Dennis Geiger • UBS Group AG

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CFO Mika Ware explained that the fiscal 2026 sales composition will shift towards lower pricing (3-4%) and flattish mix, with a continued focus on positive traffic. She noted that the company is successfully growing across all income levels and that despite a large influx of new and lapsed users, visit frequency has remained stable, indicating strong operational execution is retaining these new guests.

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CFO Mika Ware responded that the momentum has been very sustainable and consistent. She noted that in Q4, they will lap some of the Triple Dipper's initial ramp-up, which will likely cause about a one-point moderation in mix, but she affirmed that traffic continues to be very strong year-over-year with no slowdown.

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CFO Mika Ware stated the "3 for Me" mix was stable at just over 19%, similar to the prior quarter. CEO Kevin Hochman added that value scores are very strong, attributing this not just to price but to the entire experience, including better food, service, and atmosphere. He noted that while competitors can undercut on price, they struggle to replicate the overall value equation. He also confirmed directionally that both new guest acquisition and frequency are up but declined to provide specific numbers.

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CFO Mika Ware detailed that marketing costs will ramp up in Q2-Q4, while R&M expenses will moderate in the second half of the year, leading to the largest margin improvements in Q1 and Q2. CEO Kevin Hochman attributed the sustained social media success to a professional team that actively monitors trends and creates engaging content, noting the longevity of the campaign's impact is a testament to its quality.

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CFO Tricia Tolivar highlighted that recent cohorts are significantly outpacing expectations, with the 2024 class already achieving its year-two cash-on-cash return target in year one. She framed this as an acceleration of value and said that while they will monitor the trend, they view the outperformance as a potential pull-forward of future growth.

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Chief Accounting Officer Suzie Thuerk attributed the outperformance to technology investments. She highlighted that the FreshAI automated ordering technology is driving a higher mix by recommending products based on factors like seasonality and local popularity. She also noted that investments in training and reducing employee turnover have paid off, contributing to the stronger performance in company-owned locations.

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Kirk Tanner, President and CEO, expressed satisfaction with the strong start to the year, noting that over 60% of new units were international, which validates the company's global strategy. He reaffirmed confidence in the 2025 development pipeline and beyond, citing a focus on improving restaurant-level economics, lowering build costs, and leveraging an increased investment in the build-to-suit program to support growth.

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CEO Kirk Tanner expressed a high level of confidence in the 2% to 3% net unit growth guidance for 2025, stating that development agreements are in place and the near-term build pipeline is visible. He highlighted that this growth rate represents the most new restaurants built in over 15 years and mentioned that a more detailed long-term outlook will be provided at the March 6 Investor Day.

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CEO Kirk Tanner confirmed that breakfast remains a crucial long-term strategic initiative and a significant growth opportunity. He highlighted that its sales growth is outpacing both the overall business and the QSR breakfast category, providing a profit-accretive tailwind for the company.

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Michael Bailen, Senior Director & Head of IR and Financial Analysis, suggested that assuming continued modest traffic growth, the Other OpEx line could see a similar level of leverage as in the first half. He added that the labor line would likely be flat to slightly leveraged under the same traffic assumption.

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Executive Michael Bailen suggested that assuming modest traffic growth, the commodity line will face pressure throughout the year. He identified 'Other Operating' costs as the line item with the greatest opportunity for leverage for the remainder of 2025, while labor pressure would likely be less than what was seen in Q1.

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CEO Gerald Morgan responded that while the company pays attention to competitors, its primary focus is on maintaining the value proposition built into its menu. He emphasized that decisions are made in partnership with local operators to ensure they offer a competitive, value-based experience. The strategy remains a conservative approach to pricing to do right by the consumer while managing the business.

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CEO Josh Kobza highlighted strong results in Spain, Germany, and the UK, driven by innovation and balanced value offerings. He also pointed to a significant and faster-than-expected turnaround in China, where comparable sales turned positive. Executive Chairman Patrick Doyle added that Popeyes International is also experiencing rapid growth, with system sales comping in the high 20s to low 30s percent.

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CEO Josh Kobza responded that the brand's long-term 'back-to-basics' plan is working, citing its strong performance over the last five years. He acknowledged a dip in Canadian consumer confidence in Q1 but noted it has since improved in Q2, correlating with a rebound in Tim Hortons' sales. Kobza expressed strong confidence in the business, highlighting recent successful promotions like the loaded sales box with Ryan Reynolds and a strong pipeline for the rest of the year.

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CFO Sami Siddiqui noted a resolution for Burger King China is expected soon, after which guidance implications will be updated. CEO Joshua Kobza detailed 2025 plans, highlighting that Burger King will focus on family partnerships and Whopper innovation, while Tim Hortons will build on its PM food and cold beverage platforms alongside new breakfast innovations.

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CEO Josh Kobza outlined a multi-pronged growth strategy for 2025 and beyond. In the U.S., he highlighted improving profitability at Burger King, accelerating development at Firehouse Subs, and new agreements at Tim Hortons. Internationally, he pointed to significant opportunities in markets like India, Mexico, Japan, and the U.K. (for Popeyes), where strong unit economics are fueling franchisee demand for new restaurants.

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CEO Christine Barone stated they are very happy with the current adoption rate, which is being driven by customer demand rather than heavy marketing. She explained that mobile ordering drives transactions by increasing frequency among users and capturing previously untapped demand in the morning daypart. The focus remains on ensuring an exceptional customer experience through the app rather than pushing for faster adoption.

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CEO Christine Barone confirmed that mobile order is driving incrementality through increased visit frequency and faster rewards program adoption in new markets. She highlighted its success in boosting the morning daypart. Regarding promotions, she stated that while discount contribution has not increased, the company's sophistication in targeting offers has improved, leading to greater efficacy without higher spending.

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CEO Christine Barone explained that throughput efforts are focused on staff deployment and that mobile ordering naturally aids this by balancing production between walk-up and drive-thru windows. She emphasized a steady, operationally-focused rollout for mobile order rather than a heavy marketing push, noting that incrementality is observed through increased frequency from existing members, new member acquisition, and improved line speed.

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CEO and President Christine Barone explained that higher mobile order penetration is seen in newer shops where new customer routines are being established, which also boosts Dutch Rewards sign-ups. Regarding food, she positioned it as a strategic lever to build morning routines and drive beverage sales, viewing it as a 2026 and beyond opportunity that will be tested methodically throughout 2025 to ensure operational excellence.

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Executive VP & CFO Ian Borden acknowledged that the QSR industry environment remains challenging, with negative traffic and a bifurcated consumer base where low-income visits are down double-digits. While these headwinds are expected to persist, he expressed confidence in the company's planned menu and marketing calendar for the rest of the year. He reiterated the expectation that the second half of the year will be stronger than the first, with Q4 likely outperforming Q3 due to lapping a prior-year food safety event.

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CEO Christopher Kempczinski stated that Q1 was expected to be the toughest quarter, with momentum building through the year. He highlighted the success of the Minecraft promotion, which sold out in 10-14 days, and the promising soft launch of McCrispy chicken strips. Kempczinski emphasized that in a pressured consumer environment, superior execution in value, marketing, and innovation is critical for growth.

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CEO Christopher Kempczinski stated that early take rates for the McValue platform are in line with expectations and that customer perceptions of value are improving. CFO Ian Borden added that the 'buy 1 add 1 for $1' offer is accretive to the overall check, has good margins, and has performed particularly well during breakfast. Kempczinski also noted that the $5 Meal Deal is driving larger orders, with an average check over $10.

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CFO Ian Borden provided context, noting the U.S. business had strong momentum entering October with mid-single-digit positive comps before the incident caused a shift to daily negative sales. He affirmed the belief that the most significant events are now past and that the primary focus is on restoring consumer confidence and regaining the prior business momentum, suggesting no material impact is expected on full-year guidance.

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CFO Michelle Hook clarified that new store underperformance is primarily concentrated in Texas, with other new units performing largely as expected. CEO Michael Osanloo detailed a bifurcated strategy: operational improvements like drive-thru speed are key for the core Chicago market, while multichannel marketing is the priority for building awareness in new markets. He identified the Perks loyalty program as the most significant long-term driver for both.

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CEO Michael Osanloo reiterated that newer stores are well-run with generous staffing, reinforcing that the primary issue is brand awareness in a tough macro environment, not operations. He highlighted that a key behavioral trend is strengthening momentum in the drive-thru channel, which he attributed to successful initiatives to improve speed and guest satisfaction.

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CEO David Gibbs stated that the current environment is advantageous for Taco Bell, which drives over 80% of U.S. profit. He noted that Taco Bell is seeing clear trade-in from fast-casual and is experiencing transaction growth across all income bands, with no pullback from lower-income consumers. Gibbs highlighted that Taco Bell has not had a single negative sales week this year and attributed its success to innovation and a strong value proposition, with more launches planned for H2.

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CFO Christopher Turner affirmed confidence in the development plan, citing the upbeat mood at the recent global franchise convention and the strength of their well-capitalized franchisees. He noted that Q1 gross openings were higher than in 2023, with the net number impacted by planned closures in Turkey and strategic closures at Pizza Hut. He highlighted KFC's strong development and stated that Pizza Hut's net development is expected to be higher year-over-year for the rest of the year. CEO David Gibbs added that Yum China also reiterated its development confidence.

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CEO David Gibbs explained that international markets are improving, breaking down KFC's performance into three segments: markets heavily impacted by the Middle East conflict are recovering strongly (up 11% in Q4 vs. down 12% for the full year), unimpacted markets are accelerating (10% system sales growth in Q4), and other markets are also seeing recovery. CFO Chris Turner added that strong franchisee health is evidenced by the 4,500 gross new units opened during the year, calling it the ultimate test of their system's appeal.

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CFO Chris Turner stated that while specific 2025 guidance would be provided on the next call, the company's fundamental growth drivers remain strong. He noted that G&A would see benefits from recent productivity initiatives, though this would be partially offset by a reset in incentive compensation. Turner reiterated confidence in the long-term business model, driven by the performance of Taco Bell, strong international unit growth at KFC, and an expanding digital ecosystem.

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CFO Adam Rymer detailed the two-year comp stack, which was around +8% in April, dipped in May, but returned to the 8% level in June and has been 7-8% in July. CEO Scott Boatwright expressed confidence in returning to mid-single-digit comps in the near term, citing easing comparisons, upcoming LTOs, a new rewards program for college students, and operational benefits from the produce slicer rollout.

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CFO Adam Rymer noted that dinner has been holding up better than lunch. CEO Scott Boatwright emphasized that great throughput is the most critical driver, which will be aided by the new produce slicer. He described marketing and digital initiatives as providing additional 'topspin' to accelerate growth.

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CEO Scott Boatwright affirmed that mid-single-digit comp growth is the correct long-term expectation for the organization. He acknowledged the rough start to the current year due to factors out of their control but expressed confidence in the annual plan, stating the low-to-mid-single-digit guidance for 2025 is appropriate given the current situation. CFO Adam Rymer concurred.

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President & CEO Rick Cardenas stated that Olive Garden's current momentum is factored into the annual guidance and that if delivery over-performs, the brand may increase investments in other areas like affordability, which could moderate the SSS figure for the right long-term reasons. He clarified the higher long-term comp guide is more reflective of slightly higher inflation assumptions than in the past, not solely driven by delivery.

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President and CEO Ricardo Cardenas stated that Olive Garden's value scores have been gradually improving over time, driven by the total experience rather than just price. On delivery, he noted that while it's still early, they are observing 40-50% incrementality from the Uber Direct channel, even before significant marketing support. This effect is already incorporated into their financial guidance.

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Executive Ricardo Cardenas confirmed that no incremental sales from the Uber Direct rollout are built into the current fiscal year guidance. He also stated that there will be more menu innovation at Olive Garden, including both the return of fan favorites and new limited-time offers at compelling price points to attract value-seeking guests.

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Interim CEO Kevin Sheehan expressed confidence that the company's internal improvement initiatives are powerful enough to 'ride through' the current economic landscape and outperform the industry. He also described a long-term growth algorithm, which was later clarified by CFO Darin Harper to reaffirm the strategy of opening 10-14 new stores annually.

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CFO Darin Harper reported that the Friendswood location, now lapping its remodel, continues to perform well, and the company remains pleased with where its performance has settled. Regarding the macro environment, he noted it continues to be a headwind, with the low-end consumer being particularly pressured, as their spending is down significantly more than other income groups. He described the overall trend as 'a little bit more of the same' compared to Q2.

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Chief Customer and Digital Officer Ryan Ostrom explained that the definition of value is shifting from just low price to overall satisfaction and 'value for the dollar.' He cited the Munchie Meal, priced around $9-$10, as an example of 'food by the pound' value. He also confirmed the company continues to lean into core value items like its 2 Tacos and the 'Munchie's Under $4' platform, focusing on ensuring the message resonates with consumers.

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CEO Darin Harris reported that Del Taco is now approximately 80% franchised, which he considers an 'asset-light' level. While deals for another 13 restaurants are in progress, the company is currently in a 'holding pattern' on further sales. This pause allows them to assess the impact of AB1228 and the market environment on restaurant valuations to ensure they receive appropriate value for the assets.

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IHOP President Lawrence Kim noted they are testing an 'everyday' House Faves menu and exploring value through digital channels. CEO John Peyton described Applebee's value strategy as an 'evolution' centered on its '2 for $25' platform. Regarding development, Peyton expects a healthy mix of single and dual-brand openings, highlighting IHOP's consistent unit growth and a new, lower-cost Applebee's prototype.

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CEO John Peyton reported that the value mix was approximately 27-28% for Applebee's and 17-18% for IHOP, consistent with recent quarters. He elaborated that the new Applebee's platform, launching late spring/early summer, will expand on the core "2 for $25" deal to also target single diners and groups, incorporating new menu items to enhance its appeal.

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CEO John Peyton reported Q3 value incidence was 31% at Applebee's and 16% at IHOP. For off-premise, IHOP President Jay Johns highlighted the rollout of a call center to address challenges with phone orders. Applebee's President Tony Moralejo attributed off-premise gains to extending dine-in LTOs to takeout, targeted marketing, and improved operational efficiency.

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CEO Jonathan Neman outlined a two-pronged approach to improving throughput. For traditional stores, initiatives include optimizing labor deployment, testing planted positions, and 'Project Turbo' to leverage both front and digital make-lines. For Infinite Kitchens, he emphasized their capacity of 500 orders per hour and recent ergonomic improvements to the finishing station, enabling sub-5-minute order times even during peak hours and unlocking significant AUV potential.

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CFO Mitch Reback stated that the company expects IK store volumes to grow over time due to faster throughput and higher customer satisfaction. He noted that while it's still early, the Naperville IK (open over a year) is showing this, and the recently retrofitted Penn Plaza store grew at the faster end of the range for New York City in October.

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CEO Mike Spanos explained that the Aussie 3-Course builds brand trust and frequency. He highlighted that while the offer leads with a $14.99 price point, a significant number of guests are trading up to more premium sirloin options and adding desserts for an extra charge. He emphasized that its inclusion on the everyday menu simplifies execution for restaurant teams compared to rotating LTOs.

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CEO Mike Spanos emphasized that the foundation of any marketing is a great guest experience, which is the primary focus. He noted that marketing spend and activity in Q3/Q4 were flat year-over-year. CFO Michael Healy added that while they have strong analytical capabilities for marketing ROI, communicating a new brand message for Outback will be a key consideration after the strategic work is complete. Regarding Brazil, Healy reiterated the deal terms, stated the goal is to close by year-end, and confirmed they will receive an ongoing royalty but did not disclose the rate.

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CFO Craig Pommells stated that Q2 performance was pleasing and in line with expectations. He noted that this year's Thanksgiving strategy was adjusted from the prior year to better balance top-line results with guest experience, employee experience, and profitability, with a successful increased emphasis on dine-in. CEO Julie Masino added that the loyalty program, with over 6 million members, is driving higher frequency, spend, and check averages. She highlighted successful tests using the program to drive incremental retail purchases.

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CEO Julie Masino noted a slight recovery in the 65+ guest cohort and a spending decline among the under-$60k income group, but no other major demographic shifts. She stated the company is focused on loyalty members' behavior rather than their demographics. CFO Craig Pommels added that dinner trends are improving. He confirmed the $50-$60 million three-year cost savings target remains, but it will not fully flow through in the fiscal 2025 investment year, and G&A is expected to normalize in late fiscal 2026 and 2027.

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CFO and EVP, International Ravi Thanawala stated that while some 'pruning' may continue, the major steps in optimizing the international footprint have been taken, with the 'narrow and deep' strategy yielding strong results in priority markets. President and CEO Todd Penegor added that the company will compete by executing its own playbook, balancing 1P and 3P channels and leveraging its premium positioning and innovation.

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CEO Josh Kobza attributed the sustained success to foundational improvements in operations and a strong franchisee partnership. He highlighted that ongoing initiatives in PM food, such as Flatbread Pizzas, and growth in cold beverages provide further avenues for growth. Kobza emphasized that Tim Hortons' strong value proposition positions it well to continue performing in any consumer climate.

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CEO Josh Kobza responded that he is very pleased with the sustained performance, attributing it to strong execution on business fundamentals, positive traffic, and growth in the PM food and cold beverage categories. Kobza highlighted that recent innovations like Flatbread Pizzas open up more opportunities, expressing confidence in the brand's trajectory for the year.

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