Q2 2024 Restaurant Brands International Inc Earnings Call

Good morning and welcome to the Restaurant Brands International 2nd Quarter 2024 Earnings Conference Call.

Speaker Change: All participants will be in listen-only mode. To unmute a system, please signal conference specialist by pressing the star key, followed by zero.

Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star, then 1 on the telephone keypad.

Operator: At the end of today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on the telephone keypad. You will hear a tone to confirm that you are in the queue. To exit the question queue, you may press star, then 2.

Speaker Change: after today's presentation there will be in an opportunity to ask questions to ask a question you may press star than one mon technical keypat

you hear t't confirt that you're in the queue to exit the question que you may press star thank you all callers will be limited to one question

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

Speaker Change: 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.

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

Unknown Executive: Thank you, operator. Good morning, everyone, and welcome to Restaurant Brands International's Ernst Conference Call for the second quarter ended June 30, 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 Sami Siddiqui. 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 filing.

Kendall Peck: Thank you, Operator. Good morning, everyone, and welcome to Restaurant Brands International's Ernst Conference Call for the second quarter ended June 30, 2024.

Kendall Peck: And welcome to Restaurant Brands International's Ernst & Young Conference Call for the second quarter ended June 30, 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 RBI Executive Chairman Patrick Doyle, CEO Josh Kobza, and CFO Sami Siddiqui

Kendall Peck: 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 Sami Siddiqui.

Kendall Peck: Today's earnings call contains forward-looking statements that are subject to various risks set forth in the press release issued this morning and in our SEC filing. In addition, this earnings call includes non-GAAP financial measures. Reconciliations of non-GAAP financial measures are included in the press release and trending schedules available on our website. As a reminder, following our acquisition of Carroll's Restaurant Group, which closed on May 16, 2024, we introduced a sixth reportable segment, Restaurant Holdings.

Speaker Change: today's earnings call contains forward-looking statements which are subject to various risks set forth in a 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 and trending schedules available on our website.

Unknown Executive: As a reminder, following our acquisition of Carroll's Restaurant Group, which closed on May 16, 2024, we introduced a sixth reportable segment, Restaurant Holdings. This segment includes results from operations of the Burger King restaurants acquired as part of the Carroll's acquisition and will include results from our Popeyes China restaurants beginning in the third quarter.

Speaker Change: as a reminder following our acquisition of carroll' restaurant group which closed on may sixteenth two thousand and twenty-four we introduced a sixth reportable segment restaurant holdings

Operator: 2nd quarter, 2024 earnings conference call. All participants will be in this and only mode. Tuning the system, please signal conference specialists by pressing the star key followed by zero.

Kendall Peck: This segment includes results from operations of the Burger King restaurants acquired as part of the Carroll's acquisition and will include results from our Popeyes China restaurants beginning in the third quarter. The consolidated growth metrics discussed in the prepared remarks, including organic adjusted operating income growth and organic adjusted EPS growth, exclude results from our restaurant holding segment.

Speaker Change: This segment includes results from operations of the Burger King restaurants acquired as part of the Carroll's acquisition and will include results from our Popeyes China restaurants beginning in the third quarter.

Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one or type on keypad. You will hear a tone to confirm that you are in the queue. To exit the question queue, you may press star then two. All callers will be limited to one question.

Josh: The consolidated growth metrics discussed during the prepared remarks, including organic adjusted operating income growth and organic adjusted EPS growth, exclude results from our restaurant holding segment. And now I'll turn the call over to Josh.

Joshua Kobza: And now, I'll turn the call over to Josh.

Operator: Please note, this event is being recorded.

Joshua Kobza: We had a busy second quarter and grew comparable sales while navigating a softer consumer environment that's impacting the broader restaurant industry. Our teams worked closely with franchisees and their team members to deliver delicious food and beverages, provide a great experience for guests, and improve our physical and digital footprint, and we identified opportunities to drive cost savings for our franchisees, P&L, and around. Comparable sales grew 1.9%, and net restaurants grew 4%, which translated into system-wide sales growth of 5% and organic adjusted operating income growth of 9.3%.

Joshua Kobza: Good morning, everyone, and thanks for joining us. We had a busy second quarter and grew comparable sales while navigating a softer consumer environment that's impacting the broader restaurant industry. Our teams work closely with franchisees and their team members to deliver delicious food and beverages, provide a great experience for guests, and improve our physical and digital footprint. We close strategic transactions that will strengthen our long-term positioning for the Burger King brand in the U.S. and for Tim Hortons and Popeyes in China, and we identify opportunities to drive cost savings for our franchisees, P&L, and around the world.

Josh: Good morning everyone and thanks for joining us. We had a busy second quarter and grew comparable sales while navigating a softer consumer environment that's impacting the broader restaurant industry.

Kendall Peck: I will now like to turn the conference over to Kendall Peck, RBI's head of investor relations. Please go ahead. Thank you operator.

Kendall Peck: Good morning everyone and welcome to Restaurant Brands International's earnings conference call for the 2nd quarter ended June 30th, 2024. As a reminder, a live broadcast of this call may be accessed on the investor relations web page at RBI dot com forward slash investors and a recording will be available for replay.

Josh: Our teams worked closely with franchisees and their team members to deliver delicious food and beverages, provide great experience for guests, and improve our physical and digital footprints.

Speaker Change: we closeed strategic transactions that will strengthen our long-term positioning for the burking brand of u s and for importance and popis in china and we identify opportunities to drive costsavings for a franisees pl and one

Kendall Peck: Joining me on the call today are Restaurant Brands International's Executive Chairman, Patrick Doyle, CEO Josh Cobsa, and CFO, Sami Siddiqui. Today's earnings call contains four looking statements, which are subject to various risks set forth in the press release issues this morning and in our SEC finalings. In addition, this earnings call includes non-gap financial measures. Reconciliation of non-gap financial measures are included in the press release and trending schedules available on our website.

Joshua Kobza: Our results demonstrate our brand's strong relative value proposition. The Importance of Franchisee Alignment and the Benefits of Maintaining Cost Disadvantages. Comparable sales grew 1.9% and net restaurants grew 4%, which translated into system-wide sales growth of 5% and organic adjusted operating income growth of 9.3%. We certainly were planning for better absolute top-line results.

Speaker Change: Our results demonstrate our brand's strong relative value propositions, the importance of franchisee alignment, and the benefits of maintaining cost discipline.

Speaker Change: Comparable sales grew 1.9% and net restaurants grew 4% which translated into system-wide sales growth of 5% and organic adjusted operating income growth of 9.3%.

Josh Cobsa: As a reminder, following our acquisition of Carol's Restaurant Group, which closed on May 16th, 2024, we introduced a 6th reportable segment, Restaurant Holdings. This segment includes results from operations of the Burger King restaurants acquired as part of the Carol's acquisition, and will include results from our Popeye's China restaurants beginning in the 3rd quarter.

Josh: We certainly were planning for better absolute top-line results. However, relative to the overall performance of our industry, we've continued to outperform key competitors in some of our largest markets.

Joshua Kobza: However, relative to the overall performance of our industry, we've continued to outperform key competitors in some of our largest markets. Tim Hortons and International drive nearly 70% of our adjusted operating income, and both delivered strong AY in the second quarter. TIMSS in Canada once again outperformed the industry and continues to showcase the power of delivering the fundamentals of quality, service, and convenience to guests every day and driving results for restaurant owners and for our business. Our international business demonstrated its resilience and delivered solid top-line results that translated into strong adjusted operating income growth. The remaining 30% of our AOI comes from Burger King, Popeyes, and Firehouse in North America.

Josh: Tim Hortons and International drive nearly 70% of our adjusted operating income, and both delivered strong AY in the second quarter.

Josh: Tim's in Canada once again outperformed the industry and continues to showcase the power of delivering the fundamentals of quality, service, and convenience to guests every day and driving results for restaurant owners and for our business.

Josh Cobsa: The consolidated growth metrics discussed during the prepared remarks, including organic adjusted operating income growth and organic adjusted EPS growth, excluded results from our restaurant holding segment, and now I'll turn the call over to Josh.

Josh: our international business demonstrated its resilience and delivered solid top line results that translated into into strong adjusted operating income growth

Josh Cobsa: Good morning, everyone, and thanks for joining us. We had a busy second quarter and grew comparable sales while navigating a softer consumer environment that's impacting the broader restaurant industry. Our teams worked closely with franchisees and their team members to deliver delicious food and beverages, provide great experience for guests, and improve our physical and digital footprints. We closed strategic transactions that will strengthen our long-term positioning for the Burger King brand in the US, and for Tim Hortons and Popeye's in China, and we identify opportunities to drive cost savings for our franchisees P&L and our own.

Josh: The remaining 30% of our AOI comes from Burger King, Popeyes, and Firehouse in North America.

Joshua Kobza: At Burger King U.S., our turnaround is well underway. Our balanced approach to everyday value continues to resonate with guests, and the team has reacted calmly in the face of heightened promotional activity across the industry. Popeyes remains focused on unlocking sales opportunities through menu innovation and making restaurants easier to run. And at Firehouse, the team is building out its development pipeline with a clear path to accelerate growth this year and beyond.

Josh: At Burger King U.S., our turnaround is well underway.

Josh: Our balanced approach to everyday value continues to resonate with guests, and the team has reacted calmly in the face of heightened promotional activity across the industry.

Josh: Popeyes remains focused on unlocking sales opportunities through menu innovation and making restaurants easier to run.

Speaker Change: and if firehouse the team is building on develolvement pipeline with a clear past accelerate growth this year and beyond

Josh Cobsa: Our results demonstrate our brand's strong relative value propositions, the importance of franchisee alignment, and the benefits of maintaining cost discipline. Comparable sales grew 1.9 percent, and that restaurant's grew 4 percent, which translated into system-wide sales growth of 5 percent, and organic adjusted operating income growth of 9.3 percent. We certainly were planning for better absolute top line results. However, relative to the overall performance of our industry, we've continued to outperform key competitors in some of our largest markets.

Joshua Kobza: As I mentioned before, this quarter we took a few important steps to strengthen our long-term positioning in the U.S. and in China. We closed the acquisition of Carroll's and are working to remodel 600 Carroll's restaurants through 2028, so we can begin refranchising the vast majority of the portfolio to smaller owner operators in the next few years. Our co-investment in Tim's China reflects our confidence in the long-term potential of the brand in the market. While we still delivered solid global comparable sales growth this quarter, there's no denying that the environment has been tough.

Joshua Kobza: As I mentioned before, this quarter we took a few important steps to strengthen our long-term positioning in the U.S. and in China. We closed the acquisition of Carroll's and are working to remodel 600 Carroll's restaurants through 2028, so we can begin refranchising the vast majority of the portfolio to smaller owner operators in the next few years. You also saw us acquire Popeyes China and make a co-investment into Tim Hortons in China

Speaker Change: As I mentioned before, this quarter we took a few important steps to strengthen our long-term positioning in the U.S. and in China.

Speaker Change: We closed the acquisition of Carroll's and are working to remodel 600 Carroll's restaurants through 2028, so we can begin refranchising the vast majority of the portfolio to smaller owner-operators in the next few years.

Speaker Change: You also saw us acquire Popeyes China and make a co-investment into Tim Hortons in China.

Joshua Kobza: We've taken control of Popeyes China and plan to grow the business ourselves in the coming years before finding a new partner to accelerate long-term growth. We're working closely with the Popeyes China team to refine our business plans, and we'll update you when we have more to share. Our co-investment in Tim's China reflects our confidence in the long-term potential of the brand in the market. There is a lot of work for us to do in China, especially given the compounding impacts of lingering consumer and competitive challenges, but these are both important steps in the right direction.

Speaker Change: We have taken control of Popeyes China and plan to grow the business ourselves in the coming years before finding a new partner to accelerate long-term growth.

Josh Cobsa: Tim Hortons and international driving nearly 70 percent of our adjusted operating income, and both delivered strong AI in the second quarter. Tim's in Canada once again outperforming the industry, and continues to showcase the power of delivering the fundamentals of quality, service, and convenience to guess every day and driving results for restaurant owners and for our business. Business. Our international business demonstrated its resilience and delivered solid top line results that translated into strong adjusted operating income growth.

Speaker Change: We're working closely with the Popeyes China team to refine our business plans and will update you when we have more to share.

Speaker Change: Our co-investment in Tim's China reflects our confidence in the long-term potential of the brand in the market.

Speaker Change: There's a lot of work for us to do in China, especially given the compounding impacts of lingering consumer and competitive challenges, but these are both important steps in the right direction.

Joshua Kobza: We're fortunate to have Patrick Seward, a seasoned executive with extensive knowledge of food, beverage, and consumer products in Asia, on board as our Chairman for Asia Pacific. He's helping us solidify long-term plans, build key relationships, and accelerate development for each of our businesses in the region. Before I turn to segment results, I'd like to provide a high-level update on expectations for 2024, which Sami will expand upon shortly. While we still delivered solid global comparable sales growth this quarter, there's no denying that the environment has been tough. As such, we believe system-wide sales will be a bit lighter this year compared to our stated long-term growth algorithm.

Patrick Stewart: We're fortunate to have Patrick Stewart, a seasoned executive with extensive knowledge in food, beverage, and consumer products in Asia, on board as our Chairman for Asia-Pacific. He's helping us solidify long-term plans, build key relationships, and accelerate development for each of our businesses in the region.

Josh Cobsa: The remaining 30% of our A.O.I, comes from Burger King, Popeyes, and Firehouse in North America. At Burger King, U.S., our turnaround is well underway. Our balanced approach to everyday value continues to resonate with guests and the team has reacted calmly in the face of heightened promotional activity across the industry. Popeyes remains focused on unlocking sales opportunities through menu innovation and making restaurants easier to run. And at Firehouse, the team is building on development pipeline with a clear path to accelerate growth this year and beyond.

Speaker Change: Before I turn to segment results, I'd like to provide a high-level update on expectations for 2024, which Sami will expand upon shortly.

Sami: while we still delivered solid global comparable sales growth thisquarter there's no deny that the environment has been tough

Sami: as such we believe system-wide sales will be a bit laterghter this year compared to our stated long-term growth algorithm

Joshua Kobza: That said, we've implemented expense improvements while continuing to invest in all the right areas to drive sustainable sales growth. As a result, I'm confident we'll deliver organic adjusted operating income growth of 8% plus this year. Turning now to segment results, I'll start with Tim Hortons, which delivers about 43% of our adjusted operating income. In June, I joined Axel, the Tim's team, and over 1,800 restaurant owners and leaders in Toronto for their convention celebrating 60 years of Tim Hortons in Canada, 50 years of the Tim's Foundation, and 40 years of Tim Hortons in the U.S.

Josh Cobsa: As I mentioned before, this quarter we took a few important steps to strengthen our long-term positioning in the U.S, and in China. We closed the acquisition of Carrils and are working to remodel 600 Carrils restaurants through 2028 so we can begin refranchising the vast majority of the portfolio to smaller owner operators in the next few years. You also saw us acquire Popeyes China and make a co-investment into Tim Hortons in China.

Sami: that said we've implemented expense improvements while continuing toinvest in all the right areas that to drive sustainable sales growth

Joshua Kobza: As a result, I'm confident we'll deliver organic adjusted operating income growth of 8% plus this year. Turning now to segment results, I'll start with Tim Hortons, which delivers about 43% of our adjusted operating income. In June, I joined Axel, the Tim's team, and over 1,800 restaurant owners and leaders in Toronto for their convention celebrating 60 years of Tim Hortons in Canada, 50 years of the Tim's Foundation, and 40 years of Tim Hortons in the U.S. It was amazing to celebrate the Tim's Foundation, which is so core to Tim's strong community ties, and we recently raised nearly 13 million Canadian dollars for Tim's Foundation camps through our annual camp day.

Speaker Change: as a result i'm confident will deliver organic adjusted operating income growth of eight percent plus this year

Speaker Change: yeah

Speaker Change: turning now to segment results i'll start with tim hance that delivers about forty-three percent of our adjusted operating income

Josh Cobsa: We have taken control of Popeyes China and planned to grow the business ourselves in the coming years before finding a new partner to accelerate long-term growth. We're working closely with the Popeyes China team to refine our business plans and will update you when we have more to share. Our co-investment in Tim's China reflects our confidence in the long-term potential of the brand in the market. There's a lot of work for us to do in China, especially given the compounding impacts of lingering consumer and competitive challenges, but these are both important steps in the right direction.

Joshua Kobza: It was an incredible experience, complete with a special musical, The Last Timbit, and a ton of product tastings from the Culinary and Beverage departments. It was amazing to celebrate the Tim's Foundation, which is so core to Tim's strong community ties, and we recently raised nearly 13 million Canadian dollars for Tim's Foundation camps through our annual camp day.

Speaker Change: in june i joined ax the tim team and over eighteen hundred restaurant owners and leaders in toronto for their convention celebrating sixty years of timim hortens in canada fifty years of the ten foundation and forty years of tim importance in u s

Speaker Change: It was an incredible experience, complete with a special musical, The Last Timbit, and a ton of product tastings from the Culinary and Beverage teams.

Speaker Change: It was amazing to celebrate the Thames Foundation, which is so core to Thames' strong community ties. And we recently raised nearly $13 million Canadian dollars for Thames Foundation camps through our annual camp day.

Joshua Kobza: I love seeing the excitement and confidence of so many restaurant owners for the future of this brand. So much of this confidence is due to the strong foundation Axel and the TIMSS leadership team have built alongside our restaurant owners over the past five years and the results that they continue to drive every day. Tim's in Canada delivered a 4.9% increase in comparable sales, well ahead of the broader industry, and did so through a balanced mix of traffic and jet growth.

Joshua Kobza: I love seeing the excitement and confidence of so many restaurant owners for the future of this brand. Tim's in Canada delivered a 4.9% increase in comparable sales, well ahead of the broader industry. We're looking forward to working with Ryan, and we'll have more to share on that.

Josh Cobsa: We're fortunate to have Patrick Seward, a seasoned executive with extensive knowledge in food, beverage, and consumer products in Asia on board as our chairman for Asia Pacific. He's helping us to let a fly long-term plans, build key relationships, and accelerate development for each of our businesses in the region.

Speaker Change: I love seeing the excitement and confidence of so many restaurant owners for the future of this brand.

Speaker Change: so much of this confidence is due to the strong foundation axual and attempts leadership team of built alongside our restaurant owners over the past five years and the results that they continue to drive every day

Josh Cobsa: Before I turn to segment results, I'd like to provide a high-level update on expectations for 2024, which Stamin will expand upon shortly. While we still delivered solid global comparable sales growth this quarter, there's no denying that the environment has been tough. As such, we believe system-wide sales will be a bit lighter this year compared to our stated long-term growth algorithm.

Speaker Change: tims in canada delivered a four point nine percent increase in comparable sales well ahead of the broader industry and did so through a balanceced mix of traffic andcheck growth

Joshua Kobza: It's pretty remarkable to see the market leader expand share in core categories like coffee, breakfast, and baked goods. This is a testament to the team's marketing and menu initiatives, relevant value positioning, operational excellence, and unmatched convenience. Morning daypart sales grew 4.5% year over year, anchored by our leadership in brewed coffee with over 70% market share and breakfast sandwiches and wraps, where we hold over 60% market share. Some of you may have seen that even Deadpool can't live without his Tim.

Speaker Change: It's pretty remarkable to see the market leader expand share in core categories like coffee, breakfast, and baked goods.

Speaker Change: This is a testament to the team's marketing and menu initiatives, relevant value positioning, operational excellence, and unmatched convenience.

Josh Cobsa: That said, we've implemented expensive improvements while continuing to invest in all the right areas to drive sustainable sales growth. As a result, I'm confident we'll deliver organic adjusted operating income growth of 8% plus this year.

Speaker Change: Morning day part sales grew 4.5% year over year, anchored by our leadership in brewed coffee, with over 70% market share, and breakfast sandwiches and wraps, where we hold over 60% market share.

Josh Cobsa: Turning now to segment results, I'll start with Tim Hortons that delivers about 43% of our adjusted operating income.

Speaker Change: Some of you may have seen that even Deadpool can't live without his Timbs. We're looking forward to working with Ryan, and we'll have more to share on that soon.

Joshua Kobza: We're looking forward to working with Ryan, and we'll have more to share on that. Great results are as much a product of strong operations as strong markets. The team is delivering some of the best weekday morning service times we've seen in the past five years, with even more opportunity in the morning daypart through increased adoption of our Scan and Pay app, Shoulder-to-Shoulder Restaurant Visits, and Layout Optimization from Store Renovations and New Build. We've made exciting strides on our PM food journey, which began in 2022 with the launch of Loaded and Anytime Snackers. We've already seen these two platforms contribute two points to PM food market share growth.

Josh Cobsa: In June, I joined Axel, the Tim's team, and over 1,800 restaurant owners and leaders in Toronto for their convention celebrating 60 years of Tim Hortons in Canada, 50 years of the Tim's foundation, and 40 years of Tim Hortons in the U.S. It was an incredible experience, complete with a special musical, The Last Timbit, and a ton of product tastings from the culinary and beverage teams. It was amazing to celebrate the Tim's foundation, which is so core to Tim's strong community ties, and we recently raised near the $13 million Canadian dollars for Tim's foundation camps through our annual camp day.

Speaker Change: great results are as much of the product of strong operations in strong marketing

Speaker Change: The team is delivering some of the best weekday morning service times we've seen in the past five years, with even more opportunity in the morning day part through increased adoption of our Scan and Pay app feature, shoulder-to-shoulder restaurant visits, and layout optimization from store renovations and new builds.

Speaker Change: we've made exciting strides on ourpm food journey which beganin in two thousand and twentytwo with the unch of loaded and anytime nackers

Speaker Change: We've already seen these two platforms contribute two points to PM food market share growth.

Josh Cobsa: I love seeing the excitement and confidence of so many restaurant owners for the future of this brand. So much of this confidence is due to the strong foundation Axel and the Tim's leadership team have built alongside of restaurant owners over the past five years, and the results that they continue to drive every day. Team's in Canada delivered a 4.9% increase in comparable sales, well ahead of the broader industry, and did so through a balanced mix of traffic and check growth.

Joshua Kobza: This success paved the way for our expansion into Collaborate Pizzas, introduced in mid-April after two years of testing, aligning with restaurant owners, and adding new ovens to the back of house. We've been pleased with the results so far, and we're excited for the innovation opportunities our new ovens will unlock. I had the pleasure of tasting a number of these at convention in June.

Speaker Change: This success paved the way for our expansion into Collaborate Pizzas, introduced in mid-April after two years of testing, aligning with restaurant owners, and adding new ovens to the back of house.

Speaker Change: We've been pleased with the results so far, and we're excited for the innovation opportunities our new ovens unlock. I had the pleasure of tasting a number of these at convention in June .

Joshua Kobza: Flatbread pizzas are helping us increase our exposure to the family guest occasion and improve throughput for restaurants during historically underutilized times, such as after 2 p.m. and on the weekend. Between loaded flatbread pizzas and our savory pastries, we have a clear path to drive franchisee profitability and achieve double-digit PM food market share in the near future. Our PM food innovation ties in nicely as we broaden our beverage strength, especially in the cold category, which represented nearly 40% of total beverage sales in the second quarter.

Speaker Change: fl od pizz are helping us increase our exposure to the family guestication and improved throughput for restaurants during historically underutilized times such as as two pm and on the weekends

Josh Cobsa: It's pretty remarkable to see the market leader expand share in core categories like coffee, breakfast and baked goods. This is a testament to the team's marketing and menu initiatives, relevant value positioning, operational excellence and unmatched convenience. Morning day part sales grew 4.5% year over year, anchored by our leadership and brewed coffee, with over 70% market share, and breakfast sandwiches and wraps where we hold over 60% market share. Some of you may have seen that even Deadpool, Deadpool can't live without his Tim's.

Speaker Change: Between loaded flatbread pizzas and our savory pastries, we have a clear path to drive franchisee profitability and achieve double-digit PM food market share in the near future.

Joshua Kobza: Our PM food innovation ties in nicely as we broaden our beverage strength, especially in the cold category, which represented nearly 40% of total beverage sales in the second quarter. We entered France about a year ago, and although we only have 16 stores today, the market offers a lot of potential. In May, I visited our first Popeyes in Lyon and saw how much our beautiful restaurants and high quality food are resonating with our French guests. I'll be there with Tiago and our international team in a couple of weeks to celebrate their early success and learn about the key ingredients for it.

Speaker Change: Our PM food innovation ties in nicely as we broaden our beverage strength, especially in the cold category, which represented nearly 40% of total beverage sales in the second quarter.

Joshua Kobza: We kicked off the summer with two co-branded ice cap partnerships, Caramilk and Oreo Double Stuff, to honor 25 years of our iconic ice cap beverage. We also added exciting flavors to our Sparkling Quencher lineup and most recently introduced Infuser, an energy drink made with natural caffeine that appeals to younger guests looking for a delicious caffeinated beverage alternative.

Speaker Change: We kicked off the summer with two co-branded Ice Cap partnerships, Caramilk and Oreo Double Stuff, to honor 25 years of our iconic Ice Cap beverage.

Josh Cobsa: We're looking forward to working with Ryan, and we'll have more to share on that soon. Great results are as much of the product of strong operations is strong marketing. The team is delivering some of the best weekday morning service times we've seen in the past 5 years, with even more opportunity in the morning day part, through increased adoption of our Scan and Pay app feature, shoulder shoulder restaurant visits and layout optimization from store renovations and new builds.

Speaker Change: we also added exciting flavors to our arkling queninter lineup and most recently introduced in fuser and energy drink made with natural captain that appeals to younger guests looking for a delicious cafated beverage alternative

Joshua Kobza: I'm very excited about all the progress the team continues to make here at Thames & Canada and feel very confident that Thames is well positioned for growth into the future. Moving now to International, which comprises about 25% of our adjusted operating income. International saw comparable sales of 2.6%, net restaurant growth of 8.2%, and system-wide sales growth of 9.2%. In April, I spent some time with our Burger King partners in France, which remains a standout market for us and outperformed the industry this past quarter.

Speaker Change: I'm very excited about all the progress the team continues to make here at Thames & Canada and feel very confident that Thames is well positioned for growth into the future.

Josh Cobsa: We've made exciting strides on our PM food journey, which began in 2022 with the launch of loaded and anytime snackers. We've already seen these two platforms contribute two points to PM food market share growth. This success paved the way for our expansion into collaborate pizzas, introduced in mid April after two years of testing, aligning with restaurant owners, and adding new ovens to the back of house. We've been pleased with the results so far, and we're excited for the innovation opportunities our new ovens unlock.

Speaker Change: shifting out an international which compromise comprises about twenty-five percent of our adjusted operating income

Speaker Change: international saw comparable sales of two point six percent net restaurant growth of eight point two percent and system wide sales growth of nine point two percent

Speaker Change: In April , I spent some time with our Burger King partners in France, which remains a standout market for us and outperformed the industry this past quarter.

Joshua Kobza: Our local team and restaurant operators are really talented and very passionate, and we appreciate the work they've done to build such a powerful and relevant brand in France over the past 10 years, building the brand to over 530 locations today with over $2 billion in annual system-wide sales. Burger King also saw positive results in markets like Brazil, Japan, Australia, and Mexico. This strength helped to partially offset moderating price trends in many of our Western European markets, challenging consumer dynamics in China, and conflict in the Middle East.

Speaker Change: Our local team and restaurant operators are really talented and very passionate, and we appreciate the work they've done to build such a powerful and relevant brand in France over the past 10 years, building the brand to over 530 locations today with over $2 billion in annual system-wide sales.

Josh Cobsa: I had the pleasure of tasting a number of these at convention in June. Fleprad pizzas are helping us increase our exposure to the family guest occasion and improve throughput for restaurants during historically underutilized times, such as after 2 p.m, and on the weekends. Between loaded, fleprad pizzas and our savory pastries, we have a clear path to drive franchisee profitability and achieve double digit PM food market share in the near future. Our PM food innovation ties in nicely as we broaden our beverage strength, especially in the cold category, which represented nearly 40% of total beverage sales in the second quarter.

Speaker Change: burgering also the saw positive results in markets like brazil japan australia and mexico this strength helped to partially offset moderating price trends in manyof our western european markets challenging consumer dynamics in china and the compleflict in the middle east

Joshua Kobza: At Popeyes, we're bringing our delicious Louisiana chicken to more markets around the world. Since acquiring Popeyes in March of 2017, the brand has grown from over 500 international restaurants generating roughly $300 million in annual system sales to nearly 1,300 restaurants today and over $1 billion in system-wide sales. To give you a few market examples, in 2019, we brought Popeyes to Spain with one of our existing Burger King partners, RB Iberia, and we now have nearly 140 stores in the market with an attractive runway for further development.

Speaker Change: At Popeyes, we're bringing our delicious Louisiana chicken to more markets around the world.

Speaker Change: since acquiring popiis in march of two thousand and seventeen the brand has growned from over five hundred international restaurants generating roughly three hundred million dollars in annual system sales to nearly threeteen hundred restaurants today and over one billion dollars in system ide sales

Josh Cobsa: We kicked off this summer with two co-branded ice cap partnerships, Caramelk and Oreo double stuff, to honor 25 years of our iconic ice cap beverage. We also added exciting flavors to our sparkling quinter lineup, and most recently introduced in fuser, an energy drink made with natural caffeine that appeals to younger guests looking for a delicious caffeinated beverage alternative.

Speaker Change: To give you a few market examples, in 2019 we brought Popeyes to Spain with one of our existing Burger King partners, Arby's Ideria. And we now have nearly 140 stores in the market, with an attractive runway for further development.

Josh Cobsa: I'm very excited about all the progress the team continues to make here at Tim's in Canada, and feel very confident that Tim's well positioned for growth into the future.

Joshua Kobza: In the UK and India, the brand is off to a great start and has already reached roughly 50 restaurants in each market in less than three years, with clear paths to accelerate from there. We entered France about a year ago, and although we only have 16 stores today, the market offers a lot of potential.

Speaker Change: In the UK and India, the brand is off to a great start and has already reached roughly 50 restaurants in each market in less than three years, with clear paths to accelerate from there.

Josh Cobsa: Shifting out an international, which comprises about 25% of our adjusted operating income. International saw comparable sales of 2.6%, net restaurant growth of 8.2%, and system wide sales growth of 9.2%. In April, I spent some time with our Burger King partners in France, which remains a standout market for us and outperform the industry this past quarter.

Speaker Change: We entered France about a year ago, and although we only have 16 stores today, the market offers a lot of potential.

Joshua Kobza: In May, I visited our first Popeyes in Lyon and saw how much our beautiful restaurants and high-quality food are resonating with our French guests. Most recently, New Zealand welcomed its first Popeyes restaurant, which is on track to deliver over $6 million in annual restaurant sales, making it one of our strongest new country entries to date. I'll be there with Tiago and our international team in a couple of weeks to celebrate their early success and learn about the key ingredients for it.

Speaker Change: in may i visited our first popeyes in le and saw how much our beautiful restaurants and high-quality food are resonating with our french guests

Speaker Change: most recently new zealand welcome isits first popy restaurant which is on track to deliver over six million doars in the annual ad restaurant sales making it one of our strongest new country enttriies to date

Josh Cobsa: Our local team and restaurant operators are really talented and very passionate, and we appreciate the work they've done to build such a powerful and relevant brand in France over the past 10 years, building the brand to over 530 locations today with over $2 billion in annual system wide sales. Burger King also saw positive results in markets like Brazil, Japan, Australia, and Mexico. This strength helped to partially offset moderating price trends in many of our Western European markets, challenging consumer dynamics in China and the conflict in the Middle East.

Speaker Change: I'll be there with Tiago and our international team in a couple of weeks to celebrate their early success and learn about the key ingredients to it.

Joshua Kobza: Not to be outdone, though, our Latin America team followed the New Zealand opening by opening in Costa Rica in July, and that restaurant opened to nearly 1,800 transactions on day one. A big congratulations to our teams and our partners on some remarkable accomplishments with Pompeyes International.

Speaker Change: not to be up though our latin america team followed the new zealand opening by opening in coaster rico and july and that restaurant open to nearly eighten hundred transactions on day one a big congratulations to our teams and our partners on some remarkable accomplishments with pis international

Josh Cobsa: At Popeyes, we're bringing our delicious Louisiana chicken to more markets around the world. Since acquiring Popeyes in March of 2017, the brand has grown from over 500 international restaurants generating roughly $300 million in annual system sales to nearly $1,300 restaurants today and over $1 billion in system-wide sales. To give you a few market examples, in 2019 we brought Popeyes to Spain with one of our existing Burger King partners, RBI Deria, and we now have nearly 140 stores in the market, with an attractive runway for further development.

Joshua Kobza: While Popeyes is having a lot of early success in many markets around the world, we know it can do so much better. Burger King U.S. comparable sales were relatively flat, while total net restaurants declined 2%, resulting in a negative 0.8% decline in system-wide sales. Top-line results reflect the environment I've discussed, but our WINGS platform, which recently expanded with the launch of Boneless and our big box value promotions, helps lead to overall QSR share growth year over year.

Speaker Change: While Popeyes is having a lot of early success in many markets around the world, we know it can do so much more.

Joshua Kobza: While Popeyes is having a lot of early success in many markets around the world, we know it can do so much better. Shifting now to Burger King, which delivered about 18% of our adjusted operating income this quarter. Burger King U.S. comparable sales were relatively flat, while total net restaurants declined 2%, resulting in a negative 0.8% decline in system-wide sales.

Speaker Change: shifting out a burgerking which delivered about eighteen percent of our adjusted operating income this quarter

Speaker Change: Burger King U.S. comparable sales were relatively flat, while total net restaurants declined 2%, resulting in a negative 0.8% decline in system-wide sales.

Joshua Kobza: The absolute sales and traffic results at Burger King were clearly softer than we aspire to, but the business continued to outperform Burger QSR sales and traffic. I believe this is in large part due to our responsible approach to everyday value, our focus on meeting the needs of our guests and franchisees, and the impact of our operational improvements starting to shine through. The word value has received a lot of airtime in the past few months.

Speaker Change: The absolute sales and traffic results at Burger King were clearly softer than we aspire to, but the business continued to outperform Burger QSR sales and traffic.

Josh Cobsa: In the UK and India, the brand is off to a great start and has already reached roughly 50 restaurants in each market in less than three years, with clear paths to accelerate from there. We entered France about a year ago, and although we only have 16 stores today, the market offers a lot of potential. And may I visited our first Popeyes in Lyon, and saw how much our beautiful restaurants and high-quality food are resonating with our French guests.

Speaker Change: I believe this is in large part due to our responsible approach to everyday value, our focus on meeting the needs of our guests and franchisees, and the impact of our operational improvements starting to shine through.

Speaker Change: the word value has received receiveda lot of airitime in the pastfew month we've been reinforcing vricaness value proposition great tasting food and an affordable price for the fast for the past few years now with our distinctive qualities of flame drilling the wper and have it yearway

Joshua Kobza: We've been reinforcing Burger King's value proposition, great tasting food at an affordable price, for the past few years now with our distinctive qualities of flame grilling the Whopper and having it your way. We brought back another $5 price-pointed item this quarter, the $5 Your Way Meal, and balanced it with premium menu innovation like Melts and now our new Fiery Menu. There's even more we can do to enhance the value we offer, and I believe great operations, digital, and re-imaging are just as important to win in the long term.

Josh Cobsa: Most recently, New Zealand welcomed its first Popeyes restaurant, which is on track to deliver over $6 million in annual restaurant sales, making it one of our strongest new country entries to date. I'll be there with Tiago and our international team in a couple of weeks to celebrate their early success and learn about the Ekkeding ingredients to it. Not to be outdone though, our Latin America team followed the New Zealand opening by opening in Costa Rica in July, and that restaurant opened to nearly 1800 transactions on day one.

Speaker Change: We brought back another $5 price-pointed item this quarter, the $5 Your Way Meal, and balanced it with premium menu innovation like Melts and now our new Fiery Menu.

Speaker Change: There's even more we can do to enhance the value we offer, and I believe great operations, digital and re-imaging are just as important to win in the long term.

Joshua Kobza: We're on track to complete nearly 400 remodels this year and bring our system to between 85 to 90% modern image by 2028. We now have 150 Royal Reset remodels open for at least six months, and they're driving uplifts in the mid-teens range, net of control. A number of these stores showcase our new sizzle image, and Sami and I got to visit a few recently in Atlanta and in Miami with Tom and the team.

Speaker Change: we're on track to complete nearly four hundred threeremodels this year and bring our system to between eighty-five to ninety percent modern image by two thousand and twenty eight

Josh Cobsa: A big congratulations to our teams and our partners on some remarkable accomplishments with Popeyes and international. While Popeyes is having a lot of early success in many markets around the world, we know it can do so much more.

Speaker Change: We now have 150 Royal Reset remodels open for at least six months, and they're driving uplifts in the mid-teens range, net of control.

Speaker Change: A number of these stores showcase our new sizzle image, and Sami and I got to visit a few recently in Atlanta and in Miami with Tom and the team.

Josh Cobsa: Shifting out of Burger King, which delivered about 18% of our adjusted operating income this quarter. Burger King US comparable sales were relatively flat, while total net restaurants declined 2%, resulting in a negative 0.8% decline in system wide sales. The absolute sales and traffic results at Burger King were clearly softer than we aspire to, but the business continued to outperform Burger QSR sales and traffic.

Joshua Kobza: We're very excited to get more sizzles in our system as we remodel Carroll's restaurants and execute our $300 million Royal Reset 2.0 investment. It may take time to see the full impact of our Burger King investments flow through, but I'm confident in the brand's path forward, especially given the focus of our multi-year plans and the strong alignment our team has built with our franchisees. I think we'll find that the shorter-term pressures being felt by the QSR industry are masking some pretty incredible changes at Burger King that will deliver long-term rewards.

Speaker Change: we're very excited to get more sisignals in our system as we remodel carol's restaurants and execute our three hundred million dollars royal reset two point o investment

Speaker Change: It may take time to see the full impact of our Burger King investments flow through, and I'm confident in the brand's path forward, especially given the focus of our multi-year plans and the strong alignment our team has built with our franchisees.

Josh Cobsa: I believe this is in large part due to our responsible approach to everyday value. Our focus on meeting the needs of our guests in franchisees and the impact of our operational improvements starting to shine through. The word value has received a lot of airtime in the past few months. We've been reinforcing Burger King's value proposition, great tasting food at an affordable price, for the past few years now, with our distinctive qualities of flame grilling the waffle and have it your way.

Speaker Change: I think we'll find that the shorter-term pressures being felt by the QSR industry are masking some pretty incredible changes at Burger King that will deliver long-term rewards.

Joshua Kobza: Turning now to Popeyes, which comprises about 10% of our adjusted operating income. Popeyes U.S. grew net restaurants 3.8% and comparable sales 0.6%, resulting in system-wide sales growth of 4%. Top-line results reflect the environment I've discussed, but our WINGS platform, which recently expanded with the launch of Boneless and our big box value promotions, helps lead to overall QSR share growth year over year. Our freshly hand-battered and breaded boneless wings are a great way to expand our wing platform to new guests and occasions.

Speaker Change: Turning now to Popeyes, which comprises about 10% of our adjusted operating income.

Josh Cobsa: We brought back another $5 price-pointed item this quarter, the $5 euro annual, and balanced it with premium menu innovation like Meltz, and now our new fiery menu. There's even more we can do to enhance the value we offer, and I believe great operations, digital and re-imaging are just as important to win in the long term. We're on track to complete nearly 400 remodels this year, and bring our system to between 85% to 90% modern image by 2028.

Speaker Change: popy' u s grew net restaurants three point eight percent in comparable sales zero point six percent resulting in system wide sales growth of four percent

Speaker Change: Top-line results reflect the environment I've discussed, but our Wings platform, which recently expanded with the launch of Boneless, and our big box value promotions, helps lead to overall QSR share growth year-over-year. Our freshly hand-battered and breaded Boneless Wings are a great way to expand our Wings platform to new guests and occasions.

Joshua Kobza: While we aren't yet seeing the uplift from WINGS and attracting new users, we are seeing strong traction from existing guests. Awareness, trial, and consideration take time to build, and by continuing to focus on WINGS with the right promotional and advertising strategy, we're confident there's a lot of runway for us to bring in new guests and take share in one of the fastest-growing chicken categories. Digital is also an important channel to communicate Popeye's value to guests and drive traffic. And we saw 32% growth in digital sales this quarter, reaching a digital sales mix of over 27%.

Speaker Change: while we aren't yet seeing the uplift from wings and attracted new users we are seeing strong traction from existing guests

Speaker Change: awareness trial and consideration take time to build and by continuing to focus on wins with the right promotional and advertising strategy we're confident there's a lot of runway for us to bring a new guests and take share in one of the fastest growing chicken categories

Josh Cobsa: We now have 150 Royal Reset remodels open for at least six months, and they're driving uplets in the mid-teens range, net of control. A number of these stores showcase our new Sizzle image, and Sam and I got to visit a few recently and Atlanta and in Miami with Tom and the team. We're very excited to get more Sizzles in our system as we remodel Carol's restaurants and execute our $300 million Royal Reset 2.0 investments.

Speaker Change: Digital is also an important channel to communicate Popeye's value to guests and drive traffic.

Speaker Change: And we saw 32% growth in digital sales this quarter, reaching a digital sales mix of over 27%.

Joshua Kobza: Jeff and his team have now converted around 50 kitchens under our easy-to-run model, and we shared initial learnings with franchisees at our convention in New Orleans in May. The simplified kitchens and automated ordering are driving improvements in order accuracy, driver wait times, and team member and guest satisfaction. Franchisees are eager to introduce it in their own restaurants, and we're excited to expand to more hub markets like Houston and Central Florida this year.

Speaker Change: Jeff and team have now converted around 50 kitchens under our easy-to-run model, and we shared initial learnings with franchisees at our convention in New Orleans in May. The simplified kitchens and automated ordering are driving improvements in order accuracy, driver wait times, and team member and guest satisfaction.

Josh Cobsa: It may take time to see the full impact of our Burger King investments flowed through, and I'm confident in the brand's path forward, especially given the focus of our multi-year plans, and the strong alignment our team has built with our franchisees. I think we'll find that the shorter-term pressures being felt by the QSR industry are masking some pretty incredible changes at Burger King that will deliver long-term rewards.

Speaker Change: franchise are eager toadopt in their own restaurants and we're excited to expand to more hub markets like houston and central florida this year we'll continue to incorporate feedback and provide necessary resources and training to optimize this investment before scaling across the entire system

Joshua Kobza: We'll continue to incorporate feedback and provide necessary resources and training to optimize this investment before scaling across the entire city. We also expect another solid development year at Popeyes and are focused on delivering high-quality openings with top operators. We're on track to have over 4,000 Popeyes restaurants in the US and Canada by 2028 as we drive average US franchisee profitability closer to our goal of $300,000. Finally, Firehouse Subs, which saw relatively flat comparable sales and increased system-wide sales by 3.3%.

Josh Cobsa: Turning now to Popeyes, which comprises about 10% of our adjusted operating income. Popeyes US grew net restaurants, 3.8% and comparable sales 0.6%, resulting in system-wide sales growth of 4%. Topline results reflect the environment I've discussed, but our Wings platform, which recently expanded with the launch of Boneless, and our big box value promotions, helps lead to overall QSR share growth year over year. Our freshly hand-battered and breaded Boneless Wings are a great way to expand our Wings platform to new guests and occasions.

Speaker Change: we also expect another solid development year ro pa and are foccus on delivering high-quality openings with top operators

Joshua Kobza: We're on track to have over 4,000 Popeye's restaurants in the U.S. and Canada by 2028 as we drive average U.S. franchisee profitability closer to our goal of $300,000. Finally, Firehouse Subs, which saw relatively flat comparable sales and increased system-wide sales by 3.3%.

Speaker Change: we're on track to have over four thousand pis restaurant in the us canada by two thousand andtwenty gh as we drive average u s franchise profitability closer towards our goal of three hundred thousand dollars

Speaker Change: Finally, Firehouse Subs, which saw relatively flat comparable sales and increased system-wide sales by 3.3%.

Joshua Kobza: Firehouse is becoming more convenient for guests by opening more restaurants and strengthening our digital leadership. Mike and his team have added 44 net new restaurants since the second quarter of 2023 and saw over 40% of sales come through digital channels, primarily driven by mobile order and pay and attractive digital-only deals. I'm excited to join the team and our franchisees in Austin later this month to celebrate Firehouse's 30th anniversary at our convention and update our franchisees on our long-term plan. With that, I'll pass it over to Sami to walk you through our financial results for the quarter. Sami? Thanks, Josh.

Speaker Change: Firehouse is becoming more convenient for guests by opening more restaurants and strengthening our digital leadership. Mike and team have added 44 net new restaurants since the second quarter of 2023 and saw over 40% of sales come through digital channels, primarily driven by mobile order and pay and attractive digital only deals.

Josh Cobsa: While we aren't yet seeing the uplift from Wings and attracting new users, we are seeing strong traction from existing guests. Awareness, trial, and consideration take time to build, and by continuing to focus on Wings with the right promotional and advertising strategy, we're confident there's a lot of runway for us to bring in new guests and take share in one of the fastest growing chicken categories. Digital is also an important channel to communicate Popeyes valued to guests in drive traffic, and we saw 32% growth in digital sales as Porter, reaching a digital sales mix of over 27%.

Speaker Change: I'm excited to join the team and our franchisees in Austin later this month to celebrate Firehouse's 30th anniversary at our convention and update franchisees on our long-term plans.

Ammy: with that i'll f over to ammy to wal you through our ancial results for the quarter ammy thanks josh and good morning everyone

Sami Siddiqui: Thanks, Josh. And good morning, everyone. We were pleased to close two significant and highly strategic transactions this quarter, our acquisition of Carroll's, which closed on May 16th, and our acquisition of Popeyes China, which closed at quarter end. I want to provide you with a quick update on how those two transactions will impact our segment reporting going forward. And since we plan to refranchise the vast majority of the Carroll's restaurants and to find a new partner for our Popeye's China business over time, we will be reporting results of the BK Carroll's and Popeye's China restaurants in a separate segment called Restaurant. For the second quarter, we grew global comparable sales 1.9%.

Sami Siddiqui: Thanks, Josh, and good morning, everyone. We were pleased to close two significant and highly strategic transactions this quarter. Our acquisition of Carroll's, which closed on May 16th, and our acquisition of Popeyes China, which closed at quarter end. I want to provide you with a quick update on how those two transactions will impact our segment reporting going forward. As I mentioned last quarter, we want to preserve the franchisor dynamics and P&Ls consistent with how our businesses will be run long term.

Josh Cobsa: Jeff and team have now converted around 50 kitchens under our easy-to-run model, and we shared initial learnings with franchisees at our convention in New Orleans and May. The simplified kitchens and automated ordering are driving improvements in order accuracy, driver wait times, and team member in guest satisfaction. Franchisees are eager to adopt in their own restaurants, and we're excited to expand to more hub markets like Houston and Central Florida this year. We'll continue to incorporate feedback and provide necessary resources and trainings to optimize this investment before scaling across the entire system.

Ammy: we were pleased to close to significant and highly strategic transactions this quarter our acquisition of carols which closed on may sixteenth and our acquisition of pop' china which closed at quarter-end

Sami Siddiqui: And since we plan to refranchise the vast majority of the Carroll's restaurants and to find a new partner for our Popeye's China business over time, we will be reporting results of the BK Carroll's and Popeye's China restaurants in a separate segment called Restaurant. Restaurant Holdings will pay intercompany royalties, rents, and advertising fees to the respective franchisor segments, the Burger King and international segments, respectively, which All the organic growth rates I'll be discussing today exclude results from the restaurant holding sector.

Speaker Change: I want to provide you with a quick update on how those two transactions impact our segment reporting going forward.

Ammy: as i mentioned last quarter we want to preserve the franchise or dynamics and peanuts consistent with how our businesses will be run long term

Ammy: And since we plan to re-franchise the vast majority of the Carroll's restaurants and to find a new partner for our Popeye's China business over time, we will be reporting results of the BK Carroll's and Popeye's China restaurants in a separate segment called Restaurant Holdings.

Josh Cobsa: We also expect another solid development year at Popeyes, and are focused on delivering high-quality openings with top operators. We're on track to have over 4,000 Popeyes restaurants in the US and Canada by 2028, as we drive average US franchisee profitability closer towards our goal of $300,000.

Ammy: Restaurant Holdings will pay intercompany royalties, rents, and advertising fees to the respective franchisor segments, the Burger King and International segments respectively, which will be eliminated upon consolidation on the face of the P&L.

Josh Cobsa: Finally, Firehouse subs, which saw relatively flat, comfortable sales and increased system wide sales by 3.3%. Firehouse is becoming more convenient for guests by opening more restaurants and strengthening our digital leadership. My team have added 44 net new restaurants since the second quarter of 2023 and saw over 40% of sales come through digital channels, primarily driven by mobile order and pay and attractive digital only deals.

Ammy: All organic growth rates I'll be discussing today exclude results from the restaurant holding segment. For a full primer on how these eliminations map to our segment P&Ls, I'd encourage you to visit our Investor Relations website or feel free to reach out to Kendall if you have any questions.

Sami Siddiqui: For a full primer on how these eliminations map to our segment P&Ls, I'd encourage you to visit our investor relations website or feel free to reach out to Kendall if you have any questions. Now turning to our results. For the second quarter, we grew global comparable sales 1.9%. We grew global system-wide sales 5%.

Josh Cobsa: I'm excited to join the team and our franchisees in Austin later this month to celebrate Firehouse's 30th anniversary at our convention and update franchisees on our long term plans.

Ammy: Now turning to our results.

Ammy: For the second quarter, we grew global comparable sales 1.9%. We grew global system-wide sales 5%.

Sami Siddiqui: We grew Organic Adjusted Operating Income 9.3%, and we grew Organic Adjusted Earnings Per Share 3.1%. Second, we recorded just over $6 million of net bad debt recoveries across the entire business, compared to $3 million of net bad debt expenses in Q2 of 2020. Our adjusted EPS was $0.86 for the quarter, compared to $0.85 last year, representing an organic increase of 3.1% year over year, excluding an FX headwind of $0.03 per share and a $0.01 benefit from restaurant holdings.

Sami Siddiqui: We grew Organic Adjusted Operating Income 9.3%, and we grew Organic Adjusted Earnings Per Share 3.1%. AOI growth outpaced system-wide sales growth this quarter for a few reasons. First, our TIM supply chain business benefited from lower average cost of inventory during the quarter, resulting in organic gross profit dollar growth of roughly $20 million year over year. However, over $4 million of that increase was related to net bad debt recovery in the current year period.

Sami Siddiqui: With that, I'll pass over to Sammy to walk you through our financial results for the quarter. Sammy? Thanks, Josh.

Ammy: We grew Organic Adjusted Operating Income 9.3% and we grew Organic Adjusted Earnings Per Share 3.1%.

Sami Siddiqui: And good morning, everyone. We're pleased to close to significant and highly strategic transactions this quarter. Our acquisition of carols, which closed on May 16th, and our acquisition of Popeyes China, which closed at quarter end. I want to provide you with a quick update on how those two transactions impact our segment reporting going forward. As I mentioned last quarter, we want to preserve the franchise or dynamics and peanuts consistent with how our businesses will be run long term.

Ammy: AOI growth outpaced system-wide sales growth this quarter for a few reasons.

Ammy: First, our TIMS supply chain business benefited from lower average cost of inventory during the quarter, resulting in organic gross profit dollar growth of roughly $20 million year over year.

Ammy: Over $4 million of that increase was related to net bad debt recovery in the current year period.

Sami Siddiqui: Excluding these recoveries, our supply chain margin would have been just north of 20%, and we continue to expect our full year supply chain margin in the 19% range, as we stated previously. Second, we recorded just over $6 million of net bad debt recoveries across the entire business, compared to $3 million of net bad debt expenses in Q2 of 2020. Our Q224 net recovery included that Tim Horton supply chain recovery I just mentioned and also included $2 million of net recoveries at BurgerKing.

Sami Siddiqui: Network. And since we plan to refranchise the vast majority of the Carol's restaurants and to find a new partner for our Popeye's China business over time, we will be reporting results of the B.K. Carol's and Popeye's China restaurants in a separate segment called Restaurant Holdings. Restaurant Holdings will pay inter-company royalties, rents, and advertising fees to the respective franchisee or segments, the Burger King and international segments respectively, which will be eliminated upon consolidation on the face of the PNL.

Ammy: Excluding these recoveries our supply chain margin would have been just north of 20% and we continue to expect our full year supply chain margin in the 19% range as we stated previously.

Ammy: Second, we recorded just over $6 million of net bad debt recoveries across the entire business compared to $3 million of net bad debt expenses in Q2 of 2023.

Ammy: Our Q224 net recoveries included that Tim Horton supply chain recovery I just mentioned, and also includes $2 million of net recoveries at Burger King U.S.

Sami Siddiqui: All organic growth rates I'll be discussing today exclude results from the restaurant holding segment. For a full primer on how these eliminations map to our segment PNLs, I'd encourage you to visit our investor relations website or feel free to reach out to Kendall if you have any questions.

Sami Siddiqui: And third and finally, as I discussed on our previous call, we've been working hard to drive operating leverage in our P&L by closely evaluating our costs. To that end, Segment G&A, excluding restaurant holdings, of $158 million was up only 1% year-over-year in cash. These three factors taken together, supply chain, bad debt recovery, and cost discipline, helped drive organic AOI growth of 9.3% for Q2. And they're shifting to EPS.

Ammy: And third and finally, as I discussed on our previous call, we've been working hard to drive operating leverage in our P&L by closely evaluating our cost structure.

Speaker Change: to that end segment ga excluding restaurant buildings of one onehundred and fifty eight million dollars was up only one percent year-over-year in q two

Sami Siddiqui: Now turning to our results. For the second quarter, we grew global comparable sales 1.9 percent. We grew global system-wide sales 5 percent. We grew organic adjusted operating income 9.3 percent, and we grew organic adjusted earnings per share 3.1 percent. AOI growth outpaced system-wide sales growth this quarter for a few reasons. First, our Kim supply chain business benefited from lower average cost of inventory during the quarter, resulting in organic growth profit dollar growth of roughly $20 million year-over-year.

Ammy: these three factors taken together supply chain that debt recoveries and cost discipline helped drive organic ay growth of nine point three percent for q two

Sami Siddiqui: Our adjusted EPS was 86 cents for the quarter, compared to 85 cents last year, representing an organic increase of 3.1% year-over-year, excluding an FX headwind of 3 cents per share and a one-cent benefit from restaurant holdings. Our strong growth in organic AOI was offset by an increase in adjusted income tax expense due to a higher effective tax rate, which had a 6 cents per share negative impact on earnings, as well as an increase in our adjusted net interest expense of approximately $18 million a year.

Speaker Change: they 're shifting to eps

Speaker Change: Our adjusted EPS was $0.86 for the quarter, compared to $0.85 last year, representing an organic increase of 3.1% year-over-year, excluding an FX headwind of $0.03 per share and a $0.01 benefit from restaurant holdings.

Sami Siddiqui: Over $4 million of that increase was related to net bad debt recovery in the current year period. Excluding these recoveries, our supply chain margin would have been just north of 20 percent, and we continue to expect our full year supply chain margin in the 19 percent range as we stated previously. Second, we recorded just over $6 million of net bad debt recoveries across the entire business compared to $3 million of net bad debt expenses in Q2 of 23.

Ammy: our strong growth in organic i was offset by an increase in adjusted income tax expense due to a higher effective tax rate which had a six cent per share negative impact on earnings

Ammy: as well as an increase in our adjusted net interest expense of approximately eighteen million dollars year-over-year

Sami Siddiqui: Our adjusted effective tax rate in this quarter was approximately 20%, bringing our year-to-date rate to approximately 19%, and the increase in adjusted net interest expense was mainly driven by a higher debt balance following the Arc Carols transaction. In terms of our capital structure, in June, we saw a good opportunity to reprice our $5.9 billion term loan and improve the spread on our interest rate by 50 basis points, from SOFR plus 225 to SOFR plus 175, which is one of the tightest spreads for a credit of this size and this rate. In conjunction, we paid down the term loan B from $5.9 billion to $4.75 billion, and we issued $1.2 billion of six and one eighth senior notes due in 2029.

Ammy: our adjusted effective tax rate in this quarter was approximately twenty percent bring our year-to-date rate to approximately nineteen percent and the increase in adjusted net interest expense was mainly driven by a higher debt balance following arcar's transaction

Sami Siddiqui: Our Q2 24 net recoveries included that Tim Horton supply chain recovery I just mentioned, and also includes $2 million of net recoveries at Burger King U.S. And third and finally, as I discussed on our previous call, we've been working hard to drive operating leverage in our P&L by closely evaluating our cost structure. To that end, segment G&A excluding restaurant holdings of $158 million was up only 1 percent year-over-year in Q2. These three factors taken together supply chain bad debt recoveries and cost discipline helped drive organic AOI growth of 9.3 percent for Q2.

Sami Siddiqui: In terms of our capital structure, in June, we saw a good opportunity to reprice our $5.9 billion term loan and improve the spread on our interest rate by 50 basis points, from SOFR plus 225 to SOFR plus 175, which is one of the tightest spreads for a credit of this size and this rate. We have $48 million of our fuel-to-flame marketing spend left, and we expect to contribute around $10 million in Q3, with the balance of that $48 million to be spent in Q4.

Ammy: in terms of our capital structure in june we saw a good opportunity to reprice our five point nine billion dollars term loan and improve the spread on our interest rate by fifty basis point

Ammy: Products, from SOFR plus 225 to SOFR plus 175, which is one of the tightest spreads for a credit of this size and this rating.

Sami Siddiqui: These successful transactions are expected to drive approximately $30 million in annualized net interest savings and are leveraged in new. We ended Q2 with available liquidity of approximately $2.2 billion, including nearly $950 million of cash on the balance sheet, and our net leverage ratio was five times. We continue to anticipate reaching mid four times net leverage by the end of this year pro forma for a full year of Carroll's. Turning now to free cash flow and our recent investments.

Ammy: In conjunction, we paid down the Term Loan B from $5.9 billion to $4.75 billion, and we issued $1.2 billion of 6-1-8 senior notes due in 2029.

Ammy: these successful transactions are expected to drive approximately thirty million dollars in annualized net interest savings and our leverage neutral

Sami Siddiqui: Now shifting to EPS, our adjusted EPS was 86 cents for the quarter compared to 85 cents last year representing an organic increase of 3.1 percent year-over-year excluding an FX headwind of 3 cents per share and a one-set benefit from restaurant holdings. Our strong growth in organic AOI was offset by an increase in adjusted income tax expense due to a higher effective tax rate which had a six cent per share negative impact on earnings as well as an increase in our adjusted net interest expense of approximately $18 million year-over-year.

Ammy: We ended Q2 with available liquidity of approximately $2.2 billion, including nearly $950 million of cash on the balance sheet, and our net leverage ratio was five times.

Ammy: We continue to anticipate reaching mid four times net leverage by the end of this year pro forma for a full year of Carroll's results.

Ammy: Turning now to free cash flow and our recent investments.

Sami Siddiqui: During the quarter, we generated over $290 million in free cash. As a reminder, our free cash flow metric does not reflect the benefit of our FX and interest rate hedges, which added approximately $46 million of positive cash.

Ammy: During the quarter, we generated over $290 million in free cash flow.

Ammy: As a reminder, our free cash flow metric does not reflect the benefit of our FX and interest rate hedges, which added approximately $46 million of positive cash flow.

Sami Siddiqui: Our adjusted effective tax rate in this quarter was approximately 20 percent bringing our year-to-date rate to approximately 19 percent. And the increase in adjusted net interest expense was mainly driven by a higher debt balance following the Arcturals transaction.

Sami Siddiqui: We spent $15 million on Reclaim the Flame investments at Burger King U.S., of which $5 million was related to our Fuel the Flame marketing investment. We have $48 million of our fuel-to-flame marketing spend left, and we expect to contribute around $10 million in Q3, with the balance of that $48 million to be spent in Q4. As a reminder, in Q3 of 23, we did not contribute to the Fuel to Flame marketing investment.

Ammy: we spent to fifteen million dollars on reclaim the flame investments at burger king us of which five million dollars was related to our fuel to flame marketing investment

Sami Siddiqui: Action. In terms of our capital structure, in June, we saw a good opportunity to reprise our $5.9 billion term loan and improve the spread on our interest rate by 50 basis points, from SOFR plus 225 to SOFR plus 175, which is one of the tightest spreads for a credit of this size and this rating. In conjunction, we paid down the term loan fee from $5.9 billion to $4.75 billion and we issued $1.2 billion of $6.18 senior notes due in 2029.

Ammy: we have forty-eight million dollars of our fuel to flame marketing investment let's marketing spend left and we expect to contribute around ten million dollars in q three with the balance of that forty-eight million dollars to be spent in q four

Ammy: As a reminder, in Q3 of 23, we did not contribute to the Fuel to Flame marketing investment, and in Q4 of 23, we contributed $37 million.

Sami Siddiqui: And in Q4 of 23, we contributed $37 million. We returned $261 million of capital to shareholders this quarter through our dividend, which we declared for Q3 at $0.58 per common share and unit, with a 2024 target of $2.32 per share. As Josh touched on this quarter, we also acquired Popeyes China for an enterprise value of $15 million.

Sami Siddiqui: We returned $261 million of capital to shareholders this quarter through our dividend, which we declared for Q3 at $0.58 per common share and unit with a 2024 target of $2.32 per share. As Josh touched on this quarter, we also acquired Popeyes China for an enterprise value of $15 million. As Josh discussed earlier, considering our year-to-date results and current industry trends, we now expect our second half results to be similar to what we saw in Q2, implying system-wide sales growth in the 5.5% to 6% range for the full year.

Ammy: We returned $261 million of capital to shareholders this quarter through our dividend, which we declared for Q3 at 58 cents per common share and unit, with a 2024 target of $2.32 per share.

Sami Siddiqui: These successful transactions are expected to drive approximately $30 million in annualized net interest savings and our leverage neutral. We ended Q2 with the available liquidity of approximately $2.2 billion including nearly $950 million of cash on the balance sheet and our net leverage ratio was five times. We continued to anticipate reaching mid four times net leverage by the end of this year pro forma for a full year of Carol's results.

Ammy: As Josh touched on this quarter, we also acquired Popeyes China for an enterprise value of $15 million.

Sami Siddiqui: At Tim's China, we agreed to invest up to $30 million via three-year convertible notes, $20 million of which were issued at closing, with the balance to be issued over the coming months, subject to the business meeting certain operational and financial. I'll now provide you with an update on our expectations for 2024, which excludes results from restaurant holdings. As Josh discussed earlier, considering our year-to-date results and current industry trends, we now expect our second half results to be similar to what we saw in Q2, implying system-wide sales growth in the 5.5% to 6% range for the full year.

Speaker Change: At Tim's China, we agreed to invest up to $30 million via three-year convertible notes, $20 million of which were issued at closing, with the balance to be issued over the coming months, subject to the business meeting's certain operational and financial conditions.

Sami Siddiqui: Turning now to free cash flow in our recent investments. During the quarter, we generated over $290 million in free cash flow. As a reminder, our free cash flow metric does not reflect the benefit of our effects and interest rate hedges, which added approximately $46 million of positive cash flow. We spent $15 million on reclaim the flame investments at Burger King U.S., of which $5 million was related to our fuel-to-flame marketing investment.

Speaker Change: I'll now provide you with an update on our expectations for 2024, which excludes results from restaurant holdings.

Speaker Change: as josh discussed earlier considering our year-to-date results and current industry trends

Speaker Change: We now expect our second half results to be similar to what we saw in Q2, implying system-wide sales growth in the five and a half to six percent range for the full year.

Sami Siddiqui: We have $48 million of our fuel-to-flame marketing investment, marketing spend less and we expect to contribute around $10 million in Q3 with the balance of that $48 million to be spent in Q4. As a reminder, in Q3 of 23, we did not contribute to the fuel-to-flame marketing investment, and in Q4 of 23, we contributed $37 million. We returned $261 million of capital to shareholders this quarter through our dividend, which we declared for Q3 at $0.58 per common share and unit, with a 2024 target of $2.32 per share.

Sami Siddiqui: Embedded within that are slightly tempered expectations for net restaurant growth of roughly 4% for the full year, given some of the impacts that we're seeing from macro and geopolitical challenges in a few markets, including China. Even so, we're very confident we will deliver 8% plus organic adjusted operating income growth this year, consistent with our long-term growth outcome. My team and I have been working closely with our business leaders to identify cost opportunities while continuing to invest in all the right areas to build sustainable sales and deliver the long-term growth targets we outlined for you in February.

Josh: embedded within that our slightly tempered expectations for net restaurant growth of roughly four percent for the full year given some of the impacts that we're seeing from macro and geopolitical challenges in a few markets including china

Sami Siddiqui: Even so, we're very confident we will deliver 8% plus organic adjusted operating income growth this year, consistent with our long-term growth. My team and I have been working closely with our business leaders to identify cost opportunities while continuing to invest in all the right areas to build sustainable sales and deliver the long-term growth targets we outlined for you in February. And finally, we now anticipate adjusted net interest expense to be between $565 million and $575 million, inclusive of the $750 million of debt raised as part of our Carol's acquisition and the benefits of our June financing transaction. And with that, I'll now hand it over to Pat.

Josh: Even so, we're very confident we will deliver 8% plus organic adjusted operating income growth this year, consistent with our long-term growth algorithm.

Josh: My team and I have been working closely with our business leaders to identify cost opportunities while continuing to invest in all the right areas to build sustainable sales and deliver the long-term growth targets we outlined for you in February.

Sami Siddiqui: As a result, we now expect 2024 segment G&A to be between $640 million and $660 million, including equity-based compensation between $170 million and $180 million, resulting in relatively flat year over year growth in G&A. We continue to expect consolidated 2024 CapEx tenant inducements and incentives to be roughly $300 million, though the timing of cash outlays may spill into 2025. And finally, we now anticipate adjusted net interest expense to be between $565 million and $575 million, inclusive of the $750 million of debt raised as part of our Carol's acquisition and the benefits of our June financing transaction.

Sami Siddiqui: As Josh touched on this quarter, we also acquired Popeye's China for an enterprise value of $15 million. At 10th China, we agreed to invest up to $30 million via three-year convertible notes, $20 million of which were issued at closing with the balance to be issued over the coming months, subject to the business meaning certain operational and financial conditions.

Josh: As a result, we now expect 2024 segment GNA to be between $640 million and $660 million.

Josh: Including equity-based compensation between $170 million and $180 million, resulting in relatively flat year-over-year growth in G&A.

Josh: we continue to expect consolidated to two thousand and twenty-four capex ten an inducements and incentivesto be roughly three hundred million dollars though the timing of cash outlays may spill into two thousand and twenty five

Sami Siddiqui: I'll now provide you with an update on our expectations for 2024, which excludes results from restaurant holdings. As Josh discussed earlier, considering our year-to-date results and current industry trends, we now expect our second half results to be similar to what we saw in Q2, implying system-wide sales growth in the five-and-a-half to six percent range for the full year. Embedded within that are slightly tempered expectations for net restaurant growth of roughly 4 percent for the full year, given some of the impacts that we're seeing from macro and geopolitical challenges in a few markets, including China.

Josh: And finally, we now anticipate adjusted net interest expense to be between $565 million and $575 million, inclusive of the $750 million of debt raised as part of our Carrolls acquisition and the benefits of our June financing transactions.

Sami Siddiqui: While 2024 will be a softer system-wide sales growth year than our long-term outlook, our business is incredibly resilient, and our balance of strategic investments and history of cost discipline allows us to successfully navigate short-term consumer pressures and not overreact to one or two quarters of softer sales. We have four amazing brands, and I'm pleased with many of the initiatives underway that will help us drive bottom-line growth in 2024 while positioning the business for long-term success. And with that, I'll now hand it over to Pat.

Josh: while twothousand andtwenty four will be a softer system white sales growth here in our long-term outlook

Josh: Our business is incredibly resilient.

Josh: Our balance of strategic investments and history of cost discipline allows us to successfully navigate the short-term consumer pressures and not overreact to one or two quarters of softer sales.

Sami Siddiqui: Agenda. Even so, we're very confident we will deliver 8 percent plus organic adjusted operating income growth this year, consistent with our long-term growth algorithm. My team and I have been working closely with our business leaders to identify cost opportunities while continuing to invest in all the right areas to build sustainable sales and deliver the long-term growth targets we outlined for you in February. As a result, we now expect 2024 segment G&A to be between $640 million and $660 million, including equity-based compensation between $170 million and $180 million, resulting in relatively flat year-over-year growth in G&A.

Josh: We have four amazing brands, and I'm pleased with many of the initiatives underway that will help us drive bottom-line growth in 2024 while positioning the business for long-term success.

Patrick Doyle: Thank you, Sami, and good morning, everyone. We clearly saw softer sales than expected across our businesses in Q2, and it's not yet clear when we'll see the category strengthen. But in watching this quarter play out, I've learned a lot about this team.

Josh: And with that, I'll now hand it over to Patrick.

Patrick Stewart: Thank you, Sami, and good morning, everyone. We clearly saw softer sales than expected across our businesses in Q2, and it's not yet clear when we'll see the category strengthen. But in watching this quarter play out, I've learned a lot about this team.

Patrick Doyle: While Absolute Sales weren't what we wanted, we did pretty well on a relative basis. We did that by creating value for our customers and prioritizing our franchisees' profits. That's impressive.

Patrick Stewart: While Absolute Sales

Patrick Stewart: Worked what we wanted, we did pretty well on a relative basis.

Josh: We did that by creating value for our customers and prioritizing our franchisees' profits.

Sami Siddiqui: We continue to expect consolidated 2024 CAPEX, tenant inducements, and incentives to be roughly $300 million, though the timing of cash outweighs may spill into 2025. And finally, we now anticipate adjusted net interest expense to be between $565 million and $575 million, inclusive of the $750 million of debt raised as part of our Carol's acquisition and the benefits of our June financing transactions.

Patrick Doyle: That's impressive. The team quickly and efficiently went after costs in our own P&L, and they did it in a manner to protect the investments that are going to grow the business in the medium and long term. It's allowed us to move quickly when needed as conditions have shifted. I'm going to do it now, but hopefully, you'll understand it isn't in some proformal way.

Patrick Doyle: The team quickly and efficiently went after costs in our own P&L, and they did it in a manner to protect the investments that are going to grow the business in the medium and long term. We're sitting here today with system sales growth lower than we'd expected for our growth algorithm. But, as you heard, we still expect to deliver 8% plus adjusted operating income growth for the year. That's also impressive.

Speaker Change: that 's impressive

Josh: The team quickly and efficiently went after costs in our own P&L and they did it in a manner to protect the investments that are going to grow the business in the medium and long term.

Josh: We're sitting here today with system sales growth lower than we'd expected for our growth algorithm, but as you heard, we still expect to deliver 8% plus adjusted operating income growth for the year. That's also impressive.

Patrick Doyle: And maybe most importantly, we've seen the value of building a great working relationship with our franchisees by consistently acting in their best interests. It's allowed us to move quickly when needed as conditions have shifted. I hear franchisors thank their franchisees regularly on these calls. I'm going to do it now, but hopefully, you'll understand it isn't in some proformal way; our alignment with our franchisees is becoming a real strength of our business. We debate things thoroughly, which is how you get to the best answer.

Sami Siddiqui: Well, 2024 will be a softer system-wide sales growth year than our long-term outlook. Our business is incredibly resilient and our balance of strategic investments and history of cost discipline allows us to successfully navigate the short-term consumer pressures and not over-react to one or two quarters of softer sales. We have four amazing brands, and I'm pleased with many of the initiatives underway that will help us write bottom-line growth in 2024 while positioning the business for long-term success.

Josh: And maybe most importantly, we've seen the value of building a great working relationship with our franchisees by consistently acting in their best interest.

Josh: It's allowed us to move quickly when needed as conditions have shifted.

Speaker Change: I hear franchisors thank their franchisees regularly on these calls. I'm going to do it now, but hopefully you're going to understand it isn't in some pro-formal way.

Speaker Change: Our alignment with our franchisees is becoming a real strength of our businesses.

Patrick Doyle: And with that, I'll now hand it over to Patrick. Thank you, Sammy, and good morning, everyone. We clearly saw softer sales and expected across our businesses in Q2, and it's not yet clear when we'll see the category strengthen.

Patrick Doyle: We debate things thoroughly, which is how you get to the best answer. But clearly, we have opportunities to position ourselves to perform even better in all environments and take share no matter the category condition. We need to continue to improve operations across the board. This is something we can never take for granted, even at a brand like Tim's, which is already executing at a stunning level. We need to bring Burger King into the modern image, and we need to make ourselves more convenient at Popeyes and Firehouse and for all our brands around the world. The great thing is that each of our teams has strong long-term plans in place to do just this, and I'm confident in their ability to execute.

Josh: We debate things thoroughly, which is how you get to the best answer.

Patrick Doyle: But the trust we're building with our franchisees allows us to move quickly together when needed, and that creates a competitive advantage. So, thank you to our franchisees and restaurant owners. Your growing trust in us inspires us to do great work to profitably grow your business. We exist to serve our guests, and we know that their purchase habits are affected by a lot of macro factors, and it's our job to adapt. But clearly, we have opportunities to position ourselves to perform even better in all environments and take share no matter the category condition.

Josh: But the trust we're building with our franchisees allows us to move quickly together when needed, and that creates competitive advantage.

Patrick Doyle: But in watching this quarter play out, I've learned a lot about this team. While absolute sales weren't what we wanted, we did pretty well on a relative basis. We did that by creating value for our customers and prioritizing our franchisees' profits. That's impressive. The team quickly and efficiently went after costs in our own P&L, and they did it in a manner to protect the investments that are going to grow the business in the medium and long term.

Josh: So, thank you to our franchisees and restaurant owners. Your growing trust in us inspires us to do great work to profitably grow your businesses.

Josh: We exist to serve our guests, and we know that their purchase habits are affected by a lot of macro factors, and it's our job to adapt. But clearly, we have opportunities to position ourselves to perform even better in all environments and take share no matter the category conditions.

Patrick Doyle: We need to continue to provide guests with the best quality food and beverages in each of our categories and to innovate to meet our guests' needs. We also need to continue to improve operations across the board. This is something we can never take for granted, even at a brand like Tim's, which is already executing at a stunning level. We need to bring Burger King into the modern image, and we need to make ourselves more convenient at Popeyes and Firehouse and across all our brands around the world.

Patrick Doyle: We're sitting here today with system sales growth lower than we'd expected for our growth algorithm. But as you heard, we still expect to deliver 8% plus adjusted operating income growth for the year. That's also impressive. And maybe most importantly, we've seen the value of building a great working relationship with our franchisees by consistently acting in their best interests. It's allowed us to move quickly when needed as conditions have shifted. I hear franchiseors thank their franchisees regularly on these calls.

Josh: we need to continue to provide guests the best quality food and beverages in each of our categories and to innovate to meet our guest needs

Josh: we need to continue to improve operations across the board this is something we can never take for granted even at a brand like tims which is already executing at a stunning level

Speaker Change: we need to bring berger kingdom modern image and we need to make ourselves more convenient at popides and firehouse and for all our brands around the world

Patrick Doyle: The great thing is that each of our teams has strong long-term plans in place to do just that, and I'm confident in their ability to execute. I've been around this business long enough to know that you're going to have both. But you don't know the quality of the team and the franchisees until you see them operate through a bump. Having now seen them operate in a tougher environment, I'm impressed. And with that, I'll turn it over to the operator for questions.

Josh: the great thing is that each of our teams has strong long-term plans in place to do just this and i'm confident in their ability to execute

Patrick Doyle: I'm going to do it now, but hopefully you're going to understand it isn't in some pro form away. Our alignment with our franchisees is becoming a real strength of our business. Businesses. We debate things thoroughly, which is how you get to the best answer. But the trust we're building with our franchisees allows us to move quickly together when needed. And that creates competitive advantage.

Speaker Change: I've been around this business long enough to know that you're going to have bumps.

Josh: But you don't know the quality of the team and the franchisees until you see them operate through a bump. Having now seen them operate in a tougher environment, I'm impressed.

Speaker Change: And with that, I'll turn it over to the operator for questions.

Patrick Doyle: So thank you to our franchisees and restaurant owners. You're growing trust in us inspires us to do great work to possibly grow your businesses. We exist to serve our guests and we know that their purchase habits are affected by a lot of macro factors, and it's our job to adapt. But clearly, we have opportunities to position ourselves to perform even better in all environments and take share no matter the category conditions.

Operator: Ladies and gentlemen, if you would like to ask a question, please press star followed by 1 on the telephone keypad now. If you change your mind, please press star followed by 2 to withdraw the question. Please limit to one question at a time. And please ensure that your phone is unmuted locally. Our first question comes from Brian Bittner from Oppenheimer. Brian, your line is now open.

Speaker Change: Thank you. Ladies and gentlemen, if you would like to ask a question, please press star followed by 1 on the telephone keypad now.

Speaker Change: did you changchange your mind prepressed our follow about two to withjor questions

Speaker Change: Please limit to one question at a time.

Speaker Change: And please ensure that your phone is unmuted locally. We have our first question comes from Brian Bittner from Oppenheimer.

Speaker Change: Brian , your line is now open.

Brian Bittner: Good morning. Thank you.

Patrick Doyle: We need to continue to provide guests the best quality food and beverages in each of our categories and to innovate to meet our guest needs. We need to continue to improve operations across the board. This is something we can never take for granted, even at a brand like Tim's, which is already executing at a stunning level. We need to bring burger king to modern image and we need to make ourselves more convenient at Popeyes and Firehouse and for all our brands around the world. The great thing is that each of our teams has strong long-term plans in place to do justice. And I'm confident in their ability to execute.

Brian Bittner: Good morning. Thank you. I just have a clarification for Sami and then a follow-up question for Josh and Patrick. Sami, you said on the...

Speaker Change: Outlook that you expect to be...

Speaker Change: This year to be an algorithm year for operating profits despite system sales being a little light. Is this...

Speaker Change: Being partially driven by the inclusion of the incremental profits from the restaurant holding segment, or are you expecting to achieve algorithmic profit growth regardless of those acquired stores? And for Joshua, Patrick, just as it relates to unit growth,

Joshua Patrick: you anticipate to drive unit growth of roughly four percent across the enterprise in two thousand and twenty four can you

Patrick Doyle: I've been around this business long enough to know that you're going to have bolts. But you don't know the quality of the team and the franchisees until you see them operate through a bump. Having now seen them operate in a tougher environment, I'm impressed.

Joshua Patrick: Update us on how...

Joshua, Patrick: You are anticipating unit growth to evolve after 24 into 25.

Speaker Change: And if you do anticipate any acceleration, can you remind us of the building blocks that drive this? Thanks, guys.

Operator: And with that, I'll turn it over to the operator for questions. Thank you.

Brian Bittner: I just have a clarification question for Sami and then a follow-up question for Josh and Patrick. Just Sami, you said on the outlook that you expect this year to be an algorithm year for operating profits, despite system sales being a little light. Is this being partially driven by the inclusion of the incremental profits from the restaurant holding segment? Or are you expecting to achieve algorithmic profit growth regardless? Of those acquired stores and for Josh or Patrick, just as it relates to unit growth.

Speaker Change: All right, Brian . Morning. Thanks for the question. So just to clarify,

Operator: Ladies and gentlemen, if you would like to ask a question, please press star followed by one on telephone keypad now. If you change your mind, please press star followed by two to withdraw the questions. Please limit to one question at a time. And please ensure that your phone is unmuted locally.

Speaker Change: when I was speaking to the algorithm and the forward-looking guidance.

Speaker Change: We were very clear that it does not include restaurant holdings, so it is the business kind of pre-Carroll's transaction. And just to reiterate, for the full year we're expecting 8% plus organic adjusted operating income growth, which excludes Carroll's.

Brian Bickner: With our first question comes from Brian Bickner from Open Himer. Brian, your life is not open.

Brian Bittner: You anticipate driving unit growth of roughly 4% across the enterprise in 2024. Can you update us on how you are anticipating unit growth to evolve after 24 into 25? And if you do anticipate any acceleration, can you remind us of the building blocks that drive this? Thanks, guys.

Brian Bittner: Great. And Brian , I'll take the second one on unit growth. So there's a number of things that we're working on to drive improvement in unit growth over time, and I'll talk through each of those.

Sami Siddiqui: Good morning. Thank you. I just have a clarification for Sammy and then a follow-up question for Josh and Patrick. Just Sammy, you said on the outlook that you expect to be this year to be an algorithm year for operating profits despite system sales being a little light. Is this being partially driven by the inclusion of the incremental profits from the restaurant holding segment or are you expecting to achieve algorithmic profit growth regardless of those acquired stores.

Brian Bittner: first of all we have seen improvement in the trajectory of our burking u us business

Speaker Change: and we hope to seeeven further improvement in the unittrjectory of that business as we go into two thousandand twenty five we're also making progress at firehouse and mentioned a bunch of times that you mike end doing some great work building up a development pipeline in the u s and and in canada as well improve the pase of growth there so i' hope that will see some good improvement here in two thousand and twenty four and build upon that as we go into two thousand and twenty five

Sami Siddiqui: All right, Brian, morning. Thanks for the question. So just to clarify, when I was speaking to the algorithm and the forward-looking guidance, we were very clear that it does not include restaurant holding. So it is the business kind of pre-Carol's transaction. And just to reiterate, for the full year, we're expecting 8% plus organic adjusted operating income growth, which excludes Carol.

Sami Siddiqui: And for Josh or Patrick, just as it relates to unit growth, you anticipate to drive unit growth of roughly 4% across the enterprise in 2024. Can you update us on how you are anticipating unit growth to evolve after 24 into 25? And if you do anticipate any acceleration, can you remind us of the building blocks that drive this? Thanks guys.

Speaker Change: i also think we can see some improvement at importance in canada and the u s

Joshua Kobza: Great. And Brian, I'll take the second one on unit growth. So there are a number of things that we're working on to drive improvement in unit growth over time, and I'll talk through each of those.

Speaker Change: We've talked about the opportunities in both of those geographies, but we're looking at opportunities to grow the store base in Canada, as we've referenced a little bit in the past. The population has grown up here, and that creates opportunities. And there are still some provinces where we're relatively underpenetrated.

Josh Cobsa: All right, Brian, morning. Thanks for the question. So just to clarify, when I was speaking to the algorithm and the forward looking guidance, we were very clear that it does not include restaurant holding. So it is the business kind of pre the carols transaction and just to reiterate for the full year we're expecting 8% plus organic adjusted operating income growth, which excludes care.

Speaker Change: So we're looking at some opportunities in Canada, and we're also making some good progress in the U.S., so Katerina and her team.

Katerina: Our building development pipelines both in some of our existing markets in the northern parts of the U.S.

Katerina: But we're also opening more restaurants in the southern part of the U.S.

Katerina: You've seen us in Texas and Georgia, and we have plans to open up in a number of additional geographies later in this year and building upon that into 2025.

Josh Cobsa: Grant and Brian, I'll take the second one on unit growth. So there's a number of things that we're working on to drive improvement unit growth over time, and I'll talk to each of those. First of all, we have seen improvement in the trajectory of our Burger King US business, and we hope to see even further improvement in the unit trajectory of that business as we go into 2025. We're also making progress at Firehouse.

Katerina: On top of that, there's a lot we're working on in our international markets. I referenced a few of the really exciting developments.

Katerina: that we've seen, especially at Popeyes, I would say, and we've got some big markets that are starting to get to relevant scale, places that I mentioned like Spain, the UK, India, those are starting to ramp up their development pace, but we're opening some new markets as well. And I would say the results of those new markets have been really encouraging. So all that, all that are kind of projects that we're working on for 2025.

Josh Cobsa: I mentioned a bunch of times that Mike's been doing some great work building up a development pipeline in the US and in Canada as well to improve the pace of growth there. So I am hopeful that we'll see some good improvement here in 2024 and build upon that as we go into 2025. I also think we can see some improvement at Tim Hortons in Canada and the US. We've talked about the opportunities in both of those geographies, but we're looking at opportunities to grow the store base in Canada as we've referenced a little bit in the past.

Katerina: On top of that, we're trying to make more progress in China. You saw us take a few important steps there in this quarter, where we're setting ourselves up for, I think, better results in the future, especially for Popeyes and Tim Hortons as we get into 2025, though we obviously have work to do on our Big A business there still. So, I don't think we have a solution to everything there, but I think we're making some good progress across a lot of our international markets.

Josh Cobsa: The population's grown up here and that creates opportunities and there's still some provinces where we're relatively under penetrated. So we're looking at some opportunities in Canada, and we're also making some good progress in the US. So Catherine and her team are building development pipelines both in some of our existing markets in the northern parts of the US, but we're also opening more restaurants in the southern part of the US. So you've seen us in Texas and Georgia, and we have plans to open up in a number of additional geographies later in this year and building upon that into 2025.

Katerina: So those are some of the building blocks we're working on. A lot of stuff going on, and I think a lot of ways to accelerate growth from where we're at today.

Katerina: Thanks. Thanks for the clarification, Sami, and thanks for the answer, Josh. Appreciate it.

Speaker Change: Thank you. Our next question comes from David Palmer from Apricot SIS. David, your line is now open.

David Palmer: Good morning.

David Palmer: want to just explore what you're thinking about

Josh Cobsa: On top of that, there's a lot we're working on in our international markets. I referenced a few of the really exciting developments that we've seen, especially at Popeyes, I would say, and we've got some big markets that are starting to get to relevant scale places that I mentioned like Spain, the UK, India, those are starting to ramp up their development pace, but we're opening some new markets as well. And I would say the results of those new markets have been really encouraging.

David Palmer: in terms of gives takes on the same source sales in the second half of the year i think you're more or less saying that comps probably blended will be something like two percent in the second half based on your commentary on

David Palmer: on, you know, things being roughly similar to the second quarter.

Speaker Change: I think there's concern out there that the industry trends are getting softer into the third quarter and a competitive discounting.

Josh Cobsa: But all of that are kind of projects that we're working on for 2025. On top of that, we're trying to make more progress in China. You saw us take a few important steps there in this quarter, where we're setting ourselves up for I think better results in the future, especially for Popeyes and Tim Hortons as we get into 2025. So we obviously have work to do on our business there still. So I don't think we have a solution to everything there, but I think we're making some good progress across a lot of our international markets.

Speaker Change: is intensifying. So maybe could you talk about gives and takes among your brands and regions and maybe what gives you confidence you can at least be somewhat stable into the second half? Thanks.

Speaker Change: Hey David, Sami, good morning. Thanks for the question. So the way you're framing it is correct. We expect the second half of the year comp to be consistent with what we saw in Q2. That was roughly 2% as you look at Q2 same store sales.

Brian Bickner: So those are some of the building blocks we're working on a lot of stuff going on, and I think a lot of ways to accelerate growth from where we're at today. Thanks. Thanks for the clarification, Tammy, and thanks for the answer, just appreciate it. Thank you.

Speaker Change: We're not going to get into the specifics of the business units and the segments around the world. There will be puts and takes as you think about kind of how big our business is.

Speaker Change: and and where we you know how diversified we are but I think we expect kind of I think broadly speaking the environment to continue to be the same as we compare h2 to the second quarter and for the full year that that what that's what kind of gives us confidence around

David Palma: Our next question comes from David Palma from Africa, SIS. David, you're nice. Now, open.

David Palma: Good morning. I wanted to just explore what you're thinking about in terms of gifts and takes on the same source sales in the second half of the year. I think you're more or less saying that comps globally blended will be something like 2% in the second half based on your commentary on things being roughly similar to the second quarter. I think there's concern out there that the industry trends are getting softer into the third quarter and a competitive discounting is intensifying.

Speaker Change: The guidance of five and a half to six percent system-wide sales growth and eight percent plus adjusted operating income growth.

Patrick Doyle: And the one thing is, Patrick, the one thing I'd add to that is, as you think about value,

Speaker Change: And the one thing, Patrick, the one thing I'd add to that is, as you think about value and, you know, you...

Patrick Stewart: Suggested kind of, you know, heavier.

Speaker Change: value positioning from the category. You know, look, overall, I mean, if you look at our two biggest businesses, Tim's continues to do just exceptionally well in Canada. The Canadian market is...

David Palma: So maybe could you talk about gifts and takes among your brands and regions and maybe what gives you confidence you can at least be somewhat stable into the second half. Thanks. Hey, David, it's Sami. Morning. Thanks for the question. So the way you're framing it is correct. We expect the second half of the year to be consistent with what we saw in Q2. That was roughly 2% as you look at Q2 seems to our sales.

Speaker Change: is no easier right now than the US from an overall perspective. It's just outperformance by Axel and the team. We're taking share. We're just hitting on all cylinders up here. If you look at the burger category and Burger King in the US,

Speaker Change: We feel really good about the different value levers that we have in the US. They're levers that we've been pulling for a while. And frankly, the fact that

David Palma: We're not going to get into the specifics of the business units and the segments around the world. There will be puts and takes as you think about kind of how big our business is. And, and where we, you know, how diversified we are. But I think we expect kind of I think broadly speaking, the environment to continue to be the same as we compare H2 to the second quarter. And for the full year that that would kind of gives us confidence around the guidance of 5.5 to 6% system wide sales growth and 8% plus adjusted operating income growth.

Unknown Executive: that there are others out there that are advertising around $5 on meals is probably overall a positive because it is doing a bit better than the industry overall.

Speaker Change: that there are others out there that are advertising around $5 on meals is probably overall a positive because it is.

Speaker Change: getting consumers to understand that there is good value in the category overall that's a positive

Speaker Change: We need to not only be focused ourselves on seeing if we can take share, but we also need the category to be healthy. And the fact that there's a lot of messaging out there right now around that $5

David Palma: And the one thing Patrick, the one thing I'd add to that is, is you think about value and you, you suggest it kind of, you know, heavier value positioning from, from the category, you know, look overall, maybe if you look at our two biggest businesses, Tim continues to do just exceptionally well in Canada, the Canadian market is, is no easier right now than the US. From an overall perspective, it's just out performance by axle and the team, we're taking share, we're just hitting on all cylinders up here.

Speaker Change: Price point I think is overall a positive for the category so we feel pretty good about where we are but you know we're taking actions on the business

Speaker Change: As if this is going to continue for at least another, you know, quarter or two through the end of the year.

Speaker Change: We've gone after the the cost side of the business to make sure that we're protecting

Speaker Change: That 8% plus algorithm that we've talked about is our long-term growth algorithm for the bottom line on operating income. And we're gonna do that in an environment where we're probably gonna be a couple points short of.

David Palma: If you look at the burger category and Burger King in the US. You know, we feel really good about the different value levers that we have in the US. They're, they're lovers that we've been pulling for a while. And frankly, the fact that, that there are others out there that are advertising around $5. On meals is probably overall a positive because it is getting consumers to understand that there is good value in the category overall, that's a positive, you know, we need to not only be focused ourselves on seeing if we can take share, but we also need the category to be healthy.

Speaker Change: You know our system wide sales

Speaker Change: long term growth algorithm that we said we would hit on average over time.

Speaker Change: You know, unfortunately, this first year, it looks like we may be a little short on that. But we're protecting the bottom line, we're going to deliver really good operating income growth. I'm proud of the team. I mean, they've gotten after it. And I think on an overall basis, we're doing a really nice job of

Speaker Change: of doing a bit better than the industry overall.

Speaker Change: Thank you.

Speaker Change: Our next question comes from John Avango from JP Morgan.

Operator: Jon, your line is now open.

Joshua Kobza: You know, first of all, we have seen improvement in the trajectory of our Burger King US business, and we hope to see even further improvement in the unit trajectory of that business as we go into 2025. We're also making progress at Firehouse.

Speaker Change: Jon, your line is now open.

David Palma: And the fact that there is a lot of messaging out there right now around that $5 price point, I think is overall a positive for the category. So we feel pretty good about where we are, but, you know, we're taking actions on the business as if this is going to continue for at least another, you know, quarter or two through the end of the year. We've gone after the cost side of the business to make sure that we're protecting that 8% plus algorithm that we've talked about is our long term growth algorithm for the bottom line on operating income.

John Avango: Thank you very much. You know, first, since it's been, you know, a focus on the call, you know, the GNA and cost containment in fiscal 24, does that represent a new base, you know, to grow off of, you know, in 25 or

John Avango: Might it actually present, you know, some difficult comparisons from a profit growth perspective, 25 over 24s, or maybe some catch-up expenses, is the first question. And secondly,

Jon Tower: You know, you mentioned, you know, economic, geopolitical, you know, situation, which obviously has been deeper for longer than you know, certainly any of us would have hoped. And I think it's expected, you know, as you know, a number of your franchisees do, you know, asset reviews on a trade area by trade area basis, you know, might there be an uptick in closures, you know, as we kind of go into 25 at this point, or, you know, are these 20 year types of investments, you know, where your franchisees are willing, able, you know, to kind of withstand that, you know, a bad year or slow year, in terms of impacted markets, and basically just wait, just wait the storm or war, as you want to call it out. Thank

John Avango: You know, you mentioned, you know, economic, geopolitical, you know, situation, which obviously has been, you know, deeper for longer than, you know, certainly any of us would have hoped, and I think expected, you know, as, you know, a number of your franchisees do, you know, asset reviews on a trade area by trade area basis,

David Palma: And we're going to do that in a, you know, in an environment where we're probably going to be a couple points short of, you know, our system wide sales long term growth algorithm that we said we would hit on average over time. You know, unfortunately this first year, it looks like we may be a little short on that, but we're protecting the bottom line. We're going to deliver really good operating income growth. I'm proud of the team. I mean, they've gotten after it. And I think on an overall basis, we're doing a really nice job of doing a bit better than the industry overall. Thank you.

Speaker Change: You know, might there be an uptick in closures, you know, as we kind of go into 25 at this point, or...

Speaker Change: You know, are these 20-year types of investments, you know, where your franchisees are willing, able, you know, to kind of withstand about, you know, a bad year or a slow year in terms of impacted markets and basically just wait the storm or war, as you want to call it, out? Thank you.

Joshua Kobza: I mentioned a bunch of times that you know, Mike's been doing some great work, building up a development pipeline in the US and in Canada as well, to improve the pace of growth there. So I'm hopeful that we'll see some good improvement here in 2024 and build upon that as we go into 2025.

Speaker Change: Great. Thanks, Jon, for the question. I'll take the first one and then I'll throw it over to Josh. Specifically on the GNA, it's a great question. I think, broadly speaking, as you look at where, you know, our guidance has come down and gotten better as the years progressed on GNA, that's really driven by three factors and

Jon Ivankoe: Our next question comes from Jon Ivankoe from Pete Morgan. Jon, your life is now open. You know, first, since it's been, you know, a focus on the call, you know, the GNA and cost containment in fiscal 24, does that represent a new goal?

Josh: Roughly a third, a third, a third, I think.

Josh: The first one was something we commented on Q1 was there are some personnel and senior level changes earlier this year that are flowing through the P&L and as you think about the recurring nature of those, that is a new baseline.

Sami Siddiqui: A new base, you know, to grow off of it, you know, in 25 or might it actually present, you know, some difficult comparisons from a profit growth perspective, 25 over 24's or maybe some catch up expenses is the first question. And secondly, you know, you mentioned, you know, economic, geopolitical situation, which obviously has been deeper for longer than, you know, certainly any of us would have hoped. And I think it's expected.

Josh: So those are permanent. I think as you look at the second bucket, you look at as where the year is sort of headed, our incentive-based compensation structure for this year will be slightly down because our algorithm, our full-year numbers have sort of changed. So you'll see that also reflected in the numbers. Now, I would argue that that is not a permanent change. As you think about incentive-based compensation, we typically go into every year assuming that we'll hit our targets.

Sami Siddiqui: You know, as, you know, a number of your franchisees do, you know, asset reviews on a trade area by trade area basis, you know, might there be an uptick enclosures, you know, as we kind of go into 25 at this point where, you know, are these 20 year types of investments, you know, where your franchisees are willing able, you know, to kind of withstand that, you know, a bad year or slow year. In terms of interactive markets and basically just wait, just wait the storm or where you want to call it out.

Josh: and we'll pay out on those targets. This year is a little light on that, which is why the incentive-based comp has come down a little bit.

Speaker Change: and then the third bucket that we've alluded to as well is rareally kind of broadly just cost disciplinine measures that wewerere implementing across the business so we've flowed the pace of hiring a little bit we've been really disciplined about where we invest our resources without compromising some of the really big investments that we're making it our brands like burger king an i think that is a new baseline we will continue to see those investments and those decisions

Sami Siddiqui: Thank you. Great. Thanks, John, for the question. I'll take the first one and then I'll throw it over to Josh specifically on the GNA. It's a great question. I think probably speaking as you look at where, you know, our guidance has has come down and gotten better as a years progressed on GNA. That's really driven by three factors and roughly a third, a third, a third. I think the first one was something we commented on Q1 was there were some personnel and senior level changes earlier this year that are flowing through the PNL.

Speaker Change: really flow through the pl and so i'd say as you look at the allocations of jun anythingthink two of the three buckets are a new baseline for for the business so hopefully that help

Speaker Change: Great, and John , I'll take the second part.

John Avango: and we have seen some of the geo political impacts last little bit longer than i thinkmanyof us was expected what we're seeing so far at least is probably just some marginal slowdown in some of the opening pace in some of the impacted markets and thats part of what's reflected in that energ outlook that we had it moving from for anda half to four percent

Sami Siddiqui: And as you think about the recurring nature of those that is a new baseline. So those are permanent. I think as you look at the second bucket, you look at as where the year is sort of headed, our incentive based compensation structure for this year will be slightly down because our algorithm are full year numbers of outlook of sort of change. So you'll see that also reflected in the numbers. Now I would argue that that is not a permanent change as you think about incentive based compensation.

Speaker Change: Okay, thank you.

Unknown Shareholder: Thank you.

Speaker Change: Thank you.

John Avango: Our next question comes from Lauren Silberman from Deutsche Bank. Lauren, your line is now open.

Unknown Shareholder: Thank you very much. I wanted to ask you something about

Lauren Silberman: Thank you very much. I wanted to ask about Tim's and Solid Trends during the quarter. Any color you can give on cadence of what you saw, how you're thinking about the outlook. Really just talk a bit more on what you're seeing with the consumer in Canada specifically. Thank you very much.

Sami Siddiqui: We typically go into every year assuming that we'll hit our targets and we'll pay out on those targets this year is a little light on that, which is why the incentive based confidence come down a little bit. And then the third bucket that we've alluded to as well is really kind of broadly just cost discipline measures that we're implementing across the business. So we've slowed the pace of hiring a little bit.

Joshua Kobza: I also think we can see some improvement at Tim Hortons in Canada and the US. You know, we've talked about the opportunities in both of those geographies. But we're looking at opportunities to grow the store base in Canada. As we've referenced a little bit in the past, the population has grown up here. And that creates opportunities.

Joshua Kobza: And there are still some provinces where we're relatively under penetrated, so we're looking at some opportunities in Canada. And we're also making some good progress in the US. So Katarina and her team are building development pipelines, both in some of our existing markets in the northern parts of the US, but we're also opening more restaurants in the southern parts of the US. So you've seen us in Texas and Georgia.

Joshua Kobza: And we have plans to open up in a number of additional geographies later this year and build upon that into 2025. On top of that, there's a lot we're working on in our international markets. I mentioned a few of the really exciting developments that we've seen, especially at Popeyes, I would say, and we've got some big markets that are starting to get to relevant scale. Places that I mentioned, like Spain, the UK, India, those are starting to ramp up their development pace.

Joshua Kobza: But we're opening some new markets as well, and I would say the results of those new markets have been really encouraging. So all those are kind of projects that we're working on for 2025. On top of that, we're trying to make more progress in China. You saw us take a few important steps there this quarter, setting ourselves up for, I think, better results in the future, especially for Popeyes and Tim Hortons as we get into 2025, though we obviously have work to do on our Big A business there still.

John: learn john take as you mentioned i think tim performance has really been remarkable know even in 'ssomewhat challengge consumer environment there re out performing the industry lot margin and they've been doing it consistently for a long time and you know like i i think that's that's really a credit to actual on rest tems team and restaurant owners i think they're getting all the basics right and they're building their business and i think really taking the industry forward in a lot of the new categories you knowwe've been pushing into p m food for a while and into cold beverages and we that consistently with a number of new platforms the lat of which would are pizzas that we launched in apr

Sami Siddiqui: We've been really disciplined about where we invest our resources without compromising some of the really big investments that we're making in our brands like Burger King. And I think that is a new baseline. We will continue to see those investments and those decisions really flow through the P&L. And so I'd say, you know, as you look at the allocations of June, I think two of the three buckets are a new baseline for the business. So hopefully that helps. Thank you very much.

Josh Cobsa: Great, and I'll take the second part. And we have seen some of the geopolitical impacts last a little bit longer than I think many of us expected. What we're seeing so far at least is probably just some marginal slowdown in some of the opening pace in some of the impacted markets, and that's part of what's reflected in that NRG outlook that we had at moving from 4.5 to 4%.

Josh Cobsa: Okay, thank you. Thank you.

Speaker Change: I think the progress there has been really encouraging. We actually, we just realized recently we broke the 10%, really around the 10% threshold in PM food.

Lauren Silberman: and so I think we're making a lot of progress there, it's kind of a big milestone we wanted to get to and we want to build much beyond that and I think as I look at the pipeline

Lauren Silberman: Our next question comes from Lauren Silberman from Boyce Bank. Lauren, your life now open. Thank you very much.

Speaker Change: that Axel and Hope and the team have here.

Lauren Silberman: for building the FPM food and cold beverage business for the next couple of years. I'm really excited and I think they're going to continue to grow this business really well.

John: I wanted to ask about Tim's and Solid Trend during the quarter. Any color you can give on cadence of what you saw, how you're thinking about the outlook. Really just talk a bit more on what you're seeing with consumer and Canada specifically. Thank you very much.

Unknown Shareholder: Thank you.

Lauren Silberman: Thank you.

Speaker Change: Our next question comes from Dennis Geiger from UBS. Dennis, your line is now open.

Dennis Geiger: Great. Thanks, guys. Just wanted to ask you

John: Yeah, Laurenal, it's John, I'll take that one. As you mentioned, I think Tim's performance has really been remarkable. Even in the somewhat challenging consumer environment, they're outperforming the industry by a wide margin, and they've been doing it consistently for a long time. And like I said, I think that's really a credit to Axel and the rest of the Tim's team and our restaurant owners. I think they're getting all the basics right.

Dennis Geiger: Great. Thanks, guys. I just wanted to ask a little bit more on the Burger King investments in the U.S., and maybe specifically on the reimage program. Just kind of the latest and greatest there on thoughts, how that rollout's going, what you guys are seeing, and kind of confidence in the plans going forward and what that can do for the business overall. Thank you.

Joshua Kobza: Yeah, Dennis, it's Josh. Thanks for the question. We've seen continued progress on a few different fronts. For example, we're seeing an increase in the pace of remodels. And I mentioned that a little bit earlier; we expect to do about 400 this year, which will be fantastic. And as the sample size has grown, we're continuing to see really great results from those re-imagings. So we're still around sort of the mid-teens uplift. That's tremendous. That's a great result, and I think it speaks to the quality of the projects that we're doing and the execution of those projects. We've been around to visit an awful lot of them.

Joshua Kobza: So I don't think we have a solution for everything there, but I think we're making some good progress across a lot of our international markets. So those are some of the building blocks we're working on. Lots of stuff going on, and I think there are a lot of ways to accelerate growth from where we're at today.

Joshua Kobza: Yeah, Dennis, it's Josh. Thanks for the question. We've seen continued progress on a few different fronts.

John: And they're building their business. And I think really taking the industry forward in a lot of the new categories. You know, we've been pushing into PM food for a while into cold beverages, and we've done that consistently with the number of new platforms, the latest of which are flatbread pizzas that we launched in April. I think the progress there has been really encouraging. We actually, we just realized recently we broke the 10 percent, really around the 10 percent threshold in PM food.

Joshua Kobza: We're seeing an increase in the pace of remodels, and I mentioned that a little bit earlier, we expect to do about 400 this year, which will be fantastic.

Speaker Change: As the sample size has grown, we're continuing to see really great results from those re-images. So we're still around sort of the mid-teens uplift. That's tremendous. That's a great result. And I think it speaks to the quality of the projects that we're doing and execution of those projects.

Joshua Kobza: And especially, we're trying to visit as many sizzles as we can. And I've got to tell you, I think this is a limit. It's getting better and better every time we do a new one. And some of the customer reactions we've seen have been incredible. So I think there's building excitement for the sizzle image. And as we transition to doing more of those this year and especially into next year, I think it's really going to transform the image of the Burger King brand in the US and help to modernize it and elevate it.

Joshua Kobza: Thanks. Thanks for the clarification, Sammy. And thanks for the answer, Josh. I appreciate it.

Joshua Kobza: We've been around to visit an awful lot of them, and especially we're trying to visit as many sizzles as we can, and I've got to tell you, I think the sizzle image, it's getting better and better every time we do a new one, and some of the customer reactions we've seen have been incredible, so I think there's building excitement for the sizzle image, and as we transition to doing more of those this year, and especially into next year, I think it's really going to transform the image of the Burger King brand in the U.S., and help to modernize it and elevate it.

John: And so I think we're making a lot of progress there. It's kind of a big milestone. We wanted to get to, and we want to build much beyond that. And I think, as I look at the pipeline that Axel and Hope and the team have here for building that PM food and cold beverage business for the next couple of years, I'm really excited. And I think they're going to continue to grow this business really well.

John: Thank you.

Danis Geiger: Our next question comes from Danis Geiger from UBS. Danis, your line. It's now open.

Joshua Kobza: So I think we're seeing good returns, we're seeing good progress on getting the remodels done, and good progress towards moving to our new modern image, so I'm really happy with it so far and think the team's doing a great job.

Danis Geiger: Great. Thanks, guys.

Danis Geiger: Just wanted to ask a little bit more on the Burger King investments in the U.S. And maybe specifically on the re-image program, just kind of the latest and greatest there on thoughts, how that rollout's going, what you guys are seeing and kind of confidence in the plans going forward and what that can do for the business overall. Thank you.

Joshua Kobza: And so I think we're seeing good returns, we're seeing good progress on getting the remodels done, and good progress towards moving to our new modern image. So I'm really happy with it so far and think the team is doing a great job. Okay. Thanks, Josh. Thank you. Our next question comes from Andrew Charles from TD Cowen.

Andrew Charles: Great, thanks Josh.

Andrew Charles: and Julia Lyons-Darrow. Great, thanks. You talked about how

David Palmer: Thank you. Our next question comes from David Palmer from Africa SIS. David, your line is now open.

David Palmer: Good morning. I'd love to just explore what you're thinking about in terms of gives and takes on same-source sales in the second half of the year. I think you're more or less saying that comps globally blended will be something like 2% in the second half, based on your commentary on things being roughly similar to the second quarter. I think there's concern out there that the industry trends are getting softer into the third quarter and that competitive discounting is intensifying. So maybe you could talk about gives and takes among your brands and regions and maybe what gives you confidence that you can at least be somewhat stable into the second half? Thanks.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Andrew Charles from TD Cowen.

Sami Siddiqui: Hey, David, and Sami. Morning. Thanks for the question. So the way you're framing it is correct. We expect the second half of the year comp to be consistent with what we saw in Q2. That was roughly 2%. As you look at Q2 same store sales, we're not going to get into the specifics of the business units and the segments around the world; there will be puts and takes as you think about kind of how big our business is, and, and, and where we are, you know, how diversified we are.

Speaker Change: And you realize they're open.

Sami Siddiqui: But I think we expect the kind of, I think, broadly speaking, the environment to continue to be the same as we compare H2 to the second quarter. And for the full year, that would kind of give us confidence around the guidance of five and a half to 6% system-wide sales growth and 8% plus adjusted operating income. And the one thing is, Patrick, the one thing I'd add to that is, as you think about value.

Speaker Change: Great, thanks. You talked about how the long-term guidance framework for 5% plus net restaurant growth still holds through 2028, though 2024, of course, is tempered to around 4%.

Josh Cobsa: Yeah, Danis, it's it's John. Thanks for the question. We've seen continued progress on a few different fronts. We're seeing an increase in the pace of remodels. And I mentioned that a little bit earlier. We expect to do about 400 this year, which will be fantastic. And as the sample size has grown, we're continuing to see really great results from those re-images. So we're still around sort of the mid-teens uplift. That's tremendous.

Speaker Change: Can you help bridge, though, from how you get to 4% unit growth in 2024 to 5% in 2025? You know, I recognize, obviously, that China investments will help. That's probably only a piece of it. That's something else that's probably needed to help accelerate that cadence of openings back to 5%. Thanks.

Patrick Doyle: And the one thing is, Patrick, the one thing I'd add to that is you think about value and you suggested kind of, you know, heavier value positioning from the category. Look, overall, I mean, if you look at our two biggest businesses, Tim's continues to do just exceptionally well. In Canada, the Canadian market is no easier right now than the U.S. From an overall perspective, it's just outperformance by Axel and the team.

Josh Cobsa: That's a great result. And I think it speaks to the quality of the projects that we're doing, an execution of those projects. We've been around to visit an awful lot of them. And especially we're trying to visit as many sizzles as we can. And I've got to tell you, I think this is a limit. It's getting better and better every time we do a new one. And some of the customer reactions we've seen have been incredible.

Andrew Charles: Yeah, Andrew, so as I mentioned a little bit earlier, there's a lot of things we're working on, you know, frankly, across all of the business units. I think we've got a lot of opportunities we've got to go out and realize.

Speaker Change: All those opportunities, and each of them can be a material building block towards getting towards that long term algorithm.

Speaker Change: I think the math is pretty simple. A point is about 300 restaurants, and that's not so far. We're not so far off of that level, and I think if we can make progress on a decent number of the things that I laid out a little bit earlier, we have confidence that we're going to get back to where we need to be to hit that guidance over the long term.

Josh Cobsa: So I think there's building excitement for the sizzle image. And as we transition to doing more of those this year, and especially into next year, I think it's really going to transform the image of the Burger King brand in the U.S, and help to modernize it and elevate it. So I think we're seeing good returns. We're seeing good progress on getting the remodels done. And good progress towards moving to our new modern image. So I'm really happy with it so far. And I think the team's doing a great job.

Josh Cobsa: Great. Thanks, Josh.

Operator: Our next question comes from Danilo Gargiulo from A.B. Bernstein. Your line is now open.

Danilo Gargiulo: Thank you.

Speaker Change: Our next question comes from Danilo Gargiulo from A.B. Bernstein. Your line is now open.

Andrew Charles: Thank you. Our next question comes from Andrew Charles from TD Cohen.

Danilo Gargiulo: great thank you ase i like how berburg ting it is going to be approaching value going forward specifically some peers have talked about another national plassformroom so what is it reasonable to expect from from burgiccking

Andrew Charles: Andrew, you're nice now, open. Great, thanks. You talked about how the long-term guidance framework for 5% plus net restaurant growth still holds through 2028. Though 2024, of course, is tempered to around 4%. Can you help bridge, though, from how you get to 4% unit growth in 2020? 4% to 5% in 2025? You know, I recognize obviously that shine investments will help. That's probably a piece of it. That's something else is probably needed to help accelerate that cadence of openings back to 5%. Thanks.

Danilo Gargiulo: And then can you maybe also help us understand the impact on traffic and comms of the $5 meal deal and how you were able to make it profitable for your franchisees? Thank you.

Patrick Doyle: We're taking share. We're just hitting on all cylinders up here. If you look at the burger category and Burger King in the U.S., there are others out there that are advertising around $5 for meals. That's probably a positive because it is getting consumers to understand that there is good value in the category overall. You know, we need to not only be focused on seeing if we can take share, but we also need the category to be healthy.

Joshua Kobza: Yeah, you know, I would say a couple things about Birkin's value approach, which we're really happy with overall. It's not something new. You know, we've had value in our business, and we've had compelling value offerings at the $5 price point and elsewhere for some time now. We have had our $5 Whopper Junior Duos out there, we have had the $5 Your Way meal a couple of times, and we have some great offers, both in printed and digital format.

Joshua Kobza: Yeah, Danilo, I would say a couple things on Burking's value approach.

Joshua Kobza: We've had value in our business and we've had compelling value offerings, both the $5 price point and elsewhere for some time. We've had our $5 Whopper Junior Duos out there. We've had the $5 Your Way meal a couple of times, and we have some great offers, both in printed and digital format.

Andrew Charles: Yeah, Andrew. So as I mentioned a little bit earlier, there was a lot of things we're working on. You know, frankly, across all of the business units. I think we've got a lot of opportunities. We've got to go out and realize all those opportunities. And each of them can be a material building block towards getting towards that long-term algorithm. You know, I think the math's pretty simple. A point is about 300 restaurants.

Andrew Charles: And, you know, so that's not so far. We're not so far off of that level. And I think if we can make progress on a decent number of the things that I laid out a little bit earlier. We've got, we have confidence that we're going to get back to where we need to be to hit that guidance over long term. Thank you.

Joshua Kobza: And I would say as we look at the business, and as we talk to some of our biggest operators, I'd say our feel is that we've got the value offering just right; we're not trying to change anything. We think it's working for the business, and we can see it's really compelling for consumers and what they're looking for in the business today. And we see that in the incidence of all of those offers, which have been received really well. But importantly, they're also profitable for our franchisees. They have a reasonable gross profit margin.

Joshua Kobza: And I would say, as we look at the business, and as we talk to some of our biggest operators, I'd say our feel is that we've got the value offering just right. We're not trying to change anything. We think it's working for the business. We can see it's really compelling to consumers and what they're looking for in the business today. And we see that in the incidence of all of those offers, which they've been received really well. But importantly, they're also profitable for our franchisees. They have a reasonable gross profit margin.

Daniel Gadgeto: Our next question comes from Daniel Gadgeto from AP Princeton.

Joshua Kobza: And so I think our franchisee base, our operators, and we're a big owner of restaurants, too.

Joshua Kobza: And so our I think our franchisee base, our operators, and we're a big owner of restaurants too, we think it's exactly the right balance for the business. Just to give a little bit more color on that, you know, Tom and the team just decided together with the franchisees that we're going to extend that $5 Your Way meal now into October because we feel like it's working perfectly for the business and we think customers are loving it.

Daniel Gadgeto: Your life now open. Great. Thank you. Can you please highlight how Burger King is going to be approaching value going forward, and specifically some peers have talked about another national platform. So what is it reasonable to expect from from Burger King? And then can you maybe also help us understand the impact on traffic and cost of $5 meal deal, and how you were able to make it profitable for your friends of these?

Joshua Kobza: We think it's exactly the right balance for the business.

Joshua Kobza: Just to give a little bit more color on that, Tom and the team just decided together with the franchisees that we're going to extend that $5 year way meal now into October because we feel like it's working perfectly for the business and we think customers are loving it. So we're going to keep that going because we think we have the right balance.

Joshua Kobza: So, you know, I think we've got the right things going on. We're happy with how it's performing in the business, and that's kind of what's embedded in our outlet for the rest of the year.

Daniel Gadgeto: Thank you. Yeah, you know, I would say a couple of things on Burger King's value approach, which we're really happy with overall. You know, it's not something new. You know, we've had value in our business and we've had compelling value offerings, both the $5 price point and elsewhere for some time. You know, we've had our $5 offer junior duos out there. We've had the $5 your way meal a couple of times, and we have some great offers both in printed and digital format.

John Ivankoe: Our next question comes from John Ivankoe from JP Morgan. Jon, your line is now open.

Joshua Kobza: Hey Danilo, I'll just add that, as you know, we launched the $5 Your Way meal in early June, and we're seeing some really interesting stats so far early on. We're seeing it over-indexed with lower and middle-income consumers, which was really the intended purpose. We're also seeing it over-indexed with women, and we're seeing the average check is over $10. So I think as you look at the $5 Your Way meal, and you also look at it in conjunction with the $5 Whopper Junior Duos, we really have a comprehensive value strategy, plus wraps at $2.99, that really is able to speak to all of our guests in a comprehensive way that delivers value in a profitable way for our franchise.

Patrick Doyle: And the fact that there's a lot of messaging out there right now around that $5 price point, I think is overall positive for the category. So we feel pretty good about where we are. But you know, we're taking actions on the business as if this is going to continue for at least another quarter or two through the end of the year. We've gone after the cost side of the business to make sure that we're protecting that 8% plus algorithm that we've talked about as our long-term growth algorithm for the bottom line on operating income.

Joshua Kobza: So we're going to keep that going because we think we have the right balance. So, you know, I think we've got the right things going on. We're happy with how it's performing in the business. And that's kind of what's embedded in our outlook for the rest of the year. Hey Danilo, I'll just add that, you know,

Patrick Doyle: And we're going to do that in an environment where we're probably going to be a couple points short of, you know, our system-wide sales, long-term growth algorithm that we said we would hit on average over time. Unfortunately, this first year, it looks like we may be a little short of that. But we're protecting the bottom line; we're going to deliver really good operating income growth. I'm proud of the team. I mean, they've gotten after it, and I think on an overall basis, we're doing a really nice job of doing a bit better than the industry overall.

Joshua Kobza: Hey, Danilo, I'll just add that, you know, as you know, we launched the $5 Your Way Meal in early June , and we're seeing some really interesting stats so far early on. We're seeing it over indexed,

Speaker Change: with the lower and middle income consumers, which was really the intended purpose. We're also seeing it over-indexed with women.

Daniel Gadgeto: And I would say as we look at the business and as we talk to some of our biggest operators, I'd say our feel is that we've got the value offering just right. We're not trying to change anything. We think it's working for the business. We can see it's really compelling to consumers and what they're looking for in the business today, and we see that in the incidence of all of those offers, which they've been received really well.

Danilo: and we're seeing the average check is over $10 and so I think as you look at the $5 your way meal and you also look at it in conjunction with the $5 Whopper Junior Duos, we really have a comprehensive value strategy plus wraps at $2.99 that really is able to speak to all of our guests

Danilo: in a comprehensive way that delivers value in a profitable way for our franchisees.

Daniel Gadgeto: But importantly, they're also profitable for our franchisees. They have a reasonable gross profit margin. And so our, I think our franchise is eBay's, our operators, and we're big on our restaurants too. We think it's exactly the right balance for the business just to give a little bit more color on that. Tom and the team just decided together with the franchisees that we're going to extend that $5 your way meal now into October because we feel like it's working perfectly for the business and we think customers are loving it.

Danilo: Great, thank you.

John Ivankoe: Thank you very much. First, since it's been, you know, a focus on the call, you know, the G&A and cost containment in fiscal 24, does that represent a new base you have to grow off of, you know, in fiscal 25? Or might it actually present, you know, some difficult comparisons from a profit growth perspective, 25 over 24? Is there maybe some catch-up expenses, is the first question. And secondly, you know, you mentioned economics.

Speaker Change: Thank you. Our next question comes from Sara Senatore from Bank of America. Sara, your line is now open.

Sami Siddiqui: Great. Thanks, Jon, for the question. I'll take the first one, and then I'll throw it over to Josh.

Joshua Kobza: Hi, thank you. This is Catherine on for Sara. Thanks for the questions. First, I just wanted to ask about the, you know, some of the pressure that you're seeing in the demand and competitive environment. Will this change how you're thinking about the trajectory of the franchisee cash flow targets that you've previously outlined?

Daniel Gadgeto: So we're going to keep that going because we think we have the right balance. So I think we've got the right things going on. We're happy without performing in the business, and that's kind of what's embedded in our outlets for the rest of the year.

Joshua Kobza: We're feeling good about it, and franchisee profitability is absolutely top of mind, and we want to continue making improvements there, but nope, doesn't change a thing.

Sami Siddiqui: Specifically on the GNA, it's a great question. I think, broadly speaking, as you look at where our guidance has come down and gotten better as the years have progressed on the GNA, that's really driven by three factors, and roughly a third, a third, a third. I think the first one was something we commented on in Q1 was that there were some personnel and senior level changes earlier this year that are flowing through the P&L, and as you think about the recurring nature of those, that is a new baseline, so those are permanent.

Joshua Kobza: Nope.

Danilo: We're feeling good about it, and franchisee profitability is absolutely top of mind, and we want to continue making improvements there, and are, but nope, doesn't change a thing.

Daniel Gadgeto: Hey, Danilo, I'll just add that, you know, as you know, we launched the $5 your way of meal in early June, and we're seeing some really interesting stats so far early on. We're seeing it over index with the lower and middle income consumers, which was really the intended purpose. We're also seeing it over index with women. And we're seeing the average check is over $10. And so I think as you look at the $5 your way meal, and you also look at it in conjunction with the $5 whopper junior duos, we really have a comprehensive value strategy plus plus wraps at $299 that really is able to speak to all of our guests in a comprehensive way that delivers value in a profitable way for our franchisees. Great. Thank you.

John Ivankoe: Okay, thanks. And then, second question, just on some of the investments in Tim's China, I think given some of the pretty persistent challenges in that market, had you considered pausing or maybe rethinking some of the growth targets in that market rather than reinvesting in the business in order to sustain growth there?

John Ivankoe: Okay, thanks. And then second question, just on the some of the investments in Tim's China, I think given some of the pretty persistent challenges in that market, had you considered pausing or maybe rethinking some of the growth targets in that market rather than reinvesting in the business in order to sustain growth there?

Sami Siddiqui: And I think that is a new baseline; we will continue to see those investments and those decisions really flow through the P&L. And so I'd say, you know, as you look at the allocation of G&A, I think two of the three buckets are a new baseline for the business. So hopefully that helps.

Sami Siddiqui: I think as you look at the second bucket, you see where the year is sort of headed; our incentive-based compensation structure for this year will be slightly down because our algorithm, our full-year numbers outlook has sort of changed, so you'll see that also reflected in the numbers. But I would argue that that is not a permanent change.

Sami Siddiqui: As you think about incentive-based compensation, we typically go into every year assuming that we'll hit our targets and we'll pay out on those targets. This year is a little light on that, which is why the incentive-based comp has come down a little bit. And then the third bucket that we've alluded to as well is really kind of broadly just cost discipline measures that we're implementing across the business. So we've slowed the pace of hiring a little bit, and we've been really disciplined about where we invest our resources without compromising some of the really big investments that we make in our brands like Burger King.

Speaker Change: Kevin, so my point of view on this, I think that we absolutely believe in the long-term potential of the coffee market in China. We recognize it's very competitive right now. I think that's a reflection of the size of the opportunity.

Speaker Change: I think the business, you know, any of those businesses that's going to be competitive in China, you've got to get to critical mass, you've got to get to large scale to be competitive. So I think it is really important over the medium to long term that we pursue a pretty aggressive growth path there.

Sarah Sanatore: Our next question comes from Sarah Sanitor from Bank of America. Sarah, your line is now open. Hi, thank you.

Speaker Change: At the same time, we are working on making sure that we're operating the business in a really profitable way. So, the team at Tim's in China has taken a lot of actions to improve the profitability of the business, the profitability of the restaurant base, and I think we're seeing some good progress now. We've come a long way in the first six, seven months of the year, and that's encouraging to us in terms of how the business is performing, but it also gives more confidence.

Sarah Sanatore: This is Catherine on for Sarah. Thanks for the question. First, I just wanted to ask about the, you know, some of the pressure that you're seeing in the demand and competitive environment. Well, this can trigger thinking about the trajectory of the franchisee casual targets that you've previously outlined. Nope. Great. Thank you. We're feeling good about it. And franchisee profitability is absolutely top of mind. And we want to continue making improvements there. And our, but nope, doesn't change a thing. Okay. Thanks.

Speaker Change: to want to see that business grow aggressively over time.

Speaker Change: Thank you.

John Ivankoe: look

Joshua Kobza: Great, and I'll take the second part. We have seen some of the geopolitical impacts last a little bit longer than I think many of us expected. What we're seeing so far, at least is probably just some marginal slowdown in some of the opening pace in some of the impacted markets, and that's part of what's reflected in that NRG outlook that we had it moving from four and a half to four percent. Okay, thank you. Thank you. Our next question comes from...

Speaker Change: Thank you.

John Ivankoe: Our next question comes from Jeffrey Bernstein from Barclays. Jeffrey, your line is now open.

Lauren Silberman: Our next question comes from Lauren Silberman from Deutsche Bank. Lauren, your line is now open. Thank you very much. I wanted to ask about

Joshua Kobza: Yeah, Lauren. It's Joshua. I'll take that one.

Josh Cobsa: And then second question just on the, some of the investments in Kim's China. I think given some of the pretty persistent challenges in that market, had you considered pausing or maybe rethinking some of the growth target in that market rather than reinvesting in the business in order to sustain growth there? So my point of view on this, I think that we absolutely believe in the long term potential of the coffee market in China.

Joshua Kobza: As you mentioned, I think Tim's performance has really been remarkable. You know, even in a somewhat challenging consumer environment, they're outperforming the industry by a wide margin. And, you know, like I said, I think that's really a credit to Axel and the rest of the Tim's team and our restaurant owners. I think they're getting all the basics right, and they're building their business.

Joshua Kobza: And I think really taking the industry forward in a lot of new categories. You know, we've been pushing into PM food for a while, and into cold beverages. And we've done that consistently with a number of new platforms, the latest of which was our flatbread pizzas that we launched in April. I think the progress there has been really encouraging. We actually just realized recently that we broke the 10%, really around the 10% threshold in PM food.

John Ivankoe: Hi, good morning. This is Pratik for Jeff. Thanks for taking the question.

Sami Siddiqui: Sami, it seems like the balance sheet, even after these acquisitions and investments in Tim China, etc., is in pretty good shape with a sizable cash balance, and I believe the release mentioned that you're, you know, within your target...

Speaker Change: The leverage ratio around five times, just how should we think about cash usage going forward? It seems like, you know, the shares are at a pretty attractive value right now. And just wanted to get your thoughts on potential share repurchase going forward. Thank you.

Josh Cobsa: We recognize it's very competitive right now. I think that's a reflection of the size of the opportunity. But I think the business, you know, any of those businesses that's going to be competitive in China, you've got to get to critical mass. You've got to get to large scale to be competitive. So I think it is, it is really important over the medium to long term that we pursue a pretty aggressive growth path there.

Speaker Change: Hey, Pratik, thanks for the question. And yeah, we similarly feel very strongly about the position we're in and the balance sheet, the position of the balance sheet. I think it's really a testament to the business model. It's a resilient business model that generates really high free cash flow, which allows us to do a couple things. I think, number one, and first and foremost, we're going to continue to invest in our own business,

Josh Cobsa: At the same time, we are working on making sure that that we're operating the business in a really profitable way. So the team at Tim's in China has taken a lot of actions to improve the profitability of the business of the profitability of the restaurant base. And I think we're seeing some good progress now. We've come a long way in the first six, seven months of the year. And that's encouraging just in terms of how the business is performing, but it also gives more confidence to want to see that business grow aggressively over time. Thank you.

Speaker Change: As you've seen with the Burger King Reclaim the Flame plan, as you've seen really with the Carroll's acquisition, which was really an investment in the Burger King U.S. business, and I think it's really important that we continue to do that with the right discipline measures in place.

Speaker Change: I think number two, we are committed to our dividend and having a healthy payout ratio. And so as we think about capital allocation, the dividend has been a big part of our strategy for a while now and will continue to be a big part of our capital allocation going forward.

Jeffrey Bernstein: Our next question comes from Jeffrey Bernstin from Barclays.

Pratik Patel: Jeffrey, your line's not open. Good morning. This is product for Jeff. Thanks for taking a question. It seems like the balance sheet, even after the acquisitions and investments in Tim China, et cetera, is in pretty good shape with a sizable cash balance. And I believe the release mentioned that you're within your target leverage ratio around five times. How should we think about cash usage going forward? It seems like the shares are at a pretty attractive value right now. And just want to get your thoughts on potential shares we're just going forward.

Speaker Change: And then, as you sort of start thinking about share buybacks to your question and...

Speaker Change: and you sort of measure it against deleveraging.

Speaker Change: I think it's hard to speak sort of an absolute, but I'd say our preference at the moment is really to focus on deleveraging. We've been very clear that we want to hit the mid four times leverage range.

Speaker Change: by the end of this year. And we remain committed to that. And so we will continue to, you know, always be nimble. But I think deleveraging is our priority on the balance right now.

Speaker Change: go thanks appreciate

Joshua Kobza: And so I think we're making a lot of progress there. It's kind of a big milestone we wanted to get to. And we want to build much beyond that. And I think as I look at the pipeline that Axel and Hope and the team have here for building that PM food and cold beverage business for the next couple of years, I'm really excited. And I think they're going to continue to grow this business really well. Thank you. Our next question comes from Dennis Geiger from UBS.

John Ivankoe: Thank you. Our next question comes from Jon Tower from Citi. Jon, your line is now open.

Pratik Patel: Thank you. Hey, Pratik, thanks for the question. And yeah, we similarly feel very strongly about the position we're in and the balance sheet, the position of the balance sheet. I think it's really a testament to the business model. It's a resilient business model that generates really high free cash flow, which allows us to do a couple things. I think number one and first and foremost, we're going to continue to invest in our own business as you've seen with the Burger King Reclaim the Flame Plan.

John Ivankoe: Great, thanks for taking the question. Just I guess a follow up on the China business, maybe not the Tim Horton side, but the PLK, as well as the Burger King business. I'm just curious, you know, with the investment in PLK, you know, should we expect any strategic shifts in that market specifically around that brand? And then

Speaker Change: Can you give us an update on the Burger King China business and I know that that's been a source of...

Pratik Patel: As you've seen really with the Carol Zach was a position which was really an investment in the Burger King U.S, business. And I think it's really important that we continue to do that with the right discipline measures in place. I think number two, we are committed to our dividend and having a healthy payout ratio. And so as we think about capital allocation, the dividend has been a big part of our strategy for a while now and will continue to be a big part of our capital allocation going forward.

Speaker Change: a slower growth for the overall company. Um, have you made any progress in, you know, shoring up growth going forward from a unit growth perspective over there?

Joshua Kobza: Hey, John, it's Josh. Thanks for the questions. I'll take each of those.

Josh: Hey John , it's Josh.

Joshua Kobza: Thanks for the questions. I'll take each of those. So in Popeye's, you know, we were really encouraged by how the brand was received initially. And I would say that the shift is just for us to take it on and make sure it has

Pratik Patel: And then as you sort of start thinking about share buybacks to your question and you sort of measure it against de-leveraging. I think it's hard to speak sort of an absolute, but I'd say our preference at the moment is really to focus on de-leveraging. We've been very clear that we want to hit the mid four-time leverage range by the end of this year. And we remain committed to that. And so we will continue to always be nimble, but I think de-leveraging is our priority on the balance right now.

Pratik Patel: Thanks.

Josh: I'd say not a big brand positioning or strategy shift there. I think we'll just be working on building up the team and then building up the development pipeline to make sure that we start growing that at the pace that we think makes sense. So that's the game plan there. And we're planning to do that ourselves for a while, and then we'll start working on finding the right long-term local partner there over the next couple of years.

Pratik Patel: I appreciate that.

John Powell: Thank you.

Joshua Kobza: So in Popeyes, you know, we were really encouraged by how the brand was received initially. And I would say that the shift is just for us to take it on and make sure it has the capital and the support it needs to realize its full potential. So I'd say not a big, like brand positioning, or strategy shift there. I think we'll just be working on building up the team and then building up the development pipeline to make sure that we start growing that at the pace we think makes sense. So that's the game plan there. Well, you know, and we're planning to do that ourselves for a while.

Joshua Kobza: And in terms of Burger King in China, it has been a challenging environment, so the business has been a bit challenged there. We don't have anything new to share, that one's more of a work in progress, happy that we made some progress on Tim's and Popeye's, and we're still working on Burger King.

Josh Cobsa: Our next question comes from John Powell from City. John, you're nice now open. Great. Thanks for taking the question. Just I guess follow up on the China business, maybe not the Tim Horton side, but the PLK as well as the Burger King business. I'm just curious, you know, with the investment in PLK, should we expect any strategic shifts in that market specifically around that brand. And then can you give us an update on the Burger King China business.

Speaker Change: Got it. Thank you.

Joshua Kobza: And then we'll start working on finding the right long-term local partner there over the next couple of years. And in terms of Burger King in China, it has been a challenging environment. So the business has been a bit challenged there. We don't have anything new to share as that one's more of a work in progress. I'm happy that we made some progress on Tim's and Popeyes. And we're still working on Burger.

Dennis Geiger: Our next question comes from Dennis Geiger from UBS. Dennis, your line is now open. Great. Thanks, guys. Just wanted to ask

Joshua Kobza: Thank you.

Speaker Change: Our next question comes from Eric Gonzalez from KeyBank Capital Markets. Eric, your line is now open.

Joshua Kobza: Yeah, Dennis. It's Josh. Thanks for the question. We've seen continued progress on a few different fronts. For example, we're seeing an increase in the pace of remodels. And I mentioned that a little bit earlier; we expect to do about 400 this year, which will be fantastic. And as the sample size has grown, we're continuing to see really great results from those re-imagings. So we're still around sort of the mid-teens uplift.

Operator: Our next question comes from Eric Gonzalez from KeyBank Capital Markets. Eric, your line is now open.

Joshua Kobza: That's tremendous. That's a great result. And I think it speaks to the quality of the projects that we're doing and the execution of those projects. We've been around to visit an awful lot of them. And especially, we're trying to visit as many sizzles as we can. And I've got to tell you, I think this is a limit.

Chris Onfer: Hi, good morning. This is Chris Onfer, Eric.

Joshua Kobza: It's getting better and better every time we do a new one, and some of the customer reactions we've seen have been incredible. So I think there's building excitement for the sizzle image, and as we transition to doing more of those this year and especially into next year, I think it's really going to transform the image of the Burger King brand in the US and help to modernize it and elevate it. So I think we're seeing good returns.

Josh Cobsa: And I know that that's been a source of slower growth for the overall company. Have you made any progress and, you know, showing up growth going forward from a new unique perspective over there? Hey, John. It's Josh. Thanks for the questions. I'll take each of those. So in Popeyes, you know, we were really encouraged by how the brand was received initially. And I would say the shift is just for us to take it on and make sure it has the capital and the support it needs to realize its full potential.

Chris Onfer: Hi, good morning. This is Creston for Eric. So maybe following up on the prior franchisee profitability question,

Chris Onfer: Can you provide an update, at least at a high level, on some of the puts and takes around BK Domestic Franchisee profitability today? I know you'll provide specific details once the year closes, but

Chris Onfer: Any updates on progress against last year's $205K average four-wall EBITDA in the context of some of the consumer and operating dynamics today, including focus on value, commodity and labor cost trends, or anything else that's relevant. Thank you.

Chris Onfer: So maybe following up on the prior franchisee profitability question, can you provide an update, at least at a high level, on some of the puts and takes around BK domestic franchisee profitability today? I know you'll provide specific details once the year closes, but any updates on progress against last year's $205K average four-wall EBITDA in the context of some of the consumer and operating dynamics today? Including a focus on value, commodity, and labor, cost trends, or anything else that's relevant. Thank you.

Josh Cobsa: So I see not a big like brand positioning or strategy shift there. I think we'll just be working on building up the team and then building up the development pipeline to make sure that we start growing that at the pace we that we think makes sense. So that's the game plan there. Well, you know, and we're planning to do that ourselves for a while, and then we'll start working on finding the right long term local partner there over the next couple of years.

Speaker Change: Hey Chris, I can take the first or second part of that question regarding sort of some of the costs we're seeing in the business. You've obviously seen the reported sales that we're seeing in the Burger King business and really roughly flat for the quarter on the top line. As you think of sort of some of the commodity impacts, we haven't seen a ton of impact in terms of commodity inflation.

Josh Cobsa: And in terms of Burger King in China, it has been a challenging environment. So the business has been a bit challenged there. We don't have anything new to share. That one's more of a work in progress. Happy with that. We made some progress on Tim's and Popeyes. And we're still working on Burger King. Got it.

Speaker Change: Eva Martinez from Beast which has been widely reported on I think earlier this year, we do expect in the second half of the year to see some beef inflation. And so I think if you think about the Burger King commodity basket for the full year, we'll see low single digits commodity inflation. But in that range, primarily driven by beef, there's some other items that are also impacting that. And then on the labor side, I think nothing dissimilar from what we're seeing across the rest of the industry. Also, low single digits inflation on the labor side. So those are probably the cost elements. I don't know, Josh, if you have anything to add on the top of that.

Josh Cobsa: Thank you.

Eric Gonzalez: Our next question comes from Eric Gonzalez, from Keybank Capital Lockings. Eric, your line's now open. Hi, good morning.

Chris: This is Chris Onfer, Eric. So maybe following up on the prior franchisee profitability question, can you provide an update at least at a high level on some of the puts and takes around BK domestic franchisee profitability today? I know you'll provide specific details, details once the year closes, but any updates on progress against last year's 205K average for a while, even done in the context of some of the consumer and operating dynamics today, including folks on value, commodity and labor costs trends or anything else that's relevant.

Speaker Change: I think as you mentioned, we'll share the update at the end of the year. I'd say overall, BKUS franchise profitability has been sort of stable to improving. And so that's what we're seeing so far, and we'll give specific numbers when we get to the end of the year.

Speaker Change: Alright, thanks so much.

Joshua Kobza: Yeah, Andrew. So, as I mentioned a little bit earlier, there's a lot of things we're working on, you know, Frankly, across all of the business units. I think we've got a lot of opportunities; we just have to go out and realize all those opportunities. And each of them can be a material building block towards getting towards that long-term algorithm. You know, I think the math is pretty simple. A point is about 300 restaurants.

Joshua Kobza: We're seeing good progress on getting the remodels done and good progress towards moving to our new modern image, so I'm really happy with it so far and think the team is doing a great job. Great. Thanks, Josh. Thank you. Our next question comes from Andrew Charles from TD Collins and Julia Lyons-Darrow.

Speaker Change: Thank you.

Chris Onfer: Our next question comes from Gregory Francfort from the Newham Securities. Gregory, your line is now open.

Andrew Charles: Our next question comes from Andrew Charles from TD Cowen and Julia Lyons-Darrow. Great, thanks. You talked about how

Chris: Thank you. Hey, Chris, I can take the first or second part of that question regarding sort of some of the costs we're seeing in the business that you've obviously seen the reported sales that we're seeing at the Burger King business and really roughly flat for the quarter on the top line. As you think of sort of some of the commodity impacts, we haven't seen a whole ton of impact in terms of commodity inflation from beef, which has been widely reported on, I think earlier this year, we do expect in the second half of the year to see some beef inflation.

Speaker Change: Hey, thank you guys for the question. My question is just, there's been a lot of talk about the U.S. consumer. You guys are performing pretty well.

Speaker Change: at Tim's Canada, and I'm just wondering if you could kind of compare and contrast.

Speaker Change: What you're seeing in the U.S. and what you're seeing in Canada and then I think your biggest competitor up there about four weeks ago put out a dollar level entry price point for coffee. Do you feel like you have value in the right spot up there? Do you feel like you have to make any changes? Just any thoughts on kind of the menu construct and the pricing construct? Thanks.

Chris: And so I think as you think about the Burger King commodity basket for the full year, we'll see low single digits commodity inflation in that range, primarily driven by beef. There's some other items that are also impacting that. And then on the labor side, I think nothing dissimilar from what we're seeing across the rest of the industry also low single digits inflation on the labor side. So those are probably the cost elements.

Speaker Change: Yeah, Greg, I'll take this one. You know, there has been some consumer softness in in Canada. There are a little bit different dynamics, I would say, you know, inflation has softened up in Canada, a fair bit, but there's a little bit more unemployment up here. So some a little bit of nuance there. And, you know, I think the probably the biggest difference is just Tim's is doing a great job outperforming the market, even in a difficult market. And that's been the case for a while now. And it's certainly been the case in the year to date and in the second quarter.

Chris: I don't know if Josh, if you have anything to add on the top one. No, I think as you mentioned, we'll share the update at the end of the year. I'd say overall, BK, US, Frenchist, profitability has been sort of stable to improving. And so that's what we're seeing so far and we'll give specific numbers when we get to the end to the year end. Thanks so much.

Chris Onfer: In terms of value offerings, two thoughts on this one. One, I think that Tim's business, what it does so well is provide incredible everyday value.

Speaker Change: You see that in our menu prices, but we also hear it back from guests, and any of our brand surveys were number one in value for money. So I think we've been really disciplined in our everyday pricing, which has been paying really good dividends.

Chris: Thank you. Our next question comes from Gregory Frafford from Gondorham Secretties. Gregory, you're live now open. Hey, thank you guys for question. My question is just, and there's been a lot of talk about the US consumer. You guys are performing pretty well at Tim's Canada. I'm just wondering if you could kind of compare and contrast what you're seeing in the US or what you're seeing in Canada. And then I think your biggest competitor up there about four weeks ago, put out a dollar level entry price point for coffee. You feel like you have value in the right spot up there. Do you feel like you have to make any changes, just any thoughts on the menu construct and the pricing construct. Thanks.

Speaker Change: We also do have value mechanisms from time to time up here. Right now, we have a $3 breakfast sandwich with the purchase of any coffee. I had that this morning for breakfast, which was great. That's all been really effective and is great for the business, and guests are really enjoying that. I think we're pretty well positioned up here, and you kind of see that in the results. The one thing I would add to that is that

Speaker Change: What's generating growth at Tim's in Canada is just relentless

Speaker Change: improvement across the business. What builds a great restaurant business is

Gregory Francfort: Yeah, Greg, I'll take this one. There has been some consumer softness in Canada. There are a little bit different dynamics. I would say in installation has often been Canada up there a bit, but there's a little bit more unemployment up here. So some a little bit of nuance there. And I think probably the biggest difference is just Tim's is doing a great job outperforming the market even in a difficult market. And that's been the case for a while now and it's certainly been the case in the year to date and in the second quarter.

Unknown Executive: I'm continually improving your food, improving your service, making your restaurants look great, and having a great relationship with terrific motivated franchisees, focusing on success for them and for us. Deliver Better Food, you know, the price part is an element of that, to your customers. And that's the lesson from the success that Tim's is having in Canada and their outperformance versus, you know, the industry and, frankly, their great absolute performance given, you know, given the overall economy in Canada right now. And it's the model for how we grow Burger King and all of our businesses.

Unknown Executive: Continually improving your food, improving your service, making your restaurants look great, having a great relationship with terrific, motivated franchisees.

Unknown Executive: focusing on on success for them and for us.

Unknown Executive: and we're seeing that with Tim's and it is frankly the template for success everywhere for us. If we continue to give better service, deliver better food, you know, the price part is an element of that.

Gregory Francfort: In terms of value offerings, you know, two thoughts on this one. One, I think that Tim's business, what it does so well is provide incredible everyday value. Review. You see that in our menu prices, but we also hear it back from guests and any of our brand surveys were number one and value for money. So I think we've been really disciplined in our everyday pricing, which has been paying really good dividends.

Unknown Executive: But it's not the only thing. And frankly, it's less important than most of the other things, which is continually giving a better experience.

Unknown Executive: to your customers. And that's the lesson from the success that Tim's is having in Canada, and their outperformance.

Gregory Francfort: So we also do have value mechanisms from time to time up here. Right now we have a $3 breakfast sandwich with the purchase of any coffee. I had that this morning for breakfast, which was great. And that's all been really effective in his great for the business and guests are really enjoying that. So I think we're pretty well positioned up here and you can see that in the results.

Unknown Executive: versus, you know, the industry and frankly, their great absolute performance given, you know, given the overall economy in Canada right now, and it's the model for how we grow Burger King and all of our businesses.

Josh Cobsa: And the one thing I would add to that is that what's generating growth at Tim's in Canada is just relentless improvement across the business. What builds a great restaurant business is continually improving your food, improving your service. Making your restaurants look great, having a great relationship with with terrific motivated franchisees, focusing on on success for them and for us. And we're seeing that with Tim's and it is frankly the template for success everywhere for us.

Joshua Kobza: And, you know, that's not, that's not so far, we're not so far off of that level. And I think if we can make progress on a decent number of the things that I laid out a little bit earlier, we have confidence that we're going to get back to where we need to be to hit that guidance over the long term. Our next question comes from Danilo Gargiulo of A.B. Bernstein. Your line is now open.

Speaker Change: Thank you both.

Speaker Change: Thank you. Our last question comes from Christine Cho from Goldman Sachs. Christine, your line is now open.

Speaker Change: Thank you. So I think the previous question provides a good segue. But I think, how do you think about kind of the value messaging in other international markets? And, and how do you make sure that these kind of local strategies align with the brand equity and core strategies that you have here? Any color will be great. Thank you.

Josh Cobsa: If we continue to give better service, deliver better food, you know, the price part is an element of that, but it's not the only thing. And frankly, it's less important than most of the other things, which is continually giving a better experience to your customers. And that's the lesson from the success that Tim's is having in Canada and their outperformance versus, you know, the industry. And frankly, they're great absolute performance given, you know, given the overall economy in Canada right now.

Danilo Gargiulo: Yeah, Danilo, I would say a couple things about Burking's value approach, which we're really happy with overall. It's not something new. You know, we've had value in our business, and we've had compelling value offerings at the $5 price point and elsewhere for some time now. We have had our $5 Whopper Junior Duos out there, we have had the $5 Your Way meal a couple of times, and we have some great offers, both in printed and digital format.

Danilo Gargiulo: And I would say as we look at the business, and as we talk to some of our biggest operators, I'd say our feel is that we've got the value offering just right; we're not trying to change anything. We think it's working for the business, and we can see it's really compelling for consumers and what they're looking for in the business today. And we see that in the incidence of all of those offers, which have been received really well.

Danilo Gargiulo: But importantly, they're also profitable for our franchisees; they have a reasonable gross profit margin. And so our I think our franchisee base, our operators, and we're a big owner of restaurants too, we think it's exactly the right balance for the business. Just to give a little bit more color on that, you know, Tom and the team just decided together with the franchisees that we're going to extend that $5 Your Way meal now into October because we feel like it's working perfectly for the business, and we think customers are loving it.

Danilo Gargiulo: So we're going to keep that going because we think we have the right balance. So, you know, I think we've got the right things going on. We're happy with how it's performing in the business. And that's kind of what's embedded in our outlook for the rest of the year. Hey Danilo, I'll just add that, you know,

Unknown Executive: Hey Christine, this is Josh. It's a great question and I think, I guess that's something...

Joshua Kobza: Hey Danilo, I'll just add that, as you know, we launched the $5 Your Way meal in early June, and we're seeing some really interesting stats so far early on. We're seeing it over-index with lower and middle-income consumers, which was really the intended purpose. We're also seeing it over index with women, and we're seeing the average check is over $10. And so I think as you look at the $5 Your Way meal, and you also look at it in conjunction with the $5 Whopper Junior Duos, we really have a comprehensive value strategy, plus wraps at $2.99, that really is able to speak to all of our guests in a comprehensive way that delivers value in a profitable way for our franchise.

Unknown Executive: A great value proposition is one important part of the business, and it is important all over. And you've seen us in a lot of our international markets as well bring through compelling value. That can mean something a little bit different.

Unknown Executive: in each market, what exactly we focus on, whether it's a meal or, you know, a two burger for a fixed price, that can be a little bit local, but wherever we've had really great value for our customers, everyday value, and promotions, those are the things that I think are really resonating with guests in the US and Canada and in a large number of our international markets. So it's something that we're focused on, and all of our international teams try to work with the local master franchisees to make sure that we've got the right balance of that in each of our markets.

Sara Senatore: Thank you. Our next question comes from Sara Senatore from Bank of America. Sara, your line is now open.

Katherine Griffin: Hi, thank you. This is Katherine on behalf of Sara.

Katherine Griffin: Thanks for the questions. First, I just wanted to ask about some of the pressure that you're seeing in the demand and competitive environment. Will this change how you're thinking about the trajectory of the franchisee cash flow target?

Joshua Kobza: Great, thank you.

Joshua Kobza: We're feeling good about it, and franchisee profitability is absolutely top of mind, and we want to continue making improvements there, but nope, doesn't change a thing.

Katherine Griffin: Okay, thanks. And then a second question just on some of the investments in Tim's China. I think given some of the pretty persistent challenges in that market, had you considered pausing or maybe rethinking some of the growth targets in that market rather than reinvesting in the business in order to sustain growth there? Kevin, so my point of view on this.

Joshua Kobza: Kevin, so my point of view on this is that we absolutely believe in the long-term potential of the coffee market in China. We recognize it's very competitive right now, but I think that's a reflection of the size of the opportunity.

Joshua Kobza: But I think any business that's going to be competitive in China, you've got to get to critical mass; you've got to get to a large scale to be competitive. So I think it is really important over the medium to long term that we pursue a pretty aggressive growth path there. At the same time, we are working on making sure that we're operating the business in a really profitable way.

Joshua Kobza: So the team at Tim's in China has taken a lot of actions to improve the profitability of the business, the profitability of the restaurant base. And I think we're seeing some good progress now; we've come a long way in the first six, seven months of the year. And that's encouraging to us in terms of how the business is performing, but it also gives us more confidence to want to see that business grow aggressively in the future.

Josh Cobsa: And it's the model for how we grow burger king and all of our businesses. Thank you both. Thank you.

Jeffrey Bernstein: Our next question comes from Jeffrey Bernstein from Barclays. Jeffrey, your line is now open.

Speaker Change: Thank you.

Unknown Executive: We have no further questions on the line. I will now pass back to Josh for closing remarks.

Pratik Patel: Hi, good morning. This is Pratik for Jeff.

Christine Cho: Thank you both. Thank you. Our last question comes from Christine Cho from Goldman Sachs. Christine.

Pratik Patel: Thanks for taking the question. Sami, it seems like the balance sheet, even after these acquisitions and investments in Tim China, etc., is in pretty good shape with a sizable cash balance. And I believe the release mentioned that you're within your target leverage ratio of around five times. Just how should we think about cash usage going forward? It seems like, you know, the shares are at a pretty attractive value right now. And I just wanted to get your thoughts on potential share repurchases going forward. Thank you.

Christine Cho: Thank you. Our last question comes from Christine Cho from Goldman Sachs. Christine, your line is now open. Thank you.

Sami Siddiqui: Hey, Pratik, thanks for the question. And yeah, we similarly feel very strongly about the position we're in and the balance sheet, the balance sheet position. I think it's really a testament to the business model. It's a resilient business model that generates really high free cash flow, which allows us to do a couple things. I think, number one, and first and foremost, we're going to continue to invest in our own business. As you've seen with the Burger King Reclaim the Flame plan, as you've seen really with the Carroll's acquisition, which was really an investment in the Burger King US business.

Joshua Kobza: Yeah, Christine, and Josh, it's a great question. And I think that's something we talked about a lot of just the value: a great value proposition is one important part of the business. And it is important all over. And you've seen us in a lot of our international markets as well, bringing compelling value. And that can mean a little bit of something a little bit different in each market. What exactly we focus on, whether it's a meal or, you know, two burgers for a fixed price, that can be a little bit local, but wherever we've had really great value for our customers, everyday value, and promotions.

Christine Chow: Our last question comes from Christine Chow from Goldman Sach. Christine, your life now open. Thank you.

Sami Siddiqui: And I think it's really important that we continue to do that with the right discipline measures in place. Number two, we are committed to our dividend and having a healthy payout ratio. And so as we think about capital allocation, the dividend has been a big part of our strategy for a while now and will continue to be a big part of our capital allocation going forward. And then, as you sort of start thinking about share buybacks in your question, and you sort of measure them against deleveraging, I think it's hard to speak sort of of an absolute, but I'd say our preference at the moment is really to focus on deleveraging

Joshua Kobza: Those are the things that I think are really responding with guests in the US and Canada and in a large number of our international markets. So it's something that we're focused on in all of our international teams, trying to work with the local master franchisees to make sure that we've got the right balance of that in each of our markets.

Unknown Executive: Great. Well, thanks everybody for joining us today. We really appreciate the time and the great questions. We look forward to chatting again. We'll update you here in a few months with our Q3 earnings. Have a great day.

Sami Siddiqui: We've been very clear that we want to hit the mid four times leverage range by the end of this year, and we remain committed to that. And so we will continue to, you know, always be nimble. But I think deleveraging is our priority on the balance right.

Operator: We have no further questions on the line. I will now pass back to Josh for closing remarks. Great. Well, thanks, everybody, for joining us today. We really appreciate it.

Pratik Patel: Got it. Thanks. I appreciate that.

Joshua Kobza: Great. Well, thanks, everybody, for joining us today. We really appreciate the time and the great questions. We look forward to chatting again. We'll update you here in a few months with our Q3 earnings. Have a great day.

Jon Tower: Our next question comes from Jon Tower from Citi. Jon, your line is now open.

Operator: Ladies and gentlemen, this concludes today's call. Thank you for joining us. You may now disconnect the line.

Jon Tower: Great, thanks for taking the question. Just a follow-up on the China business, maybe not the Tim Horton side, but the PLK, as well as the Burger King business. I'm just curious, you know, with the investment in PLK, should we expect any strategic shifts in that market specifically around that brand? And then can you give us an update on the Burger King China business? And I know that that's been a source of on that list, slowing growth for the overall company. Have you made any progress in, you know, shoring up growth going forward from a unit growth perspective over there? Hey, John. It's Josh.

Joshua Kobza: Hey, John, it's Josh. Thanks for the questions. I'll take each of those.

Joshua Kobza: So in Popeyes, you know, we were really encouraged by how the brand was received initially. And I would say that the shift is just for us to take it on and make sure it has the capital and the support it needs to realize its full potential. So I'd say not a big, like brand positioning, or strategy shift there. I think we'll just be working on building up the team and then building up the development pipeline to make sure that we start growing that at the pace we think makes sense. So that's the game plan there. We'll you know, and we're planning to do that ourselves for a while.

Josh Cobsa: So I think the previous question provides a good segue, but I think how do you think about kind of the value messaging in other international markets and and how do you make sure that these kind of local strategies align with the brand equity and core strategies that you have here. Any color will be great. Thank you.

Joshua Kobza: And then we'll start working on finding the right long-term local partner there over the next couple of years. And in terms of Burger King in China, it has been a challenging environment. So the business has been a bit challenged there. We don't have anything new to share as that one's more of a work in progress. I'm happy that we made some progress on Tim's and Popeyes. And we're still working on Burger.

Eric Gonzalez: Our next question comes from Eric Gonzalez from KeyBank Capital Markets. Eric, your line is now open.

Chris Anfer: Hi, good morning. This is Chris Anfer, Eric.

Chris Anfer: So maybe following up on the prior franchisee profitability question, can you provide an update, at least at a high level, on some of the puts and takes around BK domestic franchisee profitability today? I know you'll provide specific details once the year closes, but any updates on progress against last year's $205K average four-wall EBITDA in the context of some of the consumer and operating dynamics today? Including a focus on value, commodity, and labor, cost trends, or anything else that's relevant. Thank you.

Sami Siddiqui: Hey, Chris, I can take the first or second part of that question regarding sort of some of the costs we're seeing in the business. You've obviously seen the reported sales that we're seeing in the Burger King business and, really, roughly flat for the quarter on the top line. As you think of sort of some of the commodity impacts, we haven't seen a ton of impact in terms of commodity inflation from beef, which was widely reported on, I think, earlier this year.

Unknown Executive: www.globalonenessproject.org

Sami Siddiqui: We do expect in the second half of the year to see some beef inflation. And so I think as you think about the Burger King commodity basket for the full year, we'll see low single-digit commodity inflation in that range, primarily driven by beef. There are some other items that are also impacting that. And then on the labor side, I think nothing dissimilar from what we're seeing across the rest of the industry, also with low single-digit inflation on the labor side. So those are probably the cost elements. I don't know, Josh, if you have anything to add to that. No, I think, as you mentioned, we'll share the update at the end of the year.

Joshua Kobza: As you mentioned, we'll share the update at the end of the year. I'd say overall, BKUS franchise profitability has been sort of stable to improving, and so that's what we're seeing so far, and we'll give specific numbers when we get to the end of the year.

Gregory Francfort: Great, thanks so much. Thank you. Our next question comes from Gregory Francfort from Newham Securities. Gregory, your line is now open. Hey, thanks you guys for the questions.

Gregory Francfort: Our next question comes from Gregory Francfort from Dunningham Securities. Gregory, your line is now open.

Joshua Kobza: Yeah, Greg, I'll take this one. You know, there has been some consumer softness in Canada, but there are a little bit different dynamics. I would say inflation has softened up in Canada a fair bit, but there's a little bit more unemployment up here. So there is a little bit of nuance there. And, you know, I think the probably the biggest difference is just Tim's is doing a great job outperforming the market, even in a difficult market.

Operator: Ladies and gentlemen, this concludes today's call. Thank you for joining us. You may now disconnect the lines.

Joshua Kobza: And that's been the case for a while now, and it's certainly been the case in the year to date and in the second quarter. In terms of value offerings, you know, two thoughts on this one. One, I think that Tim's business, what it does so well, is provide incredible everyday value.

Joshua Kobza: You see that in our menu prices, but we also hear back from guests, and any of our brand surveys were number one in value for money. So I think we've been really disciplined in our everyday pricing, which has been paying really good dividends. Though, you know, we also do have value mechanisms from time to time up here. Right now, we have a $3 breakfast sandwich with the purchase of any coffee. I had that this morning for breakfast, which is great.

Joshua Kobza: And you know, that's all been really effective and is great for the business, and guests are really enjoying it. So I think we're pretty well positioned up here. And you kind of see that in the results. And the one thing I would add to that is that what's

Operator: Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.

Patrick Doyle: I would add to that that what's generating growth at Tim's in Canada is just relentless improvement across the business. What builds a great restaurant business is that I'm continually improving your food, improving your service, making your restaurants look great. Having a great relationship with terrific motivated franchisees, focusing on success for them and for us. And we're seeing that with Tim's, and it is, frankly, the template for success everywhere for us.

Patrick Doyle: If we continue to give better service, Deliver Better Food, you know, the price part is an element of that, um, but it's not the only thing, and, frankly, it's less important than most of the other things which are continually giving a better experience of Canada, the World of Agriculture, and the International Agricultural Environment.

Christine, it's a great question. And I think I guess that's something, you know, that we talked about a lot of just the value, a great value proposition is one important part of the business, and it is important all over. And you've seen us in a lot of our international markets as well, bring through compelling value and that can mean a little bit, something a little bit different in each market. What exactly we we focus on whether it's a meal or, you know, a two burger for fixed price.

That can be a little bit local, but wherever we've had really great value for our customers every day value and promotions. Those are the things that I think are really resonating with guests in the US and Canada and in a large number of our international markets. So it's something that we're focused on and are all of our international teams try to work with the local master franchisees to make sure that we've got the right balance of that in each of our markets. Markets.

Thank you. We have no further questions on the line.

I will now pass back to Josh for closing remarks. Great. Well, thanks everybody for joining us today. We really appreciate the time and the great questions. We look forward to trying again. We'll update you here in a few months with our Q3 earnings.

Have a great day.

Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect the lines.