Q2 2025 Restaurant Brands International Inc Earnings Call

Good morning and welcome to the restaurant Brands. International second quarter 2025 earnings conference call Will participants will be in listen-only mode. Should you need assistance? Please signal your conference specialist by pressing the star key followed by zero. After today's presentation there will be an opportunity to ask questions to ask a question. You may press star then 1 on your telephone keypad, you will hear a tone to confirm that you in the queue.

To exit the question queue. You may press star. Then to all callers will be limited to 1 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.

Thank you, operator. Good morning, everyone and welcome to restaurant Brands Internationals earnings call for the second quarter end of June 30th of 2025.

Joining me on the call today are restaurant Brands Internationals executive chairman, Patrick Doyle CEO, Josh kabza and CFO Sammy sadiki following remarks from Josh Sammy and Patrick we will open the call to questions.

today's discussion may include forward-looking statements, which are subject to risks details in the press release issue this morning and in our SEC filings,

We will also reference non-gaap Financial measures reconciliations of which are available in the press release and trending schedules on our IR website.

As a reminder.

Suggested operating income growth exclude results from the restaurant holding segment.

In addition, on February 14th, 2025, we acquired substantially all the remaining Equity interests in Burger, King China from our former joint venture partners.

Trending schedules available on our investor relations website.

For calendar planning purposes, our preliminary Q3 earnings call is scheduled for the morning of November 5th. And now I'll turn the call over to Josh.

Good morning everyone and thank you for joining us.

We made solid progress in Q2, with sales accelerating to 2.4% year-over-year and net restaurant growth of 2.9%.

Driving systemwide sales of 5.3%.

Combined with discipline, cost management, this translated into organic adjusted operating income growth of 5.7%.

These results, reflect the strength of Our Brands, and the focus, and execution of our teams and our franchises.

While the consumer environment remains Dynamic, we've seen signs of improvement across many of our largest businesses.

That's giving us added confidence as we continue focusing on the fundamentals that matter the most quality service and convenience.

Our teams are executing disciplined well-balanced marketing calendars, elevating restaurant operations, and delivering better, guest experiences every day.

At the same time, we're running the businesses and investing behind priorities. We Believe will generate long-term value for our guests, our franchisees, and our shareholders.

Tim Hortons and our International businesses which together account for nearly 70% of our adjusted operating income led the way this quarter.

Tim's posted its 17th consecutive quarter of positive comparable sales in Canada and our International segment delivered another quarter of strong growth.

We also saw solid improvement across the rest of the business, and I feel confident in our ability to build on that momentum in the second half of the year and deliver at least 8% organic adjusted operating income growth in 2025.

I'm equally encouraged by the steps. We're taking to return to a more simplified business model.

This includes launching Carol's free franchising efforts 2 years ahead of schedule. And moving with urgency to position, Burger King China for Success, under a new partner.

With that, let's turn to our segment results. Starting with Tim Hortons, which accounts for about 43% of our business.

Tim's delivered, a strong quarter with Canadian comparable sales accelerating to 3.6%.

Growth was relatively balanced between check and traffic. Supported by positive sales, across all day Parts, including 5% growth in the morning.

These results. Reflected, a well-executed marketing, calendar, featuring our scrambled eggs, loaded breakfast, box filled Timbits and summer cold. Beverage lineup, all brought to life by our dedicated restaurant owners.

in April, we launched this scrambled eggs, loaded breakfast box a new platform in partnership with Ryan, Reynolds featuring, 100% Canadian, Farm certified eggs,

This offering brought a delicious and uniquely Canadian voice to our breakfast business and helped drive over 10% growth in breakfast, food sales in the quarter.

We also played in nostalgia and brought back skilled 10 bits nationwide for the first time in 5 years, featuring blueberry cheesecake and powdered strawberry flavors.

These delicious additions to our baked, baked good showcase where this outcome of strong collaboration between our culinary and operations teams to deliver. Fun guests, love treats and an easier to execute format for our team members.

Beverage sales, grew 4% year-over-year driven by strength in cold and espresso based beverages.

We kicked off our summer lineup with new quencher flavors like pineapple dragon fruit and the launch of Frozen quenchers.

We also introduced new and improved iced lattes, which helped Drive record high. Espresso beverage incidents in the quarter.

with new espresso, machines, rolling out later this year, we see opportunity to drive improved consistency and further Elevate, the guest experience in this high potential category,

Operationally, our restaurant owners and teams delivered meaningful, improvements across the board.

Speed of service improved across all day parts and guest satisfaction rows more than 4 Points year-over-year to its highest level. Since we began tracking in 2018,

As we broaden, our presence in the PM Day part we're focused on delivering the same high-quality Tims, experience our guests know and love.

That was the focus of our restaurant leadership symposiums in May and June which brought together over 3,700 leaders across the system under the theme of winning in the PM.

The alignment achieved coming out of these events, translated to improved execution, including through the launch of our latest PM food, menu Innovation, the Supreme stack sandwich.

We're also making progress on development and remain on track to return to modest. Net restaurant growth in Canada, in 2025, supported by strong unit economics.

Finally, I want to thank our restaurant owners for delivering 2 incredible campaigns. Smile cookie week in April, which raised a record-breaking 23 million for Charities across Canada and the US and Camp day in July, which raised 13 million dollars for the Tim Hortons Foundation camps.

Brand spot and owner Story video series, these help Tims further solidify its position as Canada's most loved brand.

All-in. I'm proud of the sustained momentum at Tim Hortons it's a business with incredibly strong fundamentals grounded in its number 1 brand love and Trust in Canada.

This quarter marked a clear return to the consistent performance. We've come to expect from the Tim's brand, a reflection of axle and A team's disciplined execution, and the unwavering dedication of our restaurant owners and their team members.

Now turning to our International segment which accounts for 26% of our adjusted operating income and continues to be a key growth engine for our business.

In Q2, International delivered, nearly 10% systemwide sales growth supported by 5.4% at restaurant growth and 4.2% comparable sales once again. Outpacing, many of our largest global peers,

This strong performance, reflects the strength of our balance Playbook across menu Innovation, marketing, digital and operations.

which are driving continued outperformance in same store sales in many major markets, like the UK, Spain, Australia and Germany,

At our BK CEO Summit and International Convention in Lisbon Thiago and his team laid out a Clear Vision for the future in shared our bold ambition of chasing number 1 globally.

That means great flame for flame grilled burgers. Served your way in restaurants guests. Love to visit and franchisees are proud to run.

At convention, we reinforced our commitment to the guest experience and highlighted. The critical role of our restaurant general managers by honoring our top 50 International rgms, as amazing examples of operational excellence.

We also recognize several High performing partners with 2024 Awards.

Burger King India, which surpassed 500 restaurants in 2024 was named both franchisee and operator of the year.

Burger King Turkey earned Developer of the Year and is opening nearly 50 net new restaurants in 2024.

And no, morasan and the team at Burger King, Japan were recognized as marketer of the year after delivering nearly 20% same store, sales growth in 2024 fueled by a compelling Whopper relaunch.

Following convention I visited Brazil 1 of our most important growth markets.

Since entering the market in 2010, we scaled Burger King from about 100 restaurants to roughly 1,000.

Generating nearly 1 billion dollars in systemwide sales.

Building on that Foundation. We introduced Popeye's in 2018, in Firehouse Subs, in June of this year,

Popeye's Brazil delivered double-digit same store, sales growth in 2024 in mid- Te same store, sales growth. So far this year further evidence that Fried Chicken is on an incredible Global trajectory and that Popeye's is well positioned to take share.

I also visited our first 2 Firehouse restaurants with Yuri Miranda, who's leading the Brand's roll out in Brazil.

I'm encouraged by the early transaction and excited about the opportunity to scale. Firehouse Brazil under Yuri's Excellence leadership,

Finally, we're making meaningful progress at Burger King China and delivered results. This quarter ahead of our expectations.

Since assuming control, we've moved quickly, putting in place a seasoned local leadership. Team sharpening, our marketing on core burger burger and chicken, equities and re-establishing an operational Focus.

Comparable sales turned positive in the second quarter and unit economics, improved meaningfully quarter over quarter. It's been an encouraging start, reinforcing our conviction in the long term opportunity.

Burger King has strong brand awareness in China and is 1 of the few scaled beef burger players in the market with favorable category Dynamics

With the right local partner Capital support and development plan. We see a clear path to reignite growth

We're actively working with Morgan Stanley to identify that partner, someone who can build on our early progress and unlock the next chapter of growth for the brand in China.

Now turning to Burger King, which represents around 19% of our business.

Tom and team continued to making progress executing against their long-term plans. Despite an admittedly tougher industry backdrop.

In the US comparable sales, grew 1.5% modestly. Outperforming the burger qsr segment.

On the marketing front, we're delivering against our 3. Focus areas.

First reestablishing, relevance with families second reinforcing. Our core brand equities and third meeting the needs of today's value conscious guests.

Our, How to Train Your Dragon partnership brought our flame, grilled burgers into a popular franchise and drove our highest King Junior meal incidents in more than a decade.

We'll continue Building, Family engagement, in the months and years ahead through fun effective and relevant Partnerships.

On core equities. We're leading into the Whopper with Innovation and our habit, your way, promise through guest Le ideas from our recently launched Whopper BYU platform,

Stand out a delicious guest design. Take on the classic that highlights, our flame grilled flavor.

And when it comes to Value, we're maintaining a barbell approach with premium offerings. Alongside alongside our evolving 5 Duo and 7 Tri allow guests. Freedom of Choice ensuring we keep delivering a variety of fan. Fun, fan favorites at Great everyday prices.

We're happy with our value initiatives are performing and are encouraged to see the percentage of sales on Deal stabilized around. Pre pandemic levels,

We're also making good progress in operations.

Operating satisfaction for lunch and dinner, Rose 4.0 over a year reaching their highest levels, since we launched proclaim the flame in 2022.

This progress was driven by continued improvements in customer friendliness food, quality order, accuracy and speed of service.

To help meet late night, demand from guests. We also saw around 1,200 restaurants, extend their hours by at least 1 hour year-over-year.

We continue to see a clear link between strong operations, and profitability.

Over the last 12 months, a operators, have generated over 70% higher, 4-wall ibido on average than the rest of the system reinforcing. The importance of operational, consistency and transitioning underperforming restaurants to more engaged operators.

Our Carol's restaurants outperformed, both the broader BK system and other Burger uh, qsr peers, this quarter and are a great example of the importance of having strong operations, led by great restaurant, general managers.

Modern image is another driver of sales and profitability and we remain on track to complete roughly 400 remodels this year.

They continue to generate average sales, uplifts in the mid- teens, net of control.

These Investments are improving brand perception. And franchisee profitability reinforcing the value of our modern image efforts,

Finally, we began our referencing process process for Carol's restaurants. This quarter including signing 5 candidates for Crown your career, a program that supports high potential internal Talent on their Journey, towards restaurant ownership, over a 1 to 3 year period.

Our Focus remains on placing restaurants with highly engaged operators, who are well positioned for long-term success.

Altogether. Tom and his team are making steady progress across marketing modernization operations. And the guest experience all underpinned by strong franchisee alignment.

While there's still a lot more work to do this quarter's industry. Outperformance is another sign that we're on the right path to building a healthier business for the long term.

Finally turning the to the remaining 12% of our business with Popeye's and Firehouse Subs.

In the second quarter, Popeye's delivered, systemwide sales, growth of 1.9% in the US supported by net restaurant. Growth of 2.1% in partially offset by a 0.9% decline in comparable sales.

This quarter, the team's flavor-forward pickle menu and launch of $3.99 wraps generated strong guest engagement and helped drive a sequential improvement in comparable sales.

We also continue to enhance operations by scaling our easy to run kitchens as well as providing targeted. Operational Support to restaurants, that need it, the most

At the same time, remain highly disciplined in our development approach opening new restaurants. Only with top, tier operators aligned on quality and execution.

Finally, at Firehouse Subs, systemwide sales, grew 6.3% in the second quarter driven by 6.4%. Net restaurant growth and a 0.8% decline in comparable sales.

We're encouraged by the momentum and quality of the development. We're seeing with new restaurant openings, performing above the system average,

Last month, Mike and his team hosted their annual family reunion in Las Vegas and laid out the Brand's 3 year roadmap, which outlines clear initiative to to drive sales growth and enhance the guest experience and support franchisee profitability. There's strong excitement from the franchisees about the path forward for Firehouse.

With that, I'll pass it over to Sami Sami.

Thanks, Josh, and good morning, everyone.

Today, I'll discuss our Q2 Financial results, our capital structure and financial guidance for the remainder of 2025.

We are encouraged by the Improvement and results this quarter, especially against a dynamic consumer backdrop.

We delivered Global comparable sales of 2.4%.

systemwide sales growth of 5.3% organic aoy, growth of 5.7% and nominal adjusted, EPS, growth of 9.2%,

Organic aoi growth, slightly outpaced systemwide sales growth. This quarter driven by continued cost discipline including a 15 million reduction in segments GNA as well as a 6 million dollar Tailwind from lapping last year's fuel to Flame. Add fund contribution.

These Tailwinds were partially offset by a couple of factors in the quarter.

Primarily tied to our international business, which impacted f&p, expenses in international and supply chain cost of sales at Tim Hortons.

We're actively engaged with our partners to collect on these revenues.

We also had a discrete situation at Burger King us, which was resolved in June.

And second as I mentioned last quarter since we are actively working to find a new local partner for the BK China business, we are treating it as held for sale with results. Recorded in discontinued operations.

As a result, we saw a $10 million year-over-year revenue headwind in Q2.

For the full year, assuming no change in ownership, we continue to expect a 37 million impact to revenue and a 19 million impact to aoi on a year-over-year basis. Given that we recorded about 18 million dollars of bad debt expenses related to BK China. In 2024 largely in Q4.

For more details, you can refer to the quarterly breakdown of 2024 BK, China, revenues, and bad debt expenses available in the trending schedules and on the RBI investor relations website.

Now, turning the eps.

Adjusted EPS increased to 94 cents. Per share from 86 cents. Last year, representing nominal growth of 9.2%.

EPS growth was driven by aoi performance as well as a 12 million year-over-year. Decrease in adjusted net, interest expense to 131 million reflecting the benefits of our upsized cross-currency swaps 2024 refinancing and interest rate swaps.

For the full year. We now expect adjusted net. Interest expense to be around 520 million assuming an average. So for rate of 4.3% flowing through to approximately, 15% of our debt,

Now, turning to free cash flow in our capital structure.

In Q2, we generated 446, million of free, cash flow inclusive of approximately 35 million in cash benefits from our hedges.

During the quarter, we allocated Capital to key strategic priorities. And recorded 68 million of capital expenditures, tenant, inducements and incentives, collectively referred to as capex and cash. Inducements

We continue to expect 2025 capex and cash, inducements to be between 400 to 450 million though. We think we will come in at the lower end of that range.

In addition, this quarter, we capitalize Burger King, China with 30 million to support operations, build out our local team, and to fund marketing.

We also returned 282, million of capital to shareholders through our dividend, which we declared for Q3 at 62 cents per common, share and unit with a 2025 Target of $2.48 per share.

We ended Q2 with total liquidity of 2.3 billion including approximately a billion dollars of cash and a net leverage ratio of 4.6 times.

As a reminder, our Capital allocation priorities remain unchanged. We're focused on investing in Our Brands and businesses where we see clear and compelling returns, maintaining a healthy and growing dividend and steady steadily deleveraging over time.

Now before shifting to our 2025 Financial guidance, I'd like to take a moment to address Commodities specifically beef and coffee.

We've been closely monitoring beef, which makes up roughly a quarter of the commodity basket for Burger. King us.

In the first half of 2025 beef, prices were up High Teens year-over-year, which we expect to translate into a mid single digit increase in the total commodity basket at Burger, King us for the full year 25.

While elevated this trend is largely driven by the cyclical nature of us herd rebuilding and we expect prices to normalize over time.

On that note, we've been encouraged to see some normalization coffee prices, following a period of historic highs.

This is welcome news for our Tim Horton's business, where coffee accounts are around, 15% of the commodity baskets.

Given our forward buying strategy. We expect to see these lower costs flow through in mid to late 2026.

Now, wrapping up with 525.

First, we remain confident, in delivering, net restaurant growth of around 3% for the year and 8% Plus organic aoi growth in 2025.

As a reminder AI growth this year will be weighted towards the fourth quarter as we lap 41 million of the Burger King fuel. The flame add fund expense and 20 million dollars of net bad debt expenses recognized in Q4 of 24.

Second, we continue to expect full year, 25, Tim Horton, supply chain, gross margin of roughly 19%.

Pick Q4 will be the lowest margin quarter reflecting typical seasonality and the impact of working through higher cost inventory.

Third, we remain on track for 2025 segment GNA. Excluding restaurant Holdings of 600 to 620 million reflecting a healthy, sustainable, Baseline that supports continued investment in our people and our strategic priorities.

Forth.

We expect second half restaurant level margins, at Burger, King Carol's Restaurant in Rah to compress by approximately 100 basis points year-over-year from the roughly 12.3% margin. We saw in the second half of 2024. This is primarily driven by commodity cost inflation, as well as the impact of the 50 basis point, add fund contribution Step Up.

in addition, the RH segment includes Popeye's China and Firehouse Brazil

These are early stage businesses and in the first half of 2025, they generated a combined aoi, loss of 9 million.

We expect this loss to increase to around 15 million dollars in the second half of the year as we build our teams and development Pipelines.

That said, these early stage washes should be more than offset by positive. Ay contribution from our BK Carol's restaurants in RH

Finally, we continue to to expect an adjusted effective tax rate of 18 to 19% for the year.

As a reminder year to date our tax rate was 18.3%. While we do not expect recent changes in tax legislation to to be material at the RBI level. We do expect us franchises, particularly those investing in development and remodels to see, benefits related to bonus depreciation and interest deductibility

overall to wrap up when I look at our Q2 results I see real progress. Our 2 largest businesses representing nearly 70% of aoi delivered, strong performance,

I also see promising signs within restaurant Holdings with Carol's outperforming Burger qsr, refrencing efforts beginning ahead of schedule and early traction with development and sales at Popeye's China.

Although we're operating through a period of peak complexity today, we are starting to simplify the steps we're taking from reranch Burger. King us restaurants to setting BK China up for success with a new partner position us to be a more streamlined and stronger business in the years ahead.

At the same time, we're maintaining cost discipline at the RBI level, keeping us on track to deliver 8% plus aoi growth in 2025, and Beyond.

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

Thank you, Sammy. The story. This quarter is pretty straightforward. We've been consistently putting in the work, and it's starting to show.

We're focused on what matters running great restaurants, supporting great operators, and building brands that stand the test of time.

That's been the plan and this quarter is another step forward in that Journey.

Tim Hortons is a great example. Tim's is exceptionally well-run.

Our franchisees are great locally involved, operators and the team running the business in Toronto is terrific. Consistent, strong results are the outcome.

You can say the same for our international business which continues to deliver strong growth and outperform. Most of our largest qsr peers quarter after quarter.

The kind of consistency we're seeing from Tims and across many of our international markets comes from doing the basics really well. It's built on a foundation of strong local leadership, brand trust, disciplined operations, and relevant marketing.

The end of the day, it all comes down to Great teams, putting in the hard work to run. Great restaurants. We're seeing it at Tims, we're seeing it at International and we're starting to see it in more parts of our business.

Take our 47 company, run Burger, King restaurants in Miami.

These are restaurants where we're leading by example and everything is lining up operations, marketing and image and they're performing well above the system average comping into the double digits, driven by mid single digit growth in traffic.

It's a real example of what the Burger King brand can do, when all the pieces come together and I'm confident we're going to see more of it. Because as we execute reclaim, the flame more markets, should start to look and feel like Miami,

And when that happens, it creates a systemwide lift.

Towards that same kind of Turning Point at Burger King us.

It can be a tough unglamorous lift, but the operators restaurant managers and team members doing that work are the heroes of a turnaround and they're the ones helping to move the entire system forward.

And then there's BK China.

Not long ago. There were real questions about this business, but since February we've taken control brought in strong. Local leadership refocused. Our marketing and started to execute more consistently.

Same store sales turned positive in Q2 that doesn't happen by accident. It happens because the brand has strengths. And when it's supported by the right strategy and the right team it works

We still need to find the right long-term partner and we're actively working on that. But this quarter showed us that the business has real potential and under the right ownership, it can thrive

So that's the story of this quarter focused execution, steady progress.

And those generate consistent results, we've got real momentum in the places. We put in the work, there's more to do and we're not letting up. But we're proving what these businesses can deliver when everything starts to click.

and if this is what we can deliver in the current consumer backdrop or even more excited, about what's possible as the environment improves and that should give all of us confidence in where we're headed,

With that, we can take questions.

As a reminder, if you'd like to ask a question on today's call, please press star. Followed by 1 on your telephone keypad. Now, remember, when preparing to ask your question, please, ensure you are unmuted locally.

Our first question today comes from Brian Bittner from Oppenheimer and Co Brian. Please go ahead. Your line is open.

Hey, thank you. Good morning. Um, as it relates to Burger, King us, the, the Carol's restaurants and your Rh segment had nearly 3%, seems to our sales growth, biggest outperformance. First, the rest of the system in a couple years is this, a product of the remodels happening at Carol's or or is there other factors driving this outperformance and just secondly to that. You did mention that, um, you're ahead of schedule on on reranch? What does that mean, exactly? Uh, does that mean you're planning on going faster? If you could unpack that comment a little bit more? It'd be helpful. Thanks.

Morning, Brian. It's Josh. Thanks for the question. Yeah, I would tell you we've been really proud of the performance across, uh, both the the Carol's restaurants and the rest of our our BK company restaurants. And I think it comes from a, a couple of of like from a lot of focus on getting a couple of the most important fundamentals, right? And both of those portfolios, they're operating at a very high level. Uh, we've got great teams. We have really good restaurant managers and we see it in all of our op stats. And I think that's, that's driving a lot of the outperformance. And on top of it, the remodels, uh, both of those. Both of those portfolios are making significant investments in remodels and the returns from those remodels have been very good. Uh, they're doing the right scopes of of work. They're executing them well and they're really making sure that they get, uh, the results out of them. So, I, I think that that's what gives us a lot of confidence in where the rest of the system can go, because we've got a lot of other operators that are doing that increasingly too, uh, but that I think that's what's driving the consistent outperformance. Uh, that we we started to see from the

From the Carol's portfolio in terms of the refrigerant, we're also making a lot of progress there. Uh, we mentioned we've started to do some referencing activity already. Uh, you know, I think if you go back to when we we first acquired Carol's, we said that we were going to do the refrigerating between years 3 and 7.

And we've obviously started that early uh and we're we're working on plans to kind of move that ahead at a reasonable Pace. It's incredibly important for us that all of those restaurants go to very good operators. Uh, that was the, you know, the the intention of the Acquisitions in the first place, was to make sure that those restaurants get remodeled and their in the hands of excellent local operators. Uh, so, uh, we want to make sure that we preserve that intent but we would like to move it along at at a reasonable pace and and we're happy that we've kicked it off already. And we'll try to keep doing that. Uh, keep moving along at at as good of a pace as we can over the next couple of years.

The next question is from David Palmer from evercore isi, David, please go ahead. Your line is open.

What might be a slower market up there but you can't really see that if you look at the results of Tim Horton, so love to, you know, have your comment about the the qsr market in Canada. And how if if you if you think that there's reasons why Tim Horton's Trends are perhaps uh widening versus the competitive set in Canada and then secondly, I know you're not a huge fan of speaking about inter quarter Trends, but I know people are certainly interested in in what is happening with Burger. King us given you saw snack wraps, introduced by major competitor at 299. You've had a lot of success with royal crispy wraps. So, you know, how if there's any comment you can make about July Trends and, uh, with that major competitor launched, that'll be helpful and thank you.

Warren Dave. Uh, thanks for the question. It's Josh, um, I'll I'll take those 2 in turn, you know. I I think in terms of the Canada Trends, we were really pleased to see the improvement from q1 to Q2. I think you've heard all of us, say consistently and we're just so proud of the work that the Tim's team is doing. You know, I mentioned earlier we're on our 17th quarter of consecutive, same Source sales, I think. That's because they're doing all the the fundamentals, right? And I think that's perhaps why you might see, you know, the consistent outperformance versus the pure set. And if you look at what's been happening up here, uh, you've seen Tim to do, uh, really well consistently, but you've also seen a bit of, like, a

Improvement in some of the consumer uh, confidence indices and that happened throughout the second quarter, but it's continued into the third quarter. So I I don't see any real reason to expect any any change in Trend uh or any deterioration up here in Canada for our 10 business.

In terms of uh, Burger King in the US, uh, similar story. We're really happy to see, uh, what happened from q1 to Q2? I think, Tom and the team were doing a great job. They're sticking to the plan. Uh and we haven't seen any impact in in July from competitor activity. So continue to be really confident in where we're going uh with BK. We're going to stick to our plan and uh we're excited about the stuff that we have planned for the second half.

Dave, the only thing I'd add to that is a lot of what you're seeing in the results from Burger. King is better execution, remodels working, driving results. These are things. We can control that are frankly, separate from competitive activity, um, and somewhat from, you know, even kind of the, the macro environment. So we we feel very good about where we are.

Christian comes from Dennis, go from UBS Dennis, please. Go ahead. You are on is open.

Great. Thanks guys. Uh, congrats on the momentum in the international business. I want to dive in there if I could and uh maybe just if there's anything more that you could kind of share and sort of unpacking the, the BK International momentum, uh, and the performance in in the quarter across key markets, you know, perhaps relative to to injuries industry Dynamics in in those markets. And uh, just how you're thinking about that, momentum going forward and, and maybe what it does for kind of the longer term development, uh, trajectory as you think about the international potential, thank you.

Thanks Dennis. Uh, well, I'll share a few thoughts on on the international business, both in the quarter and I think overall it's worth reiterating, you know, that that BK international business is a fantastic business and it's been on a, a really great growth trajectory, you know, I think now for for 10 or 15 years and, you know, as we talked about a lot, the the brands just in a good place in a lot of these International markets. Uh we have high quality newer assets. We have really good operations, we have good food, quality perception. It's a highly digital business and we have some fantastic Partners, uh, around the world who who are just doing a very nice job. You know, I think as you as you look around the world in terms of the the performance in the quarter, as some of the the highlights are places like Spain, Germany, and the UK. So some of our largest markets, they're doing a nice job on Innovation, but also I think the importantly keeping the right balance of value offerings, uh in the market. So I think they're getting both of those things, right? And it's driving

Some good same store sales, you know, the 1 market that's been a little bit softer for us, over the course of of the last few quarters has been Burger King in France. But I think really encouragingly we've now seen some improvement there. So as you get into, especially the last couple of months, Alex, Simone and the team there in BK, France, have really turned a corner and I think we're, we're back on a much more positive trajectory. So I think that's encouraging in terms of where that business is is going overall, outside of that, you know, if you look across APAC, we've had some really good consistency in terms of the markets. The big markets that are outperforming

We were, we had negative comps, uh, for a while, uh, throughout the prior year. And as we mentioned, we're now into positive territory. And I think that's a really remarkable, uh, turnaround that we've had in BK China. I would say that's happening even faster than than we expected. And I think that the team there is just really moving quickly and doing all the things that we wanted to do in terms of building a great team, cleaning up the store base fixing operations, bringing marketing, back to relevance focusing on the Whopper and an amazing new chicken sandwich called the crisper. Uh, so I would say China's going better than we expected. Uh, and we're really pleased to see that and that helps a bit on the, on the international same store sales as well. So those are some of the things that are are going well, overall, very proud of, of our partners and, and our teams in their National Business and happy with the results.

2, 2 things. I'd add to that first. Um, in terms of China teams, just doing it outstanding job. I mean, as Josh said, I mean, we are, we are ahead of where we thought we were going to be at this point because they are executing so well against the plan that they put together. Um, the other thing I'd point out is, um, I think every us brand that is reported so far was positive in China. Um, so you know, people have been talking about the China Macro for quite some time and, you know, everybody I believe everybody was positive. So it has clearly, uh, improved and, uh, that gives us some confidence as well. The other interesting thing I would point out, I mean, Josh highlighted,

DK in international. Um, you know, Popeye's did north of 400 million of system sales in the second quarter outside of the US and Canada and um you know it's comping just nominal sales, it's comping, you know, high 20s, low, 30s percent and systemwide sales growth. I believe of the top 10 brands us Brands outside of the US that it is the only 1 that is Growing System. Sales double digit. Um, so it is, it is an extraordinary business outside of the us growing very fast. Um, proud of what the team, what Thiago and the team are doing with it. Our Master franchisees around the world but it is really strong outside of the US.

The next question comes from John ivanco from JP Morgan, John. Please go ahead. Your line is open.

Um, hi, thank you, as you part of the themes, you know, both, you know, this quarter this year past couple of years is a lot of companies that have really, you know, developed their own or at least leaned in, um, to their Digital Data. Artificial intelligence, uh, type of capabilities, including personalized marketing as a, as a big part of their overall marketing efforts. So, you know, I know it's a big topic but, you know, I was hoping, you know, if we could revisit the overall qf,

Our strategy, you know, for our franchisees, you know, around this and how, you know, you could potentially take advantage of some of these scale-driven opportunities of your brand versus what others are doing. Thank you.

Yeah. Um, this is Patrick. I we are very excited about what we're doing on this front. We haven't been talking about it. Um, all that much because we think there are some things that we're doing that. Uh, that not everybody else has figured out yet. What I will tell you is um we are very focused on uh what can happen with uh with AI in our restaurants, how that can improve the customer experience, how that can improve the, uh, efficiency and effectiveness of operations. Um, you know, we're not fighting the last war. I mean, we are we are focused on AI and what we can do there. Um, you know, it is not, you know, it's not what I mean. I spent a lot of time on technology and my old life and it was just a very, very different world. Um, when we were doing that and we're just seeing opportunities now kind of across the board on everything that you do to run your restaurants.

Effectively and how you interact with our customers. That gets us excited, more to come on that. Um, as we roll more things out, but um, I'm excited about how it's going to affect our operations. Um, our franchisees their profitability, the customer experience, just a lot happening there.

Thank you.

The next question comes from De Julio from Bernstein. Your line is now open. Please go ahead.

Quarter doesn't seem to be overly hinging too much on the value platform because you're sustaining momentum even without having a 5 dollar meal deal. Um, so I was wondering if you can help us understand how you are scoring internally. Your affordability of your core items in the domestic market. And if you can also give us a little bit of, um, highlight or uh, excitement that you might be having for the marketing calendar heading into the second half of the Year. Thank you.

Hi Danilo. Uh, thanks for the question. Uh, I I think, uh, you characterized recently that, you know, I think we've had a more stable, uh, value offering. And I think we're very happy with how things are working. We've got our 5 Duo and 7 dollar trios, we think that's been working reasonably well, for us, and I think we'll continue to have, uh, value offerings. We'll probably bring some some new news, uh, whether that's product news or, uh, some of the mechanics and some of the communication of, of value over the next 6 months, uh, to a year. But I, I don't see a big change in, in the weight of, of value offerings or on Deal offerings within our menu. And I think if you, if you look back over time within the industry, uh, over a long time Horizon, you know, it the on Deal part of the business tends to be about 30%, it'll move up down, you know, a couple points here in here and there, but that's relatively consistent. It's an important part of the business, uh, but I think what you've seen Tom and team correctly focused on is making sure we're doing. We're focusing on.

All the important parts. We're focusing on premium offerings and family offerings. We're focused on our strongest equity, which is the Whopper and elevating the Whopper, and we're focused on making sure that we have relevant and Fresh Value. Offerings, I think you got to make sure that you're doing all 3 of those. And I think, as you mentioned doing all those things is, is what allowed us, what has allowed us over a number of quarters, uh, to perform in line, or, or better than than the pure Set, uh, without getting, uh, stuck too much on on, you know, an overd dependency, uh, on value. And I, I think, you know, we, we view that, uh, as an as a, an overall equation that we provide to our guests. It's having an awesome core offerings at a fair price, having good value offerings. And having exciting, premium Innovation. And and frankly, I as you look forward with the marketing calendar, we are very excited because we're going to do all of those things. Uh, we're going to bring new Partnerships and new family properties. That keep bringing, uh families and younger guests back into the restaurant. We're going to have even more, uh, exciting offer Innovations, all in the lines of some of the things you've seen.

Recently and we're going to keep value fresh. I think that's probably the the simplest kind of 3-part explanation of what the forward calendar looks like. And we look forward to sharing more of it uh, with you and with our guests over the next few months.

Thank you. Next question comes from Andrew Charles from TD Cowen Andrew please go ahead. Your line is open.

Great, thank you. You know Patrick you talked about the success of Burger King remodels that you know are driving mid-teen, sales lists and outperformance of carols. But, you know, if we think about the soft Quick Service sales backdrop, you know, the significant beef inflation. Um, in the first half of this year as well as you know, the challenge lending environment. You know, how can you accelerate the pace remodels to help more meaningfully accelerate, the share gains versus peers? You know, I guess I'm curious as well. Are you, are you open-minded? Um, I know you obviously they there's a target for 85 to 90% reimage by 2028. Uh buring is obviously funding, some of this, but open-mindedness to increase capex to kind of accelerate this transformation. Um, you know, over this time as well.

Hey, Andrew, it's Josh. I'll I'll uh, I'll start and let Patrick add anything that um that he'd like you know, in terms of the BK remodels. Uh we continue to have the exact same vision uh that we we articulated a couple of years back. Uh, we think it's really important to the brand to have fresh uh modern Assets in almost every, you know Community. You go to Across the us. And we think getting to around 85% in the next few years is is still the right goal. I I think we can continue to be very encouraged by the, by the results we're seeing from, from the remodels. You know, the uplifts have been consistent. The guest reaction is great. And you know, we see incredible results, especially in our, our company restaurants, uh, whether it's carols or some of the

Uh, restaurants. And those are the kind of things that make us want to want to stay the course and continue on the path. So I think that's, uh, that's our our game plan. We know there's been some fluctuations in in commodity prices that will happen in the business, but I think over long term that that vision is the right 1. Uh, and we're seeing all the data points that we wanted to see, uh, to continue investing behind the brand and the assets.

The next question comes from Gregory Frankfort. From Guggenheim, Gregory your line is open. Please go ahead.

Hey hey, thanks for the question. Um,

He is and and the the the pace of development that you would expect and how quickly you can get there nice.

Yeah, so uh, in terms of unit growth at at Tims in Canada, we are pleased that I think we're, we're on track to get back to positive, uh, growth this year. And the way I I think about it, uh, is that we've seen population growth over the last few years. And I think there's an Outlook, uh, for perhaps more moderate population growth in, in Canada, over the next few years. But we, you know, our view is directionally. If you have 1% population growth, uh, then we should be growing more Tims. And there are a lot of new communities that are being developed whether, you know, here in around around Toronto or out west. And, you know, when you have new housing and communities new retail, uh, new commercial complexes, we want to have a Tims in those. And so we're looking at where all the developments happening all across the the country, we have weed, control the development uh, here in Canada. So we have an in-house development team. That's very close to all the landlords and developers and so we're making sure that we're a part of those conversations and we're growing Tims as kind of the footprint in the population of of Canada grows.

And we think and you know, I think it helps as well as the returns are great. Uh, this is 1 of the best businesses, you know, in the qsr space in the entire world. So we're very excited to be part of building uh, new Tims and growing with Canada.

The next question comes from Jeff. Bernstein from Barclays, Jeff. Please go ahead. Your line is open.

I wanted to ask a question on franchisees.

How would you characterize franchisee willingness to lean into a national value platforms? Particularly if it comes at the expense of near-term, profitability and are there any concerns around franchisee alignment or marching compression as you compete more aggressively on price, thanks?

Yeah, and you should, uh, it's Josh. Uh, thanks for the question. You know, I would say in terms of franchisee alignment, it's as good as its, uh, as it's ever been, you know, we have great franchisee alignment. I think across all of of the businesses, you know, and a lot of that comes, uh, from from the great work, our teams have done developing those relationships. I think our franchisees know, and trust that we have their best interests in mind, you know, over the last couple of years, we published their profitability. And we've made it very clear that we're being held accountable to improve that, that profitability across the balance of things that that we do in the business. Whether that's, you know, operational initiatives investment initiatives, or some of the marketing initiatives across premium core and and value. And I think that our franchisees, uh, they understand that value is a part of the business and it's an important part of the business. And we work very closely with them to talk through what the right value strategy is for each of Our Brands and to make sure that we've got alignment that those are the right things that are going to.

To drive the business, uh, that are respectful of the profitability of the business, but will help bring more guests in into our restaurant. So I think we've developed a good relationship with all the franchises. I think we have a very balanced but effective value mechanisms across all of the businesses and we'll keep having that be an important, but only 1 part of of the business strategy going forward.

Question comes from Brian Harper and Morgan Stanley Ryan. Please go ahead.

Yeah, morning guys. Um, where roughly, this is more of a US question but roughly, where are you running a year-over-year price today. And I think the broader question is just, you know, I think there's been more talk about not just value, but sort of broader price architecture in the industry. Do you think that's, um, you know, a focus for you to or how do you see that sort of changing in in qsr broadly?

Hey Brian. Um, So within the US, I say, uh, most of the brands are running sort of low single digits on on pricing right now and it's something we're we're keeping a close eye on and and trying to make sure that that we're as balanced as we can. In, in the the menu pricing. I I wouldn't say we're uh, we're contemplating any large scale changes in in pricing architecture. Uh, as I mentioned to to, in response to a couple of the earlier questions and of the value or on Deal, part of our business has been pretty stable. Um, and then we're, we're just focused on making sure that those those offerings are compelling, but

But, uh, reasonably profitable for the franchises. And that we keep the, uh, the Baseline menu pricing. Um, you know, as contained as, as it's reasonable to do.

The next question comes from Sarah, Senator from Bank of America. So, please go ahead.

Or increase the the rate at which franchises want, um, to do some of these sort of more, these Fuller remodels. Because I know, at some point you kind of shifted to a little bit of the lighter touches, um, you know, shifted some of your funding that direction and I, I was curious, if, if you're seeing any kind of swing back to the bigger, uh, remodels, if you touched on that. And then the question I guess for Patrick is about the chicken segment and Popeye's, you know, at your last company, obviously, you know, you you overtook the the biggest competitor in the pizza space and kind of never looked back. Um, is there any risk that Popeye's, you know, even though it has big scale advantage over? Some of these up and coming Concepts, you know, the assets aren't in the right place or the product mix isn't isn't quite right. You know, is there any risk that? You know, it's it's it's hard for Popeye's to to keep Pace um, with the industry, just, you know, because of perhaps, maybe more structural issues about the um you know, the system. So those are the the 2 questions. Thanks.

Hey Sarah. Good morning. It's Sammy. I I'll take the first question and then I'll throw it over to uh, to Patrick to talk about uh, Chicken on, on the remodels. Actually, um, you know, we continue to be very pleased with kind of the, the uplifts, we're seeing in the mid teens and, uh, it's actually quite the opposite. We're what we're seeing is more franchises leaning into the sizzle image, which is a, a full, the, the brand new modern image of uh, of the Burger King system. I think what you may be referencing is a thing of the past of, you know, many years ago when there were like,

Wider touch remodels. But, you know, for our system right now and really since the Inception of reclaim the flame the focus has been doing on high quality, really good remodeled. And we know that sometimes those are a bit more expansive, which is how we designed the incentive program. But that's what ultimately drives. The, the lifts, the and guests coming back to the restaurant. So we're really pleased and and I will point out actually the sizzle uplifts. Uh, there's only about so far probably about 100 in the data set but the sizzle uplifts are uh are even better than the mid teens uplifts. We're seeing on average across the program. So we're really pleased with those numbers.

And Sarah on the, on the chicken side. Um, you know, it's it's actually been a very interesting Dynamic, the last, you know, 6 months or so, because with beef prices up.

Um, you've seen, uh, you've seen a lot of people running chicken promotions, you know, from McDonald's and Taco Bell and um, you know, folks kind of leaning in there, just because the protein costs, um, on the, on the beef side has been higher. And so it's interesting because while chicken is kind of having a moment, um, you know, I think the people who are focused on chicken, um, have been feeling everybody else kind of playing in in that space. And, you know, the, the, the reality is that, while people tend to look at things within, you know, the burger chains and the chicken chains and the pizza chains. Um, you know, there is a

A lot of competition amongst all of them for, you know, share of wallet from, you know, from consumers and, you know, a couple of the of the biggest um, chicken players are private. Um, and we think that they've actually been under pretty good pressure from a comp standpoint recently. Um, I like where Popeye's is the big thing on Popeye's is. We've got to get better at, uh, at running the stores. We're doing it. We're getting improvements. Um, we're seeing it in, you know, consumer metrics, we're seeing it in the things we look at in terms of speed of service and accuracy and you know, complaints and all of the all of the measures show us that we're making progress on improving the operations. We just need to do it even faster. And uh, and I'm confident that's going to get us the kind of growth that we need, and the proof point on that is again, kind of the international.

Side.

Where we started with the, you know, the, the kitchens laid out the way we want them laid out now. Um, it means that we're very efficient at how we're running those restaurants and it's an absolutely booming business.

Term. So if I can just add 1, more thing on uh, on what Patrick mentioned on on the Popeyes business. Uh, I would just call it that we already have a very clear plan aligned with the franchisees to modernize all of the assets including making sure they're all on the new easy to run kitchens over the next few years. So I think there's a clear path to basically entirely modern, uh, asset base that you're going to start seeing show up this year and into the next couple of years that I think is going to set us on on an even better footing with the Popeye's business.

The next question comes from John cynn power from Scotia Bank, John. Please go ahead. Your line is open.

Thanks very much. Good morning. Um the questions on franchise has a profitability in the in the US at BK. It's it's a difficult comp environment but um you're still seeing some meaningful costs inflation. I wonder are there still ways to grow branches, you profitability this year and next if you don't see a meaningful Improvement in the macro and I'm thinking about some of your initiatives like additional operating hours, kiosk usage, the Tailwind, you're seeing for modernization are are those sufficient to get you to grow average franchises, you profitability to the levels you're looking for by 26. Thank you.

Hey, John. Good morning. Thanks for the question. Um, look, I I think as you think about through 2 quarters of the year, uh, for our Burger King us system, uh, sales are, are, are roughly flat. And, yeah, we have seen some commodity headwinds. So I, I think I mentioned in the prepared remarks, uh, beef is about 25% of our cost basket and we're seeing around 15% inflation on that year to date. So it leads to about mid single digit cost inflation, uh, on the cogs line of the p&l, a couple things I'd say. I think number 1 is we are scouring the p&l and and there are opportunities in other costs wide items to to still help offset some of that mid single digits cost inflation. But, but that level of inflation. We, we also view as manageable and, you know, as we think about it, it is a point in time. And, and, and is driven by mainly beef. And, and we are, you know, in the middle of a herd re, uh, rebuilding cycle here in the US, uh, you know, we've studied these cycles and and they continued their Cycles, they will.

Reverse, uh, you know, probably 1 of the best analogs. We see is up here in our Tim's business is coffee, coffee has been at record highs for, for months now, and we've seen that reverse and, and that's a big benefit to franchise profitability. So, as we think about out to 2026, we're still, you know, a year and a half away from from the end of the year. And uh, we feel that these, that, this, this cycle will reverse, and we're doing the right things on the top line, Josh mentioned a lot on, in terms of what we're doing, um,

With our 3 prong strategy to, uh, to ultimately Drive the top line, and, and get us to a better place on profitability. And most importantly, I think our franchises are are super aligned to the things that we're doing uh and believe in the plan such that we, you know, we'll get there.

Our final question. Today comes from Christine Cho from Goldman Sachs Christine. Your line is open. Please go ahead.

Thank you so much. Uh, just a quick follow-up on this curls we franchised. Uh, I just wanted to understand, uh, what factors kind of influenced your decision to accelerate the process. And how would you characterize the current demand and interest from the potential franchises. Thank you.

Yeah. Hey, hey, Christine, thanks. Thanks for the question. I think, uh, you know, ultimately, the most important thing and I think Josh mentioned this is that we get restaurants into the hands of the best operators, right folks, who are local, who are going to be in the restaurants, uh, you know, serving the guests every day and we've seen a lot of demand. Uh, internally from folks, uh, at Carol's. Uh, these are above restaurant leaders who are in the organization already. Uh, we've seen it from potential new franchises, and we've seen it from existing franchises. In the Burger King system who are already great operators. They're a operators and they have the operational and financial capacity to take on more. And so we um, you know, this was this was actually a pretty welcome outcome from us. That that there's a lot of demand and that caused us

To, to start re-rating, early. Ultimately, um, you know, we think we'll do somewhere between 50 and 100 reranch this year. So, that's, that's a couple years ahead of schedule and we think that number will accelerate as we go into 2026 in terms of

Uh, more reranch and and I think again it's a testament to the progress we're seeing at Burger King us. Uh the plan is working and and folks are buying into the plan. And the most important investment they can make is with their capital and their time and and their choosing to do both with the referencing.

There is no better incentive to prove that you were a great operator at Carols than the opportunity to become an owner. And so, I think we're seeing a really nice.

Um, Dynamic there that you know, people see that opportunity, they're running those restaurants getting good results better than we're seeing from the overall system right now and they're proven that they can be great operators and that means some of them are going to have the opportunity to become owners and absolutely love that dynamic.

Inclusion. Today's Q&A session. So, hand to go back to Josh for some closing comments.

Well, thank you everybody for joining us today, and, and thanks for the questions. I'd like to. Once again, thank our teams and our franchises for, for their very hard work, this quarter and to look forward to sharing more on our our call next quarter, have a great day.

This concludes today's call, thank you very much for your attendance. You may now disconnect your lines.