Restaurant Brands International Inc. (QSR) Q2 2014 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to the Burger King Worldwide Second Quarter 2014 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. [Operator Instructions] I'd now like to turn the conference call over to your host, Mr. Sami Siddiqui, Senior Director of Investor Relations. Please go ahead.

Thanks, operator, and good morning, everyone. Welcome to Burger King Worldwide's Earnings Call for the Second Quarter Ended June 30, 2014. A live broadcast of this call may be accessed through the Investor Relations page on our website at investor.bk.com, and a recording will be available for replay. With me today are Burger King Worldwide's CEO, Daniel Schwartz; CFO, Josh Kobza; and President of North America, Alex Macedo. The team will be available to answer questions during the Q&A portion of today's call. Before we begin today, I'd like to remind everyone that this earnings call and presentation include forward-looking statements, which are subject to various risks set forth in the press release that we issued this morning. In addition, this earnings call and presentation include non-GAAP financial measures, the reconciliations of which are included in this presentation and in this morning's press release, both of which are available on our website. Let's start on Slide 4 with the agenda for this morning's call. First, Daniel will walk us through the highlights for this quarter and provide an update on our key initiatives. Then, he'll turn it over to Alex to discuss progress we've made in the U.S. and Canada. Daniel will then run through regional performance, and Josh will discuss financial results. Daniel will close the call with concluding remarks before we open it up for Q&A. And with that, I'll now turn the call over to Daniel.

Thanks, Sami, and good morning, everyone. We continued our positive momentum in the second quarter, delivering strong year-over-year growth and making progress on each of our strategic initiatives. The key to our Q2 success was consistency. We consistently executed on our strategy of menu and operational simplicity in North America, and we consistently grew the BURGER KING brand around the world. We believe that this consistency will not only ensure that our guests have a great experience and keep coming back to our restaurants, but also that our franchisees will continue to see increased profitability. As we've said before, it is ultimately these 2 groups, our guests and our franchisees, that are instrumental in making the BURGER KING brand what it is today. In Q2, we made significant progress. First, in the U.S. and Canada, we generated our third consecutive quarter of positive same-store sales growth. This was driven by our strategy of launching fewer, more impactful products and by the continued popularity of our core offerings. We used operationally simple innovation to attract new guests while offering existing guests fresh new value. For example, the Chicken BIG KING, which we rolled out in April, did a great job of building on our position in fried chicken, a category that has been less of a focus for us historically. At the same time, we launched the Chicken BIG KING as part of our 2 for $5 platform, which allowed our existing guests to experience a fresh new taste at an attractive price point. In all, we launched 5 new menu items during the quarter, a significant decrease from Q2 of the prior year. Even more important is that the 5 new products collectively required only one new SKU to be introduced into our restaurants. We believe that these types of operationally simple products are the key to increasing franchisee margins. Year-to-date, we're encouraged by the year-over-year increases we've seen in franchise profitability, and we continue to introduce new initiatives to grow this even further. Second, on the international front, we continued to leverage a balanced marketing approach, introducing premium products to complement our already popular value menus. Again, to the point of consistency, we've spent a lot of time ensuring that the BURGER KING brand has a consistent identity around the world. Our innovations in the second quarter range from a Hashbrown WHOPPER in Korea to a Mexican Whopper in Spain to a BBQ Bacon WHOPPER right here in the U.S. It is this type of consistency that we believe will continue to drive global growth while preserving our brand identity. Third and finally, we accelerated development, opening 131 net new restaurants in the second quarter and 682 net new restaurants in the trailing 12 months. This annual pace makes us one of the fastest-growing QSR's in the world. I had the opportunity to visit South Africa this quarter, where I saw firsthand one of the markets that's contributing to this best-in-class growth. With the help of our partners, we've already opened 10 new restaurants this year and are on track to surpass our targets for the year. Our growth in South Africa is being supported by our JV partner's new meat plant that is expected to manufacture over 700,000 beef patties per month at the strict quality standards that BURGER KING demands. This facility will not only support our growth in South Africa but will one day accelerate our expansion into the rest of sub-Saharan Africa. It is examples like these that make me confident in our ability to drive net restaurant growth at an accelerating pace going forward. Consistent marketing and development activity allowed us to deliver 19% year-over-year adjusted EPS growth and 13% year-over-year organic adjusted EBITDA growth. We have consistently grown adjusted EBITDA and adjusted EPS every quarter since becoming a public company in mid-2012. This level of growth would not be possible without the exceptional work of our partners, our franchisees and our team members around the world. Let's start with Slide 6 for an overview of growth highlights. Global comparable sales were up nearly 1% in the second quarter, driven by positive comparable sales growth across all 4 regions. From a restaurant development perspective, as I already mentioned, we opened 682 net new restaurants on a trailing 12-month basis. This represents more than 30% year-over-year growth in net new units from the second quarter of last year. Strong unit growth, combined with positive same-store sales growth, drove global system-wide sales growth of more than 5%. The next slide shows our profitability metrics for Q2. All 3 statistics, organic adjusted EBITDA, adjusted EBITDA minus CapEx and adjusted diluted EPS, grew by double-digit year-over-year growth percentages. Performance was primarily driven by organic adjusted EBITDA growth across all 4 regions, including double-digit growth in our international regions. Moving to Slide 8. We continue to execute on our established business strategy to position the business for long-term sustainable growth. Alex will walk you through our strategy in the U.S. and Canada on the next few slides.

Thanks, Daniel. Our strategy of launching fewer, more impactful products has been in place for over 1 year now, and it continues to deliver tangible results. As you might remember, on last year's second quarter earnings call, I spent a lot of time discussing the different seasonal menu items we had in place, as well as a number of new value menu items. While many of these products were innovative and effective at driving sales, some of them were operational challenges in our kitchens. So a year ago, we decided that our innovation pipeline had to be more focused. This would allow us to simplify in-restaurant operations, bring more consistency to our marketing strategy and spend our media dollars more wisely in a few high-impact areas. After 1 year with this strategy in place, we are seeing positive results. We have delivered 3 consecutive quarters of positive comparable sales growth in North America, and we've also improved profitability for our franchisees. As Daniel mentioned, discipline and consistent execution of this strategy will be the key to building on this momentum as we enter into the back half of the year. During Q2, we were excited to launch 4 new sandwiches into different layers of our menu. On the premium side, we launched the BBQ Bacon WHOPPER sandwich. Guests have enjoyed this twist on America's favorite sandwich, with its fire-grilled taste, its thick cut bacon and its sweet and smoky barbecue sauce. As part of our 2 for $5 line-up, we introduced the Chicken BIG KING sandwich and the Extra Long BBQ Cheeseburger. Both of these helped to drive traffic while solidifying our strength in the large sandwich category. Finally, we introduced the Bacon Cheeseburger Deluxe into our KING DEALS value menu, a value menu that we launched just last quarter but is quickly becoming a guest favorite. Although these 4 sandwiches were introduced at different layers in our menu, they all deliver on the strategy I mentioned earlier. They are great-tasting, operationally simple and offer compelling value to our guests. We've been pleased to see the momentum we've generated through the first half of the year carry over into Q3. In July, we delivered our best comp of the year. We look forward to updating you on our Q3 sales results on our next earnings call. Turning to Slide 10. The reimaging component of our Four Pillars strategy continues to be a focus area, as it is a proven avenue for growing the top line of our restaurants. Our team continues to work hard on expediting construction and growing our remodel pipeline for the remainder of the year. As always, we will update you on our progress at year end, but we remain on track to hit our stated target of 40% of U.S. system on the modern image by the end of 2015. Moving on to operations on Slide 11. The Restaurant Excellence Visit program or REV program, which we launched at the beginning of the year, continues to be an important focus area as we pursue best-in-class operations. Our REV program is designed to complement our Coaches initiative. Our coaches continue to work with restaurant teams and managers to share best practices, while restaurant auditing is performed by outside specialists. This structure allows our coaches to focus their efforts entirely on supporting restaurant teams and managers, which we believe is the right strategy to improve consistency in system-wide operations. Auditors, on the other hand, can provide an objective and analytical assessment of vast [ph] performance so that we can benchmark across our system. Since the REV program has been in place, we've already seen tangible results. Overall, guest satisfaction scores have improved 11%, and speed of service has improved 9%. While there is still much room to improve, we believe we have the right strategy in place to bring our restaurants to best-in-class operations. Now I will turn it back to Daniel, who will give you an update on our international development.

Thanks, Alex. The last 12 months have been an active year for global development, as we now have over 13,800 locations in nearly 100 countries. Our strategy continues to be focused on opening restaurants with attractive unit economics that deliver strong, financial returns for our franchisees and partners. During the second quarter, we continued to see positive momentum in our existing markets, but we also saw great traction in some of our newer markets, such as France and India. I had the opportunity to visit one of our new restaurant openings in Marseille, France last month. This restaurant is on track to be one of our highest-grossing restaurants in all of EMEA. It gave me even more confidence that we have the right partner in place and will be able to quickly grow the BURGER KING brand in this attractive market. I also visited India last week. I spent my time touring new prospective sites, tasting new menu items and meeting some of the great team that we have on the ground there. We expect to open our first restaurant there in the near future, and I'm confident that this market will be a key growth driver for years to come. As you can see by the growing number of colors on this map, our master franchise joint venture and development model continues to be an effective way of building our brand in new and existing markets. Similar to prior years, we expect that our net restaurant growth in 2014 will be back-end weighted, with significant unit acceleration expected in Q3 and Q4. Let's now walk through the first quarter highlights for each region, starting with the U.S. and Canada on Slide 13. Alex has already talked us through many of the highlights in North America. The only point I'd like to reiterate is that our consistent marketing strategy helped us generate approximately 6% year-over-year organic adjusted EBITDA growth in the second quarter. We still have a lot of work left to do, but we're confident that we have the right strategy and innovation pipeline in place. Turning to Slide 14. EMEA delivered its 14th consecutive quarter of comparable sales growth. Performance was driven by strength in Turkey, the U.K. and Spain. In Turkey, we were excited to introduce the Gourmet Series premium line-up to complement the Double Deals promotion that continues to perform well. In the U.K., the premium ANGRY WHOPPER sandwich and the Summer BBQ promotion balanced our new King Savers value menu to help grow sales. Finally, Spain continued to perform well due to the further expansion of our popular EUROKING and KING AHORRO value platforms. In the last 12 months, EMEA has opened 346 net new restaurants, representing almost half of global net restaurant growth. Both strong energy and comparable sales growth has helped us increase total system sales by nearly 11%. Turning to Slide 15. LAC delivered its fourth consecutive quarter of comparable sales growth. Performance was driven by strength in Brazil, where the premium Picanha Steakhouse limited time offering and the WHOPPER JR. Furioso promotion helped generate strong sales growth. In Mexico, ongoing competitive pressures led to challenging sales, but our team is working hard to realign our menu architecture to help reignite sales growth going forward. LAC overall system sales grew by 14% in the quarter, driven by 159 net new restaurant openings in the last 12 months. Wrapping up on Slide 16. APAC delivered its seventh consecutive quarter of same-store sales growth, with nearly 4%. Growth was primarily led by Australia, our largest market in the region, which continues to perform well due to the new Chicken Crunch premium limited time offering. In South Korea, strength was driven by the recently introduced Hashbrown WHOPPER. Lastly, in China, we continued to deliver solid performance from a strong line-up of premium products and a refresh of our value offerings. APAC system sales grew by 14%, which was driven by 223 net new restaurants opened during the last 12 months. I'll now turn it over to Josh to review our financial results.

Thanks, Daniel. Moving now to Slide 17. I'd like to walk through our financial results for the quarter. Q2 revenue increased 6% year-over-year on an organic basis, excluding the impact of refranchising transactions and changes in foreign currency. 6% organic growth was driven by nearly 1% global comparable sales growth and over 5% net unit growth, as we've opened 682 net new units over the past 12 months. Top line growth was driven by all 4 regions, particularly EMEA, LAC and APAC, which all generated double-digit organic growth. Moving down the page, Q2 adjusted EBITDA grew even faster at 13% year-over-year on an organic basis. Strength was driven by double-digit growth across all 3 international businesses as well as solid performance in North America. We benefited from G&A leverage and greater efficiency as we continued to identify and implement savings initiatives. Management G&A in Q2 came in at approximately $40 million, which is slightly lower than we had expected, and we will likely see modestly higher G&A in the back half of the year. Finally on this slide, our adjusted net income and adjusted diluted earnings per share increased by nearly 20% and 19%, respectively, in Q2, driven by higher adjusted EBITDA, partially offset by higher share-based compensation expense, higher interest expense and higher adjusted income tax expense. Depreciation and amortization was relatively unchanged from the prior year, as we completed our transition to a fully franchised business model at the end of last year. Net interest expense increased by almost $1 million year-over-year as a result of the accretion in the balance of our noncash pay discount notes. While income taxes did increase on a nominal basis, our effective tax rate was slightly lower in Q2 compared to the prior year, due to a favorable movement in our mix of taxable income across various jurisdictions. The following page provides reconciliations to help you better understand the impact of refranchising from last year and FX on our reported revenue and adjusted EBITDA growth, which I highlighted earlier. Slide 19 underscores the attractive free cash flow generation characteristics of our business. In the year-to-date, we generated $343 million in adjusted EBITDA and $207 million of free cash flow. We also paid down $40 million of debt and paid out nearly $50 million in dividends to shareholders. As a result, our cash balance has increased from $790 million at year end to $905 million at the end of Q2. Turning to Slide 20. This consistent cash flow generation has led to steady deleveraging, bringing our leverage ratio down to 3.0x net debt-to-EBITDA for the second quarter. On Slide 21, we're excited to announce the increase of our dividend from $0.07 to $0.08 per share for the third quarter of 2014. This underscores our continued confidence in BURGER KING's business model and commitment to returning capital to shareholders. I will now turn the call back over to Daniel for closing remarks.

Thanks, Josh. We've mentioned a number of times today that the key to our second quarter success was consistency. We delivered our third consecutive quarter of comparable sales growth in the U.S. and Canada, thanks to our consistent strategy of launching fewer, more impactful products and our continued focus on the Four Pillars. We continued to have strong comparable sales in our international businesses through a well-balanced menu and promotional mix. And finally, we continued to accelerate restaurant openings. But consistency did not happen overnight. We've been working hard over the past year, and we will continue to strive to deliver. We have to keep launching operationally simple and impactful innovation in the U.S. and Canada, and we have to keep finding new sites and building new restaurants around the world. I'm confident that we have the right franchisees, the right partners and the right team members in place to execute on these goals. I look forward to updating all of you as we carry out our Q2 momentum into the back half of 2014. Thanks a lot for joining us this morning, and we're happy to open up the call for Q&A now. Operator?

[Operator Instructions] The first question comes from Nicole Miller of Piper Jaffray.

When you talk about the value menu today, can you talk to us about how you define that versus its KING DEALS starting at a $1? 2 to $5, I would imagine, is in that category. Has it changed as a percentage of sales? And then as you've made the SKU and operational efficiencies, has it changed from a margin perspective as well?

Thanks, Nicole. So just to start out, the KING DEALS value menu and the 2 for $5 promotion are 2 independent promotions, right? The KING DEALS value menu, which we launched in the beginning of the year, really focuses on price points between $1 and $1.99. And the main change that we did starting Q2 was to create a ladder approach, right, where we have products that start at $1, we have a product at $1.29, $1.49, $1.69 and $1.99. And we did that after learning with consumers that they look for different price points between $1 and $2. When we did this, we were actually able to not only simplify our operations because we have very basic, simple products in the value menu line-up, but we also increased overall units and profitability for the franchisees.

The next question comes from John Glass of Morgan Stanley.

First, you mentioned increased profitability of the franchisees. Can you quantify that, talk about either, directionally, how much more profit per store there is or index it somehow so we understand where they stand in profitability today versus history? And just as a follow-up, can you just talk about the second quarter traffic versus transactions versus mix or check in the U.S.?

Thanks, John. I'll start with the first one in relation to franchisee. We really started to address our franchisee profitability 1 year ago, as I mentioned during the call, when we really targeted simplifying our restaurant operations and looking at those SKUs that we could work better with our suppliers to reduce costs. I think all the effort that we've put in over the last 12 months really played out and are really helping to increase franchisee profitability despite some of the heavy pressures that we're getting on commodity prices, specifically when it comes to beef, right? So it's -- it involves all areas of the restaurant, including speed of service, to make sure we get more cars through the drive-through, and it's something that will not change. We're going to continue to focus on franchisee profitability for the coming months. In relation to your second question, we don't usually break up the sales between traffic and check, but we're actually very happy to see the consistency that we've been able to deliver since the beginning of the year. And there's no change in that consistency. It's an average balance between check and traffic. And because our strategy, moving forward, is very similar to what we have in place now, we believe we're going to have similar and positive results.

The next question comes from Joseph Buckley of Bank of America.

Maybe just a clarification on the last one. So in that 0.4% comp, are you saying that traffic was positive? And then a couple of other questions. Could you talk about the performance of the remodeled restaurants versus those not remodeled? Then maybe just a little bit more color on the franchisee profitability because, usually, that kind of same-store sales increase in a higher feed cost environment would pressure margins as opposed to seeing margins higher.

So let me break down those 3 questions. In relation to traffic, we usually don't open the traffic figures, so I'm going to jump immediately down to the second, which are the remodel. We're really happy to -- with all the remodel efforts we've done since we first started, right? Right now, we finished last year with 30% of the system remodeled, and we continue to see good traction. And that's very good news because we've remodeled now over 2,200 restaurants, and the overall ceiling in the numbers continues to be exactly what I shared with you during the presentation, an uplift between 10% and 15% in sales. And the franchisees are very confident that remodeling in our image is a great investment. So we expect to continue to increase and to reach our target, which is to have 40% of the system remodeled by the end of 2015. In relation to franchisee profitability, it's really one of the areas, given that we don't have control over commodity pricing, that we have a big team and target spread throughout the company to make sure that we can reduce everything that we have control over. So we're looking on everything inside the restaurant, from the paper cups to the wrappers to how we cook our products, and that's not going to stop. We're not going to stop because that's what we can control in the restaurants. Because on the commodity pricing, it's very difficult for us to be able to manage that.

The next question comes from Jeffrey Bernstein of Barclays.

Just 2 questions, the first one just on the U.S. comp. Clearly, it's not as positive and your third consecutive quarter of that. But presumably, it's not as strong as maybe you would have or anybody else would have liked or perhaps hoped for 12 months ago with what seems like an improving macro. So I'm just wondering, from your perspective, what do you think is the limiting factor, whether it's the consumer, or is it broader QSR competition, fast casual intrusion? I'm just wondering how you view it and maybe what your biggest daypart or product opportunity is because, obviously, you still have a huge gap from that AUV perspective. I'm just wondering what could be that driver. And then I had a follow-up question on cash.

Okay, sure. So Jeffrey, first of all, you know how tough the QSR industry has been over the past several months. So we're actually very happy to be able to deliver 3 consecutive quarters not only positive, but also ahead of the industry, right, which leads us to believe that we're gaining market share. The other good news that I shared during the call is that July actually turned out to be our best comp month of the year. We're actually comping a couple of points better than what we delivered in Q2, so it really makes us excited that we're going on the right direction. The products that we're putting out there have seen a lot of success. The Extra Long BBQ Cheeseburger in July performed very well. The Orange Freeze that we launched, a frozen beverage, actually is running out before expectations, so the guests really like that product. And the new value menu, as I addressed earlier, continues to deliver great value at attractive price points to our guests. So in that sense, I think our strategy will remain consistent, and I think, looking forward, we're pretty optimistic.

Got it. And then just on the cash side. I mean, you talked about, in the slides, north of $900 million in cash and leverage moving down towards 3x. So any update you can offer on the timeframe for more aggressive action in terms of -- whether it be a boost to leverage for return of cash to shareholders or refinancing? I know we've talked about that the past few quarters, but any update on the thought process would be great.

Jeff, it's Josh. Thanks for the question. As we've discussed before, we're getting closer to the first calls on our bonds and our discount notes that will come up in October of this year and then in April of 2015. So as we get closer there, we're continuing to monitor capital markets and analyze different alternatives for our capital structure. The decision that we take will ultimately -- it will depend on the market conditions at the time and what we view to be the most efficient use of our capital to create value for shareholders. So there's no real update today, but we'll continue to keep you guys updated to the extent there's more news over the next couple of quarters.

The next question comes from Jeff Farmer of Wells Fargo.

Just a quick follow-up. I think you just said July was, same-store sales, a couple points better. I'm curious if the comparisons in August and September are more or less challenging as you move through the quarter.

So we usually don't disclose that kind of information. But we're actually very happy with how the quarter started, and I think we can have one of our best quarters in the last few quarters.

The next question comes from Will Slabaugh of Stephens Inc.

I wonder if you could help us out a little bit more with the unit growth outlook for the back half of this year and then into 2015, if you could. You noted that EMEA had driven nearly half the unit growth in the past 12 months. I wonder if that's something you expect to continue. And are there other territories you would either expect to pick up or slow down in terms of unit expansion? And then one quick follow-up, if I could. At least from a high level, given that internationally is where we're seeing this unit growth, could you touch on unit economics just from a high level?

It's Daniel. Look, maybe before we talk about it this year or next year, just to put things in perspective, we're really happy with the work we've done on the international development front. We've quadrupled the pace of growth over the past few years. Only in 3 years, we've quadrupled the pace of our growth. What we've said in the past is that we're comfortable that we can continue growing at the same pace of growth that we did last year, with increasing quality. So for example, the restaurants that we opened at the -- in the fourth quarter of 2013, the sales, the profitability, they're even better than they were a year ago, than the restaurants that we opened at the end of 2012. And that's what really gets us excited. So we're confident we can continue growing at this pace, and that's before some of these other pretty exciting market opportunities are ramping up. So without that, we're pretty excited also, countries like South Africa, countries like France, now India, where the unit economics in France and the unit economics in South Africa, very encouraging. So as we see these countries begin to ramp up, that gives us increasing confidence that we can continue to increase the pace of our growth for years to come. This is a global brand that operates in nearly 100 countries, and we're excited about our ability to continue to grow it year in and year out.

The next question comes from Alvin Concepcion of Citi.

Just wanted to follow up on the international. I wonder if you could give us an update on China and if you've seen any impact from the meat suppliers and the unfavorable media there. And then secondly, just wondering if you could talk about what you're seeing at breakfast and the opportunity there, particularly what your mix was versus last year.

Yes, it's Daniel. I'll comment quickly on China, and then I'll let Alex comment on the breakfast. And we have slightly over 200 restaurants in China. We've been making great progress there. Similar to some of the peers, we did see a slowdown in traffic. But when you look at our limited scale in the market, it's really not material for us at this point. So -- and I'll let Alex take the breakfast question.

Sure. Alvin, so breakfast is one of the fastest-growing dayparts for QSR, and it has been the same with BURGER KING. So for the first half of the year, from all of our dayparts, breakfast is where we saw the highest improvement. We've focused on breakfast throughout -- and activated breakfast through the best half of first half, and we continue to see breakfast as a long-term opportunity. We're going to continue to pursue breakfast. We're known for being open for breakfast, and we have been serving breakfast for many years. So for us, it's a long-term game, and we continue to see it as the biggest opportunity in terms of daypart.

The next question comes from Keith Siegner of UBS.

Alex, sorry to ask a similar question to last quarter, but there's been some good progress in the last 3 months. I was wondering if you could talk about the digital mobile update to the U.S. with the perks programs or loyalty programs. How has that rollout been going? You've had some interesting developments. How has the customer response been? Any updates along that front would be very helpful.

Sure, Keith. Thank you for asking that question. I was really expecting someone would because we have good news. Starting at the end of August, we're going to begin to deploy our digital platform that had -- has been in test for quite a few months already. And our app has been tested in 5 or 6 markets across the country with very good results, and we have some very exciting different capabilities in the apps that go all the way from mobile couponing, as well as mobile payments and, of course, geo-targeting and all the great stuff that you can do with an app. So you can expect some news in the coming weeks as we start to deploy this in the United States.

The next question comes from David Palmer of RBC Capital Markets.

One big-picture question on the U.S. and one on Europe. And the one on U.S. is, how do you see yourselves -- to some degree, this is relevant to some of your competitors too. It seems like this whole year is like a digestion year from an innovation standpoint, and we've just not seen the pace of innovation that we've seen out of fast food players in 2014 that we've seen in the past. I think there's been a focus on profitability. There's been an easing up on dollar menus out there too. I'm wondering, after a digestion year like this, what aspect has been at the sacrifice of traffic for check and profitability. Is this something that sets the table for more rapid innovation in '15 as you think about yourselves and the industry? And that's the U.S. question. And then for Europe, this is supposed to be the year of green shoots for the Europe economy. Are you just simply -- it doesn't look like that's really happening for the European fast food market, but perhaps you can give a comment on that.

Yes. David, it's Daniel. I'll actually -- I'll take both. Look, I think we always have to find a balance between innovation and operations and driving traffic. And I'd say that the approach that we've taken, where we're going to innovate and trying to minimize operational complexity, trying to maximize guest -- a combination of guest satisfaction and franchise profitability, is really the right combination for us. So I think you're probably going to see more of the same, with increasingly strong performance as we deliver on the Four Pillars. And then in Europe and our other international markets, we continue to be really encouraged by the progress that we've made on the sales front and on the development front. Unit economics are strong around the world for the BURGER KINGs that are being developed. Same-store sales continue to grow, and it's really a function of the brand being in a different stage in many of these international markets than it is here. And we're pretty excited, and we think we have quite a long way to go.

The next question comes from Jeff Farmer of Wells Fargo.

Just a bigger-picture question, probably for Josh. But just looking forward, as you guys think about this financial model, how it plays out over the next couple of years, 2, 3, 4 years, is there any framework on the -- actually, just EBITDA framework you can point to across things like unit development, same-store sales, margins? Any high-level thoughts on how EBITDA growth is going to play out now that you're done with your refranchising?

Jeff, yes, thanks for the question. Yes, I think when we think about how we develop the business and how the financial model works going forward, we really think about the underlying business drivers. And there are a few of them, the most important of which are growing same-store sales. We need to bring more customers to the restaurant that we already have, so that's one driver, and then growing the brand around the world. As Daniel talked about, we see huge runway for the brand, both in some of the markets where we're already growing; secondly, in some of the markets where we're just starting to develop the brand, places like France and South Africa and now India; and then potentially in other countries where we don't have a big presence or are not developing very quickly today. So we see a big opportunity to drive unit growth around the world. And I'd say that's the second lever. And then I think the third big piece is on the cost side. And I think it's something that's embedded in our culture, is that we're going to continuously look for areas to find efficiencies and to operate our business in a smarter way. And so that's another area that we'll continue to be focused on over the next few years in trying to be the most efficient operator in our sector. And that's really kind of how we think about driving underlying growth in our business, and those are the big focuses for our model going forward.

We show no further questions at this time. I would like to turn the conference back over to Daniel Schwartz, Chief Executive Officer, for any closing remarks.

I just want to quickly thank everyone for joining us, and we look forward to updating all of you next quarter. And thanks for your support.

The conference has concluded. You may now disconnect your line at this time.