, demonstrating how providing customers what they want a great value always resonates.

By simply featuring our core products at a compelling price point during a critical day part we drove market share gains in both breakfast and coffee demonstrating how providing customers what they want at great value always resonates.

Ian Borden: Germany delivered its highest ever monthly sales performance by focusing on the evolving needs of our customers amid increasing macro pressures. The market launched a your remix your deal promotion exclusively in the app, allowing customers to build their own small bundles. Beyond affordability, this promotion offered the personalization our customers are looking for and significantly increase customer engagement, which was evident in an additional 1 million 90 day active loyalty members in the third quarter.

Speaker 5: The D123 everyday value menu in the US takes a similar approach to affordable bundles, with nationally promoted products at locally relevant price points.

The D 123 everyday value menu in the U S. It takes a similar approach to affordable bundles with nationally promoted products it locally relevant price points.

Speaker 5: platform features products such as the McDouble or four piece McNugget.

Platform features products, such as the Mcdowell or four piece mcnuggets.

Speaker 5: With a bundle offered at each day part, customers can visit McDonald's for an affordable meal, no matter the time of day.

With a bundle offered at each day part customers can visit Mcdonald's for an affordable meal no matter the time of day.

Speaker 5: And while prices have evolved over time, the featured products have remained the same, providing customers with their familiar favorites from our core menu.

And while prices have evolved over time. The featured products have remained the same providing customers with their familiar favorites from our core menu.

Ian Borden: This approach of smaller more affordable bundles featuring our core menu favorites was first highlighted earlier this year in Germany and the UK. With the launch of new permanent value offerings and has since been adapted locally in other markets.

Speaker 5: This consistency in our value offerings means customers know exactly what to expect every time they visit us, driving our strong position as the affordability leader in the market.

This consistency in our value offerings means customers know exactly what to expect every time they visit us driving our strong position as the affordability leader in the market.

Ian Borden: Records. In Canada, a highly competitive breakfast market, the team offered customers a more affordable option with a McMuffin and hot coffee pairing. By simply featuring our core products at a compelling price point during a critical day part, we drove market share gains in both breakfast and coffee, demonstrating how providing customers what they want a great value always resonates. The menu in the U.S, takes a similar approach to affordable bundles with nationally promoted products at locally relevant price points.

Speaker 5: And in China, with slowing macroeconomic conditions and historically low consumer sentiment, the market relaunched a campaign with small price-pointed bundles featuring our hot, delicious burgers.

And then China was slowing macroeconomic conditions and historically low consumer sentiment the market re launched a campaign with small price pointed bundles, featuring our hot delicious burgers.

Speaker 5: Designed to engage our Gen Z consumers, this promotion drove meaningful customer demand and increased beef share in the market.

<unk> to engage our Gen Z consumers this promotion drove meaningful customer demand and increased fee share in the market.

Beyond the price of our food, we're continuing to provide customers with new experiences further elevating their value perceptions.

Speaker 5: Beyond the price of our food, we're continuing to provide customers with new experiences, further elevating their value perceptions.

Speaker 5: Many markets are using our digital app to drive engagement and increase loyalty participation with our fans through exclusive activation.

Many markets are using our digital app to drive engagement and increase loyalty participation with our fans through exclusive activations.

Ian Borden: The platform features products such as the McDouble or 4-piece McNuggets. With a bundle offered at each day part, customers can visit McDonald's for an affordable meal no matter the time of day. And while prices have evolved over time, the featured products have remained the same, providing customers with their familiar favorites from our core menu. This consistency in our value offerings means customers know exactly what to expect every time they visit us, driving our strong position as the affordability leader in the market.

Speaker 5: This was on display through recent monopoly campaigns in several markets.

This was on display through recent monopoly campaigns in several markets.

Starting with Australia, where monopoly contributed to record digital sales in the market for the quarter fueled by higher App registrations and increased game piece redemptions.

Speaker 5: Starting with Australia, where monopoly contributed to record digital sales in the market for the quarter, fueled by higher app registrations and increased game piece redemption.

And in the U K monopoly return for the 17th consecutive year.

Speaker 5: And in the UK, Monopoly returned for the 17th consecutive year.

Speaker 5: featuring a double-peel option, encouraging customers to scan their game pieces into the app. Monopoly, once again, ignited our fans' love of the brand and delivered higher levels of app engagement than ever before.

Featuring a double appeal option encouraging customers to scan their game pieces into the App monopoly once again ignited our fans love of the brand and delivered higher levels of app engagement than ever before.

Ian Borden: And in China, with slowing macroeconomic conditions and historically low consumer sentiment, the market relaunched a campaign with small price-pointed bundles featuring our hot delicious burgers. Designed to engage our Gen Z consumers, this promotion drove meaningful customer demand and increased beef share in the market. Beyond the price of our food, we're continuing to provide customers with new experiences further elevating their value perceptions. Many markets are using our digital app to drive engagement and increase loyalty participation with our fans through exclusive activations.

Speaker 5: Spain had similar success with their Monopoly promotion over the summer. Now leveraging the same app features as the UK, the promotion delivered significant increases in both app downloads and registration.

Spain had similar success with their monopoly promotion over the summer now.

Now leveraging the same app features as the U K the promotion delivered significant increases in both app downloads and registrations.

Speaker 5: This is another great example of sharing best bets across our system to fuel our digital growth ambitions.

This is another great example of sharing best bets across our system to fuel our digital growth ambitions.

Speaker 5: In fact, in our top six markets, digital sales represented more than 40 percent of system-wide sales, or nearly $9 billion for the third quarter.

In fact in our top six markets digital sales represented more than 40% of system wide sales or nearly $9 billion for the third quarter.

Ian Borden: This was on display through recent monopoly campaigns in several markets. Starting with Australia, where monopoly contributed to record digital sales in the market for the quarter, fueled by higher app registrations and increased game piece redemptions. And in the UK, monopoly return for the 17th consecutive year featuring a double-peel option, encouraging customers to scan their game pieces into the app. Now, monopoly once again ignited our fans love of the brand and delivered higher levels of app engagement than ever before.

Speaker 5: We now have over 57,90 day active members across these top markets, and our relationship with them continues to grow.

We now have over 57 million 90 day active members across these top markets and our relationship with them continues to grow.

Speaker 5: We're learning when they visit, how they visit, and what they buy, with more and more of our sales coming through identified channels than ever before.

We're learning when they visit how they visit and what they buy with more and more of our sales coming through identified channels than ever before.

By continuing to elevate the mcdonalds digital experience our customers feel more connected to the brand.

Speaker 5: By continuing to elevate the McDonald's digital experience, our customers feel more connected to the brand, driving those incremental visits that we believe would otherwise go uncaptured. And it gives us more ways to reunite with customers who haven't visited us in a while.

Driving those incremental visits that we believe would otherwise go on captured.

And it gives us more ways to reunite with customers, who haven't visited us in a while.

Ian Borden: Spain had similar success with their monopoly promotion over the summer. Now leveraging the same app features as the UK, the promotion delivered significant increases in both app downloads and registrations. This is another great example of sharing best bets across our system to fuel our digital growth ambitions. In fact, in our top six markets, digital sales represented more than 40% of system-wide sales or nearly $9 billion for the third quarter. We now have over 57 million 90-day active members across these top markets and our relationship with them continues to grow.

Speaker 5: Beyond monopoly, the brand was at the center of our marketing yet again this quarter. As we leveraged a one McDonald's way approach to celebrating the FIFA Women's World Cup in July .

Beyond monopoly the brand was at the center of our marketing yet again this quarter as we leveraged our one Mcdonald's way approach to celebrating the FIFA Women's World Cup in July.

Speaker 5: With record-breaking viewership and fan engagement, our brand was part of a cultural moment, and we continue to elevate our creative excellence through a scalable, culturally relevant campaign.

With record breaking viewership and fan engagement, our brand was part of our cultural moment and we continue to elevate our creative excellence through a scalable culturally relevant campaign.

Speaker 5: This came to life through global activations across 28 markets.

This came to life through global Activations across 28 markets tapping into local fan excitement and was supported by a fully integrated social digital streaming and content strategy.

Speaker 5: tapping into local fan excitement and was supported by a fully integrated social digital streaming and content strategy

Speaker 5: Even more exciting, we celebrated our restaurant teams by sending crew members who go above and beyond to attend the live match.

Even more exciting we celebrated our restaurant teams by sending crew members, who go above and beyond to attend the live matches.

Ian Borden: We're learning when they visit, how they visit and what they buy, with more and more of our sales coming through identified channels than ever before. By continuing to elevate the McDonald's digital experience, our customers feel more connected to the brand, driving those incremental visits that we believe would otherwise go uncaptured, and it gives us more ways to reunite with customers who haven't visited us in a while. Beyond Monopoly, the brand was at the center of our marketing yet again this quarter.

Across the as featured in campaign monopoly activation in the FIFA Women's World Cup.

Speaker 5: across the as featured in campaign monopoly activation and the fiefa women's world cup

I can't think of another time, when we better utilized our scale to leverage great marketing ideas across our system.

Speaker 5: I can't think of another time when we better utilized our scale to leverage great marketing ideas across our system.

Speaker 5: which is a tangible demonstration of our accelerating the organization principles in practice.

Which is a tangible demonstration of our accelerating the organization principles and practice.

Speaker 5: Our food is at the heart of our customer's relationship with the brand.

Our food is at the heart of our customer's relationship with the brand.

Ian Borden: As we leveraged a one McDonald's way approach, to celebrate the FIFA Women's World Cup in July. With record-breaking viewership and fan engagement, our brand was part of a cultural moment, and we continued to elevate our creative excellence through a scalable, culturally relevant campaign. This came to life through global activations across 28 markets, tapping into local fan excitement, and was supported by a fully integrated social, digital streaming, and content strategy. Even more exciting, we celebrated our restaurant teams by sending crew members who go above and beyond to attend the live matches.

This is why we're also taking a one Mcdonald's way approach to our menu further fueling our chicken ambition by scaling core chicken equities.

Speaker 5: This is why we're also taking a one McDonald's way approach to our menu. Further fueling our chicken ambition by scaling core chicken equities.

Speaker 5: Our McCrispy Chicken Sandwich continues to be an important driver of chicken share growth, having first launched in 2022 and now a billion-dollar brand across multiple markets.

Army Crispy chicken sandwich continues to be an important driver of chicken share growth, having first launched in 2022 and now a $1 billion brand across multiple markets.

Speaker 5: McCrispy was the most recently launched in Australia this quarter, where early results indicate a lift to chicken category sales while bringing a renewed focus to our chicken portfolio.

From a crispy was the most recently launched in Australia. This quarter, where early results indicate a lift to chicken category sales, while bringing a renewed focus to our chicken portfolio.

The UK continued to drive excitement and chicken by creating fresh takes on our new global favorites.

Speaker 5: the UK continue to drive excitement in chicken by creating fresh takes on our new global favorite.

Speaker 5: This past quarter, the market featured a new line extension, the McCrispy Deluxe, offered alongside the McCrispy and the McSpicy in the market.

This past quarter the market featured a new line extension.

Ian Borden: Across the as featured in campaign, monopoly activation and the FIFA Women's World Cup, I can't think of another time when we better utilized our scale to leverage great marketing ideas across our system, which is a tangible demonstration of our accelerating the organization. Our food is at the heart of our customer's relationship with the brand. This is why we're also taking a one McDonald's way approach to our menu, further fueling our chicken ambition by scaling core chicken equities.

This speed deluxe offered alongside them, a crispy and the mix spicy in the market.

By combining strong execution of our core menu offerings with new flavor news and limited additional complexity.

Speaker 5: By combining strong execution of our core menu offerings with new flavor news and limited additional complexity, we continue to strengthen our chicken credibility with customers and maintain our market share leadership in the chicken category.

We continued to strengthen our chicken credibility with customers and maintain our market share leadership in the chicken category.

Speaker 5: across each of our Accelerating the Arches growth pillars, it is clear that our playbook is working.

Across each of our accelerating the arches growth pillars. It is clear that our playbook is working.

Thanks to the resilience of our system and the strong execution across the CS and DS were staying relevant to our customers as their needs continue to change.

Speaker 5: Thanks to the resilience of our system and the strong execution across the M's, C's, and D's, we're staying relevant to our customers as their needs continue to change.

Ian Borden: Our McCrispy Chicken Sandwich continues to be an important driver of chicken share growth, having first launched in 2022, and now a billion dollar brand across multiple markets. McCrispy was the most recently launched in Australia this quarter, where early results indicate a lift to chicken category sales while bringing a renewed focus to our chicken portfolio. The UK continued to drive excitement in chicken by creating fresh takes on our new global favorites. This past quarter, the market featured a new line extension that McCrispy Deluxe offered alongside the McCrispy and the McSpicy in the market.

Turning to the P&L, our strong topline performance drove adjusted earnings per share of $3 19 for the quarter.

Speaker 5: Turning to the P&L, our strong top line performance drove adjusted earnings per share of $3.19 for the quarter. This is an increase over the prior year of 16% in constant currencies, excluding current ear charges primarily related to accelerating the organization restructuring costs.

This is an increase over the prior year of 16% in constant currencies, excluding current year charges, primarily related to accelerating the organization restructuring costs.

Speaker 5: Our company operated margin performance remains pressured by continued cost inflation in line with our expectations.

Our company operated margin performance remains pressured by continued cost inflation in line with our expectations.

Speaker 5: We expect these macro headwinds will continue in the fourth quarter.

We expect these macro headwinds will continue in the fourth quarter.

Speaker 5: Strong franchise sales performance continues to be partially offset by targeted and temporary franchisee assistance, provided mainly to our European franchisees where elevated costs continue to pressure restaurant cash flows. We're still anticipating that these efforts will have an impact of $100 to $150 million on our full-year results.

Strong franchise sales performance continues to be partially offset by targeted and temporary franchisee assistance provided mainly to our European franchisees were elevated costs continue to pressure restaurant cash flows.

Ian Borden: By combining strong execution of our core menu offerings with new flavor news and limited additional complexity, we continued to strengthen our chicken credibility with customers and maintain our market share leadership in the chicken category. Across each of our accelerating the arches growth pillars, it is clear that our playbook is working. Thanks to the resilience of our system and the strong execution across the MCs and Ds, we're staying relevant to our customers as their needs continue to change.

We're still anticipating that these efforts will have an impact of $100 million to $150 million on our full year results.

Total restaurant margin dollars grew by about $335 million in constant currencies or about 10% for the quarter.

Speaker 5: Total restaurant margin dollars grew by about $335 million in constant currencies, or about 10% for the quarter.

Speaker 5: GNA for the quarter increased 1% in constant currency, and our adjusted effective tax rate for the quarter was nearly 21%.

G&A for the quarter increased 1% in constant currency and our adjusted effective tax rate for the quarter was nearly 21%.

Ian Borden: Turning to the PNL, our strong top line performance drove adjusted earnings per share of $3.19 for the quarter. This is an increase over the prior year of 16% in constant currencies, excluding current ear charges primarily related to accelerating the organization restructuring costs, guests. Our company operated margin performance remains pressured by continued cost inflation in line with our expectations. We expect these macro headwinds will continue in the fourth quarter. Strong franchise sales performance continues to be partially offset by targeted and temporary franchisee assistance provided mainly to our European franchisees where elevated costs continue to pressure restaurant cash flows.

Adjusted year to date operating margin is 47, 5% driven by our strong topline growth.

Speaker 5: Adjusted year-to-date operating margin is 47.5% driven by our strong top-lying growth. For the full year, we now expect adjusted operating margin to be about 47%, including an expected property gain in other operating income in the fourth quarter, and GNA of about 2.2% of system-wide sales.

For the full year, we now expect adjusted operating margin to be about 47%, including an expected property gain in other operating income in the fourth quarter.

And G&A of about two 2% of system wide sales.

Speaker 5: Foreign currency translation positively impacted third quarter results by about eight cents per share with a slight tailwind expected for the full year.

Foreign currency translation positively impacted third quarter results by about <unk> <unk> per share with a slight tailwind expected for the full year.

Speaker 5: As I wrap up, I want to touch on the recent dividend increase approved by our Board of Directors in early October . This marks our second consecutive annual increase of 10 percent, and we're extremely proud of our track record of delivering meaningful cash return to shareholders marked by our 47th consecutive dividend increase.

As I wrap up.

Wanted to touch on the recent dividend increase approved by our board of directors in early October.

This marks our second consecutive annual increase of 10% and we're extremely proud of our track record of delivering meaningful cash returned to shareholders marked by our 47th consecutive dividend increase.

Ian Borden: We're still anticipating that these efforts will have an impact of one hundred to one hundred and fifty million dollars on our full year results. Total restaurant margin dollars grew by about three hundred and thirty five million dollars in constant currencies or about ten percent for the quarter. GNA for the quarter increased one percent in constant currency and our adjusted effective tax rate for the quarter was nearly twenty one percent. Adjusted year to date operating margin is forty seven point five percent driven by our strong top line growth.

This demonstrates our confidence in the accelerating the arches strategy and our commitment to our long term growth for the system and our shareholders.

Speaker 5: This demonstrates our confidence in the accelerating the archestrategy and our commitment to a long-term growth for the system and our shareholders.

Speaker 4: I look forward to sharing more with you at our investor update in December . And with that, I'm going to turn it back over to Chris. Thanks, Ian. As we continue to operate in a challenging macro environment, what remains unwavering is our commitment to creating an environment where the entire McDonald system thrives together.

I look forward to sharing more with you at our Investor update in December and with that I'm going to turn it back over to Chris Thanks, Ian as.

As we continue to operate in a challenging macro environment, what remains unwavering as our commitment to creating an environment, where the entire Mcdonald's system thrives together.

Ian Borden: For the full year, we now expect adjusted operating margin to be about forty seven percent including an expected property gain in other operating income in the fourth quarter. And GNA of about two point two percent of system wide sales foreign currency translation positively impacted third quarter results by about eight cents per share with a slight tailwind expected for the full year.

Speaker 4: Through our artillery and the orchestra's strategy, we've acquired an industry-leading digital loyalty base that complements our restaurant footprint.

Through our accelerating the Orchard strategy, we've acquired an industry, leading digital loyalty base that complements our restaurant footprint.

Speaker 4: We're retaining top talent who are passionate about the McDonald's brand.

We're retaining top talent, who are passionate about the Mcdonald's brand.

Our restaurant teams are executing at a high level customer satisfaction is increasing.

Speaker 4: Our restaurant teams are executing at a high level, customer satisfaction is increasing.

Speaker 4: and we continue to attract the best franchisees in the world at a franchise or of choice

And we continue to attract the best franchisees in the world as a franchise or of choice.

Ian Borden: As I wrap up I want to touch on the recent dividend increase approved by our board of directors in early October. This marks our second consecutive annual increase of ten percent and we're extremely proud of our track record of delivering meaningful cash return to shareholders marked by our forty seventh consecutive dividend increase. This demonstrates our confidence in the accelerating the arches strategy and our commitment to a long term growth for the system and our shareholders.

Despite ongoing legislative and regulatory headwinds, we are committed to mobilizing our system to protect franchisee decision, making at a local level.

Speaker 4: Despite ongoing legislative and regulatory headwinds, we are committed to mobilizing our system to protect franchisee decision-making at a local level.

Speaker 4: and on building a long-term presence in civic spaces to advocate for policies that benefit local restaurant owners and the communities they serve.

And on building, a long term presence and civic spaces to advocate for policies that benefit local restaurant owners in the communities they serve.

We're also fulfilling our purpose of feeding and fostering community.

Speaker 4: We're also fulfilling our purpose of feeding and fostering community. In September , we hosted our second global volunteer month, where over 6400 volunteers across 12 markets spent an estimated 26,000 hours giving back to local community.

In September we hosted our second global volunteer month, where over 6400 volunteers across 12 markets spent an estimated 26000 hours, giving back to local communities.

Chris Kempczinski: I look forward to sharing more with you at our investor update in December and with that I'm going to turn it back over to Chris. Thanks Ian. As we continue to operate in a challenging macro environment, what remains unwavering is our commitment to creating an environment where the entire McDonald system thrives together. Through our accelerating the arches strategy, we've acquired an industry leading digital loyalty base that complements our restaurant footprint, where retaining top talent, where passionate about the McDonald's brand.

Speaker 4: And at the beginning of October , McDonald's was named to Fast Company's List of Brands That Matter for a company whose work is moving the needle on critical issues and that display the highest level of commitment to their purpose and values.

And at the beginning of October Mcdonald's was named to fast company's list of brands that matter for a company, whose work is moving the needle on critical issues and that display the highest level of commitment to their purpose and values.

While our strategy is working our customers continue to expect even more of us and we're prepared to meet that challenge.

Speaker 4: While our strategy is working, our customers continue to expect even more of us, and we're prepared to meet that challenge.

What Ray Kroc said in 1967 still stands true today.

Speaker 4: What Ray Kroc said in 1967 still stands true today. We are living in a rapidly changing world, so McDonald's will change with it. Change is our only constant.

Chris Kempczinski: Our restaurant teams are executing at a high level customer satisfaction is increasing and we continue to attract the best franchisees in the world as a franchise or of choice. Despite ongoing legislative and regulatory headwinds, we are committed to mobilizing our system to protect franchisee decision making at a local level and on building a long term presence in civic spaces to advocate for policies that benefit local restaurant owners and the communities they serve.

We are living in a rapidly changing world. So Mcdonald's will change with it changes are only constant.

Speaker 4: As was the case for those who came before us, who built McDonald's into the global leader it is today, we will earn our success, and together as a system, we will lay the foundation for our future.

As was the case for those who came before US who built Mcdonald's into the global leader. It is today, we will earn our success and together as a system, we will lay the foundation for our future.

Speaker 4: And on Wednesday, December 6th, I hope you'll join us to hear more at our investor update as we look to the growth potential that lies ahead and share our plans for the future.

And on Wednesday December six I hope Youll join us to hear more at our Investor update as we look to the growth potential that lies ahead and share our plans for the future.

Chris Kempczinski: We're also fulfilling our purpose of feeding and fostering community. In September we hosted our second global volunteer month, where over 6400 volunteers across 12 markets spent an estimated 26,000 hours giving back to local communities. And at the beginning of October, McDonald's was named to fast companies list of brands that matter for companies whose work is moving the needle on critical issues and that display the highest level of commitment to their purpose and values.

Speaker 4: Makes me excited to think about what the next 5 to 10 years will bring for McDonald's.

Makes me excited to think about what the next five to 10 years will bring for Mcdonald's.

Speaker 4: We believe that because we're operating from a position of strength with a strategy that continues to deliver, we now have the opportunity, the ability and the obligation to reimagine our brand for the future.

We believe that because we're operating from a position of strength with a strategy that continues to deliver we now have the opportunity the ability and the obligation to re imagine our brand for the future.

I look forward to seeing you in Chicago This December and now I'll hand, it over to Mike for Q&A.

Speaker 4: I look forward to seeing you in Chicago this December , and now I'll hand it over to Mike for Q&A.

Speaker 2: Thank you. And as a reminder, if you are an investor and would like to ask a question, please press star, followed by the number one on your telephone keypad. We ask that you limit yourself to one question and re-cue for any additional question.

Thank you and as a reminder, if you are an investor and we'd like to ask a question. Please press star followed by the number one on your telephone keypad, we ask that you limit yourself to one question and re queue for any additional questions.

Chris Kempczinski: News. While our strategy is working, our customers continue to expect even more of us, and we're prepared to meet that challenge. What Ray Crock said in 1967 still stands true today. We are living in a rapidly changing world, so McDonald's will change with it. Change is our only constant. As was the case for those who came before us, who built McDonald's into the global leader it is today. We will earn our success and together as a system, we will lay the foundation for our future.

Speaker 3: Our first question is from John Ivanko with J.P. Morgan.

Our first question is from John <unk> with Jpmorgan.

Hi, Thank you.

Hi, Thank you very much obviously value of a big focus on this call and I wanted to ask.

Speaker 5: Hi, thank you very much. Obviously, you know, value of a big focus on this call, and I wanted to ask, you know, I guess the focus on value in the context of recent average ticket increases, you know, for you and really across the sector, much of which.

The focus on value in the context of recent.

Chris Kempczinski: And on Wednesday, December 6th, I hope you'll join us to hear more at our investor update, as we look to the growth potential that lies ahead and share our plans for the future. Makes me excited to think about what the next five to ten years will bring for McDonald's. We believe that because we're operating from a position of strength with a strategy that continues to deliver, we now have the opportunity, the ability and the obligation to re-imagine our brand for the future.

Average ticket increases for you and really across the sector much of which driven by premium as Asian customization larger size is what have you in other words pricing.

Speaker 6: driven by premiumization, customization, you know, larger sizes, what have you. In other words, pricing increases an average ticket beyond just that of price. So, you know, as we talk about value, what does that mean to future price increases? And is there an intention, you know, to devalue a particular bundle value to where the average ticket can be protected? Or would you sacrifice some average ticket in order to get future market share gains and presumably transactions?

Increases in average ticket beyond just that a price so as.

As we talk about value what does that mean to future price increases and is there an intention to devalue in particular bundled value to where the average ticket can be protected or would you sacrifice. Some average ticket in order to get future market share gains and presumably transaction gains. Thank you.

Mike Cieplak: I look forward to seeing you in Chicago this December and now I'll hand over to Mike for Q&A. Thank you. And as a reminder, if you are an investor and would like to ask a question, please press star followed by the number one on your telephone keypad. We ask that you limit yourself to one question and re-cue for any additional questions.

Yes, Thanks John.

Speaker 4: Yeah, thanks John and You know on value. I think it's always a focus at McDonald's I mean we're a business built on value and convenience with great tasting food, so we're always

And value I think it's always a focus at Mcdonald's I mean, we're a business built on value and convenience with great tasting food. So we're always.

And our focus on value I think certainly given the inflation that the <unk>.

Speaker 4: keen to focus on value. I think certainly given the inflation that the market has experienced, that we've experienced over the last year, really more than a year, we've tried to be very choiceful and disciplined on how we have executed those price increases.

John Ivanko: Our first question is from John Ivanko with J.P. Morgan. Hi, thank you very much. Obviously, you know, value of a big focus on this call. And I wanted to ask, you know, I guess the focus on value and the context of recent average ticket increases, you know, for you and really across the sector, much of which driven by premiumization, customization, you know, larger sizes, what had you. In other words, pricing increases an average ticket beyond just that of price. So, you know, as we talk about value, what does that mean to future price increases?

And experience that we've experienced over the last year really more than a year.

We've tried to be very choice full and disciplined on how we have executed those price increases and the good news is we continue to lead on affordability, we continue to lead on value for money we've seen.

Speaker 4: The good news is we continue to lead on affordability. We continue to lead on value for money. We've seen no deterioration in our advantages there. We are holding those up.

No deterioration in our advantages there.

We are holding those up.

Speaker 4: How we do it varies by market, so I wouldn't give you a generalized statement about how we approach value. It's up to each individual market to think about how they continue to deliver the customer great value, but I can tell you on every single major market that we look at, the teams are doing a great job on value. They're delivering against it, and we're seeing really no change at all in terms of customer acceptance pass-through.

How we do it varies by market. So I wouldn't give you a generalized statement about how we approach value it's up to each individual market to think about how they continue to deliver the customer great value, but I can tell you.

Chris Kempczinski: And is there an intention, you know, to do value in particular, bundle value to where the average ticket can be protected or would you sacrifice some average ticket in order to get future market share gains and presumably transaction gains? Thank you. Yeah, thanks, John. And, you know, on value, I think it's always a focus in McDonald's. I mean, we're a business built on value and convenience with great tasting foods. So, we're always keen to focus on value.

Every single major market that we look at.

The teams are doing a great job on value, they're delivering against it and we're seeing really no change at all in terms of customer acceptance pass through on pricing, which to me is also an indication that the teams are striking the right balance.

Speaker 4: on pricing, which to me is also an indication that the teams are striking a right balance.

Alright next question is from David Palmer with Evercore.

Speaker 3: Our next question is from David Palmer with Evercourt.

Thanks.

Speaker 5: Thanks. And thanks for the color and the marketing initiatives in the IOM countries. And it does sound like there's a bit more focus on value, but I love to hear how trends might be settling out in these big IOM countries, the big five, so to speak, in the post-COVID mobility.

Yes, and thanks for the color on the marketing initiatives and the IOM countries.

Chris Kempczinski: I think certainly given the inflation that the market has experienced, that we've experienced over the last year really more than the year, we've tried to be very joyful and disciplined on how we have executed those price increases. And the good news is we continue to lead on affordability. We continue to lead on value for money. We've seen no deterioration in our advantages there. We are holding those up. How we do it varies by market.

And it does sound like there's a bit more focus on value, but I'd love to hear how trends might be settling out in these big.

AUM countries, the big five so to speak.

In the post.

Covid mobility.

Recovery World in other words, maybe back to school might be a good way to look at that as you get past the tourism boost of the summer.

Speaker 6: recovery world. In other words, maybe back to school might be a good way to look at that. As you get past the tourism boost of the summer, maybe you're getting a sense of what type of comps we should be expecting for these IOM markets. So any color about the type of consumer environment you're seeing in these markets, how seems to our sales trends really exited the quarter would be very helpful.

Youre getting a sense of what type of comps, we should be expecting for these IOM markets. So any color about the type of consumer environment Youre seeing in these markets how same store sales trends really exited the quarter would be very helpful.

Chris Kempczinski: So, I wouldn't give you a generalized statement about how we approach value. It's up to each individual market to think about how they continue to deliver the customer great value. But I can tell you on every single major market that we look at, the teams are doing a great job on value. They're delivering against it. And we're seeing really no change at all in terms of customer acceptance past through unpricing, which to me is also an indication that the teams are striking the right balance.

Yeah. Thanks, David I'll start at a high level, and then hand, it over to Ian to give you any more texture on that but at a high level. We continue to be very pleased.

Speaker 4: Yeah, thanks, David. I'll start at a high level and then hand it over to Ian to give you any more texture on that. But at a high level, we continue to be very pleased with how our IOM business is performing. We're seeing, whether you look on the quarter,

With how our IOM business is performing.

We're seeing whether you look on the quarter the year over a four year stack this bid.

Speaker 4: the year or a four-year stack. This business is continuing to perform very well overall. We're also seeing that there's great execution. We're seeing customer satisfaction scores increasing in almost all of our major IOM markets. So overall, we feel good.

David Palmer: Our next question is from David Palmer with Evercore. Thanks, and thanks for the color and the marketing initiatives in the IOM countries and it does sound like there's a bit more focus on value, but I love to hear how trends might be settling out in these big IOM countries, the big five so to speak in the post COVID mobility. The recovery world, in other words, maybe back to school might be a good way to look at that, as you get past the tourism boost of the summer, maybe you're getting a sense of what type of comps we should be expecting for these IOM markets.

This is continuing to perform very well overall, we're also seeing that there is great execution, we're seeing customer satisfaction scores.

Increasing.

Almost all of our major IOM markets. So overall, we feel good.

Speaker 4: In Europe in particular, we've certainly seen more inflation in Europe and so the team there has had to be probably even more laser focused on making sure that we deliver great value. But the business overall, not seeing any big change quarter to quarter in terms of how it's performing, but I'll give it over to Ian to give you some more texture.

In Europe in particular, we've certainly seen more inflation in Europe and so the team there has had to be probably even more laser focused on making sure that we deliver great value.

But the business overall, not seeing any big change quarter to quarter in terms of.

How it's performing but I'll give it over to Ian to give you some more texture.

Good morning, David just maybe a couple of build to what Chris mentioned.

Speaker 5: Morning, David. Yeah, just maybe a couple of builds to, uh, took what Chris, um, mentioned. Um, I mean, again, I think if you look at the comps for the quarter across IOM at 8.3 percent, but

David Palmer: So any color about the type of consumer environment you're seeing in these markets, how seems to our sales trends really exited the quarter would be very helpful. Yeah, thanks David. I'll start at a high level and then had it over to Ian to give you any more texture on that, but at a high level we continue to be very pleased with how our IOM businesses performing. We're seeing whether you look on the quarter, the year or a four year stack, this business is continuing to perform very well.

Dan I think if you look at the comps for the quarter across Iowa.

Eight 3%, that's a pretty strong indication of the consistency and fund or a fundamental underlying momentum that we've got in the segment. We had positive traffic growth in the segment, which I think is.

Speaker 5: strong indication of the consistency and fundamental underlying momentum that we've got in the segment. We had positive traffic growth in this segment, which I think is...

David Palmer: Overall, we're also seeing that there's great execution. We're seeing customer satisfaction scores increasing in almost all of our major IOM markets. So overall, we feel good. In Europe in particular, we've certainly seen more inflation in Europe and so the team there has had to be probably even more laser focused on making sure that we deliver great value. But the business overall, you know, not seeing any big change quarter to quarter in terms of how it's performing, but I'll give it over to Ian to give you some more texture.

Speaker 7: an indication of how that momentum is.

An indication of how that momentum is as is.

Speaker 7: Obviously from a sales and traffic perspective and we're continuing to grow market share Across the majority of those large markets which tells us despite as Chris talked to some of the different

Obviously from a sales and traffic perspective, and we're continuing to grow market share across the majority of those large markets, which tells us despite as Chris talked to some of the different <unk>.

Speaker 7: Macro or consumer environment in those markets, which are obviously varied. Obviously some of those markets there's a fair bit of pressure.

Macro our consumer environments in those markets, which are obviously there is obviously some of those markets. There is a fair bit of pressure.

Speaker 7: From a macro headwind or consumer headwind, we're continuing to do well versus the landscapes around us. I mean, I think we have spoken and you heard it in our opening.

From a macro headwind or consumer headwind, we're continuing to do well versus the landscape around us I mean, I think we have spoken and you heard it in our opening.

Speaker 5: remarks around the expectation that we're going to continue to see moderation in that top line as insulation levels continue to come down and obviously pricing comes down in line with that. But I think we're in a really good spot and I think that just speaks to how our strategic plan around accelerating the arches continues to resonate with consumers consistently across.

Our remarks around the expectation that we're going to continue to see moderation in that topline as inflation levels continue to come down and obviously pricing comes down in line with that.

But I think we're in a really good spot and I think that just speaks to how our strategic plan around accelerating the arches continues to resonate with consumers consistently across the business.

Chris Kempczinski: Morning, David. Yeah, just maybe a couple of builds to what Chris mentioned. I mean, again, I think if you look at the comps for the quarter across IOM at 8.3%, that's a pretty strong indication of the consistency and fundamental underlying momentum that we've got in the segment. We had positive traffic growth in this segment, which I think is an indication of how that momentum is obviously from a sales and traffic perspective.

Speaker 3: Our next question is from David Tarantino with FAIR.

Alright next question is from David Tarantino with Baird.

Hi, Good morning my.

Hi, good morning. My question's on the cost side. I think you lowered your S-GNA outlook. At least it's a percentage of system sales versus what you.

My questions on the cost side.

I think you lowered your SG&A outlook at least as a percentage of system sales versus what you. What you had given US last time and I was just wondering what what changed in that outlook.

Chris Kempczinski: And we're continuing to grow market share across the majority of those large markets, which tells us despite as Chris talked to some of the different macro or consumer environments in those markets, which are obviously varied. Obviously, some of those markets, there's a fair bit of pressure from a macro headwind or consumer headwind. We're continuing to do well versus the landscape surround us. I mean, I think we have spoken and you heard it in our opening remarks around the expectation that we're going to continue to see moderation in that top line as inflation levels continue to come down and obviously pricing comes down and line with that. But I think we're in a really good spot. And I think that just speaks to how our strategic plan around accelerating the arches continues to resonate with consumers consistently across the business.

A matter of some of the savings and accelerating the organizations coming through or are delays in investment spending I guess any context, you could give us on that front would be helpful. Thank you.

Good morning, David Ian obviously, so let me try and give you some color there.

Morning, David. Ian, obviously, so let me try and give you some color there. I mean, I think...

I mean, I think as we said.

And our guidance at the beginning of the year, we expected G&A as a percentage of sales to be in the range of $2 two to $2 three.

In our guidance at the beginning of the year, we expected GNA as a percentage of sales to be in the range of 2.2 to 2.3. And obviously we've updated that to say more about 2.2. So it's come down marginally. I think obviously we've had some really strong top line results this year. So obviously that's a partial element of the benefits. And I think the other part is just...

And obviously, we've updated that to say more about two point too. So it's come down marginally I think obviously, we've had some really.

Strong top line results this year, so obviously that's.

Partial elements of the benefits and I think the other part is just tie.

Ian Borden: Our next question is from David Tarantino with Fared. Hi, good morning. My question's on the cost side. I think you lowered your S-GNA outlook, at least as a percentage of system sales versus what you had given us last time. And I was just wondering, what changed in that outlook? Is it a matter of some of the savings and accelerating the organizations coming through or delays in investment spending? I guess any context you could give us on that front would be helpful.

timing of spend, I mean, we are kind of a back half weighted spend cycle within the business. I think fourth quarter more pronounced from a quarterly standpoint. So we do expect a higher level of spending as we get into the fourth quarter. But I think just that, you know, there's a timing element and just kind of how, you know, the investments that we're making, I talked about kind of two areas.

Timing of spend I mean, we are kind of a back half weighted spend cycle within the business I think fourth quarter more pronounced from a quarterly standpoint, so we do expect a higher.

Level of spending as we get into the fourth quarter, but I think just there's a timing element of just kind of how.

The investments that we're making I talked about kind of two areas.

On our last quarterly call, where we continue to invest, one is behind technology and digital, which we believe are continue to provide strong opportunities for growth and we're going to continue to invest.

On our last quarterly call, where we continue to invest one is behind technology and digital which we believe are continue to provide strong opportunities for growth and we're going to continue to invest when we have those opportunities I think we've got a pretty strong track record in how those investments are delivering for the business the other.

Ian Borden: Thank you. Morning, David. Ian, obviously, so let me try and give you some color there. I mean, I think as we said in our guidance at the beginning of the year, we expected GNA as a percentage of sales to be in the range of 2.2 to 2.3. And obviously we've updated that to say more about 2.2. So it's come down marginally. I think obviously we've had some really strong top line results this year.

have those opportunities, I think we've got a pretty strong track record in how those investments are delivering for the business.

The other area is around our global business service organization, which we stood up earlier this year as part of accelerating the organization. We spent a

Area.

Around our global business service organization, which we stood up earlier this year as part of accelerating the organization we spent.

A lot of time over the last six months or so looking at what we believe the opportunities are for the business there. And I think we've got good line of sight into some things that we think can drive kind of sustainable efficiencies.

A lot of time over the last six months or so looking at what we believe the opportunities are for the business there.

And I think we've got good line of sight into some things that we think can drive kind of sustainable efficiencies from an operational perspective as we go forward and we're certainly investing now behind some of those areas of opportunity. So what I would call it a little bit more of kind of the timing of spend around those initiatives and more of a focus in the first half of the year.

Ian Borden: So obviously that's a partial elements of the benefits. And I think the other part is just timing of spend. I mean, we are kind of a back half weighted spend cycle within the business. I think fourth quarter more pronounced from a quarterly standpoint. So we do expect a higher level of spending as we get into the fourth quarter. But I think just that there's a timing element and just kind of how, you know, the investments that we're making.

from an operational perspective as we go forward and we're certainly investing now behind some of those areas of opportunity. So when I would call it a little bit more of kind of the timing of spending around those initiatives and more of a focus in the first half of the year on kind of bringing our ATO organizational changes to life.

Iran kind of bringing our Ato organizational changes to life.

Alright next question is from Jeff Bernstein with Barclays.

Our next question is from Jeff Bernstein with Barclays.

Ian Borden: I talked about kind of two areas. On our last quarterly call, where we continue to invest one is behind technology and digital, which we believe are continue to provide strong opportunities for growth. And we're going to continue to invest when we have those opportunities. I think we've got a pretty strong track record in how those investments are delivering for the business. The other area is around our global business service organization, which we stood up earlier this year as part of accelerating the organization.

Great. Thank you very much. Just focused on the U.S. consumer, I'm just wondering if you'd...

Great. Thank you very much.

<unk> focused on the U S consumer I'm, just wondering if you would.

Talk about any change in behavior, whether there was a change in trend through the quarter or more recently into the fourth quarter. Just wondering if there's pressure in some areas, maybe benefit from trade down in others.

Talk about any change in behavior, whether there was a change in trend through the quarter or.

Singly into the fourth quarter, just wondering if there's pressure in some areas maybe benefit from trade down in others.

Otherwise, you mentioned in the release, I think, that the U.S. comp was driven by strategic menu pricing, no mention of the traffic. So I'm just wondering if you could maybe give a breakdown of that U.S. comp component.

But otherwise you mentioned in the release I think that the U S comp was driven by strategic menu pricing no mention of the traffic. So I'm just wondering if you could maybe give us a breakdown of the U S comp components.

whether the lack of traffic growth is a concern, looking at 24, how you think about those components within that US comp. Thank you.

The lack of traffic growth is a concern looking at 'twenty four how.

Ian Borden: We spent a lot of time over the last six months or so looking at what we believe the opportunities are for the business there. And I think we've got good line of sight into some things that we think can drive kind of sustainable efficiencies from an operational perspective as we go forward. And we're certainly investing now behind some of those areas of opportunities. So what I would call it a little bit more of kind of the timing of spend around those initiatives and more of a focus in the first half of the year on kind of bringing our ATO organizational changes to life.

How do you think about those components within that U S comp. Thank you.

Okay.

Yes, Thanks for the question, Jeff and I'll answer and then if he has anything else he wants to pick up on this but.

Thanks for the question, Jeff, and I'll answer and then if Ian has anything else who wants to pick up on this. But...

Specific to the U S. We've been talking about how the consumer is more discriminating.

Pacific to the U.S. we've been talking about how the consumers is more discriminating because of all the price pressures that they're facing as well as interest rates, things like that.

Because of all the price pressures that they're facing.

As well as interest rates things like that.

What you end up seeing is that the pressure is felt more on the lower-income...

What you end up seeing is that the pressure is felt more on the lower income.

Jeff Bernstein: Our next question is from Jeff Bernstein with Barclays. Great. Thank you very much. Just focused on the US consumer. I'm just wondering if you would talk about any change in behavior, whether it was a change in trend through the quarter or more recently into the fourth quarter. And it's one of those pressure in some areas and maybe benefit from trade down in others. Otherwise, you mentioned in the release, I think that the US comp was driven by strategic menu pricing, no mention of the traffic.

consumer and so one of the things that that we saw industry wide Is that that low-income consumer? Which we would say is is 45k and under Was negative from an industry standpoint?

Consumer and so one of the things that we saw industry wide.

Is that that low income consumer.

We would say is 45 and under.

<unk> was negative from an industry standpoint.

Um, if you, if you zoom out and you think about our performance relative to that, we continue to have on the full year basis traffic growth.

If you zoom out and you think about our performance relative to that.

We continue to have on a full year basis traffic growth.

We had a slight dip in traffic. We went slightly negative in Q3. We expected that because of what we were lapping, but if you look at us on a 2-year stack.

We had a slight dip in traffic.

Went slightly negative in Q Q3.

Jeff Bernstein: So I'm just wondering if you could maybe give a breakdown of US comp components, whether the lack of traffic growth is a concern, looking at 24. How you think about those components within that US comp. Thank you.

We expected that because of what we're lapping, but if you look at us on a two year stack.

in the quarter, our traffic is up strongly. So I think we're just gonna need to continue to keep a close eye on that 45k and under consumer because of the pressure that they're feeling there and make sure that we're offering value, but hopefully the industry stays disciplined as well on prices.

In the quarter, our traffic is up strongly so.

I think we're just going to need to continue to keep a close eye on.

Chris Kempczinski: Thanks for the question, Jeff. And I'll answer. And then if he has anything else who wants to pick up on this, but Pacific to the U.S. We've been talking about how the consumers is more discriminating because of all the price pressures that they're facing, as well as interest rates, things like that. What you end up seeing is that the pressure is felt more on the lower income consumer. And so one of the things that we saw industry-wide is that that low-income consumer, which we would say is 45k and under was negative from an industry standpoint.

On that 45, K and under consumer.

Because of the pressure that they're feeling there.

Make sure that we're offering value, but hopefully the industry stays disciplined as well on pricing.

Maybe just, I'll just add a bit of a build to Chris' commentary, which certainly hit the headlines, but just maybe I think the texture is really important in the quarter. I mean, I think the headline would be on an overall basis that we maintained our QSR traffic market share in the quarter. I think we continue to see really strong share gains in both beef and chicken being.

Maybe just I'll just add a bit of a bill too.

Christmas commentary, which certainly hit the headlines, but just maybe on it because I think the texture is really important in the quarter I mean, I think the headline would be on a on an overall basis that we maintained our <unk> traffic market share in the quarter and I think we continue to see really strong share gains in both beef and chicken being the kind of two key.

kind of two key elements of the category. We continue to gain share with both the middle and higher income consumers and that speaks a little bit.

Elements of the category, we continued to gain share with both the middle and higher income consumers and that speaks a little bit.

Chris Kempczinski: If you zoom out and you think about our performance relative to that, we continue to have on the full year basis traffic growth. We had a slight dip in traffic. We went slightly negative in Q3. We expected that because of what we were lapping, but if you look at us on a two-year stack in the quarter, our traffic is up strong. So I think we're just going to need to continue to keep a close eye on that 45k and under consumer because of the pressure that they're feeling there and make sure that we're offering value, but hopefully the industry stays disciplined as well on pricing.

Jeff, to what you call that, which is that we're certainly partly benefiting from the trade down.

Jeff to what you what you called out which is that we're certainly partly benefiting from the trade down.

from more expensive alternatives within those kind of income or segment levels.

From more expensive alternatives within those kind of income segment levels, we held share with the lower income consumer in a pretty competitive marketplace.

We held share with the lower income consumer in a pretty competitive marketplace.

But I think the headline is that the comparableness Chris talked about industry traffic was down in the quarter as it has been for the last couple of quarters.

But I think the headline is that the comparable as Chris talked about industry traffic was down in the quarter as it has been for the last couple of quarters.

And so our comparable traffic was marginally down as a result of that and I think just I think I just would want to highlight I think the strength of our topline performance overall through our comp sales, which remained industry, leading as you've seen and what we've announced for this quarter.

So our comparable traffic was marginally down.

as a result of that. And I think just, you know, I think I just would want to highlight, I think, the strength of our top line performance overall through our comp sales, which remain industry leading, as you've seen.

Ian Borden: I'll just add a bit of a build to Chris' commentary, which certainly hit the headlines, but maybe I think the texture is really important in the quarter. I think the headline would be on an overall basis that we maintained our QSR traffic market share in the quarter. I think we continue to see really strong share gains in both beef and chicken being the two key elements of the category. We continue to gain share with both the middle and higher income consumers, and that speaks a little bit, Jeff, to what you called out, which is that we're certainly partly benefiting from the trade down from more expensive alternatives within those kind of income or segment levels.

And what we've announced for this quarter, and I think that's a combination of.

And I think Thats, a combination of the our strategic strengths coming together, which we've been working on over the last couple of years, we've got a fully modernized the state we've got a digital platform that's coming to life at scale, that's allowing us to really interact with our consumers on a much more individual basis, our marketing execution, which I think has really been elevated.

Our strategic strengths coming together, which we've been working on over the last couple of years, we've got a fully modernized estate, we've got a digital platform that's coming to life and scale that's allowing us to really interact with our consumers on a much more individual basis, our marketing execution, which I think has really been elevated and is resonating in a more culturally relevant way with our consumers. And then I would just call out, I think, and this is really...

And it's resonating in a more culturally relevant way with our consumers and then.

I would just call out I think and this is really.

So, civic to the US business, the outstanding execution our whole system is delivering. We know we're delivering.

Specific to the U S business the outstanding execution of our whole system is delivering we know we're delivering a better experience.

A better experience for customers, we know we're better staffed and as Chris talked about earlier, we know we've got a leading position.

Periods for customers, we know, we're better staffed and as Chris talked about earlier, we know we've got a leading position on value for money and affordability and so I think as a result of all of that we certainly believe we continue to be in an advantaged position as we continue to kind of lean into these macro headwinds that we're obviously having to navigate.

Ian Borden: We held share with the lower income consumer in a pretty competitive marketplace, but I think the headline is that the comparable as Chris talked about industry traffic was down in the quarter as it has been for the last couple of quarters, and so our comparable traffic was marginally down as a result of that. I think I just would want to highlight the strength of our top line performance overall through our comp sales, which remain industry leading as you've seen in what we've announced for this quarter.

on value for money and affordability and so I think it's a result of all of that

We certainly believe we continue to be in an advanced position as we continue to kind of lean into these macro headwinds that we're obviously having to navigate. Our next question is from Eric.

Our next question is from Eric Gonzalez with Keybanc.

Hey, and thanks for the comment on traffic and I was wondering if you could expand on the pricing discussion I think last quarter. You said you expected pricing to be in the double digits for the year. So maybe you can comment on what that might imply that might imply for the fourth quarter and perhaps you can give us an early look on what we should expect for 2020 for whether that would be that you expect prices to be a little bit more normally.

Hey, and thanks for the comments on traffic. I'm wondering if you could expand on the pricing discussion. I think left quarter you said you expected price to be in the double digits for the year. So maybe in comment on what that might imply, might imply for quarter. And perhaps you can give us an early look on what we should expect for 2024, whether that would be that you expect price to be a little bit more normalized in what we've seen the last few years. Thanks.

Ian Borden: I think that's a combination of our strategic strengths coming together, which we've been working on over the last couple of years. We've got a fully modernized estate, we've got a digital platform that's coming to life and scale that's allowing us to really interact with our consumers on a much more individual basis, our marketing execution, which I think has really been elevated and is resonating in a more culturally relevant way with our consumers.

And what we've seen in the last few years. Thanks.

Morning, Eric, it's Ian. So let me talk a little bit about pricing. And obviously, this is specific to the US, because obviously, pricing varies across markets, depending on

Good morning, Eric It's Ian So let me talk a little bit about pricing and obviously this is specific to the U S. Because obviously pricing.

Areas across markets, depending on the context in the individual marketplace I think as I talked about last quarter, certainly continue to believe that our average pricing level in the U S business for the full year will be.

The context in the individual marketplace. I think as I talked about last quarter, certainly continue to believe that our average pricing level in the US business for the full year will be.

Ian Borden: And then I would just call out, I think, and this is really specific to the US business, the outstanding execution, our whole system is delivering. We know we're delivering a better experience for customers. We know we're better staffed, and as Chris talked about earlier, we know we've got a leading position on value from money and affordability. And so I think as a result of all of that, we certainly believe we continue to be in an advanced position as we continue to kind of lean into these macro headwinds that we're obviously having to navigate. And so I think we're going to be able to do that. We're going to be able to do that. Great.

Just over 10%. I think what we did see in quarter three, and this is the first time now in a number of quarters, is that our average pricing level has started to come down in terms of the rate of increase. I think that speaks to the fact, as we've spoken to before, that inflation is starting to come down. And of course, we expect pricing to come down kind of in line with how inflation's coming down. I think as...

Just over 10% I think what we did see in quarter three and this is the first time now in a number of quarters is that our average pricing level has started to come down in terms of the rate of increase I think that speaks to the fact as we've spoken to before that inflation is starting to come down and of course, we expect pricing to come.

Eric Gonzalez: Our next question is from Eric Gonzalez with Keving. Hey, and thanks for the comments on traffic. And I'm wondering if you could expand on the pricing discussion. I think left quarter, you said you expected price to be in the double digits for the year. So, if you comment on what that might imply, might imply for quarter.

Down kind of in line with how inflation is coming down I think.

We've talked about before, our US business has been really disciplined in how they have continued to take pricing. We've put a lot of effort in over the last couple of years.

We've talked about before.

Our U S business.

<unk> been really disciplined in how they have continued to take pricing we've put a lot of effort in over the last couple of years.

Ian Borden: And perhaps you guys an early look on what we should expect for 2024, whether that would be that you expect price to be a little bit more normalized in what we've seen in the last few years. Thanks.

Two I think the data and analytical capability that comes from our third party advisors, who obviously make pricing recommendations to our business, including our franchisees, who obviously make their own pricing decisions and I think the fact that we continue to maintain that leadership position in both value for money and affordability.

to I think the data and analytical capability that comes from our third-party advisors who obviously make pricing recommendations to our business, including our franchisees, who obviously make their own pricing decisions. And I think the fact that we continue to maintain that leadership position in both value from money and affordability speaks to the fact that even though we've obviously had elevated pricing levels on the back of elevators.

Ian Borden: Morning, Eric. It's Ian. So let me talk a little bit about pricing and obviously this is specific to the US because obviously pricing varies across markets, depending on the context and the individual marketplace. I think as I talked about last quarter, certainly continue to believe that our average pricing level in the US business for the full year will be just over 10%. I think what we did see in quarter three, and this is the first time now in a number of quarters is that our average pricing level has started to come down in terms of the rate of increase.

Speaks to the fact that even though we've obviously had elevated pricing levels on the back of elevated cost and inflationary pressures that we have been able to execute that in a way that has minimized the resistance from the customer and maximize the flow through that we're getting as a result of those price increases and I would say our <unk>.

cost and inflationary pressures that we have been able to execute that in a way that has minimized

the resistance from the customer and maximize the flow-through that we're getting as a result of those price increases. And I would say our flow-through continues to kind of be in line with historical norms, which I think speaks to the capability and the precision that we've been able to deliver with pricing. So, again, I think, as we've talked about moderation, I think part of that will be pricing if inflation continues to kind of come down as we look forward.

Flow through continues to kind of be in line with historical norms, which I think speaks to the capability and the position that we've been able to deliver with pricing.

Ian Borden: I think that speaks to the fact as we've spoken to before that inflation is starting to come down. And of course, we expect pricing to come down kind of in line with how inflation is coming down. I think as we've talked about before, you know, our US business. Has been really disciplined and how they have continued to take pricing. We've put a lot of effort in over the last couple of years to, I think the data and analytical capability that comes from our third party advisors who obviously make pricing recommendations to our business, including our franchisees, who obviously make their own pricing decisions.

Again I think.

Talked about moderation I think part of that will be pricing if inflation continues to kind of come down as we look forward.

Our next question is from Dennis Geiger with UBS.

Our next question is from Dennis Geiger with UBS.

Great. Thank you I wanted to just ask a bit more on how you're thinking about maintaining that underlying momentum and share share gains in the U S. As you think about some of the key drivers in place across the three D is the operational execution that youre speaking to value the ready on arrival best Burger et cetera.

Great, thank you. I wanted to just ask a bit more on how you're thinking about maintaining that under time momentum and share gains in the US. As you think about some of the key drivers in place across the 3D's, the operational execution that you're speaking to, value the ready on arrival, best burger, et cetera. Chris, you sort of impact latest thoughts on some of these most impactful traffic and sales opportunities in the next year and even beyond.

Ian Borden: And I think the fact that we continue to maintain that leadership position in both value for money and affordability speaks to the fact that even though we've obviously had elevated pricing levels on the back of elevated cost and inflationary pressures that we have been able to execute that in a way that has minimized the resistance from the customer and maximize the flow through that we're getting as a result of those price increases. And I would say our flow through continues to kind of be in line with historical norms, which I think speaks to the capability and the position that we've been able to deliver with pricing. So again, I think we've talked about moderation. I think part of that will be pricing if inflation continues to kind of come down as we look forward.

Can you sort of unpack latest thoughts on on some of these and most impactful traffic and sales opportunities into next year and even beyond thank you.

Great well. Thanks for the question I guess I'd start with I look forward to seeing you at December six because we will get into a lot more.

Great, well thanks for the question. I guess I'd start with, I look forward to seeing you at December 6th, because we'll get into a lot more in that about how we see the outlook for next year and some of the specific things.

In that about how we see the outlook for next year and some of the specific things.

that we've got planned to continue to drive the business, but I would say broadly We think our strategy or exhilarating the arches strategies still has a lot of runway in it Each of the growth pillars the marketing core menu and four Ds We think that there's so a lot more that we can do Underneath each of those again will be more specific about what that is on December the 6th and then if you think about

We've got plans to continue to drive the business, but I would say broadly we.

Our strategy of accelerating the Orchard strategy is still has a lot of runway in it.

Each of the growth pillars, the marketing core menu and <unk>.

We think that there's still a lot more that we can do underneath each of those again will be more specific about what that is on December six.

Dennis Geiger: Our next question is from Dennis Geiger with UBS. Great. Thank you. I wanted to just ask a bit more on how you're thinking about maintaining that under time and share games in the US. As you think about some of the key drivers in place across the 3D, the operational execution that you're speaking to, value the ready on arrival, best burger, et cetera. Chris, can you sort of impact latest thoughts on some of these most impactful traffic and sales opportunities in the next year and even beyond? Thank you. Great. Well, thanks for the question.

And then if you think about.

More broadly, what's happening right now is this business is starting to a mass on the digital side, some pretty significant scale. And the scale that we're building on the digital side opens up a lot of opportunities that we think quite honestly are gonna be difficult for our competitors to match. And so when you take our physical presence, having more restaurants in the US,

More broadly.

Whats happening right now is this business is starting to amass on the digital side, some pretty significant scale.

And the scale that we're building on the digital side opens up a lot of opportunities that we think quite honestly youre going to be difficult for our competitors to match and so when you take our physical presence.

More restaurants in the U S and anyone else, our digital presence, which is bigger than anybody else in the.

our digital presence which is bigger than anybody else in the US along with great execution which we're seeing with strong consumer satisfaction scores Our service times are down roughly nine seconds in the quarter. They're down slightly less than that, but but still down I think about seven seconds on the full year We're in a really strong position in the US to continue the growth that we've got

Chris Kempczinski: I guess I'd start with, I look forward to seeing you at December 6th, because we'll get into a lot more in that about how we see the outlook for next year. And some of the specific things that we've got planned to continue to drive the business. But I would say broadly, we think our strategy or exhilarating the arches strategy still has a lot of runway in it. Each of the growth pillars, the marketing, core menu, and 4Ds, we think that there's still a lot more that we can do underneath each of those.

Along with great execution, which we're seeing with strong consumer satisfaction scores.

Our service times are down roughly 90 seconds in the quarter Theyre down.

Slightly less than that but still down.

I think it's about seven seconds on the full year.

We're in a really strong position in the U S to continue the growth that we've got.

Maybe one just small build Dennis and I'll be a bit of a broken record on this, but I just I wouldn't under has to mate

Maybe one just small built Dennis and I'll be a bit of a broken record on this but I just I wouldn't underestimate.

Chris Kempczinski: Again, we'll be more specific about what that is on December the 6th. And then if you think about more broadly, what's happening right now is this business is starting to a mass on the digital side, some pretty significant scale. And the scale that we're building on the digital side opens up a lot of opportunities that we think quite honestly are going to be difficult for our competitors to match. And so when you take our physical presence, having more restaurants in the US than anyone else, our digital presence, which is bigger than anybody else in the US, along with great execution, which we're seeing with strong consumer satisfaction scores.

Some of those things that we've done over the last couple of years like the fully modernized estate. I mean, imagine, and this is the situation that some of our competitors are in today, that you're trying to do that today in an environment of pressured cash flows and higher interest rates. I mean, we've got a fully modernized estate.

Some of those things that we've done over the last couple of years like them fully modernized state I mean imagine and this is the situation that some of our competitors are in today that you are trying to do that today in an environment of pressured cash flows and higher interest rates I mean, we've got a fully modernized to state as Chris talked about we've got a modernized digital platform.

As Chris talked about, we've got a modernized digital platform that continues to grow. And I think that's fundamentally some of these significant investments that we've made have been critically important as we head into this more kind of macro.

It continues to grow.

That's fundamentally some of these significant investments that we've made have been critically important as we head into this more kind of macro.

headwind and and volatility. Yeah, just one thing Ian said the trigger as well, a thought which is

Headwinds and volatility.

One thing Ian said that triggered as well a.

Thought which is.

Being able to drive that business, we need our franchisees to be in a strong position and.

Being able to drive the business, we need our franchisees to be in a strong position. And franchisee cash flow in the US is up. This year we're up in the gold.

Chris Kempczinski: Our service times are down roughly 9 seconds in the quarter. They're down slightly less than that, but still down. I think about 7 seconds on the full year, we're in a really strong position in the US to continue the growth that we've got.

Franchisee cash flow in the U S is up.

This year, we're up in the quarter. So I think that just goes to sentiment it's much more challenging as you would imagine.

So I think that just goes to sentiment. It's much more challenging as you would imagine.

to continue to drive the business if the franchisees are not seeing it flow through and Fortunately for us, we're seeing good flow through for our franchisees despite having to absorb Quite a bit of inflation both on the food and paper side as well as on the labor side So that's another thing that gives us confidence as we head into the new year

To continue to drive the business if the franchisees are not seeing it flow through and Fortunately for us we're seeing good flow through for our franchisees, despite having to absorb quite a bit of inflation, both on the food and paper side as well as on the labor side. So thats. Another thing that gives us confidence as we head into the new year.

Ian Borden: Maybe one just small bill, Dennis, and I'll be a bit of a broken record on this, but I just I wouldn't under estimate some of those things that we've done over the last couple of years like the fully modernized estate. I mean imagine, and this is the situation that some of our competitors are in today that you're trying to do that today in an environment of pressured cash flows and higher interest rates.

Our next question is from Lauren Silverman with Deutsche Bank.

Our next question is from Lauren Silberman with Deutsche Bank.

Okay. Thank you appreciate it so just want to follow up on the commentary regarding the competitive environment can you talk about what you're seeing in the promotional environment any uptick in discounting across the industry, while my ear approach to value teams humira.

Thank you, appreciate it. So I just want to follow up on the commentary regarding the competitive environment. Can you talk about what you're seeing in the promotional environment, any uptick and discounting across the industry, and how might your approach to value change if the consumer gets weaker? Then I guess related, any color on SAMHSA or sales across different day parts, or any greater competitive activity in certain day parts? Thank you.

Ian Borden: I mean, we've got a fully modernized estate. As Chris talked about, we've got a modernized digital platform that continues to grow, and I think that's fundamentally some of these significant investments that we've made have been critically important as we head into this more kind of macro headwind and volatility.

Humira gets weaker and I guess related any color on same store sales across different day parts or any competitive greater competitive activity.

Chris Kempczinski: Yeah, just one thing Ian said, the trigger as well, I thought which is being able to drive the business, we need our franchisees to be in a strong position. And franchisee cash flow in the US is up this year, we're up in the quarter. So I think that just goes to sentiment, it's much more challenging as you would imagine to continue to drive the business if the franchisees are not seeing it flow through.

You.

Yes, I'll take the the overall.

In terms of the competitive landscape, let Ian speak specifically to the date part question.

terms of the competitive landscape and let Ian speak specifically to the Dave Bart question. But overall, I think what you're seeing

But overall I think.

What youre seeing there is.

Everybody is looking to make sure that they are competitive.

Everybody is looking to make sure that they are competitive from a value standpoint with

From a value standpoint with.

with the consumer, and in particular, I talked about earlier that low-income consumer, which I would say is, you know, let's call that in this particular instance, 45K and under. That part of the business, we're seeing traffic in the quarter was down.

With the consumer and particularly I talked about earlier.

Chris Kempczinski: And fortunately for us, we're seeing that flow through for our franchisees despite having to absorb quite a bit of inflation, both on the food and paper side as well as on the labor side. So that's another thing that gives us confidence as we head into the new year.

That low income consumer, which I would say is let's call that.

In this particular instance, 45 K and under.

That part of the business, we're seeing traffic in the quarter was down.

Lauren Silverman: Our next question is from Lauren Silverman with Deutsche Bank. Thank you, appreciate it. So I just want to follow up on the commentary regarding the competitive environment.

There is a step up that we're seeing in some promotional activity by some of our competitors, but nothing alarming on that, nothing that, you know, I'd say is looking to be what we would say is beyond prudent.

There is a.

Step up that we're seeing in some promotional activity by some of our competitors.

But nothing alarming on that nothing that.

Chris Kempczinski: Can you talk about what you're seeing in the promotional environment, any uptick and discounting across the industry, and how might your approach to value change if the consumer gets weaker. And I guess related, any color on stamps or sales across different day parts, or any competitive greater competitive activity in certain day parts. Thank you. Yeah, I'll take the overall terms of the competitive landscape and let Ian speak specifically to the day part question.

I would say is looking to be.

What we would say is beyond prudent.

So we're going to just continue to monitor it we are focused on maintaining our value leadership.

If we're going to just continue to monitor it, we are focused on maintaining our value leadership. And we're going to do what we need to do to maintain our value leadership. But I think we've also got lots of things that go into value. It goes beyond just price and incorporate.

And we're going to do what we need to do.

To maintain our value leadership.

But I think we've also got lots of things that go into value. It goes beyond just price it incorporates delivering.

delivering a better customer experience which we're doing through faster service times improved hospital

Delivering a better customer experience, which we're doing through faster service times.

Chris Kempczinski: But overall, I think what you're seeing there is everybody is looking to make sure that they are competitive from a value standpoint with the consumer. And particularly I talked about earlier, that low income consumer, which I would say is, you know, let's call that in this particular instance, 45k and under that part of the business, we're seeing traffic in the quarter was down. There is a step up that we're seeing in some promotional activity by some of our competitors, but nothing alarming on that, nothing that you know I'd say is looking to be what we would say is beyond prudent.

Proved hospitality it goes to doing through that through a modernized the state.

going through that through a modernized state, which we've got that is not something true across the rest of the industry.

Which we've got that is not something true across the rest of the industry.

And we're seeing great execution, which means consumers are getting hotter, faster, better-tasting.

And we're seeing great execution, which means consumers are getting hotter faster.

Tasting food so all of those things go into value perception, which is why we're seeing our value perception hold up in the industry. Despite some of these pressures so I don't.

So all those things go into value perception.

which is why we're seeing our value perception hold up in the industry despite some of these pressures. So I don't...

for C any big changes there but certainly everybody is paying attention to that for this specific day parts I'll let Ian talk about that a little bit

<unk>.

Any big changes there, but certainly everybody is paying attention to that for this specific day parts I'll, let Ian talk about that a little bit more.

Yeah, morning, Lauren. I just maybe on the build on the on the day parts and I'm again, I'm using the US as the specific context is we've had pretty strong.

Yes, good morning, Lauren I, just maybe on the build on the on the day parts and I'm again, I'm using U S. As the specific context is we've had pretty strong and consistent performance across all the day parts in the business. So I don't think there is a.

Chris Kempczinski: So we're going to just continue to monitor it. We are focused on maintaining our value leadership and we're going to do what we need to do to maintain our value leadership. But I think we've also got lots of things that go into value. It goes beyond just price, it incorporates delivering a better customer experience, which we're doing through faster service times, improved hospitality. It goes to doing through that through a modernized state, which we've got that is not something true across the rest of the industry.

all the day parts in the business so I don't think there's a

Chris Kempczinski: And we're seeing great execution, which means consumers are getting hotter, faster, better tasting food. So all those things go into value perception, which is why we're seeing our value perception hold up in the industry despite some of these pressures.

you know, one day part that I would call out.

One day part that I would call out.

Where we arent seeing strong performance I do think as we've seen kind of I'll call. It a bit of a more return to work and return to office routine theres, probably a little bit more pressure in the breakfast day part just as some of those competitors who've been further behind and recovery are kind of coming to life in that category.

where we aren't seeing strong performance. I do think, as we've seen, kind of, I'll call it a bit of a more return to work and return to off-race routine. There's probably a little bit more pressure in the breakfast day part, just as some of those competitors who've been further behind in recovery are kind of coming.

To life in that category, but again, we're continuing to see good performance there.

Corey, but again, we're continuing to see good performance there.

And maybe the only other build and this is a bit with an international lens on value is is you've heard us speak to some of the

And maybe the only other build and this is with an international lens on value as you have heard us speak to some of the.

I will call it adjustments that some of our international markets have made to value maybe one I would just call out is in Canada, where the team there and put a morning offer in place, which was a mcmuffin and coffee pairing.

I would call it adjustments that some of our international markets have made to value. Maybe one I would just call out is in Canada where the team there put a morning offer in place, which was a McMuffin and coffee pairing.

Ian Borden: So I don't foresee any big changes there, but certainly everybody is paying attention to that for the specific date parts. I'll let Ian talk about that a little bit, of Moore. Yeah, I'm warning Lauren, I just, maybe on the build on the, on the day parts, and I'm, again, I'm using the US as the specific context is we've had pretty strong and consistent performance across all the day parts in the business.

Breakfast in Canada is a pretty important day part coffee is a pretty important part of that day part and so I think our markets are going to continue to front footed and proactively make sure that we're adjusting value. So it's relevant to what our consumers are looking for is the context continues to evolve and value as Chris talked about.

Breakfast in Canada is a pretty important day part. Coffee is a pretty important part of that day part. And so I think our markets are going to continue to front-footed and proactively make sure that we're adjusting value. So it's relevant to what our consumers are looking for as the context continues to evolve. And value, as Chris talked about, is a strategic part of our fundamental business model. But we are obviously going to continue to listen to our customers and make sure we're delivering what they need and what they expect from us. Our next question is from Brian .

Ian Borden: So I don't think there's a, you know, one day part that I would call out where we aren't seeing strong performance. I do think as we've seen, kind of, I'll call out a bit of a more return to work and return to offer us routine. There's probably a little bit more pressure in the breakfast day part, just as some of those competitors who've been further behind in recovery are kind of coming to life in that category.

It is a strategic part of our fundamental business model, but we are obviously going to continue to listen to our customers and make sure we are delivering what they need and what they expect from us.

Alright next question is from Brian Bittner with Oppenheimer.

Okay.

Thanks, good morning. As it relates to the US company-owned restaurant margins, they expanded this quarter for the first time in two years. I'll be at modestly, but a good indication of maybe your franchise store-level margins as well. What was the biggest driver of this? Was it simply easing food cost inflation against still strong pricing, or was there anything else?

Thanks, Good morning.

As it relates to the U S company owned restaurant margins expanded this quarter for the first time in two years.

Ian Borden: But again, we're continuing to seek good performance there. And maybe the only other build with an international lens on value is is you've heard us speak to some of the, I would call it adjustments that some of our international markets have made to value. Maybe one I would just call out is in Canada. Where the team there put a morning offer in place, which was a McMuffin and coffee pairing breakfast in Canada is a pretty important day part, coffee is a pretty important part of that day part.

Be it modestly, but a good indication of maybe your franchise store level margins as well what was the biggest driver of this was it simply.

Food cost inflation again still strong pricing or was there anything else.

to point two and could this be a potential turning point for restaurant margin stabilization in the US or maybe even perhaps some expansion moving forward?

Two in and could this be a potential turning point for for restaurant margin stabilization in the U S are or maybe even perhaps some expansion moving forward.

Ian Borden: And so I think our markets are going to continue to front footed and proactively make sure that we're adjusting value. So it's relevant to what our consumers are looking for as the context continues to evolve and value as Chris talked about as a strategic part of our fundamental business model, but we are obviously going to continue to listen to it to our customers and make sure we're delivering what they need and what they expect from us.

Good morning, Brian Yes, thanks for the question.

Morning, Brian . Yeah, thanks for the question. Look, I think what I would say on...

Look I think what I would say on an.

Company operated restaurant margins, we've been pretty consistent and if you look at the full year 2023, We expect company operated margin percent both in the U S to be in line.

company operated restaurant margins, we've been pretty consistent in, if you look at the full year 2023, we expect company operated margin, both in the US and IOM, to be in line roughly with where we landed in quarter for 2022. I think that view hasn't changed. Obviously we've had really strong sales performance.

Lastly, with where we landed in quarter four 2022, I think that view hasn't changed obviously, we've had really strong sales performance. This year, which is which is helping and I think as you've heard me talk about before the only way you sustainably work through periods of higher inflation in the business is obviously to continue.

Brian Vittner: Our next question is from Brian Vittner with Oppenheimer. Thanks. Good morning.

this year which is helping, and I think as you've heard me talk about before, the only way you sustainably work through period of higher inflation in the business is obviously to continue to grow the top line and deliver strong performance. And that's what we're focused on. And we're obviously very confident as we're able to continue to do that, that we're going to be able to kind of see.

Ian Borden: As it relates to the US company owned restaurant margins, they expanded this quarter for the first time in two years. I'll be at modestly, but a good indication of maybe your franchise door level margins as well. What was the biggest driver of this was it simply easing food cost inflation against still strong pricing or was there anything else to point to and could this be a potential turning point for restaurant margin stabilization in the US or maybe even perhaps some expansion moving forward.

To grow the top line and deliver strong performance and that's what we're focused on.

And we're obviously very confident as we are able to continue to do that then we're going to be able to kind of see improved.

improved restaurant margin from a percentage basis performance in addition obviously to the really strong dollar growth that we're seeing on the back of those

Restaurant margin from a percentage basis performance. In addition, obviously to the really strong dollar growth that we're seeing on the back of those strong top line sales. So I think no change to what we expect for the full year. This year, but I think we feel like we're in really good position with the momentum we've got across the business. The other thing that I would just add.

strong top line sales. So I think no change to what we expect for the full year this year, but I think we feel like we're in really good position with momentum, we've got across the business. The other thing that I would just add on the Makapka side, but it's also something that we've seen with Franceses is...

Ian Borden: Good morning, Brian. Yeah, thanks for the question. Look, I think what I would say on company operated restaurant margins. You know, we've been pretty consistent in if you look at the full year 2023, we expect company operated margin percent both in the US and I am to be in line roughly with where we landed in quarter for 2022. I think that view hasn't changed. Obviously, we've had really strong sales performance this year, which is which is helping.

Add on the <unk> side, but it's also something that we've seen with franchisees is.

They're experiencing these gains even though roster sizes are growing. And I think part of the benefit that we're seeing is turnover is down. So we're as we're even as we're expanding roster sizes.

They're experiencing these gains even though roster sizes are growing.

And I think part of the benefit that we're seeing as turnovers down so.

As even as we're expanding roster sizes and our <unk> restaurants. The team has done a really nice job and we're seeing turnover turnover levels down pretty significantly from prior year and all of that has benefits.

in our Makapka restaurant, the team has done a really nice job and we're seeing turnover levels down pretty significantly from prior year and all of that has benefits of with associated with it of course you have less training but you also have improved execution. So I think that's one thing that we're seeing.

Ian Borden: And I think as you've heard me talk about before the only way you sustainably work through periods of higher inflation in the business is obviously to continue to grow the top line and deliver strong performance. And that's what we're focused on. And we're obviously very confident as we're able to continue to do that that we're going to be able to kind of see improved restaurant margin from a percentage basis performance in addition obviously to the really strong dollar growth that we're seeing on the back of those strong top line sales.

Associated with it of course, you have less training, but you also have improved execution. So I think thats one thing that we're seeing.

That also would extend out to franchisees franchisees

But also as you extend out to franchisees franchisees roster sizes are up versus last year applications are up significantly. So I do think to the question about is something turning.

Roster sizes are up versus last year. Applications are up significantly. So I do think to this question about is something turning.

On the labor side in the U.S., we're definitely seeing a turn there to the positive in terms of having our restaurants fully staffed and having lower turnover as a result of that.

On the labor side in the U S. We're definitely seeing a turn there to the positive in terms of having our restaurants fully staffed.

Ian Borden: So I think no change to what we expect for the full year this year, but I think we feel like we're in really good position with momentum. We've got across the business. The other thing that I would just add on the on the Makapka side, but it's also something that we've seen with franchisees is because they're experiencing these gains even though roster sizes are growing and I think part of the benefit that we're seeing is turnover is down.

And having lower turnover as a result of that.

Our next question is from Brian <unk> with Morgan Stanley.

Our next question is from Brian Harbour with Morgan Stanley .

Ian Borden: So even as we're expanding roster sizes in our Makapka restaurants, the team has done a really nice job and we're seeing turnover levels down pretty significantly from prior year and all of that has benefits associated with it of course. You have less training but you also have improved execution. So I think that's one thing that we're seeing that also is to extend out to franchisees, franchisees, roster sizes are up versus last year applications are up significantly.

Yeah, thank you, good morning. You commented sort of on the US side, but just within IOM and IDL, same store sales, wondering if you had any comments on kind of the check versus traffic component. And then also just within the US, I was curious if you had a sense for roughly how much your California franchisees will be seeing wages go up and how much pricing they might presumably take to offset that.

Yes. Thank you good morning.

You commented sort of on the us side, but just within IOM and IDL same store sales wondering if you had any comments on kind of the check versus traffic component.

And then also just within the U S. I was curious if you had a sense for.

Roughly how much your California franchisees will be seeing wages go up and how much.

Pricing they might presumably take to offset that.

Yes, I'll cover just the California question and then Ian can cover the rest of what you laid out specifically around the IOM, but.

Yeah, I'll cover just the California question and then Ian can cover the rest of what you laid out specifically around IOM, but.

As you.

mentioned and noted California with the passage.

<unk> mentioned and noted, California with the passage.

of the recent legislation there around what that's going to do to wages. There is going to be a wage impact for our California franchisees.

Of the recent legislation there.

Ian Borden: So I do think to this question about is something turning on the labor side in the U.S, we're definitely seeing a turn there to the positive in terms of having our restaurants fully staffed and having lower turnover is a result of that.

Around what that's going to do to wages, there is going to be a wage impact for our California franchisees.

I don't think at this point, we can say exactly how much.

I think at this point, we can say exactly how much of that is going to work between through pricing. Certainly there's going to be some element of that that does need to be worked through with higher pricing. There's also going to be things that I know that the franchisees and our teams are going to be looking around productivity.

Of that it's going to work its way through pricing certainly theres going to be some element of that that does need to be worked through with higher pricing.

Brian Harbour: Next question is from Brian Harbour with Morgan Stanley. Yeah, thank you, good morning. You commented sort of on the U.S, side but just within IOM and IDL, same store sales, wondering if you had any comments on kind of the check versus traffic component and then also just within the U.S.

There is also going to be things that I know that the franchisees and our teams there are going to be looking around productivity.

How all of that plays out there will certainly be a hit in the short term.

How all of that plays out, there will certainly be a hit in the short term to franchise in cash flow in California, up to no exactly what that hit will be because of some of the mitigation efforts, but there will be a hit longer term what we've been talking about with our franchisees is this is an opportunity for us to gain share.

To franchisee cash flow in California.

Chris Kempczinski: I was curious if you had a sense for roughly how much your California franchisees will be seeing wages go up and how much pricing they might presumably take to offset that. Yeah, I'll cover just a California question and then Ian can cover the rest of what you laid out specifically around IOM but as you mentioned and noted California with the passage of the recent legislation there. Around what that's going to do to wages, there is going to be a wage impact for our California franchisees.

Tough to know exactly what that it won't be because of some of the mitigation efforts.

But there will be a hit.

Longer term, what we've been talking about with our franchisees is this is an opportunity for us.

To gain share because.

Chris Kempczinski: I don't think at this point we can say exactly how much of that is going to work between through pricing certainly there's going to be some element of that that does need to be worked through with higher pricing. There's also going to be things that I know that the franchisees and our teams are going to be looking around productivity. How all of that plays out there will certainly be a hit in the short term to franchise and cash flow in California up to know exactly what that hit will be because of some of the mitigation efforts but there will be a hit longer term what we've been talking about with our franchisees is this is an opportunity for us to gain share because this is an impact that's going to hit all of our competitors.

This is an impact that's going to hit all of our competitors.

This is an impact that's going to hit all of our competitors.

We're in a better position. We believe we're in a better position than our competitors to weather this. And so let's use this as an opportunity.

In a better position, we believe we're in a better position than our competitors to weather this and so let's use this as an opportunity.

to actually accelerate our growth in California and accelerating our growth along with some mitigation.

To actually accelerate our growth in California.

And accelerating our growth along with some mitigation the two of those in combination is the best way.

The two of those in combination is the best way to minimize any impact long-term on francher seed cash flow.

To minimize any impact long term on franchisee cash flow.

With that.

on California, let me have you and just cover the rest of your questions on Iowa.

California, Let me have Ian just cover the rest of your questions on Iowa.

Yes, good morning, Brian So let me try and give you a bit of texture on kind of AUM and an idea I mean, I think you've obviously seen the headline comp numbers for the quarter.

Yeah, morning, Brian . So let me try and give you a bit of texture on kind of IOM and IDL. I mean, I think you've obviously seen the headline comp numbers for the quarter, which I think are obviously really strong. And I would say that...

Which I think are obviously really strong.

I'd say the.

The consistency is the broad based.

The consistency is the broad-based, and I think consistency of the momentum we're seeing which just goes back to what we've talked about earlier today.

Think consistency of the momentum, we're seeing which just goes back to what we've talked about earlier today, which is our accelerating the art just strategy continues to really deliver.

are accelerating the Argus strategy continues to really deliver pretty consistent results across the business. I mean, of course.

Pretty consistent results across the business I mean of course, when there are 100 plus markets. There are always a couple of markets that are maybe dealing with more kind of headwinds and others. I mean, I think in I O N. France would certainly be one of those markets, we spoke a little bit about that on the <unk>.

When there are 100-plus markets, there are always a couple of markets that are maybe dealing with more kind of headwinds than others. I mean, I think in IOM, France would certainly be one of those markets. We spoke a little bit about that on...

Chris Kempczinski: We're in a better position. We believe we're in a better position than our competitors to whether this and so let's use this as an opportunity to actually accelerate our growth in California and accelerating our growth along with some mitigation. The two of those in combination is the best way to minimize any impact long-term on franchisey cash flow.

the quarter two call, but I think if you look at the IEO sector in France still hasn't recovered back to where it was in 2019. I mean, we have generally been taking share in the marketplace, but I think the consumer sentiment.

Quarter, two call, but I think if you look at the <unk>.

Oh sector in France, still hasnt recovered back to where it was in 2019.

Have generally been taking share in the marketplace, but I think the consumer sentiment with everything that's going on which is consistent obviously across all markets higher inflation higher interest rates and then I think.

with everything that's going on, which is consistent, obviously across all market, higher inflation, higher interest rates. And then I think in France, as we worked through the summer, you saw a level of social unrest. You saw some kind of violent activity coming out of that social arrest. I think that's all kind of dampened.

Ian Borden: With that on California let me have Ian just cover the rest of your questions on IOM. William. Yeah, morning, Brian. So let me try and give you a bit of texture on kind of IOM and IDL. I mean, I think you've obviously seen the headline comp numbers for the quarter, which I think are obviously really strong. And I would say the consistency is the broad based, and I think consistency of the momentum we're seeing, which just goes back to what we've talked about earlier today, which is our accelerating the artist's strategy.

In France as we worked through the summary, you saw the level of social unrest you saw some kind of violent activity coming out of that social arrest I think thats, all kind of dampened consumer demand. So I think our team in France is really really focused on having good clarity on what we need to continue to do when we're going to continue to do.

and consumer demand. So I think our team in France is really, really focused on having good clarity on what we need to continue to do and we're going to continue to deliver even in that more difficult environment. But broadly.

<unk>, even in that more difficult environment, but broadly speaking consistently.

consistently, you know, really strong and consistent performance across the business that we're very very

Really strong and consistent performance across the business that we're very very pleased with them.

Ian Borden: We continue to really deliver pretty consistent results across the business. I mean, of course, when there are 100 plus markets, there are always a couple of markets that are maybe dealing with more kind of headwinds and others. I mean, I think in IOM, France would certainly be one of those markets. We spoke a little bit about that on the quarter to call, but I think if you look at the IEO sector in France still hasn't recovered back to where it was in 2019.

Our next question is from John Tower with City.

Our next question is from Jon Tower with Citi.

Right, thanks for taking the question. First clarification and then a question. Ian, could you provide potential range of the size of the property gain in the fourth quarter? And then second, I'm just curious, did you gain your thoughts on the recent NLRB ruling that's set to be implemented, I believe, in December ? And how you think this might influence your own business or that of the industry in the years?

Great. Thanks for taking the question first clarification and then a question.

Ian could you provide potential range of the size of the property gain in the fourth quarter and then second.

I'm just curious to gauge your thoughts on the recent NLRB ruling that's set to be implemented I believe in December and how you think this might influence your own business or is that.

Ian Borden: I mean, we have generally been taking share in the marketplace, but I think the consumer sentiment with everything that's going on, which is consistent, obviously, across all markets, higher inflation, higher interest rates. And then I think in France, as we worked through the summer, you saw a level of social unrest. You saw some kind of violent activity coming out of that social arrest. I think that's all kind of dampened consumer demand.

The industry in the years ahead.

Jonathan Let me take the first one and then I'll turn it over to Chris on the NRL.

John , let me take the first one and then I'll turn it over to Chris on the NRLB. On the property gain, which is in our IOM segment, we expect that to be about 60 million.

On the property gain which is in our IOM segment, we expect that to be about <unk> <unk>.

$60 million.

<unk>.

Thank you.

You've probably heard us talk before. We get these kind of high value individual properties at some time.

You've probably heard US talk before we get these kind of high value individual properties that sometimes.

The highest invest use is different than what we're using it for today. This is an example of that. I don't think we certainly expect these are going to be occurring very often. But this is a case where that was just a good business decision to make and that's what we're expecting in quarter four of them.

Ian Borden: So I think our team in France is really, really focused on having good clarity on what we need to continue to do when we're going to continue to deliver even in that more difficult environment, but broadly speaking, consistently, you know, really strong and consistent performance across the business that we're very, very pleased with.

The highest and best use is different than what we're using it for today. This is an example of that I don't think we certainly expect these are going to be occurring very often.

But this is a case.

That was just a good business decision to make and Thats what were expecting in quarter four on that.

Again, on the NLRB ruling, I mean, as you would expect, we strongly object to the last week's NLRB ruling. We think it's going to undermine small business ownership in the U.S.

Yeah and on the NLRB ruling I mean, as you would expect we strongly object last week settled and I'll review ruling we think its going to undermine small business ownership in the U S.

John Tower: Next question is from John tower with city. Right, thanks for taking the question. First clarification and then a question.

If you think about it, the franchise business model, it's really a great American innovation. It's created wealth for thousands, particularly underrepresented minorities and women, and this is something we think that needs to be supported, not attacked. And so, in our mind, this is yet another example of agency overreach coming out of D.C. And we expect it's going to be contested. It's going to be contested in the courts. It's going to be contested in Congress.

Ian Borden: Ian, could you provide potential range of the size of the property gain in the fourth quarter? And then second, I'm just curious to gain your thoughts on the recent NLRB ruling that's set to be implemented, I believe in December and how you think this might influence your own business or that of the industry. John, let me take the first one and then I'll turn it over to Chris on the NRLB on the property gain, which is in our IOM segment.

If you think about it as a franchise business model its really a great American innovation.

Created well for thousands, particularly underrepresent minorities and women.

And this is something we think that needs to be supported not attacked and so in our mind. This is yet. Another example of agency overreach coming out of D. C.

And we expect it's going to be contested it's gonna be contested in the court is going to be contested and Congress in.

In fact, you may have seen already the Senate.

As indicated, they're going to seek to pass a continuous resolution, which is an opposition.

Ian Borden: We expect that to be about 60 million, you know, I think we've probably heard us talk before we get these kind of high value individual properties that sometimes the highest invest use is different than what we're using it for today. This is an example of that. I don't think we certainly expect these are going to be occurring very often, but this is a case where that was just a good business decision to make and that's what we're expecting in in quarter four on that.

Has indicated they're going to seek to passed the continuing resolution, which is in opposition to this ruling so Mcdonald's certainly opposes it we're going to support others, who oppose it.

to this ruling. So McDonald certainly opposes it. We're going to support others who oppose it.

How it all plays out in time, I think, you know, it's tough to say, but this is something that's going to affect everybody. And as we've shown throughout

It all plays out in time I think it.

It's tough to say, but this is something thats going to affect everybody.

And as we've shown throughout time, so long as there is a level playing field and Mcdonald's is on the same level as everybody else.

So long as there's a level playing field and McDonald's is on the same level as everybody else.

We tend to win, and so even if this NLRB ruling were to pass, it's going to affect the industry at writ large, and we think we're better positioned than anybody else to withstand it. Our next question is from Andy.

We tend to win and so.

Chris Kempczinski: Yeah, and on the NLRB ruling, I mean, as you would expect, we strongly object to the last week's NLRB ruling. We think it's going to undermine small business ownership in the US. If you think about it, the franchise business model, it's really a great American innovation. It's created wealth for thousands, particularly underrepresented minorities and women. And this is something we think that needs to be supported, not attacked. And so in our mind, this is yet another example of agency overreach coming out of DC.

Even if this NLRB ruling were to pass it's going to affect the industry writ large.

And we think we're better positioned than anybody else to withstand it.

Next question is from Andy Barish with Jefferies.

Good morning.

Good morning. Just shifting gears to IOM for a moment. Can you give us roughly how much of the 100 to 150 million in subsidies had shown up so far? And then...

Shifting gears to Ireland for a moment.

Can you give us roughly how much.

$250 million in subsidies.

So far and then.

You know, on the company or margin question, but related to ILM, I mean, this used to be a 20% you know, margin business, obviously more pricing in the business today. Any, you know, any thoughts longer term about kind of realizing back to 20% restaurant level margins in this segment? Yeah.

On the company owned margin question, but related to ILM I mean, this used to be at 20%.

Chris Kempczinski: And we expect it's going to be contested. It's going to be contested in the courts. It's going to be contested in Congress. In fact, you may have seen already the Senate has indicated they're going to seek to pass a continuing resolution, which is an opposition to this ruling. So McDonald certainly opposes it. We're going to support others who oppose it. How it all plays out in time, I think, you know, it's tough to say, but this is something that's going to affect everybody.

Margin business, obviously more pricing in the business today.

Any any thoughts longer term about kind of.

Realizing back to 20% restaurant level margins in this segment.

Good morning, Andy.

It's Anne.

So I think on the subsidies.

So I think on the subsidies, I guess that the headline would be, you know, we expect to spend in line with what we've said consistently for the year, 100 to 150 million. And so I think we're tracking in line with that where you'd expect us to be at this point in the year is what I would say on that.

Chris Kempczinski: And as we've shown throughout time, so long as there's a level playing field and McDonald's is on the same level as everybody else, we tend to win. And so even if this NLRB ruling were to pass, it's going to affect the industry at writ large. And we think we're better positioned than anybody else to withstand.

The headline would be.

We expect to spend in line with what we've said consistently for the year of $100 million to $150 million and so I think.

We're tracking in line with that where you would expect us to be at this point in the year is what I would say on that.

I think in terms of longer term margins I mean, if you go back over our 60 year history. I mean, we've had obviously many periods of higher inflation that we've had to work through over time, we've always been able to kind of get margins back.

I think in terms of longer term margins, I mean, if you go back over our 60 year history, I mean, we've had obviously many periods of higher inflation that we've had to work through over time. We've always been able to kind of get margins back as we're able to continue to drive strong top-lying growth. And I certainly don't see any reason why that would be different this time. I mean, I think we have.

Andy Barish: David, our next question is from Andy Barish with Jeffries. Good morning. Just shifting gears to IOM for a moment.

Ian Borden: Can you give us roughly how much of the 100 to 150 million in subsidies had shown up so far? And then, you know, on the company or margin question, but related to IOM, I mean, this used to be a 20%, you know, margin business. Obviously we're pricing in the business today. Any, you know, any thoughts longer term about kind of realizing back to 20% restaurant level margins in this segment?

As we're able to continue to drive strong topline growth and I certainly don't see any reason why that would be different this time.

I think we have.

We're going to make sure, as you've heard us talk about today, that we say really disciplined in how we're pricing to the consumer. We feel we've got a lot of capability, data, and analytical capability that's allowing us to do that better than most. And we also have...

We're going to make sure as you've heard us talk about today that we say really disciplined in how we're pricing to the consumer we feel we've got a lot of capability data and analytical capability, that's allowing us to do that better than most.

And we also have.

Ian Borden: Good morning, Andy. It's Ian. So I think on the subsidies, I guess that the headline would be, you know, we expect to spend in line with what we've said consistently for the year 100 to 150 million. And so I think we're, we're tracking in line with that where you'd expect us to be at this point in the year is what I would say on that. I think in terms of longer term margins, I mean, I mean, if you go back over our 60 year history, I mean, we've had obviously many periods of higher inflation that we've had to work through over time.

you know, industry leading momentum as you continue to see in our results. And if you were able to have industry leading momentum and as you heard Chris talk about, you continue to invest in those structural advantages, whether that's the fully modernized state, digital platforms at scale. Obviously, you're going to be in an advantage position versus others in how you can kind of...

Industry, leading momentum as you continue to see in our results and if you are able to have industry, leading momentum and as you heard Chris talk about you continue to invest in those structural advantages whether that's the fully modernized state digital platforms at scale, obviously youre going to be in an advantaged position versus others and how you can kind of.

continue to let that flow through the business. And I think that's certainly what we expect as we look forward on margins and the ability to kind of build those as we continue.

Continue to let that flow through the business and I think thats certainly what we expect as we look forward on margins and the ability to kind of build those as we continue.

We have time for one more question. Brian Mullen with Piper Sandlin.

We have time for one more question, Brian Mullan with Piper Sandler.

Okay. Thank you just a question on developments specific to the U S could you perhaps comment on the takeaway only location in Texas any early learnings you've had thus far I imagined we might hear more about this at the <unk>.

Thank you. Just a question on development specific to the US. Can you perhaps comment on the takeaway only location in Texas any early learnings you've had thus far? I imagine we might hear more about this at the investor but just high level. Do you expect new formats have the potential to play a more meaningful role in the future US Unicro?

Ian Borden: We've always been able to kind of get margins back as we're able to continue to drive strong top-lying growth. And I certainly don't see any reason why that would be different this time. I mean, I think we have, we're going to make sure, as you've heard us talk about today, that we say really disciplined in how we're pricing to the consumer. We feel we've got a lot of capability, data and analytical capability that's allowing us to do that better than most.

Yesterday, but just high level do you expect new formats, having the potential to play a more meaningful role in the future U S unit growth.

Yes, you are.

Yeah, so you're right. We will talk a little bit more about this, actually a lot more about this when we get together on December 6th. We're continuing to follow and assess the test that we have down in Texas. I think you can say that certainly there is going to be an opportunity for us to have.

All right, we will talk a little bit more about the sector a lot more about this when we get together on December six.

We're continuing to follow in.

Ian Borden: And we also have, you know, industry leading momentum as you continue to see in our results. And if you are able to have industry leading momentum and as you heard Chris talk about, you continue to invest in those structural advantages, whether that's the fully modernized state digital platforms at scale. Obviously, you're going to be in an advantage position versus others and how you can kind of continue to let that flow through the business. And I think that's certainly what we expect as we look forward on margins and the ability to kind of build those as we continue.

Assess the test that we have down in Texas I think you can say that certainly there is going to be an opportunity.

For us to have.

Rescrons that are smaller footprint that don't have a dining room.

Restaurants that are smaller footprint that don't have a dining room.

You know, you will see some of those, but I think from a development standpoint, the vast majority of the development opportunity that we see is for our traditional restaurants. We think that there's still quite a bit of opportunity for traditional restaurants.

You will see some of those but I think from a development standpoint.

Majority of the development opportunity that we see is for our traditional restaurants.

Think that they are still <unk>.

Quite a bit of opportunity for traditional restaurants.

that will be the bulk of it you might see again you know something around the edges which is uh... some of these smaller format uh... but the big idea is traditional restaurants that we're talking about on December

That will be the bulk of it you might see again.

Chris Kempczinski: We have time for one more question, Brian Mullin with Piper Samler. Thank you. Just question on development specific to the US. Do you perhaps comment on the takeaway only location in Texas, any early learnings you've had thus far? I imagine we might hear more about this at the investor, but just high level. Do you expect new formats? Have the potential to play a more meaningful role in the future US Unicrow? Yeah, so you're right.

Something around the edges, which is some of these smaller format.

But the big idea is traditional restaurants that we'll talk more about on December six.

Okay, thank you, Chris. Thank you, Ian, that completes our call today. Thanks, everyone, for joining.

Thank you Chris Thank you Ian that completes our call today and thanks, everyone for joining.

This concludes the external corporation investor call. You may now disconnect and have a great day.

This concludes Mcdonald's Corporation Investor call you May now disconnect and have a great day.

Chris Kempczinski: We will talk a little bit more about this, actually a lot more about this when we get together on December 6th. We're continuing to follow and assess the test that we have down in Texas. I think you can say that certainly there is going to be an opportunity for us to have restaurants that are smaller footprint that don't have a dining room. You know, you will see some of those, but I think from a development standpoint, the vast majority of the development opportunity that we see is for our traditional restaurants. We think that there's still quite a bit of opportunity for traditional restaurants. That will be the bulk of it you might see again, you know, something around the edges, which is some of these smaller formats.

Operator: But the big idea is traditional restaurants that we'll talk more about on December 6th. Thanks for the six.

Operator: Okay, thank you, Chris, thank you, Ian, that completes our call today, thanks everyone for joining. This concludes the McDonald's Corporation Investor Call.

Operator: You may now disconnect and have a great day.