Q4 2024 Restaurant Brands International Inc Earnings Call
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Speaker Change: Good morning and welcome to the Restaurant Brands International full year fourth quarter 2024 earnings conference call. All participants will be in listen-only mode.
Speaker Change: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad.
Speaker Change: You will hear a tone to confirm you are in the queue.
Speaker Change: To exit the question queue, you may press star then 2. All callers will be limited to one question.
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 and welcome to our earnings call for the year and quarter ended December 31st, 2024.
Speaker Change: Joining me on the call today are Restaurant Brands International's Executive Chairman Patrick Doyle, CEO Josh Kobza, and CFO Sammy Siddiqui.
Speaker Change: Following remarks from Josh, Sammy, and Patrick, we will open the call to questions.
Speaker Change: Today's discussion may include forward-looking statements, which are subject to risks detailed in the press release issued this morning and in our SEC filing.
Speaker Change: We will also reference non-GAAP financial measures, reconciliations of which are available in the press release and trending schedules available on our website. Please note that franchisee profitability referenced on this call is based on unaudited, self-reported franchisee data.
Speaker Change: As a reminder, following our acquisition of Carol's Restaurant Group, which closed on May 16, 2024, and our acquisition of Popeyes China, which closed on June 28, 2024, we introduced a sixth reportable segment, Restaurant Holdings, which comprises the Popeyes China business and the Burger King Carol's Restaurant.
Speaker Change: The consolidated growth metrics discussed on this call, including organic adjusted operating income growth and organic adjusted EPS growth, exclude results from the restaurant holding segment.
With that, I'll turn it over to Josh.
Thank you. Thank you.
Good morning, everyone, and thank you for joining us today.
Speaker Change: As I begin my third year in this role, I'm incredibly proud of the strong foundations we've built across all of our businesses.
Speaker Change: I've spent the past two years traveling the world, from Australia to Japan and Nova Scotia, visiting countless restaurants and connecting with our dedicated team members, franchisees and guests.
Speaker Change: Across every visit, one thing has remained clear. Successful restaurants execute the fundamentals of quality, service, and convenience with excellence.
Speaker Change: Reflecting on 2024, while we encountered challenges, our focus on delivering these fundamentals enabled us to provide even better experiences for our guests, and outperform most of our global QSR peers, from both a top-line and bottom-line perspective.
Speaker Change: In 2024, we grew comparable sales 2.3%, net restaurants 3.4%, and system-wide sales by 5.4%.
Speaker Change: Our top-line performance, coupled with disciplined cost management and a strong business model, drove significant operating leverage and resulted in 9% organic-adjusted operating income growth.
Speaker Change: Our brands continue to stand out for their high quality food and beverages.
Speaker Change: This year, we delighted guests with exciting menu innovations, from Wednesday's Whopper at Burger King in the U.S. to our King-to-Bees collaboration with a Michelin-starred chef at Burger King Spain, and seasonal hits like the Thanksgiving Sub at Firehouse.
Speaker Change: Quality extends beyond menu and ingredients. It's also about execution and delivering a great guest experience.
Speaker Change: By enhancing team member trainings and upgrading restaurant equipment, we are strengthening in-restaurant operations and elevating product satisfaction across our flagship offerings like Popeye's Bone-in Chicken, The Walker at Burger King, and Tim's Coffee and Breakfast Sandwiches.
Thank you.
Speaker Change: In 2024, Tim's Canada reduced already remarkably fast drive-thru times and hosted Tim's Way training symposiums to elevate hospitality.
Speaker Change: Popeyes US improved order accuracy, driver wait times, and product satisfaction.
Speaker Change: and across all our businesses, we reinforce our commitment to excellence by transitioning underperforming franchise portfolios to stronger, more engaged operators.
Speaker Change: Expanding access to our brands for guests around the world remains a key focus.
Speaker Change: This year, we grew in 110 brand market combinations and improved our digital capabilities to facilitate a seamless experience for all guest interactions.
Speaker Change: By delivering on these three core fundamentals, quality, service and convenience, we are solidifying RBI as the preferred home for franchisees looking to grow their businesses and for industry talent looking to grow their careers across brands and geographies.
Speaker Change: Our franchisees have the opportunity to invest in up to four strong, growing brands, offering high-quality products that resonate with guests worldwide, all while benefiting from RBI's global infrastructure and talent.
Speaker Change: We already have many examples of franchisees capitalizing on these opportunities.
Speaker Change: From Yuri Miranda, who helped grow Burger King Brazil into a nearly $1 billion system-wide sales business and is now launching firehouse subs in that market, to Gregorio Jimenez, who built a thriving Burger King business in Spain, later expanding to Portugal and adding Tim's Spain, Popeye's Spain, and Popeye's Italy to his business.
Speaker Change: or Ken and Alicia Jure at Tim Hortons Canada who've grown their business in Manitoba to now include firehouse subs.
Speaker Change: Supporting our franchisees' profitability remains foundational to our success. It's why we continue to be accountable to franchisees by sharing average restaurant profitability across our four brands and their home markets.
Speaker Change: We're two years into this commitment, and feel good about the progress we've made.
Speaker Change: For 2024, average four-wall EBITDA at Tim's Canada exceeded $305,000 Canadian dollars, up from $280,000 in the prior year.
and Popeye's US increase to just over $255,000 from $245,000.
Speaker Change: Burger King U.S. remained stable at $205,000, marking a substantial improvement from just two years ago.
Speaker Change: and Firehouse Subs saw a step back to approximately $90,000, largely due to broader substandard category sales dynamics over the summer and fall.
Speaker Change: Overall, we're very pleased with the improvements we delivered at Tim's and Popeye's and we're working to return to growth at Burger King and Firehouse in 2025.
Speaker Change: While 2024 had its challenges, our teams and franchisees remained focused and resilient.
Speaker Change: Positioning RBI and its brands for long-term success and for 2025 to be another year of 8% plus organic adjusted operating income growth.
Speaker Change: Together, we're building businesses that thrive on quality, service, and convenience, while delivering meaningful value to our guests, our franchisees, and our shareholders alike. With that, let's move into our second highlights, starting now with Tim Hortons.
Speaker Change: Tim Hortons delivered a strong performance in 2024 and surpassed $1 billion in AOI for the first time.
Speaker Change: Tim's Canada grew comparable sales 4.3%, significantly outpacing major peers in the market, which declined 0.5% on average.
Speaker Change: For Q4, Tim's in Canada delivered a 2.5% increase in comparable sales, again outperforming the industry, which was relatively flat.
Speaker Change: Growth in Canada was primarily driven by traffic, the best way to get it done. With Tim's delivering its 15th consecutive quarter of positive traffic growth, an impressive achievement given its leading market share position.
Speaker Change: This success highlights Axel and the team's focus on offering guests quality food and beverages at a great price, having engaged restaurant owners, and providing exceptional digital and physical convenience.
Speaker Change: Q4 morning day part sales outpaced overall sales, fueled by high single-digit growth in breakfast sandwiches and wraps, including an extension of our $3 hot breakfast sandwich offer.
Speaker Change: Our continued morning innovation, including our recent launch of freshly cracked Canadian scrambled eggs, keeps us at the forefront of guest preferences.
Speaker Change: In the PM, we built on the success of our Loaded and Anytime Snackers platforms with the launch of our flatbread pizzas in April, and delivered over 5% growth in PM main foods during the quarter.
Speaker Change: Flatbread Pizzas support our goal of increasing Tim's presence throughout the day and expanding our appeal for families.
Speaker Change: We're excited to keep innovating with new flavors and side pairings that leverage our restaurant's new ovens.
Speaker Change: We're also expanding our beverage leadership into strategic growth categories like cold and espresso-based beverages.
Speaker Change: Warmer-than-average Q4 temperatures contributed to over 6% growth in cold beverages, while our delicious lineup of ice caps, cold brews, and fletchers continues to meet evolving guest preferences.
Speaker Change: Meanwhile, our early results from new espresso machines, which are currently being tested in about a hundred restaurants, are showing promising potential.
Speaker Change: Our operations team and restaurant owners are committed to operational excellence.
Speaker Change: Q4 marked Tim's eighth consecutive quarter of year-over-year improvements in average weekday morning drive-through times, which now average about 28 seconds per car at the window.
Speaker Change: This solidifies TIMSS as one of the fastest drive-through concepts in North America. The team's consistent focus on speed of service is enhancing guest satisfaction, boosting throughput, and driving sales.
Speaker Change: We estimate every one second reduction in drive-thru time translates to approximately $30,000 of incremental annual sales per restaurant.
Speaker Change: On the development front, we're very excited for Canada to return to positive net unit growth in 2025, supported by compelling unit economics and ambitious restaurant owners looking to expand, especially in underpenetrated regions like Western Canada and in rural areas.
and the rest of the team. Thank you. Thank you.
Speaker Change: Kim Wharton's deep community ties remain a key pillar of its strength and brand love.
Speaker Change: In 2024, our restaurant owners helped raise $44 million Canadian dollars for local charities and our Tim's Foundation camps, including nearly $11 million Canadian dollars from Holiday Smile Cookie and Q4.
Speaker Change: I'm incredibly proud of our Tim's team and our restaurant owners.
Speaker Change: Tim Hortons remains one of the only brands in Canada consistently growing traffic, which was up nearly 3% for 2024. And we're doing it profitably for our restaurant owners.
Speaker Change: With its strong value proposition, number one brand love, innovative marketing, operational excellence, and dedicated restaurant owners, I'm confident Tim's will continue to deliver positive sales growth and industry outperformance.
Thank you. Thank you.
Speaker Change: Shifting now to international, which continues to be a strong growth engine, closing the year with over 15,600 restaurants and over $18 billion in system-wide sales, approximately 60% of which was driven by our top 10 markets.
Speaker Change: We feel very good about the relative performance of our international business versus our global peers.
Speaker Change: In 2024, international comparable sales grew 3.3%, including 4.7% growth in the fourth quarter.
Speaker Change: We saw solid growth in many of our largest markets, including Australia, Spain, the UK, and Brazil, thanks to well-executed calendar initiatives, compelling core value offerings, and great restaurant-level execution.
Speaker Change: We achieved net restaurant growth of 6.1%, despite temporary headwinds from geopolitical pressures in certain markets, as well as net closures in BK China.
Speaker Change: While we don't have an update on BK China today, we're optimistic we'll have a resolution relatively soon and Sammy will provide you with a few financial details on the business shortly.
Speaker Change: Importantly, since most of the development slowdown stemmed from lower average restaurant sales, or ARS, markets like China, the overall impact on system-wide sales was minor.
Speaker Change: As a result, we delivered full-year system-wide sales growth of 10%.
Speaker Change: Meanwhile, Burger King, Spain, and Italy, each with strong <unk> of $1 6 million remained steady contributors to our restaurant expansion and the team at hungry Jacks in Australia continues its momentum delivering nearly $2 $6 million.
Speaker Change: Across its 471 restaurants.
Speaker Change: We also know it's important to continue growing in markets with enormous white space opportunities like India and China.
Speaker Change: While these markets are not yet major drivers of NOI, we are laying the foundation to ensure that RBI brands become strong players in the world's largest <unk> markets in the future.
Speaker Change: Additionally, our continued expansion of popeye's, Tim Hortons and firehouse subs into new international markets will be a long term catalyst for unit growth.
Since acquiring <unk> in 2017, we've brought the brand to more than 15, new markets, including New Zealand, Italy, and Costa Rica in 2024.
Speaker Change: We've grown the business from roughly 500 international restaurants to nearly 500 today.
Speaker Change: And from around $300 million in system wide sales to nearly $1 3 billion.
Speaker Change: The brand's remarkable 47% system wide sales growth this year building on 61% growth from the prior year showcases its incredible momentum.
Speaker Change: This success is driven by strong partnerships with our master franchisees, such as RV, Iberia, which expanded to over 150 locations in Spain, and just five years and recently launched pop is in Italy.
Speaker Change: It's clear that popeye's delicious high quality chicken and authentic, Louisiana flavors resonate with guests around the world and as we keep delivering strong system wide sales growth, we will see more robust our contribution to our NOI.
Speaker Change: Turning now to Burger King in the U S and Canada, which grew comparable sales, 1% in 2024 and.
Speaker Change: In the fourth quarter Burger King U S outperformed major Burger <unk> with a one 5% increase in comparable sales a solid achievement following last year's six 4% increase.
Speaker Change: Tom his team and our dedicated franchisees are executing the multiyear Mclean the plan plan and providing guests exciting menu innovation compelling value offerings and improved overall experience.
Speaker Change: By emphasizing operational excellence and investing in modern welcoming restaurants, we're setting the brand up for long term success.
Recent menu initiatives, such as the atom family menu, featuring featuring Wednesdays Whopper the million dollars Whopper campaign, and the <unk> platform have reinforced that guests create innovation and high quality food at a great price.
Speaker Change: For 2025, we will continue leading into our key differentiators of flame grilling, the whopper and have it your way, while enhancing quality and consistency through menu renovation and operational improvements.
Speaker Change: Operational excellence remains a key pillar of our strategy in.
Speaker Change: In 2024 hour a operators achieved average four wall EBITDA of over $275000, that's 35% higher than the system average.
Speaker Change: This is one of the most compelling metrics, we can share with our franchisees as it demonstrates the direct impact of operational excellence on running a healthy and growing business.
Speaker Change: It also reinforces our ongoing efforts at the corporate level to raise the bar <unk>.
Speaker Change: Transitioning disengage franchisees out of the system and the tracking dedicated operators who share our vision for brand excellence.
Speaker Change: In January I had the opportunity to meet with two such dedicated operators, Tim fully and Jon Kaufman.
Speaker Change: Since acquiring about 20 restaurants in North Carolina in 2021 from an underperforming franchisee they've transformed their portfolio improving their franchise successful from a D to an a.
Speaker Change: They delivered an over 30% increase in average restaurant sales and more than doubled their restaurants, four wall EBITDA to an impressive $325000 per store on average.
Speaker Change: Their success is built on the right fundamentals instilling a culture of operational excellence training and engaging their team members executing with the guests first mentality and modernizing their assets.
Speaker Change: Exemplify how powerful Burger king can be in the hands of strong operators, which is why we're excited about the recent expansion acquiring 30 more restaurants from another underperforming franchisee in the Carolina region.
Speaker Change: Modern image is another key driver of our success during my trip to North Carolina.
Speaker Change: Two newly opened Carol civil restaurants, and they are truly stunning these restaurants showcase the future of Burger King beautiful inviting and well designed restaurants with modern guests and families in mind.
Speaker Change: With about 80 systems in operation today, we're thrilled with the early results and excited to see how these restaurants will inspire both our franchisees and our guests with a transformed Burger king experience.
Speaker Change: Our commitment to modernizing modernizing the Burger King system remains very strong in.
Speaker Change: In 2024, we completed 370, remodels, including about 60, carol's restaurants, bringing the system to 51% modern image weed.
Speaker Change: We had about 220 remodels that have been opened for more than six months now and they continue to deliver an average of mid teens year, one sales uplift net of control and even stronger improvements in franchisee profitability.
Speaker Change: As we've previously shared with you we are on track to reach 85% plus modern image by 2028, and we are confident this transformation will further strengthen <unk> position in the industry.
Speaker Change: At <unk>, we made progress towards the modern image by accelerating our pace of Remodels in 2024.
Speaker Change: Additionally, we've initiated work to begin Refranchising select locations in $2025. Two years ahead of our original plan and expect to accelerate Refranchising efforts in 2026 and beyond.
Speaker Change: As we look ahead Burger King is in a strong position to build on its recent success with a continued focus on operational excellence menu innovation and a modernized restaurant image. We are confident in our ability to drive sustainable long term growth for the brand and strong returns for our franchisees.
Speaker Change: Turning now to popeye's in 2024 pump I've continued its growth trajectory and grew net restaurants by three 7% driving a four 2% increase in system wide sales.
Speaker Change: While top line results came in softer than we would've liked our six dollar big box value meal and protein only three for $5 offering resonated with guests in Q4, helping us to modestly expand our share within the chicken <unk> category. This year.
Speaker Change: Over the past few quarters, Jeff and team have been working closely with our franchisees on several strategic initiatives to support our <unk> plan.
Speaker Change: We're excited to announce that roughly 85% of popeye's restaurants committed to amend their franchise agreement, resulting in alignment on our easy to love plan to drive sales through increased media investment and a unified restaurant image.
Speaker Change: This amendment commits participating restaurants to test higher national advertising rates over three years beginning this April with an initial step up from four 5% to 5% in year, one and up to five 5% by year three subject to meeting certain profitability thresholds.
Speaker Change: The amendment also establishes a remodel schedule by which most of the system will feature a modern image by 2030, ensuring our guests will enjoy a beautiful updated restaurants across all locations as.
Speaker Change: As part of this commitment participating franchisees will.
Speaker Change: We'll receive a $4000 royalty credit per restaurant to offset that year, one increased advertising investment.
Resulting in a $10 $5 million investment from <unk>.
Speaker Change: Taken together the amendment supports our commitment to delivering impactful brand messaging, achieving modern image and providing greater flexibility and alignment for our franchisees.
Speaker Change: Meanwhile, we are advancing the popeye's experience and simplifying operations with our easy to run initiative, which standardizes processes enhanced technology and introduces new kitchen equipment and a new production line.
Speaker Change: Following 18 months of testing across 200 locations. We are excited to begin rolling out these updates systemwide.
Speaker Change: By the end of 2026, our goal is for all top locations in the U S to feature cloud based point of sale systems digital dropped charts sticky label printers, or order ready ready boards kiosks and upgraded back of house equipment, including auto battery makers and improved hot holding units.
Speaker Change: These upgrades enhance the team member experience reduce wait times and improve order accuracy, all while preserving the brand's unique Louisiana, Louisiana culinary heritage and our food quality.
Speaker Change: Franchisees can also choose to implement the new production line as they adopt the upgraded equipment or during their restaurants next remodel.
Speaker Change: During a recent visit Orlando, and Houston, which our hub markets for easy to run I saw firsthand how operators who have embraced these improvements are already delivering notable performance gains.
Speaker Change: We also remain committed to our easy to access initiative and have been raising the bar for new franchisee development. So that every new popeyes restaurants delivers a great guest experience.
Speaker Change: While this heightened focus on operational standards led to a slight slowdown in our pace of development. We still opened over 160 restaurants in 2024 and remained amongst the fastest growing freestanding drive thru chicken USR concepts in the U S and Canada.
Speaker Change: As we look ahead, we plan to build on this momentum through new format innovations that enhance convenience optimized build cost and uphold strong average unit volumes.
Speaker Change: We are confident these strategic priorities and our franchisees alignment will strengthen <unk> competitive position and drive sustainable growth well into the future.
Speaker Change: I'll close with an update on firehouse subs in the U S and Canada.
Speaker Change: While full year comparable sales declined about 1% due to broader use sub sandwich category challenges in Q3, we saw about five points of sequential improvement in Q4, resulting in flat comparable sales for the quarter.
This was driven by the successful launch of our hot sauce bar and the introduction of delicious menu innovations such as our Thanksgiving and friendship subs as well as strong performance in Canada.
Speaker Change: On the development side after several years of laying important foundational groundwork, including development team investments moving away from our legacy area developer arrangement and introducing targeted development incentive programs. We are now seeing real acceleration in net restaurant growth.
Speaker Change: This year, Mike and team opened 80, net new restaurants across the U S and Canada and more than doubled net restaurant growth from 3% last year just over 6% in 2024.
Looking ahead, our development pipeline for 2025 is even stronger reinforcing our confidence in delivering another year of accelerated expansion.
Speaker Change: We're excited to continue building on our success in bringing firehouse subs to even more guests across North America in the years ahead.
Speaker Change: With that I'll hand, it over to Tammy to walk you through our financial results.
Tammy: Thanks, Jos and good morning, everyone.
Speaker Change: Today, I will discuss our long term outlook, our 2024 financial results and capital structure and some modeling nuances to keep in mind for the upcoming year.
Speaker Change: I'll also provide some incremental color on Burger King China.
Speaker Change: Last February we introduced <unk> long term growth algorithm targeting 3% plus comparable sales, 5% plus net restaurant growth, 8% plus system wide sales growth and 8% plus organic growth on average over the five year period from 2024.
Speaker Change: 2028.
Speaker Change: We acknowledged from the outset the results could fluctuate year to year due to market dynamics unexpected headwinds, our strategic investments and that we're committed to making the right long term decisions for our business to ensure sustainable growth and strong financial performance two.
Speaker Change: 2024 was a good example of this global comps grew two 3% outpacing global <unk> peers, but still reflecting a challenging consumer backdrop moderated pricing and some periods of marketing softness across some of our brands.
Speaker Change: Net restaurant growth of three 4% was affected by a few discrete items, including a development slowdown and geopolitical impacted markets and a 100 basis point year over year headwind from Burger King China.
Speaker Change: Importantly, given the low RF contribution from BK, China restaurants, averaging around $400000 per unit, we did not experience a material impact to system wide sales.
We know NRG expectations are top of mind, and we expect to have a resolution for Burger King China relatively soon.
Speaker Change: Following a resolution we will be able to update you with any potential implications on our energy targets.
Speaker Change: Importantly, we are on track to achieve our guidance for 8% plus organic NOI growth supported by continued cost discipline and a development focus on a higher system wide sales and NOI contribution markets.
Speaker Change: At Tims, we're excited to return to positive net unit growth in Canada, while accelerating in the U S. Importantly, Canadian unit growth where are assets $2 4 million Canadian dollars on average is accretive to both system myself and AOI growth.
Speaker Change: At BK or are asset now reached $1 $6 million per unit, we expect a more stable development outlook, while remodels remain our top priority. We are also given strong operators with a modern portfolio the opportunity to expand.
Speaker Change: And popeye's, we've added nearly 1300 restaurants since 2017 and reached over one $9 million <unk> in the U S. The team has been doing the right thing for the long term health of the brand by ensuring new development occurs with the strongest operators, we expect to see continued growth at popeye's.
Speaker Change: Supported by strong and improving unit economics.
Speaker Change: Firehouse, which delivers nearly $1 million in IRS achieved impressive NRG acceleration in 2024 and is well positioned for another strong year in 2005.
Speaker Change: And finally in our international markets growth will be driven by a mix of new brand market combinations as well as increased penetration in existing high RF market like France, Australia and the UK.
Adding that all up we are confident our business brands and partners can support reaching 5% NRG overtime.
Speaker Change: While 2020 for topline results were below our long term average targets disciplined cost management enabled us to deliver above average organic growth of 9% underscoring the strength of our business model.
Speaker Change: Our two largest businesses Tim Hortons in international stood out highlighting their strong fundamentals.
Speaker Change: <unk> achieved over 10% organic NOI growth in 2024 building on 7% growth last year, while international grew organically by over 7% following a robust 15% increase in 2023.
Speaker Change: Turning now to a few call outs from the year and the fourth quarter.
Speaker Change: First segment G&A for the full year, excluding restaurant holdings decreased to $632 million driven by a $15 million decrease in Q4.
Speaker Change: This was primarily due to lower incentive based compensation and benefits and benefits from cost initiatives identified during 2024, which should continue to flow through our P&L through the first half of 2025.
Speaker Change: Second in Q4, Tim supply chain $520 million increase in organic gross profit dollars driven by lapping an $11 million trade expense true up in the CTG business from Q4 of 'twenty, three and a $9 million increase in the underlying supply chain business full year gross profit margin was 19 five.
Speaker Change: Percent, which was slightly ahead of our guidance of around 19%.
Speaker Change: And lastly, we recorded $20 million of net bad debt expenses in Q4, primarily related to Burger King, China, which I will expand on shortly.
Speaker Change: Now turning to EPS 2024, adjusted EPS increased to $3 34 per share from $3 24 last year, representing organic growth of four 4%. While Q4, adjusted EPS grew 11% organically year over year to 81 per share.
Speaker Change: As a reminder, our 2023 adjusted EPS. It included a 12 cent per share net benefit related to discrete non cash tax items for.
Speaker Change: For the full year 'twenty four we had roughly an 18% adjusted effective tax rate.
Speaker Change: Assuming no changes in tax policy, we would expect our 2025 tax rate to be in the 18% to 19% range, though we will be monitoring potential legislation closely.
Speaker Change: 2024, adjusted net interest expense was $554 million, which was slightly better than our prior guidance due to benefits from our proactive FX risk management through cross currency swaps.
Speaker Change: In Q4, we upsized, our USD CAD swap from $5 billion to $5 7 billion.
Speaker Change: And we extended the maturity through 2030 to better align with our debt maturities.
Speaker Change: In 2025, our net interest expense will reflect a full year of benefits from these upsized cross currency swaps as well as the benefits of our 2020 for refinancings and our interest rate swaps as a result of all of these we expect adjusted net interest expense to improve to the 500 to 520.
Speaker Change: Range based on an average so for rate of four 2%, which flows through to approximately 15% of our debt.
Turning now to free cash flow and our capital structure.
Speaker Change: We generated $1 5 billion and free cash flow inclusive of approximately $180 million of cash benefits from our hedges.
Speaker Change: Our strong cash flow generation allows us to continue investing in key initiatives like reclaim the flame at Burger King U S. While returning over $1 billion of capital to shareholders via a healthy and growing dividend.
Speaker Change: This year, we successfully met our mid four times net leverage target ending 2024 with $2 6 billion of liquidity and net leverage of four five times, assuming a full year of <unk> results.
Speaker Change: Looking forward, we continue to monitor the interest rate environment, and we intend to continue prioritizing deleveraging.
I would now like to spend a moment on Burger King China.
Speaker Change: As previously mentioned, we expect to have an update soon and thought it would be helpful to provide some financial context on the business.
Speaker Change: In 2024, we generated $37 million of royalty and franchise fee revenue from BK, China $19 million of which was reflected in our AOE.
Speaker Change: After terminating the agreement in October we recorded bad debt expense for the remaining $18 million of revenue recognized but not collected.
Speaker Change: Therefore, if you were to model no change in the current situation, we would see a $19 million year over year impact to our 2025 or about <unk> <unk> on an EPS basis.
Speaker Change: Even factoring in this potential headwind, we are confident we would still deliver 8% plus AOI growth in 2025.
Speaker Change: I'd also like to discuss restaurant holdings.
As a reminder, our H includes our <unk> restaurants top ice China and starting in 2025 firehouse, Brazil.
Speaker Change: We do not plan to own and operate these businesses permanently which is why we've carved them out to maintain the franchise or relationship with our BK and international segments.
Speaker Change: 2025 will be our first full year with our H&R consolidated results. So there are a few modeling items worth noting.
Speaker Change: A BK carols, we expect Q1 to see between 150 to 200 basis points of restaurant level EBITDA margin compression compared to our fourth quarter margin of 12, 3%.
Speaker Change: This is driven by normal Q1 seasonality.
Speaker Change: Stepped up add some levy following our completion of the fueled the flame investment.
Speaker Change: And the higher commodity costs, primarily related to beef.
Speaker Change: We also expect to have a step up in segment G&A for RH from $59 million in 2024 to around $100 million in 2025, as we incorporate a full year of results of BK careful and build out our teams for pop ice, China and firehouse, Brazil.
Speaker Change: I'll now wrap up with four additional modeling topics for the year ahead.
Speaker Change: Total capex Ti and remodel incentives will be between 400 and $450 million for the full year 2025, as compared to over $330 million in 2024, both including Capex related to RH.
Speaker Change: This increase was primarily driven by modern image investment that BK U S increased remodels in development at Tims, Canada, and accelerating development of op ex China.
Speaker Change: Second with the U S dollar strengthening we thought it would be helpful to provide a perspective on our FX exposure.
Speaker Change: For every one cent change in the USD CAD and the USD Euro, we see a roughly $8 million and 4 million annual impact respectively.
Speaker Change: Based on todays rates and assuming rates were to stay constant for the rest of the year. This would translate to a nearly $15 million FX headwind to our Q1, Oi and around $45 million for the full year.
Speaker Change: For context in both 2024 and 2023 the business saw about a $38 million annual impact from FX.
Speaker Change: Third as we think about our earnings and comparable sales trajectory for the year, we anticipate Q1 to be the lowest absolute same store sales and EPS quarter due to typical seasonality as well as a tougher comparable sales lap, including the roughly 100 basis point leap day benefit our business on Q1.
Speaker Change: 24.
Speaker Change: We expect the year over year comparisons to ease into the summer months.
Speaker Change: And finally, because we achieved our 2024 fueled the flame franchisee profitability target Burger King U S. Franchisees have increased their AD on levy from four to four 5% beginning in 2025 through at least 2026 as a result, our Burger King corporate advertising fund.
Speaker Change: Contribution, which was $58 million in 2024 will fall off in 2025 bps.
Speaker Change: This benefit should help offset potential year over year drags from BK, China, bad debt, which I already discussed and a $20 million reset and incentive based compensation and G&A that stems from a lower bonus payout in 2024.
Speaker Change: I know this is a lot, but as we start the year. We wanted to give you as much clarity as we can around the puts and takes of the P&L. In summary, we are pleased with our bottom line results in 2024 and are confident we will deliver another year of 8% plus organic NOI growth in 2025, and with that I'll hand, it over to Pat.
Speaker Change: Eric.
Pat: Thank you Sammy as I reflect on the past year. The first thing I want to highlight is franchisee profitability the foundation for driving sustainable growth across all aspects of our business.
Pat: In 2024, we remained laser focused on enhancing franchisee profitability through topline growth operational improvements and modernizing our restaurant image. Our continued emphasis on operational excellence, including all the hard work, our franchising and development teams are doing to place our rest.
Pat: Once in the hands of engaged operators is already starting to deliver results.
Pat: At RBI, we also used our global procurement capability to drive incremental savings for franchisees.
Pat: As you know, we fully owned the procurement and supply chain at Tim Hortons in Canada, and consistently deliver savings and best in class service to our franchisees and.
Pat: And recently, our procurement team has been working much more closely with the popeye's in Burger King systems as well.
Pat: We're already seeing the impact of these efforts Tim Hortons has exceeded our Canadian $300000 goal and popeye's continues making strides towards reaching the $300000 U S. Marc Burger King U S was relatively stable this year, while firehouse did experience some pressure due to.
Pat: Challenging category environment.
Pat: That said when I look at franchisee profitability compared to just two years ago and when I hear directly from our franchisees about their optimism in the business. It's clear that our franchisee base is far stronger today and that directly translates to healthier brands.
Pat: At the end of the day, it's franchisee profitability that fuels, our ability to hit our growth targets, which is why it remains a top priority for me and the entire team.
Speaker Change: Taking a closer look at each of our businesses I couldnt be prouder of what we're achieving together Tim.
Speaker Change: <unk> continues to prove quarter after quarter, it's incredible strength and ongoing potential.
Speaker Change: We're one of the only brands growing traffic in Canada, and we're doing it while maintaining leading market share and incredible achievement, especially for a brand of our scale.
Speaker Change: The return to positive unit growth in 2025 reflects the brand's strong underlying unit economics, and we're thrilled to bring more tims restaurants to communities across Canada.
Speaker Change: Our international business is a standout performer.
Speaker Change: Growing at a strong pace and continuing to outstanding global peers, we see tremendous white space opportunities with new brand market combinations and lots of headroom in our existing higher <unk> markets as well.
Speaker Change: See were addressed in a few markets, where we face challenges, but the opportunities far outweigh. These obstacles looking forward I'm confident that we'll see momentum across the globe.
In the U S. Burger King continues making meaningful progress by staying committed to doing the right things for the long term, whether it's for the brand our franchisees or our guests. It is clear that the team's efforts to cleanup our franchisee in restaurant base is paying off.
Speaker Change: And I believe most of our troubled situations are behind us now.
Speaker Change: Now we're excited about the operational improvements and modernization efforts underway and we feel good about the direction of our marketing plans I'm.
Speaker Change: I'm looking forward to seeing more modern image Burger King's thrive under strong operators.
Speaker Change: For Popeye's, our strategy is clear attract more people to try our food and ensure every guest receives a consistently great experience our food quality speaks for itself. So delivering consistently exceptional guest experiences will be key to unlocking further growth.
Speaker Change: Proud of the progress the team made in 2020 for to grow our business, while maintaining the quality of our restaurants set operators and I'm excited to see that continue in 2025.
Speaker Change: Finally, firehouse subs is just beginning to tap into its potential the value here will really come from ramping up development, Mike and the team delivered a significant step forward in 2024, and we expect this momentum to continue in 2025 it's.
Speaker Change: It's clear there's plenty of runway ahead for this incredible brand and we're really just getting started.
Speaker Change: I'm proud of our team and our franchisees, we're doing all the things that I know create outperformance versus the category. Our food is getting better our services improving our restaurants are getting remodeled and we're being very smart about giving good value to our guests, while helping generate improved profits.
Speaker Change: For our franchisees.
Speaker Change: And where we have problems, we face them head on and openly.
Speaker Change: While we do all of that we're being smart about managing the cost side of the business. So that we are generating strong earnings growth for our shareholders.
Speaker Change: With that let's open the line for questions operator.
Speaker Change: Thank you.
Speaker Change: I'd like to ask a question on todays call. Please press star followed by one on your telephone keypad.
Speaker Change: Any reason you would like to turn we just had a question. Please press star followed by two again to ask a question. Please press star followed by one as a reminder, all quarters will be limited to one question will.
Speaker Change: I will start with our first question, which comes from the line of Brian Bittner from Oppenheimer. Please go ahead. Your line is now.
Brian Bittner: Thank you and good morning.
Speaker Change: On 2025, the adjusted operating income growth you stated that you are anticipating on algorithm year of 8% plus.
Speaker Change: From a real high level can you help us understand the same store sales range, you're assuming to get there.
Speaker Change: Do you need to be in line with your 3% long term target to achieve that that operating income growth or do you have additional cost efficiencies that will turn like we saw in 2024.
Speaker Change: Hey, Brian its Fannie and good morning, and thanks for the question.
Brian Bittner: Look I think when we put out our algorithm last year, we talked about our algorithm.
Brian Bittner: Being a five year kind of growth outlook for the business and some years it would be on in some years would be would be off.
Brian Bittner: But on average that was the target we're not going to get into the specifics of the topline components of what that looks like on a year to year basis, but we do feel good about the AOE bottomline.
Brian Bittner: Guidance that we provided of 8% plus growth. This year I think there are puts and takes to all of that obviously same store sales is a component and we feel really good about the marketing programs. We have planned for this year as well as the operational improvements we see across the business that will help deliver on that 8% plus of AOI growth for this year.
Speaker Change: Thank you Jamie.
Speaker Change: Thank you.
Speaker Change: Next question comes from the line of Dennis Geiger from UBS. Please go ahead. Your line is now live.
Dennis Geiger: Great. Thanks, guys I appreciate it I guess first just a clarification I guess, just given that the BK China situation.
Dennis Geiger: As it relates to development, we're sort of waiting on that for color on 25 notes. So I just wanted to confirm that guys and then the question. If I could is just as it relates to BK in tims brand in their home markets and twenty-five.
Dennis Geiger: Against what seems like a difficult macro still tough promotional backdrop seemingly.
Speaker Change: Maybe you could just kind of speak to that how are you thinking about the two brands and this year in their markets is it fair to assume that some of the key 24 sales drivers will also support growth in 'twenty five or does that look a little different if any color there.
Speaker Change: Hey, guys. Thanks for the question I'll take it and then I'll pass it over to Josh just to clarify.
Speaker Change: As I said in the prepared remarks, we're in active discussions.
Speaker Change: On the Burger King, China situation, and we can't speculate.
Speaker Change: On sort of the outcomes.
Speaker Change: We expect to have a resolution.
Speaker Change: Relatively soon and following that resolution, we will update you with any potential implications on energy targets.
Speaker Change: And Dennis I'll take the second part on kind of on marketing plans across Burger King and tims in their home markets for this year.
Speaker Change: Thank you you alluded to it well I think you'll see a lot of building upon some of the things that really worked for the businesses and 24 with a couple of new twists and innovations and maybe just to recap that in terms of Burger King I think we have an excellent calendar for the year and I think it's it's balanced across a few different.
Speaker Change: Things that have been working well for us one of them has been families and we've done some great partnerships you thought with the Addams family in 2020 for those kinds of things are really resonating when we have the right.
Speaker Change: Great partnerships with the right properties and we do really compelling innovation that leverages, our core equities like the Walker and planned drilling. So I think you can expect to see a couple of really a really fun ones that I think will bring a lot of families and kids into the restaurants.
Speaker Change: 2025, you'll also see us focus on the Whopper again, we had some very successful activations things like the $1 million Whoppers, where we had guests created versions of the whopper that really appeal to guests and I think.
Speaker Change: Puts the whopper and the right places a premium product. So you should expect to see more Walker innovation in 2025.
Speaker Change: Also you should also expect to see us focus very much on quality across the menu and quality comes from a lot of different places it can be working with our suppliers on upgraded recipes.
Speaker Change: Also really important elements that come from operations as Youll see us focus a lot on training you've seen us focused on upgrading our equipment, which has a big impact on our ability to deliver the quality that we want to consistently across the restaurant base.
Speaker Change: So you'll I think you'll see continued focus on elevating quality in the system and lastly, we will continue to bring news to value. We've done that now in the first part of the year with our $5 duos and $70 trios. So I think you can expect some refreshed messaging and mechanics on the value side just to keep that.
Speaker Change: A relevant and fresh for our guests. So that's what I would look for on the Burger King side on Tim's a similar story, where we've been focused for a while on on PM food and KOL Bev. So youll see more of that I think what might be a little bit a little bit new and incremental this year is we've got some really.
Speaker Change: Citing breakfast innovation, that's coming out to you probably saw some news on scrambled eggs.
Speaker Change: One of the things that we're excited about for this year.
Speaker Change: We might we might have some celebrity collaborations to go along with some of these innovations to that we think will be pretty engaging for our guest base in Canada. So hopefully that gives you a little bit of an overview.
Speaker Change: We're building a lot of things that have worked but keeping them fresh and new and adding a few new things and we're pretty confident in the plans for this year.
Speaker Change: Yeah.
Speaker Change: Great. Thank you.
Speaker Change: Our next question today comes from the line of Dennis <unk> from Bernstein. Please go ahead. Your line is the only thing.
Speaker Change: Thank you.
Speaker Change: Sounds like you're doing an excellent job also and speed of service with regards to.
Speaker Change: In Canada, and I was wondering if you can elaborate a little bit more on the early feedback from parents to be from the testing of new espresso machines, and maybe the potential impact on speed of service.
Speaker Change: I think the number of seconds that you can say.
Steve: With a full rollout and then Steve on the on the coffee.
Speaker Change: Do you think it might help us understand a bit more the impact of the coffee price increases on your supply chain margins in modern general on the coffee demand in Canada that would be very helpful. Thank you.
Steve: Yeah.
Steve: Thanks, Neil I'll take the first part and then I think Sam you will take the last part.
Steve: In terms of speed of service.
Steve: Really proud of the work that Matt Moore, who is our COO up there has done with his team and the franchisees have been highly engaged on it I mentioned one of the statistics.
Steve: They are about how much incremental sales we get some just one second of improvement and that tells you why were all collectively so focus on the topic and I think Matt in our our franchisees have done a great job driving continued improvement in <unk>.
Steve: In Windows times as I mentioned, we've just done at quarter in quarter out through a lot of focus and a lot of small tweaks or even <unk>.
Steve: Even though our renovations, which we've started doing more and more of one of the central elements of those renovations is an update to the way that the back of house flow works and those renovations are enabling us to get more throughput.
Steve: Faster speed of service as well so you can kind of see it across the business.
Steve: We're highly focused on driving speed of service and I think it's we're seeing it come through and I think thats, helping our sales and traffic momentum that I mentioned has been so consistent too in terms of the espresso machine.
Steve: Our machines test I think we're still early in that.
Steve: Only I think we need to give it a little bit more time I would tell you that as much as as it is focused on speed, it's probably even more focused on enhancing quality.
Steve: We really want to make sure across all of our brands all categories for serving the best product in the market and that's something we're looking at across recipes machines procedures.
Speaker Change: And that's the piece that I think I'm, most excited about and where we're going with this breadth of machines has the potential to serve an even better product to our guests in the future. Maybe standard you want to take the coffee question, Yeah, I can take that hey, good morning Danilo.
Speaker Change: So coffee, it's no secret I think most of you have read about probably.
Speaker Change: It's at historic highs.
Speaker Change: I think couple of things that we'd say about that number one have you think about our Tim Hortons commodity basket coffee is only about 15% of our Tim Hortons total commodity basket. So so.
Speaker Change: Relatively small smaller in terms of the entire basket I think number two.
Speaker Change: For a bit of background on how we buy coffee, we buy coffee forward typically six to 18 months.
Speaker Change: On a.
Speaker Change: Forward buying strategy and what this allows us to do is really smooth out potential volatility and we as we pass those costs on.
Speaker Change: The franchisees.
Speaker Change: And it gives us visibility really into into what the year might look like and given that visibility we still feel good.
Speaker Change: That 2025 supply chain margin will be around 19%.
Speaker Change: As you recall, we finished 2024, a little bit higher than that at 19, 5%, but we feel we feel good about 19% for the full year and 25%.
Speaker Change: I will call out that we typically talk about the margin percentages, but a really good way to look at think about this business is actually the growth in gross profit dollars and as we think about where those gross profit dollars where that growth comes from it's really around increased volume.
Speaker Change: Around mix shifts and it's around new development as we open restaurants as well as expansion of our CPG business. So.
Speaker Change: Taking all that into account I think I think we'll leave it at that but 19% for the full year on supply chain margin.
Speaker Change: Great. Thank you.
Speaker Change: Thank you.
Speaker Change: Question today comes from the line of David Palmer from Evercore ISI. Please go ahead. Your line is now open.
Speaker Change: Thanks.
Speaker Change: Very nice comp growth from the international segment this quarter and I'm wondering how you're thinking about 2025 for the segment any color and feelings about key markets and shaped to the year's growth would be helpful. Obviously, you entered the year pretty strongly you talked about sort of a back weighted year for BK U S.
Speaker Change: I wonder.
Speaker Change: Maybe it's going to be the opposite for Burger King International for example, but any color about how youre thinking about the year for that segment in terms of comps.
Speaker Change: Hey, Dave.
Dave: Thanks for the question we were pleased with the improvement in same store sales trajectory going into going into Q4 in international and there was a pretty good step up there.
Dave: We're very happy with momentum, we're not ready to give guidance on the sales for that segment, but I think a lot of the things that you saw in Q4 are things that we'll keep working on into 2025, we focus on making sure that we've had and compelling value offerings.
Dave: All of those markets.
Dave: Combining that with some really compelling innovation that I mentioned in my remarks earlier. So I think we'll keep working on those things and hope to continue the momentum we saw in Q4.
Dave: Through next year.
Dave: And I'll just I'll just add that Q1 as I said in the prepared remarks does have the impact of a leap day, so good to kind of adjust your.
Dave: Your model for that.
Dave: Thanks for the question.
Speaker Change: The next question today comes from the line of John <unk> from J P. Morgan. Please go ahead. Your line is now open.
Speaker Change: Hi. Thank you. The question is on Capex and just overall capital intensity in the business.
Speaker Change: 400 to 450, I think was guided for fiscal 'twenty high but the new development is that your refranchising. Some of the Carol's units ahead of your expectations, which might lessen capex requirements and 26% 27. So the question is really is 25.
Speaker Change: Capex guide kind of the high watermark of Capex might we expect further increases as overall Burger King U S development accelerates into 'twenty six 'twenty seven and certainly I do ask that Capex question not only in the context of you being free cash flow positive, but the fact that you carry a billion three of cap.
Speaker Change: Of cash excuse me on your balance sheet. So I wanted to get a sense of whether carrying that much cash on your balance sheet. It did make sense given future capital intensity of your business. Thank you.
Speaker Change: Yes.
Speaker Change: Hey morning, John and Thanks for the question I think when you take a step back and you think sort of about the cash flow generation of the business, you're absolutely right, we've had strong and growing cash flow generation.
Speaker Change: Which really does allow us to invest in our businesses and I think as we think about capital allocation priorities are number one priority is always to invest in our business and high ROI investments in our business.
Speaker Change: Capex as we think about 2025 is really a reflection of that and that increase I think its probably two main things number one is a stepped up pace of the repayment of flame remodels both.
Speaker Change: In the BK franchise system, but also at Carol as we step up to a higher pace Youll recall, we want the system to be at 85% to 90% modern image by 2028, so in order to hit those numbers.
Speaker Change: Capex has been naturally step up.
Speaker Change: This year.
Speaker Change: And even as we re franchised restaurants that Carol.
Speaker Change: You won't you won't see that directed an offset in the capex.
Speaker Change: And typically we will try to re franchise restaurants, as we remodel I think sort of on the second point and another driver of the increase in Capex is really around some stepped up development and development investments as we think about Tims, Canada, Josh mentioned returning to.
Speaker Change: Development growth and new unit.
Speaker Change: New unit growth in Canada.
Speaker Change: As Youll recall, our business model in Canada is often around a full kind of real estate model and finding sites and typically that is a little bit more capital capital intensive that said the rois on that capital are extremely good and we think is a good use of our capital. So as we think about expanding penetration in Canada.
Speaker Change: Which we still can do we think that's a really efficient use of the capital.
Speaker Change: And I realize my my question was done so as we think about capital needs in 'twenty six 'twenty seven is the 25 number a good number to use should we expect in a modest increases from here and do give us a sense of what the right level of cash RBI should run on the business longer term.
Speaker Change: As it currently sits at around 1 billion three on the balance sheet.
Speaker Change: Yes look I think as you think about the capex trajectory of the business I think around this $400 million to $450 million.
Speaker Change: I think this elevated level is elevated and it will gradually come down over time as we move towards 2028, and then once were to reclaim the flame plan has sort of.
Speaker Change: We've achieved kind of our target.
Speaker Change: That will come down a little bit more so you can kind of view this level for the next couple of years and coming down.
Speaker Change: With respect to kind of cash on the balance sheet.
Speaker Change: We ended the year in a really good liquidity position I think it is similar to kind of the liquidity positions that we've had in prior years and going back to capital allocation I think.
Speaker Change: <unk> sort of those high ROI investments that we make in the business.
Speaker Change: We then look at how do we return capital to shareholders, we've done that through a healthy and growing dividend and last year. We did it through we also Ben.
Speaker Change: Deleveraged and we started taking leverage down we finished the year, we were proud to finish the year at four five times net leverage assuming a full year of Carroll's, we will likely continue to take that leverage level down as we kind of monitor the interest rate environment and the general macro conditions.
Speaker Change: But we feel good about those capital allocation priorities.
Speaker Change: That's great. Thank you so much.
John: Thanks, John Thank you.
Speaker Change: Our next question today comes from the line of Andrew Charles from TD Cowen. Please go ahead. Your line is now.
Andrew Charles: Great. Thanks, Tim I also wanted to expand on cash priorities you talked about continuing to prioritize deleverage does this mean, we shouldnt expect share repurchase to resume in 2025. After you took a pause in 'twenty four and then also in terms of the Capex I know you guys called out 370, BK U S. Remodels in 2024, how about you.
Speaker Change: Plan for 2025.
Tim: Thanks, Andrew Thanks for the question.
Speaker Change: I'll reiterate what I said to John I think as you said deleveraging is the priority.
Speaker Change: We're not going to rule anything out we always sort of our opportunistic about things we've repurchased we did repurchase.
Speaker Change: <unk> have a $1 billion of shares in 2023, we did not repurchase shares in 2024, but as I said.
Speaker Change: Deleveraging is the priority right now.
Speaker Change: In terms of Remodels I think for 2025, we're going to step up the pace of Remodels and we'll do a round 400 remodels in 2025, and you kind of do the math and you think about getting to 85% to 90% modern image by the year 2028, the pace of Remodels naturally have to step up over time so.
Speaker Change: We think we were really proud to finish 2024 kind of around 350, remodels and stepping that pace up and 425. It is a good step forward and you'll continue to kind of see that pace as we approach the long term targets.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Next question today comes from the line of Lauren Silberman from Deutsche Bank. Please go ahead. Your line is the only thing.
Speaker Change: Thank you very much two part question on Tom One is just a follow up on the <unk> commentary understanding you're lapping over the leap day, given how much noise is there out there to start the year any color that you could share at least from what youre seeing with underlying trends across the business.
Speaker Change: And then my primary questions on Tim Hortons, Canada comp what was the composition across traffic and average check and then how are you thinking about price 25, given coffee cost is also competitive environment. Thank you.
Speaker Change: Yeah.
Speaker Change: Hey, Lauren good morning, it's Josh.
Speaker Change: In terms of Q1.
Speaker Change: I think as you point out there's always a lot of noise, especially when you are in the early part of Q1 with weather a little bit hard to get a read I think our preference is probably going to be just to wait until we get through the quarter and share how it went overall.
Speaker Change: Alright, I think Sami just wanted to call out that you need to make sure we factor in the leap day. So we'll probably wait to give an update on the Q1 performance until we get to our Q1 earnings call in terms of Tims, Canada in the comp.
Speaker Change: In Q4, and the composition of that.
Speaker Change: It was about two thirds driven by traffic and the rest was ticket and mix.
Speaker Change: And then in terms of of what wed expect in terms of check in 2025.
Speaker Change: We're always looking to overall CPI, that's kind of the starting point for us. So that's something that we're mindful of and we'll have to keep an eye on what happens with coffee prices as Sami mentioned theres, a pretty delayed impact of that for us because of the way that we hedge so that helps us remove a little bit of volatility, but thats something that I think has a question.
Speaker Change: We'll have to keep an eye on as we move through the next few months.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: The next question today comes from the line of Saracen It'll from Bank of America. Please go ahead. Your line is now open.
Speaker Change: Thank you.
Speaker Change: Hi.
Speaker Change: Quick modeling I guess clarification, and then a broader question.
Speaker Change: Classic consumers on the franchisee.
Speaker Change: Alright, Thanks, a lot for all EBITA it was stable year over year for Burger King and I guess stepping back I look at it and see a 1% same store sales growth number.
Speaker Change: It's actually pretty impressive I would've expected, maybe some monkey broadridge. So as you think about getting that number higher what's the same store sales growth number you need to.
Speaker Change: <unk>.
Speaker Change: If you can't get there yeah, I'm thinking something maybe in the 3% range.
Speaker Change: Can you.
Speaker Change: Ken franchisee still get over time to these higher EBITDA.
Speaker Change: Targets. So that was just kind of modeling question and then could you just talk a bit about.
Speaker Change: And you called out high single digit growth in back to sandwiches, 5% growth maintained at 6% and cold beverage.
Speaker Change: What were some of the offsets because those are all very strong numbers.
Speaker Change: The healthy comp or not.
Speaker Change: Not of that magnitude, so where might you be seeing tradeoffs. Thanks.
Speaker Change: Hey morning, Sara I'll take the first part of the question and then I can I can throw it over to Josh.
Speaker Change: Just on the modeling points first off yes, we were very pleased with the with the comp at Burger King.
Speaker Change: In the U S.
Speaker Change: As you think about the margin a bit of the offset.
Speaker Change: That sort of offset some of that flow through would have been increased commodity cost in the U S. We talked about there was an inflationary environment on the commodity cost side, which sort of.
Speaker Change: Which offset a little bit of that comp increase have you sort of think about longer term.
Speaker Change: And we've talked about this on prior earnings calls is as you get the comp growing.
Speaker Change: And leveraging the P&L. There is there is approximately 25% to 30% flow through on those incremental sales and that is ultimately over time growing the top line is the best thing we can do for growing franchise profitability and growing that margin. So that's really how we think about it and that's why we're so focused on really delivering a strong.
Speaker Change: Marketing calendar at Burger King U S.
Amy: Thanks Amy.
Speaker Change: What I would add there is I think.
Speaker Change: Another one of the levers that's very clear to drive franchise profitability is doing remodels.
Speaker Change: That's one of the clearest ways that we get from where we are trying to get towards that $300000 in the long run.
Speaker Change: Sure.
Speaker Change: We're actually in a lot of the Remodels that we've been doing we're pretty close to that so I think that's an important part in my mind. In addition to the marketing calendar and the operational improvements we've got to get to a modern image I think that's part of getting the franchisee four wall EBITDA.
Speaker Change: In terms of the Tims question Sarah.
Speaker Change: I think you mentioned a lot of the categories that performed the best on our sales growth basis, and what kind of above the aggregate comp.
Speaker Change: A couple of other ones.
Speaker Change: That werent above the comp I think were driven by some of the weather that we had so we had a little bit warmer weather in the quarter and that drives that tends to drive more cold beverage and so we saw less good performance in some of our hot beverage and then with those hot beverages, usually you see cold. So you see a big good attachment.
Speaker Change: To some of those hot beverages and that one was.
Speaker Change: Was less of an outperformer as well.
Patrick: So thanks, Patrick just jump in on the franchise profitability part also.
Speaker Change: Point out.
Speaker Change: We talked about the fact that our procurement team.
Speaker Change: Is working across the brands and.
Speaker Change: Our supply chains with the co op structure for Popeye's in Burger King operated pretty separately before.
Speaker Change: And one of the big benefits of I think increasing trust with our franchisees as.
Speaker Change: They are letting us work with them to try to leverage the overall scale of RBI to drive.
Speaker Change: Efficiencies and the other thing Thats important as more of our of our restaurants are owned by stronger franchisees now who are simply better at running their stores and we're seeing that play through both on the topline and the Bottomline.
Speaker Change: For those restaurant owners and so there remains a lot that can be done there.
Speaker Change: You told us that.
Speaker Change: 1% comp for 2024 was going to get us flat on the bottom line, we obviously want more than flat, but I think it's a reflection of the opportunities.
Speaker Change: That are out there that we were able to do that and we continue to look for those opportunities. We continue to remodel the restaurants and we continue to move restaurants in the hands of stronger operators and that's generating the growth or the results that youre seeing.
Speaker Change: Thank you that's exactly what I was looking for it thanks Patrick.
Speaker Change: Thank you.
Speaker Change: Today's question and answer session. So I'd like to pass the call back over to Josh for any closing remarks.
Speaker Change: Well. Thank you all very much for joining us today, and thank you, especially to our teams and our franchisees for the all of their hard work that allowed us to deliver these great results. This quarter. We look forward to updating you on our performance again on our Q1 call here in a couple of months and have a great day everybody.
Speaker Change: This concludes today's call. Thank you for your participation you may now disconnect your lines.
Speaker Change: [music].
Speaker Change: Sure.
Speaker Change: [music].