Release Date: February 12, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: On 2025, the adjusted operating income growth, you stated that you anticipate an on-algorithm year of 8% plus. Just from a real high level, can you help us understand the same-store sales range you're assuming to get there? Do you need to be in line with your 3% long-term target to achieve that operating income growth? Or do you have additional cost efficiencies built in like we saw in 2024? A: Brian, it's Sami. And thanks for the question. Look, I think when we put out our algorithm last year, we talked about our algorithm being a five-year kind of growth outlook for the business. And some years would be on and some years would be off. But on average, that was the target. We're not going to get into the specifics of the top line components of what that looks like on a year-to-year basis. But we do feel good about the AOI bottom line guidance that we provided of 8%-plus growth this year. I think there are puts and takes to all of that. Obviously, same-store sales is a component. And we feel really good about the marketing programs we have planned for this year as well as the operational improvements we see across the business that will help deliver on that 8%-plus AOI growth for this year.
Q: I guess just given that the BK China situation as it relates to development, we're sort of waiting on that for color on '25. So I just wanted to confirm that, guys. And then the question, if I could, is just as it relates to BK and Tim's brands in their home markets in 25, against difficult macro still a tough promotional backdrop, seemingly, maybe you can just kind of speak to that, how you think about the two brands in this year in their markets. Is it fair to assume that some of the key '24 sales drivers will also support growth in '25? Or does that look a little different? If any color there? A: Dennis, thanks for the question. I'll take it and then I'll pass it over to Josh, just to clarify. As I said in the prepared remarks, we're in active discussions on the Burger King China situation. And we can't speculate on sort of the outcomes, but we expect to have a resolution relatively soon. And following that resolution, we will update you with any potential implications on energy targets. And Dennis, I'll take the second part on kind of marketing plans across Burger King and Tims in their home markets for this year. I think you alluded to it well. I think you'll see a lot of building upon some of the things that really worked for the businesses in '24 with a couple of new twists and innovations.
Q: It sounds like you're doing an excellent job also in speed of service with regards to in Canada. And I was wondering if you can elaborate a little bit more on the early feedback from franchise from the testing of these new espresso machines and maybe the potential impact on speed of service in the number of seconds that you can say with full roll out. And then, Steve, on the coffee, if you mind, help us understand a bit more the impact of the coffee price increases on your supply chain margins. And more in general, on the coffee demand in Canada that would be very helpful. A: Thanks, Danilo. I'll take the first part, and then I think Sami will take the last part. In terms of speed of service, I'm really proud of the work that Matt Moore, who is our COO up there has done with his team and the franchisees have been highly engaged on it. I mentioned one of the statistics there about how much incremental sales we get from just one second of improvement. And that tells you why we're all collectively so focused on the topic. And I think Matt and our franchisees have done a great job driving continued improvement in window times, which I mentioned, we've just done it quarter in, quarter out through a lot of focus and a lot of small tweaks. They're even -- even our renovations, which we started doing more and more of, one of the central elements of those renovations is an update to the way that the back of house flow works. And those renovations are enabling us to get more throughput and faster speed of service as well. So you can kind of see it across the business. We're highly focused on driving speed of service. And I think it's -- we're seeing it come through, and I think that's helping our sales and traffic momentum that I mentioned has been so consistent, too. In terms of the espresso machines test, I think we're still early in that. So only -- I think we need to give it a little bit more time. I would tell you that as much as it is focused on speed, it's probably even more focused on enhancing quality. We really want to make sure across all of our brands, all categories for serving the best product in the market. And that's something we're looking at across recipes, machines, procedures. And that's the piece that I think I'm most excited about and where we're going with the espresso machines is the potential to serve an even better product to our guests in the future. Maybe, Sami, do you want to take the coffee questions? Yes, I can take that. So coffee, it's no secret. I think most of you have read about probably it's at historic highs and I think a couple of things that we'd say about that. Number one, as you think about our Tim Hortons commodity basket, coffee is only about 15% of our Tim Hortons total commodity basket. So relatively smaller in terms of the entire basket. I think number two, for a bit of background on how we buy coffee, we buy coffee forward typically 6 to 18 months with a forward-buying strategy. And what this allows us to do is really smooth out potential volatility as we pass those costs on to franchisees. And it gives us visibility really into what the year might look like. And given that visibility, we still feel good that 2025 supply chain margin will be around 19%. As you recall, we finished 2024, a little bit higher than that at 19.5%, but we feel good about 19% for the full year in '25.
Q: Very nice comp growth from the International segment this quarter. I'm wondering how you're thinking about 2025 for the segment and any color and feelings about key markets and shape to the year's growth would be helpful. Obviously, you entered the year pretty strongly. You talked about sort of a back-weighted year for BK US I wonder maybe it's going to be the opposite for Burger King international, for example. But any color about how you're thinking about the year for that segment in terms of comps? A: Dave, thanks for the question. We were pleased with the improvement in same-store sales trajectory going into Q4 in international, there was a pretty good step up there. We're very active momentum. We're not ready to give guidance on the sales for that segment. But I think a lot of the things that you saw work in Q4
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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