Q1 2026 A & W Food Services of Canada Inc Earnings Call

May 7, 2026

Speaker #1: Hello, everyone. Thank you for joining us, and welcome to the A & W Food Services of Canada Q1, 2026 earnings call. After today's prepared remarks, we will host a question-and-answer session.

Operator: Hello, everyone. Thank you for joining us, and welcome to the A&W Food Services of Canada Q1 2026 Earnings Call. After today's prepared remarks, we will host a question and answer session. I will now hand the call over to Susan Senecal, President and CEO. Please go ahead.

Operator: Hello, everyone. Thank you for joining us, and welcome to the A&W Food Services of Canada Q1 2026 Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask question please I will now hand the call over to Susan Senecal, President and CEO. Please go ahead.

Speaker #1: If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. I will now hand the call over to Susan Senecal, President and CEO, please go ahead.

Speaker #2: Thanks, Melissa. Good morning, everyone, and thank you for taking the time to attend our call today. I'm Susan Senecal, President and CEO of A & W Food Services of Canada, and I'm joined this morning by A & W's Chief Financial Officer, Kelly Blankstein.

Susan Senecal: Thanks, Melissa. Good morning, everyone, and thank you for taking the time to attend our call today. I'm Susan Senecal, President and CEO of A & W Food Services of Canada, and I'm joined this morning by A&W's Chief Financial Officer, Kelly Blankstein. Today, we're presenting A&W's results for the Q1 of fiscal 2026, which was a 12-week period that ended on 22 March 2026. Before we begin, as a reminder, remarks on this call may include our expectations, future plans and intentions that may constitute forward-looking information within the meaning of applicable securities laws in Canada. Such forward-looking information is based on estimates and assumptions made by management regarding, among other things, general economic and geopolitical conditions, as well as the competitive environment. Actual results may differ materially from the conclusions, forecasts, or projections expressed by the forward-looking information.

Speaker #2: Today, we're presenting A & W's results for the first quarter of fiscal 2026, which was a 12-week period that ended on March 22nd, 2026.

Speaker #2: Before we begin, as a reminder, remarks on this call may include our expectations, future plans, and intentions that may constitute forward-looking information within the meaning of applicable securities laws in Canada.

Susan Senecal: Before we begin, as a reminder, remarks on this call may include our expectations, future plans and intentions that may constitute forward-looking information within the meaning of applicable securities laws in Canada. Such forward-looking information is based on estimates and assumptions made by management regarding, among other things, general economic and geopolitical conditions, as well as the competitive environment. Actual results may differ materially from the conclusions, forecasts, or projections expressed by the forward-looking information.

Speaker #2: Such forward-looking information is based on estimates and assumptions made by management regarding among other things general economic and geopolitical conditions, as well as the competitive environment.

Speaker #2: Actual results may differ materially from the conclusions forecasts or projections expressed by the forward-looking information. We refer you to Food Services Q1, 2026 MD&A and fiscal 2025 annual information form, both of which include a summary of the material assumptions made by management, as well as the risks and factors that could affect A & W's future performance and our ability to deliver on the forward-looking information.

Susan Senecal: We refer you to Food Services Q1 2026 MD&A and Fiscal 2025 Annual Information Form, both of which include a summary of the material assumptions made by management, as well as the risks and factors that could affect A&W's future performance and our ability to deliver on the forward-looking information. We also refer you to Food Services Q1 2026 MD&A for definitions and reconciliations of any non-IFRS financial measures mentioned on today's call. Our Q1 earnings release, financial statements, MD&A, as well as our fiscal 2025 annual information form, are all available on Food Services SEDAR+ profile, as well as on our investor website at awinvestors.ca. A&W same-store sales growth for Q1 was near flat at -0.4%, but reflected regional differences in performance, with positive same-store sales growth in the Western provinces and territories being offset by negative same-store sales growth in the Eastern provinces.

Speaker #2: We also refer you to Food Services Q1, 2026 MD&A for definitions and reconciliations of any non-IFRS financial measures mentioned on today's call. Our Q1 earnings release financial statements MD&A, as well as our fiscal 2025 annual information form, are all available on Food Services Cedar Plus profile as well as on our investor website at awinvestors.ca.

Susan Senecal: Our Q1 earnings release, financial statements, MD&A, as well as our fiscal 2025 annual information form, are all available on Food Services SEDAR+ profile, as well as on our investor website at awinvestors.ca. A&W same-store sales growth for Q1 was near flat at -0.4%, but reflected regional differences in performance, with positive same-store sales growth in the Western provinces and territories being offset by negative same-store sales growth in the Eastern provinces.

Speaker #2: A & W's same-store sales growth for Q1 was near flat at -0.4%, but reflected regional differences in performance with positive same-store sales growth in the western provinces and territories being offset by negative same-store sales growth in the eastern provinces.

Speaker #2: A & W restaurants in the western part of Canada reported growth in both sales and guest counts and outperformed the market, confirming the effectiveness of our marketing strategy and value promotions.

Susan Senecal: A&W restaurants in the western part of Canada reported growth in both sales and guest counts and outperformed the market, confirming the effectiveness of our marketing strategy and value promotions. Sales in Q1 2026 from our A&W restaurants in the East were negatively impacted by severe weather events, which caused temporary closures and restricted customer access to both our restaurants and delivery services. These weather-related factors, combined with the non-recurrence of last year's federal tax holiday, resulted in a quarter-over-quarter decline in guest counts and same-store sales in the Eastern provinces. In Ontario specifically, we are actively addressing the challenges posed by changing demographics and a complex macro environment marked by economic and consumer uncertainty. We remain committed to adapting our approach to meet the evolving needs of our guests.

Speaker #2: Sales in Q1, 2026 from our A & W restaurants in the east were negatively impacted by severe weather events, which caused temporary closures and restricted customer access to both our restaurants and delivery services.

Speaker #2: These weather-related factors, combined with the non-recurrence of last year's federal tax holiday, resulted in a quarter-over-quarter decline in guest counts and same-store sales in the eastern provinces.

Susan Senecal: These weather-related factors, combined with the non-recurrence of last year's federal tax holiday, resulted in a quarter-over-quarter decline in guest counts and same-store sales in the Eastern provinces. In Ontario specifically, we are actively addressing the challenges posed by changing demographics and a complex macro environment marked by economic and consumer uncertainty. We remain committed to adapting our approach to meet the evolving needs of our guests.

Speaker #2: In Ontario specifically, we're actively addressing the challenges posed by changing demographics and a complex macroenvironment marked by economic and consumer uncertainty. We remain committed to adapting our approach to meet the evolving needs of our guests.

Speaker #2: Strategically, we continue to focus on growing restaurant counts across Canada, with a particular focus on Ontario and Quebec, and in partnership with Fencor. We opened four new A & W restaurants in Q1, 2026, two of which were in the important markets of Ontario and Quebec, and three of which were in partnership with Fencor.

Susan Senecal: Strategically, we continue to focus on growing restaurant counts across Canada, with a particular focus on Ontario and Quebec, and in partnership with Suncor. We opened four new A&W restaurants in Q1 2026, two of which were in the important markets of Ontario and Quebec, and three of which were in partnership with Suncor. Our partnership with Pret A Manger is progressing well. We're excited to share that we opened our second corporately-owned Pret location in Toronto in January 2026, and we've secured leases for additional Pret locations we expect to open, with three to four franchise locations by the end of fiscal 2026. We continue to actively work to further expand Pret's presence in Canada and are actively pursuing sites in Vancouver, Calgary, Toronto, and Montreal. With that, I'll now turn things over to Kelly, who will take us through A&W's financial highlights for Q1.

Speaker #2: Our partnership with Crédit Manger is progressing well. We're excited to share that we opened our second corporately owned Pratt location in Toronto in January 2026, and we've secured leases for additional Pratt locations we expect to open with three to four franchise locations by the end of fiscal actively work to further expand Pratt's presence in Canada and are actively pursuing sites in Vancouver, Calgary, Toronto, and Montreal.

Susan Senecal: Our partnership with Pret A Manger is progressing well. We're excited to share that we opened our second corporately-owned Pret location in Toronto in January 2026, and we've secured leases for additional Pret locations we expect to open, with three to four franchise locations by the end of fiscal 2026. We continue to actively work to further expand Pret's presence in Canada and are actively pursuing sites in Vancouver, Calgary, Toronto, and Montreal. With that, I'll now turn things over to Kelly, who will take us through A&W's financial highlights for Q1.

Speaker #2: With that, I'll now turn things over to Kelly, who will take us through A & W's financial highlights for Q1.

Speaker #3: Thank you, Susan, and good morning, everyone. I'll provide an overview of our financial results for the first quarter ended March 22nd, 2026. Total revenue for the quarter was $59.4 million, a decrease of 3% compared to Q1 of 2025, and this decrease was primarily due to three fewer new restaurant openings this quarter compared to the same quarter last year.

Kelly Blankstein: Thank you, Susan. Good morning, everyone. I'll provide an overview of our financial results for Q1 ended 22 March 2026. Total revenue for the quarter was CAD 59.4 million, a decrease of 3% compared to Q1 2025. This decrease was primarily due to 3 fewer new restaurant openings this quarter compared to the same quarter last year. Our net annual restaurant unit growth for the trailing four quarters ending in Q1 2026 was 1.7%, which is consistent with the 1.8% achieved for the trailing four quarters ending Q1 2025. As a reminder, the timing of restaurant openings fluctuates each quarter and impacts revenue from equipment sales and turnkey restaurants. These decreases were partially offset by increases in service fees and distribution revenue, which are driven by system sales.

Speaker #3: Our net annual restaurant unit growth for the trailing four quarters ending in Q1, 2026 was 1.7%, which is consistent with the 1.8% achieved for the trailing four quarters ending Q1, 2025.

Kelly Blankstein: Our net annual restaurant unit growth for the trailing four quarters ending in Q1 2026 was 1.7%, which is consistent with the 1.8% achieved for the trailing four quarters ending Q1 2025. As a reminder, the timing of restaurant openings fluctuates each quarter and impacts revenue from equipment sales and turnkey restaurants. These decreases were partially offset by increases in service fees and distribution revenue, which are driven by system sales.

Speaker #3: As a reminder, the timing of restaurant openings fluctuates each quarter and impacts revenue from equipment sales and turnkey restaurants. These decreases were partially offset by increases in service fees and distribution revenue, which are driven by system sales.

Speaker #3: The ongoing migration of A & W restaurants moving from the 2.5% to the 3.5% service fee rate also contributed to the increase in service fee revenue and the margin expansion in Q1, 2026.

Kelly Blankstein: The ongoing migration of A&W restaurants moving from the 2.5% to the 3.5% service fee rate also contributed to the increase in service fee revenue and the margin expansion in Q1 2026. System sales increased by 1.5% to CAD 402.8 million, driven primarily by the increase in our total restaurant count. Same-store sales growth was -0.4%, reflecting the regional disparity Susan described earlier. Operating costs for the quarter were CAD 33.3 million, a 2% decrease from Q1 2025, largely attributed to and associated with the fewer A&W restaurant openings. This was partially offset by timing differences in marketing spend, which resulted in the advertising funds having a CAD 3.3 million negative impact to net income before taxes this quarter.

Speaker #3: System sales increased by 1.5% to $402.8 million, driven primarily by the increase in our total restaurant count. Same-store sales growth was -0.4%, reflecting the regional disparity Susan described earlier.

Speaker #3: Operating costs for the quarter were $33.3 million, a 2% decrease from Q1, 2025, largely attributed to and associated with the fewer A & W restaurant openings.

Kelly Blankstein: Operating costs for the quarter were CAD 33.3 million, a 2% decrease from Q1 2025, largely attributed to and associated with the fewer A&W restaurant openings. This was partially offset by timing differences in marketing spend, which resulted in the advertising funds having a CAD 3.3 million negative impact to net income before taxes this quarter.

Speaker #3: This was partially offset by timing differences in marketing spend, which resulted in the advertising funds having a $3.3 million negative impact to net income before taxes this quarter.

Speaker #3: General and administrative expenses were $11.7 million, up 7% or 0.8 million from Q1, 2025. This increase relates to higher employee compensation, including a 0.3 million increase in stock-based compensation, as well as resources added to support the Pratt brand expansion.

Kelly Blankstein: General and administrative expenses were CAD 11.7 million, up 7% or CAD 0.8 million from Q1 2025. This increase relates to higher employee compensation, including a CAD 0.3 million increase in stock-based compensation, as well as resources added to support the Pret brand expansion. Income before income taxes increased by CAD 1.2 million in Q1 2026, largely as a result of a CAD 2.6 million gain on the interest rate swap and decreases in both operating costs and net finance expense. These decreases were partially offset by a decrease in revenue and an increase in G&A expenses. Adjusted EBITDA for the quarter was CAD 19.5 million and in line with Q1 2025's adjusted EBITDA of CAD 19.4 million.

Speaker #3: Income before income taxes increased by 1.2 million in Q1, 2026, largely as a result of a 2.6 million gain on the interest rate swap and decreases in both operating costs and net finance expense.

Speaker #3: These decreases were partially offset by a decrease in revenue and an increase in G&A expenses. Adjusted EBITF for the quarter was $19.5 million, and in line with Q1, 2025's adjusted EBITF of $19.4 million, adjusted EBITF increased due to lower operating costs, excluding depreciation and advertising fund expenses, which are added back when calculating adjusted EBITF.

Kelly Blankstein: These decreases were partially offset by a decrease in revenue and an increase in G&A expenses. Adjusted EBITDA for the quarter was CAD 19.5 million and in line with Q1 2025's adjusted EBITDA of CAD 19.4 million.

Kelly Blankstein: Adjusted EBITDA increased due to lower operating costs, excluding depreciation and advertising fund expenses, which are added back when calculating adjusted EBITDA. This decrease in operating expenses was offset by lower revenue, excluding advertising fund contributions, which are excluded from adjusted EBITDA and higher G&A expenses, excluding items like depreciation and stock-based compensation, which are added back when calculating adjusted EBITDA. Adjusted EBITDA margin increased 110 basis points to 32.9%, up from 31.8% in Q1 of last year. Our outlook for fiscal 2026 remains unchanged with the guidance we provided on 5 March and includes achieving adjusted EBITDA within the range of CAD 103 million to 105 million, up from the CAD 100 million achieved in 2025.

Speaker #3: This decrease in operating expenses was offset by lower revenue, excluding advertising fund contributions, which are excluded from adjusted EBITF, and higher G&A expenses, excluding items like depreciation and stock-based compensation, which are added back when calculating adjusted EBITF.

Speaker #3: Adjusted EBITF margin increased $110 basis points to $32.9%, up from $31.8% in Q1 of last year. Our outlook for fiscal 2026 remains unchanged, with the guidance we provided on March 5th and includes achieving adjusted EBITF within the range of $103 million to $105 million up from the $100 million achieved in 2025.

Kelly Blankstein: Adjusted EBITDA margin increased 110 basis points to 32.9%, up from 31.8% in Q1 of last year. Our outlook for fiscal 2026 remains unchanged with the guidance we provided on 5 March and includes achieving adjusted EBITDA within the range of CAD 103 million to 105 million, up from the CAD 100 million achieved in 2025.

Speaker #3: It also includes ending fiscal 2026 within the range of $1,112 restaurants to $1,120 A & W restaurants up from $1,094 at the end of 2025.

Kelly Blankstein: It also includes ending fiscal 2026 within the range of 1,112 restaurants to 1,120 A&W restaurants, up from 1,094 at the end of 2025. We expect to achieve system sales growth in the range of 2.5% to 5% compared to the 2.8% achieved in 2025, and expect to achieve same-store sales growth in the range of 0.5% and 3% compared to 1.2% achieved in 2025. Turning to the balance sheet, in Q1 2026, we were able to further deleverage and reduce the net debt to adjusted EBITDA ratio from 2.3 at the end of 2025 to 2.2.

Speaker #3: We expect to achieve system sales growth in the range of 2.5% to 5% compared to the 2.8% achieved in 2025 and expect to achieve same-store sales growth in the range of 0.5 and 3% compared to 1.2% achieved in 2025.

Speaker #3: Turning to the balance sheet, in Q1, 2026, we were able to further deleverage and reduce the net debt to adjusted EBITF ratio from 2.3 at the end of 2025 to 2.2.

Speaker #3: The CapEx to revenue ratio was 1.2% for Q1, 2026, up 30 basis points from 0.9% for Q1, 2025. In Q1 of 2026, food services invested capital in plant and equipment, readying the second Pratt STEM alone location for opening in January 2026, leading to an increased capital investment in plant and equipment in the first quarter of 2026 as compared to the first quarter of 2025.

Kelly Blankstein: The CapEx to revenue ratio was 1.2% for Q1 2026, up 30 basis points from 0.9% for Q1 2025. In Q1 of 2026, Food Services invested capital in plant and equipment, readying the second Pret stand-alone location for opening in January 2026, leading to an increased capital investment in plant and equipment in Q1 of 2026 as compared to Q1 of 2025. We declared a cash dividend of CAD 0.48 per share in Q1 2026 and remain committed to maintaining the current level of quarterly dividends for the foreseeable future. We announced on 18 March that the TSX had approved a normal course issuer bid that allows us to purchase up to 600,000 A&W shares over the 12-month period beginning 20 March 2026, and ending 19 March 2027.

Speaker #3: We declared a cash dividend of 0.48 per share in Q1, 2026 and remained committed to maintaining the current level of quarterly dividends for the foreseeable future.

Kelly Blankstein: We declared a cash dividend of CAD 0.48 per share in Q1 2026 and remain committed to maintaining the current level of quarterly dividends for the foreseeable future. We announced on 18 March that the TSX had approved a normal course issuer bid that allows us to purchase up to 600,000 A&W shares over the 12-month period beginning 20 March 2026, and ending 19 March 2027.

Speaker #3: We announced on March 18th that the TSX had approved a normal course issuer bid that allows us to purchase up to $600,000 A & W shares over the 12-month period beginning March 20th, 2026, and ending March 19th, 2027.

Speaker #3: We have launched an NCIB because A & W's management and its board believe that from time to time the market price of A & W shares do not reflect A & W's intrinsic value and that repurchasing the shares is an attractive and appropriate use of corporate funds.

Kelly Blankstein: We have launched an NCIB because A&W's management and its board believe that from time to time, the market price of A&W shares do not reflect A&W's intrinsic value, and that repurchasing the shares is an attractive and appropriate use of corporate funds. To facilitate share purchases during regulatory restrictions or self-imposed blackout periods, A&W also entered into an automatic share purchase plan with a designated broker. A&W did not repurchase any common shares under the NCIB in Q1 2026, and as of today, have repurchased a total of 5,391 common shares at an average price of CAD 36.16 per share. I'll now hand it back to Susan for some closing remarks.

Speaker #3: To facilitate share purchases during regulatory restrictions or self-imposed blackout periods, A & W also entered into an automatic share purchase plan with a designated broker.

Speaker #3: A&W did not repurchase any common shares under the NCIB in Q1 2026, and as of today, have repurchased a total of 5,391 common shares at an average price of $36.16 per share.

Kelly Blankstein: A&W did not repurchase any common shares under the NCIB in Q1 2026, and as of today, have repurchased a total of 5,391 common shares at an average price of CAD 36.16 per share. I'll now hand it back to Susan for some closing remarks.

Speaker #3: On that, I'll turn it back to Susan for some closing remarks.

Speaker #2: Thanks, Kelly. In summary, while we face significant weather and economic headwinds in Eastern Canada this quarter, the strong performance in the West and our ongoing expansion with Pratt demonstrate the fundamental strength of our business model.

Susan Senecal: Thanks, Kelly. In summary, while we face significant weather and economic headwinds in Eastern Canada this quarter, the strong performance in the West and our ongoing expansion with Pret demonstrate the fundamental strength of our business model. We remain focused on our strategic initiatives, including operational excellence through the five-star operating system and delivering value that resonates with our guests. We continue to see benefits and incremental gains from the investments we have made in the A&W mobile app, including our loyalty program, A&W Rewards, and our five-star operating system. We also remained focused on menu innovation and new restaurant growth, particularly in strategic markets and through our partnership with Suncor. A&W has maintained its spot as the second-largest QSR burger chain in Canada, and we believe that our strategic initiatives have us well-positioned to improve within the market.

Speaker #2: We remain focused on our strategic initiatives, including operational excellence through the five-star operating system, and delivering value that resonates with our guests. We continue to see benefits and incremental gains from the investments we have made in the A & W mobile app, including our loyalty program, A & W Rewards, and our five-star operating system.

Susan Senecal: We continue to see benefits and incremental gains from the investments we have made in the A&W mobile app, including our loyalty program, A&W Rewards, and our five-star operating system. We also remained focused on menu innovation and new restaurant growth, particularly in strategic markets and through our partnership with Suncor. A&W has maintained its spot as the second-largest QSR burger chain in Canada, and we believe that our strategic initiatives have us well-positioned to improve within the market.

Speaker #2: We also remain focused on menu innovation and new restaurant growth, particularly in strategic markets and through our partnership with Sencor. A & W has maintained its spot as the second-largest QSR burger chain in Canada and we believe that our strategic initiatives have us well positioned to improve within the market.

Speaker #2: We extend our gratitude to our shareholders for their ongoing support and appreciate the hard work of our employees, franchisees, and partners. With that, I'll turn the call back over to the operator for questions.

Susan Senecal: We extend our gratitude to our shareholders for their ongoing support and appreciate the hard work of our employees, franchisees, and partners. With that, I'll turn the call back over to the operator for questions. Thank you very much.

Speaker #2: Thank you very much.

Speaker #1: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one on your telephone keypad.

Operator: We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. Your first question comes from the line of Mark Petrie with CIBC. Your line is now open. Please go ahead.

Speaker #1: To withdraw your question, press star one again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device.

Speaker #1: Please stand by while we compile the Q&A roster. Your first question comes from the line of Mark Petrie with CIBC. Your line is now open.

Speaker #1: Please go ahead.

Speaker #3: Yeah, thanks. Good morning. I wanted to ask about the regional disparities and totally understand that, having lived through that Eastern Canada inclement winter weather.

Mark Petrie: Yeah, thanks. Good morning. I wanted to ask about the regional disparities, and totally understand that having lived through that Eastern Canada inclement winter weather. Just curious how that gets reflected in your sort of marketing and promotions, how localized you get with that. You know, maybe not so much responding to the weather, but, you know, some of the macro concerns that you also called out, how you're thinking about that for the balance of 2026 or at least the upcoming months.

Speaker #3: Just curious, how that gets reflected in your sort of marketing and promotions? How localized do you get with that? Maybe not so much responding to the weather, but some of the macro concerns that you also called out, how you're thinking about that for the balance of 2026, or at least the upcoming months?

Speaker #2: Yeah, great question. And hopefully you're out of the storms by now. Just wanted to when you think about the marketing plans that we have, we do have some national plans that cover the entire country, Quebec is handled separately.

Susan Senecal: Yeah, great question. Hopefully, you're out of the storms by now. Just wanted to, you know, when you think about the marketing plans that we have, is we do have some national plans that cover the entire country. Quebec is handled separately, but we also have local plans in place, particularly in Ontario, where it's large geography, large population, so we're able to think about local investments to really focus on that market. With things like weather, it's really difficult to sort of customize to that. As you say, where we see long-term trends or different consumer needs, we absolutely have a local focus and a local lens on our promotional and our marketing plans.

Susan Senecal: Quebec is handled separately, but we also have local plans in place, particularly in Ontario, where it's large geography, large population, so we're able to think about local investments to really focus on that market. With things like weather, it's really difficult to sort of customize to that. As you say, where we see long-term trends or different consumer needs, we absolutely have a local focus and a local lens on our promotional and our marketing plans.

Speaker #2: But we also have local plans in place, particularly in Ontario, where it's large geography, large populations. So we're able to think about local investments to really focus on that market.

Speaker #2: With things like weather, we really it's really difficult to sort of customize to that. But as you say, where we see long-term trends or different consumer needs, we absolutely have a local focus and a local lens on our promotional and our marketing plans.

Speaker #3: Yeah, so maybe just to sort of expand on that, I mean, I think it's fair to say that the macro sort of environment has worsened in the last two months.

Mark Petrie: Yeah. Maybe just to sort of expand on that, I mean, I think it's fair to say that the macro sort of environment has worsened in the last 2 months. I'm not sure if you would have necessarily seen that in sort of your consumer patterns. Just curious if that then affects how you plan and approach 2026.

Speaker #3: I'm not sure if you would have necessarily seen that in sort of your the consumer patterns, but just curious if that then affects how you plan and approach 2026.

Speaker #2: Yes, it does. I mean, sometimes there's lead time issues in terms of being able to pivot quickly. But we absolutely do. And we see the same thing as you're just stated, that the consumer environment is very challenged and we need to respond to that mostly through value, but also through, in some cases, innovation with our menu as well.

Susan Senecal: Yes, it does. I mean, sometimes there's lead time issues in terms of being able to pivot quickly, but we absolutely do. We see the same thing as you just stated, that the consumer environment is very challenged, and we need to respond to that mostly through value, but also through, in some cases, innovation with our menu as well.

Speaker #3: Yeah, okay. Thank you. Regarding the Pratt sites, I'm just curious—what can you sort of tell us about these? Are they going to existing A&W franchisees?

Mark Petrie: Yeah. Okay. Thank you. Also, regarding the Pret sites, I'm just curious, you know, what you can sort of tell us about these. Are they going to existing A&W franchisees? I think that was at least the initial intention to target that. How should we think about the financial contribution from A&W and how this will affect the P&L as the openings roll out?

Speaker #3: I think that was at least the initial intention to target that. And then how should we think about the financial contribution from A & W and how this will affect the P&L as the openings roll out?

Speaker #2: Sure. I'll chat about the franchisees. So yes, these locations will be franchised in this case to existing A & W franchisees. We may also in the future have franchisees who are non-A & W franchisees who may have an interest if there's a geographic market where that makes sense, that may happen.

Susan Senecal: Sure. I'll chat about the franchisees. Yes, these locations will be franchised, in this case, to existing A&W franchisees. We may also in the future have franchisees who are non-A&W franchisees who may have an interest. If there's a geographic market where that makes sense, that may happen. Today, all of the leases that we've signed and all of the projects that are underway are with A&W existing franchisees. Maybe Kelly can comment on the financial impact in terms of the investments as you see them.

Speaker #2: But today, all of the leases that we've signed and all of the projects that are underway are with A & W existing franchisees. Maybe Kelly can comment on the impact to the financial impact in terms of the investments as you see them.

Speaker #1: Thank you. Thank you, Susan. And good morning, Mark. Definitely we try to harmonize the activities that we do for Pratt with the activities that we do for A & W.

Kelly Blankstein: Thank you. Thank you, Susan. Good morning, Mark. Definitely, we try to harmonize the activities that we do for Pret with the activities that we do for A&W. It will look very similar. It will have a very similar pattern to the impact on our income statement and balance sheet as what you would see with the rest of the A&W restaurant population.

Speaker #1: So it will look very similar. We'll have a very similar pattern to the impact on our income statement and balance sheet as what you would see with the rest of the A & W restaurant populations.

Speaker #3: Okay, appreciate that. And then just the last one, I mean, it's fair to say the macro like we were talking about earlier has not gotten better.

Mark Petrie: Okay. Appreciate that. Then just the last one, I mean, it's fair to say, you know, the macro, like we were talking about earlier, has not gotten better. Just curious, any comments you can share with regards to Q2. Do the regional disparities persist, even as weather is normalized or how has that tracked so far?

Speaker #3: Just curious, any comments you can share with regards to Q2? Do the regional disparities persist even as weather is normalized or how has that tracked so far?

Speaker #2: Yes, we do have regional disparities persisting. And that's now mainly related to economic factors versus weather, although we've certainly continued to have some strange weather patterns.

Susan Senecal: Yes, we do have regional disparities persisting, and that's now mainly related to economic factors versus weather, although we certainly continue to have some strange weather patterns. We are seeing weaker results, particularly in parts of manufacturing, parts of Ontario, for example, that have a heavy manufacturing base, or in terms of government employment, where there's not only potential job loss, but also the threat of potential job loss, which uncertainty causes consumers to change and be more cautious about their overall spending behavior, including QSR.

Speaker #2: But we are seeing weaker results, particularly in parts of manufactured parts of Ontario, for example, that have a heavy manufacturing base. Or government intensive government employment where there's not only potential job loss, but also the threat of potential job loss, which uncertainty causes consumers to change and be more cautious about their overall spending behavior, including QSR.

Speaker #3: Yeah, okay, appreciate all the comments. And all the best. Thank you.

Mark Petrie: Yeah. Okay. Appreciate all the comments and all the best. Thank you.

Speaker #2: Yeah, thanks, Mark.

Susan Senecal: Yeah. Thanks, Mark.

Speaker #1: Your next question comes from the line of Logan Wright with RBC Capital Markets. Your line is now open. Please go ahead.

Operator: Your next question comes from the line of Logan Reich with RBC Capital Markets. Your line is now open. Please go ahead.

Speaker #4: Hey, good morning. Thanks for taking the questions. I wanted to ask one or just start on the macro environment. I mean, we've heard from a lot of other restaurant companies, this reporting season of macro pressure is weighing on the consumer, particularly related to gas prices.

Logan Reich: Hey, good morning. Thanks for taking the questions. I wanted to ask one or just start on the macro environment. I mean, we've heard from a lot of other restaurant companies this reporting season of macro pressures weighing on the consumer, particularly related to gas prices, starting in March. Just curious if you are seeing that in your consumer. I know you called out the regional disparities. I'm just curious if you think any of the sort of macro headwinds related to gas prices are affecting your consumers.

Speaker #4: Starting in March, just curious if you are seeing that in your consumer? I know you called out the regional disparities, but I'm just curious if you think, hey, the sort of macro headwinds related to gas prices are affecting your consumers?

Speaker #2: Yes. And in some ways, they're also disparities in both the actual gas price increases, but also people's dependence in different regions of Canada, on car travel or gasoline for their economic benefits and for their work and for their travel and so on.

Susan Senecal: Yes, and in some ways, there are also disparities in both the actual gas price increases, but also people's dependence in different regions of Canada on car travel or gasoline for their economic benefits and for their work and for their travel and so on. We have seen that, absolutely. It's a big chunk out of people's disposable income. Every fill-up is one meal.

Speaker #2: So we have seen that absolutely. It's a big chunk out of people's disposable income. Every fill-up is one meal.

Speaker #3: Got it. Got it. That's helpful. And then I guess just in light of that, I mean, given the worsening macro since the Q4 call, I guess what gives you confidence in the reiteration of the same store sales guidance, given the softening consumer?

Logan Reich: Got it. Got it. That's helpful. I guess just in light of that, I mean, given the worsening macros in the Q4 call, I guess, what gives you confidence in the reiteration of the same-store sales guidance given in the softening consumer? Can you just help us walk through the building blocks of the implied acceleration through the H2 that implies a meaningful step up both on a 1-year and on a 2-year basis?

Speaker #3: And can you just help us walk through the building blocks of the implied acceleration through the back half of the year? It implies a meaningful step of both on a one-year and on a two-year basis.

Speaker #2: Yeah, I mean, obviously, no one has a perfect crystal ball. I wish we did. But one of the things we looked at was the impact of the severe weather.

Susan Senecal: Yeah. I mean, obviously, no one has a perfect crystal ball. I wish we did. One of the things we looked at was the impact of the severe weather, and assuming that, you know, while macroeconomic factors may persist, but those once-in-a-100-year type weather patterns may not. Removing the impact, you know, as best we can from that, and looking forward, we think that our plans, our strategies, and especially our increased emphasis on value, will create better results through the balance of the year.

Speaker #2: And assuming that while macroeconomic factors may persist, that those once-in-a-hundred-year type weather patterns may not. And so removing the impact as best we can, from that and looking forward, we think that our plans or strategies and especially our increased emphasis on value will create better results through the balance of the year.

Speaker #3: Okay, that's helpful. And then I wanted to ask on the fee migration you guys mentioned in the script going from two and a half to three and a half.

Logan Reich: Okay. That's helpful. Then I wanted to ask on the fee migration you guys mentioned in the script, going from 2.5 to 3.5. Can you just share where you're in that process of how many stores or franchisees that's rolled out to and maybe the sort of trajectory of that rollout through the balance of the year?

Speaker #3: Can you just share where you're in that process of how many stores or franchisees that's rolled out to and maybe the sort of trajectory of that rollout through the balance of the year?

Speaker #2: Sure. question?

Susan Senecal: Sure. Kelly, did you wanna take that question?

Speaker #1: Yeah, we changed the service fee rate quite some time ago. So we are getting towards the tail end of migration. We've got about 10% of the restaurants left to move over.

Kelly Blankstein: Yeah. We changed the service fee rate quite some time ago, so we are getting towards the tail end of migration. We've got about 10% of the restaurants left to move over.

Speaker #3: Okay, got it. That's helpful. And then, I guess just on the competitive backdrop—I mean, it seems like some of your largest competitors are getting more aggressive on value.

Logan Reich: Okay. Got it. That's helpful. Then I guess just on the competitive backdrop, I mean, it seems like some of your largest competitors are getting more aggressive on value. How do you feel about the current value offering today? Do you feel, you know, any inclination or need to lean further into value, just given the competitive pressures and also where the macro environment has been going? Then, and then just lastly, any comment on the how the value or the rewards program has been tracking thus far, given it's been rolled out for a couple quarters now?

Speaker #3: How do you feel about the current value offering today? Do you feel any inclination or need to lean further into value, just given the competitive pressures and also where the macro environment has been going?

Speaker #3: And then just lastly, any comment on how the value or the rewards program has been tracking thus far, given it's been rolled out for a couple of quarters now?

Speaker #2: Sure. I think all those things combined. So we've always done well with value in terms of what you get for what you pay for.

Susan Senecal: Sure. I think all those things combined. You know, we've always done well with value in terms of what you get for what you pay for. The price competition is really heated up, that's for sure, and people have fewer dollars in their pockets, they're more looking for affordable options. We're combining both, having everyday affordability as well as having promotions that kind of reward guests for coming in, having another Teen Burger, having another, in this case, Mozza Burger, our most recent promotion. You know, I'd say that we have a very loyal and very deep connection with our guests, and they love to come to A&W.

Speaker #2: The price competition is really heated up, but that's for sure. And people have fewer dollars in their pockets, so they're more looking for affordable options.

Speaker #2: So we're combining both, having everyday affordability as well as having promotions that kind of reward guests for coming in, having another team burger, having another in this case, matzo burger that our most recent promotion.

Susan Senecal: We're combining both, having everyday affordability as well as having promotions that kind of reward guests for coming in, having another Teen Burger, having another, in this case, Mozza Burger, our most recent promotion. You know, I'd say that we have a very loyal and very deep connection with our guests, and they love to come to A&W.

Speaker #2: I'd say that we have a very loyal and very deep connection with our guests. And they love to come to A & W. So we're pressing all the buttons to make sure that that remains affordable and a good option for them when they decide that they want to eat out, especially with their families when cost, it becomes even more important.

Susan Senecal: We're pressing all the buttons to make sure that that remains affordable and a good option for them when they decide that they want to eat out, especially with their families, when cost it becomes even more important. That plan is underway, and we're happy with the progress. I think we certainly see the response from the guests, and that's our main measure. On the rewards program, we're doing very well. We just celebrated one year of the rewardiversary as our team likes to call it. We see continued increase in the number of guests that are using the program, and that's been very exciting. Our operators as well are being very creative in terms of making sure that people know that they can get points when they buy at A&W.

Speaker #2: So that plan is underway. And we're happy with the progress. I think we certainly see the response from the guests. And that's our main measure.

Speaker #2: On the rewards program, we're doing very well. We just celebrated one year or of the reward anniversary is our team likes to call it.

Susan Senecal: On the rewards program, we're doing very well. We just celebrated one year of the rewardiversary as our team likes to call it. We see continued increase in the number of guests that are using the program, and that's been very exciting. Our operators as well are being very creative in terms of making sure that people know that they can get points when they buy at A&W.

Speaker #2: And we see continued increase in the number of guests that are using the program. And that's been very exciting. Our operators as well are being very creative in terms of making sure that people know that they can get points when they buy at A & W.

Speaker #3: Got it. Super helpful. Thank you so much.

Logan Reich: Got it. Super helpful. Thank you so much.

Speaker #2: Thank you.

Susan Senecal: Thank you.

Speaker #1: There are no further questions at this time. I will now turn the call back to Susan Seneca for closing remarks.

Operator: There are no further questions at this time. I will now turn the call back to Susan Senecal for closing remarks.

Speaker #2: Thank you. And thanks, everyone, for attending our call today. We look forward to updating you on our results after the second quarter of 2026.

Susan Senecal: Thank you, and thanks, everyone, for attending our call today. We look forward to updating you on our results after Q2 2026. In the meantime, if anyone has questions that were not answered on our call today, please feel free to send a follow-up email to investorrelations@aw.ca. Thanks again.

Speaker #2: And in the meantime, if anyone has questions that we're not answered on our call today, please feel free to send a follow-up email to investorrelations@aw.ca.

Speaker #2: Thanks again.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.