Good morning, everyone and welcome to the Restaurant Brands International, Third Quarter 2021 earnings conference call. All participants will be in a listen-only mode. . After today's presentation, there will be an opportunity to ask questions. . Please note that all callers will be limited to one question.

Please also note that this event is being recorded. I'd like to turn the conference call over to Steven Lichtner, 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 30, 2021. As a reminder, a live broadcast of this call may be accessed through the Investor Relations web page, and investor.rbi.com, and the recording will be available for replay.

Joining me on the call today are Restaurant Brands International's CEO, Jose Cil, COO, Josh Kobza, and CFO, Matt Donigan. 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.

Throughout the call today, we will be referencing 2-year comparisons for system-wide sales growth and comparable sales to provide a cleaner indication of how the business is trending versus a more normalized period. These 2-year comparisons are calculated on a geometric stacked basis by using the 2020 and 2021 disclosed growth metrics.

And now, I will turn the call over to Jose..

Tim Hortons, Burger King, and Popeyes, all of which generate resilient, growing, high-margin revenue streams through comparable sales growth and restaurant development allowing us to reinvest in our business while also returning capital to shareholders.

During the third quarter, we once again grew global comparable sales year-over-year, driven by worldwide growth at Tim Hortons and strong results from Burger King and Popeyes international business, which offset softer performance from Burger King and Popeyes home markets.

As compared to 2019, our system-wide sales growth accelerated to 5% versus 4% in Q2, driven by positive overall comparable sales growth and continued progress in our development pipeline. With 264 net new restaurants delivered during the quarter, keeping us on track to return to 2018-2019 levels of growth this year.

And looking ahead to 2022 based on our current pipeline, we believe we are well-positioned to accelerate our net unit growth across all 3 brands and continue on our path to 40,000 restaurants.

Our efficient operating model helps convert the system-wide sales growth to the bottom line contributing to robust free cash flow generation that provide significant optionality, allowing us to reinvest in the business and return capital to shareholders through both dividends and open market share repurchases.

We're making investments in key areas of the business, such as building in-house technology and digital teams that we believe position us to add value directly to our guests and improve restaurant operations, investing behind our marketing plan at Tim Hortons in Canada, accelerating the roll out of outdoor digital menu boards, and investing in our people, especially in areas like technology, operation, and marketing.

We also returned roughly $240 million to our shareholders on October 5th in the form of a $0.53 per share quarterly dividend; once again, maintaining the highest payout ratio in our industry.

In addition, since announcing our expanded $1 billion buyback program at the end of July, we've repurchased and retired approximately 2.8 million shares in open market transactions, totaling just over a $180 million.

These robust capital returns reflect the confidence we have in our brands, our view of our underlying intrinsic value, and our outlook for the business.

Before I turn to our brand-level performance, I'd like to hand it over to Josh to provide you with a more detailed update on our development framework, a key driver of our long-term growth prospects, then also share an update on technology. Josh..

nearly 90%, with China in particular driving over 50% of sales from known diners. And in France, Spain, and Russia, over half of sales already come from digital channels. There are a few notable common threads across these markets. 1. Each has a strong loyalty program in place with easy in-store authentication capabilities. 2.

Each recognizes the merits of an an omni -channel approach utilizing kiosks, Mobile Order and Pay, delivery, and third-party partners to make it easy for guests to interact with the brand in their own way. 3.

All quickly integrate new and emerging channels, including third-party delivery and social commerce, like WeChat and Kakao to grow their customer base by ensuring the brand is present and has open communication channels wherever our guests are present.

And finally, each has developed a simple and effective back-end infrastructure to scale quickly without creating complexity. These are just some of the learnings we're able to apply to our home markets, which we expect will follow the path of our more digital international markets over time.

That's why we've been focused on ramping up enrollment in our loyalty programs, creating better digital experiences across service modes, including digitizing our drive - throughs, integrating with a growing number of platforms, and continuing to improve our back-end infrastructure.

We've already seen some early success with the Tim Hortons ' app, which now accounts over 10% of Canadians as monthly active users, and has the highest usage among restaurant or food delivery apps in the market.

While these initiatives take time and investment, especially in our large home market, they're critical to the future of the business and will continue to be a key priority. With that, I'll hand it back to Jose..

Australia, the UK, Russia, South Korea, and Japan. Given the diversity of our international business, it's difficult to pinpoint one or two key drivers of the overall comparable sales growth in the quarter. That said, we've noted a few highlights that we believe are contributing to growth in certain markets.

For example, our plant-based products have proved to be an important sales driver in the UK, Germany, and the Netherlands, and continue to grow as we launch new products. Our digital sales have also notably improved with the international business now generating roughly 50% of sales from digital channels.

We're pleased with the progress we continue to make internationally at Burger King and as restrictions continue to ease, we're optimistic we'll continue to see a rebound in sales that coupled with our robust development pipeline, we expect will drive long-term sustainable growth for the brand for years to come. Let's now turn to Popeyes.

As Josh highlighted, we see a significant long-term growth opportunity for the Popeyes brand. This quarter, we grew three comparable sales, nearly 15% even despite lapping the August 2019 launch of our game-changing chicken sandwich. That said, on a year-over-year basis, U.S.

comparable sales declined 4.5%, primarily driven by traffic declines and to a lesser extent, less effective impacts from the offers we had in the market. On traffic, ongoing labor challenges led to reduced service modes and operating hours, particularly in late night, as well as the temporary distribution center interruption in the Northeast.

We're focused on working with our franchisees to alleviate the impact of these challenges in the future. And while in-restaurant staffing may take time to improve, we're well into the process of further diversifying our distribution network in the region to mitigate the impact of any future distribution center disruptions on our supply chain.

Despite these headwinds, which drove the majority of the year-over-year decline, the brand continues to generate over $1.8 million in annualized sales per restaurant in the U.S. And Popeyes U.S. once again grew system-wide sales, a success from the team's focus on strong development offset the decline in comparable sales.

The team also remains committed to making progress across menu innovation and during the third quarter focused on two areas, nuggets, and premium beverages. We launched nuggets in July a new long-term category to our menu and a convenient way to enjoy a delicious hand-breaded Louisiana chicken.

While the launch of nuggets has proved to be incremental to our business attracting new guests and driving check, it was unable to offset the traffic headwinds we experienced during the quarter and we know there is more we can do to enhance the performance of this important new category for us.

For example, we know every great nugget deserves a great sauce pairing. So we're focused on innovating in this key area, introducing creative and delicious new sauces like our recently launched Hottie Sauce, yes, you heard it right, in collaboration with Megan Thee Stallion.

We're particularly excited about this collaboration as it not only introduces a new dipping sauce for our nuggets, but also innovates on our iconic chicken sandwich platform for the first time. On premium beverages, our recently launched lemonade platform drove beverage incidents to their highest levels since 2017.

Beverages are a great driver of traffic and franchise profitability, and we think there's even more we can do here and are excited to keep building on the momentum that we've seen.

We remain confident in the long-term outlook for the Popeyes brand as we continue to innovate across our menu and dayparts, enhance the guest experience, and bring Popeyes to more guests around the U.S. and the world with a robust development pipeline.

With that, I'd like to hand it over to Matt to take you through our financial and cash flow results for the quarter. Matt..

first, our supply chain business at Tim in light of the current macroeconomic environment, and second, how to think about the impact of our robust international growth on our business. On supply chain, as you've heard from our peers and others outside our industry, we're seeing increased levels in inflation on the commodities in labor front.

So we thought it would be helpful to include a brief update on our supply chain business at Tim. With sales beginning to recover this year in Canada, we've seen margins bounce back relative to 2020 and hold a pretty consistent level on a year-to-date basis. We've been very encouraged to see this improvement.

However, given the most recent market trends, we do expect margins to moderate slightly over the next couple of quarters as we navigate through this elevated volatility, monitor and adjust our pricing as appropriate, and ensure strong operations and service levels, all while keeping both our guests and our franchisees in mind as always.

On our international growth, you heard Jose and Josh mention the strong progress we've made restarting our global growth engine this year, and the expanding opportunities we have to accelerate toward our 40,000 restaurant target.

We see significant runway to continue scaling our international businesses, which are already strong contributors to our results, generating over 40% of our consolidated global system-wide sales. As a reminder, our international franchise partners typically localize supply chains and control their own real estate portfolios.

Therefore, as we continue to rapidly expand in international markets, our primary source of incremental income will come from high-quality franchising revenues with royalties tied to system-wide sales growth.

Now, turning to EPS, our 3rd quarter adjusted earnings per share was $0.76 compared to $0.68 last year, representing a nominal increase of approximately 12%. Included in this increase is an FX tailwind of about 3%.

The higher growth compared to our consolidated adjusted EBITDA growth of 5% year-over-year was mainly driven by lower net interest expense and a reduced share count from our repurchase activity, partially offset by higher adjusted effective tax rate and higher equity-based compensation.

It's worth highlighting that equity-based compensation increased quarter-over-quarter to $25 million in Q3. Given the continued investments we've been making in our people throughout the year, we do expect this to ramp up a bit more in Q4.

Turning to our capital structure, we manage a highly efficient and scalable business model with recurring and diversified income streams and strong conversion to cash flow.

During the quarter, we generated nearly $490 million of free cash flow, enabling us to reinvest in our business while also following through on our commitment to return capital to shareholders through both dividends and share repurchases.

As Jose mentioned, we've been actively buying back shares utilizing our enhanced capital allocation flexibility from our $1 billion open market share repurchase authorization.

During Q3, we repurchased and retired approximately 2.8 million shares of our common stock for over $180 million, leaving us with over $800 million still available under our current program.

On October 5th, we also returned approximately $245 million to our shareholders for a $0.53 per share quarterly dividend, and we recently declared an additional dividend of $0.53 per common share in unit payable on January 5th, 2022, consistent with our previously announced target of $2.12 per share for 2021.

Even with combined capital returns of over $425 million in the quarter, we also saw our net leverage declined further to 5.2 times. In addition, from liquidity perspective, we continue to maintain very strong flexibility. Between a nearly $1.8 billion of cash and a $1 billion revolver, we have about $2.8 billion available to us.

Looking ahead, our capital allocation priorities remain very consistent, prudently maintain an efficient capital structure, invest back in the business through high impact organic opportunities, continue returning significant capital to shareholders through dividends in our expanded open-market authorization, and evaluate accretive strategic opportunities.

With that, I'd like to thank everyone again for your support and for joining us this morning. And we'll now open the line for questions. Operator..

Good evening, gentlemen. At this time we'll begin the question-and-answer session. And as a reminder, we do ask that you please limit yourselves to a single question. Our first question today comes from Chris Carol from RBC. Please go ahead with your question..

Hi Good morning, and thanks for the question. So on Tims Canada, I appreciate all the commentary around regional and urban trends.

Can you talk a little bit more about some of the other factors driving performance in Canada, perhaps any insights on what the competitive environment has been like as mobility has improved? And curious about drive-through trends, I think you noted that drive - throughs were flat in the quarter.

If I did hear that correctly, what do you see pushing drive-through trends into positive territory? Thanks..

Hey, Chris, thanks so much for the question. If I may, I'm going to go into a little bit here because you asked a number of different components of Tims Canada performance.

So as you probably recall, last time we were together was in late July and as of end of July, reopening was well underway in Canada, and there was a lot of -- there was some momentum in the market in terms of reopening big banks and other large employers in Toronto who are expected to return to offices in Q4.

And this was the beginning of when we started to see some impact from the Delta variant, just making some noise.

When you fast-forward to the end of the summer cases started to rise pretty significantly throughout August, and reopening was paused, and we saw vaccine mandates implemented and mask mandates reintroduced, which put further pressure on mobility and reopening, which as we all know, has lagged in Canada versus the U.S.

And we've seen urban centers continue to take cautionary approaches. Downtown Toronto is an example, still not back to work and our vanity remains the biggest drag in our business in Canada. Many of the large employers have pushed back returns to office to sometime in 2022.

In the quarter we saw a nice improvement in July, and maintained that in August and September and we exited September similar to July. And there's been no real material shift in trends to call out in October versus where we were in Q3. Really that's where we stand today.

There's a clear, concentrated drag from urban and super urban locations and our business there. And this is where lagging workplace mobility most impacts our business. Where we have high-frequency, relatively low check guests; the guest that buys that coffee or 2 coffees on the way to work.

All that said despite these pressures from a mobility standpoint, we're improving quarter-to-quarter and getting back to where we were in 2019. For example, even with the drag and workplace mobility, we've gotten morning daypart to close to flat driven by our emphasis on quality enhancements in our breakfast foods.

And we're seeing sequential improvement in hot beverage. In other words, we're reducing the drag that we've seen over the last 18 months. And we see a really strong opportunity to continue to grow even if mobility doesn't come back fully. And as I mentioned in my prepared remarks, we're not waiting around.

We're protecting and enhancing the core offering while pursuing new opportunities in food -led dayparts like lunch and dinner, important dayparts that obviously are critical to the industry. In Canada, as an example, 60% of overall industry sales are in those dayparts, and we were about 35%.

So we under-index there and we think it's a unique opportunity to increase share as we continue to develop offerings and build off strong performance like Craveables, and we're encouraged by these early results in lunch, which is why we're continuing to push on that, and we've built on it during the fall with our freshly grilled wraps.

Probably the daypart that has the biggest opportunity is dinner, which is still behind pre -pandemic levels down a bit there.

And as we look at the offerings that we're developing with Artisan sandwiches and the wraps and others, we think there's a path to get it back to pre -pandemic levels and then growing from there, which is an exciting long-term opportunity for the business. Where we think we need to focus on, as I mentioned, is to succeed in lunch and dinner.

We need to drive food and beverage offerings that makes sense and pair well with food during those dayparts, which is what led to some of the innovation in cold beverage, supporting our new food platforms as well all year long.

So kind of summarizing where we are from a daypart perspective, two-year sales outside of dinner and late night, or roughly flat to above where we were in 2019 and one of the important data points is -- given the pandemic impact on the business we have been working with our franchise partners and owners in Canada, reducing and in some cases, closing late-night in order to address the reduced mobility and the market throughout the pandemic, and we're now just in Q4, beginning to reopen late later night hours for a big component of the Team Canada system.

I think as it relates to drive-through, you mentioned that we saw obviously a pretty significant growth in drive-through during COVID. Drive-through is an important channel. We have about 2600 plus locations in Canada, which is more than a 1,000 than any of our closest competitor.

And we've seen now the morning daypart roughly flat as I mentioned to 2019 levels.

Our drive-through enabled locations morning is outperforming pre -pandemic levels on average which shows the overall long-term value of drive - throughs, which is one of the reasons why we've invested significantly in our drive-through s to modernize our experience with the outdoor digital menu board and loyalty integrations which are taking place as we speak.

I think investments via the other piece I'd highlight here is that investments in our digital capabilities are really continuing to add to the experience and to the sales in the business. In Canada, we've got the number one QSR app. In Canada, Tim's Rewards is driving traffic check and beginning to contribute to sales.

And that strong relationship with our guest is allowing us to engage them and drive more frequency and check as well. And then the final comment I'd make is on the ad fund contribution that I mentioned back at the beginning of the year. We had mentioned 80 million Canadian contribution.

We're probably about 3 quarters of the way through that contribution in 2021, and just as a reminder, franchisees will, on an ongoing basis, increase their contributions to the advertising fund by 50 basis points. We're confident in the plan that we have. We're encouraged by the progress we are making so far.

We've seen improvements -- in addition to the sales in daypart and format improvements that I've mentioned, we've also seen improvements in our brand health metrics, including brand connection. Obviously, lots of work to do, but we're encouraged by the progress we're making and look forward to keeping you posted on how we evolve. Thanks so much..

Thank you..

Our next question comes from Dennis Geiger from UBS. Please go ahead with your question..

Great. Thanks for the question. Jose, I wanted to ask a bit about some of the key pressures impacting franchisees, and really the industry in particular in recent months, I guess across brands, be it staffing issues, labor pressures, commodity pressures, etc.

What kind of impact or the franchisees and the system, broadly, seeing from these pressures? How's the system managing these pressures and kind of thinking about managing them going forward? I know you spoke to some of this with the Popeyes DC issue and the Tim Hortons supply chain. But even more broadly, curiously the impacts.

And then just as it relates to potential implications that you could speak to make the -- from these impacts, be it demand -- new open demand, and in any way, potential franchise or investment support, anything. Just on the go-forward as we think about the environment right now. Thank you..

All right. Thanks, Dennis. I'll I'll take the labor impacts I think broadly speaking and I'll pass it over to Matt to touch a little bit more on broadly speaking inflation impact in the business, and then I'll wrap it up on your 3 Part, 1 question. I'll wrap it up on the development front and what impact we're seeing on that end.

As I called -- as I mentioned in the prepared remarks, obviously, labor challenges are impacting the entire industry and not just the restaurant industry, but broadly speaking, through retail and other businesses as well, shipping, etc. We called out the impact specifically at Popeyes because it was where we felt it most acutely.

We saw it in the context of reduced operating hours and services modes, especially around late night. And we also saw some impacts in our distribution centers in particular in the Northeast.

On operating hours, we saw about an average of 1 hour reduction in operating hours at Popeyes during this quarter relative to pre -pandemic levels, which obviously has an impact and that was disproportionately impacting our late night business, which historically over-indexes and family and which comes along with a pretty high check.

Outside of late night, we saw daily sales improving in either flat or improving modestly throughout the quarter. So the real drag and the real impact from a labor standpoint was the late night, the daypart.

And on service modes, we're seeing nearly 40% of the system operating with reduced service modes, either either drive-through delivery and take out only or drive-through and delivery-only, which means our dining rooms are generally -- have been closed in many cases because of some of these staffing challenges that we're facing that are near-term challenges for the system.

And then on the DC side, we saw an impact of roughly 10% of the stores with this Northeast distribution center and disruption, and one of the things that our team alongside our purchasing co-operative for Popeyes has been doing purchasing a distribution co-operative, they've been working on diversifying the distribution network and we expect to complete that transition later this quarter.

I -- I think this is a challenge that all brands here in North America are facing. But as I mentioned at the beginning of my response here, it's a challenge that's been felt most acutely with the Popeyes business in the U.S. and something we're working closely with our franchise partners to address.

We've created working teams to address -- to share best practices. There's some really good operators that have done amazing work already in creating job fairs and pipelines of folks coming into the restaurants and staffing up well.

So we're sharing those practices, and we're also leveraging technology and streamlining operations wherever possible to make this transition in this challenging moment be more, kind of, be friendlier to operations to allow for staffing levels to get to the places we need them to get to, to drive growth in the business.

And with that, I'll pass it over to Matt to touch on some of the other impacts that we're seeing in the near term..

And thanks, Jose. Hey, Dennis, good morning. Thanks for the question. Yeah, I think as it relates to inflation, I think we're fortunate to have come out of 2020, generally speaking, across our brands with strong profitability. That said, Jose touched on, I think there's headwinds for us to work through in staffing and wages and general inflation.

And so the approach we've taken is to work side-by-side with our franchisees to -- to address as best we can and manage through this -- this tougher cost environment. I'd say pricing is definitely in the conversation. We've taken pricing this year generally in line with inflation in the U.S.

and we'll continue to take a really hard look at where we go from here moving forward. On mix, we can and have looked at low margin, low traffic items with franchisees. In addition to that on the commodity front, I think, I would say that procurement is a really big focus for us.

We think that scale is an important advantage when you consider sourcing of different products around the world, across the brands and we think our system benefits from that in terms of our scale with each of the three brands.

And on the labor front, we're looking at ways we can simplify life in the restaurants, looking at processes, looking at simplifying the menu. And so we think there's a number of things that we're working on here to address the pressure that we're seeing with our franchisees.

But overall the number 1 thing we can do we think is to drive traffic and address our guests' needs and drive sales. Maybe the other -- just really quickly, the other point I would touch on is the comments I made about the Tim Hortons supply chain.

I'd say that we're encouraged by the progress that we've seen at the Tims Canada business in terms of our sales recovery, in terms of our margin improvements year-over-year versus 2020. Historically, we haven't given guidance on margins.

However, given the recent volatility around inflation that we've seen, we thought some directional color would be helpful. So as I mentioned in the prepared remarks, we expect margins to moderate slightly from where we were in Q3.

We have some time to go here in Q4, but based on what we see currently, we think the margin impact directionally could look like approximately 50 basis points versus the Q3 levels. And, of course, we will be managing very closely across all fronts over the next few months to navigate through the environment here.

So I'll pass it back to Jose on development..

Thanks, Matt. On development, obviously, there's constraints in certain markets related to labor and supply chain, but we've got a really strong network of equipment suppliers. Our teams are working closely with them, our franchisees are as well.

And we expect, as we've said several times over the last quarters, we were excited about the pipeline, we're encouraged by the progress we're making. We think we're going to be at or near levels of 2018, 2019 unit growth in 2021.

And we're confident we can accelerate in the years to come with the quality of the partners that we have, the amazing white space that exist around the world. And even here in the US and Canada. And look forward to updating you on that progress in the coming quarters. Thanks so much..

Thank you very much..

Our next question comes from John Glass, from Morgan Stanley. Please go ahead with your questions..

Thank you. And good morning. Jose on Burger King U.S. two questions. One specifically, what's the impact of removing the paper coupon? If there's a way to sort of isolate that, so we understand that impact. And then more broadly, you outlined a number of pieces that you want to work on and had to do with menu in the brand and maybe even some equipment.

What are the couple of things that we should watch for the next couple of quarters? What are the immediate action steps that might be able to bend the trend or should we think about this as a longer-term project such that none of these probably impact near-term, but are all good longer-term? Thanks..

Thanks, John. On paper coupons, as I mentioned in my prepared remarks, we tend -- historically Burger King in the U.S. over-indexes in paper coupons relative to peers, something in the neighborhood of three times the number of coupons compared to most of our peers.

It's been traditionally an important channel, but the effectiveness has eroded a bit over time, especially with the younger consumers. And so we felt, and we do feel it makes sense to transition media occasion and the focus to other consumer-facing channels that we believe over time will generate higher return.

Ideally, compensating by finding new long-term sustainable platforms, especially as it relates to digital. This is what Royal Perks is designed to do, shifting our digital media or digital offers with -- to known diners, helping us engage them better and drive guest behavior, and ultimately build a strong base with the younger generation.

As it relates to the impact, we haven't kind of communicated the details of that, but we believe we'll be able to shift very quickly with the growing Royal Perks platform that we have, and some of our digital offers that are available.

If we believe we'll be able to shift to a much more accretive digital coupon and digital engagement program over time. Now, as it relates to the Burger King plan overall, as I mentioned last quarter and mentioned in my prepared remarks, the key was focused pace and building our team.

We saw that we had done some good work with Burger King and in the U.S. on -- from time-to-time, but we haven't haven't been consistent. And so we tapped Tom and I mentioned that in recent communications, we have Tom to lead the BK U.S.

business working with franchisees now and building his team and bringing in more discipline, analytic rigor and focus to the business. The focus now is working through the details of the framework and the plan, which I laid out in -- with some broad headlines operations, digital, menu, work, and image.

I think the big -- they're all big areas to work on and these are plans and initiatives that we're developing in partnership with our franchise system in the U.S. We don't see, we don't have a timeline on this where the most important thing is that we do the right work with our franchisees.

I think a big element of the plan for the U.S is around execution and being much more consistent on that front. I think that we've been working on our times, brought a lot of discipline around, simplification of the many buildings standardization, bringing some equipment, changes in the back of house to help with accuracy.

We've also started to -- throughout the year, we've been making investments in our field organization, which we believe will be a key part to drive the business forward in partnership with our franchisees. Digital remains a big opportunity for the BK system.

We've we've already started to put in place the -- obviously they've been in place for a while, Royal Perks on loyalty, the ability to personalize offers and drive behavior with our CRM and outdoor digital menu boards making the experience in the drive-through much more digital and much more personalized.

On the menu front, being able to focus on some of these core platforms in Burger chicken and value, as I touched in my prepared remarks and really moving away from promotional in and out and -- which dilutes the message and dilutes our advertising firepower, allowing us to really drive growth in the core of our business.

I mentioned before and touched on briefly the importance of breakfast and that being a long-term driver of growth in that daypart. And then finally on the image front, being able to continue the work we're doing on drive-through and enhancing that experience.

And then also working with our partners or franchise partners to drive an acceleration of renovations where the opportunity to drive growth and good returns exist best. Q3 with the transition, Q4 is where we're launching our multiyear plan and 2022 is year 1 of execution.

And we're excited about the work we're doing, and we're excited about the engagement we have with the franchise system, and I will keep you posted on our progress there..

Thank you..

Thanks so much..

Our next question comes from John Tower from Wells Fargo. Please go ahead with your question..

Great. And again, answered much of it in the last question, but just in terms of following up on the BK U.S. would you pull up a similar lever potentially as you did with Tim Hortons in Canada and use some of the Restaurant Brands' capital to pour into the marketing programs at BK U.S.

assuming the franchisees are aligned with that message?.

John, thanks for the question. Look, I think the first level of investment that we've been making is building out a strong leadership team, and we've been doing that now at Burger King, similar to what we did at Tim Hortons. We've added -- obviously Tom has been named to run the business.

We've bolstered the team with an industry veteran in data science and analytics. We've brought in a culinary, the lead as well as shop to drive the BK innovation. These are critical role s to ensure we have the interest of our guests front and center, as well as those of our franchisees.

And as I mentioned, in response to the earlier question, we've increased presence and coverage in the field, which we think is critical here.

On the capital front, we already invest in the business from a remodel standpoint here in the U.S., and we obviously are working in the early days on how we can accelerate that in partnership with the franchise system. And as it relates to the ad fund, we're early days here on building out the BK U.S.

plan and the most important thing is to have a solid plan that our franchisees support and can drive traffic and sales, and we'll continue to use the same discipline that we've had from a capital allocation standpoint to drive the most significant impact on the business and ultimately the biggest impact long-term on shareholder returns.

Thanks so much for the question..

Our next question comes from Brian Mollen from Deutsche Bank. Please go ahead with your question..

Thank you. Question on Tim, you shared a stat that 10% of Canadians are now fully active users in the loyalty program. That's encouraging to hear.

Just big picture, do you think you're now at a place with the program where it's ready to be a meaningful transaction sale driver when the Canadian economy is truly and fully reopen ed? And if yes, is there a scenario where the benefits could prove to be multiyear in nature? Just any thoughts on your degree of optimism here as the country emerges from COVID would be helpful to you..

Yeah, Brian, it's Josh and thanks for the question. As we mentioned a little bit earlier, and I think you mentioned a moment ago, we've been really pleased with the work that Tim's team has done on the mobile app and more broadly on the Tim's Rewards program.

We launched it a couple of years ago and it's evolved in a really positive way that I think has lead so many of our guests and so many Canadians to want to engage with it. And we're really excited about how many monthly active users we have, but also about the frequency with which people engage with the app.

It's not just that they use at once a month, but they use it, in most cases, many times a week. And I think that level of engagement in a mobile app is something that's really special anywhere in the restaurant world. So we think we have something really great there.

I think the team has built that by creating a really seamless experience at the restaurants, but also through creating other exciting avenues for engagement by making the things like contests, such as roll up to win, fully digital, taking really bold steps and executing them really well and making those experiences really positive.

So we're really pleased with it. We think it is an exciting avenue to be able to drive greater engagement with the brand, and ultimately drive sales over the medium to long term. And we see it as a big asset for the business. and something that we're very excited about the prospects for -- over the long-term..

Thank you..

Our next question comes from Lauren Silverman from Credit Suisse. Please go ahead with your question..

Thank you for the session. I appreciate all the commentary on development. Tim Hortons International, another nice quarter of unit growth. You've talked about the significant opportunity in China.

What have you learned about expanding internationally with Tim Hortons China that you can leverage to expand in other international markets? And then how are you thinking about the development opportunities for Tim Hortons in Canada?.

Lauren, thanks for the question. Yeah, we've given some color over the last few quarters on Tim's China, which we're excited about it. I think the most important piece is the great work that the team there has done to build a business and brand and a product offering that really connects and engages with the consumers in China.

The digital offering it's it's pretty exciting and has done a great job of engaging consumers in-stores and also from a pre -order and payment standpoint. What gives us confidence in the opportunity in China, and more broadly, globally outside of Canada, is the fact that our beverages connect well and really travel well across many markets.

We've seen the expanded beverage offering, including cold beverages and specialty beverages, work really well. And then, we've worked closely with our partners to localize the food offering to make it relevant for consumers there. We've seen some progress.

Actually, I'm heading out to Mexico later today to go visit our Tim Hortons' business in Monterrey, Mexico, which is growing and performing well. We've got a great business in for Tims in the UK with a different offering than what we see in China. That's drive - throughs.

It's very similar in terms of scale at the restaurant and offering to what we see in our Canadian business. So there's a lot of exciting opportunities there. And we believe that we're just at the beginning of the journey internationally for Tims.

Coffee is a fast-growing segment internationally, especially Asia, but also in Europe and other markets around the globe.We've got a great coffee offering. We've got a strong heritage. with the co -- with Tim Hortons, and our price points are really accessible.

We're -- and our digital capabilities are growing and really helping engage our consumers there. We're excited about the growth prospects there, as it relates to Tims in Canada. We obviously have a strong presence all around this. There's certain parts of the country where we think we have quite a bit of room for growth.

We think continuing to expand our drive-through capabilities in certain areas is good opportunity for development, and we'll continue to infill and optimize the portfolio where we think we can provide better service and better accessibility to our guests using our digital platforms, our drive-through platform, and other off-premise and convenient ways to connect to the brand.

Thanks so much for the question. I think, Josh has 1 more comment on this..

Yeah. Lauren, if I can just add one or two things to what Jose said on the international side.

I think one of the great things that David and the international team have done with Tim Hortons business across the globe is they've figured out how to adapt the business to each of the markets in a unique way whether that's formats that are a little bit larger format drive-through in places like the U.K.

or some smaller format, but very drive-through oriented in Mexico or the format that we have in China. But the thing that's -- or the Middle East for that matter. The thing that's common across those is that we've been able to achieve some really remarkable payback period across all of those geographies.

I think that's what has our international team getting more and more excited about Tim Hortons and our ability to adapt it and create a really compelling investment proposition for franchisees all across the globe with the brand. So I think our team has done a really wonderful job with that, and we're all pretty pleased with it..

Great. Thank you, guys..

And ladies and gentlemen, our final question for this morning comes from David Palmer from Evercore ISI. Please go ahead with your questions..

Thanks for squeezing me in and great detail on the call. 2 quick ones, could you touch on the percentage of dining rooms closed or hours of operation reduction that you're seeing for Burger King U.S. and Tim Canada? Any numbers would be helpful. Obviously, those will hopefully get reopened and those hours restored.

And then it was good to see the 2-year acceleration for Burger King International, where was the greatest improvement as you look around the world? Thanks..

Thanks, David. On the dining rooms close and hours of operation, it's pretty -- it's been volatile, especially with Popeyes. We've seen a little bit of that happening as well with Burger King and Tim. So the numbers in terms of dining rooms closed fluctuates a bit.

And given the circumstances in certain markets, we've seen vaccination requirements take hold and so that's impacted as well our dining room business.

But overall, as I mentioned with Popeyes, we've seen some impacts, some significant impacts in late-night, mostly in dinner daypart, from labor shortages in some of the staffing challenges that we faced.

And as it relates to that to Burger King International, we're very excited about the progress we've made, especially in this quarter relative to last year and to 2019, where we've seen the progress is pretty widespread.

and that's what's exciting about the opportunity in our business there and the work that the team is doing with our master franchisees. Thanks again for the question, David, and for everyone else. And thanks for joining us this morning.

We've made quite a bit of progress executing on a number of our key priorities, including accelerating our development pipeline. We also know there's more work to be done to accelerate our growth in driver of brands to their full potential. I'm incredibly grateful to our team and our franchisees for their hard work day in and day out.

They remain focused on elevating the guest experience, accelerating our restaurant development, and driving long-term sustainable growth for our business and our shareholders. Thank you again for joining us, and have a great day..

Ladies and gentlemen, with that we'll conclude today's conference call. We do thank you for attending. You may now disconnect your lines..