Restaurant Brands International Inc. (QSR) Q2 2026 Earnings Call Transcript

Good morning, and welcome to Restaurant Brands International's Second Quarter 2026 Earnings Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to Kendall Peck, RBI's Vice President of Treasury and Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to Restaurant Brands International's Earnings Call for the quarter ended June 30, 2026. Joining me on the call today are Restaurant Brands International's Executive Chairman, Patrick Doyle; CEO, Josh Kobza; and CFO, Sami Siddiqui. Following remarks from Josh, Sami and Patrick, we will open the call to questions. Today's discussion may include forward-looking statements, which are subject to risks detailed in the press release issued this morning and in our SEC filings. We will also reference non-GAAP financial measures, reconciliations of which can be found in the press release and trending schedules available on our website. As a reminder, organic adjusted operating income growth is on a constant currency basis and excludes results from the Restaurant Holdings segment. For calendar planning purposes, our preliminary Q3 earnings call is scheduled for the morning of October 29, 2026. And now I'll turn the call over to Josh.

Thank you, Kendall, and good morning, everyone. Q2 was another strong quarter. We delivered 3.8% same-store sales growth and 2.9% net restaurant growth, driving 6.4% system-wide sales growth, 6.7% organic adjusted operating income growth and 12.9% adjusted EPS growth. Last quarter, we said our results were early proof that the 2028 vision we laid out at our Investor Day was taking hold. Q2 built on that momentum. We accelerated same-store sales, exceeding our long-term 3% algorithm for the third consecutive quarter, delivered double-digit earnings growth and returned $435 million of capital to shareholders. We also advanced our other key priorities, strengthening our path to becoming an investment-grade company and making progress towards 5% net restaurant growth, all while being the partner of choice for the best franchisees and the employer of choice for the best talent. Just as importantly, our results highlight the strength of our diversified portfolio and disciplined operating model. By investing behind each of our brands while executing consistently against our long-term strategies, we've built a portfolio capable of delivering durable top line and earnings growth across a variety of consumer environments. Those strategies continue to drive results with Tim Hortons and International each delivering their 21st consecutive quarters of positive same-store sales growth. Burger King U.S. was a standout performer this quarter with our elevation strategy driving another major step forward in sales and expanding our outperformance versus the industry to the high single digits. I'm incredibly proud of what our teams and franchisees have accomplished so far this year. Through the first half of 2026, we've delivered above algorithm same-store sales of 3.5% and organic adjusted operating income growth of 8.5%, along with nearly 14% adjusted EPS growth. These results highlight the power of strong alignment with our franchisees and consistent execution every day in our restaurants. We're excited about the opportunities still ahead as we look to build on this momentum in the second half of the year. With that, let's turn to our segment results, starting with Tim Hortons, which represents roughly 41% of our operating profit. At Tim Hortons, Canadian same-store sales were relatively flat at plus 0.1%. While we maintained our leadership positions in coffee, breakfast and baked goods, our calendar didn't drive the growth we've come to expect from Tims and was unable to lap last year's major platform launches. However, there were encouraging signs as the quarter progressed. In late May, we introduced melts, one of the most requested items that guests wanted to return to the menu, and we saw continued growth in cold beverages. As we look ahead, Axel and the team have an exciting marketing calendar, kicking off next week with our Harry Potter Back to Hogwarts campaign, featuring magical baked goods and beverages designed to appeal to fans of all ages and celebrate 25 years since the release of the first film. We'll follow this with new flavors across our core breakfast offerings and an exciting holiday partnership later in the year. Our recent Matcha launch also unlocks an entirely new beverage innovation opportunity, while the continued rollout of fountain equipment is enabling us to further expand our cold beverage offerings like Soda Swirls, which is Tim's version of a dirty soda, while also improving back-of-house efficiency. We're also excited about our upcoming loyalty partnership with Canadian Tire, which will allow guests to link their Triangle Rewards and Tims Rewards accounts, earning Canadian Tire money with every Tims transaction and extending the reach of our digital ecosystem through one of Canada's largest loyalty programs. Beyond marketing, we're on track to accelerate development in Canada with approximately 80 gross openings this year compared to over 50 last year, spanning every Canadian province, including Ontario, Alberta and Quebec. These will primarily be standard drive-thru restaurants, which deliver paybacks of under 3 years, one of the strongest in the industry. And just as importantly, our restaurants continue to make a meaningful impact on the communities that they serve. This year's Smile Cookie campaign raised a record $23 million for more than 600 charities and community organizations across Canada and the U.S. And in July, our annual campaign raised nearly $13 million to support Tims Foundation camps. Taking a step back, while our marketing did not perform as anticipated in Q2, we were encouraged by stronger business performance as the quarter progressed and are excited about the back half calendar. Tim Hortons remains one of the strongest and most loved restaurant brands in Canada. Canadians continue to rank us #1 in brand trust and affordable pricing, a testament to the unique role Tims plays in the everyday lives of our guests. We're focused on building on those strengths by delivering delicious food and beverages, reliable everyday value and a great experience to our guests. I'm confident these fundamentals position us well for the years ahead. Now on to our international business, which drives roughly 29% of our operating profit and remains one of the most important growth engines of the business. This quarter, International delivered comparable sales of 5.5% and net restaurant growth of 5.1%, resulting in system-wide sales of 10.7%. Growth was fueled by strong execution across many of our largest markets, including BK Germany, Spain, Brazil, China, Korea and Japan. Our teams continue to launch exciting innovation tailored to local preferences across both our core offerings as well as emerging platforms like chicken and beverages. At Burger King China, value chicken innovation and an exciting Lopper collaboration with Michelin Chef David Lye and the continued success of our whole muscle Double Patty Chicken burger drove another great quarter of results. Germany's strong performance was supported by dessert innovation and a new iced beverage platform, while in Spain, guests enjoyed our new Wild Ranch burger. These innovations were complemented by a variety of family partnerships around the world. Our Mandalorian collaboration extended across over 70 markets, including Spain, Germany and the U.K., while our Toy Story 5 kids meal helped drive traffic in countries like Brazil and Argentina. Underpinning all of this is a strong base of everyday value, creating a balanced offering for guests across a wide range of occasions. Earlier in the quarter, Thiago and his team hosted their annual Burger King CEO Summit in France, bringing together leaders across the global Burger King system. Together, we aligned on priorities to drive long-term growth, strengthening restaurant operations, simplifying our technology platforms and improving unit economics. Those priorities continue to translate into results with average paybacks of around 4.5 years across our top 10 growth markets, and we remain committed to improving those over time. Delivering attractive returns supports new unit growth and market expansion, such as the recent successful launch of Firehouse Subs in Australia. In July, I visited our Firehouse business in Brazil with Thiago, Yuri and our local team, where transactions per restaurant are up over 60% just this year. While in Brazil, we also toured Burger King and Popeyes restaurants. Popeyes continues to perform very well with comparable sales up over 20% year-to-date on top of roughly 20% growth in 2025, resulting in improving unit economics. Meanwhile, our Burger King team has accelerated investments in restaurant image and operations, and they're seeing incredible results there so far. I'm also very encouraged by Burger King's performance in China under CPE's leadership. The team has hit the ground running with another quarter of double-digit comparable sales and a sequential improvement in unit economics. Their operational expertise, local market knowledge and fast pace of execution are very exciting to see, especially given the important role Burger King China plays in our path back to 5% net restaurant growth. International's performance in Q2 once again demonstrated that our growth is broad-based and repeatable. Across markets, our experienced local teams are executing a proven playbook that continues to generate attractive results in a wide range of consumer environments. After more than 4 years of consistent outperformance, this business remains one of the strongest long-term growth opportunities across our portfolio. Moving now to Burger King, which represents nearly 19% of our operating profit. The business delivered another exceptional quarter with comparable sales of 8.6%, driving system-wide sales growth of 8.2%. For the second quarter in a row, we're seeing years of our team's hard work translate into strong absolute results and accelerating outperformance with U.S. same-store sales of 8.5% beating the burger QSR industry by over 9 points. In Q2, we continued building on the momentum established by the launch of our Whopper and brand elevation campaigns earlier this year. Those campaigns were just the first of many chapters in our multiyear elevation road map, all of which is anchored in listening to guest feedback to make the Burger King experience even better and more consistent across the country. More recently, we introduced the next phase of our journey, service elevation with the launch of the Your Way Champion and Whopper Guarantee. Together, these initiatives reinforce our commitment to ensuring guests get their order their way every time. Every Burger King restaurant now has a dedicated Your Way champion, a reimagined restaurant general manager devoted to putting the guest experience first and making things right whenever needed. And if a guest Whopper isn't up to our standards, we'll remake it with the next one on us. Importantly, we have many more chapters in our elevation road map ahead of us from culinary improvements to operational initiatives to image, all of which supports durable outperformance. At the same time, we remain focused on the core pillars of our Claim the Flame strategy by executing remodels, refranchisings and marketing centered around the Whopper, families and kids and consistent everyday value. Our Q2 marketing built on the momentum from the elevated Whopper with platforms like Whopper Wednesday and Whopper by You, featuring the loaded Jalapeña Whopper, driving even more engagement with our flagship burger platform. We've seen Whopper platform AUVs grow by over 20% since launching our elevation campaign, reinforcing our confidence that these initiatives are creating lasting behavior change. In May, we also strengthened our connection with families and kids by collaborating with Disney's Mandalorian, helping drive Q2 kids meal AUVs above $28 per day. That's up nearly 50% since 2022. We're excited about this achievement, but there is still significant opportunity to grow the category as we remain well below historical kids meal levels. Lastly, underlying all of this is our steady base of everyday value with $5 Duos and $7 Trios continuing to provide guests with consistent value and choice. This quarter is more evidence that Tom, his team and our dedicated franchisees have built and are continuing to build a better Burger King. We invited guests back earlier this year to experience the improvements we've made over the past 4 years, and our results year-to-date reinforce that those investments are resonating. What excites us most, though, is that we're still early in our journey with more chapters of marketing and menu elevation to come alongside continued restaurant remodels and operational improvements that will further strengthen the Burger King experience. Moving on to Popeyes, where U.S. net restaurant growth of 0.3% was more than offset by a same-store decline of 5.2%, resulting in system-wide sales of negative 3.3%. While sales remained soft during the quarter, we're encouraged by the improvement we saw and continue to execute against the same priorities we've discussed, improving operations and service, refocusing on our core menu and strengthening our value proposition. During the quarter, we completed the rollout of an improved tender spec across the system and continued leveraging our increased field support through operations coaching visits and training. These efforts contributed to improved product satisfaction across our core offerings. And moving forward, we'll continue innovating around those core platforms while ensuring operational simplicity. On value, the $5 value platform introduced in January continues to perform well, driving higher repeat purchase behavior and helping to support traffic. In Q2, we layered on the $6 big box in our $20 family meal to serve additional occasions, and we'll continue to focus on maintaining consistent, easy-to-understand value for guests moving forward. Overall, Peter and his team are focused on the right things, and we remain confident in a return to positive comps in the second half of this year. By working closely with our franchisees, I'm confident Popeyes will deliver the best tasting, best value chicken in America. Finally, at Firehouse Subs, Q2 system-wide sales grew 7.5%, driven by 8.1% net restaurant growth and 0.4% comparable sales growth. Our new steak and cheese melt was well received by guests and unlocks future flavor innovation opportunities like our recently launched Smoke Honeymelts. I was just at our convention in Nashville with Mike and the team, and it was great to see the enthusiasm from our franchisees. They were especially excited about our July announcement naming Firehouse Subs as the official sub partner of Major League Baseball across the U.S. and Canada. As Firehouse's first national professional sports league partnership, it provides another meaningful platform to build awareness and support long-term growth. We also introduced our new ladder up training program for restaurant general managers, which began rolling out this summer and reflects our continued investment in developing great restaurant leaders. Separately, we continue to see excellent momentum across our development pipeline and remain on track to accelerate unit growth this year. With that, I'll hand it over to Sami.

Thanks, Josh, and good morning, everyone. Today, I'll discuss our Q2 financial results, capital structure and our 2026 financial guidance. In Q2, comparable sales of 3.8% and net restaurant growth of 2.9% drove system-wide sales growth of 6.4%. We translated that into organic AOI growth of 6.7% and nominal adjusted EPS growth of 12.9%. This was another exciting quarter of accelerating top line growth, led by double-digit growth in our international business and high single-digit system-wide sales growth at Burger King and Firehouse. We also saw sequential improvement in net restaurant growth, led by a diverse mix of markets. We continue to expect net restaurant growth to accelerate through the second half of the year as we progress toward our 5% unit growth target by 2028. We converted our strong top line performance into double-digit earnings growth while returning capital to shareholders through both dividends and share repurchases. At the same time, we made further progress toward our goal of achieving corporate investment-grade leverage, which I'll update you on in a few moments. This quarter, adjusted EPS increased 12.9% to $1.07 per share from $0.94 last year. This was driven by our AOI growth as well as a $6 million year-over-year decrease in adjusted net interest expense. In addition, our adjusted effective tax rate this quarter was 16.8%, bringing our year-to-date tax rate to 17.6%. We continue to expect our full year adjusted effective tax rate to be between 18% and 19%. Now moving to cash flow and capital allocation. We generated $501 million of free cash flow in Q2, including the impact of $62 million of CapEx and cash inducements and a $22 million benefit from our swaps and hedges. We returned $435 million of capital to shareholders through our dividend and share repurchases, including repurchasing a total of $137 million of stock in the quarter. Importantly, we remain on track to repurchase approximately $500 million for the full year. We ended Q2 with total liquidity of approximately $2.3 billion, including $1.1 billion of cash and a net leverage ratio of 4.1x, down from the prior quarter. As we shared at our Investor Day, we remain committed to becoming an investment-grade company. And in May, we achieved an important milestone on that path by receiving a ratings upgrade from S&P to BB+. As our business grows, we will continue to naturally work our way down to corporate investment-grade leverage by 2028 or the low to mid-3x net leverage range. Finally, I'd like to discuss our 2026 financial guidance. First, we continue to expect segment G&A, excluding Restaurant Holdings, of about $600 million to $620 million for the full year. Second, we continue to expect net adjusted interest expense to stay approximately flat year-over-year in the $500 million to $520 million range based on a high 3% average SOFR rate, which flows through to less than 15% of our debt. Third, we continue to expect 2026 CapEx and cash inducements, including capital expenditures, tenant inducements and incentives to be around $400 million. Fourth, we continue to expect Tim Hortons supply chain margins to be roughly in line with 2025 levels. And last, we continue to expect total Restaurant Holdings AOI of roughly $10 million to $20 million for the full year, reflecting the impact of Carrols restaurant refranchising, continued beef inflation and incremental investments in our international start-up businesses that we expect to continue until we transition ownership to new local partners. Lastly, I'd like to address FX rates, given recent movements in currency markets and U.S. dollar appreciation. Based on current rates, we expect an approximately $10 million headwind to AOI and a $0.02 to $0.03 headwind to adjusted EPS for the second half of 2026. To close, I'd like to take a step back. Year-to-date, we've delivered above algorithm same-store sales growth of 3.5%, above algorithm organic AOI growth of 8.5% and nearly 14% adjusted EPS growth. On top of that, we've returned $750 million of capital to shareholders through our dividend and buybacks, and we've made clear progress on the path to corporate investment-grade leverage. Those are great results that demonstrate the strength of our business model and show we're executing against the plan we outlined at our Investor Day. And importantly, they keep us on track to deliver 8% organic adjusted operating income growth. And with that, I'll turn it over to Patrick to provide his perspective on the quarter.

Thanks, Sami. Three months ago, I said I didn't believe our Q1 consolidated results were an outlier. I believe they reflected years of work that we're finally beginning to show up in our top line. Q2 has only strengthened that conviction. Burger King's performance this quarter was exceptional. Growing same-store sales by high single digits in today's restaurant environment is an outstanding outcome, especially following the momentum we delivered in Q1. What's really encouraging to me is what those results tell us about guest behavior. Today, guests have more choices than ever before for where to eat and where to spend their dining dollars. And every day, more and more of them are choosing Burger King. That's the clearest indication that the work we've been doing is resonating. We're winning because we're delivering a better guest experience, and that's exactly what Tom and his team set out to accomplish when they launched Reclaim the Flame four years ago. One thing I've learned over the years is that businesses rarely change overnight. They change because thousands of people make thousands of better decisions every single day. That's what's happened at Burger King. The effects of better operations, better culinary, better marketing, better restaurants and better franchisees have been compounding for several years. This quarter is an important milestone, but I see it as the results of that compounding work, not as the beginning or end of anything. The Burger King team and our franchisees have accomplished a tremendous amount, but they'd be the first to tell you we aren't close to finished. We continue to see opportunities to elevate the menu, strengthen operations and keep raising standards across the system. That's the mindset you want after delivering results like these because it means they're focused on building a better business for the long term, not just celebrating a strong quarter. And the reality is there are still meaningful parts of the business we haven't yet transformed, which gives me confidence there's plenty of runway ahead. More broadly, I think our year-to-date results say something important about RBI as a whole. We built this company around four iconic brands in four of the fastest-growing global QSR categories. Each of our brands has different opportunities and is at different stages of their journey. That intentional diversification allows us to continue growing sales and earnings while investing for the future. We don't need every brand to have the same results each quarter or be at the same point in its journey for RBI to deliver strong consolidated results. What matters is that we're consistently strengthening each business over time. I think that's one of the defining advantages of this company, and it's that balanced strength and consistent top line growth that continues to give me confidence in our ability to grow adjusted operating income by 8% and EPS at an even faster rate. Our international business is another great example of that diversification. I continue to believe we have the strongest scaled international business in the restaurant industry. We are the only global QSR to grow our international system-wide sales by double digits each of the last few years. Our growth at scale is unmatched in consistency and in the absolute. And with Burger King China back on track, my confidence in our ability to continue outperforming is high. At Tim Hortons, while our comparable sales performance wasn't our best this quarter, I remain incredibly confident in Tims, its strength and love with our Canadian guests and most importantly, in Axel, his team and our restaurant owners in Canada. Tims is a stunningly strong business and brand, and we will continue to drive this going forward. We're proud of what we've accomplished in the first half of the year, but we also know that our shareholders expect consistency and sustainable strength. The bar we've set for ourselves is higher today than it was a year ago, and that's exactly how it should be. Our job is to continue earning investor confidence quarter after quarter. We have a lot of work left to do, but I couldn't be more confident in our people, our plans and our ability to keep executing. With that, operator, let's open the line for questions.

Our first question comes from the line of Brian Bittner with Oppenheimer & Co.

Congratulations on the year-to-date results. Congratulations on Burger King's standout quarter. As it relates to Burger King, I can certainly attest that my three boys are definitely helping that kids meal growth. They love their Burger King. And clearly, years of hard work seem to be showing up in the results this year, and it's created some momentum. But you also said that you think you're still very early on in your journey, which suggests you still see a runway for above-average growth moving forward. I think you gained the credibility to say it. And I know you're winning because you've tackled and improved the underlying fundamentals, but I would love to hear what you believe at this point in the journey may be the most overlooked drivers that you can still unlock for this brand moving forward to drive more outperformance.

Brian, thanks for the question. And mostly, I think you just put a smile on the face of everybody in this room. So we appreciate it. I appreciate your family's love for Burger King. I would just echo a little bit of what you said. We do very much feel that there's a lot in front of us. We feel great about the sustainability of what we're doing because it's built on improving the fundamentals. We see operations having improved tremendously over the last three to four years. We've started to make some progress on image, and we're starting to execute all the menu items that we serve even better. And if I can just take a front seat, I think our team has done a great job, but I would like to say thank you as well to our franchisees because for as much money as we're investing in the system, they've been investing even more in bringing their restaurants up to modern image. And I think it's that alignment that we have with the franchisees that's been so powerful in the journey that we've been on over the last few years. On operations, we've made progress, but the franchisees have committed to upgrading operations in the restaurants. So I think we have a lot to thank them for and making sure that we're serving you and your three boys better every day at each of the restaurants you go to. In terms of what we have in front of us, I think as Patrick mentioned, we feel like we have a lot ahead of us. As much as we've made progress on image, we still have a lot of restaurants out there that aren't modern image. So I think we still have a few years left of getting to that point we've all talked about where almost every Burger King across America is a new modern Burger King. So I think there's still a big tailwind that we'll realize over the next few years. I think as well on operations, we've made progress. We were tied for the #1 burger chain in the ACSI index, which was a big evolution. But it still feels like we have a long way to go, and we still have spots within the system where we want to get better. So I still think there's a lot of progress to be made there. Maybe one of the bigger things that we're still working on is we really want to continue to upgrade and elevate the menu. You saw us do this with the Whopper at the beginning of this year, but there's still a lot of other parts of the menu that we think can be made even better. You're going to see another chapter of this coming up in the next month or so, which we're pretty excited about. And we've got a few more chapters of menu elevation that are going to come over the next year and into 2027. So I would say really happy with the progress, but there is a lot of work left to do over the next couple of years, and we're looking forward to it, and we think there's just a lot more potential for the brand than what we've realized so far. Patrick, anything you want to add to that?

Yes, Brian, first, congrats on raising your boys correctly. I know you've heard me talk about this before, but growth in this industry happens because you wake up in the morning and you're confident that your average guest is going to have a better experience today than they did a year ago. And the reason I'm confident in Burger King's performance going forward is I know what we're working on in terms of culinary. There are still things that we know can be better on our menu. I know we're going to have more remodeled modern image restaurants a year from now than we do today. We've got our value layer figured out and it's consistent. And the more people know that they can come to us for great value, it's going to do well. Our franchisees are leaning in and they're aligned with us, and they're committed to working with us to find ways to improve the service in our restaurants every day. So my confidence level that our guests are going to have a better experience a year from now than they do today is high. And in a similar manner to how they're having a better experience today than they were a year ago. And that's what's going to drive growth. It's not going to be a new promotion that's going to do it. It's going to be that our marketing is talking about the truth, which is you're having a better experience at Burger King now than a year ago, and you're going to have a better experience a year from now than you do today.

Our next question comes from the line of Dennis Geiger with UBS.

Very helpful color on Tim Hortons in the quarter. I wanted to ask a bit more about the improvement that you saw through the quarter and whether that was a function of some of the marketing adjustments you spoke to or something else that you would call out? And as importantly, as it relates to thinking about the back half of the year and the trajectory for the brand through the back half after the improvement you've been seeing through the second quarter. Anything to highlight there? Anything as it relates to the macro environment in Canada to call out or the competitive environment or anything else as it relates to your own execution and strategy?

Dennis, thanks for the question. I'll try to address a couple of pieces of that. In terms of the sequencing through the quarter, I do feel like some of our marketing got a little bit better. We had some items that didn't work as well in the first part of the quarter, and we had items that worked a little better later, like melts. It was something that guests had asked us for for a long time; we tried it back and guests really liked it. So that helped. I would say, overall, the macro picture in Canada has been relatively stable. If you look at things like CPI, it's been around kind of 3%. Unemployment has been in the mid-6s and interest rates in the low 2s. Maybe CPI ticked up a little bit with gas prices in the beginning part of the quarter, and that could have had a little bit of impact. But I would say the broad macro indicators across the quarter point to a pretty stable Canadian macro environment. And if you look at foodservice growth overall in Q2 in Canada, it wasn't so far off the U.S. So I really think a lot of this is in our control, and that's what's encouraging in terms of how we saw things improve as I think we got some better momentum on the marketing side. Stepping back and looking forward, this team led by Axel has an incredible track record; we're on 21 quarters now of driving positive same-store sales. They are incredibly talented and really know what they're doing. I think they've got some exciting stuff that we've launched recently and some really positive things that are going to come out in the back part of the year. We just launched Matcha. It's something we were all really excited about, and we're pleased with it so far. It's particularly exciting because it's a whole new occasion. It tends to skew heavily into cold beverage and also PM, which is one of the dayparts we're really trying to grow. It tends to be something that people come in in the afternoon as an afternoon drink, and that's very complementary to our existing morning business. So we've got that out there now. I think we have a tremendously good product, and it's a baseline that we can also innovate off of into the future. We're excited for the Harry Potter partnership; it appeals to all ages and should bring in a mix of guests. On top of that, we're going to bring out more breakfast innovation to reinforce our AM daypart across the back half of the year. We're very excited for the loyalty partnership with Canadian Tire, bringing together some of the most iconic Canadian brands and additional benefits to our guests to be loyal Tim's Rewards members. The last part I would call out as you look over the next 6 to 9 months is we're making good progress systematically rolling out our new fountain systems in our restaurants across Canada, which is enabling further innovation pipelines like Soda World. So I think we've got a pretty great pipeline for the second half of this year and look forward to sharing the results of that as we get through Q3 and Q4.

Your next question comes from the line of David Palmer with Evercore ISI.

That last answer was really where I was going to go with this because I think the market would love to see, call it, 2% plus comps out of Tims Canada. If you can get there, it feels like you're going to have to do that with market share gains. It just feels like that market is going to remain soft for a while. I don't know if you would agree with that. Some of the things you mentioned do sound like sales layer-ish as opposed to big platform lifts. But I think right now, people want to see sustainable food, beverage and value news. Maybe you can just speak to what degree you feel like you're digging a little bit deeper to gain share in a more durable way up there — questioning how much of a leadership you might have in certain things to grow share in a more sustainable fashion.

Dave, I'll take that. In terms of the market share and how the market is growing, the Canadian foodservice market is doing okay. The growth rate for the overall foodservice market was in the 3% range in terms of sales for the quarter, which is very similar to the U.S. market. What's going on within that market is that some chains are doing better and some chains are not doing as well. So that's why I really feel this is very much in our control. We have an incredible business, the best franchisees and restaurant operators in Canada and a wonderful team leading the business. They've got a lot of things they're working on that will allow us to perform well within a market that I think is doing all right. On value, we are the #1 value leader in Canada. If you look at any of the brand scores, we have been and continue to be a leader in providing the best value for money across Canada. So I think we're in a good spot there. On the food and beverage side, our team is doing a nice job on innovation, particularly on cold beverages, which has been our big priority. I mentioned Matcha; that's probably one of the most exciting things that we can do, but we've got a couple of other additional innovations that will come up over the next 6 to 9 months to drive sustainable growth, and hopefully in new dayparts as well. That's an interesting thing about Matcha — it brings guests back in for another visit at a daypart they might not otherwise come. That's how you drive sustainable layers of growth. On the food side, we've had some things that worked well and others that didn't work as well. Melts have come back and are working really well. I think we'll come up with more innovations on the PM food side in the next 6 to 12 months, too, that allow us to add sustainable growth there.

Your next question comes from the line of Danilo Gargiulo from Bernstein.

I want to again ask one more question on Tim Hortons. Specifically, the competitive environment is sharpening in Canada. There is also a notable Northeast chain that plans to reenter the market rapidly. My question is about the speed of innovation that you think, especially on the beverage side, you might need to adopt going forward to fend off the increased competitive environment and their intention to gain share outside of core coffee. If you look at your menu compared to competitors, there are meaningful gaps. On the one hand, that might present opportunity because you can build layers of growth from it. On the other hand, it might put you at a disadvantage compared to others who are already present in that category. So are you planning to increase the speed of innovation? If so, what is the trade-off on that? And if not, how are you planning to compete against these new entrants that are coming into Canada?

Thanks, Danilo. All QSR markets around the world are always competitive, and that will be the case in Canada and everywhere else. In terms of the pace of innovation, we have a lot of opportunities in cold beverage innovation. I take that as an exciting thing, and I think we're getting faster in how quickly we're bringing these things to market. The pace of new cold beverage innovation has definitely stepped up. I would take the Matcha launch as one of those examples. We've now launched that nationally and brought a whole new offering and experience to many folks around Canada who were never exposed to it before. That's a great example. We've been clear about moving quickly, and I think you'll see that same pace of innovation over the next 6 to 12 months.

Daniel, I'd add that the culinary team here is terrific. We had our Board here yesterday and were sampling things that are going to be launching in the future. I'm very excited about them. The team understands the breakfast daypart extraordinarily well. We're maintaining share on our core coffee customer and doing very well with cold beverages and things that are already on our menu and coming in the future. My confidence level on Tim Hortons is really high. This is a business that has consistently performed over the last five years because it is getting better at serving its guests, both in terms of service, perception of value, and how the restaurants look. We're remodeling hundreds of restaurants this year. We're starting to build new ones because the return for franchisees is great. Our competitive set in Canada five years from now will be pretty much identical to today. Announcements aside, Starbucks had a very good start to the year, but they're a quarter of the restaurants that we have. This is all in our control. The loyalty deal with Canadian Tire is exciting, as is high-quality intellectual property like Harry Potter. The innovation we're doing is great. Our franchisees are doing a great job on service. There's a lot that's working well. If we have an off quarter, the team is moving quickly to improve it going forward.

Your next question comes from the line of John Ivankoe with JP Morgan.

I know international is a big segment with a lot of brands and many countries in it. I wanted to focus on the aggregate brand numbers and where you see particular strength from a return on investment perspective and where you see significant opportunities. In the context of average unit volumes: I understand it's risky to talk exact AUVs given format and country differences, but Tim Hortons in the second quarter is annualizing around $450,000, Popeyes around $1.2 million and Burger King around $1.5 million. Those numbers are less than what you're doing in the brands' respective core markets. Can you highlight where there's particular return on investment strength on a per brand, per country basis and where you see significant opportunities to improve so we could see improvements in those AUVs relative to core or home markets?

Thanks, John. If I look across our Burger King business in international, some of the highest return places are the places growing fastest. I'd point to France, where we have very strong AUVs and a great return on capital for our partners — that's been a big growth driver. Returns in Spain are also really good, which is why we have a large unit count there. In Asia, we have very strong returns in Japan, which is a major unit growth driver, and Korea also has really good returns. Australia and New Zealand also have high AUVs. Then there are markets where unit economics are meaningfully improving, such as Burger King China, where unit economics softened for a while but have materially improved over the last two years given same-store sales performance. Johnson and Daniel are doing a terrific job there, and we're getting unit economics to a place where it's compelling to accelerate growth, which is important to our net restaurant growth path. India is another market contributing growth; Raj and team had a terrific quarter with double-digit same-store sales, making unit economics more compelling. For Popeyes, markets like the U.K. have great AUVs and are growing; countries like Spain and Brazil are coming up the maturation curve with improving unit economics. Turkey has been an older market for Popeyes with very good returns and strong growth. In Asia Pacific, markets like India and China may have lower AUVs but also lower CapEx; we're seeing strong same-store sales growth that makes the economics increasingly compelling. For Tim Hortons, places like Mexico have good unit economics and margins. The U.K. is a bigger system-wide sales market with higher AUVs. The Middle East has lower AUVs but lower CapEx with smaller formats. Markets like China have lower AUVs and smaller formats; we're putting capital and plans in place to change the trajectory similar to the approach we used with Burger King China. Overall, there are many pockets of very attractive returns and several markets with rapidly improving unit economics that will drive our net restaurant growth.

John, Josh gave a nice geography lesson. I might add another lens. As we laid out the path to 5% unit growth at our Investor Day, we talked about roughly 1,100 net new units from international with about 700 of those from our top 10 growth markets. If you look at those top 10 markets — and Josh mentioned many of them — the paybacks in aggregate are between four and five years on new units, and that is improving. You're seeing markets like Japan and Korea driving improving paybacks. If you strip China out of the global ARS metrics — China generally has lower ARS — our international ARS for Burger King is pretty similar to our U.S. business. The paybacks in our international business, particularly in the top 10 markets, are better than the paybacks we're seeing in Burger King U.S. Tom and team are improving U.S. unit economics too. But when you back out China, you see exciting and impressive paybacks that support the growth model.

Your next question comes from Sara Senatore with Bank of America.

I wanted to touch on Popeyes. I know it's not the biggest segment, but it's still something like 10% of operating profit. Could you address why the turnaround may be progressing more slowly than anticipated? You said in the past the problems are more operational in nature, but the operating model seems straightforward. Is this a value issue? Is it menu innovation or competition? There's some thought that chicken is saturated. Anything you can pinpoint? Are you seeing data that suggests the second half will be comfortably positive? Or is the idea maybe it's later in the year and you're optimistic about initiatives you have in place?

Sara, Popeyes is tracking pretty much as we hoped, and that's why I reiterated our expectation for positive comps in 2H. We're seeing progress and are on the path we expected. We focused on a few priorities: value consistency, product quality and operations. We addressed value quickly with the $5 value platform along with the $20 family meal and a $6 big box to serve additional occasions. That has been effective in bringing traffic back and stabilizing sales. On marketing, we've refocused on our core menu — tenders, sandwiches and bone-in chicken — and we've seen volumes stabilize. Product satisfaction across core SKUs has improved, which is what we wanted. Operations have seen improvement in consistency; guest complaints and order errors are moving in the right direction. These things take time. We've dramatically expanded the field team and are increasing coaching and training; those folks are engaging with restaurants and making progress, especially in lagging locations. So I feel good about the work Peter and his team are doing, and the recovery is on track with what we were hoping for.

Your next question comes from the line of Brian Mullen with Piper Sandler.

Coming back to Burger King in the U.S., can you provide an update on the refranchising process, the demand you're seeing and if everything is on track with how you discussed it at the Investor Day? And separately, on the remodeling front, does the strengthening momentum in the business give franchisees enough confidence to pick up the pace of remodels? Or do you need more time to see a noticeable impact on the modern image pace?

Thanks, Brian. On refranchising, as a reminder, two years ago when we closed the Carrols acquisition, we said refranchising would start in years three through seven following the acquisition. We were pleased to start refranchising much earlier than expected based on Burger King's momentum and began in late 2025. The first half of this year, though Q2 was a bit slower than we would have expected, we've actually been very pleased with the pipeline of potential buyers. Since our Investor Day, the top-of-funnel pipeline has more than doubled in terms of folks interested in acquiring restaurants. We're still on track. In the second half, you will see acceleration in refranchising. We'll do a few hundred refranchisings here in 2026 and then the remainder in 2027, with the goal of sunsetting the Restaurant Holdings segment by the end of 2027 as outlined at our Investor Day. These transactions take time, and we want the right buyers because getting restaurants into the hands of the right operators is ultimately the best outcome. On remodel pace, we're very pleased with top line momentum in the Burger King system and the bottom-line trend, though beef costs remain at all-time highs and have impacted franchisee P&Ls. We expect more relief to come through in beef costs, likely more materially in early 2027. As that relief comes through and with the top line momentum, we'll see healthier P&Ls for franchisees. Our franchisees are supportive and excited about the remodel program, and as they see stronger results in their 2026 P&Ls, I think you'll see acceleration in remodel activity more into 2027.

I'll add that Tom and I have been spending a lot of time visiting new and potential franchisees over the last 6 to 12 months. We really want the right franchisees who are set up for success and will deliver on the vision — hands-on local operators running these restaurants. We're focused on selecting the right partners and being a supportive franchisor to ensure their success. That's been a major focus for us.

I'd add that we're excited by the quality of operators coming in. They're seeing a terrific opportunity and we have smart operators who want to grow with the brand. Interest comes from existing franchisees who want to grow, external operators new to the system, people from Carrols and corporate operations, and people on our field team who know how to run great restaurants. We're seeing a lot of interest from the right people,

Your next question comes from Andrew Charles with TD Cowen.

You reiterated the algorithm of 8% AOI growth for 2026. In the first half of the year, you saw portfolio same-store sales up 3.5%. I'm wondering if you can claim or predict that the 3% plus portfolio same-store sales long-term growth algorithm will be achieved in 2026. You talked about confidence in sustained Burger King momentum, Tim Hortons getting better for the quarter, Popeyes getting back to positive in the back half. Is that enough to get you to 3% plus portfolio same-store sales for the full year this year?

Andrew, what I would say is if you look at the business performance through the first half of the year, it's been pretty good. Standing where we do today, we continue to feel good about where we're going in the second half.

The last question will come from Gregory Francfort with Guggenheim.

I wanted to ask about the U.S. market broadly and pricing or check as part of your comps. One of your major competitors took up pricing expectations for the year and talked about franchisees maybe pushing ahead on pricing. In your conversations about pricing, particularly entry-level pricing, how are they going? Are you seeing any changes in compliance or those negotiations? Any thoughts there?

Greg, we're trying to be disciplined on menu pricing. We understand that one of the things we provide to our guests is value for money. Menu price increases have been running probably in the low single digits, and we've been pretty restrained. There are headwinds like beef inflation, but there are offsets as well. Beef is at an all-time high, and it looks like there's some signs it might come down, so we need to be thoughtful about timing. We've tried to be restrained and maintain alignment with our franchisees on what we're trying to deliver and the broader brand narrative.

When you look at year-to-date numbers for the Burger King system, we've been disciplined on price and seen a healthy mix in the business. We're selling more full-price Whoppers as part of the elevated platform, which is great value on a standalone basis, and we maintain strong performance with $5 and $7 Duos and Trios. Providing great value across the menu with the right mix is the formula, and our franchisees are supportive and seeing it in their P&Ls.

This concludes the question-and-answer session. I will now turn the call back to Josh Kobza for closing remarks.

Great. Well, thank you all for joining today. We wish everyone a great day and look forward to updating you once again on our Q3 call. Thanks so much.

This concludes today's call. Thank you for attending. You may now disconnect.