Q4 2023 Restaurant Brands International Inc Earnings Call

February 13, 2024

Operator: www.globalonenessproject.org www.globalonenessproject.org www.globalonenessproject.org www.globalonenessproject.org Good morning, and welcome to the Restaurant Brands International fourth quarter 2023 earnings conference call. All participants will be in a listen-only mode.

Okay.

[music].

Okay.

[music].

Operator: Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. You'll hear a tone to confirm that you're in the queue. To exit the question queue, you may press star then choose.

Yes.

Okay.

[music].

Okay.

[music].

Okay.

Yeah.

Okay.

Speaker Change: Good morning, and welcome to the restaurant brands International fourth quarter 2023 earnings Conference call.

Speaker Change: All participants will be in essence, 90 might should you need assistance. Please signal a conference specialist by pressing the stocky well led by is that right.

Speaker Change: After today's presentation there'll be an opportunity to ask question.

Operator: All callers will be limited to one question. Please note this event is being recorded. I would now like to turn the conference over to Kendall Peck, RBI's Head of Investor Relations. Please go ahead.

Speaker Change: To ask a question you May press Star then one on your telephone keypad, you'll have a time to go find that you in the queue.

Kendall Peck: Thank you, operator. Good morning, everyone. And welcome to Restaurant Brands International's earnings call for the fourth quarter and year ended December 31, 2020. As a reminder, a live broadcast of this call may be accessed on the Investor Relations webpage at rbi.com forward slash investor, and a recording will be available. 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 four 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 includes non-GAAP financial measures.

Speaker Change: Exit the question queue, you May press Star then shape.

Speaker Change: Oh callers will be limited to one question. Please.

Speaker Change: Please note this event is being recorded.

Speaker Change: I would now like to turn the conference over to Ken do pack Rbi's head of Investor Relations. Please go ahead.

Ken: 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.

Ken: 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 joining.

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 include.

Kendall Peck: Reconciliations of non-GAAP financial measures are included in the press release available on our website. 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 growth, exclude results from our franchised restaurants in Russia, as we did not generate any new profits from restaurants in Russia in 2022 or 2021. As a reminder, our Tim Hortons, Burger King, Popeyes, and Firehouse Subs segments include results from each brand's restaurants in the U. Finally, this morning, we published updated trending schedules and provided restaurant counts by brand and market. Both documents can be found on our Investor Relations webpage under Financial Information. And now, I'll turn the call over to you. Good morning, everyone, and thank you for joining us today.

Speaker Change: 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 growth.

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 subs 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.

Speaker Change: Both documents can be found or invest on our investor relations webpage under financial information and now I will turn the call over to Josh.

Josh Kobza: Good morning, everyone and thank you for joining us today.

Josh Kobza: With our investor event coming up in New York on Thursday, I plan to use today's call to focus on Q4 and 2023. And then we'll use Thursday's event to give a longer-term outlook on the company, including sharing, for the first time, long-term guidance. Today's call marks our first quarterly reporting under five seconds.

With our Investor event coming up in New York on Thursday.

Josh Kobza: Plan to use today's call to focus on Q4 and 2023 performance.

Josh Kobza: Then we'll use Thursdays event to give a longer term outlook on the business, including sharing for the first time long term guidance.

Josh Kobza: Today's call marks our first quarter reporting under five segments.

Josh Kobza: Tim Hortons, Burger King, Popeyes, Firehouse, and International, and Reporting Adjusted Operating. 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 over their strategic decisions and greater accountability to deliver strong results. We are also lapping the one-year anniversary of our commitment to provide public accountability for reporting on franchisee profitability. I'll let Patrick share the results in a bit, because this was really his push, 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 impact. We're proud of the progress they have made, including delivering average home market franchisee profitability growth of over 30% in 2015, and we're working to drive continued strength in 2020. Turning now to the results.

Josh Kobza: Burger King Havas, firehouse and international and reporting adjusted operating income.

Josh Kobza: 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.

Josh Kobza: 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.

Speaker Change: Turning now to results for 2023 comparable sales grew eight 1% and net restaurants grew three 9%.

Josh Kobza: For 2023, comparable sales grew 8.1%, and net restaurants grew 3.9%, resulting in 12.2% system-wide sales growth and 7.5% organic adjusted operating income. For the fourth quarter, we delivered 5.8% comparable sales and 3.9% net restaurant cost, strove year-over-year for system-wide sales growth of 9.6%. This quarter, organic adjusted operating income was relatively flat year-over-year, largely due to incremental spending behind our fuel-to-flame initiatives at Burger King in the U.S. We also delivered solid overall traffic this quarter, with Tim Hortons Canada seeing positively positive traffic and Burger King US reaching positive Firehouse U.S. traffic was also positive, while Popeyes U.S. and international traffic declined slightly year over year, with international traffic impacted by the conflict in the Middle East.

Speaker Change: <unk> and 12, 2% system wide sales growth and seven 5% organic adjusted operating income growth.

For the fourth quarter, we delivered five 8% comparable sales and three 9% net restaurant growth, which drove year over year at system wide sales growth of nine 6%.

Speaker Change: 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.

Speaker Change: 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.

Speaker Change: 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.

Josh Kobza: We grew full-year global digital sales 20% to over $14 billion, representing over a third of consolidated system-wide sales. We opened 695 net new units during the quarter and 1,168 net new openings for the year, resulting in net restaurant growth of 3.9%. Net restaurant growth was impacted by our incremental closures at Burger King U.S. and a higher mix of express units at Tim's China, which, as a reminder, are smaller format units with lower average revenue that are not included in our restaurant results. I'd now like to turn to our segment results, starting with Tim Horton's in Canada. This year, we're celebrating the 60th anniversary of Tim Hortons in Canada. Axel and the team kicked off the festivities with the return of our four retro doughnuts. And as a fun fact, the walnut crunch has been the best seller of the retro showcase.

Speaker Change: We grew full year global digital sales, 20% to over $14 billion.

Speaker Change: Representing over a third of consolidated system wide sales.

Speaker Change: 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. Another fun fact, the Walnut Crunch has been the best seller of the retro showcase.

Josh Kobza: In 2023, Tim Hortons Canada successfully grew its share of 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. For the fourth quarter, we saw a very healthy balance of check-in traffic, aided by operational improvements and strong calendar initiatives. All of which drove Tim's Canada comparable sales growth of 8.7% and system-wide sales growth of 9.3%. Our hot, cold, and specialty beverage selection continues to gain traction with our guests. Sparkling Quenchers helped fourth quarter cold beverage sales grow 19% year over year. We also broadened our beverage and baked goods strengths with our Baileys collaboration, including Baileys Cold Brew with infused foam, Baileys Latte, and our delicious Baileys Boston Cream Dough.

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%.

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 phone bally's latte, and our delicious Bally's Boston Kreme doughnuts.

Josh Kobza: This partnership proved to be one of our most successful and contributed nicely to traffic growth during the quarter. Our PM-led snacking initiatives, like our Savory Twists and Dream Cookies, as well as our Loaded Bowls and Wraps, contributed to PM food sales growth of 7% year-over-year, lapping 18% growth in the prior year, so very strong year-on-year results. These initiatives also helped us to make progress growing our PM food market share to nearly 9%, up from approximately 8% in 2022. We are also maintaining excellent operations by working closely with restaurant owners to deliver an amazing and consistent guest experience. 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 card and pay for their order at the same time.

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.

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.

Josh Kobza: This helped to drive 9% year-over-year improvements in drive-through speed of service, an important contributor to traffic growth this quarter. Additionally, our digital community of over 5 million monthly active users continues to drive over 30% of sales. In 2023, 45% of our Tim's Rewards loyalty guests visit us in the morning and return 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.

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.

Speaker Change: 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.

Josh Kobza: In addition to our strong and loyal digital community, we also have an amazing restaurant owner community that is dedicated to giving back. Since 1996, Tim Hortons has held an annual Smile Bookie 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: In addition to a strong and loyal digital community. We also have an amazing restaurant owner community that is dedicated to getting back soon.

Since 1996, Tim Hortons is held in annual Smile Cookie campaign that raised nearly $20 million in the summer.

Speaker Change: And in November we launched our first ever holiday Smile Cookie campaign that raised another 10 million Canadian dollars for 600 local charities.

Josh Kobza: This included our very own Tim Hortons Foundation, which is a really impressive community achievement for our restaurant owners and for their guests. Shifting now to our international segment, which ended the year with over 14,700 restaurants, over $17 billion in systemwide sales, and grew systemwide sales 17.6% for the full year. You've heard us say that the international business is an important growth engine for our brands, and that is one of the reasons why we are so excited to now have international in its own segment.

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.

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 are so excited to now have international as its own segment.

Josh Kobza: 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 scalable global burger industry. For the fourth quarter, our international segment grew comparable sales by 4.6% and net restaurants by 8.9%, driving system-wide sales growth of 12.8%. 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. We estimate the conflict resulted in a 1.5 point headwind to comparable sales and a 3 point impact to traffic this quarter. We're not going to speculate on how long this headwind may last.

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 have developed over the years through our scaled global Feraheme 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.

Josh Kobza: In the impacted countries, our entire focus is on the safety of our team members and our partners. Despite these pressures, a 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. In 2023, we grew in over 75 markets outside of the US and Canada and signed 15 development and master franchise agreements for 15 new markets, including Tim Hortons in Singapore and South Korea, Firehouse in Mexico and the UAE, and Popeyes and Burger King in Bosnia, which all serve as long-term opportunities for our brands.

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.

Josh Kobza: 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. In the fourth quarter, Tim Hortons had new openings in South Korea and Singapore. Meanwhile, Popeye surpassed the 100-unit mark in Spain, just five years after opening its first restaurant in November of 2019. We also continued Popeye's expansion in Eastern Europe by opening in the Czech Republic and recently announced we are bringing our awesome Louisiana chicken to Italy.

Speaker Change: Our largest contributors to net restaurant growth. This year included burgers in 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.

Speaker Change: 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 often Louisiana and a chicken daily.

Josh Kobza: 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. At Tim Hortons and Popeyes, our partners are building brand awareness in new markets and ramping up the pace of development. These two brands contributed to over 45% of net restaurant growth in 2023, an impressive step up from the 10% mix in 2019. Their development strength helped drive strong double-digit system-wide sales growth in the quarter, including over 20% at Tim Hortons International and 55% at Popeyes International. I'll now turn to our modern image and digital strengths, both of which significantly enhance the experience we offer our guests. Given that nearly 90% of Tim Hortons and over 50% of Popeyes stores were opened in the past five years, we have a very high proportion of modern-image restaurants overseas, at over 75%, including burgers. International digital sales grew 20% year over year to represent over 50% of international system-wide sales in 2023.

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 Popeye's, our partners are building brand awareness in new markets and ramping up the pace of development in.

Speaker Change: 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.

Josh Kobza: The ongoing addition of kiosks in many markets around the world is helping to contribute to this growth in digital sales and, importantly, improve the overall guest and team member experience while also being more profitable for our franchises. Before I shift to Burger King US, I'd like to discuss our 2024 net restaurant growth expectations. Last year, we shared our expectations for 5% plus net restaurant growth in 2024. A key factor to delivering this level of growth was our expectation that our development in China would accelerate in 2024 off of 2023 levels. We now believe that the outlook is less certain and have updated our outlook to reflect a lower level of net unit additions in China this year.

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.

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.

Josh Kobza: 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. We have a strong belief in China as an attractive growth market for our brands. 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. 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. In the U.S., we completely control menu innovation and advertising and have demonstrated our willingness to invest significantly behind each of our businesses. In China, we rely on our master franchisees for that level of commitment. Burger King China is a good business with nearly 1,600 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 the sport.

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.

Josh Kobza: On the Tim's business, we believe our partner is going to need to commit more capital to grow that business in an exciting way, and we believe it's critical that they do. We're working with them both to lay the foundations needed to meet the growth aspirations that we know we're capable of. Shifting now to Burger King in the U.S., 2023 was an incredible year for the brand. Burger King US grew franchisee profitability nearly 50% year over year, significantly surpassed our year-end 2024 fuel-to-flame target, well ahead of schedule, and achieved low single-digit positive traffic growth in the fourth quarter, and saw significant improvements in operations across the board. Burger King U.S. grew fourth-quarter comparable sales by 6.4% and system-wide sales by 4.6%.

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%.

Josh Kobza: Our total net restaurants declined 3.7% year over year, driven by elevated gross closures this year as part of our planned efforts to strengthen the system for the long term and address the underlying issues of franchisees who overextended themselves in the last few years. We believe most of these closures are behind us and expect a more normalized level of closure activity in 2024. Results in the quarter were driven by guest experience enhancements and strong calendar initiatives like our Royal Crispy Wraps and Halsey's Combo that highlighted our Have It Your Way brand positioning that differentiates us in the category. Guest satisfaction will always be a top priority for the system.

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.

Josh Kobza: 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 last guests, and deliver low single-digit positive traffic during the quarter. We have also seen success in our purposeful marketing of the Whopper, including the Whopper jingle and Ways to Whopper campaign. We've taken this one step further with our Million Dollar Whopper campaign that launched last week. It's designed to let guests help decide the next Whopper through a unique experience that leverages advanced AI technology, brings guests to our Royal Perks app, and lets them win some cool prizes along the way. We've already seen guests create about one and a half million new Whoppers. If you haven't seen it yet, please download the BK app and check it out.

Speaker Change: We are also seeing success in our purpose purposeful marketing of the whopper, including the leverage Engel and ways to offer campaign. We've taken this one step further with our $1 billion, while for campaign that launched last week.

Speaker Change: It is designed to let guests helped design the next water 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.

Speaker Change: 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.

Josh Kobza: It's a lot of fun. This campaign is one of the many ways we'll accelerate digital adoption to drive higher guest frequency. Digital sales grew 40% year over year, resulting in a digital sales mix of 15%, including a 27% mix in our company-operated restaurants. The positive results from our kiosk pilot across our company restaurant portfolio led us to expand our trial, and now we're testing this new kiosk pilot across over 100 stores in our franchisee sector. During Q4, we spent $40 million of our $150 million fuel-to-flame advertising and digital investments.

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 PFS pilot across over 100 stores and our franchisee system.

During Q4, we spent $40 million of our $150 million fueled the flame advertising and digital investments.

Josh Kobza: This included $37 million deployed towards our marketing efforts in line with the guidance we shared in Q3, leaving us with $58 million to spend on marketing in 2024. 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 Ad Fund will step up from 4% to 4.5%, ensuring we maintain our strong share of voice through at least 2026.

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.

Josh Kobza: As a reminder, should average franchisee profitability reach $230,000 by year-end 2026, this elevated ad fund contribution would remain in place through 2028. I'd also like to give a quick update on our $250 million Royal Reset Program. Given the strong early results from our short-term refresh program, as well as the impact of our pending acquisition of Carol's, we now expect to shift approximately $50 million of the $200 million investment previously earmarked for remodels to an expanded short-term refresh initiative. 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: 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.

Josh Kobza: 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 management. The incremental refresh dollars will be dedicated to participating A and B operators and support assets that improve the drive-through and digital experience. As a result of the incremental refresh investment, we now expect to positively influence more than 6,000 restaurants. Early results of the remodel program also continue to exceed program benchmarks, with average sales uplifts of approximately 20% net of control for the roughly 50 remodels that have been open for at least six months.

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.

Speaker Change: 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.

Josh Kobza: While we're really encouraged by these results, I would note we'd expect the uplift to migrate lower as the number of remodels grows and overall scope shifts. That said, they are clearly outperforming what we, and our franchisees, underwrote with our investment, and we're excited to continue the program in the year ahead. 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% modernization.

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 us 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.

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.

Josh Kobza: 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 scrapes and rebuilds. And, of course, we're aiming to have our CISL format in as many of these restaurants as possible. A couple of weeks ago, I was in Philadelphia and North Carolina, visiting two of our first ten Modern Image sizzle restaurants with Tom and the team, and I can tell you I am very excited about this new restaurant format. Sizzle is not only beautiful, but it also really puts both the team member and guest experiences at the heart of the restaurant.

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.

<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 the <unk> restaurant group.

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.

Josh Kobza: 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 the Carol's Restaurant Group. This acquisition offers a compelling strategic opportunity to accelerate our modern image efforts, with a clear path to 75% modern image by 2028, to be funded entirely by Carol's operating cash flow, even after our. That 75% expectation is up from 65% that we would have achieved just based on our existing Reclaim the Flame remodel funding program. Importantly, the acquisition also enables us to re-franchise restaurants into the hands of local, strong owner- We see firsthand the benefits of being a smaller operator. The numbers speak for themselves. Operators with less than 50 restaurants had 51% a modern image and delivered average franchisee profitability of $15,000 per store above that of franchisees in the 50 plus restaurant group in 2023. Not surprisingly, they're also generally better capital.

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 knots.

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.

Speaker Change: 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 <unk>.

Speaker Change: Sami 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.

Josh Kobza: I cannot stress enough that while accelerating our modern image efforts is a key benefit of bringing Carol's together with Berg, I think what makes me, Patrick, and Tom just as excited is our ability to further accelerate change in the franchisee community and give even more great operators the opportunity to become great franchisees. I'll save the rest of my comments on Burger King U.S. until later this week at our New York Investor Event. Turning now to Popeyes, Sammy and his team are one year into their easy to love plan.

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.

Speaker Change: 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.

Josh Kobza: Popeyes US grew comparable sales by 5.8% and net restaurants by 4.5%, 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. Our November expansion of Wings into a five-flavor platform has quickly established us as the number three Wings player in quick-service restaurants in the country and helped drive traffic across digital channels like delivery and mobile order and pay. We're pleased to see this positive impact but know there is more incrementality to unlock in 2024 and beyond, starting with driving mass awareness. Two days ago, Popeyes ran its first-ever Super Bowl commercial, featuring well-known comedian Ken Jeong in a funny and impactful ad that made sure everyone watching the game would know Popeyes now has the best wings in America.

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.

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 we.

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: To $300000 by 2025.

Josh Kobza: We have also seen extensive media coverage about the ad, so great execution by the team to bring mass awareness to this important growth. We are also in the early stages of implementing our easy-to-run kitchens at Popeyes that will transform the guest and team member experience. These retrofits provide new equipment, updated kitchen layouts, technology upgrades, and process simplification, all geared to help solve fundamental operational hurdles that impact speed and overall guest satisfaction while upholding our excellent product quality. We are now transitioning from initial pilots to more scaled test clusters. I'll be visiting one of these test clusters in L.A. later this month, and I'm looking forward to seeing the progress the team is making first.

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.

Josh Kobza: At Popeyes, we're also focused on building a system of best-in-class operators to deliver a more consistent experience while driving convenience. 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 to $300,000 by 2025. Lastly, Firehouse Subs, which grew comparable sales in the U.S. by 3.8% and increased system-wide sales by 7.4%.

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.

Josh Kobza: 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. In Canada, we expanded from Ontario this quarter, opening restaurants in three different provinces in Western Canada with incredible local operators. Earlier this year, Mike and his team leaned in to the brand's public safety roots 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. We're looking forward to seeing Firehouse's development ramp up this year as we bring the brand's flavorful subs to more locations across North America.

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.

Matthew Dunnigan: Which resulted in a greater than expected investment required to maintain our leading market share we.

Matthew Dunnigan: We successfully held our share but realized an $11 million true up to close our year to date promotions from prior quarters.

Matthew Dunnigan: 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, an exciting accomplishment driven by the continued enhancements and investments the team is making to fuel the brand's overall tech strategy. 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. With that, I'll now turn it over to Matt to discuss our financial results for the quarter. Matt?

Matthew Dunnigan: Given the continued pressures across Canadian retail, we expect our trade investments to remain elevated in 2024.

Matthew Dunnigan: 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.

Matthew Dunnigan: For the fourth quarter and full year 2023. This business grew positive mid single digits year over year.

Matthew Dunnigan: In line with the healthy traffic and volume growth that we've been driving across Canada.

Matthew Dunnigan: 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.

Matthew Dunnigan: Thanks, Josh. And good morning, everyone. For the fourth quarter, our global system-wide sales grew 9.6% year-over-year, while our adjusted operating income was relatively flat, up 0.5% year-over-year. And our adjusted EPS was up 4.4% organically. The primary drivers of the difference between system-wide sales growth and organic adjusted operating income growth were our $40 million of support behind our Fuel the Flame program at Burger King U.S. and an $11 million true-up to trade expenses in our Tim Horton's Consumer Package Goods program. Combined, these had an impact of negative 7% on our year-over-year growth and adjusted operating income for the quarter.

Matthew Dunnigan: 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.

Matthew Dunnigan: Shifting to EPS, our fourth quarter adjusted earnings per share was <unk> 75.

Matthew Dunnigan: Compared to <unk> 72 last year, representing representing an organic increase of four 4% year over year.

Matthew Dunnigan: 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.

Matthew Dunnigan: For background, in the Tim's CPG business, we typically held a steady run rate of promotional spend as a percentage of revenues that was tight versus the industry, but in 2023, we saw 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 market. We successfully held our share but realized an $11 million true-up to close our year-to-date promotions from prior. Given the continued pressures across Canadian retail, we expect our trade investments to remain elevated in 2025. Aside from this impact on our Canadian CPG business, our underlying tin supply chain business has continued to perform well, with stable margins over the past few quarters. For the fourth quarter and full year 2023, this business grew positive mid-single digits year over year, in line with the healthy traffic and volume growth that we've been driving. 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. Segment G&A, which included equity-based compensation of $53 million, came in at $176 million, up $21 million year-over-year.

Matthew Dunnigan: 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.

Matthew Dunnigan: Turning now to capital structure and cash flow.

Matthew Dunnigan: During the quarter, we generated $356 million in free cash flow, reaching $1 2 billion for the year are.

Matthew Dunnigan: 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.

Matthew Dunnigan: As part of replay the flame this quarter, we deployed $40 million towards our fueled a flame advertising and digital investments and $16 million of capital toward our Royal reset program.

Matthew Dunnigan: Including $8 million for our Royal refresh program.

Matthew Dunnigan: We have $77 million of fueled the same investment left to deploy in 2024 and $189 million of Royal reset remaining.

Matthew Dunnigan: The increase in segment GNA largely reflects higher compensation-related expenses associated with hiring, mainly across operations and franchises. Shifting to EPS, our fourth-quarter adjusted earnings per share was $0.75 compared to $0.72 last year, representing an organic increase of 4.4% year-over-year. Our adjusted EPS also included a $0.05 per share net benefit related to discrete non-cash tax items, which was offset by a negative 8 cents per share headwind from the combined impact of our Burger King U.S. Fuel to Flame investment and true up related to our CPG trade spending at. 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. Turn During the quarter, we generated $356 million in free cash flow, reaching 1.2 billion dollars for the year.

Matthew Dunnigan: Our free cash flow was also impacted by higher cash interest impacting the 20% of our debt that is not fixed however.

Matthew Dunnigan: 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.

Matthew Dunnigan: We ended the year with a liquidity position of approximately $2 4 billion.

Matthew Dunnigan: 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.

Matthew Dunnigan: Looking ahead, we remain confident in reaching our mid <unk> target net leverage ratio by the end of this year, even after accounting for the pending acquisition of <unk>.

Matthew Dunnigan: Now I'd like to wrap up with some guidance for 2024 on G&A capital expenditures and interest expense.

Matthew Dunnigan: Excluding the pending acquisition of carols, we currently expect segment G&A between $680 million and $700 million.

Matthew Dunnigan: Including equity based compensation between 190 and $200 million.

Matthew Dunnigan: 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.

Matthew Dunnigan: 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 Slam at Burger King U.S. and returning roughly $634 million of capital to shareholders through our dividend and share repurchase. During the quarter, we repurchased and retired 5.9 million shares of our common stock for $385 million. And today, we declared our Q1 dividend at $0.58 per common share and unit, targeting a $2.32 per share dividend for 2024, up 5.5% year-over-year. As part of Reclaim the Flame, this quarter, we deployed $40 million toward our Fuel the Flame advertising and digital investments, and $16 million of capital toward our Royal Reset Program, including $8 million for our Royal Refresher. We have $77 million of fuel-to-flame investment left to deploy in 2024 and $189 million of Royal Reset remaining. Our free cash flow was also impacted by higher cash interest, impacting the 20% of our debt that is not fixed.

Matthew Dunnigan: 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.

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.

Matthew Dunnigan: 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.

Matthew Dunnigan: With that I'll now hand, it over to Patrick for some additional thoughts on the business. Thank.

Patrick Doyle: 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.

Matthew Dunnigan: However, our 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. We ended the year with a liquidity position of approximately $2.4 billion, including $1.1 billion of cash, and saw our adjusted EBITDA net leverage ratio remain consistent at 4.8 times given our share repurchase activity in the quarter. Looking ahead, we remain confident in reaching our mid-4x target net leverage ratio by the end of this year, even after accounting for the pending acquisition of Carol. Now, I'd like to wrap up with some guidance for 2024 on G&A, capital expenditures, and interest expenditures. Excluding the pending acquisition of Carol's, we currently expect segment G&A between $680 million and $700 million, including equity-based compensation between $190 and $200 million.

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.

Matthew Dunnigan: Following the ramp-up of our G&A investments over the past few years, we exited 2023 in 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. We currently expect total aggregate 2024 capital expenditures, tenant inducements, and remodel incentives, which, as a reminder, flow through working capital, to be roughly $300 million, primarily driven by continued Burger King U.S. Image Investments, like our expanded Royal Refresh Program and Remodel Investments, increased remodels at Tim's in Canada, technology investments across and other brand-led growth initiatives like our Firehouse Development Incentive Program. Finally, based on the current interest rate environment, we expect 2024 net interest expense, excluding the acquisition of Carol's, in the 555 to 565 million dollar range, based on an average SOFR rate of 4.6% flowing through to approximately 20% of our debt. With that, I'll now hand it over to Patrick for some additional thoughts on the. Thank you, Matt. And good morning, everyone. 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. Excuse me.

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.

Patrick Doyle: 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: 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. Firehouse Subs Ramping Up Development, Continued Acceleration in Growth of All Brands in Our International Markets, and Acceleration in China, specifically with Burger King recapturing pre-pandemic levels of growth. Our Burger King U.S., Firehouse, and broader international assumptions are still very solid.

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: Tom and his team made great progress last year, taking the necessary steps to close underperforming restaurants to improve the long-term health of the system. As a result, we should see a roughly 50 basis point year over year improvement from lower gross closures at BKUS in 2024. At Firehouse, Mike and his 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 Firehouse's strong community ties. Meanwhile, David and his team have signed development agreements in four markets and are actively working to continue building the brand's overseas pipeline.

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.

Patrick Doyle: Average home market franchisee profitability is up by 30%, while our profitability is the franchise or is up 9%.

Patrick Doyle: But we're being practical about the pace of growth we're forecasting in China, as Josh noted. Given each of these dynamics, we believe it's important to be upfront about near-term implications. So I think Josh's perspective of potentially slower development in China for the balance of this year is accurate. However, depending on the 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. Last year, we told you that our long-term growth as a company is entirely dependent on the growth and profitability of our franchisees. We reminded you that our franchisees are responsible for being great operators and stewards of our brand.

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.

Patrick Doyle: As their franchisor, we are responsible for giving our franchisees the opportunity to generate compelling financial returns. If we can deliver great returns for our franchisees, the entire flywheel of future reinvestments moves much more smoothly. 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 an over and above guest experience, and guests receive the consistent great experiences they deserve every time they visit or order from one of our restaurants.

Speaker Change: A higher AD fund rate from franchisees for the coming years.

Speaker Change: At pop is 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.

Patrick Doyle: We committed to publicly sharing four-wall EBITDA for our home markets annually, 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 as the franchisor is up 9%. And I think that's awesome.

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.

Patrick Doyle: 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. This is exactly how this is supposed to work.

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.

Patrick Doyle: At Tim Hortons in Canada, average four-wall restaurant EBITDA in 2023 was over $280,000, up nearly 30% from $220,000 a year ago. Burger King US saw average restaurant profitability of over $205,000, representing nearly 50% growth from $140,000 a year ago, and putting us well ahead of the 2024 fuel to flame threshold of $175,000 to unlock a higher ad fund rate from franchisees for the coming year. At Popeye's U.S. Average Four Wall Restaurant EBITDA grew approximately 17% year-over-year to roughly $245,000 compared to $210,000 last year. And on firehouse subs, we saw a 38% increase in restaurant profitability, reaching $110,000 compared to $80,000 the year before. 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's a lot of opportunity for our franchisees, still ahead of us, to achieve this. We need to further improve operations. We've said it before, but better operators have better profitability. On average, A operators in each home market generated restaurant profitability that was 30% higher than the system average.

Speaker Change: And as a result, these franchisees are generating strong unlevered paybacks.

Speaker Change: 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.

Speaker Change: If you change your mind. Your question has already been said Ethan Julia Your question. The question is now funded by the number Jay.

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.

Patrick Doyle: In fact, Tim's, Popeye's, and Firehouse A operators have already achieved our long-term profitability targets, which I plan to share with you on Thursday. And as a result, these franchisees are generating strong unlevered payback. I 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.

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 else these better metrics can help fuel the <unk>.

<unk> 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 U S restaurants, which is surprising it is happening.

Patrick Doyle: I'd like to echo Josh's comments about franchisee profitability. I'm very proud of the progress our teams and franchisees have made this year. Delivering results like this does not happen overnight. It requires hard work, patience, and collaboration and dedication.

Operator: I'm confident we will continue to move the ball down the field in the year ahead. With that, let's take your questions. Thank you. Please press star followed by the number one if you'd like to ask a question and ensure your device is unmuted locally when it's your turn to speak. If you change your mind or your question has already been answered, you can withdraw your question by pressing the star followed by the number two.

Brian John Bittner: 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, Brian So Brian there are really a couple of things on that first of all clearly.

Brian John Bittner: Our first question today comes from Brian Bittner of Oppenheimer. Please go ahead; your line is open. Thank you. Good morning.

Brian John Bittner: Momentum drives momentum the flywheel is working.

Other thing that I would add to your question is.

Brian John Bittner: The 20%.

Patrick Doyle: The updated franchisee profitability for your home markets was obviously very impressive, particularly with Burger King US up 46% versus last year, and it's already way ahead of your 24 targets by $30,000 per unit. So it seems the ad contribution step up is obviously inevitable, but maybe Patrick, you could unpack how else these better metrics can help fuel the Burger King momentum moving forward? Is it just momentum driving momentum, or are these metrics going to help you unlock more remodels or anything else to point out? And secondly, it does seem like between 4Q and 1Q of this year, you've acquired 127 Burger King US restaurants, which is surprising. It's happening at a time when franchisee profitability is exploding. So can you just help us understand the reasoning or perhaps the strategy behind these acquisitions going into the Carol's acquisition? Thanks. Yeah, Brian. So Brian, there are really a couple of things about that. First of all, clearly, you know, the momentum drives momentum; the flywheel is working.

Brian John Bittner: Return on.

Brian John Bittner: On on Remodels that.

Brian John Bittner: That we referenced and some of you ive seen some speculation out there that's.

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.

Brian John Bittner: 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.

All of that generate system sales growth, which generates more advertising dollars.

Patrick Doyle: You know, the other thing that I would add to your question is the 20% return on remodels that we referenced. And, you know, some of you, I'd seen some speculation out there that perhaps those numbers weren't as good as we had been expecting, that we talked about 12%, because we hadn't shared those yet. In fact, we wanted it to go on longer because, frankly, the numbers were coming in so strong that we really needed to see it go on a bit longer before we were ready to believe it.

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.

Patrick Doyle: 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 in that business right now. And, you know, look, ultimately, as franchisees get more confident about this business, as they get more confident about the return that they're going to get from remodeling restaurants, from building new restaurants, all of that generates system sales growth, which generates more advertising dollars, even off of a comparable percentage of sales. So I mean, you know, the momentum does build on itself. Our job is to keep that going. And, you know, I guess what I would say is 205 plus is great progress, but we're not there yet. Right?

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.

Patrick Doyle: I mean, it's got to be higher than that. And, you know, we're looking at plans for how we can continue to increase that. Obviously, we're excited about the momentum of the business, but we're not satisfied with the level that we're at yet. And I guess the last thing or the last question that you asked was about corporate restaurants and the addition of restaurants at the end of the quarter. That's simply from some of the workouts that you read about last year.

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.

Patrick Doyle: We provided a home for some of those restaurants. As we worked through those three bankruptcies last year, most of them that were already from those were sold to smaller, great franchisees. We were excited to have them join our system. Some of the restaurants that you saw on our books at the end of the year will still be sold off soon.

Brian John Bittner: But but ultimately that's kind of a transitory thing.

Speaker Change: Brian if I could just add on the first part of your <unk>.

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.

Patrick Doyle: And we expect that number is going to work back down over time. But, you know, 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.

Josh Kobza: But, but ultimately, that's kind of a transitory thing. Brian, if I can just add to the first part, on your question of how does this flow back into the system, I think there are some really kind of practical day-to-day things that are happening that are fueling our growth. I think as we're seeing sales and profitability improve, that also allows our operators to increase the staffing levels in the restaurant. So we've got better staff. It means our speed is getting faster, and we're also being able to expand operating hours. Again, that helps a lot. And the improvements in franchise profitability are also allowing our operators to reinvest in some of these initiatives, like the short-term role refresh, where we're getting new technology into the restaurants and new equipment. I'll tell you, I see it when I'm out in restaurants with Tom.

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 into 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.

Our next question today comes from Jeanine Gila of Bernstein. Your line is open.

Josh Kobza: There's a lot of improved technology in the restaurants, and we have a lot of updated new pieces of equipment. I think our guests are seeing that, and they're feeling the improved product quality that we're getting out of the new equipment. So there are a lot of things that sort of drive the flywheel forward, and I think we're benefiting from a number of them right now. Thanks. Our next question today comes from Danilo Gargiulo of Bernstein. Your line is open. Good morning.

Jeanine Gila: Good morning.

Jeanine Gila: Can you please elaborate maybe a little bit more on the strategic rationale persisting the budget from remodels to be.

Jeanine Gila: Refresh maybe if you can also help us understand the uplift post refresh that youre seeing today.

Jeanine Gila: Yes.

Jeanine Gila: Thanks, Neil 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.

Danilo Gargiulo: Can you please elaborate maybe a little bit more on the strategic rationale for shifting the budget from remodeled to refresh? Maybe you can also help us understand the uplift post refresh that you're seeing today. Yeah, thanks, Danilo.

Josh Kobza: So, as I mentioned, we just saw a ton of excitement within the system. Our franchisees really liked that short-term Royal Reset, and we started to make those investments, and we started to see a big impact on those restaurants. So, all of the restaurants that we were able to touch with upgrades and new equipment, we started to see those outperform the rest of the system, and I think that generated a lot of discussion between Tom and his team and the franchisees on how we could 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, if you think about once we did the Carol's acquisition, Carol's would have been a meaningful part of that kind of the first couple of years of remodels, and now that's taken out of the program.

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 Tom and 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: Think about once we do the <unk> acquisition <unk> would have 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 the positive performance going.

Jeanine Gila: Okay.

Josh Kobza: So, it frees up some capital for us to do other things, and so we're deploying it on some of the things that we can do to impact as many restaurants as possible as quickly as possible and keep the positive performance. The next question comes from John Ivankoe of J.P. Morgan. Please go ahead.

The next question comes from John <unk> of <unk>.

John: J P. Morgan. Please go ahead.

Hi, Thank you I think in your prepared remarks, correct me, but I heard some yes.

John William Ivankoe: Hi, thank you. I think in your prepared remarks, you know, correct me, you know, but I heard some, you know, softness or perhaps slowing in Burger King in Western Europe. So I wanted you to elaborate on those comments, and if you think they're specifically related to the Middle East conflict, and, if you could, juxtapose those comments with what you said about fiscal 23 development, where some of the highest rates of development were in France and Spain, specifically, and whether we could potentially see slower overall unit development as same-store sales slowed in 24 and perhaps 25. Yeah, John, thanks for the question. A few thoughts on this one. So we did see a bit of a sequential slowdown in terms of stamp source sales in Western Europe.

John: Off net sort of perhaps slowing in Burger King in Western Europe. So I wanted you to elaborate and you're kind of on those comments and if you think there is specifically related to the middle East content.

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: <unk> 24, 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 thats. The biggest driver of what we're seeing there, though I will.

Josh Kobza: I think some of that was expected, just as you're seeing inflation decelerate a bit. So I think that's the biggest driver of what we're seeing there. Though I would say we still did pretty well, you know, 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're still taking share there. So I think we're happy with the business performance; we don't see any particular correlation with the conflict in the Middle East in terms of the performance that we're seeing in Western Europe. And I think on your last point, John, in terms of development, it is true that France and Spain are some of the bigger contributors to development. And we expect that to continue into 2024. Meanwhile, we're not seeing any big impact on development expectations in Western Europe.

Speaker Change: 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're 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.

Speaker Change: And I think on your last point John in terms of development.

Speaker Change: 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.

Speaker Change: Okay.

Speaker Change: Our next question comes from David Palmer of Evercore ISI.

David Palmer: So we expect continued positive progress there this year. Our next question comes from David Palmer of Evercore ISI. Please go ahead; your line is open.

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.

Matthew Dunnigan: Thanks, good morning, and great job with the North America brands, but I wanted to ask you about Tim Horton's supply chain and that coffee profit. Over the last couple of years, I think the profit for that has been pretty good. I'm wondering, what is the profit outlook for these businesses or that combined line item? sales net of cost of sales for 24. And what's the future outlook for this? Hey, Dave, it's Matt here.

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. Thanks.

Speaker Change: <unk>.

Speaker Change: It's Matt here. Thanks for the question, yes, So I think the way.

Matthew Dunnigan: Thanks for the question. Yeah, so I think the way you know, just to point out for everyone, the CPG business and supply chain both roll up into our sales cost of sales. And so those are together.

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: I think for 2023, for the full year, what you saw in terms of our margin there was around 18%. And if you adjust for the true up that happened in Q4, the Q4 margin levels were kind of at a similar place. Looking forward, I think, you know, given the normal seasonality that we see 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 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 in the supply chain business. And it's 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, had very challenging conditions, especially in the second half of the year.

Matthew Dunnigan: And if you.

Matthew Dunnigan: Adjust for the true up that happened in Q4, the Q4 margin levels were kind of at a similar place.

Matthew Dunnigan: 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.

Matthew Dunnigan: 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 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: Had very challenging conditions.

Matthew Dunnigan: Through especially into the second half of the year.

Matthew Dunnigan: And so that's what drove the true increase in promotional expense there. We're going to continue spending a bit more on that business, but we still have a leading market share. We've held our market share over the past couple of quarters, and we've also brought in a new team and experienced leadership. And, you know, I think we have a good outlook on being able to deploy those promotional investments more effectively going forward and at more of an even cadence in 2024.

Matthew Dunnigan: So that's what drove the true up of the promotional expense there.

Matthew Dunnigan: To continue spending a bit more on 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.

Dennis Geiger: Thanks for the questions. Next in queue is Dennis Geiger of UBS. Your line is open.

Speaker Change: Thanks for the question.

Speaker Change: Nick Thank you we have Dennis Geiger of UBS your.

Dennis Geiger: Your line is open.

Josh Kobza: Great, thanks, and good morning, guys. Encouraging progress for the BK and Tim's brands in their home markets. I was wondering, on the back of some of the comments on the CPG business with Tim's in Canada and the consumer there, if you could talk a little more about what you're seeing from your customers across the U.S. and Canada as it relates to those two brands beyond CPG, anything with the low-income consumer or other behavior changes to call out. And 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 challenging spending environment, you know, what that means for the brands, for market share, perhaps, anything on that front. Thank you. Hey Dennis, good morning.

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.

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.

Josh Kobza: 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 to our minds. You know, within the Tim Hortons business in Canada, we pointed out that we had really solid same-store sales, but it was combined with a really good mix of traffic. You know, we've seen that throughout the year, but we're kind of a half and half mix, which means we had solid traffic. And I think that's 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.

Speaker Change: But it was it was combined with a really good mix of traffic, we've seen that throughout the year, but it kind of 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 in.

Josh Kobza: And then similarly, with Burger King in the US, our biggest business there, we noted that traffic was positive in Q4 for the first time in a while. So we've seen pretty good health within the US QSR space, and we're pretty happy with it. You know, so no big behavioral shifts that I would point to.

Speaker Change: With Burger King in the U S. Our biggest business there.

Speaker Change: 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.

Our space and we're <unk>.

Speaker Change: Pretty happy with it.

Speaker Change: So no big behavioral shifts that I would point to.

Andrew Charles: In terms of how our brands are positioned, 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 that's true across our entire portfolio. So I think we're already really well positioned.

Speaker Change: In terms of how.

Speaker Change: Our brands are positioned.

Speaker Change: Please go back to.

Speaker Change: 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 around quality service and convenience.

Josh Kobza: 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 around quality, service, and convenience, that's what's driving our results right now. I think that's going to serve us well and allow us to keep driving good results into 2024, regardless of what happens with the overall consumer environment. Yeah, maybe just one quick thing to add to Josh's comments on the U.S. and BK on the positive traffic. We did see positive traffic across all income levels. The next question comes from Andrew Charles of TD Cowen. Please go ahead.

Speaker Change: <unk>.

Speaker Change: 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 there.

Speaker Change: Josh as comments on the U S and decay on the positive traffic, we did see positive traffic.

Speaker Change: Cross 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.

Josh Kobza: Great, thank you. Joshua, Patrick, I just hit the last question, maybe ask it a different way, you know, curious about your level of confidence in sustaining BKUS and Canada traffic growth in 2024, and really specific to BKUS, you know, recognizing what could be an intensified value focus for the US industry in 2024, as suggested by your largest competitor. Thanks.

Andrew Charles: Great. Thank you.

Andrew Charles: Josh Patrick if I just take the last question, maybe ask it a different way I'm curious about your level of confidence of sustaining <unk> candidate 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.

Josh Kobza: Yeah, thanks, Andrew. I'll share a couple of thoughts. Patrick, feel free to jump in as well.

Andrew Charles: Yes.

Speaker Change: Andrew I'll share a couple of thoughts Patrick feel free to jump in as well.

Josh Kobza: Like I said, I think there's so much stuff that Tom and his team are doing that's focused on the basics that's going to allow us to drive traffic, not just this year, but for many years to come. We're improving our operations. We're doing really cool things, focusing on our core equities, whether it's the new commercials about how it ain't the same without the flame, or the Whopper with the million-dollar Whopper. It's a lot of stuff that's going to create consumer excitement around our strongest core equities. I think that's wonderful.

Speaker Change: Well like I said I just think there's so much stuff that Tom and team are doing that's focused on the basics thats going to allow us to drive traffic not just this year, but for many years to come.

We're improving our operations, we're doing really cool things focusing on our core equities.

Speaker Change: It's the it's the new commercials about it Ain't the same without the flame focusing on the Walker with $1 million Whopper. It has 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 a from just over 250 Remodels to 400 Remodels those are the kinds of things that.

Josh Kobza: And we're also doing a lot more remodels. I mentioned we're going to go 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. And at Tim's, I think we noted we're now, I think, in year five of Back to the Basics, and Axel and the team up there are doing a really nice job driving growth. They're doing it through all the ways we've been talking about with PM food and cold beverage, and we have a pretty exciting pipeline of new innovations that are coming on those fronts in 2024 that I think are going to keep bringing our guests back even more.

Speaker Change: 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 and at Tims.

Speaker Change: 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. They are doing it through all the way as we've been talking about with PM food in cold beverage and we have a pretty exciting pipeline.

Speaker Change: New innovations that are coming on those fronts in 2024 that I think are going to keep bringing our guests back even more often.

Patrick Doyle: Yeah, I guess the only thing I'd add is, I mean, first of all, at Burger King, you're just seeing more and more things that we're getting done that are going to contribute to growth. So, you know, more remodels coming, working through some of the tough situations with some franchisees, continued great advertising, and, you know, most importantly, franchisees getting more and more aligned and excited about the progress that we're making in the brands. You know, that increase in profitability is not only important in the absolute, but it's important in the belief of our franchisees in 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. On the Tim side, you know, this is, as Josh said, the continuation of returns from the investments that they made a number of years ago as they got everything right in that business. I love that business, the team is leading it exceptionally well, the franchisees are doing well, their profits being up the way they were were terrific year over year, still more progress to be made there, but just very, very excited about the strength of that brand and glad that I don't have to compete with them. They are really good.

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, 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 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: Our franchisees are doing well their profits being up the way. They were was was terrific year over year is still more progress to be made there.

Speaker Change: 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 and Canada is doing a lot of things right.

Patrick Doyle: They are really, really good in Canada, doing a lot of things right. Thank you. Our next question comes from Chris Kell of RBC Capital Markets. Please go ahead.

Thank you.

Speaker Change: Our next question comes from Chris <unk> of RBC capital markets.

Chris: Please go ahead.

Lauren Silberman: Thanks, good morning. So on the development outlook and update that you provided, you highlighted the slower than expected Chinese growth this year. Patrick and Josh, I know you touched on this briefly in your prepared remarks, but can you maybe expand a bit more on what or which markets you're most confident will contribute to the acceleration and development this year, even if it is a little bit lower than you previously thought? Yeah, thanks, Chris. So, 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.

Chris: Thanks.

Chris: So on the development outlook.

Chris: 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: Yes, Thanks, Chris.

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.

Josh Kobza: In terms of BKUS, that's definitely one of our focus areas. We had a bit more closures in 2023. Based on the incredible sales and improvements in profitability that Tom and the team have been driving, that gives us a lot of confidence that we're going to be able to improve 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.

Josh: 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.

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 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.

Speaker Change: 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. 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.

Josh Kobza: We're getting a lot of uptake on those, and we're starting to see the pipelines fill up, and a lot of the site is moving through those pipelines. 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's a lot of excitement for the brand across Canada, so those two things feel like they're moving in the right direction. We've got some good stuff happening in international markets across our new brand, especially some of the stuff that we're doing with Popeyes and Tim's. We have some Popeyes markets that are ramping up; think of places like Popeyes in India or Popeyes in the UK.

Speaker Change: I think there is a lot of excitement for the brand across Canada. So those two things feel like they're 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 pump is markets that are ramping up I think in places like popeye's in India or pop is in the U K there are.

Josh Kobza: There are a number of those markets; Popeyes in France is another great one; we were there just a few months ago, and they're doing a really nice job, so there are a lot of good Popeyes markets that are ramping up, and I think we'll see some positive momentum in 2024. The other side of that, obviously, is what's going on in China, and I think there are a couple of factors that are going on there.

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 there is a lot of good pop is markets that are ramping up and I think we will see some positive momentum on in 2024.

The other side of that obviously is what's going on in China, and I think Theres 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.

Josh Kobza: One, we've seen a continued shift to some of these smaller express units within Tim's, which we don't count in our restaurant count, so that has some impact on the KPI. We also do believe that there needs to be some more capital put into that business to really realize its potential. And then on BK China, you probably saw, we actually did see a step forward in 2023.

Speaker Change: As we mentioned we don't count.

Speaker Change: In our restaurant counts so that has some impact on the Kpis 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.

Josh Kobza: We were up to around 176 net new units for the year, but I think there is some question about the outlook and the kind of appetite and alignment for growth there that's impacting our outlook for the full year. So that's sort of the puts and takes of it, which, as we said, we think gets us to around 4.5%. And we'll keep updating you throughout the year as we get more visibility into where that's likely to be. The only thing I'd add is, look, we've got longer-term confidence in net unit growth. We really do.

Speaker Change: We were 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: And that's impacting our outlook for the full year. So that's sort of the puts and takes of it.

Speaker Change: We said, we think gets us to around four 5% and we will keep updating you out throughout the year as we get more visibility to where that's likely to land.

Speaker Change: The only thing I'd add is look we've got we've got longer term confidence in net unit growth, we really do this.

Patrick Doyle: This is, you know, this is simply about China and how much capital is available to grow near term this year. 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. Our next question comes from Brian Harbour of Morgan Stanley. Please go ahead; your line is open.

Speaker Change: 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've 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 Harbour: Yeah, thank you. Thank you. Good morning.

Brian John Bittner: Yes. Thank you thank you and good morning.

Brian John Bittner: <unk>.

Josh Kobza: In Burger King, you asked in the fourth quarter how much you think I know there's a number of initiatives that are working very well. But how much of that, though, do you think was, you know, a consequence of the marketing you did? Also, do you think that kind of marketing investment in 24 will look similar with respect to timing? Or, you know, what else do you think was sort of a swing factor there in the fourth quarter? Hey Brian, good morning.

Brian John Bittner: 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 do you think was.

Brian John Bittner: The consequence of the marketing you did.

Brian John Bittner: Also do you think the kind of the marketing investment in 2004 will look similar.

Brian John Bittner: 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.

Josh Kobza: So in terms of BKUS in the fourth quarter, it's hard to quantify the exact breakdown, but I do think there was a positive impact from the advertising spend, for sure. We're investing more, and I think the team is doing a wonderful job measuring the effectiveness of that advertising. But I also think there's a big impact there from operations. It's one of those 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 that's 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 improvement. So I'd say that's the other largest factor in our minds.

Speaker Change: 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 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.

And the quality of operations and our franchisees are doing a fantastic job there and we think that that's.

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.

Josh Kobza: In terms of the 2024 outlook, as we mentioned in our earlier remarks, we're about caught up in terms of where you'd expect us to be in terms of that advertising spend and the program to date. So I think we have just under $60 million left to spend in 2024. 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 2020. The next question is from Sara Senatore of Bank of America. Your line is open.

<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.

Brian John Bittner: The next question is from Sara Senatore of Bank of America. Your line is open.

Sara Harkavy Senatore: Alright, thank you.

Sara Harkavy Senatore: Great, thank you. I just wanted to ask about just one point of clarification and then a quick question. I'll start with the question first. You talked about positive traffic in Burger King, and I wanted to dig in there a little bit because you did close some stores this year. And historically, what we've seen is that door closures do tend to benefit the system in terms of positive comp. So I'm trying to understand, you know, as we think through kind of that balance of unit closures versus positive traffic and in the remaining stores, if you saw any benefit from that, you know, sales transfer or closing lower performing stores. So that was one question. And then, just quickly, the clarification was on China. You said you're working with your Tim's and Burgers partners to encourage growth, but what does that mean? Exactly, if you're not planning on committing capital as you are in the US.

Sara Harkavy Senatore: I just wanted to ask about just a point of clarification and then a quick question.

Sara Harkavy Senatore: I'll start with a question first Dan you talked about positive traffic.

Sara Harkavy Senatore: And at Burger King and I wanted to get in there, but I'll bet.

Sara Harkavy Senatore: You did close stores this year and historically, what we've seen store closures.

Speaker Change: Fair enough.

In terms of positive comp so I'm trying to understand we think through kind of that balance of unit closures versus positive traffic in the remaining stores.

Speaker Change: If you saw any benefit from that sales transfer.

Speaker Change: Our closing lower performing stores.

Speaker Change: One question and then just quickly the clarification was on China, you said, you're working with.

Speaker Change: Your <unk> partners.

Speaker Change: But what is that mean exactly if you are not planning on committing capital as you are in the U S.

Josh Kobza: Yeah, so, Sara, thanks for the questions. On the first one in terms of traffic, you know, a couple of comments I would just make there. You know, if you look at the sequencing through the year, we had been taking some closures throughout the year, and so while there may be some positive impact from that, we don't see it super clearly, and I think what's most striking, to me at least, is that we saw that very consistent movement in a pretty pronounced way in terms We went from a pretty negative place up to low single digits, negative, flat, and then 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 pace of closures there. And then on China, we kind of talked through some of the factors there.

Speaker Change: Yes, Sarah Thanks for the questions on the first one in terms of traffic.

Speaker Change: A couple of comments I would just make there.

Speaker Change: If you look at the sequencing through the year.

Speaker Change: We had 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 is 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 digit negative flat and then quite quite.

Speaker Change: Quite improved in a 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 were 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 there are a lot of different ways that we work with our partners.

Josh Kobza: We're definitely working closely with our partners. We obviously have, as I've mentioned, really big ambitions for what we think we should do in the market and what we think our brands can accomplish. There are a lot of different ways that we work with our partners on that related to 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 that quite yet today, but we'll bring back anything. Next, we have Brian Mullen of Piper Sandler. Please go ahead. Thank you. Just a question on Popeye specific to the US.

Speaker Change: Related to 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 that quite yet today, but will bring anything back as soon as we do.

Speaker Change: Next we have Brian Mullan of Piper Sandler.

Brian Mullan: Please go ahead.

Brian Mullan: Okay. Thank you and just a question on top is specific to the U S.

Brian Mullen: Please update us on the simplifying the operations journey that you're on, maybe touch on what the key priorities are for 2024 as a part of the plan, and related. I asked because the unit growth is very solid already at four and a half percent last year, but is the thought that you'd actually be able to accelerate that unit growth pace once more and more operational improvements are made? Thanks, Brian. So in terms of where we are on improving operations, especially around what we've called our easy-to-run kitchens. So throughout 2023, we were focused on improving the model, kind of making sure we had the right combination of elements in that easy-to-run kitchen, whether that's software improvements or new pieces of equipment, new procedures, or new technology.

Brian Mullan: Can you just update us on the simplifying the operations journey that you're on maybe touch on what the key priorities are 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'd actually be able to accelerate that unit growth pace once more and more operational.

Brian Mullan: <unk> are made.

Speaker Change: Thanks, Brian So in terms of where we are on an improving operations, especially around what we've called our easy to run kitchens. So throughout 2023, we were focused on.

Speaker Change: 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.

Brian Mullen: 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 of 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're going to go and do a larger deployment in the California cluster, and then we'll start to do a few more of those 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's a big element of training that goes into that.

Speaker Change: So one of 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're going to go and do a larger deployment and the cluster in California, and then we will start to do a few more of those.

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.

Speaker Change: 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.

Josh Kobza: So we want to really make sure we've got it right. And from there, you think we'll be able to scale it to the entire system, hopefully later in 2024 and into 2025. So that's sort of the game plan.

Patrick Doyle: You know, in terms of the impact that easy-to-run kitchens can have 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. I think what's going to be magical about this is if we can make it easier for the team members and therefore improve the guest experience through things like order accuracy, the speed of service, and the drive through friendliness. Those are the things that I think are going to really unlock unit level potential. And I would expect to see that in our guest feedback and our product satisfaction and, ultimately, in the same sort of traffic and sales that we're able to drive in our restaurants. That, for me, will be the biggest measure of success of easy to run. And that's what we're looking at in restaurants. Patrick, anything you want to add?

Speaker Change: In terms of the impact that the easy to run kitchens can have on the business I would tell you I probably think about it more in terms of operations and guest experience that I do in terms of restaurant growth I think what's what's going 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 potential and I would expect to see that in our guest feedback and our products product 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, Patrick do you want to yes. The only thing I would add is as you look at.

Patrick Doyle: The only thing I'd add is, as you look at the returns we're going to generate on Popeyes as it gets easier to run, there are really two things that happen when you improve service in restaurants. One is, you know, the customer is happier because they're getting a better experience. They're moving through more quickly.

Patrick Doyle: The returns we're going to generate on popeye's is it gets easier to run.

Patrick Doyle: There are really two things that happened when.

Patrick Doyle: You improve service in restaurants, one is the customer is happier because they're getting a better experience, they're moving through more quickly, but the other is frankly, just being able to fulfill.

Patrick Doyle: But the other is, frankly, just being able to meet incremental demand. And, you know, if you look at Tim's... One of the reasons TIMSS is generating traffic growth is because they have improved their service times in Canada. You go to a Tim's at 7.30 in the morning in Canada, and you are going to see very busy drive-throughs.

Patrick Doyle: Incremental demand.

Patrick Doyle: If you look at Tims.

Patrick Doyle: One of the reasons Tims is generating traffic growth is because they have improved their service times.

Patrick Doyle: In Canada, you go to a tims at 730 in the morning in Canada.

Patrick Doyle: 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 you are able to get more people through the drive through over the course of an hour as we build more demand.

Patrick Doyle: So, you know, if they can improve the speed of service, it's not only a better experience for the customers, but you're just simply able to generate more sales because you're able to get more people through the drive-through over the course of an hour. And as we build more demand with great new products at Popeyes, like Wings. Our ability to meet that demand, our ability to get them through the drive-through to give them better service times, not only will make the customers happier, which will, in turn, generate more demand, but frankly, just our ability to get more people through the drive-through is going to increase sales. The next question is from Lauren Silberman of Deutsche Bank. Your line is open.

Patrick Doyle: And with great new products at Popeye's like wing, our ability to fulfill against that our ability to get them through the drive thru to give them better service times, not only will make the customers happier, which will in turn generate more demand, but frankly, just our ability to get more people through the drive through.

Patrick Doyle: Is going to increase sales.

Patrick Doyle: The next question is from Lauren Silberman of Deutsche Bank. Your line is open.

Operator: Thanks for the question. I had another one on Tim Horton supply chain margins. Can you just talk about the underlying supply chain margins, including the CPT business and expectations there? And if you can just remind us how you price the franchisees in the commissary, the timing of that pass-through, and how that influences the margins. Thank you.

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 CTG business and expectations. There and if you can just remind us on how you price the franchisees in the commentary the timing of that pass through how that influences the margin. Thank you.

Josh Kobza: Yeah, thanks for the question, Laura. So, yeah, in terms of margins, we look at it holistically across, you know, the whole category of sales cost of sales. And kind of, as I said, I think we exited the year in 2023 at around the 18% margin, although Q1 is seasonally lower.

Yeah.

Yes, thanks for the question Laura so.

Speaker Change: Yes 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.

Matthew Dunnigan: So it'll probably be pretty consistent with that, but we do see some opportunity to drive that back up toward 2022 levels, which were a bit higher around 19%. As it relates to pass-through of commodity prices, we do that, as you recall, 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 we do that at intervals throughout the year, a couple of times a year. It doesn't happen on a frequent recurring basis.

Speaker Change: So it will probably be pretty consistent with that but we do see some opportunity.

Speaker Change: 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: Intervals 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.

Matthew Dunnigan: Having said that, I think the overall commodity cost environment has balanced out and stabilized quite a bit over the past few quarters. Thanks for the question. Next, we have a question from Eric Gonzalez of KeyBank. Your line is open.

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.

Speaker Change: Thanks for the question.

Speaker Change: Next we have a question from Eric Gonzalez of Keybanc. Your line is open.

Eric Gonzalez: Hi, thanks for the question. Congratulations on the strong improvement in franchisee profitability at BKUS. I'm just curious what this might mean for your U.S. franchisees and their ability to fund remodels at a faster pace. You know, with these numbers out there in the public domain, do you think this helps franchisees get better access to capital to fund their projects? And also, I think you attribute about half of the improvement to operations. Does this imply the other half is commodity relief?

Speaker Change: Sure.

Eric Gonzalez: Hi, 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 attribute about half the improvement to the operations.

Eric Gonzalez: This imply the other half is commodity commodity relief.

Josh Kobza: And assuming you won't get much more relief on the commodity side, do you think you should continue to drive meaningful improvement in solo profitability without significant progress on that remodel program? Yeah, thanks, Eric. Good morning.

Eric Gonzalez: And assuming you woke up before we move on the commodity side do you think you can 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.

Josh Kobza: I appreciate the question. You know, I think it's, it's for sure the case that increasing franchise profitability 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, you know, 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 definitely has an impact on everybody's excitement about investing. You saw that with our decision to acquire Carol's, I think that shows pretty clearly our optimism about where the system's going. So I think there's that is definitely the case.

Speaker Change: I think it's for sure the case that.

Speaker Change: Increasing franchise profitability.

Speaker Change: 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.

Speaker Change: We have sales traffic and profitability all moving in the right direction I think the overall excitement about the system about where we're going.

Definitely has an impact on everybody as excitement about investing you saw that with with our decision to acquire <unk> I think that shows pretty clearly are.

Speaker Change: Our optimism about where the systems going.

Speaker Change: So I think that is definitely the case and we are definitely feeling better about the outlook for Remodels and BK U S.

Josh Kobza: And we're definitely feeling better about the outlook for remodels and BKUS. One thing I would just add there, as we mentioned a little bit earlier, we already had a line-of-sight to getting to around 65% of the system on Modern Image just through the first couple of years of our Reclaim the Flame program, that was before Carol's acquisition.

Speaker Change: One thing I would just add there.

Speaker Change: And a little bit earlier, we already had.

Speaker Change: A 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 now.

Josh Kobza: Now, with Carol's, we think that line-of-sight goes up to about 75%, which is good. But ultimately, I think we want to get the BKUS system, I've said this many times, to a place where almost every Burger King you see around the country is a modern community location. We think that probably means something like 85% to 90% of the system needs to be modernized over the next few years. There will probably be some further investment. Just to give you a couple of data points to be in the right zip code there: we already have line-of-sight to 75%.

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%, if we want to get to 85% 90, that's about 1000 more restaurants that we think we would need to we need to agree to do remodels on and in terms of the cost of that for US. If you look at what we're putting into the existing first couple of years, it's just a little bit shy of 300000.

Josh Kobza: If we want to get to 85 or 90, that's about 1,000 more restaurants that we think we would need to agree to do remodels on. And in terms of the cost of that for us, if you look at what we're putting into the existing first couple of years, it's just a little bit shy of 300,000. So hopefully, those data points kind of give you a sense of where we want to go and some of the related investments that'll come over that sort of 25 to 28 time horizon. And then, in terms of the contributors to the performance, we do think a big part of that sales and traffic performance came from operational improvements. There's obviously a lot of other stuff going on as well in terms of the effectiveness of marketing and advertising spend. And I think our confidence and the ability to continue that are just driven by all the fundamentals that Tom and his team are driving. And we think there's a lot more to do in this BK system that will take us more years to fully realize.

Speaker Change: So hopefully those data points kind of give you a sense of where we want to go in some of the related investments that will come over that sort of 25 to 28 at a 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 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.

Josh Kobza: Yet, the only thing I'd add is, you know, Josh just took you through the rough math on what could be the spend to kind of 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. Um, so if we do something at that level, that would be equal to what we had done before. And frankly, what we want to do is reward franchisees who are doing these things ahead of the curve, not at the end of it. The next question comes from John Zamparo of CIBC. Please go ahead. Thank you. Good morning.

Speaker Change: Josh just took you through the rough math on.

Speaker Change: On what could be the spends.

Speaker Change: 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.

Speaker Change: So.

Speaker Change: If we do something at that level.

Speaker Change: 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.

Speaker Change: The next question comes from John Zang.

John Zamparo: CIBC. Please go ahead.

John Zamparo: 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 do you have as much visibility.

John Zamparo: I wanted to ask about international business, and in particular, store level profitability. Obviously, you've got lots of countries and formats, but I wonder if you can give any clarity on this. And I wonder how you look at store level profitability internationally. Is it by country or by region or by brand?

Josh Kobza: Do you have as much visibility internationally, at least in your most important markets, as you do in your domestic markets? And I know you don't, well, you want to save a lot of this for Thursday, but is store level profitability something you plan to offer? For the long term?

John Zamparo: 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.

Josh Kobza: Yeah, Jon, thanks for the question. I think it's a great point, and I would tell you, as we've thought about the last year or so, I think we really have brought a big level of focus, especially to our home market franchise profitability. It's where we felt like we had the most work to do, and it's a little more straightforward. As you pointed out, it's a few markets, and it's a little bit closer.

Speaker Change: Yes, John Thanks for the question that 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 is a little more straightforward as you pointed out a few markets.

Speaker Change: And it's a little bit a little bit closer we operate those markets.

Josh Kobza: We operate in those markets. 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 combination. So, we're looking at Burger King in France or Popeyes in Spain. So, that tends to be the lens, and as you can imagine, that's a lot of brand market combinations for us. It's a little bit more complicated than that.

Speaker Change: So I think we 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 pop is 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.

Patrick Doyle: We're looking there. When we look at each of those, we are looking at profitability per unit, but I think probably the easiest metric to look at across all those markets is the payback period. We want to get to a model where our franchisees are realizing compelling paybacks. That's 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, we'll bring more visibility over time, and we'll figure out the right ways to communicate that balance, I think, simplicity with trying to be clear and transparent with everybody. Badger, do you want anything else you want to add, like kind of long-term outlets or anything?

Speaker Change: 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 period, 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 balanced I think simplicity.

Speaker Change: With trying to be clear and transparent with everybody.

Speaker Change: Patrick do you want anything else want to add on kind of long term outlooks or anything.

Patrick Doyle: It's, I mean, it's complicated on the international side. What we've focused on and we've had that discussion many times inside, and there's no way to kind of give you a clean, single answer on that. What we look at is, you know, our team and 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 on those units. There is a point at which the master franchisee kind of takes over that job, but you're going to continue to help them over time. But if you've gotten them to a good cash on cash return, they understand the business well.

Patrick Doyle: Its complicated on the international side, what we've focused on it.

Patrick Doyle: We have had that discussion many times inside there is there is no way to kind of give you a clean single.

Speaker Change: Answer on that what we look at is.

Speaker Change: Our team David and his team's job.

Speaker Change: Is to find great partners and then help those partners in the early years.

Speaker Change: Work their way to a good return.

Speaker Change: On those units there is a point at which the master franchisee kind of takes over that job youre going to continue to help them over time, but if you've gotten them to a good cash on cash return they understand the business well.

Patrick Doyle: You know, in France, we've got great returns on our business. In Spain, we've got great returns on our businesses. And these are very experienced master franchisees. We can help them some, but frankly, it's probably more important for us to get, for instance, Popeye's launch in France right versus the contribution we're going to make to Burger King in France, where they've already got 500 units. So we've spent a lot of time kind of working through that. And I don't think there's a way we're ever going to be able to give you kind of a clean answer for overall on international. Really, what we're going to give you more, I think, is just guidance on how to look. And this is true,

Speaker Change: In France, we've gotten great returns on our business in Spain, We've got great returns on our businesses and these are very experienced master franchisees.

Speaker Change: We can help them some but frankly, it's probably more important for us to get for instance, popeye's launch in France right.

Speaker Change: Versus the contribution we're going to make to Burger King in France, where they've already got 500 units. So.

Speaker Change: So we've spent a lot of time.

Speaker Change: Kind of working through that and there is I don't think Theres, a way we're ever going to be able to give you kind of a clean answer.

For 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: Overall, returns are very good in our international business, but it clearly varies market to market, brand to brand, and particularly is going to vary early in the launch of a new brand in a new market. The next question comes from Gregory Frankfurt of Guggenheim Partners. Please go ahead. Hey, thanks for the question. I want to ask one.

Speaker Change: Going to very early in the launch of a new brand in a new market.

Speaker Change: The next question comes from Gregory.

Gregory: Guggenheim partners.

Please go ahead.

Hey, Thanks. Thanks for the question I want to ask one I don't think its got a lot of attention today, but just.

Patrick Doyle: I don't think it's gotten a lot of attention today, but just on Popeyes. I know the Wings launch was pretty late in the fourth quarter, but can you talk about what you're seeing either from a sales contribution or how it is attracting new customers or changing your delivery business? Just any thoughts on that would be helpful. Thanks. Yeah, Greg, thanks. And as I say, we're all really excited about the new wings at Popeyes. Most people are probably surprised to know that Popeyes didn't have a flavored wing platform.

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 a.

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 is 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.

Josh Kobza: So we're really happy we could 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 wings. If you haven't tried them yet, please do.

Josh Kobza: You know, we were already starting to see some impact of the wings in Q4. I would tell you that more of the behavior that we saw initially was add-on behavior as opposed to new guests. And that was a lot of what was behind the thought of doing the Super Bowl ad because we didn't have high awareness, mass market awareness, that Popeye's had wings. And the Super Bowl is a tremendous vehicle to drive mass market awareness. And I think the Super Bowl this year was no exception. It was one of the best. I think the viewership was actually the highest ever.

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 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.

Speaker Change: And because we didn't have high awareness of mass market awareness that pump is 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 them. The best I think the viewership is actually the highest ever so we got got even more bang for a buck.

Josh Kobza: So we got even more bang for our buck, and I think now that we have greater awareness, we're hoping to see even greater incremental traffic over the course of Q1 and beyond. But really happy with the wing so far.

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.

Josh Kobza: I think it's a terrific addition to Popeye's menu. And we'll keep you updated as we see progress through the quarter and for the rest. The next question is from Jeffrey Bernstein of Barclays. Your line is open. Great, thank you very much.

Speaker Change: It's a terrific addition to the popeye's menu and we'll keep you updated as we see progress through the quarter and for the rest of the year.

Speaker Change: Yeah.

Speaker Change: The next question is from Jeffrey Bernstein of Barclays. Your.

Jeffrey Bernstein: Your line is open.

Jeffrey Bernstein: Great. Thank you very much actually just two clarifications the first one.

Jeff Bernstein: Actually, just two clarifications. The first one, Patrick, I think the US and Canada home market franchisees are probably pretty happy with the direction of profitability. I'm wondering, with you or Josh, as you travel around meeting with franchisees, what's the new number one topic of discussion, or what's the greatest... Pushback or Concern, whether it's top line or bottom line related, just curious how those conversations are going. And the second one was just the reclaim the flame commitment.

Jeffrey Bernstein: Patrick I think the U S and Canada home market franchisees are probably pretty happy with the direction of profitability.

Jeffrey Bernstein: Wondering with you or Josh as you travel around meeting with franchisees whats the new number one topic of discussion or what's the greatest pushed.

Jeffrey Bernstein: Pushback or concern, whether its topline or bottom run related just curious how those conversations are going.

Jeffrey Bernstein: On the second one was just the.

Jeffrey Bernstein: The reclaim of flame commitment I'm, just wondering whether you think those levels were set at the right level now that you've got a chance to look back over the past year.

Patrick Doyle: Just wondering whether those levels were set at the right level now that you get a chance to look back over the past year. I think you 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 1,000 hurricane units. I'm just wondering who's expected or who's potentially considering footing that bill, whether that's a potential corporate consideration or whether that's more just encouraging franchisees to do so. Thank you.

Jeffrey 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 Hurricane unit. So I'm, just wondering who as expected our who's 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.

Josh Kobza: So I'll, I'll let Josh handle the second question. I'll take the first: are we more aligned with our franchisees than we ever have been? There is great excitement 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 that they have is whether or not there's any sense that this is a one-and-done, that we will be happy with the progress that we have made. And the answer for all of them listening is absolutely not.

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: 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.

Patrick Doyle: And we will talk about goals on Thursday for each of the home market brands. But, you know, we are not happy with where we are. We are very happy with the progress, but there is more to be done, and we are going to keep hammering away on it. Thanks, Patrick.

John: And we will talk about goals on Thursday for each of the whole market brands.

John: 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 on it.

Speaker Change: Thanks, Patrick.

Josh Kobza: On the original Reclaim the Flame 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.

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>.

Josh Kobza: We started with advertising, which we could move quickly, and now we've been deploying dollars into the short-term rural reset for a lot of those equipment and technology upgrades. Increasingly, we're shifting to these high-return remodels, and I think it was the right sequencing and the right form of partnership. All of those things, we're investing together alongside our franchisees, and we all achieve results and returns together. I think it was the right structure, and the right sequencing, and I'm very happy with it.

Speaker Change: Advertising, which we could move quickly and now we've been deploying dollars into the short term royal reset to allow those 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.

So I think it was right structure right sequencing.

Speaker Change: And I'm very happy with it.

Josh Kobza: In terms of future investments that I referenced a little bit, I've said over and over again that I think it is absolutely critical that we have to get the BKUS system to where nearly every bird king in America is modern and convenient. We are totally open to investing alongside the franchisees further in that. We've got to work through that with our franchisees. Tom and his team will be doing that over the coming months and talking to them about where the future takes us. Once we've got that all figured out, we'll definitely come back and share more detail on that. The next question comes from Andrew Strelzik of the MI Capital Market. Please go ahead.

Speaker Change: And 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 are 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.

Josh Kobza: Hey, good morning. Thanks for taking the question. I'm curious if you could share some color on the same store sales gap that you're seeing across the BKUS system between the better performing and lower performing units, or however you think about bucketing that. Are you seeing that gap narrow?

Andrew Charles: Hey, good morning, Thanks for taking the question.

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.

Andrew Charles: 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.

Josh Kobza: And in particular, curious what you're 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. Yeah, Andrew, we do see a gap, frankly, in all metrics between our higher rated and lower rated franchisees on the ABDF scale. So everything, whether it's same store sales, same store traffic, restaurant profitability, that's been pretty constant over time. We haven't seen a big shift in those gaps amongst cohorts.

Andrew Charles: Yes.

Andrew Charles: We do see a gap and frankly in all metrics between our sort of our higher rated and lower rated franchisees on the sort of scale. So everything whether it's same store sales same store traffic restaurant profitability.

Andrew Charles: Thats been pretty constant over time.

Andrew Charles: We haven't seen a kind of a big shift in those gaps amongst that cohort.

Josh Kobza: I think it's just reinforced for everybody in the system, both for us and for the franchisees, the value of good operations. I think, to Patrick's point earlier, when you see it on a page, it becomes really compelling to realize that being an A operator means a whole different level of profitability than it is to be a lower rated franchise. So, you know, 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 other thing I would point out is we've seen our franchisees moving up some of those rating scales. It feels like the message is working, people are getting it, and, you know, I'm very thankful that our franchisees are investing to improve their operations. I think they have a huge hand in the results that we've seen over the course of the past year. The next question comes from John Tower of City. Your line is open. Great, thanks for hanging in and taking the questions. Just two unrelated quick ones, hopefully.

Andrew Charles: 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 a whole different level of profitability than it is to be a lower rated franchise.

Andrew Charles: Z.

Andrew Charles: 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 some.

Andrew Charles: Are those rating scales you took place it feels like the message is working people get it and.

Andrew Charles: I am very thankful that our franchisees are investing to improve their operations I think 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.

Great. Thanks for hanging on taking the questions just two unrelated quick ones hopefully first on the China business I know you've had a couple of franchisees in that market, but I'm curious.

Josh Kobza: First, on the China business, I know you have a couple of franchisees in that market, but I'm curious what sort of recourse you might have should either 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 know we've talked a lot about the health of the franchisees and the consumer across some of the core markets, but specifically Tim Horton's Canada and BKUS. Can you help us think about how the franchisees are thinking about pricing in 2024 relative to 23 levels? John, so in terms of China, which applies to all of our international businesses, you know, we have master franchise agreements with our partners. And those tend to outline a kind of expectations, mutual expectations of the parties. They are 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 are set out.

Jon Tower: What sort of recourse you might have should either 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.

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: And 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, we have master franchise agreements with our partners and those tend to outline kind of the expectations mutual expectations of the parties.

Speaker Change: 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 are set out.

Josh Kobza: And those, In terms of Tim's and BK profitability and pricing expectations, I would just say broadly that I would expect to see less pricing taken in 2024 versus 2023. I think you all are probably seeing that across the restaurant space and in other spaces like grocery, for example. You know, I think some of that's a reflection of commodity prices that have started to stabilize a bit. I think you'll see a pretty decent step back in the level of pricing across the industry, and I expect that will be the case for Burger King in the U.S. The next question comes from Jim Sanderson of North Coast Research. Please go ahead.

Speaker Change: 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 and in other spaces like grocery for example.

Speaker Change: I think some of that is a reflection of commodity prices that have started to stabilize a bit.

Speaker Change: I think youll see a pretty pretty decent step back and level of pricing across the industry and I expect that will be the case for Burger King in the U S in tims in Canada as well.

Speaker Change: Okay.

Speaker Change: The next question comes from Jim Sanderson Northcoast Research. Please go ahead.

Josh Kobza: Hey, thanks for the question. Just real quick, I wanted to go back to the US performance for BK. You mentioned that performance improved across all income groups. Any insight on the sales mix for promotions, whether consumers are leaning in more frequently to deals that are offered in the quarter? Hey, Jim. It's Josh.

James Jon 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 leaning them more frequently to deals that are offered in the quarter.

James Jon Sanderson: Hey, Jim It's Josh no I haven't seen anything particularly of note in terms of changes in behavior there.

Josh Kobza: No, I haven't seen anything particularly of note in terms of changes in behavior. However, employment drives consumption in the category. You've heard that from me often, but that is the end. It's really about employment levels. And as long as employment stays strong, I think the categories can continue to be good. Now, we take our last question from Jake Bartlett of Tourist Security. Your line is open; please go ahead.

Josh: 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 continue to be good.

Josh: We will now take our last question from Jake Bartlett.

Jake Rowland Bartlett: Your line is open. Please go ahead.

Josh Kobza: Great, thanks for taking the question. You know, mine was about the focus on smaller franchisees in the US. And I'm wondering if you could just frame that out into, you know, for instance, how many total franchisees or average size, you know, in 23 versus maybe 22, and what you expect that to land at in 24. And really, with an eye on how that impacts G&A spend. You know, in the past, I thought that, you know, consolidating the franchisee base was a source of efficiency for you. But it seems like that's unwinding. So I'm just wondering what the impact of that would be. Hey, Jake.

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.

Jake Rowland Bartlett: And leaned out in 'twenty, four and really with an eye on how that impacts G&A spend in the past I thought that.

Jake Rowland Bartlett: Consolidated the franchisee base was a source of efficiency.

Jake Rowland Bartlett: 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.

Josh Kobza: Thanks for the question. You know, 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. You know, if you look at Tim's in Canada or Firehouse in the US, we already have that.

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.

Josh Kobza: We have, you know, operators that have one, two, three, four stores. I think that's fantastic. And I think that reflects itself in the engagement of those operators with their communities and the operations of those restaurants. 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, we do want to have our operators living and operating in their communities. You know, I would say it's 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, you know, 50 or 100 store operators that live in their markets and do an incredible job. They're operators all day long.

Jake Rowland Bartlett: Operators that have 1234 stores I think thats 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.

Jake Rowland Bartlett: We have articulated that we want to move to something not maybe not as small as that in Burger King and popeye's, but.

Jake Rowland Bartlett: 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: <unk>.

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 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.

Josh Kobza: And that's great. We're super happy about that. And we'll support those operators. But we've also had some of the situations that you've seen, particularly in Burger King in the US, where you have larger operators who have a couple hundred stores, and they're spread out across some pretty geographically divergent areas. And that's one of the common denominators that we've seen in some of these portfolios that have gotten in trouble.

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.

Josh Kobza: So we'll probably try to steer away from some of those situations as we move forward. And where some of the portfolios change hands, we'll seek to move to some of these smaller portfolios with local operators in those communities. You've seen us do that in a few of these BKUS workout situations over the past year.

Jake Rowland Bartlett: Try 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.

Josh Kobza: And I think you'll see us keep kind of nudging the systems in that direction over time. So that's what I would expect. It really doesn't have anything to do with views on GNA spend. It's really about the quality of service that we're able to provide and the success of our business in these local markets. I think that's going to dwarf any differences in GNA structures, which I don't really expect to see much of.

Jake Rowland Bartlett: And I think you'll see us keep kind of nudging.

Jake Rowland Bartlett: The systems in that direction overtime.

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: It's 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: 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.

Operator: So I would just tell you it's entirely focused on driving better operations in our restaurants. And that's what we're focused on. Thank you. This concludes the Q&A session, so I'll hand it back to Josh Kobza, Chief Executive Officer, for any closing comments. Well, thank you so much, everybody, for taking the time to join us today and for the great questions, as always. We're very thankful to our teams, our franchisees, and our restaurant teams for all the great work that they did to produce the results that we were able to share today. We look forward to seeing a number of you on Thursday in New York and sharing some more thoughts on the future there. Have a great day, and thanks for joining the call. This concludes today's call. Thank you for joining us. You may now disconnect your line: www.globalonenessproject.org

Jake Rowland Bartlett: Thank you. This concludes the Q&A session. So I'll hand back to Josh <unk>, Chief Executive Officer for any closing comments.

Josh: Well. Thank you so much everybody for taking the time to join us today and for the great questions as always.

Josh: 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.

Josh: Thursday in New York and sharing some more outlook on the future there have a great day and thanks for joining the call.

Speaker Change: This concludes today's call. Thank you for joining you may now disconnect your lines.

Speaker Change: [music].

Speaker Change: Okay.

Q4 2023 Restaurant Brands International Inc Earnings Call

Request a DemoDemo

QSR

Restaurant Brands International

Earnings