Restaurant Brands International Inc (QSR) 2017 Q3 法說會逐字稿

Good morning, and welcome to the Restaurant Brands International Third Quarter 2017 Earnings Release Conference Call.

(Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Markus Sturm, Head of Investor Relations.

Please go ahead.

Thank you, operator.

Good morning, everyone, and welcome to Restaurant Brands International's earnings call for the third quarter ended September 30, 2017.

A live broadcast of this call may be accessed through the Investor Relations webpage at investor.rbi.com, and a recording will be available for replay.

Joining me on the call today are Restaurant Brands International's CEO, Daniel Schwartz; and CFO, Josh Kobza.

The team will be available to answer questions during the Q&A portion of today's call.

Today's earnings call contains forward-looking statements which are subject to various risks set forth in the press release issued this morning and in our SEC filings.

In addition, this earnings call includes non-GAAP financial measures.

Reconciliations of non-GAAP financial measures are included in the press release available on our website.

Let's begin with the agenda for today's call.

Daniel will start by discussing highlights for the quarter at Restaurant Brands International and will then review the performance of Tim Hortons, Burger King and Popeyes Louisiana Kitchen.

Josh will then review consolidated financial results for the quarter, following which Daniel will share some concluding remarks before opening the call up for Q&A.

I'll now turn the call over to Daniel.

Thanks, Markus, and good morning, everyone.

Thanks for joining us on today's call.

I'm excited to give you an update today on our results for the third quarter.

Our continued focus on driving restaurant level profitability and a great experience for our guests led to further system-wide sales growth for each of our 3 brands: Tim Hortons, Burger King and Popeyes Louisiana kitchen.

During the third quarter, we grew adjusted EBITDA to $565 million representing 8% organic growth versus the prior years combined results of RBI, including Popeyes.

System-wide sales growth at Burger King and Tim Hortons combined with the inclusion of Popeyes in our results led to adjusted diluted EPS of $0.58 per share, up from $0.43 per share in the prior-year period.

At Tim's, we grew system-wide sales by 3% on a constant currency basis this quarter, primarily driven by net restaurant growth of 4.2%.

Some of our recent initiatives including our espresso-based beverage platform, contributed to improved comparable sales in Canada, but was partially offset by softer comparable sales in the U.S.

We maintained our strong momentum at Burger King in the third quarter with system-wide sales growth of 11.2% on a constant currency basis.

Both comparable sales of 3.6% and further accelerated net restaurant growth of 6.6% contributed to our system-wide sales momentum.

At Popeyes, system-wide sales grew by 4.5% on a constant currency basis for the quarter, primarily driven by net restaurant growth of 5.9%.

We had softer comparable sales at Popeyes where we saw continued competitive activity during the third quarter.

We remain confident in our ability to drive further sales and profitability growth for all 3 of our brands and look forward to updating everyone in the coming quarters.

We believe our long-term strategy of focusing on guest satisfaction and franchisee profitability will allow us to build on the recent momentum at Burger King and further improve results at Tim Hortons and Popeyes for many years to come.

Let's start by reviewing the results for Tim Hortons.

This quarter, adjusted EBITDA for Tim's was $294 million, up $7 million year-on-year, including a favorable FX impact.

On a constant currency basis, this represents a slight decline of 1% versus the prior year.

We grew third quarter comparable sales at Tim's by 0.3%, which was primarily driven by comparable sales of positive 0.6% in Canada.

Our results in Canada reflect growth in coffee as well as breakfast, partially offset by some softness in lunch.

We began to see the benefits of our recent initiatives in Canada throughout the quarter, including the espresso-based beverage platform that we rolled out earlier this year.

We continue to grow our sales of espresso-based beverages with our iced latte in the summer and our pumpkin spiced latte in September.

We believe this beverage platform will be key to our long-term growth at Tim's, both with existing and new customers, and will continue to be a focus of our strategy.

Additionally, our breakfast and baked goods results this quarter benefited from successful product launches such as our Canadian bacon breakfast sandwich and our S'mores-themed baked goods.

In September, we had our annual Smile Cookie Campaign where our restaurant owners raised approximately CAD 7 million to help support local charities in the community such as hospitals, food banks and children's programs.

In a further display of our brands' commitment to its communities, Tim Hortons coffee trucks were visibly supporting communities affected by the wildfires in Western Canada and a Tim Hortons donation to the Canadian Red Cross was made to support local efforts.

Community involvement has always been a distinctive attribute of the Tim's brand, and we're proud to continue serving and supporting our local communities.

Our Tim's mobile app continues to remain a strong focus for us heading into the fourth quarter.

Since we launched our mobile order and prepay at the beginning of the year, we've made further improvements based on feedback received from our restaurant owners.

The hard work and engagement from our restaurant owners is really important in making our digital platform a success.

A great example of this with one of our owners in Québec who spent time promoting the app with guests in her restaurant, encouraging them to use the mobile order and prepay functionality.

She's already seeing over 300 mobile transactions per week after just a few months.

We also celebrated National Coffee Day in both the U.S. and Canada by providing each guest who downloaded the app an offer to receive a free coffee.

The feedback we received on the app so far has been encouraging and we're going to continue to work further to enhance the app over time as we believe digital is the key channel for the long-term growth of the brand.

On the development front, we grew our Tim's restaurant count by 4.2% year-on-year, primarily driven by growth in Canada.

In the U.S., net restaurant growth has been slow, though we remain highly focused on supporting our U.S. partners in their expansion efforts and we continue to make progress with new partners.

As an example, we recently signed a new agreement to develop the Cleveland and Youngstown markets, which we believe are logical strategic markets for our growth given the proximity to our successful existing restaurant footprints in Columbus, Michigan and in Western New York.

Internationally, our first openings in both the Philippines and the U.K. continued to perform really well, and the results are encouraging for the long-term growth potential of the brand in each of our new international markets.

We have plans to open even more restaurants in both of these markets this year, and are looking forward to our first openings in Mexico and in Spain in the coming months.

We look forward to further accelerate the development at Tim's for many years to come, both in our existing markets as well as new markets all around the world.

Now let's review the results for Burger King.

We continued our strong momentum from last quarter with overall system-wide sales growth this quarter of 11.2%, driven both by comparable sales of 3.6% and net restaurant growth of 6.6%.

Growth in top line resulted in adjusted EBITDA of $234 million for the third quarter, up 16% on an organic basis versus the prior year results.

Our sales momentum in the U.S. continued into the third quarter with strong comparable sales of 4%.

In the U.S. we had successful promotions across dayparts and core products, which contributed positively to comparable sales during the quarter.

We also continue to innovate around some of our premium platforms such as our new Crispy Chicken Sandwich with the launch of our Chicken Parm Sandwich in July and the Crispy Buffalo Chicken Melt in September.

We also introduced the Mushroom & Swiss King and the Rodeo King limited time offers during the quarter, both of which innovate around our successful Bacon King Sandwich launched late last year.

Our strategy of maintaining a balanced approach to menu architecture continue to drive further sales growth in the quarter.

We also had strong results in many of our international markets like Russia, Turkey, Germany, Spain, China and Brazil.

And this was offset by some softness in other markets that experienced broad industry weakness such as Korea and Australia.

On the development front, we further accelerated the pace of net restaurant growth as compared to last quarter, with third quarter net restaurant growth of 6.6%.

Our accelerated pace of development this quarter came from markets all around the world, including top growth countries such as China, Russia, France, and Brazil, as well as markets where we've accelerated restaurant growth more recently such as the United States and India.

This quarter, we opened our 100th store in India.

A country that we entered less than 3 years ago, which is a great example of the type of growth we look for when entering new markets.

We're proud of the expansion that our partners have been able to achieve in such a short time and we continue to work towards further accelerating that growth in the future.

We also recently announced the new Master Franchise in Japan.

As the third largest economy in the world, we believe there is still a tremendous amount of growth opportunity for Burger King in Japan, where we currently have fewer than 100 restaurants.

We're confident that we will continue growing Burger King all around the world, both with existing and new partners, for many, many years to come.

We also want to take a minute to applaud the generosity of our Burger King restaurant owners, an example of which was demonstrated by the positive impact they had in their local communities during the hurricanes experienced this quarter.

In Puerto Rico, our partner launched a campaign to help address the local communication challenges experienced in the hurricane aftermath.

Our partner quickly reopened his restaurants and welcomed guests to come in and fill out a form indicating that they were safe.

The partner then posted each individual's name on social media and on the radio to help our guests reconnect with their loved ones.

At Burger King, we and our franchisees recognize the importance of community involvement and we're proud to share examples of our franchisees' generosity.

Our local partner responses to hurricanes in Puerto Rico, Houston and Florida are one example.

But all of our franchisees continue to make meaningful impacts to their respective communities around the world, including through our Burger King McLamore Foundation.

Now let's review the results for Popeyes.

We grew system-wide sales during the third quarter by 4.5% primarily driven by net restaurant growth of 5.9%, partially offset by comparable sales decrease of 1.8%.

Our comparable sales decline for the quarter was primarily driven by a U.S. comparable sales decrease of 2.6%, partially offset by positive comparable sales in some of our international markets.

Our U.S. comparable sales for the quarter reflects the continuation of increased competitive activity that we saw last quarter.

As we continue to refine our marketing calendar for the balance of the year and into next year, we'll be focused on finding ways to deliver our great products that our guests love at the right price points in a competitive landscape.

Recent examples of the types of promotions that we intend to pursue include the return of the $5 Big Box in September and the new 10 for $10 that we launched more recently.

Our teams, along with our restaurant owners, are focused on delivering a great guest experience while staying true to our rich Louisiana heritage and flavor profile.

In that regard, we celebrate opportunities to highlight the great work of our Popeyes culinary innovation team responsible for formulating our authentic and flavorful recipes.

A few months ago, our head of Popeyes culinary innovation, Amy Alarcon, was featured in a popular Food Network television show, highlighting our professionally renowned reputation in being "Louisiana fast." A label awarded to us given that we marinate our Bonafide Fried Chicken for at least 12 hours, but serve it to our guests fast.

Internationally, this quarter, we saw notable strength in Turkey, one of our largest market outside of the U.S., as a compelling family meal introduction drove growth in comparable sales for the third quarter.

This was partially offset by softer results in certain other international markets such as Korea.

In terms of development, we grew restaurant count for the third quarter by 5.9%, primarily driven by growth in the U.S. and Canada.

We're working toward accelerating our expansion around the world and we've been encouraged by the interest we have received both from existing and prospective partners seeking to lead that expansion.

Popeyes restaurants continue to benefit from strong unit economics, which, coupled with expansive growth potential of the chicken category in many markets, solidifies our confidence in the potential of this brand all around the world.

The combination of system-wide sales growth and overhead synergies allowed us to grow Popeyes adjusted EBITDA to $37 million for the quarter, up 43% organically year-on-year as compared to Popeyes previous third quarter results.

I'd now like to turn the call over to Josh.

Thanks, Daniel.

Further system-wide sales growth across each of our brands as well as the inclusion of Popeyes in our results drove adjusted EBITDA of $565 million for the quarter, which represents approximately 8% organic growth versus the prior year combined results of RBI.

Our third quarter adjusted net income increased to approximately $276 million versus prior year results of $201 million, primarily as a result of adjusted EBITDA growth.

Our adjusted diluted EPS for the quarter was $0.58, up approximately 35% from $0.43 in the prior year period.

As a reminder, neither adjusted net income nor adjusted diluted EPS include Popeyes for the prior year results, as the business was acquired in March of this year.

It is worth noting that our interest expense for the third quarter includes a full quarter of the $1.75 billion of debt that we raised in May, as well as a partial quarter impact of the $1.3 billion of 5% second lien notes raised in August, partially offset by the redemption of $1.25 billion in principle of 6% notes in September.

Now let's discuss our cash generation and capital allocation during the quarter.

We've had a number of capital structure events over the past few months that we'd like to give an update on.

In August, we issued $1.3 billion of second lien senior secured notes with an interest rate of 5%.

The net proceeds of which we used in September to redeem $1.25 billion in principle of our existing 6% second lien notes.

Subsequently, in September, we issued a $1.5 billion add-on to the 5% notes, which was funded in October.

And as such, is not included in our third quarter results.

The majority of the proceeds from the add-on offering were used to redeem the remaining $1 billion in principal of 6% second lien notes in October.

In October, we also amended our existing $500 million revolving credit facility to extend the maturity to 2022.

In the third quarter, we generated approximately $339 million of free cash flow calculated as the sum of cash flows from operating activities and cash flows from investing activities.

We also paid a total of approximately $155 million in preferred and common dividends in partnership exchangeable unit distributions.

As of September 30, 2017, our ending cash balance was approximately $3.6 billion, our total debt balance was $11.8 billion and our net debt was $8.2 billion.

This morning, we announced that on October 25, 2017, the RBI Board of Directors formally authorized the full redemption of our preferred shares, which we intend to complete on December 12, 2017, the first possible redemption date.

We also announced that we received an exchange notice for a portion of our outstanding partnership exchangeable unit.

In connection with the exchange, we plan to satisfy a portion of these exchange requests with cash on hand.

I'm also pleased to share that on October 25, 2017, the RBI Board of Directors declared a dividend of $0.21 per common share and partnership exchangeable unit of RBI LP payable on January 3, 2018.

The refinancing of a significant portion of our capital structure in 2017, the acquisition of Popeyes, the growth in our dividend, and the use of cash on hand to redeem our preferred shares and repurchase partnership exchangeable units, illustrates our balanced approach to capital allocation as we look to create further value for all of our stakeholders for many years to come.

I'd like to now hand the call back to Daniel for concluding remarks.

Thanks, Josh.

During the third quarter, we grew system-wide sales for each of our brands: Tim Hortons, Burger King and Popeyes Louisiana Kitchen, resulting in consolidated organic adjusted EBITDA growth of 8%.

We continued the strong momentum at Burger King, both in the U.S. and internationally in terms of comparable sales and net restaurant growth.

At Tim's, we began to see the benefits of our recent initiatives, including our espresso-based beverage platform as well as our digital app launch, and we continue to grow the brand's footprint around the world.

We realized further benefits of our integration efforts at Popeyes during the quarter, and we believe we have the right strategies in place to accelerate top line growth for the long run.

We appreciate the hard work of our franchisees and their employees all around the world to further improve the overall guest experience and franchisee profitability at all 3 of our brands.

We look forward to updating everyone on our results again at year-end.

Thanks, everyone, for joining us this morning.

And we'll now open up the call for Q&A.

Operator?

(Operator Instructions) The first question comes from Joshua Long of Piper Jaffray.

I wanted to see if we might be able to talk about the general competitive environment and how you're seeing that shape up.

Just generally across your brands here in the U.S. and then maybe some global comments you might have in terms of just the competitive environment and how the consumers are searching for value.

Yes.

Josh, it's Daniel.

Thanks for the question.

I think what we've said in the past and really what I'll say now, I mean, quick service restaurant industry is always competitive and our strategy has been consistent across our brands regardless of the environment.

If you look at some of the progress that we've made at Burger King in the U.S., for instance, in terms of working with our restaurant owners to renovate the restaurants, improve operations, improve marketing, always deliver that balance of value and core and premium, it's enabled us to grow sales over time.

Globally, we're seeing strengths in our sales and the pace of our restaurant openings across the world.

So while the environment continues to be competitive, we're pleased with our continued strength across our brands.

Your next question comes from John Glass of Morgan Stanley.

I apologize, I joined late.

So if some of these had been answered previously, excuse me.

Can you talk about Tim's a little bit.

Two questions.

I guess, one in Canada, what role pricing played in the comp?

If you didn't talk about that.

And maybe what the competitive dynamic out there looks like and how you feel you're competing against that?

And the system, I think, at Tim's are a little lower than Canada, so what's the dynamic, I guess, in particular in the U.S.?

Do you feel like you're operating at a level that's competitive in the U.S.?

Do you feel like there's further adjustments you need to make in that market to stimulate sales, given you're much younger in the market and you'd expect, perhaps, comps to be outpacing a more mature market?

Yes.

John, thanks for the question.

So the same store sales for the quarter was a little bit better than last quarter, and that was driven by Canada which was up around 0.6%.

We saw some growth in coffee and in breakfast in Canada.

We're starting to see, really, the benefits from some of the initiatives that we had launched, including the espresso-based beverage platform as well as our digital app.

We're innovating around espresso beverages over the summer.

We launched iced lattes.

More recently, we launched our pumpkin spiced lattes.

And we think this is going to be an important platform to continue to drive long-term growth at Tim's.

And more recently, we're excited about some of the new products that we've launched at lunch, including the artisan grilled cheese sandwich and we look forward to innovating around new and improved products at lunch.

We don't specifically break out pricing impact.

What I can say, though, we're always very thoughtful and measured in the way that we do take price.

As it relates to Tim's in the U.S., it was a bit softer.

The environment, as you know, is quite competitive.

We did recently launch lattes there as well.

And we're encouraged by the progress that we've seen in the U.S., so far, since we launched that product.

And I think, look, what we've said about the U.S. in the past, we're really committed to growing the brand for the long run.

It's quite early.

I think if you look back in time when Tim's first went out to the western part of Canada, it was also a bit slower.

It took some time, and now it's one of our more profitable regions and faster-growing regions.

So it's going to take time, but we're committed and we have good partners with whom we'll work collaboratively to make this work in the long run.

Your next question comes from Mark Petrie of CIBC.

Just wondering if you could update us on your view on a potential deal or agreement with aggregators and delivery partners, and the potential implications for your business and your franchisees.

So delivery is something that we've -- that we're doing actually in several markets around the world.

And it's -- in some markets, it's a greater percentage of our sales.

And in certain markets, we work internally.

In other markets we have partnered with aggregators.

I was in China recently where our restaurants, our Burger King China restaurants, have partnered with several of the aggregators there and delivery has become a meaningful piece of the business.

And I think we look at it on a country by country basis and we see it as one of many avenues of growth for our brands around the world for the future.

Next question comes from Brian Bittner of Oppenheimer & Company.

Question on Popeyes.

It's just now that you've had the brand for a couple of quarters under your belt, just wondering if you can better frame the opportunity to really accelerate unit openings there.

I mean, you have a much larger franchisee roster globally and you did this very well at Burger King shortly after your 2010 purchase there.

So I would just love your Popeyes thoughts, and I have a follow-up.

It's Josh, and thank you for the question.

Yes, we -- it has been, actually, it's been just a few months now that Popeyes has been part of RBI.

And I would say that we're increasingly excited about the development opportunity both in the U.S. and around the world.

We've already made some progress in the U.S. finding new development partners to help us accelerate the pace of growth.

And we're talking to a number of potential partners to set up new projects in a number of countries, in exciting markets, in international markets around the world.

So we're very excited about the long run potential for Popeyes and increasingly so with the few months that we've owned it.

And just a follow-up, just a clarification on the unit exchange.

So you guys, you're repurchasing 5 million units and then are you separately issuing 8 million units?

If you could just clarify that, I'd appreciate it.

Yes, of course.

So we received an exchange notice for 9 million units.

And to satisfy that notice, we are going to repurchase 5 million units and we will issue 4 million new common shares of RBI corporate.

The next question comes from Andrew Charles of Cowen and Company.

Two separate questions for me.

Daniel, can you talk about the changes in culture across the organization you've made since taking over, especially in Tim Hortons Canada?

And particularly, your willingness to provide some cost relief around some of the franchise claims.

And separately, just another question on Tim's, you talked about the sales softness in the U.S. -- international market.

So could you talk about the efforts in place to help accelerate unit development outside the U.S. and Canada?

Similar to what you did at BK France, could this involve franchise acquisitions of other coffee concepts to convert to Tim's that would be funded by your franchisees or prospective franchisees?

Yes.

So the 2 questions, look, as you mentioned, I have gotten closer to our Tim Hortons business in recent months.

Working with the team here, we continue to work with our owner-elected advisory board and we traveled the country meeting with our restaurant owners, sharing with them all of the positive plans and the positive agenda that we have to drive the brand forward, and we're making good progress.

We've had some good innovations around espresso-based beverages.

We worked collaboratively with our restaurant owners to launch our mobile order and prepay app.

And we're confident that the initiatives that we have, the innovation that we have, the positive agenda is going to drive long-term guest satisfaction and owner profitability.

As it relates to international openings, we've had a number of new country entries from the Philippines to United Kingdom, where we're operating great restaurants and delivering that great Tim Hortons guest experience to new guests all around the world.

And we're looking forward to taking the brand to places like Mexico, pretty soon.

And shortly thereafter, Spain.

The next question comes from Gregory Francfort of Bank of America.

I have 2 questions.

The first is maybe can you talk about what the -- some of the learnings you've taken from the Popeyes acquisition and applied to your other businesses?

Yes.

I think with respect to the Popeyes acquisition, it's still quite early.

As Josh mentioned, it's only been a handful of months.

We're excited to bring Popeyes under the RBI family of brands.

And we're spending quite a bit of time learning the business, traveling, meeting with our franchise restaurant owners and building our agenda for how to continue to drive great guest satisfaction and owner profitability for many years.

And the other one was just in terms of the gap between the system sales growth in Tim Hortons and then the sales on the -- on your line, that seemed to slow just that gap this quarter versus last quarter.

Is that just a matter of the espresso beverage sell-in being over?

Or is there something else maybe that was driving that?

Yes.

Greg, it's Josh.

That is one of the factors.

But also, we made a couple of price adjustments from Q2 to Q3 and our supply chain is we're always looking to deliver the highest quality good to our franchisees at a really compelling cost and a high level of service.

The next question comes from Dennis Geiger of UBS.

Wondering if you could talk a bit more about any performance differences at Tim's Canada, of regional differences within the same-store sales results.

And then if I could get a second one in.

Just with that launch of the espresso-based platform, has that opened any doors for you internationally when you think about some of the cultures in various countries?

Has that helped having that platform now within the brand?

Yes.

Without getting into too much detail, as you know, the economy in the western part of the country had been a bit softer, and that did affect our sales.

But we are committed to driving continued sales growth and profitability growth across the chain.

And espresso-based beverages are an important product and platform, not just in Canada and in the U.S., but in -- as you've mentioned, there's markets all around the world given our guests' eating habits and coffee drinking habits in places from the Philippines to United Kingdom to Mexico to Spain.

So I think we do see this playing an important role in the international expansion of the Tim Hortons' brand.

The next question comes from David Palmer of RBC Capital Markets.

Just a couple of questions on Tim Hortons Canada.

And forgive me if these were asked already, but we're jumping around.

The first is, are there any data points that you can share that can speak to franchisee profitability and generally the direction -- the approval of franchisees in the direction of the business given all the headlines?

Some data points here could be helpful as we address that investor concern.

And then I have a quick follow-up, if I may.

Yes.

No, we're obviously, David, we're always striving to grow franchise profitability and deliver great -- at the same time, deliver great value for our guests.

In 2015 and in 2016, our franchise profitability grew each year.

Franchise profitability in the most recent quarter was flat year-on-year, and we've seen profitability increased quarter-on-quarter.

And actually, we reached now the highest levels we've seen this year and we're committed to continue growing our restaurant owners' bottom line.

And second, with regard to Tim's Canada.

Your big competitor, McDonald's, has done lot with their assets up there.

They, obviously, had McCafe too.

When you think about Tim's in light of the competitive set, what are the big opportunities that you're going after right now or that you think are areas of opportunity?

Is it -- with regard to menu, the assets and putting this in a positive light, there could be some things that you think that have a slow burn in terms of being more competitive in that marketplace.

Yes.

No, as you noted, that the environment in Canada is competitive.

I'd say some of the opportunities that we had already talked about around espresso-based beverages and building our latte business, building our digital business, those we view as opportunities.

We also see -- while we have a significant share of traffic and sales at lunch, we see an opportunity to build an even bigger lunch business.

And more recently, we have launched a new and improved grilled cheese sandwich at lunch, which is doing well.

And we're -- you're going to see us continuing to build on our lunch business and innovate around new great products at lunch, which we do view as an opportunity for growth in our business.

The next question comes from Will Slabaugh of Stephens Inc.

This is Hugh, on for Will.

My first question would just be around, I guess, the Burger King value and how you see the positioning of that value proposition going forward in light of some of your large QSR peers getting more aggressive?

Yes.

Look, we've made quite a bit of progress on the Burger King brand.

Our franchise restaurant owners in the U.S. have done a great job.

We are pleased with the pace of growth that we achieved this most recent quarter.

And I think that it's really around maintaining that kind of that balanced approach of premium products, value offering, limited time offerings.

And we innovated around our Crispy Chicken sandwich.

We innovated around the BACON KING platform.

We are promoting the WHOPPER.

So there's no one piece that accounts for everything.

It's really just continued balanced approach and innovating around these platforms that I've mentioned.

The next question comes from Peter Sklar of BMO Capital Markets.

Question on Tim Hortons.

What's the minimum wage going up in Ontario?

As you know, quite substantially on January 1, can you talk a little bit about what your strategy is going to be to maintain franchisee economics and whether or not you'll be passing that through on your menu board?

Yes.

Our 2 primary goals are to continue driving franchise profitability and deliver great value for our guests.

We do look at pricing from time to time and adjust if needed, but we always have to balance this with delivering great value for our guests.

And ultimately, the best way to offset rising cost, be it wage or cost of sales or utilities, is to drive sales growth and that's at the forefront of our agenda with our restaurant owners.

And that's the number one topic we work with our owner-elected advisory board, putting together programs that are going to drive sales for the long run.

This concludes our question-and-answer session.

I would like to turn the conference back over to Daniel Schwartz, Chief Executive Officer for any closing remarks.

Well, thank you all so much for taking the time to join us today and we look forward to updating you all on our results for the fourth quarter early next year.

Thank you so much.

The conference has now concluded.

Thank you for attending today's presentation.

You may now disconnect.