Q4 2023 Restaurant Brands International Inc Earnings Call
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Speaker Change: Good morning, and welcome to the restaurant brands International fourth quarter 2023 earnings Conference call.
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Speaker Change: I would now like to turn the conference over she can do PEC Rbi's head of Investor Relations. Please go ahead.
Speaker Change: Thank you operator, good morning, everyone and welcome to restaurant brands International's earnings call for the fourth quarter and year ended December 31 2023.
Speaker Change: As a reminder, a live broadcast of this call may be accessed on the Investor Relations webpage at RBI Dot com forward slash investors and a recording will be available for replay.
Speaker Change: Joining me on the call today are restaurant brands International's Executive Chairman, Patrick Doyle, CEO, Josh Kobza, and CFO, Matt Dunnigan today's earnings call contains forward looking statements, which are subject to various risks set forth in the press release issued this morning and in our SEC filings. In addition, this earnings call.
Speaker Change: <unk> non-GAAP financial measures reconciliations of non-GAAP financial measures are included in the press release available on our website.
Speaker Change: During portions of the call today, we will be referencing franchisee profitability measures that are based on unaudited self reported franchisee results. In addition, the consolidated growth metrics discussed during the prepared remarks, including consolidated system wide sales growth comparable sales net restaurant growth and organic adjusted operating income grew.
Speaker Change: Exclude results from our franchise restaurants in Russia, as we did not generate any new profits from restaurants in Russia in 2022 or 2023.
Speaker Change: As a reminder, our Tim Hortons Burger King Popeye's and firehouse sub segments include results from each brand's restaurants in the U S and Canada, while our international segment represents consolidated results from all four brands outside of the U S and Canada.
Finally, this morning, we published updated trending schedules, we provided restaurant counts by brands and market. Both documents can be found or invest on our investor relations webpage under financial information and now I'll turn the call over to Josh.
Joshua C. Long: Good morning, everyone and thank you for joining us today with.
Joshua C. Long: With our Investor event coming up in New York on Thursday.
Joshua C. Long: To use today's call to focus on Q4 and 2023 performance.
Joshua C. Long: Then we'll use Thursdays event to give a longer term outlook on the business, including sharing for the first time long term guidance.
Joshua C. Long: Today's call marks our first quarter reporting under five segments.
Joshua C. Long: Burger King.
Joshua C. Long: Firehouse and international and reporting adjusted operating income.
Joshua C. Long: This shift fully aligns with how we are now managing the business and provides each of our five business unit leaders with even greater autonomy or their strategic decisions and greater accountability to deliver strong returns.
Joshua C. Long: We are also lapping the one year anniversary of our commitment to provide public accountability for reporting on franchisee profitability.
Speaker Change: I'll, let Patrick shared the results in a bit because this was really his bush, but I want to acknowledge our incredible franchisees and their restaurant teams, who are doing a great job driving sales generating cost efficiencies and delivering operational improvements.
Patrick Doyle: We're proud of the progress they've made including delivering average home market franchisee profitability growth of over 30% in 2023.
Patrick Doyle: And we're working to drive continued strength in 2024.
Turning now to results for 2023 comparable sales grew eight 1% and net restaurants grew three 9%.
Patrick Doyle: <unk> and 12, 2% system wide sales growth and seven 5% organic adjusted operating income growth.
Patrick Doyle: For the fourth quarter, we delivered five 8% comparable sales and three 9% net restaurant growth, which drove year over year its system wide sales growth of nine 6%.
Patrick Doyle: This quarter, our organic adjusted operating income was relatively flat year over year, largely due to incremental spending behind our fueled a flame initiatives efforts in the U S.
Patrick Doyle: We also delivered solid overall traffic this quarter with Tim Hortons, Canada, seeing nicely positive traffic and Burger King U S, reaching positive traffic for the first time since the second quarter of 2021.
Patrick Doyle: Warehouse U S. Traffic was also positive while pop is U S and international declined slightly over year over year with international impacted by the conflict in Middle East.
Patrick Doyle: We grew full year global digital sales, 20% to over $14 billion.
Patrick Doyle: Representing over a third of consolidated system wide sales.
Patrick Doyle: We opened 695 net new units during the quarter and 1168 net new openings for the year, resulting in net restaurant growth of three 9%.
Net restaurant growth was impacted by our incremental closures at Burger King U S and a higher mix of express units at Tims, China, which as a reminder, our smaller format units with lower average revenue that are not included in our restaurant count.
Speaker Change: I would now like to turn to our segment results, starting with Tim Hortons in Canada.
Speaker Change: This year, we're celebrating the 60 <unk> anniversary of Tim Hortons in Canada.
Speaker Change: Excellent team kicked off the festivities with the return of our four retro Donuts and is a fun fact, the walnut Crunch has been the best seller of the retro showcase.
Speaker Change: In 2023, Tim Hortons, Canada successfully grew share in sales and traffic year over year, an impressive accomplishment driven by the hard work of the team and restaurant owners to deliver a great experience to Canadians.
Speaker Change: For the fourth quarter, we saw a very healthy balance of check in traffic aided by an operational improvements and strong calendar initiatives all of which drove tims, Canada comparable sales growth of eight 7% in system wide sales growth of nine 3%.
Speaker Change: Our hot Cold and specialty beverage selection continues to gain traction with our guests.
Speaker Change: Sparkling Quenchers helped fourth quarter cold beverage sales grew 19% year over year.
Speaker Change: We also broadened our beverage and baked goods strengths with our Belize collaboration, including Bally's cold brew with infused foam bally's latte and our delicious Bally's Boston Creme donut.
Speaker Change: This partnership proved to be one of our most successful.
Speaker Change: <unk> nicely to traffic growth during the quarter.
Speaker Change: RPM led snacking initiatives like our safety twists and dream cookies as well as our loaded bowls and reps contributed to PM food sales growth of 7% year over year lapping 18% growth in the prior year, so strong year on year results.
Speaker Change: These initiatives also helped us to make progress growing PM food market share to nearly 9% up from approximately 8% in 2022.
Speaker Change: We're also maintaining excellent operations by working closely with restaurant owners to delivering amazing and consistent guest experience.
Speaker Change: The team has been delivering targeted restaurant trainings that address new product builds equipment optimization and the adoption of a single QR code for guests to scan their loyalty and pay for their orders at the same time.
Speaker Change: This helped to drive 9% year over year improvements in drive thru speed of service and important contributor to traffic growth this quarter.
Our digital community of over 5 million monthly active users continues to drive over 30% of sales in Canada in.
Speaker Change: In 2023, 45% of our tims rewards loyalty guests visit us in the morning and returned in the afternoon on the same day and we see an opportunity to grow this number even further through the continuation of targeted personalized offers.
In addition to a strong and loyal digital community. We also have an amazing restaurant owner community that is dedicated to getting back soon.
Speaker Change: Since 1996, Tim Hortons is held in annual Smile Cookie campaign that raised nearly $20 million in the summer and in November we launched our first ever holiday Smile Cookie campaign that raised another 10 million Canadian dollars for 600 local charities.
Speaker Change: This included our very own Tim Hortons Foundation camps.
Speaker Change: Is there a really impressive community achievement for our restaurant owners and from their guests.
Speaker Change: Shifting now to our international segment, which ended the year with over 14700 restaurants over $17 billion in system wide sales and grew systemwide sales 17, 6% for the full year.
Speaker Change: You've heard us say that the international business as an important growth engine for our brands and that is one of the reasons why we're so excited to now have international as its own segment.
Speaker Change: Each brand is well positioned for growth in some of the most attractive global quick service restaurant categories, all aided by the resources and development expertise we've developed over the years through our scaled global Bergen business.
Speaker Change: For the fourth quarter, our international segment grew comparable sales by four 6% and net restaurants, eight 9% driving system wide sales growth of 12, 8%.
Speaker Change: Although comparable sales were still quite solid they were impacted by softening performance in China and select markets in Western Europe continued price moderation and the effect of the conflict in the middle East on upwards of a dozen countries.
Speaker Change: We estimate the conflicts resulted in a one five point headwind to comparable sales and a three point impact to traffic. This quarter, we're not going to speculate on how long this headwind may last and the impacted countries. Our entire focus is on the safety of our team members and our partners.
Speaker Change: Despite these pressures our combination of thoughtful calendar initiatives and high quality core offerings across over 120 markets. We operate in around the world has allowed us to still deliver solid performance in the segment, including growing share in Burger King, France, where guests consider us the preferred option when it comes to value for money and great tasting food credentials.
Speaker Change: In 2023, we grew in over 75 markets outside of the U S and Canada and signed 15 development and Master franchise agreements for 15, new markets, including Tim Horton, Singapore, and South Korea, Firehouse in Mexico, and the UAE and Popeye's in Burger King in Bosnia, which all serve as long term opportunities for our brands.
Speaker Change: Our largest contributors to net restaurant growth. This year included Burger King, China, which delivered 176 net restaurants, followed by Burger King, India, France, and Spain, which collectively contributed 135 units during the year.
Speaker Change: During the fourth quarter, Tim Hortons had new openings in South Korea and Singapore.
Meanwhile, <unk> surpassed the 100 unit Mark in Spain, just five years after opening its first restaurant in November of 2019.
Speaker Change: We also continued <unk> expansion in eastern Europe by opening in the Czech Republic, and recently announced we are bringing our OSM, Louisiana Chicken daily.
Speaker Change: At Firehouse, we just opened our first location in Mexico and are excited to start, bringing our newest brand to more markets around the world.
Speaker Change: At Tim Hortons and Popeyes are partners are building brand awareness in new markets and ramping up the pace of development in.
These two brands contributed to over 45% of net restaurant growth in 2023 and impressive step up from the 10% mix in 2019.
Speaker Change: There are development strength helped drive strong double digit system wide sales growth in the quarter, including over 20% at Tim Hortons International and 55% at <unk> International.
Speaker Change: I'll now turn to our modern image and digital strengths, both of which significantly enhance the experience we offer our guests.
Speaker Change: Given that nearly 90% of Tim Hortons and over 50% of pop up stores were opened in the past five years, we have a very high proportion of modern image restaurants overseas at over 75%, including Burger King.
Speaker Change: International Digital sales grew 20% year over year to represent over 50% of international system wide sales in 2023.
Speaker Change: The ongoing addition of kiosks in many markets around the world is helping to contribute to this growth in digital sales and importantly improves the overall guest and team member experience, while also being more profitable for our franchisees.
Speaker Change: Before I shift to Burger King U S. I would like to discuss our 2024 net restaurant growth expectations.
Speaker Change: Last year, we shared our expectations for 5% plus net restaurant growth in 2024.
Speaker Change: Key factor, it's delivering this level of growth was our expectation that our development in China with accelerated in 2024 off a 2023 levels.
Speaker Change: We now believe that outlook is less certain and have updated our outlook to reflect a lower level of net unit additions in China. This year.
Speaker Change: As a result, we now expect consolidated global net restaurant growth in the mid 4% range for 2024 with growth expected to ramp up over the course of the year and improve into 2025.
Speaker Change: We have a strong belief in China as an attractive growth market for our brands given.
Speaker Change: Given the incredible geographic scope and population of the market success. There requires a serious long term capital commitment from our partners a long term time horizon and a commitment to grow the brand in the face of tough competition.
Speaker Change: In the U S. We've demonstrated our willingness to do what it takes to succeed, particularly as it relates to our Burger King business in the past 18 months and in the U S. We entirely control menu innovation and advertising spending and have demonstrated our willingness to invest significantly behind each of our businesses.
Speaker Change: In China, we rely on our master franchisees for that level of commitment.
Speaker Change: Burger King China is a good business with nearly 600 units and it's a profitable business, but ultimately we're going to need to grow further to compete effectively with the largest players in this market.
Speaker Change: On the Tims business, we believe our partner is going to need to commit more capital to grow that business and exciting way and we believe it's critical that they do so.
Speaker Change: We're working with them both to lay the foundations needed to meet the growth aspirations that we know we're capable of.
Speaker Change: Shifting now to Burger King in the U S 2023 was an incredible year for the brand Burger King U S grew franchisee profitability nearly 50% year over year significantly surpassed our year end 2024 fueled the flame target well ahead of schedule and achieved low single digit positive traffic growth in the fourth quarter.
Speaker Change: And saw significant improvements in operations across the system.
Speaker Change: Virgin use grew fourth quarter comparable sales by six 4% in system wide sales by four 6%.
Speaker Change: Our total net restaurants declined three 7% year over year, driven by elevated gross closures. This year as part of our planned efforts to strengthen the system for the long term for the long term and address the underlying issues of franchisees, who overextended themselves in the last few years.
Speaker Change: We believe most of these closures are behind us and expect a more normalized level of closure activity in 2024.
Speaker Change: Results in the quarter were driven by our guest experience enhancements and strong calendar initiatives like our Royal Crispy reps and have these combo that highlighted our habit your way brand positioning that differentiates us in the category.
Speaker Change: Guest satisfaction will always be a top priority for the system. The dedication of our franchisees to operations is why we were able to increase the product satisfaction of our core products attract more new and lapsed guests and deliver low single digit positive traffic trends during the quarter.
Speaker Change: We are also seeing success in our purpose purposeful marketing of the whopper, including the Whopper jingle and ways to offer campaign. We've taken this one step further with our $1 billion Whopper campaign that launched last week.
Speaker Change: It is designed to let guests helped design. The next whopper through a unique experience that Leverages advanced AI technology brings guests to our Royal Perks, App and lessen Winston Kool prices along the way we.
We've already seen guests create about one 5 million new offers if you haven't seen it yet please download VK app and check it out it's a lot of fun.
Speaker Change: This campaign is one of the many ways, we will accelerate digital adoption to drive higher guest frequency.
Speaker Change: Digital sales grew 40% year over year, resulting in a digital sales mix of 15%, including 27% mix in our company operated restaurants.
Speaker Change: The positive results from our kiosk pilot across our company restaurant portfolio led us to expand our trial and now were testing this new kiosk pilot across over 100 stores and our franchisee system.
Speaker Change: During Q4, we spent $40 million of our $150 million fueled the flame advertising and digital investments.
Speaker Change: This included $37 million deployed towards our marketing efforts in line with the guidance we shared in Q3, leaving.
Speaker Change: Leaving us with $58 million to spend on marketing in 2024.
Speaker Change: Based on our franchisee profitability results to date, we expect that as we enter 2025 and our marketing contribution rolls off franchisee contributions to the fund will step up from 4% to four 5% and ensure we maintain ensuring we maintain our strong share of voice through at least 2026.
Speaker Change: As a reminder, should have average franchisee profitability reached $230000 by year end 2026. This elevated AD fund contribution would remain in place through 2028.
Speaker Change: I'd also like to give a quick update on our $250 million Royal reset program.
Speaker Change: Given the strong early results from our short term refresh program as well as the impact of our pending acquisition of <unk>, We now expect to shift approximately $50 million of.
Speaker Change: Of the $200 million investment previously earmarked for Remodels to an expanded short term refresh initiative.
Speaker Change: As a result, we expect to spend approximately $100 million in total on our refresh program and roughly $150 million on our remodel program.
Speaker Change: We have seen an overwhelmingly positive response to our refresh program from franchisees, who are seeing the results show up in their sales and operating metrics.
The incremental refreshed dollars will be dedicated to participating and be operators and support assets that improve the drive thru and digital experience.
Speaker Change: As a result of the incremental refresh investment we now expect to positively influenced more than 6000 restaurants.
Speaker Change: Early results of the remodel program also continued to exceed program benchmarks with average sales uplifts of approximately 20% net of control for the roughly 50 remodels that have been opened for at least six months.
Speaker Change: While we're really encouraged by these results I'd note, we would expect the uplift to migrate lower as the number of remodels growth and overall scope shifts.
Speaker Change: That said there are clearly outperforming what we and our franchisees underwrote our investments for it and we're excited to continue the program in the year ahead.
Speaker Change: In 2023, we completed 264, Remodels, one third of which were normal course and outside of the Royal reset program and we exited the year with 46% modern image.
Speaker Change: This year, we expect to ramp up our remodel program and plan to complete nearly 400 remodels with over 80% committed to full remodels or scrape and rebuilds.
Speaker Change: And of course, we're aiming to have our sizzle format and as many of these restaurants as possible.
Speaker Change: A couple of weeks ago I was in Philadelphia in North Carolina, visiting two of our firsthand modern image sizzle restaurants, with Tom and team and I can tell you I am very excited about this new restaurant format.
Speaker Change: A couple of weeks ago I was in Philadelphia in North Carolina, visiting two of our firsthand modern image sizzle restaurants, with Tom and team and I can tell you I am very excited about this new restaurant format.
Speaker Change: <unk> is not only beautiful it also really puts both the team member and guest experiences at the heart of the restaurants design.
Speaker Change: It is awesome to see the diligent execution of our team and franchisees over the past year translate into positive results, we have more conviction than ever in our plan to reclaim the flame, which is why we are so confident in our pending acquisition of <unk> restaurant group.
Speaker Change: This acquisition offers a compelling strategic opportunity to accelerate our modeling our modern image efforts with a clear path to 75% modern image by 2028 to be funded entirely by <unk> operating cash flows even after our interest payments.
Speaker Change: That 75% expectation is up from 65% that we would've achieved just based on our existing reclaim the flame remodel funding program.
Speaker Change: Importantly, the acquisition also enables us to re franchise restaurants into the hands of local strong owner operators, many of whom we plan to develop within the existing Carol's operator network.
Speaker Change: We see firsthand the benefits of being a smaller operator the numbers speak for themselves.
Speaker Change: Operators with less than 50 restaurants have 51% modern image and delivered average franchisee profitability of $15000 per store above that of franchisees in the 50 plus restaurant group in 2023.
Speaker Change: Not surprisingly they are also generally better capitalized.
Speaker Change: I cannot stress enough that while accelerating our modern image efforts is a key benefit of bringing carol's together with Burger King I think what makes me Patrick and Tom just as excited as our ability to further accelerate change in the franchisee community and get even more great operators the opportunity to become great franchisees.
Speaker Change: I'll save the rest of my comments on Burger King U S. Until later this week at our New York Investor event.
Speaker Change: Turning now to apologise CME and team are one year into they're easy to love plan.
Speaker Change: U S grew grew comparable sales by five 8% and net restaurants by four 5%, resulting in another quarter of double digit system wide sales growth of 11, 2% and a record digital sales mix of 25% up from under 20% in 2022.
Speaker Change: Our November expansion of wings into a five flavor platform has quickly established us as the number three wings player and quick service restaurants in the country.
Speaker Change: And helped drive traffic across digital channels like delivery and mobile order and pay.
Speaker Change: We're pleased to see this positive impact, but no there is more incrementally to unlock in 2024 and beyond starting with driving mass awareness.
Two days ago Popeye's ran its first ever Super Bowl commercial featuring well known comedian Ken Zhang and a funny and impactful at that nature, everyone watching the game with no Popeye's now has the best wings in America.
Speaker Change: We have also seen extensive media coverage about the Ed so great execution by the team to bring mass awareness to this important growth platform.
Speaker Change: We are also in the early stages of implementing our easy to run kitchens that popeye's that will transform the guest and team member experience.
Speaker Change: These retrofits provide new equipment updated kitchen layouts technology upgrades and process simplification all geared to help solve fundamental fundamental operational hurdles that impacts speed and overall guest satisfaction, while upholding our excellent product quality.
Speaker Change: We are now transitioning from initial pilots to more scaled test clusters I'll be visiting one of these tests clusters in La later this month and I'm looking forward to seeing the progress the team is making firsthand.
Speaker Change: At Popeye's were also focused on building a system a best in class operators to deliver a more consistent experience while driving convenience.
Speaker Change: We made solid progress towards this goal by achieving another impressive year of unit growth with growth across a broader set of partners and most of our openings coming from top scoring operators. We saw clear progress in 2023 against our strategic plan easy to love and this gives us confidence that the priorities in place are the right ones to ultimately drive franchise profitability.
Speaker Change: <unk> to $300000 by 2025.
Speaker Change: Lastly, firehouse subs, which grew comparable sales in the U S. Three 8% and increased system wide sales by seven 4%.
Speaker Change: There is a lot of excitement among current and new franchisees to grow this incredible brand and we're seeing good progress in both the U S and Canada and.
Speaker Change: In Canada, we expanded from Ontario, this quarter opening restaurants in three different provinces in Western Canada with incredible local operators.
Speaker Change: Earlier, this year, Mike and team leaned in to the brand's public safety routes and launched an exciting addition to our development incentive program to attract veterans and first responders, who want to continue to serve their community in a new way as part of the firehouse family.
Speaker Change: We're looking forward to seeing firehouses development ramp up this year as we bring the brands flavorful subs to more locations across North America.
Speaker Change: We're also focused on being a leader in digital and saw strength in our mobile order and pay channel, which helped to drive digital sales to a record 40% of system wide sales and exciting accomplishment driven by the continued enhancements and investments the team is making to fuel the brand's overall tech strategy.
Speaker Change: As a result of this great work, we've seen close to one fifth of all transactions coming from our first party mobile order and pay or web ordering platforms. During some of our recent promotions.
Speaker Change: With that I'll now turn it over to Matt discussed our financial results for the quarter net thanks, Josh and good morning, everyone for the fourth quarter, our global system wide sales grew nine 6% year over year, while our adjusted.
Matthew Dunnigan: Operating income was relatively flat up <unk>, 5% year over year, and our adjusted EPS was up four 4% organically.
Matthew Dunnigan: The primary drivers of the difference between system wide sales growth and organic adjusted operating income growth, where our $40 million of support behind our fueled the flame program at Burger King U S and an $11 million true up to trade expenses in our Tim Hortons consumer packaged goods business.
Matthew Dunnigan: Combined these had an impact of negative 7% on a year over year growth in adjusted operating income for the quarter.
Matthew Dunnigan: For background and the Tim CPG business. We are typically held steady run rate of promotional spend as a percentage of revenues that has been tight versus industry, but in 2023 soft consumer price sensitivity and competition in Canada intensify considerably as the year progressed, which resulted in a greater than expected investment required to maintain our leading <unk>.
Speaker Change: Sure we.
Speaker Change: We successfully held our share but realized an $11 million true up to close our year to date promotions from prior quarters.
Speaker Change: Given the continued pressures across Canadian retail, we expect our trade investments to remain elevated in 2024.
Speaker Change: Aside from this impact to our Canadian CPG business, our underlying timber supply chain business has continued performing well with stable margins over the past few quarters.
Speaker Change: For the fourth quarter and full year 2023. This business grew positive mid single digits year over year.
Speaker Change: In line with the healthy traffic and volume growth that we've been driving across Canada.
Speaker Change: Our adjusted operating income was also impacted by higher segment, G&A and increased bad debt expense of $13 million, primarily impacting our Burger King segment as an expected result of finalizing a few portfolio restructurings in the quarter.
Speaker Change: Segment, G&A, which included equity based compensation, a $53 million came in at $176 million up $21 million year over year.
The increase in segment G&A, largely reflects higher compensation related expenses associated with hiring mainly across operations and franchising.
Speaker Change: Shifting to EPS, our fourth quarter adjusted earnings per share was <unk> 75.
Speaker Change: Compared to <unk> 72 last year, representing representing an organic increase of four 4% year over year.
Speaker Change: Our adjusted EPS also included a <unk> <unk> per share net benefit related to discrete non cash tax items, which was offset by a negative <unk> <unk> per share headwind from the combined impact of our Burger King U S fueled the flame investment and true up related to our CPG trade spending attempts.
Speaker Change: Our adjusted EPS was also impacted by higher interest expense due to higher U S benchmark rates, which flow through to approximately 20% of our debt.
Speaker Change: Turning now to capital structure and cash flow.
Speaker Change: During the quarter, we generated $356 million in free cash flow, reaching $1 2 billion for the year are.
Speaker Change: Our free cash flow generation allowed us to continue executing on key aspects of our capital allocation policy, including $56 million of investments behind reclaim the flame at Burger King U S and returning roughly $634 million of capital to shareholders through our dividend and share repurchases.
Speaker Change: During the quarter, we repurchased and retired five 9 million shares of our common stock for $385 million and today, we declared our Q1 dividend at <unk> 58 per common share and unit targeting at $2 32 per share dividend for 2024 up five 5% year over year.
Speaker Change: As part of replay the flame this quarter, we deployed $40 million towards our fueled the flame advertising and digital investments and $16 million of capital toward our Royal reset program.
Speaker Change: Including $8 million for our Royal refresh program.
Speaker Change: We have $77 million of fueled the same investment left to deploy in 2024 and $189 million of Royal reset remaining.
Speaker Change: Our free cash flow was also impacted by higher cash interest impacting the 20% of our debt that is not fixed however.
Speaker Change: However, free cash flow metric does not reflect the benefit of our FX and interest rate hedges, which added approximately $49 million of positive cash flow in Q4.
Speaker Change: We ended the year with a liquidity position of approximately $2 4 billion.
Speaker Change: Including $1 1 billion of cash and saw our adjusted EBITDA and net leverage ratio remained consistent at four eight times, given our share repurchase activity in the quarter.
Speaker Change: Looking ahead, we remain confident of reaching our mid <unk> target net leverage ratio by the end of this year, even after accounting for the pending acquisition of <unk>.
Speaker Change: Now I'd like to wrap up with some guidance for 2024 on G&A capital expenditures and interest expense.
Speaker Change: Excluding the pending acquisition of carols, we currently expect segment G&A between $680 million and $700 million.
Speaker Change: Including equity based compensation between 190 and $200 million.
Speaker Change: Following the ramp up of our G&A investments over the past few years, we exited 2023 and a solid place and expect our level of segment G&A on an absolute dollar basis to be more consistent from quarter to quarter in 2024 as compared to 2023.
Speaker Change: We currently expect total aggregate 2020 for capital expenditures tenant inducements and remodel incentives, which as a reminder flow through working capital to be roughly $300 million.
Speaker Change: Primarily driven by continued Burger King U S image investments like our extended Royal refresh program and remodel investments increased remodels at Tims in Canada technology investments across segments and other brand led growth initiatives like our firehouse development incentive program.
Speaker Change: Finally based on the current interest rate environment, We expect 2024 net interest expense, excluding the acquisition of <unk> in the $555 to $565 million range based on an average so for rate of four 6% flowing through to approximately 20% of our debt.
Speaker Change: With that I'll now hand, it over to Patrick for some additional thoughts on the business. Thank.
Thank you, Matt and good morning, everyone.
Patrick Doyle: Before I talk about the really exceptional improvement in franchisee profitability year over year I'd like to give you my perspective on the expectations, Josh shared for 2024 net restaurant growth.
Speaker Change: Excuse me.
Patrick Doyle: Last year, we shared our plans to reach 5% plus net restaurant growth in 2024, there are a number of opportunities to generate that growth Burger King U S. Returning to normalized closures.
Patrick Doyle: Firehouse subs ramping up development continued acceleration in growth of all brands in our international markets.
Patrick Doyle: And acceleration in China, specifically with Burger King recapturing pre pandemic levels of growth are.
Patrick Doyle: Burger King U S firehouse and broader international assumptions are still very solid.
Patrick Doyle: Tom and team made great progress last year, taking the necessary steps to close underperforming restaurants to improve the long term health of the system.
Patrick Doyle: As a result, we should see a roughly 50 basis point year over year improvement from lower gross closures at BK U S. In 2024.
Patrick Doyle: At firehouse, Mike and team have already turned on the development engine in Canada and are setting up the U S for growth through new incentive programs that really lean into fire houses strong community ties mean.
Patrick Doyle: Meanwhile, David and team signed development agreements in four markets and are actively working to continue building the brands overseas pipeline.
Patrick Doyle: But we're being practical about the pace of growth, we're forecasting in China as Josh noted.
Patrick Doyle: Given each of these dynamics, we believe it's important to be upfront about near term implications. So I think Josh as perspective of potentially slower development in China for the balance of this year is accurate.
Patrick Doyle: Pending on pace of capital improvements in the system, there may be upside to our mid 4% net restaurant growth range for 2024.
I'll wrap up today on franchisee profitability, where our teams and franchisees have really delivered terrific results.
Patrick Doyle: Last year, we told you that our long term growth as a company is entirely dependent on the growth and profitability of our franchisees.
Patrick Doyle: We reminded you that while our franchisees are responsible for being great operators and stewards of our brands as their franchise or we are responsible for giving our franchisees the opportunity to generate compelling financial returns.
Patrick Doyle: If we can deliver great returns for our franchisees the entire flywheel of future reinvestments moves much more smoothly.
Patrick Doyle: Franchisees are excited to invest in their restaurants, great operators not yet franchisees are excited to work hard for the potential opportunity to become a franchisee one day and deliver over and above guest experiences and guests received a consistent great experiences. They deserve every time they visit.
Patrick Doyle: <unk> order from one of our restaurants, we committed to publicly sharing four wall EBITDA for our home markets annually.
Patrick Doyle: So that you our investors and our franchisees can hold us accountable to continue pushing forward and making progress in 2023, we made a lot of progress.
Average home market franchisee profitability is up by 30%, while our profitability is the franchise or is up 9%.
Speaker Change: That's awesome.
Speaker Change: We need to deliver compelling profitability growth for our shareholders and we're doing that our franchisees need to realize compelling profitability growth to continue to invest in their business and they are seeing that.
Speaker Change: This is exactly how this is supposed to work at Tim Hortons in Canada average four wall restaurant EBITDA in 2023 was over 280000 Canadian dollars up nearly 30% from $220000 a year ago.
Speaker Change: King <unk> saw average restaurant profitability of over $205000, representing nearly 50% growth from $140000, a year ago, and putting US well ahead of the 2024 fueled the flame threshold of $175000 to unlock.
Speaker Change: A higher AD fund rate from franchisees for the coming years.
Speaker Change: At Popeye's U S average four wall restaurant EBITDA.
Speaker Change: Grew approximately 17% year over year to roughly $245000 compared to $210000 last year, and then firehouse subs, we saw a 38% increase in restaurant profitability, reaching $110000 compared to $80000.
Speaker Change: A year before.
Speaker Change: While these results are really impressive, especially in just one year, we need to continue demonstrating a growth path. This year and in future years. There was a lot of opportunity for our franchisees still ahead of us to.
Speaker Change: To achieve this we need to further improve operations, we've said it before but better operators have better profitability on.
Speaker Change: On average a operators for each home market generated restaurant profitability that was 30% higher than the system average in fact, Tim's popeye's and firehouse operators have already achieved our long term profitability targets, which I plan to share with you on Thursday.
Speaker Change: And as a result, these franchisees are generating strong unlevered paybacks.
We strongly believe that we must deliver our part of this equation, but ultimately execution is in the hands of our franchisees and those that do it better make way more money that should be inspiring for everyone I'd like to Echo Josh is comments around franchisee profitability.
Speaker Change: Proud of the progress our teams and franchisees made this year delivering results like this does not happen overnight. It requires hard work patience and collaboration and dedication.
Speaker Change: We will continue to move the ball down the field in the year ahead with that let's take your questions.
Speaker Change: Thank you.
Speaker Change: Followed by the one if you'd like to ask the question and as Julia devices, Amit would likely win at your attentiveness.
If you change your mind. Your question has already been said you can withdraw your question. The question is now funded by the number today.
Speaker Change: Our first question today comes from Brian Bittner of Oppenheimer. Please go ahead. Your line is open.
Brian John Bittner: Okay. Thank you and good morning.
Brian John Bittner: The updated franchisee profitability for your home markets was obviously very impressive.
Brian John Bittner: Particularly with Burger King U S up 46% versus last year and it's already way ahead of your 2004 targets by $30000 per unit. So it seems the AG contribution step up is obviously inevitable, but maybe Patrick you can unpack how all these.
Brian John Bittner: These better metrics can help fuel the Burger King momentum moving forward is it just momentum drives momentum or or are these metrics going to help you unlock more remodels or anything else to point out and secondly, it does seem like between <unk> and <unk> of this year, you've acquired a 127 Burger King.
Brian John Bittner: <unk> restaurants, which is surprising it's happening at a time that franchisee profitability is exploding. So can you just help us understand the reasoning or perhaps the strategy behind these these acquisitions going into the <unk> acquisition. Thanks, Yeah, Brian So Brian there are really a couple of things on that first of all clearly.
<unk>.
Brian John Bittner: Meant some drive this momentum the flywheel is working.
Brian John Bittner: The other thing that I would add to your question is.
Brian John Bittner: 20%.
Brian John Bittner: Return on.
Brian John Bittner: On Remodels that.
Brian John Bittner: That we referenced and some of you ive seen some speculation out there.
Brian John Bittner: Perhaps those numbers weren't as good as we had been expecting that we'd talked about 12% because we haven't shared those yet in fact, we wanted it to go longer because frankly, the numbers were coming in so strong.
That we really needed to see it go a bit longer before we were ready to believe it we believe that will work its way back down a bit over time as we get more numbers in but there is a lot of momentum.
Brian John Bittner: That business right now and look ultimately.
Brian John Bittner: As franchisees get more confident about this business as they get more confident about the return that theyre going to get for remodeling restaurants from.
Brian John Bittner: From building new restaurants.
Brian John Bittner: All of that generate system sales growth, which generates more advertising dollars.
Brian John Bittner: Even off of a comparable percentage of sales so but the momentum does build on itself.
Brian John Bittner: Our job is to keep that going and I guess, what I would say is 205 plus.
Brian John Bittner: It is great progress, but we're not there yet right I mean, it's got to be higher than that and we're looking at plans for how do we continue to increase that obviously, we're excited about the momentum of the business, but we're not satisfied.
Brian John Bittner: With the level that we're at yet and I guess the last thing are the last question that you asked was about Corp.
Brian John Bittner: Corporate restaurants, and the addition of restaurants at the end of the quarter, that's simply from some of the work outs.
Brian John Bittner: That you read about last year.
Brian John Bittner: We provided a home for some of those restaurants.
Brian John Bittner: As we worked through those.
Brian John Bittner: Those three bankruptcies last year most of them already.
Brian John Bittner: Those were sold to smaller great franchisees, we were excited.
Brian John Bittner: To have joined our system.
Brian John Bittner: Some of the restaurants that you saw.
Brian John Bittner: On our books at the end of the year will still be sold off soon and we expect that number is going to work back down.
Brian John Bittner: Over time, but.
Brian John Bittner: We're fine holding those until we find a great long term operator for those franchisees, we're going to work through those expeditiously, we don't expect to hold those particularly for the long term there are a few in south Florida that we may.
Brian John Bittner: But but ultimately that's kind of a transitory thing.
Speaker Change: Brian if I can just add on the first part of your <unk>.
Speaker Change: How does this flow back into the system I think there was some really kind of practical day to day things that are happening that are fueling our growth and I think as we're seeing sales and profitability improve that also allows our operators to increase staffing levels in the restaurant. So we've got better staffing. It means our speed is getting faster, we're also being able to expand operating hours.
Speaker Change: Again that helps a lot and the improvements in the franchise profitability are also allowing our operators to reinvest.
Speaker Change: And some of these initiatives like the short term Royal refresh, where we're getting new technology in the restaurants, new equipment I'll tell you I see it when I'm out in the restaurants with Tom There's a lot of improved technology in the restaurants, and we have a lot of updated new pieces of equipment and I think our guests are seeing that and they are feeling that and improved product quality that we're <unk>.
Speaker Change: Getting out of the new equipment. So there's a lot of things that sort of drive the flywheel forward and I think we're benefiting from a number of them right now.
Speaker Change: Thanks.
Speaker Change: Our next question today comes from Jeanine Gila of Bernstein. Your line is open.
Good morning.
Jeanine Gila: Can you please elaborate maybe a little bit more on the strategic rationale persisting the budget from Remodels to refresh maybe if you can also help us understand the uplift post refresh that youre seeing today.
Yeah.
Jeanine Gila: Thanks, Daniela so as I mentioned, we saw a ton of excitement within the system, our franchisees really like that short term real reset and we started to make those investments and we started to see a big impact on those restaurants. So that all of the restaurants that we were able to touch.
Jeanine Gila: With upgrades with new equipment, we started to see those outperforming the rest of the system and I think that generated a lot of discussion between common team and the franchisees on how we can do even more of that so we decided to shift a little bit more money to that just based on the returns that we were seeing and on top of that.
Jeanine Gila: You think about once we do the <unk> acquisition Carol's would've been a meaningful part of that in the first couple of years of Remodels and now that's taken out of the program. So it frees up some capital for us to do other things and so we're deploying it in some of the things that we can do to impact as many restaurants as possible as quickly as possible and keep deposit performance going.
The next question comes from John <unk> of Jpmorgan. Please go ahead.
Jeanine Gila: Yes.
John: Hi, Thank you I think in your prepared.
John: Remarks, correct me, but I heard some yes.
John: Softness or perhaps slowing in Burger King in Western Europe. So I wanted you to elaborate kind of on those comments and if you think they are specifically related to the middle East content Con.
John: Conflict and if you can juxtapose those comments with what you said about fiscal 'twenty three development, where some of the highest rates of development or in France, and Spain, I think specifically and whether we could potentially see slower overall unit development same store sales have slowed.
John: In 'twenty, four and perhaps 25.
Speaker Change: Yes, John Thanks for the question a few thoughts on this one so we did see a bit of a sequential slowdown in terms of same store sales in western Europe I think some of that was expected just as youre seeing inflation decelerate a bit. So I think that's the biggest driver of what we're seeing there, though I will.
John: Say, we still did pretty well in markets like France, which has been a fantastic market for us it was a little bit slower, but we were still positive and we are still taking share. There. So I think we're happy with the business performance, we don't see any any particular correlation with the conflict in the least in terms of the performance that we're seeing in western Europe.
And I think on your last point John in terms of development.
John: This is true that France, and Spain are some of the bigger contributors to development and we expect that to continue into 2024, we're not seeing any big impact on development expectations in Western Europe. So we expect continued positive progress there this year.
John: Okay.
John: Our next question comes from David Palmer of Evercore ISI.
David Palmer: Please go ahead your line is open.
David Palmer: Thanks, Good morning, and great and great job with the North America brands, but I wanted to ask you about.
David Palmer: Tim Hortons supply chain and the CPG coffee profit.
David Palmer: Over the last couple of years I think the profit for that.
David Palmer: It has been.
Speaker Change: Something like 3%, there's been some quarterly volatility like you've talked about it I'm wondering what is the profit outlook for these businesses or that combined lined item.
Speaker Change: Sales net of cost of sales for 'twenty, four and what's the what's the future outlook for this business in your view.
Speaker Change: <unk>.
Speaker Change: It's Matt here. Thanks for the question, yes, So I think the way.
Matthew Dunnigan: Just to point out for everyone. The CPG business and supply chain, both roll up into our sales cost of sales lines and so those are together I think for 2023 for the full year. What you saw in terms of our margin there was around 18%.
Matthew Dunnigan: And if you are.
Matthew Dunnigan: Adjust for the true up that happened in Q4, the Q4 margin levels were kind of at a similar place.
Looking forward I think given normal seasonality that we've seen in the beginning of the year. We would expect Q1 to come in at kind of a similar level of margin, but then I think for the full year in 2024, we see an opportunity to recover to more normalized levels.
Matthew Dunnigan: That we saw in 2022.
So I think overall, though we feel good about the direction of the business and the core margin profile that we're seeing.
Matthew Dunnigan: In the supply chain business and its tracking very nicely in terms of organic growth along with the Tim Hortons business across Canada, and the traffic and volumes that we're driving there the CPG business as we called out.
Matthew Dunnigan: <unk>.
Matthew Dunnigan: It had very challenging conditions.
Matthew Dunnigan: Through especially into the second half of the year.
Matthew Dunnigan: So that's what drove the true up of the promotional expense there.
Matthew Dunnigan: To continue spending a bit more in that business, but we still have leading market share we held our market share over the past couple of quarters and we've also brought in a new team and experienced leadership.
Matthew Dunnigan: And I think we have a good outlook on being able to deploy those promotional investments more effectively going forward and more of an even cadence in 2024.
Speaker Change: Thanks for the question.
Speaker Change: Nick Thank you we have Dennis Geiger of UBS your.
Dennis Geiger: Your line is open.
Dennis Geiger: Great. Thanks, and good morning, guys.
Dennis Geiger: <unk> progress for the BK and Tim's brands in their home markets wondering off the back of some of the comments on the CPG business with Tims in Canada and the consumer there. If you could talk a little more about what youre seeing from your customers across the U S and Canada.
Dennis Geiger: As it relates to those two brands beyond CPG.
Dennis Geiger: With the low income consumer or other behavior changes to call out.
Dennis Geiger: I guess more importantly, if you could highlight kind of how those two key brands in their home markets are positioned if we're in a more challenged spending environment what that means for the brands for market share, perhaps anything on that front. Thank you.
Speaker Change: Hey, Dennis good morning, So in terms of what we're seeing with the consumer overall, we're not seeing big behavioral changes I would point out a couple of things from Q4 that are most relevant in our mind one within the Tim Hortons business in Canada, We pointed out that we had really solid same store sales.
Speaker Change: But it was it was combined with a really good mix of traffic we've seen that throughout the year.
Speaker Change: Half and half mix, which means we had solid traffic and I think thats the consumer in Canada reacting to some great new products and really great operations. So we haven't seen a big deviation from the Canadian consumer and then similarly with.
Speaker Change: With Burger King in the U S. Our biggest business there.
Speaker Change: We noted that traffic was positive in Q4 for the first time in a while so we've seen pretty good health within the consumer in the U S. <unk>.
Speaker Change: <unk> space, and we're pretty happy with it.
Speaker Change: So no big behavioral shifts that I would point to.
Speaker Change: In terms of how our brands are positioned.
Speaker Change: I always go back to the fact that our brands are in a great place for any part of the cycle, we offer great value high quality products and convenience I think thats true across our entire portfolio. So I think we're already really well positioned and as long as we keep doing what we're doing which is focusing on the basics of the industry trying to do everything right.
Speaker Change: Around quality service and convenience.
Speaker Change: That's what's driving our results right now and I think thats going to serve us well and allow us to keep driving good results into 2020 for regardless of what happens with the overall consumer environment, Yes, maybe just one quick thing to add to.
Speaker Change: Josh as comments on the U S and decay on the positive traffic, we did see positive traffic across all income groups as well great. Thanks, Matt.
Speaker Change: The next question comes from Andrew Charles of TD Cowen.
Andrew Charles: Please go ahead.
Andrew Charles: Great. Thank you.
Andrew Charles: Josh Patrick if I just take the last question maybe ask it a different way you know curious about your level of confidence of sustaining BK U S. Canada traffic growth in 2024 really specific to <unk>, recognizing and what could be an intensified value focus for the U S industry in 2024 suggested by your largest competitor. Thanks.
Andrew Charles: Yes.
Speaker Change: Thanks, Andrew I'll share a couple of thoughts Patrick feel free to jump in as well.
Well like I said I just think there's so much stuff that Tom and team are doing that is focus on the basics thats going to allow us to drive traffic not just this year, but for many years to come.
Speaker Change: We're improving our operations, we're doing really cool things focusing on our core equities, whether it's the it's the new commercials about it Ain't the same without the flame focusing on Walker with $1 million Whopper, It's a lot of stuff that's going to create consumer excitement around our strongest core equities I think that's wonderful and we're also doing a lot more remodels I mentioned, we're going to go from.
Speaker Change: From just over 250 Remodels to 400 Remodels those are the kind of things that drive more customers into your stores and we're doing more and more of them and doing them really well. So that's the stuff that I think gives us a lot of confidence in the outlook for this year and beyond.
Speaker Change: At Tims.
Speaker Change: I think we noted we're now I think in year five of back to the basics and excellent and the team up there are doing a really nice job driving growth that they are doing it through all the way as we've been talking about with PM food <unk> beverage and we have a pretty exciting pipeline of.
Speaker Change: New innovations that are coming on those fronts in 2024, and I think there are going to keep bringing our guests back even more often.
Speaker Change: Yes, I guess, the only thing I'd add is I mean first at Burger King.
Speaker Change: Youre, just seeing more and more things that we're getting done that are going to contribute to the growth so more remodels coming on.
Speaker Change: Working through some of the tough situations with some franchisees.
Speaker Change: Continued great advertising and most importantly, franchisees getting more and more aligned and excited about the progress that we're making in the brands.
Speaker Change: That's that increase in profitability.
Is not only important in the absolute but it's important in the belief of our franchisees and what they're going to be able to accomplish with the brand. So you can feel that momentum building around BK in the U S.
Speaker Change: On the tims side.
Speaker Change: As Josh said the continuation of returns from the investments that they've made a number of years ago as they've got everything right in that business.
Speaker Change: I love that business the team is leading it exceptionally well.
Speaker Change: The franchisees are doing well their profits being up the way. They were was was terrific year over year still more progress to be made there.
But just very very excited about the strength of that brands.
Speaker Change: And and glad that.
Speaker Change: I don't have to compete with them. They are really good. They are really really good in Canada doing a lot of things right.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Chris <unk> of RBC capital markets.
Chris: Please go ahead.
Chris: Thanks.
Chris: So on the development outlook.
Update that you provided you highlighted the slower than expected China growth this year.
Chris: Patrick and Josh I know you touched on this briefly in your prepared remarks, but can you maybe expand a bit more on what our western markets, you're most confident will contribute to.
Chris: The acceleration in development this year, even if it is a little bit lower than you previously thought.
Patrick Doyle: Yeah, Thanks, Chris So.
Josh: A few different things that I think are going to be helpful. This year and Patrick I think mentioned a few of them earlier, but I'll give a quick recap as well.
Speaker Change: In terms of.
Speaker Change: BK U S. That's definitely one of our focus areas we had.
Speaker Change: A bit more closures in 2023.
Speaker Change: Based on the incredible sales and improvements in profitability that the team has been driving that gives us a lot of confidence that we're going to be able to improve that.
The unit trajectory there in a meaningful way this year, so that feels like it's on track and moving in the right direction. The second big bucket is firehouse and we've talked a lot about some of the new development programs. We've put in place we're getting a lot of uptake on those and we're starting to see the pipeline fill up in a lot of sites moving through those pipelines.
Speaker Change: So I'm pretty confident we're going to see a meaningful step up in the firehouse development both in the U S and Canada, we had some incredible openings out in Western Canada in Q4, and I think there is a lot of excitement for the brand across Canada. So those two things feel like they are moving in the right direction.
Speaker Change: We've got some good stuff happening in international across our new brands.
Speaker Change: Especially some of the stuff that we're doing with popeye's in tims, we have some of the popeye's markets that are ramping up I think in places like popeye's in India or pop is in the U K.
Speaker Change: A number of those markets popeye's in France is another great. One we were there just a few months ago.
Speaker Change: They're doing a really nice job. So theres a lot of good pop is markets that are ramping up and I think we will see some some positive momentum on in 2024.
Speaker Change: The other side of that obviously is what's going on in China, and I think there is a couple of factors that are going in there. One we've seen a continued shift to some of these smaller express units within tims.
Speaker Change: As we mentioned we don't count.
Our restaurant counts so that has some impact on the API and we also do believe that there needs to be some more capital put into that business to really realize its potential.
Speaker Change: And then on <unk> China.
Speaker Change: You probably saw we actually did see a step forward in 2023.
Speaker Change: We're up to around 176, I think net new units for the year.
Speaker Change: But I think there is some question on the outlook and kind of appetite and alignment for growth there.
Speaker Change: That's impacting our outlook for.
Speaker Change: For the full year, so that's sort of the puts and takes of it which we said we think gets us to around four 5% and we will keep updating you throughout the year as we get more visibility to where that's likely to land.
Speaker Change: I would add is look we've got we've got longer term confidence in net unit growth. We really do this is this is simply about.
Speaker Change: China and how much capital is available to grow.
Speaker Change: Near term this year.
Speaker Change: All of the rest of the things that we have looked at that are going to generate unit growth are very very much on track.
Speaker Change: Our next question comes from Brian <unk> of Morgan Stanley.
Brian John Bittner: Please go ahead your line is open.
Brian John Bittner: Yes. Thank you thank you and good morning.
Brian John Bittner: <unk>.
Brian John Bittner: And Burger King U S. In the fourth quarter, how much do you think I know theres a number of initiatives that are working very well how much of it is though do you think was a consequence of the marketing you did.
Brian John Bittner: Also do you think that kind of the <unk>.
Brian John Bittner: Marketing investment in 2004 will look similar with respect to timing or what else do you think was sort of a swing factor there in the fourth quarter.
Speaker Change: Hey, Brian Good morning.
Brian John Bittner: So in terms of BK U S in the fourth quarter.
Brian John Bittner: It's hard to quantify the exact breakdown, but I do think there was a positive impact from the advertising spend for sure. We are investing more and I think the team is doing a wonderful job on.
Brian John Bittner: On the effectiveness of that advertising, but I also think there is a big impact there from operations is one of the things that's underappreciated, but we're seeing a big improvement in the quality of operations and our franchisees are doing a fantastic job there and we think thats that.
Brian John Bittner: A big part of the overall comps for the year potentially up to about half of the comps for the year, we think could be due to operational improvements. So I'd say, that's the other largest factor in our mind in terms of the 2024 outlook as we mentioned in our earlier remarks, we're about caught up in terms of where you would expect us to be in terms of that.
Brian John Bittner: <unk> spend in the program to date. So I think we have just under $60 million left to spend.
Brian John Bittner: In 2024, we're probably we're not ready to give an exact pacing of that throughout the quarters quite yet, but I would hope it would be a little bit more even than what we saw in 2023.
Mr. Mitchell: The next question is from Mr. Mitchell of Bank of America. Your line is open.
Mitchell: Great. Thank you.
Mitchell: Okay.
Mitchell: I just wanted to ask about just a point of clarification and then a quick question.
Mitchell: I'll start with the question first Dan you talked about positive chopped up.
Mr. Mitchell: And at Burger King and I wanted to go down there, but I'll bet.
Mr. Mitchell: Okay, you did close stores this year and historically, what we've seen store closures can you tell me.
Mr. Mitchell: In terms of positive comps, so I'm trying to understand if we think through kind of that balance of unit closures versus positive traffic in the remaining stores.
Mr. Mitchell: If you saw any benefit from that yet.
Mr. Mitchell: For our or closing lower performing stores.
Mr. Mitchell: One question and then just quickly the clarification was on China, and you said Youre working with.
Mr. Mitchell: Kim Zimmer partners.
Mr. Mitchell: But what does that mean exactly if youre not planning on committing capital as you are in the U S.
Mr. Mitchell: Okay.
Speaker Change: Yes, Sarah Thanks for the questions.
Speaker Change: The first one in terms of traffic.
Speaker Change: A couple of comments I would just make there.
Speaker Change: There if you look at the sequencing through the year.
Speaker Change: We have been taking some closures throughout the year and so while there may be some positive impact of that we don't see it as a super clearly and I think what's most striking to me at least as we saw that very consistent movement in a pretty pronounced way in terms of the trajectory of our traffic right. We went from.
Speaker Change: From a pretty negative place up to low single digits negative flat and then quite quite.
Speaker Change: Quite improved kind of positive low single digits in Q4, So I think that traffic improvement is really outpacing anything you'd expect to see related to the peso closures there.
Speaker Change: And then on China, we kind of talk through some of the factors there.
Speaker Change: Definitely working closely with our partners. We obviously have as I've mentioned, we have really big ambitions for what we think we should do in the market and what we think our brands can accomplish a lot of different ways that we work with our partners.
Speaker Change: That.
Speaker Change: <unk> operations and profitability and capital and we're working through all those different options with them. We don't have anything more to share on it quite yet today, but will bring anything back as soon as we do.
Speaker Change: Next we have Brian Mullan of Piper Sandler. Please go ahead.
Brian Mullan: Thank you and just a question on top is specific to the U S.
Brian Mullan: You just update us on the simplifying the operations journey that you're on maybe touch on what the key priorities are for.
Brian Mullan: For 2024 as part of the plan and related I ask because the unit growth is very solid already at four 5% last year, but is the thought that you would actually be able to accelerate that unit growth pace once more and more operational improvements are made.
Speaker Change: Thanks, Brian So in terms of where we are on an improving.
Brian: Improving operations, especially around what we've called our easy to run kitchens. So throughout 2023, we were focused on.
Brian: Improving the model kind of making sure we had the right the right combination of elements and that easy to run kitchen, whether that's software improvements or new pieces of equipment, new procedures, New technology, and I think we've got that increasingly well refined through those early pilot restaurants, what we're working on now is starting to ramp up deployment in clusters. So one.
Brian: The ones that I mentioned is out in California. That's been one of the first places that we've got a lot of interest from franchisees. So we are going to go and do a larger deployment and the cluster in California, and then we'll start to do a few more of those throughout.
Brian: Throughout the course of 2024, so we can really figure out how to refine the deployment model and do it effectively market by market there is.
Brian: A big element of training that goes into that so we want to really make sure. We've got it right and from there. What you think will be able to scale. It to the entire system. Hopefully later in 2024 and into 2025, So that's sort of the game plan.
Brian: In terms of the impact that the easy to run kitchens can have.
Brian: On the business I would tell you I, probably think about it more in terms of operations and guest experience than I do in terms of restaurant growth.
Brian: What's what can be magical about this is if we can make it easier to run for the team members and therefore improve the guest experience through things like order accuracy and speed of service in the drive thru friendliness. Those are the things that I think are going to really unlock the unit level of potential and I would expect to see that in our guests' feedback in our product set.
Brian: Satisfaction and ultimately in the same store traffic and sales that we're able to drive it that the restaurants.
Speaker Change: That for me will be the biggest measure of success of easy to run and that's what we're looking at in the restaurants better if anything you want to add yes. The only thing I'd add is as you look at.
Speaker Change: The returns we're going to generate on popeye's is it gets easier to run.
Speaker Change: There are really two things that happened when you.
Speaker Change: You improve service in restaurants, one is the customer is happier because they're getting a better experience theyre moving through more quickly, but the other is frankly, just being able to fulfill.
Speaker Change: Incremental demand.
Speaker Change: You look at Tims.
Speaker Change: One of the reasons Tims is generating traffic growth is because they have improved their service times.
Speaker Change: Canada you go to a tims at 730 in the morning in Canada.
Speaker Change: And you are going to see very busy drive throughs. So if they can improve the speed of service, it's not only a better experience for the customers, but youre just simply able to generate more sales because we were able to get more people through the drive through over the course of an hour as we build more.
Speaker Change: Demands with great new products at Popeye's like wing.
Speaker Change: Our ability to fulfill against that our ability to get them through the drive thru to give them better service times not only we will make the customers happier, which will in turn generate more demand, but frankly, just our ability to get more people through the drive thru.
Is it going to increase sales.
The next question is from Lauren Silberman of Deutsche Bank. Your line is open.
Lauren Silberman: Thanks for the question I had another one on Tim Hortons supply chain margins can you just talk about the underlying supply chain margins, excluding CPG business and expectations. There and if you can just remind us on how you price to franchisees in the commentary the timing of that pass through how that influences the margin. Thank you.
Speaker Change: Yes, thanks for the question Laura so.
Speaker Change: Yeah in terms of in terms of margins, we look at it holistically across the whole category of sales cost of sales.
Speaker Change: And kind of as I said I think we exited the year in 2023 were around the 18%.
Speaker Change: <unk> margin.
Speaker Change: Q1 is seasonally lower.
Speaker Change: So it will probably be pretty consistent with that but we do see some opportunity.
Speaker Change: Two to drive that back up towards 2022 levels.
Speaker Change: Which were a bit high around the 19% level.
Speaker Change: As it relates to pass through of commodity prices.
Speaker Change: We do that as you recall, we do that.
Speaker Change: With a bit of a lag so we try to price through in a reasonable way, what we see happening in the commodity market, but.
Speaker Change: But we do that.
Speaker Change: <unk> throughout the year, a couple of times a year.
Speaker Change: It doesn't happen on a frequent recurring basis, having said that I think the.
Speaker Change: The overall commodity cost environment has.
Speaker Change: It has balanced out and stabilized.
Speaker Change: Quite a bit over the past few quarters.
Thanks for the question.
Speaker Change: Next we have a question from Eric Gonzalez of Keybanc. Your line is open.
Speaker Change: Sure.
Eric Gonzalez: Hi, yes, thanks for the question and congrats on the solid improvement in franchisee profitability at BK U S. I'm just curious what this might mean for your U S franchisees and their ability to fund remodels at a faster pace. These numbers out there in the public domain do you think thats help franchisees get better access to capital to fund their projects and also I think you attributed about half the improvement to the operations.
Eric Gonzalez: This imply the other half is commodity commodity relief.
Eric Gonzalez: And assuming you will get relief on the commodity side do you think you'd continue to drive meaningful improvement and so profitability without significant progress on that remodel program.
Speaker Change: Yes, Thanks, Eric Good morning appreciate the question.
Eric Gonzalez: I think it's for sure the case that.
<unk> increasing franchise profitability.
Eric Gonzalez: It impacts the attitude of lenders towards the system it impacts our franchisees' appetite to invest in their ability to invest and I think it also just shapes confidence in the future. When we have sales traffic and profitability all moving in the right direction I think the overall excitement of the system about where we're going.
Eric Gonzalez: Definitely has an impact on everybody that excitement about investing you saw that with with our decision to acquire Carol I think that shows pretty clearly our optimism about where the systems going.
Eric Gonzalez: So I think that is definitely the case and we're definitely feeling better about the outlook for Remodels and BK U S.
Speaker Change: One thing I would just add there.
Speaker Change: And a little bit earlier, we already had.
Speaker Change: Our line of sight to getting to around 65% of the system.
Speaker Change: On modern image just through the first couple of years of our Atlanta Flame program.
Speaker Change: Before the <unk> acquisition.
Speaker Change: Now with <unk>, we think that line of sight goes up to about 75%, which.
Speaker Change: Which is good but ultimately I think we want to get the BK U S system I've said, many times to a place where almost every burger King you see around the country.
Speaker Change: Modern intermediate location, we think that probably means something like 85% to 90% of the system needs to be modern and over the next few years. So there will probably be some some further investments.
Speaker Change: Just to give you a couple of data points to be in the right Zip code there.
Speaker Change: We already have line of sight to 75%.
Speaker Change: Want to get to 85% 90, that's about a 1000 more restaurants that we think we would need to we need to create a do remodels on and in terms of the cost of that for US. If you look at what we're putting into to the existing first couple of years, it's just a little bit shy of 300000. So hopefully those data points kind of give you a sense of where are we.
Speaker Change: I want to go in some of the related investments that will come over that sort of 25 to 28 at the time horizon.
Speaker Change: And then in terms of the kind of the contributors to the performance we.
Speaker Change: We do think a big part of that sales and traffic performance came came from operational improvements. There's obviously a lot of other stuff going on as well in terms of effectiveness of marketing and advertising spend and I think our confidence in the ability to continue that is just driven by all the all of the fundamentals that Tom and team are.
Speaker Change: Our driving and we think Theres a lot more we think theres a lot more to do in this PK system that will take us more years to fully realize Patrick on anything yet the only thing I'd add is Josh.
Patrick Doyle: Josh just took you through the rough math on.
On what could be the spend.
Patrick Doyle: Get us up to that $85, 90% level and the only thing I would say is we want to reward franchisees, who are leading and investing early and are excited about the brand and the business.
Patrick Doyle: So.
Patrick Doyle: If we do something at that level.
Patrick Doyle: That would be equal to what we had done before and frankly, what we wanted to do is reward franchisees who are doing these things ahead of the curve not at the end of the curve.
Patrick Doyle: Okay.
Patrick Doyle: The next question comes from John Zang.
John William Ivankoe: CIBC. Please go ahead.
John William Ivankoe: Thank you good morning, I wanted to ask about the international business and in particular store level profitability, and obviously, you've got lots of countries and formats, but I wonder if you can give any clarity on that and I wonder how you look at store level profitability internationally is it by country or by region or by brand you have as much visibility.
John William Ivankoe: <unk> internationally at least in your most important markets as you do for your domestic markets and I know you don't.
Speaker Change: Do you want to save a lot of this for Thursday, but his store level profitability is something that you plan to offer long term guidance on.
Speaker Change: Yes, John Thanks for the question I think it's a great point and I would tell you is as we thought about last year or so I think we really brought a big level of focus, especially to our home market profitable franchise profitability, where we felt like we had the most work to do.
Speaker Change: And it's a little more straightforward as you pointed out it is a few markets.
Speaker Change: And it's a little bit a little bit closer we operate those markets.
Speaker Change: So I think we've made a lot of progress on that and we're going to bring increasing focus to our international markets over the next year or so we do tend to look at it we look at it by brand market combinations. So we're looking at Burger King, France, or popeye's in Spain, so that tends to be the lens.
Speaker Change: You can imagine thats a lot of brand market combinations.
Speaker Change: So it's a little bit more complicated.
We're looking there when we look at each of those we are looking at profitability per unit, but I think the probably the easiest metric to look at across all of those markets is the payback periods, we want to get to a model where our franchisees are realizing compelling paybacks.
Speaker Change: What drives the viability of the business and causes folks to want to reinvest and grow those businesses more so that is exactly the right way I think as we shift increasing focus to those international country paybacks.
Speaker Change: We'll bring more visibility over time, and we'll figure out the right ways to communicate those.
Speaker Change: That sort of balance I think simplicity.
Speaker Change: With trying to be clear and transparent with everybody.
Speaker Change: Patrick do you want anything else you want to add on kind of long term outlets or anything.
Patrick Doyle: Its complicated on the international side, what we've focused on it.
Patrick Doyle: We have had that discussion many times inside.
Patrick Doyle: There is no way to kind of give you a clean single.
Patrick Doyle: Answer on that what we look at is.
Patrick Doyle: Our team David and his team's job.
Is to find great partners and then help those partners in the early years work their way to a good return.
Patrick Doyle: On those units there is a point at which the master franchisee.
Patrick Doyle: <unk> takes over that job.
Patrick Doyle: We're going to continue to help them over time, but if you've got them to a good cash on cash return they understand the business well.
Patrick Doyle: In France, we've gotten great returns on our business in Spain, We've got great returns.
Patrick Doyle: In our businesses and these are very experienced master franchisees.
Patrick Doyle: We can help them some but frankly, it's probably more important for us to get for instance, popeye's launch in France right <unk>.
Patrick Doyle: <unk> the contribution we're going to make to Burger King in France, where they've already got 500 units.
Patrick Doyle: So we've spent a lot of time.
Patrick Doyle: Kind of working through that and there is I don't think there is a way we're ever going to be able to give you kind of a clean answer.
Patrick Doyle: Overall on international really what we're going to give you more I think is just guidance on look and this is true overall returns are very good in our international business, but it clearly varies market to market brand to brand and particularly.
Patrick Doyle: Very early in the launch of a new brand in a new market.
Patrick Doyle: The next question comes from Gregory <unk>.
Gregory: Guggenheim partners.
Gregory: Please go ahead.
Gregory: Hey, Thanks. Thanks for the question I wanted to ask one I don't think its got a lot of attention today, but just.
Gregory: Just on <unk> I know the wings launch was pretty late in the fourth quarter, but can you talk about what youre seeing either from them.
Gregory: Sales contribution or how is attracting new customers are changing their delivery business just any thoughts on that would be helpful. Thanks.
Speaker Change: Yes, Greg.
Speaker Change: I would say, we're all really excited about the new wings.
Speaker Change: But most people are probably surprised to know that <unk> didn't have a flavored wing platform. So we're really happy we can do that and I think it's another terrific example of the work of our culinary team led by chef Amy They did a really outstanding job on these things if you haven't tried them yet please do.
Speaker Change: We were already starting to see some impact.
Speaker Change: The wings.
Speaker Change: In Q4, I would tell you more of the behavior that we saw initially was add on.
Speaker Change: Behavior as opposed to two.
Speaker Change: To new guests and that was a lot of what was behind the thought of doing the Super Bowl AD.
Speaker Change: Because we didn't have high awareness of mass market awareness at Popeyes had wings in the Super Bowl is a tremendous vehicle to drive mass market awareness.
Speaker Change: Super Bowl. This year was no exception as one of the best I think the viewership is actually the highest ever so we got got even more bang for a buck.
Speaker Change: And I think now that we have greater awareness, we're hoping to see even greater incremental to traffic over the course of Q1 and beyond but really happy with the wing so far.
Speaker Change: It's a terrific addition to the popeye's menu and we will keep you updated as we see progress through the quarter and for the rest of the year.
Speaker Change: The next question is from Jeffrey Bernstein of Barclays. Your.
Jeffrey Andrew Bernstein: Your line is open.
Jeffrey Andrew Bernstein: Great. Thank you very much actually just two clarifications the first one.
Jeffrey Andrew Bernstein: Patrick I think the U S and Canada home market franchisees are probably pretty happy with the direction of profitability.
Jeffrey Andrew Bernstein: Wondering with you or Josh as you travel around and meeting with franchisees whats the new number one topic of discussion or what's the greatest pushed.
Jeffrey Andrew Bernstein: Pushback or concern, whether its topline or bottom run related just curious how those conversations are going.
Jeffrey Andrew Bernstein: On the second one was just the.
Jeffrey Andrew Bernstein: The reclaim the flame commitment I'm just wondering whether you think those levels were set up the right level now that you've got a chance to look back over the past year.
Jeffrey Andrew Bernstein: I think you've talked about shifting dollars towards refresh, but I'm just wondering the potential to actually increase the dollars I think Josh you. Just gave an example of the math around the $300 million needed to hit those thousand Burger King units I'm, just wondering who is expected or who is potentially considering putting that bill whether thats a potential corporate consideration or whether that's more just encouraging.
Speaker Change: <unk> is used to do so thank you.
Speaker Change: So I'll, let John handle the second question I'll take the first are we are more aligned with our franchisees and I think we have ever been.
Speaker Change: There is great excitement.
Speaker Change: About the progress that we're making clearly great excitement about the focus we're putting on their profitability and the progress we've made and the number one concern.
John William Ivankoe: That they have is whether or not there is any sense that this is a one and done that we would get happy with the progress that we've made and the answer for all of them listening is absolutely not.
John William Ivankoe: And we will talk about goals on Thursday for each of the whole market brands.
John William Ivankoe: But we are not happy with where we are we are very happy with the progress, but more to be done and we're going to keep hammering away at it.
Speaker Change: Thanks, Patrick.
Speaker Change: On the request on the reclaim the flame original program. If we're happy with it I would tell you I am really happy with it I think it was very thoughtfully structured and I think it was the right plan for that moment, Tom talks a lot about the importance of sequencing and I think he got it exactly right here and we started with <unk>.
Speaker Change: Advertising, which we could move quickly and now we've been deploying dollars into the short term royal reset until a lot of this equipment and technology upgrades and increasing we're shifting to these high return Remodels and I think that was I think it was the right the right sequencing and the right form a partnership with all of those things, we're investing together alongside our France.
Speaker Change: <unk> and we all achieved results and returns.
Speaker Change: So I think it was right structure right sequencing.
Speaker Change: And I'm very happy with it in terms of future investments.
Speaker Change: I referenced a little bit.
Speaker Change: Said over and over again I think it is absolutely critical that we have to get the BK U S system.
Speaker Change: Nearly every every Burger King in America is modern and convenient and we're totally open to investing alongside the franchisees further and that we still have to work we've got to work through that with our franchisees, Tom and team will be doing that over the coming months and talking to them about where the future takes us.
Speaker Change: Once we've got that all figured out we will definitely come back and share more detail on those plants.
Speaker Change: The next question comes from Andrew <unk> of BMO capital markets. Please go ahead.
Speaker Change: Yeah.
Andrew Charles: Hey, good morning, Thanks for taking the question I'm.
Andrew Charles: I'm curious if you could share some color on the same store sales gap that youre seeing across the BK U S system between the better performing and lower performing units or however, you think about bucket in that or you see that gap narrow and in particular curious what youre seeing on the lower end of the system as you gain momentum across the initiatives you've put in place as well as the closures.
Andrew Charles: Yes.
Andrew Charles: We do see a gap frankly in all metrics between our sort of our higher rated and low rated franchisees on the sort of ADF scale.
Andrew Charles: So everything whether it's same store sales same store traffic restaurant profitability.
Andrew Charles: That's been pretty constant over time.
Andrew Charles: Haven't seen a kind of a big shift in those gaps are amongst the cohorts and I think it's just reinforced for everybody in the system, both for us and for the franchisees and the value of good operations I think that to Patrick's point earlier, when you see it on a page it becomes really compelling to realize that being an operator means.
Andrew Charles: It's a whole different level of profitability.
Andrew Charles: Then it has to be a lower rated franchisee. So I'd say it all just reinforces where we're going in terms of our focus on operations and we're pleased with that one of the thing I would point out as we've seen our franchisees moving up.
Andrew Charles: Some of those ratings scale. She took place it feels like the message is working people get it and.
Andrew Charles: I'm very thankful that our franchisees are investing to improve their operations I think they have they have a huge hand and the results that we've seen over the course of the past year.
Andrew Charles: The next question comes from Jon Tower of sticky.
Jon Tower: Your line is open.
Jon Tower: Great. Thanks for hanging in taking the questions just two unrelated quick ones hopefully first on the China business. I know you have a couple of franchisees in that market, but I'm curious.
Jon Tower: What sort of recourse you might have should either a franchisee not live up to expectations with respect to hitting their unit growth or perhaps committing more capital to the brands and then the second question I.
Jon Tower: I know, we've talked a lot about the health of the franchisees and the consumer across some of the core markets, but specifically Tim Hortons, Canada.
Speaker Change: <unk> can you help us.
Speaker Change: Think about how the franchisees are thinking.
Speaker Change: Thinking about pricing in 2024 relative to 'twenty three levels. Thank.
Speaker Change: Thank you.
Speaker Change: Hey, John So in terms of China as it applies to all of our international businesses.
Speaker Change: We have master franchise agreements with our partners and those tend to outline kind of the expectations mutual expectations of the parties.
John William Ivankoe: Our preference is always just to work collaboratively with our partners anywhere in the world to build those businesses, but there are some there are certain expectations that you set out.
John William Ivankoe: And those agreements in terms of tims, and BK profitability and pricing expectations I would just say broadly that we would expect to see less pricing taken in 2024 versus 2023, I think you all have probably seen that across the restaurant space in other spaces like grocery for example.
John William Ivankoe: I think some of that is a reflection of commodity prices that have started to stabilize a bit so.
John William Ivankoe: I think youll see a pretty a pretty decent step back and level of pricing across industry and I expect that'll be the case for Burger King in the U S in tims in Canada as well.
John William Ivankoe: The next question comes from Jim Sanderson Northcoast Research. Please go ahead.
Jim Sanderson: Hey, Thanks for the question just real quick I wanted to go back to the U S performance for BK, you mentioned that performance improved across all income groups any insight on the sale mix for promotions, whether consumers are many of them are frequently to deals that are offered in the quarter.
Jim Sanderson: Hey, Jim It's Josh no I haven't seen anything particularly of note in terms of changes in behavior there.
Speaker Change: Employment drives consumption in the category.
Josh: You've heard that from me often but that is the answer it's really about employment levels and as long as employment stays strong I think the categories.
Josh: Then you have to be good.
Josh: We will now take our last question from Jake Bartlett.
Jake Rowland Bartlett: Your line is open. Please go ahead.
Jake Rowland Bartlett: Great. Thanks for taking the question was about the focus on smaller franchisees in the U S.
Jake Rowland Bartlett: I'm wondering if you could just frame that out for instance, how many total franchisees or average size.
Jake Rowland Bartlett: In 'twenty three versus maybe 'twenty, two and what you expect that to.
Speaker Change: And leaned out in 'twenty, four and really with an eye on how that impacts G&A spend in the past I thought the consolidated the franchisee base was there was a source of efficiency for you. It seems like Thats unwinding. So I'm just wondering what the impact of that might be.
Speaker Change: Hey, Jake Thanks for the question.
Jake Rowland Bartlett: I would tell you we have been focused on having more local operators in their communities you've heard that expressed in different ways across each of our businesses. If you look at tims in Canada, our firehouse in the U S. We already have that we have.
Jake Rowland Bartlett: Operators that have 1234 stores I think that's fantastic and it I think it reflects itself in the engagement of those operators with their communities.
Jake Rowland Bartlett: And the operations of those restaurants.
Jake Rowland Bartlett: And so we have articulated that we want to move to something not maybe not as small as that in Burger King and popeye's, but we certainly do what we do want to have our operators living in.
Jake Rowland Bartlett: And operating in their communities.
Jake Rowland Bartlett: Sure.
Jake Rowland Bartlett: I would say its just so clear to us that that has a big impact on the quality of the operations that we get and that can manifest itself in a lot of different ways. We have 50 or a 100 store operators that live in their markets that do an incredible job there operators all day long and Thats, great. We're super happy about that.
Jake Rowland Bartlett: And we will support those operators.
Jake Rowland Bartlett: But we've also had some of the situations that you've seen particularly in Burger King in the U S where you have larger operators, who have a couple of hundred stores. They are spread out across some pretty geographically divergent areas and thats one of the common denominator is that we've seen in some of these portfolios that have gotten in trouble. So we will probably.
Jake Rowland Bartlett: Hi to steer away from some of those situations as we move forward and where some of the portfolios change hands, we will seek to move to some of the smaller portfolios with local operators in those communities <unk> seen us do that in a few of these.
Jake Rowland Bartlett: <unk> workout situations over the past year and.
Jake Rowland Bartlett: And I think you'll see us keep kind of nudging.
Jake Rowland Bartlett: The systems in that direction over time.
Jake Rowland Bartlett: That's what I would expect it really doesn't have anything to do with views on G&A spend.
Jake Rowland Bartlett: Really about the quality of service that we're able to provide and the success of our business in these local markets I think thats going to dwarf any any differences in G&A structures.
Jake Rowland Bartlett: Which I don't really expect to see much of so I would just tell you it's entirely focused on driving better operations in our restaurants and that's why we're that's why we're focused on.
Speaker Change: Thank you.
Speaker Change: The Q&A session. So I'll hand back to John John Chief Executive Officer for any closing comments.
John William Ivankoe: Well. Thank you so much everybody for taking the time to join us today and for the great questions as always.
John William Ivankoe: We're very thankful to our teams our franchisees our restaurant teams for all the great work that they did to produce the results that we're able to share today, we look forward to seeing a number of you on Thursday in New York and sharing some more outlook on the future there have a great day and thanks for joining the call.
This concludes today's call. Thank you for joining you may now disconnect your lines.
John William Ivankoe: [music].
John William Ivankoe: Okay.