Q3 2026 MTY Food Group Inc Earnings Call
Speaker #1: Good morning, and welcome to the MTY Food Group 2026 third-quarter earnings conference call. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session.
Operator: Good morning, and welcome to the MTY Food Group 2026 Q3 earnings conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided for you at that time for questions. If anyone has any difficulty hearing the conference, you may press star zero for operator assistance at any time. Listeners are reminded that portions of today's discussion may contain forward-looking statements that reflect current views with respect to future events. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. For more information on MTY Food Group's risks and uncertainties related to these forward-looking statements, please refer to the company's annual information form dated 19 February 2026, which is posted on SEDAR Plus.
Speaker #1: Instructions will be provided for you at that time for questions. If anyone has any difficulty hearing the conference, you may press *0 for operator assistance at any time.
Speaker #1: Listeners are reminded that portions of today's discussion may contain forward-looking statements that reflect current views with respect to future events. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements.
Speaker #1: For more information on MTY Food Group's risks and uncertainties related to these forward-looking statements, please refer to the company's Annual Information Form dated February 19, 2026, which is posted on SEDAR Plus.
Speaker #1: The company's press release, MD&A, and financial statements were issued earlier this morning and are available on its website and on Cedar Plus. All figures presented on today's call are in Canadian dollars unless otherwise stated.
Operator: The company's press release, MD&A, and financial statements were issued earlier this morning and are available on its website and on SEDAR Plus. All figures presented on today's call are in Canadian dollars unless otherwise stated. This morning's call is being recorded on Friday, 9 October 2024 at 8:30 AM Eastern Time. I would now like to turn the call over to Mr. Eric Lefebvre, Chief Executive Officer of MTY Food Group. Please go ahead, sir.
Speaker #1: This morning's call is being recorded on Friday, October 9, 2026, at 8:30 a.m. Eastern Time. I would now like to turn the call over to Mr. Eric Lefebvre, Chief Executive Officer of MTY Food Group.
Speaker #1: Please go ahead, sir.
Speaker #2: Thank you, and good morning, everyone. Rene and I will begin today's call by going through our third-quarter results, followed by addressing the conclusion of the company's strategic review.
Eric Lefebvre: Thank you, and good morning, everyone. Renee and I will begin today's call by going through our Q3 results, followed by addressing the conclusion of the company's strategic review. Starting with our Q3 results, there was a combination of challenges and advancements over the summer. We were pleased to see same-store sales sequentially improve in Canada to essentially flat, while softer results prevailed in the US at -2.7%. The Q3 was not only impacted by persistent consumer caution, but also by the timing of Labor Day, which pushed the lucrative long weekend into Q4. In the current environment, we remain focused on driving compelling guest experiences, exciting menu innovation, and leveraging the power of digital sales to drive our banners.
Speaker #2: Starting with our third-quarter results, there was a combination of challenges and advancements over the summer. We were pleased to see same-store sales sequentially improve in Canada to essentially flat, while softer results prevailed in the U.S.
Speaker #2: At -2.7%. The third quarter was not only impacted by persistent consumer caution, but also by the timing of Labor Day, which pushed the lucrative long weekend into Q4.
Speaker #2: In the current environment, we remain focused on driving compelling guest experiences, exciting menu innovation, and leveraging the power of digital.
Speaker #3: Digital sales continue to drive our banners. Despite growing complexity in the restaurant industry, our discipline has allowed us to maintain our core franchise segment margins stable at 54%, and increased our free cash flows to shareholders by over 10% in Q3.
Eric Lefebvre: Despite growing complexity in the restaurant industry, our discipline has allowed us to maintain our core franchise segment margin stable at 54% and increased our free cash flows to shareholders by over 10% in Q3. Last quarter's performance brings our free cash flows net of rent payments per diluted share to CAD 5.57 in the last 12 months, an increase of 6.7% over the previous 12 months. The food processing, distribution, and retail segment was also able to maintain relatively stable margins despite facing challenges and timing issues on key product promotions. Although revenues for this segment were down this quarter, our brands continue to have significant growth potential in this category, and we expect results to show steady improvement in the coming quarters. Shifting to store openings, our pipeline remains robust as demand for some of our concepts from new and existing franchisees remains strong.
Speaker #3: Last quarter’s performance brings our free cash flows, net of rent payments, per diluted share to $5.57 in the last 12 months—an increase of 6.7% over the previous 12 months.
Speaker #3: The Food Processing, Distribution, and Retail segment was also able to maintain relatively stable margins, despite facing challenges and timing issues on key product promotions.
Speaker #3: Although revenues for this segment were down this quarter, our brands continue to have significant growth potential in this category, and we expect results to show steady improvement in the coming quarters.
Speaker #3: Shifting to store openings, our pipeline remains robust as demand for some of our concepts from new and existing franchisees remains strong. Twenty-seven new stores that were slated for Q3 have been pushed into Q4 as a result of various uncontrollable delays, resulting in negative net openings in the third quarter.
Eric Lefebvre: 27 new stores that were slated for Q3 have been pushed into Q4 as a result of various uncontrollable delays, resulting in negative net openings in the Q3. Therefore, we continue to expect a healthy level of net new store openings by next quarter and in subsequent periods. Moving to corporate stores, our decision to exit numerous underperforming locations is well underway, and we expect the bulk of these one-time costs to be reflected over the next two quarters. The associated benefits will gradually follow, starting next quarter. We've also identified an additional seven stores for closure in addition to the 68 previously announced, bringing the total to 75 stores. Our cost estimate remains the same as before, despite the additional locations identified for closure. The rationalization of corporate store marks an important step for the company in our pursuit of value creation, growth, and taking decisive action.
Speaker #3: Therefore, we continue to expect a healthy level of net new store openings by next quarter, and in subsequent periods. Moving to corporate stores, our decision to exit numerous underperforming locations is well underway, and we expect the bulk of these one-time costs to be reflected over the next two quarters.
Speaker #3: The associated benefits will gradually follow, starting next quarter. We've also identified an additional seven stores for net foreclosure, in addition to the sixty-eight previously announced, bringing the total to seventy-five stores.
Speaker #3: Our cost estimate remains the same as before, despite the additional locations identified for foreclosure. The rationalization of corporate stores marks an important step for the company in our pursuit of value creation, growth, and taking decisive action.
Speaker #3: In the past 12 months, we've shown our commitment to creating shareholder value, and I'm excited by the many opportunities before us.
Eric Lefebvre: In the past 12 months, we've shown our commitment to creating shareholder value, and I'm excited by the many opportunities before us. With that, I'll turn it over to Renee to discuss the financials. Renee?
Speaker #4: With that, I'll turn it over to Renée to discuss the financials. Renée? Thank you, Eric, and good morning, everyone. Before we begin, just a reminder that we transitioned to a 52-week reporting basis ending on the Sunday closest to quarter end, and in this case, it's August 30.
[Company Representative] (MTY Food Group): Thank you, Eric, and good morning, everyone. Before we begin, just a reminder that we transitioned to a 52-week reporting basis ending on the Sunday closest to quarter end, and in this case, it's 30 August. Therefore, there is one day less in actual results compared to the prior year. Normalized adjusted EBITDA came in at CAD 60.8 million during the 13-week period, a decrease of CAD 13.2 million due to a reduction in profitability for the corporate store segment. Corporate store segment profits were negatively impacted by a combination of weaker sales, a CAD 4.6 million delta in non-recurring employee retention credits that we received last year, as well as CAD 0.5 million in lease exit costs. We remain disciplined in our analysis of corporate stores, identifying those that are worth reinvesting in and others that are better suited for closure.
Speaker #4: Therefore, there is one day less in actual results compared to the prior year. Normalized adjusted EBITDA came in at $60.8 million during the 13-week period, a decrease of $13.2 million due to a reduction in profitability for the corporate store segment.
Speaker #4: Corporate store segment profits were negatively impacted by a combination of weaker sales, a $4.6 million delta in non-recurring employee retention credits that we received last year, as well as $0.5 million in lease exit costs.
Speaker #4: We remain disciplined in our analysis of corporate stores, identifying those that are worth reinvesting in and others that are better suited for closure. We anticipate significant improvements in the segment next year, including an estimated $2.5 million benefit directly attributable to the closures of underperforming locations.
[Company Representative] (MTY Food Group): We anticipate significant improvements in the segment next year, including an estimated CAD 2.5 million benefit directly attributable to the closures of underperforming locations. At the end of Q3, we had already closed 50 of the 75 locations identified for closure. Turning to our bread and butter, the franchise segment, revenue increased 1.6% to CAD 102.4 million for the quarter. The lift in revenues came from the US and international segment, with increases in recurring revenue streams and higher sales related to our gift card program. Consolidated normalized adjusted EBITDA for the segment improved by 1%, while margins held steady at 54% as we offset wage inflation by improved cost efficiency in our controllable expenses. Moving to the food processing, distribution, and retail segment, revenues decreased by 12.6% to CAD 41.6 million, primarily due to delays in promotional activities.
Speaker #4: At the end of Q3, we had already closed 50 of the 75 locations identified for closure. Turning to our bread and butter, the franchise segment, revenue increased 1.6% to $102.4 million for the quarter.
Speaker #4: The lift in revenues came from the U.S. and international segments, with increases in recurring revenue streams and higher sales related to our gift card program.
Speaker #4: Consolidated normalized adjusted EBITDA for the segment improved by 1%, while margins held steady at 54%, as we offset wage inflation through improved cost efficiency in our controllable expenses.
Speaker #4: Moving to the food processing, distribution, and retail segment, revenues decreased by 12.6% to $41.6 million, primarily due to delays in promotional activities. MTY has launched several new, exciting products in the segment, and we expect a recovery in sales momentum by next year.
[Company Representative] (MTY Food Group): MTY has launched several new exciting products in this segment, and we expect a recovery in sales momentum by next year. Normalized adjusted EBITDA decreased by CAD 0.7 million, broadly in line with the decline in revenues as operating expenses remain closely aligned with sales levels. Despite the decrease, normalized adjusted EBITDA margins improved to 11% compared to 10% in the prior year. Digital sales totaled CAD 279.2 million this quarter, an increase of 0.5%, excluding the impact of foreign exchange. The sales channel represented 19.8% of total sales in Q3, up from 19.3% last year. We continue to see significant potential in Canada to expand our market share in digital sales. In terms of net income, we saw an increase of 5.9% in adjusted earnings per share in Q3, reaching CAD 1.26 per share, primarily due to foreign exchange and lower income tax expenses.
Speaker #4: Normalized adjusted EBITDA decreased by $0.7 million, broadly in line with the decline in revenues, as operating expenses remain closely aligned with sales levels. Despite the decrease, normalized adjusted EBITDA margins improved to 11% compared to 10% in the prior year.
Speaker #4: Digital sales totaled $279.2 million this quarter, an increase of 0.5% excluding the impact of foreign exchange. This sales channel represented 19.8% of total sales in Q3, up from 19.3% last year.
Speaker #4: We continue to see significant potential in Canada to expand our market share in digital sales. In terms of net income, we saw an increase of 5.9% in adjusted earnings per share in Q3, reaching $1.26 per share, primarily due to foreign exchange and lower income tax expenses.
Speaker #4: We continue to generate strong free cash flows, net of lease payments, with an increase of 10.3%, primarily due to lower taxes paid and improved working capital movement compared to the prior year.
[Company Representative] (MTY Food Group): We continue to generate strong free cash flows net of lease payments with an increase of 10.3%, primarily due to lower taxes paid and improved working capital movement compared to prior year, as well as higher proceeds on disposal of corporate stores. Moving to our balance sheet, we ended the quarter with net debt of CAD 515.1 million and have repaid over CAD 20 million so far in Q4. This brings our net debt to EBITDA ratio to approximately 1.9 times. I will turn the call over to Eric to discuss the conclusion of our strategic review.
Speaker #4: as well as higher proceeds on disposal of corporate stores. Moving to our balance sheet, we ended the quarter with net debt of $515.1 million and have repaid over $20 million so far in Q4.
Speaker #4: This brings our net debt-to-EBITDA ratio to approximately 1.9 times. And with that, I'll turn the call over to Eric Lefebvre to discuss the conclusion of our strategic review.
Speaker #3: As mentioned in our press release dated November 17, 2025, the company undertook a thorough and comprehensive review of strategic options to determine the best path forward to maximize shareholder and stakeholder value.
Eric Lefebvre: As mentioned in our press release dated 17 November 2025, the company undertook a thorough and comprehensive review of strategic options to determine the best path forward to maximize shareholder and stakeholder value. Throughout the process, the company engaged with a range of interested parties and considered a broad set of alternatives. The process generated strong interest among potential investors and reaffirmed the strength, resilience, and strategic value of MTY's platform. Following this comprehensive review, the special committee of independent directors and the board of directors have unanimously concluded that the most compelling path forward to drive shareholder value is to accelerate the evolution of MTY's current strategic plan with a sharpened focus.
Speaker #3: Throughout the process, the company engaged with a range of interested parties and considered a broad set of alternatives. The process generated strong interest among potential investors and reaffirmed the strength, resilience, and strategic value of MTY's platform.
Speaker #3: Following this comprehensive review, the Special Committee of Independent Directors and the Board of Directors have unanimously concluded that the most compelling path forward to drive shareholder value is to accelerate the evolution of MTY's current strategic plan.
Speaker #4: With a sharpened focus. I'm sorry to interrupt. Can we please confirm that people can hear the call? I've just received a note that they can only hear the music.
[Company Representative] (MTY Food Group): I am sorry to interrupt. Can we please confirm that people can hear the call? I have just received a note that they can only hear the music. Operator?
Speaker #4: Operator? We are live.
Operator: We are live.
Speaker #3: Okay. The company's proposed actions in the short term will include increasing our quarterly dividend to $0.50, restoring the Normal Course Issuer Bid, and evaluating the potential for a Substantial Issuer Bid.
[Company Representative] (MTY Food Group): Okay.
Eric Lefebvre: The company's proposed actions in the short term will include increasing our quarterly dividend to CAD 0.50, restoring the normal course issuer bid, and evaluating the potential for a substantial issuer bid. MTY will also work to optimize its portfolio of brands and intends to revert to its asset-light franchising model, in which there is a minimal number of corporate locations. All functions will be evaluated in light of the current and future plans, with the intention to streamline and generate operational efficiencies. These proposed actions reflect the board and management's confidence in MTY's underlying business and its disciplined approach to capital allocation. While mergers and acquisitions are part of MTY's DNA, the board of directors believes the best opportunity available today is MTY itself.
Speaker #3: MTY will also work to optimize its portfolio of brands and intends to revert to its asset-light franchising model, in which there is a minimal number of corporate locations.
Speaker #3: All functions will be evaluated in light of the current and future plans, with the intention to streamline and generate operational efficiencies. These proposed actions reflect the Board and management's confidence in MTY's underlying business and its disciplined approach to capital allocation.
Speaker #3: While mergers and acquisitions are part of MTY's DNA, the Board of Directors believes the best opportunity available today is MTY itself. Few acquisition targets offer the value and quality that MTY does, so for the moment, the company will focus on returning capital directly to shareholders by buying back MTY's own shares for cancellation and paying an increased dividend.
Eric Lefebvre: Few acquisition targets offer the value and quality that MTY does, so for the moment, the company will focus on returning capital directly to shareholders by buying back MTY's own shares for cancellation and paying an increased dividend. MTY is at an inflection point, well-positioned to harvest the benefits of the investment made over the last two years in our new ERP, which was delivered on time and on budget, as well as in our data infrastructure and systems architecture. We have also taken decisive action to strengthen our corporate restaurant portfolio and have begun franchising strong-performing restaurants, continuing our evolution towards the pure-play asset-light franchisor that has long been the foundation of our success. Our balance sheet is healthy, our cash generation remains strong, and we are entering this next phase with the discipline and focus needed to create lasting value. With that, we will now open the lines for questions. Operator?
Speaker #3: MTY is at an inflection point, well positioned to harvest the benefits of the investments made over the last two years in our new ERP, which was delivered on time and on budget, as well as in our data infrastructure and systems architecture.
Speaker #3: We've also taken decisive action to strengthen our corporate restaurant portfolio and have begun franchising strong-performing restaurants, continuing our evolution toward the pure-play, asset-light franchisor that has long been the foundation of our success.
Speaker #3: Our balance sheet is healthy, our cash generation remains strong, and we're entering this next phase with the discipline and focus needed to create lasting value.
Speaker #3: With that, we'll now open the lines for questions. Operator? Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star then the number 1 on your telephone keypad. If you would like to withdraw a question, please press
Operator: Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star then the number 1 on your telephone keypad. If you would like to withdraw a question, please press star then the number 2. Again, that will be star then the number 1 on your telephone keypad. We have our first question. It comes from Vishal Shreedhar from National Bank. Please go ahead.
Speaker #4: Press star, then the number 2. Again, that'll be star, then the number 1 on your telephone keypad.
Speaker #5: We have our first question. It comes from Vishal Sridhar at National Bank. Please go ahead.
Speaker #6: Hi, thanks for taking my questions. Just on the standalone plan and the strategic initiatives announced, can you give us some more concrete data points on how we should evaluate management and how much value that should create, say, over the next 12 to 18 months?
Vishal Shreedhar: Hi. Thanks for taking my questions. Just on the standalone plan and the strategic initiatives announced, can you give us some more concrete data points on how we should evaluate management and how much value that should create, say, over the next 12 to 18 months? What specifically made the standalone plan more compelling to the board, and what milestones or financial metrics should we evaluate over the next 12 to 18 months to judge whether the plan is successful and on track?
Speaker #6: What specifically made the standalone plan more compelling to the board? And what milestones or financial metrics should we evaluate over the next 12 to 18 months to judge whether the plan is successful and on track?
Speaker #3: Yeah, there's going to be numerous different initiatives going on, as you can imagine. But, you know, one of the things we want to accomplish is reduce the corporate store portfolio and go back to being a pure-play franchisor like we used to be, with maybe 1% of our stores being corporate.
Eric Lefebvre: Yeah. There's going to be numerous different initiatives going on, as you can imagine. But one of the things we want to accomplish is reduce the corporate store portfolio and go back to being a pure-play franchisor like we used to be, with maybe 1% of our stores being corporate. That's certainly one thing that we're trying to accomplish here. That's going to simplify our operations greatly. Hopefully with that, we'll be able to continue to have very strong margins for franchising, have lower weight of corporate stores, and do better on our retail operations and manufacturing. Then there's a number of different things that will be happening. I can't necessarily give you a list of all the initiatives we're going to have. But there's certainly added emphasis on evaluating each one of our brands and trying to realize the potential of our brands.
Speaker #3: So that's certainly one thing that we're trying to accomplish here, and that's going to simplify our operations greatly. Hopefully, with that, we'll be able to continue to have very strong margins for franchising, have a lower weight of corporate stores, and do better on our retail operations and manufacturing.
Speaker #3: And then, you know, there are a number of different things that will be happening. I can't necessarily give you a list of all the initiatives we're going to have, but there's certainly added emphasis on evaluating each one of our brands and trying to realize the potential of our brands.
Speaker #3: And if we see that some brands would be better in somebody—someone else's hands, then maybe we'll need to take action on that as well.
Eric Lefebvre: If we see that some brands would be better in someone else's hands, then maybe we'll need to take action on that as well. So there's a number of different things. I can't necessarily point you to an exact figure, but one thing for sure is that we want to go back to growth in general, which is something that we've been lacking. We had a really good period following COVID. The years 2022, 2023 were very strong, and we've been declining last year and this year. So, restoring a healthy consolidated growth in EBITDA and free cash flows in general, and with all the metrics that are required to get there, is the main objective here. I think, if you want to use one main metric is we need to return to growth.
Speaker #3: So, there's a number of different things. I can't necessarily point you to an exact figure, but one thing for sure is that we want to go back to growth in general, which is something that we've been lacking.
Speaker #3: You know, we had a really good period following COVID. The years '22 and '23 were very strong, and we've been declining last year and this year.
Speaker #3: So, you know, restoring healthy, consolidated growth in EBITDA and free cash flows, in general, with all the metrics that are required to get there, is the main objective here.
Speaker #3: So I think, you know, if you want to use one main metric, we need to return to growth.
Speaker #6: Okay, with respect to the brands that you'll evaluate outside of corporate stores—the corporate stores that you're eliminating, those are underperforming stores—but the other brands, is everything on the table?
Vishal Shreedhar: Okay. With respect to the brands that you'll evaluate outside of corporate stores, the corporate stores that you're eliminating, those are underperforming stores. But the other brands, is everything on the table, for instance, some of your stronger performing brands, which may command a high multiple, but if you remove those, it will place pressure on the residual business. Should we consider some of your higher performing brands up for sale as well, or are you mainly considering underperforming brands?
Speaker #6: For instance, some of your stronger performing brands, which may command a high multiple, but if you remove those, it will place pressure on the residual business.
Speaker #6: Should we consider some of your higher-performing brands up for sale as well, or are you mainly considering underperforming brands? Well,
Eric Lefebvre: Well, the goal here is not to sell the crown jewels, for sure. Everything is for sale if the price is right, I would say that. But there's no strong desire to divest of good brands. Every brand will need to be evaluated for its potential and for the plan we have to make it grow. The brands we might decide that are no longer relevant might not necessarily be the underperforming brands, but it might be brands for which we don't have plans, or we can't come up with value creation for certain brands. But yeah, I would expect that more underperforming brands will be discussed than the top brands that are performing well.
Speaker #3: You know, the goal here is not to sell the crown jewels, for sure. Everything is for sale if the price is right, I would say that.
Speaker #3: But, you know, there's no strong desire to divest of good brands, the brands that that every brand will need to be evaluated for its potential and for the plan we have to make it grow.
Speaker #3: And the brands we might decide that are no longer relevant might not necessarily be the underperforming brands, but it might be brands for which we don't have plans, or we can't come up with value creation for certain brands.
Speaker #3: But yeah, I would expect that more underperforming brands will be discussed than the top brands that are performing well.
Speaker #6: Okay, and with respect to the corporate store EBITDA, it was a bit lighter than we would have otherwise anticipated. I understand there were some items in there, which were disclosed in the discussion off the top, but nonetheless, I would have anticipated some benefit from the closures that you had implemented.
Vishal Shreedhar: Okay, and with respect to the corporate store EBITDA, it was a bit lighter than we would have otherwise anticipated. I understand there were some items in there which were disclosed in the discussion off the top. Nonetheless, I would have anticipated some benefit from the closures that you had implemented. Can you talk about what benefit you are seeing in that CAD 10 million-ish number that you talked about previously? Is that still something we should use for the benefit that we should expect from the closures?
Speaker #6: So, can you talk about what benefit you're seeing in that $10 million-ish number that you talked about previously? Is that still something we should use for the benefit that we should expect?
Speaker #6: from the closures?
Speaker #3: Yeah, it's still the right number. I mean, the closures we had during the quarter all happened towards the end of the quarter. So we— and Q3 is a weak quarter for most of the stores that we want to close.
Eric Lefebvre: Yeah. It is still the right number. I mean, the closures we had during the quarter all happened towards the end of the quarter. Q3 is a weak quarter for most of their stores that we want to close, so we did sustain the losses and the exit costs for some of these stores. So there was added pressure from these locations. The benefit will start trickling in next quarter, and probably more into 2027. But yeah, just in this quarter, the stores that were closed and slated for closure lost CAD 2.5 million plus the exit cost. So, the figures that were provided are still valid figures.
Speaker #3: So, we did sustain the losses and the exit costs for some of these stores. So there was added pressure from these locations. The benefit will start trickling in next quarter, and probably more into '27.
Speaker #3: But yeah, just in this quarter, the stores that were closed and slated for closure lost $2.5 million, plus the exit costs. The figures that were provided are still valid figures.
Speaker #3: Okay, I'll circle back. Thank you.
Vishal Shreedhar: Okay. I will circle back. Thank you.
Speaker #5: Your next question comes from Jan Zambara from Scotiabank. Please go ahead.
Operator: Your next question comes from John Zamparo from Scotiabank. Please go ahead.
Speaker #3: Thank you. Good morning. As part of the comments related to the conclusion of the strategic review, you said you'd potentially explore
John Zamparo: Thank you. Good morning. As part of the comments related to the conclusion of the strategic review, you said you would potentially explore an SIB. I wonder what factors do you or the board consider at this point when looking to do one?
Speaker #7: An SIB, and I wonder what factors you or the board consider at this point when looking to do one?
Speaker #3: Yeah, we're motivated to do an SIB. We just need to go through all the regulatory steps to get there, but we're certainly motivated to do an SIB.
Eric Lefebvre: Yeah, we are motivated to do an SIB. We just need to go through all the regulatory steps to get there. We are certainly motivated to do an SIB, so more likely than not.
Speaker #3: So, you know, more likely than not.
Speaker #7: Understood. Okay. And then, following up on the asset-light or franchising mix topic, it sounds like you do plan to refranchise additional stores. I wonder, how quickly should we expect that to happen?
John Zamparo: Understood. Okay. Following up on the asset-light or franchising mix topic, it sounds like you do plan to refranchise additional stores. I wonder how quickly should we expect that to happen? Does that require franchise agreements concluding, or if franchisees wish to do that, can you perhaps do that in 2027?
Speaker #7: Does that require franchise agreements concluding, or if franchisees wish to do that, can you perhaps do that in 2027?
Speaker #3: Yeah, we've already started, and it does take time because we—it's not a fire sale process. We're not going to give the stores away.
Eric Lefebvre: Yeah. We have already started. It does take time because it is not a fire sale process. We are not going to give the stores away. This is good valid EBITDA that we are selling. It is not like we want to give it away. We will find good franchisees to put the stores in good hands where they can perform, and make sure that our network is healthy. Again, we want to reduce that number of corporate stores, but we will do it systematically with the right valuation for the stores. It does require to have an asset purchase agreement when the franchisees take over the stores, and it does require franchise agreements to be drafted. Disclosure needs to be done in the disclosure provinces and jurisdictions in the US. It is a process that takes some time.
Speaker #3: This is good, valid EBITDA that we're selling, so it's not like we want to give it away. We'll find good franchisees to put the stores in good hands where they can perform and make sure that our network is healthy.
Speaker #3: So again, we want to reduce that number of corporate stores, but we'll do it systematically, with the right valuation for the stores. It does require having an asset purchase agreement when the franchisees take over the stores, and it does require franchise agreements to be drafted, disclosure.
Speaker #3: This needs to be done in the disclosure provinces and jurisdictions in the US, so it's a process that takes some time. But again, we've already started, so the wheels are turning. We just franchised our first two Sauce Loca locations, for example.
Eric Lefebvre: But again, we have started already, so the wheels are turning, and we just franchised our first two Sauce Pizza & Wine locations, for example. That network was fully corporate. So we are really starting to do more franchising, and we should expect the pace to accelerate.
Speaker #3: That network was fully corporate. So we're really starting to do more franchising, and we should expect the pace to accelerate.
Speaker #7: Okay, thank you for that. I'll add one last question, also related to the strategic review: the optimization plans for your brand portfolio. You commented a bit on this.
John Zamparo: Okay. Thank you for that. I will add one last one, also related to the strategic review. The optimization plans for your brand portfolio. You commented a bit on this. I wonder if you could elaborate. It sounds like it is perhaps some mix of asset sales if you get bids that you like, but potentially you would also transfer some brands or franchisees would open different brands upon franchise expiration. I wonder how we interpret that. Ultimately, it sounds like you want to get to a lower brand count, but I wonder what the likeliest path is to get there near term.
Speaker #7: I wonder if you could elaborate. It sounds like it's perhaps some mix of asset sales if you get bids that you like, but potentially you'd also transfer some brands, or franchisees would open different brands upon franchise expiration.
Speaker #7: I wonder how we interpret that. Ultimately, it sounds like you want to get to a lower brand count, but I wonder what the likeliest path is to get there in the near term.
Speaker #3: Yeah, well, the attrition of brands happens—it happens naturally. Every year, there's, you know, four, five, six brands that disappear by attrition, where we convert them into stronger concepts.
Eric Lefebvre: Well, the attrition of brands happens naturally. Every year there is four, five, six brands that disappear by attrition, where we convert into stronger concepts. So that happens naturally every year. So we do not need to advertise that our number of brands goes down naturally. So that is just normal. For the other brands, where we have franchise agreements, we have a duty to our franchisees to do our best with the brand, to try to help them as much as possible with their brand, with their operations, with their marketing, and try to help them make money as much as possible. So it is not like we can terminate a brand unilaterally and decide that we no longer operate that brand. We just need to respect our commitments to our franchisees that are in these franchise agreements.
Speaker #3: So that happens naturally every year, so we don't need to advertise that. Our number of brands goes down naturally, so that's just normal. And for the other brands, where we have franchise agreements, we have a duty to our franchisees to do our best with the brand—to try to help them as much as possible with their brand, with their operations, with the marketing—and try to help them make money as much as possible.
Speaker #3: So it's not like we can terminate a brand unilaterally and decide that we no longer operate that brand. We just need to respect our commitments to our franchisees that are in these franchise agreements.
Speaker #3: So it's a review that's going to happen, which brands are slated for natural extension—extinction—but also which brands might be better in somebody else's hands.
Eric Lefebvre: So it is a review that is going to happen, which brands are slated for natural extinction, but also which brands might be better in somebody else's hands. Again, it is not going to be a fire sale process. Some underperforming brands might have a bright future and we have turned around a number of brands in the past. So if we have a plan and if we think that we can do better than we are doing now, we are probably going to retain these brands. But there are brands out there that maybe would be more valuable in somebody else's hands, and we are going to have to review that carefully. I have nothing to announce at the moment in terms of which brands that would represent, but it is certainly a review that is happening.
Speaker #3: Again, it's not going to be a fire sale process. Some underperforming brands might have a bright future, and we've turned around a number of brands in the past.
Speaker #3: So, if we have a plan, and if we think that we can do better than we're doing now, we're probably going to retain these brands.
Speaker #3: But there are brands out there that maybe would be more valuable in somebody else's hands, and we're going to have to review that carefully.
Speaker #3: And, you know, I have nothing to announce at the moment in terms of which brands that would represent, but it's certainly a review that's happening.
Speaker #7: Got it. Okay, thank you for that. I'll pass it on.
John Zamparo: Got it. Okay, thank you for that. I will pass it on.
Speaker #5: Your next question comes from Cheryl Zhang from TD Cowen. Please go ahead.
Operator: Your next question comes from Sherry Zhang from TD Cowen. Please go ahead.
Speaker #4: Good morning, Eric. Thanks for taking our questions. Maybe let's focus on the quarter a little bit. On the same-store sales, Canada was doing better than the U.S.
Sherry Zhang: Good morning, Eric. Thanks for taking our questions. Maybe focus on the quarter a little bit. On the same store sales, Canada was doing better than the US. Wonder if you can elaborate on the difference there and what are you seeing in terms of each market and consumer behavior?
Speaker #4: I wonder if you can elaborate on the difference there. And what are you seeing in terms of each market and consumer behavior?
Speaker #3: Yeah, yeah, Canada in general is doing well. You know, consumers are very resilient, and I guess our brand portfolio is relevant for today's market.
Eric Lefebvre: Canada in general is doing well. Consumers are very resilient. I guess our brand portfolio is relevant for today's market. We have brands, obviously, that are performing better than others, but on a consolidated basis, we are not doing as good as we would like to be, and we are still short of our expectations, but we are doing better. In the US, it is a little bit more choppy. We have good periods followed by bad periods that are a little bit more difficult to explain. But the vast majority of our brands in the US have had a rough quarter in Q3. Even our top brands suffered to a certain extent. So the market is a little bit different. The consumer seems to be a little bit more volatile and unpredictable.
Speaker #3: We have brands, obviously, that are performing better than others. But on a consolidated basis, we're not doing as well as we'd like to be, and we're still short of our expectations. However, we're doing better.
Speaker #3: In the U.S., it's a little bit more choppy. We have good periods followed by bad periods that are a little bit more difficult to explain.
Speaker #3: But the vast majority of our brands in the U.S. have had a rough quarter in Q3, and even our top brands suffered to a certain extent.
Speaker #3: So the market is a little bit different. The consumer seems to be a little bit more volatile and unpredictable. So we're trying to address that, and we're trying to make our offers relevant for today's environment as much as possible in all of our brands.
Eric Lefebvre: So we are trying to address that, and we are trying to make our offers relevant for today's environment as much as possible in all of our brands. I guess that requires a little bit more work at the moment.
Speaker #3: And I guess that requires a little bit more work at the moment.
Speaker #4: Okay, great. Any early read on sales trends so far in Q4?
Sherry Zhang: All right, great. Any early reads on the sales trends so far in Q4?
Speaker #3: Yeah, it's a little bit more of the same. Canada had—well, Labor Day is a strong weekend for most of our brands, so we had a really good start to September.
Eric Lefebvre: Well, it is a little bit more of the same. Canada had a. Labor Day is a strong weekend for most of our brands, so we had a really good start of September for both Canada and US, just because the shift in Labor Day is a real thing, and it does impact our sales quite materially. In Canada, most of September was good, so followed on the trend of Q3. In the US, the last two weeks of September were a little bit more difficult. So again, following on the trend we see in Q3.
Speaker #3: For both Canada and the U.S., just because, you know, the shift in Labor Day is a real thing and it does impact our sales quite materially.
Speaker #3: In Canada, most of September was good, so it followed the trend of Q3. And in the US, the last two weeks of September were a little bit more difficult.
Speaker #3: So again, following the trend we see in Q3.
Speaker #4: Okay, thank you. And maybe just one last question before I requeue. Regarding store openings, can you elaborate on or update us about the pipeline for new openings in Q4 and 2027?
Sherry Zhang: Okay, thank you. Maybe just last one before I let you. So on store openings, can you elaborate on or update us on the pipeline for the new openings in Q4 in 2027? What are the biggest constraints to new openings today? Is it permits, site availability, or elevated construction costs? Any color there will be helpful.
Speaker #4: And what are the biggest constraints in your openings today? Is it permits, site availability, or elevated construction costs? Any color there would be helpful.
Speaker #3: Yeah, permits are still a challenge, and, you know, inspections, pre-opening inspections are also a challenge. So we're seeing that pretty much everywhere. You know, cost of construction, I think, is elevated, but it's not more elevated than it was before.
Eric Lefebvre: Yeah. Permits are still a challenge and pre-opening inspections are also a challenge. We are seeing that pretty much everywhere. Cost of construction, I think, is elevated, but it is not more elevated than it was before. Just a combination of different factors led to 27 stores being pushed from Q3 to Q4, where we were really confident they would open in Q3. That gives me a really good hope that Q4 should be probably our best quarter ever in terms of number of store openings. We are pretty ambitious. The pipeline is still very strong. The environment is complicated, but we have a really good, solid pipeline of stores that are set to open in Q4. We have identified most of the stores that need to open in 2027 as well, and 2027 should be strong as well. We are pretty bullish on that.
Speaker #3: Just a combination of different factors led to, you know, 27 stores being pushed from Q3 to Q4, where we were really confident they'd open in Q3.
Speaker #3: And that gives me really good hope that Q4 should probably be our best quarter ever in terms of number of store openings. So we're pretty ambitious.
Speaker #3: The pipeline is still very strong. The environment is complicated, but we have a really good, solid pipeline of stores that are set to open in Q4.
Speaker #3: And, you know, we have identified most of the stores that need to open in '27 as well, and '27 should be strong as well.
Speaker #3: So we're pretty bullish on that. Awesome. Thank you, Arukil.
Sherry Zhang: Awesome. Thank you. I will let you.
Speaker #5: Again, if you would like to ask a question, please press star, then the number 1 on your telephone keypad. Your next question comes from Michael Glenn at Raymond James.
Operator: Again, if you would like to ask a question, please press star then the number 1 on your telephone keypad. Your next question comes from Michael Glen from Raymond James. Please go ahead.
Speaker #5: Please go ahead.
Speaker #3: Hey, good morning, Eric. Can you maybe frame for us...
Michael Glen: Hey, good morning. Eric, can you maybe frame for us how you think about the return on capital proposition from reinvesting some of MTY's available capital into some of the brands versus pursuing an SIB?
Speaker #6: how you think about
Speaker #7: Can you discuss the return on capital proposition from reinvesting some of MTY's available capital into some of the brands versus pursuing an SIB?
Speaker #3: I think one doesn't necessarily go against the other. I don't think we need to choose between one or the other. I think we can do both.
Eric Lefebvre: I think one doesn't necessarily go against the other. I don't think we need to choose between one or the other. I think we can do both. Again, we haven't yet determined the amount of the SIB if we're going to do one. But yeah, I don't think we need to put these two in contradiction. I think we can do both, and we will do both. As you know, we're going to have a proper return on both alternatives.
Speaker #3: And again, we haven't yet determined the amount of the SIB, if we're going to do one. But yeah, I don't think we need to put these two in contradiction.
Speaker #3: I think we can do both. And we will do both, as, you know, we're going to have proper return on both alternatives.
Speaker #7: And have you then made a decision, or have you come to the conclusion that MTY does need to increase its investment in some of the brands, which could mean a higher level of CapEx for the company?
Michael Glen: Have you then made a decision or have you come to the conclusion that MTY does need to increase its investment in some of the brands, which could mean a higher level of CapEx for the company?
Speaker #3: No, we're—even if we invest in our brands, it's not going to be in the form of CapEx. We're not going to build new stores ourselves.
Eric Lefebvre: No. Even if we invest in our brands, it's not going to be in the form of CapEx. We're not going to build new stores ourselves. If we invest in our brands, it's going to be from the P&L money, not from CapEx. We don't expect that we're going to have a more elevated expense item in investing in our brands. We might reshuffle some budgets. We might rework the way we do certain things. We might prioritize certain brands maybe over a more widespread type of expenditures. But we don't expect that we're going to increase our expenses.
Speaker #3: So if we invest in our brands, it's going to be it's going to be from, from the P&L money, not from, from, not from CapEx.
Speaker #3: And we don't expect that we're going to have a more elevated expense item in investing in our brands. We might reshuffle some budgets, and we might rework the way we do certain things.
Speaker #3: We might prioritize certain brands, maybe over, you know, more widespread types of expenditures, but we don't expect that we're going to increase our expenses.
Speaker #3: And then how do we
Michael Glen: How do we think about an SIB, like maybe update on where the view of the appropriate leverage for MTY is?
Speaker #7: Think about an SIB, like maybe an update on where the view of the appropriate leverage for MTY is.
Speaker #3: Yeah, right now we're in a really good place in terms of leverage. We've paid down a lot of debt. We've paid down an additional $26 million since the beginning of Q4.
Eric Lefebvre: Yeah. Right now we are in a really good place in terms of leverage. We have paid down a lot of debt. We have paid down an additional CAD 26 million since the beginning of Q4. So our leverage is in a really good place. We are comfortable with that, and we can certainly increase our leverage to, we are comfortable up to 3x EBITDA. I think there is really no problem. I am not saying we are going to create an SIB that would get us there, but I am saying we are in a place where, no matter how big the size of the SIB is going to be, we are not going to put too much leverage on the company that would make it complicated.
Speaker #3: So our leverage is in a really good place. We're comfortable with that, and we can certainly increase our leverage. We're comfortable up to 3 times EBITDA.
Speaker #3: I think there really is no problem. I'm not saying we're going to create an SIB that would get us there, but I'm saying we're in a place where, you know, no matter how big the size of the SIB is going to be, we're not going to put too much leverage on the company that would make it complicated.
Speaker #8: Okay, and I guess one more for me. Of the corporate stores that you're—like, I know there's this kind of revolving set of corporate stores that occurs because there are franchisees that naturally exit the system and you need to take those on.
Michael Glen: Okay. I guess one more for me. Of the corporate stores that I know there is this kind of revolving set of corporate stores that occurs because there are franchisees that naturally exit the system, and you need to take those on. So, the stores that you are closing right now, are those part of that process, or were those more stores that you bought yourselves with the intention of running?
Speaker #8: So, are those—the stores that you're closing right now—are those part of that process, or were those more stores that you bought yourselves with the intention of running?
Speaker #3: You know, they were mostly repossessed stores—the ones that we closed. There were a few that resulted from acquisitions over the past few years, but for the most part, they were stores that were repossessed.
Eric Lefebvre: They were mostly repossessed stores, the ones that we closed. There were a few that resulted from acquisitions over the past few years, but for the most part, they were stores that were repossessed. For example, the Papa Murphy's portfolio of stores that we took over two years ago, with the hope of being able to turn them around. We came to the realization that maybe the brand was a little bit more damaged, and these stores were a little bit more damaged in these specific regions. So we made a decision on those. But for the most part, we are closing our stores that we repossessed from franchisees and did not succeed in turning them around.
Speaker #3: For example, the Papa Murphy's portfolio of stores that we took over two years ago with the hope of being able to turn them around, and came to the realization that maybe the brand was—a little bit more damaged, and these stores were a little bit more damaged in these specific regions.
Speaker #3: So we made a decision on those, but for the most part, the stores were—we're closing our stores that we repossessed from franchisees and did not succeed in turning them around.
Speaker #3: Okay, thank you.
Michael Glen: Okay. Thank you.
Speaker #5: Your next question comes from Vishal Sridhar from National Bank. Please go ahead.
Operator: Your next question comes from Vishal Shreedhar from National Bank. Please go ahead.
Speaker #6: Thanks. With respect to the franchisees and, you know, the pressure on same-store sales, is there any way for investors to ascertain the financial health of franchisees? And how do you feel about that, given that they're operating through such challenging times?
Vishal Shreedhar: Thanks. With respect to the franchisees and the pressure on the same store, is there any way for investors to ascertain the franchisee financial health, and how do you feel about that, given that they are operating through such challenging times?
Speaker #3: Yeah, for the most part, I think, you know, obviously there's pressure on our franchisees. Sales and traffic are certainly a challenge for our brands at the moment.
Eric Lefebvre: Yeah. For the most part, I think, obviously, there is pressure on our franchisees. Sales and traffic are certainly a challenge for our brands at the moment. There is no question, and costs are still a challenge as well. But for the information we have from our franchisees, I think in general, the profitability of our stores and of our networks is still really high compared to industry average. It is not to say that, obviously, with 7,000 locations, there are stores that are struggling. So there is no question, and we are trying to help our franchisees in these cases. But I think for the vast majority, our franchisees are operating way above industry average. And it is our job to try to help them as much as possible navigating these difficult times where, for example, the cost of proteins has become very expensive and where traffic might be a little bit more challenged.
Speaker #3: There's no question, and costs are still a challenge as well. But from the information we have from our franchisees, I think—in general—the profitability of our stores and of our networks is still really high compared to the industry average.
Speaker #3: It's not to say that, you know, obviously with 7,000 locations, there are stores that are struggling. So there's no question, and we're trying to help our franchisees in these cases.
Speaker #3: But I think for the vast majority, our franchisees are operating way above industry average. And it's our job to try to help them as much as possible navigating these difficult times, where, for example, the cost of proteins has become very expensive, and where traffic might be a little bit more challenged.
Speaker #3: So it's normal for our industry to go through these cycles, and we're prepared for that. We have 45 years of experience in doing this, and we're trying to help our franchisees navigate.
Eric Lefebvre: It is normal for our industry to go through these cycles, and we are prepared for that. We have 45 years of experience in doing that, and we are trying to help our franchisees navigate.
Speaker #6: Okay, and I'm not sure if you're able to, but is there any ability for you to provide any more color on the actual strategic review process and what caused the board to believe that the go-it-alone approach was the best?
Vishal Shreedhar: Okay. I'm not sure you're able to, but is there any ability you could provide any more color on the actual strategic review process and what caused the board to believe that go it alone was the best approach? Were there offers? Was it the economic environment? What were the factors that caused the board to decide to go it alone? How long will it take for us to see any potential asset sales that have not been previously specified, like brand sales that may be in better hands elsewhere?
Speaker #6: Were there offers? Was it the economic environment? What were the factors that caused the board to decide to go it alone? And how long will it take for us to see any potential asset sales that have not been previously specified, like brand sales that may be in better hands elsewhere?
Speaker #3: Yeah, unfortunately, I can't give you more information on the process. I'll need to stick to what I mentioned in my script and in the press release.
Eric Lefebvre: Yeah. Unfortunately, I can't give you more information on the process. I'll need to stick to what I mentioned in my script and in the press release. As far as timing on maybe optimizing the portfolio of brands, I don't want to put a timeline in place because, again, it's not a fire sale price, so it's not like we're going to go out there and say we need to commit to a certain time, and we're going to let the brands go no matter what. We love all our brands. We want them to do well. We want all our franchisees to do well. If we're going to sell a brand, it's going to be for the right value and also for the right buyer. So I don't want to commit to a timeline.
Speaker #3: As far as timing on maybe optimizing the portfolio of brands, I don't want to put a timeline in place because, again, it's not a fire sale price. It's not like we're going to go out there and say we need to commit to a certain time and we're going to let the brands go no matter what.
Speaker #3: So, we love all our brands. We want them to do well. We want all our franchisees to do well. And if we're going to sell a brand, it's going to be for the right value and also for the right buyer.
Speaker #3: So I don't want to commit to a timeline. Obviously, time is of the essence, and it's not something that we want to agonize over forever.
Eric Lefebvre: Obviously, time is of the essence, and it's not something that we want to agonize over forever. So you should see some action probably in 2027, but I can't commit to a timeline or a number of brands or anything like that.
Speaker #3: So you should see some action probably in '27, but I can't commit to a timeline or a number of brands or anything like that.
Speaker #6: Okay. And with respect to the same-store sales growth trends, is there anything that management can do to reinvigorate the store base? Some of the tactics that we've talked about over the last several years, or new marketing programs—or is it just a function of the search for value and the competition out there?
Vishal Shreedhar: Okay. With respect to the same-store sales growth trends, is there anything that management can do to reinvigorate the store base via some of the tactics that we've talked about over the last several years or new marketing programs? Or is it just a function of the search for value in the competition out there, and it's just a matter of tweaking the existing menu? Is there any large initiatives, or you think it's going to be status quo for a while on the comps?
Speaker #6: And it's just a matter of tweaking the existing menu. Are there any large initiatives, or do you think it's going to be status quo for a while on the comps?
Speaker #3: Yeah, there are many initiatives, and each brand has different initiatives. We're also working really hard on all our data infrastructure and our data scientists.
Eric Lefebvre: Yeah, there are many initiatives, and each brand has different initiatives. We are also working really hard on all our data infrastructure and our data scientists that we have in-house to help the brand have more intelligence about the brands and have a better ability to address our existing consumers and also work in consumer acquisition, which is always a challenge. We have a lot of smaller initiatives at the brand level. We have larger initiatives at the company level. What you mentioned regarding value, it is a real thing for sure, especially in some segments. It is not necessarily applicable to all our brands. For example, if we are looking at Wetzel's Pretzels, maybe value is not necessarily what consumers are looking for, where it is an indulgence and an impulse buy.
Speaker #3: that we have in-house to help the brand gain more intelligence about the brands and have a better ability to address our existing consumers and also work in consumer acquisition.
Speaker #3: Which is always a challenge. So, we have a lot of smaller initiatives at the brand level, and we have larger initiatives at the company level.
Speaker #3: And what you mentioned regarding value, it's a real thing for sure, especially in some segments. It's not necessarily applicable to all our brands.
Speaker #3: For example, if we're looking at Wetzel's Pretzels, maybe value is not necessarily what consumers are looking for, where it's an indulgence and an impulse buy.
Speaker #3: But when you look at pizza, obviously it's a super competitive environment where our competitors are pretty much giving away the product these days. So the value is very important.
Eric Lefebvre: When you look at pizza, obviously, it is a super competitive environment where our competitors are pretty much giving away the product these days, so the value is very important. Not all brands need to operate the same promotions and need to operate under the same set of assumptions. We cannot have a one-size-fits-all type of company-wide initiative. It is really important that each brand keeps their identity and each brand tries to operate the right levers. There are some corporate-wide initiatives, like everything related to data, that will be critical for the company's success in the future.
Speaker #3: Not all brands need to operate the same promotions and need to operate under the same set of assumptions. So it's, we can't have a one-size-fits-all type of company-wide initiative.
Speaker #3: So it's really important that each brand keeps its identity, and each brand tries to operate the right levers. But there are some corporate-wide initiatives, like everything related to data, that will be critical for the company's success in the future.
Speaker #3: Thank you.
Vishal Shreedhar: Thank you.
Speaker #5: Your next question comes from Rylan Conrad with RBC Capital Markets. Please go ahead.
Operator: Your next question comes from Ryland Conrad of RBC Capital Markets. Please go ahead.
Speaker #8: Yeah, thanks very much. Good morning. Maybe to start, just on the sequential improvement in same-store sales growth for Canada this quarter, are you able to kind of unpack the drivers there and maybe what you’re seeing across...
Ryland Conrad: Yeah. Thanks very much. Good morning. Maybe just start on the sequential improvement in same-store sales growth for Canada this quarter. Are you able to unpack the drivers there and maybe what you are seeing across traffic or average basket size?
Speaker #7: traffic or average basket size? Yeah, the, um,
Eric Lefebvre: Yeah. I think traffic for a lot of our brands is still a challenge, even in Canada. The basket size is good for most of our brands, the basket size is on the rise. So we are able to optimize each visit, but the traffic is still a challenge, so we really need to work on the number of visits and the frequency of each visit for consumers. But in Canada, consumers are a little bit more resilient. Our mall concepts had a really good quarter in Q3 in Canada. So that was good to see after a few periods where it was a little bit more complicated. In general, our breakfast places are doing well, our sushi concepts are doing exceptionally well. So we have a number of concepts that are really pulling the company upwards in Canada.
Speaker #3: You know, I think traffic for a lot of our brands is still a challenge. Even in Canada, the basket size is good for most of our brands.
Speaker #3: The basket size is on the rise. So we're able to optimize each visit. But the traffic is still a challenge. So we need to, we really need to work on the number of visits and the frequency of each visit for consumers.
Speaker #3: But in Canada, consumers are a little bit more resilient. Our mall concepts had a really good quarter in Q3 in Canada, so that was good to see after a few periods where it was a little bit more complicated.
Speaker #3: And in general, you know, our breakfast places are doing well. Our sushi concepts are doing exceptionally well. So, we have a number of concepts that are really pulling the company upwards in Canada.
Speaker #8: Okay, and excluding the locations that have been closed or are being closed, like, could you just give us an update on the health and performance of the remaining Papa Murphy's portfolio and just whether you're seeing any stabilization in the sales trajectory there, as I know you do have some kind of ongoing initiatives there.
Ryland Conrad: Okay. Excluding the locations that have been closed or are being closed, could you just give us an update on the health and performance of the remaining Papa Murphy's portfolio and just whether you are seeing any stabilization in the sales trajectory there, as I know you do have some ongoing initiatives there?
Speaker #3: Yeah, Papa Murphy's is—our franchisees who are doing well at Papa Murphy's are doing extremely well. The business model, the economic model, and the margins we drive with Papa Murphy's are really good, and that helps even when sales are going down slightly.
Eric Lefebvre: Yeah. Our franchisees who are doing well at Papa Murphy's are doing extremely well. The business model and the economic model and the margins we drive with Papa Murphy's are really good. That helps even when sales are going down slightly, the stores remain profitable. But there are some pockets where it is a little bit more challenging, where sales need a serious lift for franchisees to be able to turn a good, healthy profit and deliver on their return on investment expectations. So it is a challenge. But I will say that the business model for Papa Murphy's allows for a little bit more sales variations because the margins are so healthy.
Speaker #3: The stores remain profitable, but there are some pockets where it's a little bit more challenging, where sales need a serious lift for franchisees to be able to turn a good, healthy profit and deliver on their return on investment expectations.
Speaker #3: So it's a challenge, but I will say that the business model for Papa Murphy's allows for a little bit more sales variation because the margins are so healthy.
Speaker #8: Got it. And maybe just last for me, I know you called out strength in the construction pipeline for Q4, but I guess, you know, looking further out, just given the current macro and we have higher interest rates, like Are you, are you hearing anything from existing or prospective franchisees around just the appetite to open new locations looking further out?
Ryland Conrad: Got it. Maybe just last for me, I know you called out strength in the construction pipeline for Q4, but I guess, looking further out, just given the current macro and we have higher interest rates, are you hearing anything from existing or prospective franchisees around just the appetite to open new locations looking further out?
Speaker #3: No, it's actually where, you know, our franchising teams are doing exceptional at the moment. We're selling as many, if not more, locations as we have in the past.
Eric Lefebvre: No, it is actually our franchising teams are doing exceptional at the moment. We are selling as many, if not more, locations as we have in the past. Our pipeline remains very strong. Obviously, some brands are performing better than others in terms of new stores. We have a lot of existing franchisees reinvesting in the brands. That is actually more than half of the locations we have in the pipeline are from existing franchisees. That is good validation for our business models also. So there is no concerns on that side.
Speaker #3: Our pipeline remains very strong. Obviously, some brands are performing better than others in terms of new stores, and we have a lot of existing franchisees reinvesting in the brands.
Speaker #3: That's actually more than half of the locations we have in the pipeline are from existing franchisees. And that's good validation for our business models, also.
Speaker #3: So, there's no concerns on that side. Great, thanks very much.
Ryland Conrad: Great. Thanks very much.
Operator: There are no further questions. This concludes today's conference call. Thank you for participating. You may now disconnect.
