Q1 2024 Restaurant Brands International Inc Earnings Call

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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.

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 Kenny I'll be always head of Investor Relations. Please go ahead.

Kendall Peck: Thank you, operator. Good morning, everyone.

Kenny: Thank you operator, good morning, everyone and welcome to restaurant brands Internationals earnings call for the first quarter ended March 31 2024 as.

Kendall Peck: And welcome to Restaurant Brands International's earnings call for the first quarter ended March 31, 2024. As a reminder, a live broadcast of this call may be accessed on the Investor Relations webpage at rbi.com forward slash investors, and a recording will be available for replay. Joining me on the call today are Restaurant Brands International's Executive Chairman Patrick Doyle, CEO Josh Kobza, and CFO Sammy Cedillo. 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 includes non-GAAP financial measures. Reconciliations of non-GAAP financial measures are included in the press release available on our website.

Kenny: As a reminder, a live broadcast of this call may be accessed on the Investor Relations webpage at RBI Dotcom 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 Jamie City. 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 includes non-GAAP.

Kenny: GAAP financial measures reconciliations of non-GAAP financial measures are included in the press release available on our website and now I will turn the call over to Josh.

Kendall Peck: And now, I'll turn the call over to Josh.

Joshua Kobza: Thanks, Kendall. Good morning, everyone, and thank you for joining us today to discuss our first quarter of 2020. We talked a lot about our business and strategy during our investor event in February, so I'll keep my remarks brief today and focus on the

Joshua Kobza: Thanks, Ken Good morning, everyone and thank you for joining us today to discuss our first quarter of 2024.

Joshua Kobza: We talked a lot about our business and strategy during our investor event in February So I'll keep my remarks brief today and focus on the quarter.

Joshua Kobza: We had a good start to the year with first quarter consolidated comparable sales of 4.6% and net restaurant growth of 3.9%. This translated into system-wide sales growth of 8.1% and organic adjusted operating income growth of 7.7%. Leap Day contributed about 1% to same-store sales globally, so that's important to keep in mind as we talk through the results.

Josh: We had a good start to the year with first quarter consolidated comparable sales of four 6% and net restaurant growth of three 9%.

Josh: This translated into system wide sales growth of eight 1% and organic adjusted operating income growth of seven 7%.

Josh: Leap day contributed about 1% same store sales globally. So that's important to keep in mind as we talk through results.

Joshua Kobza: We're proud of the hard work our teams and franchisees are doing to deliver outstanding product quality and service to guests every day at a great value. That's what brings guests back and will be the driver of sales and traffic growth today and into the future. We're also making progress towards improving convenience. In addition to remodeling our restaurants, we opened 43 net new restaurants this quarter.

Josh: We're proud of the hard work our teams and franchisees are doing to deliver outstanding product quality and service to guess everyday at a great value.

Josh: That's what brings guests back and will be the driver of sales and traffic growth today and into the future.

Josh: We're also making progress towards improving convenience and addition to remodeling our restaurants, we opened 43 net new restaurants. This quarter. We continue to expect mid 4% net restaurant growth for 2024 with development ramping in the second half of the year.

Joshua Kobza: We continue to expect mid-4% net restaurant growth for 2024, with development ramping up in the second half of the year. And finally, after an incredible performance in 2023, our franchisees and teams delivered another quarter of improved home market franchisee profitability. Driven by Top Line Sales Growth and Enhanced Operations. Before I shift to our segment results, I'd like to address the consumer environment. As we've all seen, sales across the restaurant industry have been slowing for a few. In our own data, we've seen consumers become a bit more sensitive to price, resulting in moderating check. This is why driving traffic is so important and why I'm so pleased to see our brands deliver better traffic than most of the industry this past quarter. We know value is also top of mind, and while there are a few tactical things we can do You should not expect us to reinvent the wheel on value.

Josh: And finally after an incredible performance in 2023, our franchisees and teams delivered another quarter of improved home market franchisee profitability.

Josh: Given by the topline sales growth and enhanced operations.

Speaker Change: Before I shift to our segment results I'd like to address the consumer environment.

Speaker Change: As we've all seen sales across the restaurant industry have been slowing for a few quarters.

Speaker Change: And our own data, we have seen consumers become a bit more sensitive to price, resulting in moderating check growth.

Josh: This is why driving traffic is so important and why I'm. So pleased to see our brands deliver better traffic than most of the industry This past quarter.

Josh: We know value is also top of mind and while there are a few tactical things. We can do on the margin you should not expect us to reinvent the wheel on value.

Joshua Kobza: Our priority is to continue enhancing our value proposition through quality food and beverages at attractive prices, improved operations, and delivering a modern, Convenient Experience for Our Guests. As we continue executing against our plans, we feel well-positioned to outperform the broader industry in traffic. Now, let's turn to our results, and we'll start with Tim Hortons in Canada. We kicked off Tim's 60th anniversary year with a 7.5% increase in comparable sales, including mid-single-digit traffic growth and 8.3% growth in system-wide sales.

Josh: Our priority is to continue enhancing our value proposition through our quality food and beverages at attractive price points improved operations and delivering a modern convenient experience for our guests as we continue executing against our plans, we feel well positioned to outperform the broader industry in traffic.

Josh: Now, let's turn to our results and we'll start with Tim Hortons in Canada.

Josh: We kicked off Tim 60th anniversary year, with a seven 5% increase in comparable sales, including mid single digit traffic growth and eight 3% growth in system wide sales.

Joshua Kobza: These fantastic results were driven by operational and digital improvements as well as a strong marketing calendar, which included the January launch of our Retro Donuts and Omelette Bites. Our high quality offerings, great value for money, incredible speed of service, and unmatched convenience have made Tim Hortons the most loved restaurant brand in Canada and the number one breakfast destination for millions of Canadians. We saw the team grow sales 7.5% year over year in our morning daypart, which contributes over 45% to total system-wide sales in Canada. On PMFood, we're bringing Canadians delicious products at attractive price points, including our loaded bowls and wraps and anytime snackers, which now include our savory pinwheels.

Josh: These fantastic results were driven by operational and digital improvements as well as a strong marketing calendar, which included the January launch of our retro Donuts and omelette bites.

Josh: Our high quality offerings, great value for money incredible speed of service and unmatched convenience have made Tim Hortons. The most loved restaurant brand in Canada, and the number one breast breakfast destination for millions of Canadians.

Josh: We saw the team grow sales seven 5% year over year, and our morning day, part, which contributes over 45% to total system wide sales in Canada.

Josh: On PM food, we're bringing Canadians delicious products at attractive price points, including our loaded bowls and reps and anytime Snaggers, which now include our savory pinwheels.

Joshua Kobza: We're dialing up the cravability of our PM food even more with the launch of our new flatbread pizza, which leverages our baked good credentials and offers guests a heartier meal at a really great value. To bring these delicious products from Market Test, our largest and most successful in recent history, to national launch, we invested approximately $20 million Canadian dollars, alongside our franchisee, to roll out high-speed convection ovens across the country. Our marketing and culinary teams, and restaurant owners are really excited about the future menu opportunities this new equipment unlocks, and we see a clear path to achieve double-digit PM food market share in the next year or so.

Josh: We're dialing up the capability of our PM food, even more with the launch of our new Flatbread pizzas.

Josh: Which leverage our baked good potentials and offer guests a heartier meal at a really great value.

Josh: To bring these delicious products from market test, our largest and most successful in recent history.

Josh: Natural to National launch, we invested approximately $20 million Canadian dollars alongside our franchisees to roll out high speed convection ovens across the system.

Josh: Our marketing and culinary teams and restaurant owners are really excited about the future menu opportunities. This new equipment unlocks and we see a clear path to achieve double digit PM food market share in the next year or so.

Joshua Kobza: We're also building our Great Cold Beverage lineup to make Tim's a destination of choice for PM occasions. Even during the colder winter months, sparkling quenchers remained highly sought-after refreshments for our guests and helped cold beverage sales grow 12% year-over-year during the quarter. As patio season approaches, we see an exciting opportunity to drive traffic through additional cold beverage innovation. Finally, we saw another quarter of drive-thru speed of service improvements, with average drive-thru times improving 8% per year to 33 seconds.

Josh: We're also building our great cold beverage lineup to make terms a destination of choice for pm occasions.

Josh: Even during the colder winter months sparkling Quenchers remained highly sought after refreshments for our guests and help cold beverage sales grow 12% year over year during the quarter.

Josh: As patio season approaches, we see an exciting opportunity to drive traffic through additional cold beverage innovations.

Josh: Finally, we saw another quarter of drive thru speed of service improvements with average drive thru times, improving 8% per year to 33 seconds.

Joshua Kobza: Continued restaurant trainings and ongoing adoption of our single QR code scan and pay feature are helping to drive these great results. Tim Horton's had a great start to the year. It's an important one for the brand as we celebrate its 60th anniversary, the 50th anniversary of its beloved Tim Horton's Camp Foundation, and the 40th anniversary of Tim Horton's in the U.S.

Josh: <unk> restaurant trainings and ongoing adoption of our single QR code scan and pay feature are helping to drive these great results.

Josh: Tim Hortons had a great start to the year, it's an important one for the brand as we celebrated <unk> anniversary the 50th anniversary for its beloved Tim Hortons Camp Foundation, and the 40th anniversary for Tim Hortons in the U S.

Joshua Kobza: Restaurant owners are gathering with Axel and his team in Toronto in June to celebrate these important milestones. We're confident we can continue to drive growth for the business with the support and hard work of our dedicated restaurant owners, and we're looking forward to seeing them all next month. Moving to International, I'm excited to have Thiago join the leadership team as our new President of International. Thiago has done an amazing job leading our largest international region, which is Europe, the Middle East, and Africa, for the past two years, and he led Latin America for three years prior to that.

Josh: Our restaurant owners are gathering with excellent his team in Toronto in June to celebrate these important milestones. We're confident we can continue to drive growth for the business with the support and hard work of our dedicated restaurant owners and we're looking forward to seeing them all next month.

Josh: Shifting to international I'm excited to have Thiago joined the leadership team as our new President of International Ti.

Josh: Thiago has done an amazing job, leading our largest international region, which is the Europe, which is Europe, the middle East and Africa for the past two years and led Latin America for three years prior to that he.

Joshua Kobza: He's been instrumental in expanding our brands internationally with the launch of Firehouse Subs International and taking Popeyes to many markets like France and Eastern Europe, just to name a few. In March, I spent time with Tiago and our partners in Asia, where we visited our Burger King, Tim Hortons, and Popeyes businesses in Shanghai, and then visited our Tim's location in Singapore to spend time with our local partners and understand how the team is successfully translating the brand to markets across Asia.

Josh: He has been instrumental in expanding our brands internationally with the launch of firehouse subs international and taking popeye's to many markets like France, and Eastern Europe just to name a few.

Josh: In March I spent time with Thiago and our partners in Asia, where we visit our Burger King Tim Hortons and Popeye's businesses in Shanghai, and then visited our tims location in Singapore to spend time with our local partners and understand how the team has successfully translating the brand to markets across Asia.

Josh: It's clear we have a tremendous opportunity in APAC over the long term.

Josh: That said there is work to do in certain markets like China to improve our near term path and once we have updates on that we'll share those with you.

Joshua Kobza: It's clear we have a tremendous opportunity in APAC over the long term. That said, there is work to do in certain markets like China to improve our near-term path, and once we have updates on that, we'll share those with you. For the first quarter, international comparable sales were 4.2%, and net restaurant growth was 8.4%, driving system-wide sales growth of 11.6%. Positive results in markets such as France, Brazil, Mexico, Australia, and Japan were partially offset by the softer consumer backdrop in China, a deceleration in pricing in many markets in Western Europe, and the conflict in the Middle East.

Josh: For the first quarter International comparable sales were four 2% and net restaurant growth was eight 4% driving system wide sales growth of 11, 6%.

Josh: Positive results in markets, such as France, Brazil, Mexico, Australia, and Japan were partially offset by the softer consumer backdrop in China deceleration in pricing in many western markets in Western Europe, and the conflict in the Middle East.

Josh: Our performance in the midst of these macro pressures is a testament to our strong brand positioning and the hard work of our teams and partners.

Josh: Together, we've developed balanced menus with enticing gourmet premium and value products and are serving guests in modern digitally enabled <unk> restaurants.

Josh: Burger King, France is value menu and focus on great food, coupled with excellent guest satisfaction helped the market grow its share and doubled its strong position and value for money.

Joshua Kobza: Our performance in the midst of these macro pressures is a testament to our strong brand position and the hard work of our teams and partners. Together, we've developed balanced menus with enticing gourmet, premium, and value products and are serving guests in modern, digitally enabled restaurants. Burger King France's value menu and focus on great food, coupled with excellent guest satisfaction, help the market grow its share and uphold its strong position in value for money.

Josh: At Burger King, Brazil value oriented calendar initiatives and effective advertising drove topline momentum during the quarter.

Josh: At Tim Hortons in Mexico, we have a really strong business and saw another great quarter of comparable sales.

Josh: International Digital sales grew 15% year over year and represented over 50% of international system sales led by Asia Pacific where digital represented over 55% of the region system wide sales.

Josh: We know our four brands are well positioned to adapt to the evolving business landscape of over 120 diverse markets with many still representing significant development opportunities for decades to come.

Joshua Kobza: At Burger King Brazil, value-oriented calendar initiatives and effective advertising drove top-line momentum during the quarter. At Tim Hortons in Mexico, we have a really strong business and saw another great quarter of comparable, International digital sales grew 15% year over year and represented over 50% of international systems, led by Asia-Pacific, where digital represented over 55% of the region's system-wide.

Josh: Shifting now to Burger King U S. Comparable sales grew three 9% and traffic was relatively flat while total net restaurants declined two 8%, resulting in two 4% system wide sales growth.

Josh: Results were driven by continued progress across all pillars of our claim the flame, including marketing focused on our flame grilled and have it your way core equities and strong value messaging.

Josh: Through operational improvements and a balanced menu of value in calendar initiatives, such as our $5 <unk> and our fiery Buffalo innovation Burger King U S comparable sales and traffic once again outperformed the industry.

Joshua Kobza: We know our four brands are well-positioned to adapt to the evolving business landscape of over 120 diverse markets, with many still representing significant development opportunities for decades. Shifting now to Burger King U.S., comparable sales grew 3.9% and traffic was relatively flat, while total net restaurants declined 2.8%, resulting in 2.4% system-wide sales growth. Results were driven by continued progress across all pillars of Reclaim the Flame, including marketing focused on our flame-grilled and have-it-your-way core equities and strong value messages.

Josh: We know we still have a lot more work ahead of us, including closing and integrating our pending <unk> acquisition, but it's clear reclaim the flame is driving strong early results and positioning us well to outperform in any consumer environment.

Josh: On the advertising and digital side, we spent $6 million of our fuel the flame investment during the quarter and given continued franchisee profitability improvements we are well positioned to maintain our improved share of voice with franchisees on track to take on the incremental 50 basis points of AD Levy starting next year.

Joshua Kobza: Through operational improvements and a balanced menu of value and calendar initiatives, such as our $5 DUOs and our Fiery Buffalo innovation, Burger King U.S. comparable sales and traffic once again outperformed the industry. We know we still have a lot more work ahead of us, including closing and integrating our pending Carroll's acquisition, but it's clear Reclaim the Flame is driving strong early results and positioning us well to outperform in any consumer environment

Josh: Our Royal reset refresh investments energy from our Royal round tables and targeted gold standard service trainings are as travelers are establishing a stronger restaurant level culture at Burger King that's been a driving force behind our operational improvements.

Josh: We're also making strides on the digital front and saw increased mobile order and pay kiosk usage and adoption of our Royal Perks loyalty program drive digital sales growth of 37% year over year, resulting in a digital sales mix of 17%.

Josh: We are on track to complete nearly 400 remodels both through our fully committed rail reset remodel program and normal course re imaging in 2024, and now have nearly 100 Royal reset remodels that have been open for at least six months, we're really impressed by the results we've seen so far including average uplifts in the high teens net of control.

Joshua Kobza: On the advertising and digital side, we spent $6 million of our fuel-to-flame investment during the quarter, and, given continued franchisee profitability improvements, we're well-positioned to maintain our improved share of voice, with franchisees on track to take on the incremental 50 basis points of ad levies starting next year. Our Royal Reset Refresh Investment

Josh: As expected that's down a little from the 20% figure we shared in February as more full remodel restaurants have come into the sample.

Josh: These results are giving us and our franchisees a ton of confidence that recently reclaim the flame is working and youre seeing another clear demonstration of that confidence and the expanded co investment we announced this morning.

Joshua Kobza: Energy from our Royal Round Tables and targeted gold standard service training are establishing a stronger restaurant-level culture at Burger King that's been a driving force behind our operational improvement. We're also making strides on the digital front and saw increased mobile order and pay, kiosk usage, and adoption of our Royal Perks loyalty program drive digital sales growth of 37% year over year, resulting in a digital sales mix of 17%. We are on track to complete nearly 400 remodels, both through our fully committed Royal Reset Remodel Program and Normal Course Reimaging in 2024, and we now have nearly 100 Royal Reset Remodels that have been open for at least six months.

Josh: The $300 million investment will contribute to remodeling, another 1100 restaurants and bring us to between 85 and 90% modern image by 2028.

Josh: We're continuing to incentivize better operations and higher scope remodels, while introducing another element to incentivize urgency.

Josh: By providing franchisees more meaningful contributions the sooner they re image.

Josh: We've seen solid interest from franchisees in our new sizzle image, which we've been piloting and testing over the past few quarters.

Josh: And are excited to officially make sizzle available to all franchisees soon.

Josh: Tom and team are on the road with franchisees launching the new program and we are excited to work with them to bring beautiful digitally forward Burger kings to more guests around the U S.

Josh: For those of you in Miami, Las Vegas, New Jersey, Northern California, and Asheville, North Carolina, I encourage you to check out our newest VK has to get a taste of what's to come in the years ahead I've been to all of those except Las Vegas recently and continue the restaurants look great and guests are loving the upgraded experience.

Joshua Kobza: We're really impressed by the results we've seen so far, including average uplifts in the high teens net of control. As expected, that's down a little from the 20% figure we shared in February, as more full remodel restaurants have come into the sample. These results are giving us and our franchisees a ton of confidence that Reclaim the Flame is working, and you're seeing another clear demonstration of that confidence in the expanded co-investment we announced this morning.

Josh: Between our reclaim the flame investment pending <unk> acquisition and this additional $300 million investment into Remodels. We believe the brand is now fully funded to deliver against our long term plans for Burger King.

Josh: Now turning to Popeye's were excited to have Jeff client take on the role of President of Popeyes in the U S and Canada.

Josh: <unk> has over 20 years of marketing experience and was an important contributor to our easy to love planned development, while leading the launch of our we don't make sense, we make chicken brand messaging and our wings campaign.

Joshua Kobza: The $300 million investment will contribute to remodeling another 1,100 restaurants and bring us to between 85 and 90% modern image by 2028. We're continuing to incentivize better operations and higher-scope remodels while introducing another element to incentivize urgency by providing franchisees with more meaningful contributions the sooner they reimagine. We've seen solid interest from franchisees in our new sizzle image, which we've been piloting and testing over the past few quarters, and we are excited to officially make sizzle available to all franchisees.

Josh: He has amazing operations culinary and development team supporting him and he is excited to continue executing executing against easy to London.

Josh: Shifting to results for the quarter Popeye's U S grew comparable sales of six 2% and net restaurants four zero percent.

Josh: Resulting in system wide sales growth of 10, 2%.

Josh: We're seeing exciting momentum in the early days of our journey as a wings player. The brand's first ever Super Bowl AD proved to be successful driving mass awareness swings.

Joshua Kobza: Tom and his team are on the road with franchisees launching the new program, and we are excited to work with them to bring beautiful digitally forward Burger Kings to more guests around the U.S. For those of you in Miami, Las Vegas, New Jersey, Northern California, and Asheville, North Carolina, I encourage you to check out our newest BKs to get a taste of what's to come in the years ahead. I've been to all of those except Las Vegas recently and continue to see the restaurants look great, and guests are loving the upgraded experience.

Josh: In March we built on this strength with the introduction of our newest flavor Honeywell endeavor as a digital exclusive which paved the way for new and existing guests to trial, our wings and helped deliver a digital sales mix of 27%.

Josh: We layered this digital promotion with our big box value deal and both represented key drivers in our traffic and chicken <unk> share growth this quarter.

Josh: Our easy to run kitchen conversions are also delivering encouraging results and enabling us to create a better experience for both team members and guests.

Joshua Kobza: Between our Reclaim the Flame investment, the pending Carril's acquisition, and this additional $300 million investment into remodels, we believe the brand is now fully funded to deliver against our long-term plans for Burt. Now, turning to Popeyes, we're excited to have Jeff Klein take on the role of President of Popeyes in the U.S. and Canada.

Josh: We started to rollout easy to run kitchens, and clustered markets beginning with California.

Josh: I visited our California easy to run kitchens twice now this year and have heard from franchisees and team members, how impactful the simplified kitchens and automated ordering can be to our business.

Josh: The best part is that the conversions can be completed in just a few nights with no restaurant downtime during the day.

Joshua Kobza: Jeff has over 20 years of marketing experience and was an important contributor to our easy to love plan development while leading the launch of our We Don't Make Sense, We Make Chicken brand messaging and our Wings campaign. He has amazing operations, culinary, and development teams supporting him, and he's excited to continue executing against easy to love. Shifting to results for the quarter, Popeyes U.S. grew comparable sales 6.2% and net restaurants 4.0%.

Josh: We're showcasing this opportunity with our franchisees next month at the <unk> Convention, which of course will be in our hometown of New Orleans, where our company restaurants will host the system and recently upgraded easy to run restaurants.

Josh: The team is closely monitoring results from the easy to run kitchens, we have today and we look forward to sharing more updates with you on our journey later later this year.

Josh: Finally on firehouse subs, we saw relatively flat comparable sales in the U S and increased system wide sales by three 3% we.

Josh: We remain focused on driving development and strengthening our digital leadership.

Joshua Kobza: Resulting in system-wide sales growth of 10.2%. We're seeing exciting momentum in the early days of our journey as a Wings player. The brand's first-ever Super Bowl ad proved to be successful, driving mass awareness for Wings. In March, we built on this strength with the introduction of our newest flavor, Honey Lemon Pepper, as a digital exclusive, which paved the way for new and existing guests to try our wings and helped deliver a digital sales mix of 27%.

Josh: On development, Mike and team are building, a strong multiyear pipeline with attractive development incentive programs. We saw nice traction this quarter from these programs with commitments from new and existing franchisees, including first responders to open restaurants in the USA and Canada.

Josh: The firehouse team recently participated and sponsored the FDIC convention that stands for fire Department instructors conference.

Josh: Where we serve thousands of firehouse subs and hosted a session on becoming a firehouse franchisee.

Joshua Kobza: We layered this digital promotion with our big box value deal, and both represented key drivers in our traffic and Chicken QSR share growth this quarter. Our easy-to-run kitchen conversions are also delivering encouraging results and enabling us to create a better experience for both team members and guests. We started to roll out easy-to-run kitchens in clustered markets, beginning with California. I visited our California easy-to-run kitchens twice this year, and I've heard from franchisees and team members how impactful the simplified kitchens and automated ordering can be to our business. The best part is that the conversions can be completed in just a few nights with no restaurant downtime during the day.

Josh: Our franchisees in Canada, some of whom are Tim restaurant owners as well have done a great job and we're seeing strong average unit volumes in the market.

Josh: It's clear Canadians have an appetite for more firehouse. So we're excited to continue bringing the brand's hardy subs to new destinations across the country.

Josh: We also made progress migrating to digital channels and grew digital sales mix to over 40% for the quarter.

Josh: Higher households, the highest home market digital penetration across all of our brands and has tons of potential to further enhance its overall digital strategy.

Josh: I, just got back from Texas, and Oklahoma with Mike and the rest of the firehouse team visiting a couple of our best franchisees to talk about development and some of the hot new marketing innovations. We're working on everyone's fired up for where we're going to take this brand and I share their optimism.

Joshua Kobza: We're showcasing this opportunity with our franchisees next month at the Popeyes convention, which, of course, will be in our hometown of New Orleans, where our company restaurants will host the system in recently upgraded, easy-to-run restaurants. The team is closely monitoring results from the easy-to-run kitchens we have today, and we look forward to sharing more updates with you on our journey later this year. Finally, on firehouse subs, we saw relatively flat comparable sales in the U.S. and increased system-wide sales by 3.3%.

Josh: I'm really pleased to have Sami with us today in his new role as CFO Sami brings an incredible balance of financial strategic and operational experience having worked across nearly all of our businesses across the last 10 years. He has already proven himself to be an incredible partner to me and to the business unit presidents as we work together to deliver against.

Josh: Our long term plans, so now I'll turn it over to Sami to walk through our financial results for the quarter.

Sami: Thank you Josh and good morning, everyone, it's really great to be here today and.

Joshua Kobza: We remain focused on driving development and strengthening our digital leadership. For development, Mike and his team are building a strong multi-year pipeline with attractive development incentive programs. We saw nice traction this quarter from these programs, with commitments from new and existing franchisees, including first responders, to open restaurants in the U.S. and Canada. The Firehouse team recently participated in and sponsored the FDIC convention, that stands for Fire Department Instructors Conference, where we served thousands of Firehouse subs and hosted a session on becoming a Firehouse Franchisee.

Sami: And RBI, we have five amazing businesses and I'm excited to work with each of them to deliver on our long term outlook of 3% plus comparable sales growth, 5% plus net restaurant growth, 8% plus system wide sales growth and at least 8% adjusted operating income.

Sami: Growth on average over the next five years.

Sami: For the first quarter global system wide sales grew eight 1% year over year and our organic adjusted operating income grew seven 7%.

Sami: Organic adjusted EPS declined slightly <unk>, 9%.

Sami: System wide sales and adjusted operating income growth were largely in line with one another this quarter that said there were a few items that impacted results, which I'll walk you through now.

Joshua Kobza: Our franchisees in Canada, some of whom are Tim's restaurant owners as well, have done a great job, and we're seeing strong average unit volumes in the market. It's clear Canadians have an appetite for more Firehouse, so we're excited to continue bringing the brand's hearty subs to new destinations across the country. We also made progress migrating to digital channels and grew the digital sales mix to over 40% for the quarter. Firehouse holds the highest home market digital penetration across all of our brands and has tons of potential to further enhance its overall digital strategy.

Sami: First we estimate that the February leap day benefit of consolidated comparable sales by 120 basis points, which was almost entirely offset by a 60 basis point consolidated headwind from the ongoing conflict in the middle East and a 50 basis point headwind from tough weather largely impacting Burger King and.

Sami: In the U S.

Sami: Second we recorded just over $7 5 million of net bad debt expenses compared to $5 5 million in Q1 of 23 3 million of which impacted Burger king in that quarter.

Joshua Kobza: I just got back from Texas and Oklahoma with Mike and the rest of the Firehouse team, visiting a couple of our best franchisees to talk about development and some of the hot new marketing innovations we're working on. Everyone's fired up for where we're going to take this brand, and I share their optimism. I'm really pleased to have Sammy with us today in his new role as CFO. Sammy brings an incredible balance of financial, strategic, and operational experience, having worked across nearly all of our businesses over the last 10 years.

Sami: Our Q1 'twenty for expenses or primarily split between royalties at our international segment and cost of sales and our Tim Hortons supply chain business relating to coffee sales to certain international partners.

Sami: Third and finally segment G&A increased $16 million year over year, primarily reflecting higher compensation related expenses associated with increased head count to support our development franchising and operations efforts.

Joshua Kobza: He's already proven himself to be an incredible partner to me and to the business unit presidents as we work together to deliver against our long-term plan. So now I'll turn it over to Sammy to walk through our financial results for the quarter.

Sami: These items were offset by strong underlying growth in system wide sales.

Sami: And profitability improvements at Pie five company restaurants, as well as the impact of restaurant acquisitions at Burger King, including 89 restaurants acquired in Q4 of 2003 and 38 restaurants added in January of this year.

Sammy Cedillo: Thank you, Josh. And good morning, everyone. It's really great to be here today. At RBI, we have five amazing businesses, and I'm excited to work with each of them to deliver on our long-term outlook of 3% plus comparable sales growth and 5% plus net restaurant growth. 8% plus system-wide sales and at least 8% adjusted operating income growth on average over the next five years. For the first quarter, global system-wide sales grew 8.1% year over year, and our organic adjusted operating income grew 7.7%. Organic Adjusted EPS declined slightly by 0.9%. However, system-wide sales and adjusted operating income growth were largely in line with one another this quarter. That said, there were a few items that impacted the results, which I'll walk you through.

Sami: Shifting now to EPS organic adjusted earnings per share decreased slightly <unk>, 9% year over year to 73 per share compared to <unk> 75 per share last year the.

Sami: The decrease was primarily due to an increase in adjusted income tax expense.

Sami: And an increase in adjusted interest expense of approximately $16 million year over year, driven by our September 22023, refinancing and the impact of higher U S benchmark rates, which flow through to approximately 20% of our total debt.

Sami: As a reminder, Q1 2023 adjusted EPS included a <unk> <unk> per share net benefit related to discrete non cash tax items. Our adjusted effective tax rate. This quarter was approximately 17, 5% and included a three point benefit from the timing of equity based comp.

Sammy Cedillo: First, we estimate that the February leap day benefited consolidated comparable sales by 120 basis points, which was almost entirely offset by a 60 basis point consolidated headwind from the ongoing conflict in the Middle East and a 50 basis point headwind from tough weather, largely impacting Burger King and Popeyes in the U.S. Second, we recorded just over $7 and a half million of net bad debt expenses compared to five and a half million dollars in Q1 Our Q124 expenses were primarily split between royalties at our international segment and cost of sales in our Tim Hortons supply chain business relating to coffee sales to certain international partners.

Sammy Cedillo: Sensation, which typically have an outsized impact on our tax rate during the first quarter.

Sami: Turning now to cash flow and capital allocation.

Sami: Q1 is seasonally the seasonally smallest cash flow quarter of the year for us and this quarter, we generated $122 million or free cash flow.

Sammy Cedillo: This quarter, we spent approximately $25 million on reclaimed the flame related investments, we returned $245 million of capital to shareholders through our dividend, which we declared for Q2 at 58 per common share and unit with our full year target of $2 30.

Sammy Cedillo: <unk> per share for the full year 2024.

Sammy Cedillo: We ended Q1 with available liquidity of approximately $2 3 billion.

Sammy Cedillo: Third and finally, Segment G&A increased $16 million year-over-year, primarily reflecting higher compensation-related expenses associated with increased headcount to support our development, franchising, and operations efforts. However, these items were offset by strong underlying growth in system-wide sales and profitability improvements at Popeyes company restaurants, as well as the impact of restaurant acquisitions at Burger King, including 89 restaurants acquired in Q4 of 23 and 38 restaurants added in January of Shifting now to EPS, organic adjusted earnings per share decreased slightly, by 0.9% year over year, to $0.73 per share, compared to $0.75 per share last year.

Sami: Including over $1 billion of cash and our net leverage ratio was four eight times, we have a clear path to reaching mid four times net leverage by the end of this year pro forma for our pending acquisition of <unk>.

Sammy Cedillo: Now speaking of Carroll's. We're also on track to complete our acquisition this quarter with a <unk> shareholder meeting to vote on the merger scheduled for May 14th we've already secured $750 million of funding as an add on to our existing term loan b, which is contingent on acquisition clubs.

Sami: For those of you looking to incorporate <unk> into your models, we plan to report Carol's Burger King restaurants, as a separate segment with intercompany franchise and rental fees that will be eliminated upon consolidation.

Sammy Cedillo: The decrease was primarily due to an increase in adjusted income taxes and an increase in adjusted interest expense of approximately $16 million year over year driven by our September 2023 refinancing and the impact of higher U.S. benchmark rates, which flow through to approximately 20% of our total debt. As a reminder, Q1 2023 adjusted EPS included a $0.04 per share net benefit related to discrete non-cash taxes. Our adjusted effective tax rate this quarter was approximately 17.5% and included a three-point benefit from the timing of equity-based compensation, which typically has an outsized impact on our tax rate during the first quarter. Turning now to cash flow and capital allocation. Q1 is the seasonally smallest cash flow quarter of the year for us, and this quarter, we generated $122 million of free cash.

Sammy Cedillo: Our goal in doing this is to keep the Burger King segment relatively untouched and consistent with how the business will be run over the long term this will become especially important as we begin refranchising carol's restaurants in the future.

Speaker Change: I'll now provide an update on our 2020 for guidance and capital allocation priorities.

Sammy Cedillo: As a reminder, this guidance excludes the impact of tariffs.

Sami: We now expect 2024 segment G&A between.

Sammy Cedillo: $665 million and $685 million, including equity based compensation between $180 million and $190 million. This represents about a $15 million reduction from our prior segment G&A guidance largely due to personnel changes and other identified opportunities.

Sammy Cedillo: Across a variety of areas in our business.

Sammy Cedillo: We continue to expect consolidated 2020 for Capex tenant inducements and incentive to be roughly $300 million.

Sammy Cedillo: Compared to around $170 million in 2023.

Sammy Cedillo: This quarter, we spent approximately $25 million on Reclaim the Flame-related investments. We returned $245 million of capital to shareholders through our dividend, which we declared for Q2 at 58 cents per common share and unit with a full year target of $2.32 per share for the full year 2025. We ended Q1 with available liquidity of approximately $2.3 billion, including over $1 billion of cash, and our net leverage ratio was 4.8.

Sammy Cedillo: Of this amount less than half will be tenant inducements and remodel incentives, which as a reminder flow through other working capital.

Sammy Cedillo: Given our expected increase in Capex and tenant inducements, we expect quarterly segment depreciation and amortization will ramp over the course of 2024 from around $41 million in Q1 towards the mid to high $40 million range by Q4 of 'twenty four.

Sammy Cedillo: As it relates to capital allocation, we will continue to invest in high return opportunities for our business, while returning capital to shareholders through our dividend and assessing share repurchase opportunities when appropriate.

Sammy Cedillo: We have a clear path to reaching mid-4x net leverage by the end of this year, pro forma for our pending acquisition of Carroll. Now speaking of Carroll, we're also on track to complete our acquisition this quarter with a Carroll shareholder meeting to vote on the merger scheduled for May 14. We've already secured $750 million of funding as an add-on to our existing Term Loan B, which is contingent on Acquisition Close. For those of you looking to incorporate Carroll's into your models, we plan to report Carroll's Burger King restaurants as a separate segment with intercompany franchise and rental fees that will be eliminated upon consolidation.

Sammy Cedillo: Over the long term, we plan to maintain net leverage between 3% and five times, where we land in this range will ultimately depend on market conditions.

Sammy Cedillo: Finally, as it relates to our long term outlook I'd like to address a question. We've been asked on why we didn't explicitly guide towards our leverage.

Sammy Cedillo: I'll reiterate what Josh shared in February this guidance, it's not what we're striving for it's what we feel we can confidently achieve over the next five years on average and Meanwhile, we are working towards achieving much bigger results.

Sammy Cedillo: Our goal in doing this is to keep the Burger King segment relatively untouched and consistent with how the business will be run over the long term. This will become especially important as we begin re-franchizing Carroll's restaurants in the future. I'll now provide an update on our 2024 Guidance and Capital Allocation Priorities. As a reminder, this guidance excludes the impact of care.

Sammy Cedillo: That said I'll remind you we have a few earnings streams that don't always grow in line with our global system wide sales and those are number one our property businesses at Tim's and Burger King.

Sammy Cedillo: To our supply chain business at Tims and number three our CPG business at tips.

Sammy Cedillo: For reference in 2023, our CPG business represented roughly 15% of total Tim segment sales and 15% of Tim Hortons segment sales less cost of sales gross profit dollars.

Sammy Cedillo: We now expect 2024 segment GNA between $665 million and $685 million, including equity-based compensation between $180 million and $190 million. This represents about a $15 million reduction from our prior segment G&A guidance, largely due to personnel changes and other identified opportunities across a variety of areas. We continue to expect consolidated 2024 CapEx tenant inducements and incentives to be roughly $300 million compared to around $170 million in 2023. Of this amount, less than half will be tenant inducements and remodel incentives, which, as a reminder, flow through other working capital.

unknown: To wrap up I'll be working closely with each of our presidents and their teams to drive leverage in other areas of our business as we scale around the world and deliver even greater return from the investments we've been making over the past few years I look forward to working with all of you over the coming quarters and with that I'll hand, it over to Patrick.

Sammy Cedillo: Yeah.

Speaker Change: Thanks, Sami and good morning, everyone.

Sammy Cedillo: When I take a step back and I look at the quarter I'd say it was a pretty good quarter that I'd put solidly in the win column as Tim's in Canada Burger King in the U S. Pop is in the U S and several international markets one market share, we're beginning to see the benefit of having the right teams with the right plan.

Sammy Cedillo: Given our expected increase in capex and tenant inducements, we expect quarterly segment depreciation and amortization to ramp over the course of 2024 from around $41 million in Q1 towards the mid to high $40 million range by Q4 of 2024. As it relates to capital allocation, we will continue to invest in high-return opportunities for our business while returning capital to shareholders through our dividend and assessing share repurchase opportunities when appropriate. Over the long term, we plan to maintain net leverage between three and five times.

Sammy Cedillo: And the time to execute them in the right way and importantly, we're seeing the benefit of strongly aligning with our franchisees.

Sammy Cedillo: The performance from Tim's in Canada has just been stunning.

Sammy Cedillo: Excellent team have a clear path to keep driving the business forward, giving Canadians even more reasons to love tims with our growing food and beverage offerings and amazing service.

Sammy Cedillo: Our international segment has shown great top line resilience over the past few quarters, especially considering the broader environment affecting the whole industry.

Sammy Cedillo: Where we land in this range will ultimately depend on the market. Finally, as it relates to our long-term outlook, I'd like to address a question we've been asked on why we didn't explicitly guide towards AOI leverage. I'll reiterate what Josh shared in February. This guidance isn't what we're striving for.

Sammy Cedillo: With that said I'd really like to see us unlock the potential we know exists in China, while it's a very small portion of our results today less than 2% of total RBI adjusted operating income.

Sammy Cedillo: We know the long term opportunity there is significant we will have more to say about this in the coming quarters.

Sammy Cedillo: At Burger King U S. We've now committed more than $2 billion to put the brand on the right track when you considered todays $300 million co investment in addition to our $250 million Royal reset investments towards restaurant equipment and re imaging efforts.

Sammy Cedillo: It's what we feel we can confidently achieve over the next five years, on average. And in the meantime, we are working towards achieving much bigger results. That said, I'll remind you we have a few earning streams that don't always grow in line with our global system-wide sales. And those are number one, our property businesses at Tim's and Burger King. Number two, our supply chain business at Tim, and number three, our CPG business at Tim. For reference, in 2023, our CPG business represented roughly 15% of total Tim segment sales, and 15% of Tim Horton segment sales left cost of sales gross profit. To wrap it up, I'll be working closely with each of our presidents and their teams to drive leverage in other areas of our business as we scale around the world and deliver even greater returns from the investments we I look forward to working with all of you over the coming quarters, and with that, I'll hand it over to Pat.

Pat: Another $150 million towards marketing and digital and the $1 billion acquisition and $500 million remodel commitment we are making with carol's I also think it's important to not forget that I'm talking about our investment and in addition, we will be seen billions of dollar.

Pat: It accelerated investments from franchisees as well.

Pat: When we work together as a system like this the impact on the brand will be pretty spectacular.

Pat: We have a great team in place led by Tom who has been driving a lot of positive change and we finally have a line of sight to driving franchisee profitability passed $300000.

Pat: Our shared with you all in New York, a few months ago that you shouldn't question, our commitment to getting the brand right in the U S.

Pat: The marketing is getting better we have the biggest focus on operational consistency that the brand has ever had we now have a path to be nearly fully modern image across the U S. By 2028, our franchisees are now on a path to strong profitability.

Patrick Doyle: Thanks, Sammy, and good morning, everyone. When I take a step back and I look at the quarter, I'd say it was a pretty good quarter that I'd put solidly in the win column, as Tim's in Canada, Burger King in the U.S., Popeye's in the U.S., and several international markets, one market share. We're beginning to see the benefit of having the right teams with the right plans and the time to execute them in the right way. And importantly, we're seeing the benefit of strongly aligning with our franchisees. The performance from Tim's in Canada has just been stunning.

Patrick Doyle: And our strong franchisees know they have the ability to drive even higher than average profits for their businesses.

Patrick Doyle: Now, it's just down to good old fashioned execution and Thats, what Tom loves as an operator.

Patrick Doyle: Popeye's is still early on its journey to make the brand easy to love, we're coming from a pretty amazing starting point with what I'd say is the best fried chicken in the business and I'm really excited about the potential of lock for franchisees team members and guests from easy to run kitchen conversions.

Patrick Doyle: Axel and his team have a clear path to keep driving the business forward, giving Canadians even more reasons to love Tim's with our growing food and beverage offerings and amazing service. Our international segment has shown great top-line resilience over the past few quarters. Especially considering the broader environment affecting the whole industry. With that said, I'd really like to see us unlock the potential we know exists in China. While it's a very small portion of our results today, less than 2% of total RBI adjusted operating income.

Patrick Doyle: Jeff understands clearly the benefits that get unlocked by implementing all of the operational changes involved here. So again. This is just a matter of focused execution and our kitchens.

Patrick Doyle: At firehouse were working to give more people access to the brand and our development incentive programs are helping unlock the unit growth. We know this brand is capable of I think we've been a little bit slower than expected on the growth. We wanted from this brand, but Mike is making all the right development decisions for the long term and we will.

Patrick Doyle: We know the long-term opportunity there is significant. We'll have more to say about this in the coming quarter. At Burger King US, we've now committed more than $2 billion to put the brand on the right track. When you consider today's $300 million co-investment, in addition to our $250 million Royal reset investments in restaurant equipment and re-imaging X. Another $150 million towards marketing and digital and the $1 billion acquisition and $500 million remodel commitment we're making with Carroll. I also think it's important to not forget that I'm talking about our investment.

Patrick Doyle: Shortly see the benefit of that.

Patrick Doyle: I'm also an optimist and still with that Mike and team will achieve my challenge of being a 100% digital by the end of 2025.

Patrick Doyle: Part of my confidence on achieving that as a point Josh just made.

Patrick Doyle: Our international business now has the majority of its sales through digital channels, that's an amazing milestone.

Patrick Doyle: Finally, as you saw in March Josh now has his team in place I'm extremely excited about this team and what they all bring to the table I'm confident that together this team will deliver against our long term guidance. We laid out for you in February and drive value for all our stakeholders with that.

Patrick Doyle: And in addition, we will be seeing billions of dollars of accelerated investments from franchisees as well. When we work together as a system like this, the impact on the brand will be pretty spectacular. We have a great team in place, led by Tom, who's been driving a lot of positive change. And we finally have a line of sight to driving franchisee profitability past $300,000. I shared with you all in New York a few months ago that you shouldn't question our commitment to getting the brand right in the U.S. The marketing is getting better. We have the biggest focus on operational consistency that the brand has ever had.

Speaker Change: Let's take your questions.

Patrick Doyle: Thank you if you would like to ask a question. Please dial star followed by one on your telephone keypad now if you change your mind. Please all stockholders by two to execute.

Patrick Doyle: When preparing to ask your question. Please ensure that youll find is unmatched it locally.

Speaker Change: And finally as a reminder, all callers will be limited to one question.

Patrick Doyle: We now have a path to be nearly fully modernized across the US by 2028. Our franchisees are now on a path to strong profitability, and our strong franchisees know they have the ability to drive even higher than average profits for their business. Now it's just down to good old-fashioned execution, and that's what Tom loves as an operator. Popeyes is still early on its journey to make the brand easy to love.

Patrick Doyle: And our first question today is from the line of Dennis Geiger.

Speaker Change: My apologies.

Patrick Doyle: First question is from the line of Dennis Geiger of UBS. Dennis Your line is open. Please go ahead.

Speaker Change: Great. Thanks, and good morning, guys wanted to ask on Tims and as it relates to the strength of the momentum that you continue to see with the brand wondering if you could just talk a little more about the sustainability of the underlying gains it seems like progress against the back to basics plans continue to resonate and that's the main driver of performance, but anything notable.

Patrick Doyle: We're coming from a pretty amazing starting point with what I'd say is the best fried chicken in the business. And I'm really excited about the potential we'll unlock for franchisees, team members, and guests from easy-to-run kitchen conversions. Jeff understands clearly the benefits that get unlocked by implementing all the operational changes involved here. So again, this is just a matter of focused execution in our kitchen.

Patrick Doyle: To call out as well maybe on the macro your customer in Canada, and how any of that may impact the outlook relative to strategy. Thank you.

Speaker Change: Good morning, Josh Thanks for the question.

Patrick Doyle: At Firehouse, we're working to give more people access to the brand, and our development incentive programs are helping unlock the unit growth we know this brand is capable of. I think we've been a little bit slower than expected on the growth we wanted from this brand, but Mike is making all the right development decisions for the long term, and we'll soon see the benefit of that. I'm also an optimist and still would bet that Mike and his team will achieve my challenge of being 100% digital by the end of 2025.

Patrick Doyle: As we mentioned, we're really pleased with the performance at Tims and I think as you mentioned, it's it sustained for quite some time now I think Axel hope Matt the whole team up there are working really well with our franchisees.

Patrick Doyle: And we're working on and just improving all the basics and I think that's why you've seen so much momentum in the business.

Patrick Doyle: I think the quarter was really good.

Patrick Doyle: Both same store sales and the traffic, which has continued to be solidly in the positive category. So we're really happy there.

Patrick Doyle: We have we have a lot more to do still at terms that we've been talking about building into the PM food.

Patrick Doyle: Part of my confidence in achieving that is a point Josh just made: our international business now has the majority of its sales through digital channels. That's an amazing milestone. Finally, as you saw in March, Josh now has his team in place. I'm extremely excited about this team and what they all bring to the table. I'm confident that together, this team will deliver on the long-term guidance we laid out for you in February and drive value for all our stakeholders.

Patrick Doyle: Part of the business and growing our cold beverages mix and I think as you saw in the quarter were doing those things and you've seen even more recently.

Patrick Doyle: US coming out and building on some of the food offerings with our flatbread pizzas and deployment of Mary chef ovens.

Patrick Doyle: We're pleased with the result of that so far but I think it just it opens up even more things that we can do it creates more options in the innovation pipeline for us over time, they're going to allow us to continue to build on top of an amazing breakfast business.

Operator: With that said, let's take your questions. Thank you. If you would like to ask a question, please dial star followed by one on your telephone keypad now. If you change your mind, please dial star followed by two to exit the queue. When preparing to ask your question, please ensure that your phone is unmuted.

Operator: A great lunch and later in the day business, So I'm pretty pleased with what Theyre doing really great work from the teams and we're confident in where we're going for the rest of the year.

Operator: Thank you. If you would like to ask a question, please dial star followed by one on your telephone keypad. Now, if you change your mind, please dial star followed by two to exit the queue. When preparing to ask your question, please ensure that your phone is unmuted locally.

Speaker Change: Thank you our next question today.

Brian Harbour: Oppenheimer Brian Your line is open. Please go ahead.

Speaker Change: Thanks, Good morning.

Operator: You laid out a path this morning to getting Burger King, 85% to 90% remodeled and obviously youll remodel those 600 stores you've talked about from the <unk> acquisition and it will be exciting to see that in the new reporting segment and then this morning, you announce that Youll remodel another 11 Hunter.

Operator: And finally, as a reminder, all callers will be limited to one question. And our first question today is from the line of Dennis Geiger of UBS. Dennis, your line is open. Please go ahead. Great.

Dennis Geiger: Franchise stores through the $300 million co investment.

Joshua Kobza: Dennis, good morning. It's Josh.

Joshua Kobza: Thanks for the question. You know, as we mentioned, we're really pleased with the performance at Tim's. And I think, as you mentioned, it's sustained for quite some time now. I think Axel, Hope, Matt, the whole team up there are working really well with our franchisees and working on just improving all the basics.

Dennis Geiger: And the question is will these remodels on the $300 million.

Joshua Kobza: Impactful as the Remodels, you're spearheading with with the <unk> acquisition and as you work through this path to get to 85% to 90% remodeled.

Joshua Kobza: Specced, another batch of closings or relocations to get the portfolio at Burger King U S exactly where you want it to be.

Joshua Kobza: And I think that's why you've seen so much momentum in the business. And I think you saw in the quarter that we were doing those things, and you've seen even more recently coming out and building on some of the food offerings with our flatbread pizzas and deployment of Mary chef ovens. And we're pleased with the results of that so far, but I think it just opens up even more things that we can do.

Speaker Change: Hey, Bryan I'll take those maybe in reverse order if thats okay.

Joshua Kobza: I don't expect another.

Joshua Kobza: Like sizeable batch of closures in the business I think we've we've gotten past that.

Joshua Kobza: And you see that reflected a bit in our outlook, which we've talked about to see the stabilization in the Burger King U S store base numbers.

Joshua Kobza: It creates more options in the innovation pipeline for us over time. They're going to allow us to continue to build on top of an amazing breakfast business, a great lunch, and later in the day business. So I'm pretty pleased with what they're doing, really great work from the teams, and we're confident where we're going for the rest of the year.

Joshua Kobza: So that's the first part of it in terms of the Remodels and how impactful.

Joshua Kobza: There'll be I do expect that that all of these are models should be fairly impactful, we're doing larger scope remodels in general compared to what we did over the prior 10 years. So those tend to have a big impact on the consumer and on sales.

Operator: Thank you. Our next question today is from Brian Bittner of Oppenheimer & Co. Brian, your line is open, please go ahead.

Brian John Bittner: The other thing that I'm really excited about that you haven't really seen in the numbers yet, but I think you will over the next three years is the impact of this sizzle image and all of the elements of that and how they come together.

Joshua Kobza: Thanks, good morning. You laid out a path this morning to getting Burger King 85 to 90% remodeled. And you know, obviously, you'll remodel those 600 stores you've talked about from the Carroll's acquisition. And it'll be exciting to see that in the new reporting segment. And then this morning, you announced that you'll remodel another 1100 franchise stores through the 300 million co-investment, and the question is, will these remodels on the 300 million be as impactful as the remodels you're spearheading with the Carroll's acquisition, and as you work through this path to get to 85 to 90 percent remodeled, should we expect another batch of closings or relocations to get the portfolio at Burger King U.S.

Joshua Kobza: The Remodels, we've been doing we've been talking about are more in our prior garden grill image and so youre just starting to see some of those signals we mentioned it in our prepared remarks.

Joshua Kobza: Look awesome during the day and they look I think even better at night, perhaps they are really beautiful, but importantly, they incorporate a lot of new digital elements in our new guest flow. So they are all they are all built intentionally to have a nice interior flow with all kiosks and to have beautiful drive throughs and really great layout.

Joshua Kobza: In the kitchen, so I think.

Joshua Kobza: There's a lot of different elements to the sizzle that I think are going to be good for the uplift that we get over the over the duration of the program that you haven't really seen come together in the backward looking results so far.

Joshua Kobza: Hey, Brian, I'll take those maybe in reverse order, if that's okay. I don't expect another sizable batch of closures in the business. I think we've gotten past that. And you see that reflected a bit in our outlook, which we've talked about, to see the, you know, stabilization in the Burger King US store base numbers. So that's the first part. And in terms of the remodels and how impactful they'll be, you know, I do expect that all of these remodels should be fairly impactful. We're doing larger-scale remodels in general compared to what we did over the prior 10 years, so those tend to have a big impact on the consumer and on sales.

Speaker Change: Brian I would add one thing on that which is when you get to the point, where the vast majority of your restaurants are re imaged.

Joshua Kobza: Got a bit of a catalytic effect from that so having your burger King re imaged and looking great.

Joshua Kobza: <unk> has effect on that restaurants, but when all of the restaurants are rounded our re imaged.

Joshua Kobza: You get a a dual effect right and so going to a great looking burger king, but driving past another one that doesn't look great.

Joshua Kobza: And the other thing that I'm really excited about that you haven't really seen in the numbers yet, but I think you will over the next three years, is the impact of this sizzle image and all of the elements of that and how they come together. The remodels we've been doing, we've been talking about, are more in our prior garden grill image, and so you're just starting to see some of those sizzles.

Joshua Kobza: Is not ideal and so we thought it was important for to get this last leg out there to show our commitment to the franchisees to give you visibility.

Joshua Kobza: On our path to getting the system all looking great, but there is a real advantage I mean, we're still a bit under 50% today.

Joshua Kobza: Getting to the point, where virtually every restaurant you're ever going to see looks great has a real positive effect on the brand overall.

Joshua Kobza: We mentioned it in our prepared remarks. They look awesome during the day, and they look, I think, even better at night, perhaps. They're really beautiful, but importantly, they incorporate a lot of new digital elements and a new guest flow, so they're all built intentionally to have a nice interior flow with all the kiosks, and to have beautiful drive-throughs, and really great layouts in the kitchen. I think there are a lot of different elements to the sizzle that I think are going to be good for the uplifts that we get over the duration of the program that Brian, I'd add one.

Joshua Kobza: Thank you. Our next question today is from the line of David Palmer of Evercore ISI. David Your line is open. Please go ahead.

Joshua Kobza: Thanks.

Speaker Change: Question on Tim Hortons, Canada, obviously, very strong quarter could you provide any color about how tims and the Canadian fast food industry progressed through the quarter and perhaps how things are starting this quarter given what seems to be so.

Joshua Kobza: The negative macro headlines that we hear about the consumer in that market.

Speaker Change: Is there an adjustment that's needed.

Speaker Change: You probably are.

Joshua Kobza: Not aware, but there was another call today in the U S and the U S fast food market slowing down was certainly highlighted and the need to access the value challenged or lower income cohort.

Patrick Doyle: Brian, I'd add one thing to that, which is when you get to the point where the vast majority of your restaurants are re-imaged, you get a bit of a catalytic effect from that. So, you know, having your Burger King re-imaged and looking great has an effect on that restaurant. But when all of the restaurants around it are re-imaged, we will step out there to show our commitment to the franchisees, to give you visibility on our path to getting this system all looking great.

Speaker Change: It's certainly a theme for the U S. I am wondering if youre seeing that.

Patrick Doyle: In Canada as well thank you.

Patrick Doyle: Hey, Dave Good morning, and thanks for the question.

Patrick Doyle: We're not going to get into kind of the intra quarter like monthly dynamics too much but what I can share is that we're really pleased with the performance of the Tims, Canada business, We think we're taking share.

Patrick Doyle: But there's a real advantage. I mean, you know, we're still a bit under 50% today. Getting to the point where, you know, virtually every restaurant you're ever going to see looks great has a real positive effect on the brand overall.

Patrick Doyle: And that market, which is great. That's what we're focused on everyday is competing effectively in the marketplace and I think we're doing that because we're executing across all fronts. We're very convenient we're improving operations and we already have the best value for money rankings in the market I think thats, something really special about <unk> that positions us very well.

Operator: Thank you. Our next question today is from the line of David Palmer of Evercore ISI. David, your line is open. Please go ahead.

Joshua Kobza: Thanks. A question on Tim Horton's Canada, obviously a very strong quarter. Could you provide any color about how Tim's and the Canadian fast food industry progressed through the quarter? And perhaps how things are starting this quarter, given what seems to be some negative macro headlines that we hear about the consumer in that market? And, you know, is there an adjustment that's needed? You probably are not aware, but there's another call today in the US, and the US fast food market slowing down was certainly highlighted in the need to access about a value-challenged or lower income cohort is certainly a theme for the US. I'm wondering if you're seeing this in Canada as well. Thank you.

Joshua Kobza: Especially if youre going into a tougher consumer environment, we already provide that best value in the market and Thats, probably an important part of why the business has been performing so well on an absolute and on a relative basis.

Joshua Kobza: Thank you. Our next question today is from the line of Doug Wheeler of AB Bernstein.

Speaker Change: Hello. Your line is open. Please go ahead.

Speaker Change: Thank you and Congress on a great quarter I mean, it looks like your brands are accelerating or decelerating environment than maybe you have even greater line of sight, all kinds of things profitability increases.

Joshua Kobza: Noticing some incremental pressures among the Canadian franchisees in light of the increase in labor cost due to the minimum wage increases. So maybe can you elaborate on the extent of these pressures and what are you contemplating to alleviate the operating costs in the stores without compromising on quality and it sounds like you're really working on some equipment upgrades, but maybe there is.

Joshua Kobza: Hey Dave, good morning. And thanks for the question. We're not going to get into kind of the intra-quarter, like monthly dynamics too much.

Joshua Kobza: But what I can share is that we're really pleased with the performance of the Tim's Canada business. We think we're taking share in that market, which is great. That's what we're focused on every day, competing effectively in the marketplace. And I think we're doing that because we're executing across all fronts.

Speaker Change: Thank you.

Joshua Kobza: Yes.

Speaker Change: Thanks for the question.

Joshua Kobza: In terms of what we're seeing in terms of business performance in Canada, and then how that translates to our franchisees' P&L and the outlook for that.

Joshua Kobza: We're very convenient, we're improving operations. And we already have the best value for money rankings in the market. I think that's something really special about Tim's that positions us very well, especially if you're going into a tougher consumer environment. We already provide the best value in the market. And that's probably an important part of why the business has been performing so well on an absolute and on a relative basis.

Joshua Kobza: As you've seen our same store sales performance has been good both last year and into the first quarter, we announced that franchise profitability was up very significantly last year.

Joshua Kobza: Given the sales outlook and the sales that we've already seen plus what we see in terms of some favorable commodity movements, we actually have a very positive outlook for for further growth and Tim Hortons Canadian franchise profitability throughout the course of 2024, So we feel pretty good about both the progress in Q1 on that front.

Operator: Thank you. Our next question today is from the line of Danilo Gargiulo of AB Bernstein. Danilo, your line is open, please go ahead.

Operator: <unk>.

Danilo Gargiulo: And the outlook for the full year for franchise profitability.

Danilo Gargiulo: Thank you. Our next question today is from the line of John <unk> of Jpmorgan. John Your line is open. Please go ahead now.

Joshua Kobza: Thank you and congratulations on a great quarter. It looks like your brands are accelerating in a decelerating environment, and maybe you have even greater line of sight on franchisees' profitability increases. We are noticing some incremental pressures among Canadian franchisees in light of the increasing labor costs due to minimum wage increases. So maybe you could elaborate on the extent of these pressures and what you are contemplating to alleviate the operating costs in the stores without compromising on food quality? It sounds like you're really working on some equipment upgrades, but maybe there is more coming. Thank you.

Joshua Kobza: Josh in your prepared remarks, you mentioned not wanting to recreate.

Joshua Kobza: Recreate the wheel on value. So I just wanted to revisit what that meant I mean do you think.

Joshua Kobza: Burger King, particularly in the U S. But also around the world has an opportunity to kind of rotate back to a pre COVID-19 type of pricing stance in general for the industry that did involve some type of a value menu and at least communicating to customers in some way.

Joshua Kobza: Giving them some sense, what core menu things like whopper combo meals themselves.

Joshua Kobza: Yeah, Danilo, thanks for the question. In terms of what we're seeing in terms of business performance in Canada and then how that translates to our franchisees, P&Ls, and the outlook for that. As you've seen, our same store sales performance has been good both last year and into the first quarter, and we announced that franchise profitability was up very significantly last year. You know, given the sales outlook and the sales that we've already seen, plus what we've seen in terms of some favorable commodity movements, we actually have a very positive outlook for further growth in Tim Horton's Canadian franchise profitability throughout the course of 2024. So we feel pretty good about both the progress in Q1 on that front and the outlook for the full year for franchise profitability.

Joshua Kobza: With we cost them so as.

Joshua Kobza: As the industry as David Palmer was alluding to I mean, as the industry is going to be talking a lot more about value very explicitly it might be trying to get some of your lower income or perhaps middle income consumer way are you preparing to perhaps be more explicit to communicate price points.

Joshua Kobza: As we move forward versus what you've done in the past four years.

Speaker Change: Hey, John Good morning.

Joshua Kobza: When I look back at Q1, the way I read it I think what we're doing is working really well.

Joshua Kobza: Yep.

Joshua Kobza: For sure at our Tim Hortons business in Canada, but also in our BK and Popeyes U S businesses, our sales and traffic performance relative to competition is pretty good. So I'd say, we're pretty happy with the strategy that we have the perspective that we've had over the last few years is we try to be balanced in how we manage any cost headwinds.

Operator: Thank you. Our next question today is from the line of John Ivankoe of J.P. Morgan. John, your line is open. Please go ahead now.

Joshua Kobza: Josh, in your prepared remarks, you mentioned, you know, not wanting to recreate, you know, the recreate the wheel on value. So I just wanted to revisit what that meant. I mean, do you think, you know, Burger King, particularly in the US, but also around the world has an opportunity to kind of rotate back to a pre COVID type of pricing stance in general, you know, for the industry, you know, that did involve some type of a value menu, and at least, you know, communicating to customers in some way, you know, perhaps, you know, giving them some sense what core menus, things like Whopper combo meals themselves, you know, would would would cost them.

Joshua Kobza: We don't want to take price up quickly and we but we also want to avoid some.

Joshua Kobza: Some of the deeper discounting that happened at Burger King.

Joshua Kobza: Probably three to five years ago. So we're trying to drive to have to make sure we have everyday good value and some reasonable value offerings.

Joshua Kobza: So I think within the Burger King system, specifically kind of U S and around the world.

Joshua Kobza: <unk>.

Joshua Kobza: In the U S. We already have some pretty effective value mechanisms that seem to be working we have our $5 duo is that we've had in the market. We had $5. Your way meals. We've had the 299 reps. So those are the things that we've been doing we think they've been pretty effective while having a balanced margin profile for the franchisees and I'd say there is no.

Joshua Kobza: So, you know, as David Palmer was alluding to, I mean, as the industry is going to be talking a lot more about value very explicitly, it might, you know, be trying to get some of your lower income or perhaps middle income customers, you know, consumer way. Are you preparing, you know, to perhaps be more explicit in communicating price points, you know, as we move forward versus what you've done in the past four years?

Joshua Kobza: No real intention to change the strategy there if you get into the international it is a bit more nuanced, it's a lot of markets and a lot of different strategies and I think you can see there a little bit more of a division where some of the markets, where I think we've had a better strategy on value I think.

Joshua Kobza: Hey, John, good morning. You know, when I look back at Q1, the way I read it, I think what we're doing is working really well, right? You know, for sure, at our Tim Hortons business in Canada, but also in our BK and Popeyes U.S. businesses, our sales and traffic performance relative to competition is pretty good. So I'd say we're pretty happy with the strategy that we have. You know, the perspective that we've had over the last few years is we try to be balanced in how we manage any cost headwinds. We don't want to take prices up quickly.

Joshua Kobza: Like France, we've gotten credit for that with consumers and we've been able to take market share and we have some other markets that we need to do a little bit more work on so I think there's probably a little bit more of a division and some of those markets and we're working with all the places.

Joshua Kobza: Results haven't been as good to make sure we've got the right value offerings, but I think when you zoom out.

Joshua Kobza: Across the majority of our big markets, we're happy with the value for money, we're providing and we think the results reflect that.

Joshua Kobza: Canadian with consumers.

Joshua Kobza: And we all but we also want to avoid some of the deeper discounting that happened at Burger King, you know, probably three to five years ago. So we're trying to strive to make sure we have everyday good value and some reasonable value offerings. So, you know, I think within the Burger King system, specifically kind of in the U.S. and around the world. In the U.S., we already have some pretty effective value mechanisms that seem to be working. We have our $5 duos that we've had in the market. We've had $5 your way meals and $2.99 wraps.

Joshua Kobza: John We've just got a lot of levers to pull.

Joshua Kobza: So when you look at all of the different things, we're doing with getting Burger King's re imaged with launching PM foods at Tims with.

Joshua Kobza: Increased ad spend at.

Joshua Kobza: At Burger King with easy to love easy to run at Popeye's, giving better service and more consistent product.

Joshua Kobza: We feel good about our value platforms.

Joshua Kobza: Got to be a balance and we have it offering good value too.

Joshua Kobza: To consumers through a range of products.

Joshua Kobza: But we have a lot of other levers that we're pulling to try to get balanced growth out of the business.

Joshua Kobza: So those are the things that we've been doing. We think they've been pretty effective while having a balanced margin profile for the franchisees. And I'd say there's no real intention to change the strategy there. But if you get into international, it is a bit more nuanced.

Joshua Kobza: First quarter was a pretty good reflection of that.

Joshua Kobza: Great. Thank you. Our next question is from the line of Lauren Silberman of Deutsche Bank. Lauren. Your line is open. Please go ahead.

Speaker Change: Thank you.

Joshua Kobza: Unit growth I know it tends to be back half weighted can you just talk about the visibility in the development pipeline for 'twenty four and how the timing is going versus your expectations and then any color on.

Joshua Kobza: There are a lot of markets and a lot of different strategies, and I think you can see there a little bit more of a division between some of the markets where I think we've had a better strategy on value. I think places like France have gotten credit for that with consumers, and we've been able to take market share. And we have some other markets that we need to do a little bit more work on.

Joshua Kobza: How the 2025 pipeline is beginning to shape up thank you.

Joshua Kobza: Hi, Lauren good morning.

Joshua Kobza: So our outlook is still for mid 4% unit growth for the year as you pointed out Q1 is always pretty quiet.

Joshua Kobza: So I think there's probably a little bit more of a division in some of those markets, and we're working with all the places where results haven't been as good to make sure we've got the right value offerings. But I think when you zoom out across the majority of our big markets, we're happy with the value for money we're providing, and we think the results reflect that it's satisfying customers.

Joshua Kobza: We're working on building those pipelines I think we'll have more visibility as we get further into the year and of course, we'll share that as we get through Q2 and get to our call. There I think what we'll build more and more visibility on exactly where we'll land.

Joshua Kobza: I think it's probably a bit early for 2025.

Joshua Kobza: We probably want to wait and just checking on that when we get further into the year as well and we'll have a better sense of <unk>.

Patrick Doyle: John, we've just got a lot of levers to pull. You know, so when you look at all of the different things we're doing with, you know, getting Burger King's reimage with launching PM foods at Tim's with, you know, increased ad spend at Burger King with easy to love, easy to run at Popeyes, giving better service and a more consistent product. You know, we feel good about our value platforms. It's got to be a balance, and we have it offering good value to consumers through a range of products, um, but we have a lot of other levers that we're pulling on to try to get, you know, balanced growth out of the business, and the first quarter was a pretty good reflection of that.

Patrick Doyle: Planning together with our franchisees, usually we do a lot of that more in the back half of the year kind of Q3 Q4.

Speaker Change: Where are we plan all of the kind of the growth targets for the final year, So probably need a few more months before we can come back with more visibility on that front.

Patrick Doyle: Thank you. Our next question today is from the line of Andrew Charles of TD Cowen Andrew. Your line is open. Please go ahead.

Speaker Change: Great. Thank you John.

Speaker Change: Josh you spoke to a challenging restaurant macro that we're hearing about some other U S. Quick service restaurants is anticipated to continue to soften so notwithstanding <unk> strong performance across the portfolio is long term guidance for 3% plus same store sales still on track for 2024 across the portfolio.

Operator: Great, thank you. Our next question is from the line of Lauren Silberman of Deutsche Bank. Lauren, your line is open. Please go ahead.

Joshua Kobza: Thank you.

Joshua Kobza: Hi Lauren, good morning. So our outlook is still for mid-4% unit growth for the year. As you pointed out, Q1 is always pretty quiet, and we're working on building those pipelines. I think we'll have more visibility as we get further into the year, and of course, we'll share that as we get through Q2 and get to our call there. I think we'll build more and more visibility on exactly where we'll land.

Joshua Kobza: In the business that would make you think otherwise, particularly in the U S market just given what we're hearing from peers.

Lauren: Good morning, Andrew.

Joshua Kobza: So.

Joshua Kobza: I think if you look at the kind of industry. Overall, you have seen some softening softening in sales and traffic levels. Some of that I think is to be expected. We knew that as you came into 2024, you are going to see inflation coming down and pricing coming down from some of the elevated levels. We saw the past couple of years.

Joshua Kobza: I think it's probably a bit early for 2025. I think, you know, we probably want to wait and just check in on that when we get further into the year as well. And we'll have a better sense of planning together with our franchisees. You know, usually we do a lot of that in the back half of the year, kind of Q3, Q4, where we plan all the growth targets for the final year. So probably need a few more months before we can come back with more visibility. Thank you.

Joshua Kobza: But you have seen and heard some commentary on some consumer softening.

Joshua Kobza: Some lower end consumer softening.

Joshua Kobza: Despite that we've been able to put up pretty good numbers in Q1, right. We were about four 5% in terms of our same store sales, so health healthy margin north of that 3%.

Joshua Kobza: We feel pretty good about the outlook for the year, but we'll keep updating you on that as we progress through the next couple of quarters.

Joshua Kobza: Yeah.

Operator: Our next question today is from the line of Andrew Charles of TD Cowen. Andrew, your line is open. Please go ahead. Great, thank you. Josh, you spoke with a challenging restaurant macro.

Joshua Kobza: Thank you. Our next question is from the line of John <unk> of CIBC. John Your line is open. Please go ahead.

Andrew Charles: Thank you good morning, I wanted to ask about the <unk> supply chain and CPG businesses.

Operator: Thank you. Our next question today is from the line of Andrew Charles of TD Cowen. Andrew, your line is open. Please go ahead.

Andrew Charles: I appreciate the additional disclosure on that but I wonder if you could parse the performance of those two in the quarter and I believe the commentary last quarter was that you'd get back to a call. It low to mid 18% margin range can you comment on when you expect margins to stabilize at that level.

Joshua Kobza: Morning, Andrew. So I think if you look at the kind of industry overall, you have seen some softening in sales and traffic levels. Some of that I think is to be expected. We knew that as you came into 2024, you were going to see inflation coming down and prices coming down from some of the elevated levels we saw in the past couple of years. But you have seen and heard some commentary on some consumer softening, some lower-end consumer softening.

Joshua Kobza: Hey, John its Sammy Thanks for the question I think a couple of things going on in the supply chain business for the first quarter.

Joshua Kobza: So first off is kind of I mentioned and alluded to in my prepared remarks, Q1 is typically seasonally the smallest quarter of the year. So in a business like the supply chain business, where you have higher fixed cost you'll see the margin be a little bit lower in Q1. If you look at Q1 of this year, we were around 17, 5%.

Joshua Kobza: I think despite that, we've been able to put up pretty good numbers in Q1, right? We were about four and a half percent in terms of our same store sales. So a healthy margin north of that 3%. We feel pretty good about the outlook for the year, but we'll keep updating you on that as we progress through the next couple of quarters. Thank you. Our next question is from the line of John Zamparo of CIBC. John, your line is open. Please go ahead. Thank you. Good morning.

John Zamparo: Sales less cost of sales margin.

John Zamparo: There were there was a bad debt expense that I alluded to in my prepared remarks around certain international partners I think on a more normalized basis.

Operator: Thank you. Our next question is from the line of John Zamparo of CIBC. John, your line is open. Please go ahead.

Operator: Hey, John. It's Sammy. Thanks for the question. I think a couple things are going on in the TIMS supply chain business for the first quarter. So first off, as I kind of mentioned and alluded to in my prepared remarks, Q1 is typically seasonally the smallest quarter of the year. So in a business like the supply chain business, where you have higher fixed costs, you'll see the margin be a little bit lower in Q1.

Operator: That margin will be closer to 18% for the first quarter and on a full year basis. As we've said in the past, we expect full year supply chain margin to be around our 2022 full year levels, which were at 19%. So hopefully that gives you some color.

Operator: If you look at Q1 of this year, we were around 17 and a half percent sales less less cost of sales margin. There was a bad debt expense that I alluded to in my prepared remarks around certain international partners. I think, on a more normalized basis, that that margin will be closer to 18% for the first quarter. And on a full year basis, as we've said in the past, we expect full year supply chain margin to be around our 2022 full year levels, which were, So hopefully that gives you a...

Operator: Thank you. Our next question is from the line of Brian Mullan of Piper Sandler.

Operator: Brian Your line is open. Please go ahead.

Speaker Change: Thank you I had a question on Tims, Canada I just wanted to ask specifically about speed of service last quarter, you called that out as a positive contributor I'm wondering if that continues to be a benefit.

Operator: Q1, and then kind of just related to that if you could give us some historical context when was tims at its best and where are you in the process now of improving that metric and can this be attractive a traffic driver from here.

Sammy Cedillo: Thank you. Our next question is from the line of Brian Mullan of Piper Sandler. Brian, your line is open. Please go ahead. Thank you.

Operator: Thank you. Our next question is from the line of Brian Mullan of Piper Sandler. Brian, your line is open, please go ahead.

Operator: Hey, Brian, thanks for the question. So we do continue to make progress on speed of service. I think I mentioned for this quarter that we did improve about 8% year on year. So we're making more progress. Matt Moore and the team are really doing a wonderful job on that front.

Brian Hugh Mullan: Hey, Bryan Thanks for the question.

Operator: So we do continue to make progress on speed of service I think I mentioned for this quarter, we did improve about 8% year on year. So we're making more progress Matt and the team are really doing a wonderful job on that front I think we'll probably see a little bit of a headwind in the near term from the flatbread piece.

Joshua Kobza: I think we'll probably see a little bit of a headwind in the near term from the flatbread pizza launch. That will slow us down a little bit, we think, probably for some number of weeks. And that's something that we saw in the market test when we launched flatbread. We slow down for a little bit as we kind of learn the muscle memory, but then we pick back up to where we were before. So I think probably a little bit of a near-term headwind, but something that we'll work through as teams get used to the flatbreads, and then we should be back on track.

Joshua Kobza: The launch that will slow us down a little bit we think probably for like for some number of weeks and that's something that we saw in the market test is when we launch flatbreads.

Joshua Kobza: We slow down for a little bit as we kind of we learned the muscle memory, but then we pick back up to where we were before so I think probably a little bit of a near term headwind, but something that we'll work through it as teams get used to the Flatbreads and then we'll we should be back on track.

Joshua Kobza: Yeah.

Joshua Kobza: Great. Thank you. Our next question today is from the line of Sara Senatore of Bank of America, Sorry go.

Operator: Great, thank you. Our next question today is from the line of Sara Senatore of Bank of America.

Sara Harkavy Senatore: Go ahead.

Operator: Oh, thank you. A clarification and a question. The question is, you mentioned you're on the path to getting franchisees to 300,000. Does that require significant volume increases, or are there self-help opportunities that can get you there? I'm just trying to think about union economics and a period of perhaps slower growth. And then, maybe it's not a clarification, but just specifics on the GNA outlook. I think you mentioned headcount reduction, but you've always been much leaner than others, so I'm just wondering if you could give a little bit of color on that. Thanks.

Sara Harkavy Senatore: Thank you a clarification and a question.

Operator: The question is you mentioned you're on the path to getting franchisees to 300000 does that require significant volume increases or are there self help opportunities and that can get you. There I'm just trying to think about.

Operator: And in economics.

Operator: Kerry to perhaps slower growth and then maybe just on a clarification, but just specifics on the G&A outlook. I think you mentioned head count reduction, Steve you've always been much leaner than others. So I'm just wondering if you could give a little bit of color on that thanks.

Operator: Sarah just a clarification on the 300000 franchise profit are you talking about.

Joshua Kobza: Hey Sara, just a clarification on the 300,000 franchise property. What are you talking about? Which concept are you referring to?

Speaker Change: Which concept are you referring to.

Speaker Change: I thought.

Speaker Change: I thought it was for Burger King U S. I thought that's what Patrick.

Sara Harkavy Senatore: I thought it was for Burger King U.S., so I thought that's what Patrick was referring to.

Patrick Doyle: Patrick Thank you.

Speaker Change: Perfect Okay, great yes.

Joshua Kobza: Perfect okay great yeah so I think there's a few things that that will drive that one of them is as absolutely increased sales that can come from a combination of improved operations even more effective marketing increasing our advertising spending which we've been doing but also importantly remodels and that's one of the really important pieces that we think it's helpful to have more visibility on now that we've announced the funding that's needed to get to move us to a fully modern state so there's a few different pieces of sales growth that are definitely part of the mix there there's also a piece of it which is which is improving margins and you've seen us be more thoughtful about discounting so we've already made a lot of progress there in terms of managing our gross profit margins better and then I think those the increase in sales can also allow us to become more efficient with with labor and we're at sales levels where you get a lot of incremental margin out of out of those marginal sales and a lot more labor productivity so that's an important part of the piece as well and I think some of the stuff that we're doing on on technology can also be a really important margin driver if we're able you know over the course of a few years to move for example to a fully digital ordering model whether it's through kiosks or or digital ordering and the drive-through that really changes the operating model of the restaurant and can allow us to be much more efficient and how we run the restaurants over time so those are a few of the pieces we're working at all of them you know some of them will work better than others but there's a lot of different things we're working on that can be pieces of the puzzle to to get towards that 300,000 yeah

Speaker Change: So I think Theres, a few things that will drive that.

Joshua Kobza: One of them is as absolutely increased sales that can come from a combination of improved operations.

Joshua Kobza: Even more effective marketing, increasing our advertising spending, which we've been doing but also importantly, remodels and that's one of the really important pieces that we think it's helpful to have more visibility on now that we've announced the funding thats needed.

Joshua Kobza: To get to move us to a fully modern.

Joshua Kobza: The state. So there is a few different pieces of sales growth that are definitely part of the mix. There. There is also a piece of it which is which is improving margins and you've seen us be more thoughtful about discounting. So we've already made a lot of progress.

Joshua Kobza: They are in terms of managing our gross profit.

Joshua Kobza: Margins better and then I think those the increase in sales can also allow us to become more efficient with with labor. We're at sales levels, where you get a lot of incremental margin out of out of those marginal sales in a lot more labor productivity.

Joshua Kobza: So that's the important part of the piece as well and I think some of the stuff that we're doing on technology can also be a really important margin driver. If we're able to over the course of a few years.

Joshua Kobza: To move for example to a fully digital ordering model, whether it's through kiosks or or digital ordering in the drive thru that really changes the operating model of the restaurant and can allow us to be much more efficient in how we run the restaurants over time. So those are a few of the pieces were working at all of them.

Joshua Kobza: Some of them will work better than others, but there's a lot of different things. We're working on that can be pieces of the puzzle to get towards that 300000.

Sammy Cedillo: Yeah, and Sara, I'll maybe I'll give you a clarification on your clarification. So in Q1, segment G&A grew 11% year over year. And so actually, that was related to higher compensation-related expenses, the majority of which were in the second half of 2023. So they're, they're now flowing into Q1 of 24.

Speaker Change: Yes, and Sarah I will.

Sara: Maybe I'll give you a clarification to your clarification.

Sammy Cedillo: So in Q1 segment G&A grew 11% year over year.

Sammy Cedillo: And so actually that was related to higher compensation related expenses. The majority of which were in the second half of 2023. So there are now flowing into Q1 of 'twenty four as we think about guidance for the full year, we took it down by about $15 million for the full year that guidance and the majority of that reduction.

Sammy Cedillo: As we think about guidance for the full year, we took it down by about $15 million for the full year. That guidance and the majority of that reduction are really related to stock-based comp expense, which as you know, goes into our segment G&A. So that's the majority of the $15 million. There are some one-off items as well, some smaller G&A items in that $15 million.

Sammy Cedillo: <unk> is really related to stock based comp expense, which as you know goes into our segment G&A. So that's the majority of the $15 million. There are some there are some one off items as well some smaller G&A items in that $15 million.

Operator: I'm digging in, I'm new to the role, and I've, you know, I've been working pretty closely with the brand presidents to see how we maximize the leverage we can get on the investments we've made. Thank you. Our next question today is from the line of Brian Harbour of Morgan Stanley. Brian, your line is open. Please go ahead. Yeah, thanks. Good morning. Maybe just following up on your...

Speaker Change: Im digging in.

Sammy Cedillo: New into the role and I've been working pretty closely with our brand presidents to see how we maximize the leverage we can get on the investments we've made and and if we have anything else to report there we'll come back to you.

Brian Harbour: Thank you. Our next question today is from the line of Brian <unk> of Morgan Stanley. Brian. Your line is open. Please go ahead.

Brian Harbour: Yeah. Thanks, good morning.

Brian Harbour: Maybe just following up on your unit growth comments.

Brian Harbour: Mainly outside of North America or are there any markets that you think could remain slower for <unk>.

Operator: Thank you. Our next question today is from the line of Brian Harbour of Morgan Stanley. Brian, your line is open. Please go ahead.

Brian Harbour: Have a reason whether it's.

Brian Harbour: Middle East or if it's just sort of like macro issues and then.

Joshua Kobza: Brian, thanks for the question. You know, I think you hit on the two main things that are top of mind and that have a lot of focus from us. First, we may see a small impact in some of the Middle East markets where pipelines might be a little bit slower there, so that's certainly something that we're paying attention to. And I think the other one is China, which we've called out before and we talked about in February. I think that's a huge long-term opportunity for us. But I think it will take some time to get all those markets on the right track.

Brian Harbour: China It sounds like Youll update us later, but is that going to be more of a 25 story.

Joshua Kobza: Best.

Joshua Kobza: Okay.

Joshua Kobza: Brian. Thanks for the question I think you hit on the two main things that are top of mind and that have a lot of focus from us.

Joshua Kobza: First we may see a small impact in some of the middle East markets.

Joshua Kobza: Pipelines might be a little bit slower there. So that's certainly something that we're paying attention to and I think the other one is China, which we've called out before and we talked about in February I think that's a huge long term opportunity for us I think it will take some time to get all of those markets on the right track as you mentioned, we don't have anything new to touch on today, there but of course.

Operator: As you mentioned, we don't have anything new to touch on today, but of course, we'll update you in the coming quarters. Thank you. Our next question is from the line of Eric Gonzalez of KeyBank. Eric, your line is open. Please go ahead. Thanks. Good morning.

Eric Andrew Gonzalez: We'll update you in the coming quarters there.

Operator: Thank you. Our next question is from the line of Eric Gonzalez of Keybanc. Your line is open. Please go ahead.

Eric Andrew Gonzalez: Thanks. Good morning. So my question is about the remodel investment Patrick you said to us over a year ago that if we saw <unk> investment that is because the company found something he was confident to generate a significant return to shareholders. So it's exciting to hear this next round of capital and I. Appreciate the comment that youre seeing in the high teens uplift, which appears quite strong can you speak to the call.

Operator: My question is about the remodel investment. You know, Patrick, he said to us over a year ago that if we saw RBI,

Operator: Thank you. Our next question is from the line of Eric Gonzalez of KeyBank. Eric, your line is open. Please go ahead. Thanks. Good morning.

Eric Andrew Gonzalez: Cost of the remodel today and maybe what percentage of RBI has contributed on average each project. So we can maybe assess the return on the investment of that initiative.

Operator: Sure, so I think you're seeing the remodels. It depends on the scope of the remodel. Clearly, if it's a scrape and rebuild, it's going to be close to the cost of building a new unit, depending on the equipment that you're going to reuse.

Operator: Yeah.

Eric Andrew Gonzalez: Sure so.

Eric Andrew Gonzalez: Youre seeing.

Eric Andrew Gonzalez: The remodels it depends on the scope of the remodel.

Eric Andrew Gonzalez: Clearly if it's a if it's a scrape and rebuild.

Eric Andrew Gonzalez: Going to be.

Eric Andrew Gonzalez: Close to the core.

Eric Andrew Gonzalez: Cost of building, a new unit, depending on equipment that youre going to reuse, but I think youre going to see an average on full remodels and lighter remodels.

Patrick Doyle: But I think you're going to see an average for full remodels and lighter remodels that, You know, are going to wind up in the half a million to a million range, obviously closer to the high end of that. You know, if you just play through the numbers that we rolled out today, you're looking at about 250 of that coming from us. And, you know, if we get a list in the double digits, as we have seen to date, our return on that is healthy, and the franchisees' return on that is healthy.

Patrick Doyle: Going to wind up in the half a million to a $1 billion range full obviously closer to the high end of that.

Patrick Doyle: If you just play through the numbers that we rolled out today you are looking at about 250 of that coming from us.

Patrick Doyle: And if we get a.

Patrick Doyle: A list than the double digit says we have seen to date.

Patrick Doyle: Our return on that is healthy and the franchisees' return on that is.

Patrick Doyle: So, you know, overall, and, you know, this kind of plays back to Sara's question a bit on, you know, how do you get to that 300,000 over time if we still have half of our system to get remodeled, and we can see, you know, double digit lifts, you know, mid-teens lifts on those remodels. You know, when you average that out over half of our system, that's a pretty nice lift to the overall average unit and does really good things for the profitability of those units.

Patrick Doyle: Is healthy.

Patrick Doyle: So overall.

Patrick Doyle: This kind of plays back to <unk> question, a bit on how do you get to that 300000 over time.

Patrick Doyle: Still got.

Patrick Doyle: Half of our system to get remodeled and we can see.

Patrick Doyle: Double digit lifts mid teens lifts on those remodels.

Patrick Doyle: When you average that out over a half of our system that's.

Patrick Doyle: That's a pretty nice lift to the overall average unit.

Patrick Doyle: And does really good things for the profitability of those units so.

Patrick Doyle: So we feel very good about the return for the franchisees and for us, and ultimately, this is us kind of laying out the full plan and the full commitment to the progress that we are making and are going to continue to make to get Burger King to a great place. We are fully committed to having the brand fixed. We're seeing great progress on that. We're pulling lots of different levers. And we feel very much on track.

Patrick Doyle: We feel very good about the return for for the franchisees and for Us and.

Patrick Doyle: Ultimately.

Patrick Doyle: This is this is us kind of laid out the full plan.

Patrick Doyle: And the full commitment for.

Patrick Doyle: The progress that we are making it are going to continue to make to get Burger King to a great place we are fully committed.

Patrick Doyle: To having the brand fix we're seeing great progress on that we're pulling lots of different levers.

Patrick Doyle: And.

Patrick Doyle: And we feel very much on track.

Patrick Doyle: Thank you. Our last question today will be from the line of Gregory Francfort of Guggenheim. Gregory, your line is open. Please go ahead. Hey, hey, thanks for the question.

Gregory Francfort: Thank you our last question today will be from the line of Gregory Frankfurt with Guggenheim. Your line is open. Please go ahead.

Gregory Francfort: Hey, Thanks for the question. My question is mostly I guess on the U S market.

Operator: Thank you. Our last question today will be from the line of Gregory Francfort of Guggenheim. Gregory, your line is open. Please go ahead.

Gregory Francfort: We're seeing in the in the protein markets is that they seem to be <unk> at a time when the industry seems to be focusing more on value.

Gregory Francfort: And I'm curious.

Operator: Hey, Greg, it's Sammy. I can take the first part of your question. Look, as we look at, first off, the Q1 results, but even the outlook for the year, I think, from a protein perspective, most of you have read about beef headwinds and potential headwinds in that market. But then, on the flip side, as you think about Popeyes and the chicken industry, you've actually seen some abatement in food costs, from a macro perspective.

Gregory Francfort: One is that is that something youre seeing in your business.

Greg: Two how do you expect that to play out as we get through 2024 do you expect maybe that focus on value from the industry to start to abate later in the year, just just any thoughts on that would be great. Thanks.

Operator: Hey, Greg It's Sami I can take the first part of your question as we look at.

Operator: First off the Q1 results, but even the outlook for the year I think.

Operator: Protein perspective, most of you have read about beef headwinds and potential headwinds in that market, but then on the flip side as you think about pop is in the chicken industry, you've actually seen some abatement in food costs from a macro perspective, so nothing nothing to call out here on on a forward looking basis when it comes to two.

Operator: So, you know, nothing to call out here on a forward-looking basis when it comes to the food cost side of things. We're going to continue to monitor the situation. But, as Josh mentioned earlier, we feel good about the position where our franchise profitability ended last year and our outlook for this year. And I think nothing in the food cost arena changes that outlook.

Operator: The food cost side of things, we're going to continue to monitor the situation, but as Josh mentioned earlier, we feel good about the position where our franchise profitability ended last year in <unk>.

Operator: And our outlook for this year and I think nothing.

Operator: Food cost arena changes that outlook.

Joshua Kobza: Thank you. This will conclude the Q&A for today. And I'd like to hand it back to Josh Kobza for any closing remarks.

Joshua Kobza: Thank you and this will conclude the Q&A for today and I'd like to hand back to Josh Kobza for any closing remarks.

Joshua Kobza: Well, thank you all for taking the time to join us today on the earnings call. I'd just like to say thank you one more time to our corporate teams, our franchisees, and our restaurant teams for an amazing job and for all your hard work you do every day. Have a great day, everyone, and we'll talk again soon.

Joshua Kobza: Thank you all for taking the time to join US today on the earnings call I'd, just like to say thank you one more time to our corporate teams, our franchisees and our restaurant teams for an amazing job and for all your hard work you do every day have a great day, everyone and we'll talk again soon.

Operator: This concludes today's call. Thank you all for joining us. You may now disconnect your lines.

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

Operator: [music].

Operator: Yes.

Operator: Okay.