Same-Store Sales Trends
Q: How are current same-store sales trends and what's changed quarter-to-date?
A: The company experienced industry softness in January but saw strength in February, becoming the #3 brand ordered on Uber Eats for the Super Bowl. They anticipated Q1 would be the toughest quarter, with plans for strong comp sales growth taking effect in Q2 when a 20% increase in media spending and a new advertising campaign will launch, along with new innovations in April. Despite a soft start in January, they see strong sales momentum ahead.

U.K. Store Closures
Q: Why are you closing 50 company-operated units in the U.K. despite improving trends?
A: The 50 restaurants being closed are company stores unlikely to reach profitability due to factors like trade zones moving. They won't benefit from better operations, so the decision was made to close them. The closures will be immediately accretive to income as these are negative profit restaurants. Closing them will make remaining stores higher volume and more profitable, with some sales transferring to other restaurants.

Domestic Development Incentives
Q: Are franchisees increasing commitments due to new U.S. development incentives?
A: There's significant excitement among franchisees. In 2023, they delivered 57 net new units in North America and plan to grow that by at least 20% in 2024. The development incentive has been extended into 2025, offering 5 years of national marketing fund relief for stores built in 2024 and 3 years for those in 2025. The company is hopeful that domestic development will help close any gaps, noting that one domestic opening equals four international openings in financial impact.

International Development Outlook
Q: How quickly can international development reaccelerate given challenges in key markets?
A: Three markets—U.K., Russia, and the Middle East—are impacting openings over the next couple of years. The U.K. had been opening about 50 units a year, but some weren't optimal, leading to strategic closures. They are now ensuring new international openings undergo the same scrutiny as domestic ones. Once optimization is complete and geopolitical situations improve, they are confident in their long-term international growth rate.

Consumer Spending and Value Strategy
Q: What changes are you seeing in consumer behavior, and how are you addressing value?
A: There's been consumer spending softness across industries, which isn't surprising due to macroeconomic factors. Pizza offers great value relative to other segments, and the gap has never been greater. They're balancing premium and value, currently running a national promotion: an $8.99 large one-topping pizza, the most aggressive deal since the CEO joined. While competing for transactions, they continue to deliver premium innovation and maintain a balanced strategy.

Shift in Advertising Strategy
Q: Can national advertising offset reduced local spend from 8% to 6%?
A: National advertising yields over a 25% improvement in return on ad spend compared to local. By reducing total advertising investment by 25% and gaining a 25% pickup, they believe the impact is at least comparable. New tools and a media partner enhance targeting and efficiency, increasing confidence despite the reduction from 8% to 6%. Some franchisees will continue spending above 6% due to existing local partnerships.

Innovation Pipeline
Q: Are new products coming in 2024 that could be significant?
A: Yes, they're launching a new innovation in April across multiple platforms: pizza, Papadias, and Papa Bites. This will be advertised holistically to raise awareness of products with less household penetration. They're also innovating in marketing, loyalty, and promotional strategies to drive both pizza sales and additional offerings.