Good morning and welcome to the Restaurant Brands International Third Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. And 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 International's Earnings Call for the third quarter ended September 30th, 2023. As a reminder, a live broadcast of this call may be accessed on the Investor Relations webpage at rbi.com/investor and a recording will be available for replay. Joining me on the call today are Restaurant Brands International's Executive Chairman, Patrick Doyle; CEO, Josh Kobza; and CFO, Matt Dunnigan. Today's earnings call contains forward-looking statements, which are subject to various risks set forward 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. During portions of the call today, we will be referencing franchisee profitability measures that are based on unaudited self-reported franchisee results. In addition, the consolidated gross metrics discussed during the prepared remarks, including consolidated system-wide sales growth, comparable sales, net restaurant growth, organic adjusted EBITDA growth and organic adjusted EPS growth exclude results from our franchised restaurants in Russia, as we did not generate any new profits from restaurants in Russia in 2022, and do not expect to generate any new profits in 2023. And now I'll turn the call over to Josh.

Good morning, everyone, and thank you for joining us on today's call to discuss our third quarter of 2023. We delivered another solid quarter, including 7% comparable sales and 4.2% net restaurant growth, which drove year-over-year system-wide sales growth of 10.9% and organic adjusted EBITDA growth of 9.3%. Our comparable sales this quarter were driven by 8.1% growth at Tim Hortons Canada, 7.6% in Burger King International and 6.6% at Burger King US. In addition, Popeyes US grew 5.6% and Firehouse US was up 3.9%. Our development teams are focused on closing out the year, with Q4, as always expected to be the biggest development quarter of the year. That said, we are now expecting a higher mix of smaller format express units at Tims China, which drive brand awareness and penetration, but we will not be including in our restaurant count or net restaurant growth results given their lower ARS levels. As a result of this, as well as smaller movements in other markets, we now expect 2023 net restaurant growth to be around 4%. Looking to 2024, we are confident, we can drive 5% plus net restaurant growth as we stabilize Burger King US ramp up Burger King China and Firehouse US and see Tims, Popeyes and Firehouse International accelerate. We are also focused on driving traffic and franchisee profitability growth at each of our brands, and we're pleased to make progress on both this quarter. Tim Hortons Canada drove positive traffic, tickets at Burger King International were flat, and while we still have plenty of work to do, we were very pleased to see progress in our Burger King and Popeyes US businesses with traffic improving to flat year-over-year. On franchisee profitability, strong top-line results, moderating costs and improved labor productivity helped deliver another quarter of double-digit…

Thanks, Josh. Good morning everyone. For the third quarter, our global system-wide sales grew 10.9% year-over-year, and our organic adjusted EBITDA grew 9.3%, while our adjusted EPS was down 5.6% organically as we lapped a large discrete, non-cash tax benefit in Q3 of last year. The primary driver of the difference between system-wide sales growth and organic adjusted EBITDA growth was a 2% year-over-year organic decline in gross profit in our Tim Hortons sales, minus cost of sales. While we've continued to see healthy underlying traffic growth at Tims in Canada, which is the primary driver of sales growth for the supply chain. There are timing dynamics impacting our second half year-over-year gross profit comparisons. As a reminder, we typically pass through commodity pricing semi-annually and last year we pass-through second half pricing in early Q3, while commodity prices were still increasing quite significantly. This dynamic drove a benefit to our Q3'22 gross profit dollars, which then reversed to a headwind for Q4'22, given the higher cost of sales base. In addition, our Q3 adjusted EBITDA growth benefited slightly from the lapping of nearly $6 million of net bad debt expense in Q3'22 as compared to $2 million of net recoveries this quarter. Looking ahead, we are expecting roughly $10 million of net bad debt expense in Q4'23, predominantly related to Burger King US. As you know, we have been working closely with franchisees to transition restaurant portfolios into the hands of strong local operators. Over the past few quarters, we prioritize the most distressed situations, closing unviable restaurants and cleaning up a number of portfolios. We expect to largely finalize the remainder of those workouts and closures by end of year, resulting in elevated bad debt for Q4, but with the benefit of a much improved foundation entering 2024.…

Thanks, Matt, and thank you all for joining us this morning. This time last year, I was finalizing my own investment thesis ahead of making my equity purchase in RBI. I was clearly excited about the opportunity last November, and looking back now, I can say I am far more bullish today than I was a year ago. While we haven't gotten everything right this year and frankly, we won't always get everything right, we've made a ton of progress moving each of our businesses in the right direction. I've spent the past year assessing our brands, our teams, our franchisees, and our capital allocation priorities. We have four amazing brands in the largest and fastest growing QSR segments globally burgers, chicken, coffee and sandwiches. Each offers guests convenience, great value and the best food and beverages in their respective categories, and each is well positioned to succeed in various consumer environments. We have talented teams leading these brands with a winning combination of industry veterans and homegrown RBI talent. These teams are focused on clear priorities, delivering the highest quality products, running great restaurants, being a great resource to our franchisees, driving profitable traffic, and delivering compelling unit economics. We have many dedicated, ambitious and diverse franchisees aligned with our vision for growth. These franchisees span multi market, multi-brand international master franchisees all the way down to single restaurant operators. And we have a resilient business model that generates a ton of free cash flow, providing us with plenty of flexibility to invest for growth while returning capital to shareholders. To me, these are key ingredients for success, but to really succeed, it all comes down to driving consistently positive traffic and higher franchisee profitability. While we've definitely improved in both these areas to really get where we want…

Thank you. [Operator Instructions] Our first question comes from Dennis Geiger with UBS. Your line is open.

Great. Thanks and good morning, folks. Josh, appreciate your commentary on unit development and the return to 5% plus next year. And I think, Patrick, you kind of spoke to confidence in the opportunities as well looking ahead. Just wondering if you could speak a bit more to that global unit growth opportunity, looking ahead over the next several years as some of the pressures maybe, that you've seen over the last couple of years roll off and then really that potential across brands and markets that you spoke to you knowcomes into view a bit more over the coming years. Thank you.

Hi, Dennis. Good morning and thanks so much for the question. Yeah, as we mentioned a little bit earlier, there are a lot of reasons we're pretty excited about where we can go on unit development and why we're confident in that 5% plus. So I'll take through a few of them. You know, I thin, the first clear one is just stabilizing the unit count at Burger King in the US. That will be a bit of a drag this year in 2023. And I think what we're seeing in the business between sales consistently growing now having stable traffic that will look to turn to positive over time and franchise profitability, probably most important of all, which is really moving back in the right direction. That starts to give us a bit more visibility into being able to stabilize the unit count next year and beyond. So we think that's a big driver in terms of where we can, how we can evolve the net restaurant growth globally. I think there's another factor is Burger King in China. You know that one that's been more stable in terms of unit count for the last couple of years. And we're starting to see the pace of unit growth there pick up. So we're seeing more progress there this year than we saw last year. And we look forward to a good year-end. So we feel like we're making some progress with Burger King in China, which helps as well. Then I'd say the next big, big part of the equation is Firehouse around the world, but particularly in the US and Canada. You know, Mike and the team have done a great job in improving the unit economics this year. We're seeing franchise profitability moving in the right direction,…

We now turn to Brian Bittner with Oppenheimer. Your line is open.

Thank you. Good morning. My question relates to Burger King US and your plan to spend $150 million on advertising and digital by the end of '24, you've only spent 33 million of this so far, so you have almost $120 million left to spend over the next five quarters. And I think you talked on your prepared remarks about how you've preserved a lot of firepower. Was that the plan all along to preserve the firepower the way you have and as you deploy it moving forward, should we expect it to support a new advertising campaign, or should we expect you to double down on what's been working?

Yeah, Brian, thanks for the question. You know, you're right. We have spent a little bit less of it period to date than you -- then maybe the average over the -- over the whole period would be and as Matt mentioned in some of his prepared remarks, we do expect to ramp up the pace of spending into Q4 and next year. I wouldn't say that was any particular strategy. It's just the way that the advertising spending and different campaigns have laid out. I think as you look into next year, of course, we'll have some new stuff coming. We'll have some exciting new products, we'll definitely have some new campaigns. But I think you can probably expect that a lot of those will continue to be focused on our core equities. We think that Burger King has some really special things about it between the Whopper flame grilling and have it your way. And while we'll always bring kind of new twists on things, I think you can expect more focus on a lot of those core equities from us.

We now turn to David Palmer with Evercore ISI. Your line is open.

Thanks. On Burger King US I think this is probably the biggest hang up for investors on the stock. And I was wondering if maybe Josh, you and Patrick want to talk about that a little bit. And the brand turnaround, obviously half the assets probably are pretty outdated, maybe very outdated in the US, and that seems like a big disadvantage versus direct peers that have gone through their reimaging cycles already. So obviously that makes people think maybe doubt the sustainability of a brand turnaround into '24. So maybe you could talk about that. And then and then obviously building costs and interest rates are higher. So perhaps you can give a sense, maybe the long term sense about the pace that you think you could affect the turnaround of the assets. Thanks.

Thanks, Dave. Appreciate the question. And certainly Burger King US is a big focus for us and for Tom and the team. And I think Tom and the team are doing a really great job. We mentioned a little bit earlier, we just had our convention here in Miami, had all the franchisees together, and everybody really feels the progress being made. I think there's been a big change in sentiment and support and confidence across that business. A couple of the things that that are helping me feel more confident about it, you know, one of them, which we mentioned here earlier, is the same store traffic. And if you go back over the last year, you know, we were pretty meaningfully behind where the industry was. And we've systematically narrowed that gap to where we got it back to flat. And now in the past couple of months, we're actually performing above the industry in terms of same store traffic. So I think you're seeing very clear evidence on some of the most important KPIs that what the team is doing is working. In terms of the assets, we definitely need to get to a more modern asset base. The way I framed it, I think, you know, basically every Burger King that you see across the US, it needs to be modern, convenient and competitive across the country. What gives me confidence there is that we're seeing good results initially from the remodels. So those uplifts are above where we expected. And that means the returns are starting to work. And I think that's really important for us and for the franchisees. And on top of that, we're seeing a lot of momentum in franchisee profitability. And that has benefits in terms of confidence and where we're going. But it also generates profits that can be reinvested into the system to be able to fund all of those remodels. As you pointed out, interest rates are higher and that is a higher cost on the margin. But I really look at those unlevered unit economics, the unlevered returns on the remodels. That's what we can control and we can impact. So we are very focused on making sure that those gross returns are good, and we're getting to a place that we feel much better in. The last thing I would just point out, it usually gets less attention, but I think it's perhaps one of the most important is operations. And Tom has brought an incredible focus on the quality of operations and guest experience, everything from product quality and temperature to hours of operations and speed of service. And we're making a lot of progress under the surface there. And I think that's a really important ingredient to what's driven the same store traffic improvements to where we are today. Patrick, I don't know if you want to add anything to that.

Yeah, I would, so that last point that Josh just made, I mean, you listen to all these calls and there's always a lot of discussion about operational improvements. I will tell you, it is very real. We are foundationally running these restaurants better than we were a year ago, and I am sure better than we were five years ago and it's working. In terms of the assets, I guess what I'd say is you're exactly right. You know, we're a little bit under 50% in the image that we want to be in. It's not a great reflection of where we are. And we've got all of those improvements ahead of us. So if we've got assets that don't all look great today and we're already outperforming on a traffic standpoint that tells you we should be pretty confident about what we're going to be able to do once we get those assets where we want to be. The last thing I would say is the comment I made about the alignment with the franchisees, it is pretty remarkable right now. We are going through an awful lot of change, and our great franchisees in the Burger King system are aggressively talking to us about keep going. You're going the right way. This is working. Keep the pressure on to continue improving operations, to continue getting our assets where they need to be. That alignment is what allows us to move fast. Trust levels are building with Tom and his team, and it's what allows forward progress. So I'll tell you, I am awfully confident about our ability to keep this going. This is you know, these are foundational things that are driving this business right now. And that's pretty exciting.

Thank you.

Our next question comes from Andrew Charles with TD Cowen. Your line is open.

Great. Thank you. I wanted to pivot to Tims Canada for a second, obviously impressive performance in the third quarter. There seems to be investor concern on the Canadian consumer. That might be even more concern than the broader US consumer. And I'm curious, you know, in the context of very strong 3Q results. You know, what part of the plan for Tims would you guys lean on the most if we were to see the consumer pull back more in Canada?

Yeah. Thanks, Andrew. I would tell you, we haven't seen any big change in consumer behaviour yet in Canada at this point. As I mentioned a little bit earlier, the business is doing really well. I think Axel and the team have done a really nice job focusing on the basics and that's what's propelling both traffic and sales growth. And it has for an awful lot of quarters now. I think if you just step back and look at how Tims is positioned in the Canadian market, we do all of the fundamentals of QSR, right? We have high quality products. We are incredibly convenient. And we offer it at a compelling price point. And I think that's a great place to be in any market, whether you're in a good sign of the economic cycle or a little bit more difficult one. So we're just going to keep focusing on that. We're going to keep introducing really fantastic products. We're going to have compelling value. And the teams working on operations to make sure we do it even faster. Some of the things I mentioned earlier are really incredible. We improved the speed of service in the drive thru by 10% year-on-year. That's a tough thing to do in a big business like this with a ton of volume. And so I think Matt Moore and the team there have been doing some good things. So we're just going to keep focusing on the basics. I think we're well positioned regardless of the economic environment. And we'll keep you updated as things evolve.

We now turn to Lauren Silberman with Deutsche Bank. Your line is open.

Thank you very much. My question is on BK International. Two parts. One is a follow-up to Dennis' question. As you look out over the next few years, do you think that BK global can get back to 6% plus global unit growth that it saw pre-COVID and then just on BK International for this quarter? I think you mentioned a decel in comps is largely driven by price. It looks like relative to 19 also a bit of a decel from 2Q? Is there any specific market call out or additional color you can provide on what you're seeing across markets? Thank you.

So, Lauren, I'll take both of those. Maybe I'll take them in inverse order. So, first, in terms of the evolution from Q2 to Q3, we did see a bit of a slowdown in comps, and I'll give it a little bit of color. The biggest driver on that I think is some reduction in year-on-year price. One market that moved a bit is France, which I would just say Q2 was really incredible. We were doing double-digit same-store sales and that slowed down a little bit into Q3, but we're still high single-digits, around 9% same-store sales, and we're taking significant market share. So we're performing above the industry. So you have some of those where you saw a little bit of a slowdown sequentially, but generally the performance is still really good, especially in France where we're really pleased with the business there. And it's actually it's our biggest market at this point for BK International. In terms of the unit, the pace of unit growth won't get into breaking down the exact numbers of the forecast. But I do think there's an opportunity for us to improve a little bit in terms of the BK International pace of growth. The piece I mentioned a little bit earlier that I think is already starting to move is working in China. That had been a bit of a slower grower for the last couple of years and we've seen improvements. So we've already seen the openings year-to-date are improving a lot year-on-year and I think the outlook is for some pretty meaningful improvement in '23 versus '22. So that's probably the most important or specific piece that started to go in the right direction. And we hope to see more next year.

We now turn to John Ivankoe with JPMorgan. Your line is open.

Hi. Thank you. Josh, in your prepared remarks, you mentioned, you know, franchisees that were focused -- focusing on quality over quantity in terms of, you know, their bigger remodels. And obviously that's interesting, especially when we talk about scrapes and rebuilds that can well exceed $1 million per project, I think up to $1.8 million per project. So, you know, can you talk about what that means for you? You know, as you kind of think about, you know, doing 800 units for 200 million, I think the numbers are correct me. But, you know, through 2025, might we expect, you know, a lower number of units that are done with a higher contribution but a higher sales lift. Just, you know, dive in a little bit more, you know, if there are any implications on that comment in terms of the timing and the cost of the number of projects you know, that you expect to accomplish in the next couple of years. Thank you.

Thanks, John. So we are seeing a higher mix to your point of both scrapes and what we call full remodel. So that's a more scope heavy remodel. And I think that's a great thing. It means our franchisees are really investing for the long-term. And those types of remodels definitely have the highest sales uplifts. By far they make the most impact on the experience of both our guests and team members. So we're really happy to see that focus from our franchisees and kind of shared point of view on making big investments for the long-term. To your point, that will likely shift a little bit the spend where it might be a little bit higher contribution for unit, a little bit lower number of units within that mix. But I would tell you we think that's a positive thing. We want to see the right investments made. That's the big shift we're trying to make in this program. And we think that's what's going to produce the best business results over the medium to long-term.

Our next question comes from Eric Gonzalez with KeyBanc Capital Markets. Your line is open.

Hi. Thanks for taking the question. Sounded like you made a lot of progress on the digital side this quarter, particularly at BK US where I think I heard you saw 40% improvement in digital sales. So maybe you can give us a few more highlights on the progress we've made on the technology front, and help us understand more about your aspirations to make the brands more digital over time, and how you're measuring the return on those investments. Thanks.

Thanks, Eric. You're absolutely right. We made a lot of progress in the quarter. We were up, I think over 40% in terms of digital sales at both Burger King and Popeyes. I think those teams are doing a really nice job on getting all the basics right. They're making sure the apps are faster. They're really learning how to work well with the delivery business. So they're growing that business. And I think importantly with Burger King, we're starting to make some progress figuring out kiosks. And you go back a few years. We had started to bring kiosks to the US. There wasn't so much consumer uptake. And I think that condition has really changed. You know, we've started to pilot in more and more of our Burger King company restaurants, and we're seeing tremendous results. The vast majority of the in-restaurant tickets are all going through these kiosks. So that's a lot of what's driving that 28% number that I mentioned in terms of the digital sales at company restaurants. So I think the US is ready for kiosks now and we're likely to see a faster rollout of those around the world. You know we've seen it in all of our international markets. I mentioned earlier, we're over 50% of our international markets have been converted to kiosks. And it really transforms the guest experience and the team member experience especially when you go kind of all in on kiosks and convert the whole restaurant makes it really clear for the guests, give them, gives them time and kind of a no stress ordering experience. That tends to also lead to higher order values, which is good. And it also reduces stress on the team members. You take away that sort of stressful interaction at the front counter for both sides and the team members can focus more on producing a really high quality meal and delivering it in a kind way to the guests. So I think this is a great thing for the business. It's exciting that consumers are more accepting of it in the US than they were a few years back, and it's something that will likely start to roll out pretty rapidly across all of our US businesses. Last point I would just make, Eric, on your question regarding our aspirations in digital. I tell you, my point of view is we need to get this business to 100% digital. We should have all of the order taking done through digital ordering channels over time. We'll have to see exactly what that looks like especially in a drive thru. But I'd say that, that's sort of our North Star of where we want to go with the business. We have that in quite a number of our restaurants in international markets and it really improves the operation of the whole restaurant. Patrick, anything you want to add?

The only thing I'd add is, you know, Josh and I were in stores mentioned in Paris that are 100% digital because they don't have a drive thru, it's 100% kiosk. It is so much better of an experience, not only for the customers, but for the people working in the restaurants. It's better for profitability. I mean, everything you've heard from us and frankly, you've heard from other big players and it's a big point of leverage for scale businesses versus smaller players to be able to roll this out into the restaurants, have it work, improve the efficiency of the restaurants, the customer satisfaction. I mean, it just, it is a win on every single front. And so it is clearly where we're going to be going as rapidly as we can. And frankly, you're going to see it with other players as well because it just it's a better way to do business.

Our next question comes from Sara Senatore with Bank of America. Your line is open.

Great. Thank you. I have a clarification and then a question on Tims Canada. Just the clarification is you mentioned that the BK remodel lifts were better than expected. I think the last number that we saw was something like 12% sales. So just trying to understand if you're saying that the sales lifts are actually higher than that or if you could quantify it. And then on Tims Canada I know you said you're taking share of lunch, but the PM food sales increase is 7% with slower than the system-wide sales growth. So is that just a slower growing daypart? Or is there less of a tailwind from mobility there, just as the economy reopened? Just trying to reconcile share gains but a slower growth than the broader business. Thanks.

Yes. Sara, on the first one on BK remodels. What I was referencing is what you said that we are seeing in the initial remodels recently. We're seeing higher than that 12%. I'd say we should let us get a few more data points, a little bit more time before we update any of those numbers. But we're very pleased to see that we're coming in above what we're seeing historically. In terms of Tims Canada. I think we have made some progress on the PM food side. To your point, the sales growth in the PM day food -- in the PM day part is pretty similar to what we're seeing overall in the market. So we're looking to make more progress there next year. We have some things in the pipeline that I think will allow us to do that, and a lot of that will probably come in 2024.

Yeah, maybe. Sara, the only thing I'd add to that is in Q3, we're lapping from 2022, a full quarter of loaded. So that also is something that we're growing on top of this quarter.

Our next question comes from Chris Carril with RBC Capital Markets. Your line is open.

Hi. Thanks and good morning. I wanted to follow up on Popeye's. Maybe can you expand a bit more on the progress with easy-to-love and easy-to-run strategies and development for the brand remains strong. I think up over 11% during the quarter. So curious if you could comment on how you're thinking about contribution by Popeyes to overall development next year and beyond? Thanks.

Yeah, Chris. So on each of those on the easy-to-run work on the kitchens, we continue to work on those pilots. So we've got it out in quite a number of restaurants now and we're seeing what's working well. We're making tweaks to some of the things that need improvement. And we want to make sure that we get that model really locked in and have really clear benefits to show the system before we roll it out. So you'll probably see us over the next couple of quarters adding more restaurants to those pilots, getting more franchisees involved and making sure we kind of finalize the format of that before we roll it out to the system at large next year and beyond. In terms of development, you're right. It's been a really big driver for us. You know, I think, if you just step back a little bit, you know, the global chicken QSR segment is really awesome and it's been doing great over a long period of time. You know, within the US, it's been one of the fastest growing and largest segments. There's a lot of players doing really well. I think chicken overall has been gaining a lot of share systematically within the US consumer's basket of goods. So it's a great place to be. And the same is true in international. There's a lot of international markets where chicken is growing a lot and I think we have decades of tailwinds of growth in that segment. And fortunately we've got a terrific brand with the best product in that segment. And you're seeing us grow and grow it in both of those geographies. We've consistently been one of the fastest growing, you know, drive through concepts in the US. And we continue that into this year. And we've ramped up the international growth. You saw in the materials that we shared when we did the international visit that Popeyes is really ramped up the pace of restaurant growth in a lot of different markets around the world. And I still think we're very early in that process, got some really big markets out there, places like India, France, China where we've just gotten started. But some of the initial results are really encouraging. As I mentioned, the France stores that we just got started in over the last year or so, they're doing fantastic. Average restaurant sales are really good. And so we just need to ramp up the pace of development. And I think that's one of probably one of the biggest opportunities that we have as a company, as you look over the next decade, is to make Popeyes very relevant kind of leading brand in all of these geographies around the world.

And the only thing I'd add on that is I'd point to the system-wide sales growth number for the rest of the world for Popeyes, which was 43.6% up, rolling over 43.4% up for the quarter a year ago. Plus 40s on top of plus 40s. Those numbers get really large very fast, that business is just exceptional both in the US, but particularly outside of the US in terms of the growth that it can generate.

That's a good point. Thank you Patrick.

Plus 40s are good.

Great. Thank you. I agree.

That's my headline.

We now turn to Brian Harper with Morgan Stanley. Your line is open.

Yep. Thanks. Good morning guys. Just on Tims Canada the supply chain profit dynamic. Matt, would you expect that to be similar in the fourth quarter. Any comments on that. And then also maybe just comment on franchisee profitability. There I think you said double-digit increases like in other markets. But you know what other initiatives are kind of most important for you on that front. How much more progress do you think you can make on that side?

Yeah. Thanks, Brian. Matt here. So just on the supply chain question. I think what we were trying to describe was the dynamic that we saw in the second half of last year between Q3 and Q4, which, you know, is creating a little bit of year-over-year volatility in that we increased prices entering the second half of last year as commodities were going up into the right. And so therefore, Q3 of last year was a bit stronger. And then you know our average cost base was higher in Q4 of last year. So where we are this year is we feel really good about the strength of the Tims business progress and traffic that we're driving there, which is the primary driver of the supply chain business. So we still see good continued momentum there. And we expect if you sort of look through the second half, our average growth in organic gross profit for that business for the second half we think will be strong and similar to the first half of the year.

And then, Brian, just on your question in terms of franchisee profitability at Tims in Canada, we are making a lot of progress there. It starts with sales and Axle and the team have done a terrific job driving really strong same-store sales over the last few years. But this year as well, that makes the P&L get a lot better. But we've also been doing work on some of the other lines as well. Matt Moore and his team have been working very closely with all of our franchisees in Canada to do a lot of trainings that helped us to manage the P&L better everything from inventory clinics to a lot of focus on labor scheduling. All of those things kind of they're small improvements, but they make a big difference on the P&L. And on top of that, we have seen a bit of moderation in some of the cost of goods. So we're seeing softer kind of inflation in terms of our cost of goods basket, and that certainly helps as well. So all those things are adding up to some pretty substantial progress, and we're excited to be able to share with you kind of where we land for the full year when we share our Q4 results in February.

Thanks.

We now turn to Gregory Francfort with Guggenheim Securities. Your line is open.

Hey, thanks for the question. Maybe I don't know if it's for Patrick or Josh, but just, are you considering making further investments in the Burger King US business beyond the 400 million? I need to talk about it a little bit, but I ask it because I guess if you prove the returns are high enough where you would increase that size, theoretically, franchisees would then also be willing to make the investments. I'm just trying to think about the path the next 18 months that would tell you that 400 million was the right level or what you would need to see to consider raising that. Any thoughts there? Thanks.

Good morning, Greg. Thank you for the question. You know I would say that I think we're really pleased with the progress from Tom and the team at BK. It's really great. And we're excited to make that $400 million investment. We're seeing good returns on the initial portion of it. But to your point, we want to see even more data that supports the return on those investments. And I think we'll see that over the next year and a half or so. We'll see more and more remodels. And we want to see continued uplifts that tell us that those returns are going to be really good. And we structured the program that way intentionally. We set up about a two year program initially to cover 2023 and 2024, which would allow us that we could prove return on capital from things like our advertising spend, which is going great, and on remodels, which is going well, but it's still a little bit earlier. I think, to your point on, future investments will absolutely be open to making future investments in the BK system. What we're doing in '23 and '24 will allow us to make progress and prove things out, but it doesn't take us all the way to where we need to be. I mentioned earlier, we need to have effectively every restaurant in the BK system needs to be modern, beautiful, convenient. And that means that we're all going to have to keep making investments beyond 2024. The exact form of that we still have to figure out. And we've got to work with our franchisees to agree on what level investments and what format that will take. We don't have anything to share on that yet. We'll keep working with our franchisees and we'll share more with you all once we have it all figured out.

We now turn to Danilo Gargiulo with Bernstein. Your line is open.

Thank you. I was wondering if you can share some details on the intra quarter cadence of your same-store sales and traffic especially with regards to Popeye's and Burger King in the US and what might be impacting the cadence. That might give you some incremental confidence onto getting into 4Q and beyond. Thank you.

Good morning, Danilo. Thank you for the question. I would just reemphasize that we're really pleased with how both of those brands performed. We mentioned that both Popeyes and Burger King in the US got to flat traffic, and BK has actually been performing above the industry in the last couple of months. I'm not going to get into the kind of month to month stuff. We generally try not to do that, but I think a lot of the things that are working are things that we're doing very systematically across both of those brands, and that's what gives us confidence that we can continue that pace of improvement in the quarters and years to come.

Our next question comes from Jeff Bernstein with Barclays. Your line is open.

Hi. Good morning. This is Pratik on for Jeff. I just wanted to ask about BK US and the broader quick service industries positioning into a potential macro slowdown. I think in the past you've spoken of a trade down benefit from above and maybe losing some customers to food at home. Can you talk about what you're currently seeing with your customers by income cohort? We've heard some others in your industry talk about cheque management recently and have you seen any signs of that to date? And Patrick in a potential economic slowdown, how do the four brands compare to your prior life in what's perceived to be a very resilient value led pizza segment? Thanks.

Thanks, Pratik. A couple of thoughts on this. And then I'll let Patrick comment on pizza. So, you know, I would just say that the business seems to be doing pretty well, right? We're seeing consistent same-store sales, our traffic has been stable. So the actual business performance has been good. If you look back to past macro cycles, our industry tends to do pretty well overall. I think what we offer is good value, convenience, quality products. That's the kind of thing that tends to perform pretty well through the cycles. And as Patrick I think has pointed out a number of times, the biggest thing that really drives our industry is employment. Employment's been pretty good. So all those factors, I think, give us a lot of comfort that the business does and should continue to perform well kind of regardless of what's happening in a broader macro environment.

Yeah, just to throw in data point there on what Josh was talking about. We did in the quarter. See traffic growth in the less than $100,000 income cohort with our guests, based on some of the compelling value offers that we had like the Royal Crispy Wraps and the Whopper Junior Duo. So just a data point on that. Yeah, I guess, what I would add to that is just simply, look, these categories are the same as pizza, which is they're good value. They are not recession proof, but they are recession resistant. And they are, as Josh said, they're driven by employment levels. We added another 150,000 jobs last month and that's a good thing for the category. So, you know, I still see things as pretty darn and good overall as long as employment levels stay solid I think the category is going to do absolutely fine.

We now turn to Joshua Long with Stephens. Your line is open.

Great. Thank you for taking the question. When we think about the narrowing of that gap on traffic specific to Burger King US certainly exciting and it seems like you've also been able to do that with a real focus on day to day operations and kind of the core equities from a marketing perspective. Just curious if you think there's more opportunity for upside to continue closing that gap and driving traffic before needing to lean into maybe new product innovations or new LCOs specific to the US.

Can I just? I'm going to start by saying we don't want to narrow the gap because it's a positive gap for us. We want to expand the gap at this point. And, yes, Joshua I think there are absolutely opportunities to continue to, as Patrick said, expand the gap. So a couple of big ones. I really think the operations side is one of the things we will be continuing to focus on it. I think it's a huge opportunity. We have made a lot of progress over the last year and a half or so, but there's still a long way to go. We still have restaurants that have big opportunities in terms of the quality of operations we're running there, and that is a front center focus for Tom and the team. We want -- we made some progress in some of the OP stats, whether it's our internal ones or some external rankings, but we want to go much farther on that than where we've gotten to. And I think that's maybe one of the single most important drivers of our traffic opportunity over time and perhaps a bit of an underappreciated one. I also think that what we're doing on the image side is going to be really powerful and we've just gotten started there. So we have a lot more we want to do in terms of modernizing the fleet. And when we do those remodels, especially when they're the more meaningful ones, those kind of full remodels and the scrapes that I mentioned with John's question, those are really powerful in driving additional traffic to our restaurants. So as we get more of those going on, I think that's going to be a bit of a tailwind to.

Helpful on widening that gap. Thank you.

This concludes our Q&A. I'll now hand back to Josh Kobza, CEO, for closing remarks.

Thank you all so much for taking the time to join us today. And again thank you very much to all of our team members, to our franchisees, to our restaurant teams around the world who drove a really great quarter this quarter. We look forward to updating everybody on our results again for Q4 in February and wish you all a great rest of the day.

Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.