Alsea, S.A.B. de C.V. (ALSEA) Earnings Call Transcript & Summary

Good morning, everyone. For those who don't know me, I'm Flavio Burjato, Head of LatAm sales at Citi. And it's a great pleasure today that we are hosting the Alsea Day here at the Citi office in this beautiful day in Tribeca. Tribeca, cool place, good restaurants, expensive housing, but here we are. Anyway, thanks to all the Alsea management that are here today, and thanks for our consumer analyst, Sergio Matsumoto for pushing this to get done. We have a great program ahead of us today, and I'll pass the word to Salvador Villaseñor, Alsea Investor Relations Officer. Thank you.

Thank you, Flavio. Hello, everyone. Thank you for coming. First of all, I would like to thank Citi for hosting the event as well. And it's been a while since we've been in person. So it's glad to be here hosting these events as well. Today, we will have presentations -- today, we will have presentations from our CEO and broader management team. One of the things that we want to introduce to you is the quality of our management team that we have behind the people that you often see in meetings. So we'll have presentations from our CEO, Armando Torrado; from Pablo de Brito, our Commercial and Business Development Director; Cory Guajardo, Human Resources Director; Miguel Cavazza, Supply Chain Director; Jose Luis Portela, CEO of Alsea Europe; Rafael Contreras, our CFO; and finally, Alberto Torrado is going to give some comments, our Chairman, giving some comments in the end before we enter Q&A. Before starting up with the presentations, I would like to start off with a video of what we are, what Alsea is. [Presentation]

Now I will leave you with Armando Torrado. Thank you.

Good morning, everyone. Thanks for coming. Thanks for joining us this morning. I think it's going to be -- you're going to see some new things that I hope you like it, and thanks for all the people that is also connected online. We are very pleased to be here and excited to present you what will be the future of Alsea. Thanks for Citi Group. Thanks for Sergio and all the group for hosting us here this morning. Thank you all. And today, I'm going to talk about the prominent future and opportunities that we have and Alsea has ahead. Some of the topics that I will cover in this conversation this morning will be the key strategy for the company, the business model that we are deeply going through, our Alsea culture and then some growth opportunities that we have ahead. And why not, I will say, Rafael will give a financial update of the company. And later on, I'm going to present you how we are doing a little bit to week 12 of that where -- when we [indiscernible]. So I'm going to give you a little bit of update on how we're doing. First, I am honored also to have here my -- part of my leadership team. They will give a deep dive -- a little bit deep dive in the 4 pillars that I think are more important in the company. And I want you to hear from them what are those 4 pillars and how we're going to a do double click and a deep dive in those [indiscernible]. First, let me present you said myself, I know somebody -- some of you not everybody, but I'm Armando Torrado, I'm 53 years old, and I've been working in this company since I am 19 years old. So I've been most of my life here almost 33 years in this company, I'm married. We have 4 daughters. It's the -- where I started with Domino's Pizza a long, long time ago in the corporate stores, working there like around 7 years. Then I was the CEO for Domino's for around 7 years more. And then as soon as we make this company public, I went to development -- store development. Where I really were there 5 years knowing the whole niche of Mexico, all the cities, we were opening 95 stores a year in Domino's. So that was a big walk around from all the cities, all the streets. So I really have a knowledge of the country that I am from. Then I became the CEO for the cash flow division. I was starting with the cash flow division where we brought Chili's, our first brand for cash flow. I was there for 5 years joining and bringing some other brands of Casual Dining. And then when I was appointed -- well, I was appointed CEO in July of last year before I was in international for 4 years. I was running first Latin America, and then I manage the whole area, including Europe for 5 years. So first of all, I'm very pleased and honored to lead this company. I feel this is, of course, my house, your house. I mean I know the company very well deeply, been in several positions in the support center and being managed in some brands that give me a little bit good knowledge of what do we need in both sides as a company, giving a much broader perspective of the needs and an opportunity that this company has. Since July that I started, I put a plan, and I said, let's roll out. Let's go that -- I make up as I said let's go to 100 stores in 100 days. I did that challenge. It was possible going to all geographies. I went to most of the brands of the stores and the only good word that I saw was opportunity, opportunity in all the cases, -- and I saw a big energy team, thankful for the past 18 months that we had before that, that it was closing stores, some bad situation in our segment. But everybody that I went to a store was just thankful, thankful for giving the work, thanks for having us here, thanks for letting us be part of this journey. And in all the stores that we saw and all the brands was an opportunity moment. So I'm pleased that now that we are coming back that is -- the road is ahead for a [ nice ] future just to tell you that we have the team and we have excellent brands to develop that future road. As a leader of this organization, I have a clear mission of where we need to go, what we need to achieve and of course, the results that we need to deliver. First, I would like to talk of our purpose. It's important to let you know that this stands in all the company and everywhere that we are. And we are a people-based company. There's no doubt. We're a people-based company with a single purpose of delivering happiness to our consumers, with our clients and our partners, our team members. We want to serve at top every day one by one -- a pizza one by one and let all those customers to be glad on serving the best service and diverse product that we are. Here, I would like to talk about Alsea culture. I -- how we can maximize this Alsea value. And these are 6 pillars that are super strategic, super important for us. First, you have the best talent. I think Cory is going to talk a little bit more about how we're doing in talent and what's going on about turnover, how we're doing. I think that's the best and more important thing for our success in the future. Second, operational excellence. We are an operational company. We have KPIs. We have the road ahead so to have the big excellence in operations, digital transformations and cutting-edge marketing, super important in these days. Then of course, the portfolio probability. I'm going to talk later on a little bit how we're doing the portfolio profitability, where we're going, how it's going to be standing in the 2027 in 4 more years, with a percentage of brands and geographies. Talk about innovation, and I would say, innovation in technology, innovation also in products and of course, sustainability pillar right now for our future. The values I always -- when I chat with my team, I am very proud to say this is the values that we strive for, of course, is winning attitude, engagements leadership, amazing service that's what we are standing here for, a collaborate spirit in our team and attention to all the details. That means [indiscernible] in Spanish, and then doing a commitment of what strive for. We need to develop the best team in order to grow, in order to handle to the operation of the stores, always making the best decisions for our customers and teams, always thinking and -- if that customer is going to like, if that customer is going to be ready for [indiscernible], if it's okay for the customer. So we need to think about, first, the customer and then our team members. And then, of course, increasing the potential great value of the customer and then, of course, maximize the value of all of our shareholders. Since I joined the company this new role in July and being in 2 parts of the game, in the corporate position and then in operational side. I said, let's do a different model of working. I saw with a lot of my team people doing more transactions and transactions and businesses wise. So I try to sell it and move separately, all the transactions that we do in the support center and let the leaders that do business-wise every day just focusing on that. So we have here that customer-centric just in the center of our flywheel of the strategic model. Then all the brands abroad. We have the accelerated growth that is our people that is in the field, in real estate, growing and seeing opportunities of the field, a white space for us to still grow in the company. And then our 4, these 4 pillars that as people capability that Cory is going to talk a little bit more what do we strive for that people capability. Operational capability, there Miguel is going to talk a little bit more how we do it, how we give them those support in order them to focus in sales, in the customer and in human resources to each brand. We're going to talk about the management capability, Rafael is going to talk a little bit more about that, And Pablo is going to talk about the commercial digital capability that we strive in the company. And we want to make sure, of course, the same -- we translated in our people capability, commercial, operational and management, how can we attract better talent and with compensations, work flexibility, very important right now, the transformation that we have in the human resources side of the table, it's been -- I would say, we are not that complicated to get people, but it's getting a little bit different. Different ways to attract talent, especially in Mexico, we didn't have that problem before. It was just easy, you put an ad in the news, there's 1,000 people now there. And now there's not 1,000, probably 150, but in what details we need to really focus to have the best talent in our stores. We're going to talk about commercial digital capability, a lot of change, a lot of movement. Starbucks is moving to SDS platform that Pablo is going to talk, how we're doing in Domino's with technology and also in the restaurant segment, that's going to be interesting to talk. Of course, the data analytics now is a good way to track and with our customers, personalize our customer experience. Data, I mean the price revenue management with this inflation that we just pass by, price and management are super key for results. So we're going to talk about that. And then operational capability, how can we continue to improve the performance, what are we doing in our distribution centers? What are we doing in some -- especially in Mexico, Colombia and Europe regarding producing some sandwiches and capabilities of manufacturing some products that we are aligned to. And then, of course, Rafael is going to talk a little bit, and myself, of portfolio management, where are we going in brands, how the geography looks and how the portfolio looks. So I'm going to pass the microphone here for Cory in order to start talking about human resources a little bit where we're going in people. Thank you.

Thank you, Armando. When we talk about people capability, we like to think about the results and the value that we have to provide to the business. It's not about what we do in HR, but what the result of that, what the brands need, so what we have to work on. And that value is basically expressed in 3 main results. And I'm going to talk about the first one full staffing at the stores to deliver superior service. I know that this might seem pretty basic. But at the end of the day, that's what sustains business performance. As Armando was saying, we are taking a very close look at what the market is telling us, what we're learning from our partners, from our franchisors and make sure that we do this all the time, and we do it in a very good and effective way. And of course, it all starts with a purpose. When we decided to include the word happiness in the purpose, this idea of bringing happiness. Of course, it represents a lot of commitment in terms of the quality of the working experience for Alsea, how it's working for Alsea and how do we make sure that working for Alsea and its brand is really a very positive experience for people. And so the purpose is inspiring significant change to the way we traditionally manage people. This idea that we are a high turnover industry, and we have to live with that, we're really challenging that. It is not only HR, but influencing the business, influencing the business leaders so that we really think about this differently. And think of Alsea not only as a big employer, which we already are, but as a good employer and employer of choice in making sure that the jobs that we offer are jobs where people want to stay, where they can grow, they can learn and they can continue developing. So the people promise across markets, this happiness issue means that we offer jobs where people are treated with dignity. That's the main thing and where we foster well being and promote development opportunities. All HR initiatives are connected to that. So that we really offer our people reasons to stay, not just to join Alsea, but to stay in Alsea. And at the same time, we know and we acknowledge that we must have a very effective recruiting model. And I'm so proud of what the team in Mexico -- Mexico is the biggest market. I am so proud of what they've done in terms of the recruitment process using artificial intelligence, and we want to transfer that model to the rest of the countries. We -- you wouldn't believe it, but we only have a team of 33 recruiters in Mexico that work hand-in-hand with our store managers, and we are able to hire and recruit high volume every month around 2,000 people per month. So the KPIs that you see there, 98% of coverage. Critical stores, those are the stores that have coverage below 80%. Those stores should not be more than 5%. When that store gets to that level, we always help them directly to recruit and complete the staff, and the time to fill 7 days to complete the open positions that we have within the operations. So we want to share this model with the rest of the countries, mainly with those where we are seeing challenge in order to hire the people that we need. And as part of this process, we are focusing on the critical zones for market. We are learning that in certain cities, it's been challenging to get the people that we need. And at the end of the day, I could tell you a lot of examples of the regional approaches that our store managers are having. But the most important thing is to provide them with the authority and tools so that they connect to their people, they learn about their needs. Every person is going to have a different need, a different motivation. And so what we say the store manager is just try to meet that. If somebody is asking you for a fixed shift, which is something that we're not very used to the world, try to do it because that's the best way to provide the value that the people is expecting. So -- and I connect with the next one, this personalization of the working experience. At the end of the day, we know that these challenges have to be addressed store by store and provide them with the authority, the tools and this process of test new solutions and learn and just let's keep the communication so we can really identify where we should be addressing the most important initiatives -- institutional initiatives across all the brands. And fair income, this concept of [Foreign Language] which is a core element of the HR and the ESG strategy. The main gap that we have is in Mexico and we are working on that. We're really taking very seriously this idea that the main reason why people work for us is because they need the job. So those jobs have to be well compensated, and we're always talking about this with Alberto in the world that we are really committed to investing in better salaries, mainly where we have main gaps, which is Domino's, Burger King and making sure that all of our people meet this idea of fair income, okay? And we talk about income, not only salary because we know that in our industry, tipping is important. So we're also enabling this tipping through all the channels and the different brands in order to help them to have a better income. And the key metric that we are taking care of is, of course, turnover. Turnover is going to be always the main result through which we can help the business offer a better service and have always the customers preferring our brands. So as you can see, Alsea Global looks pretty good, and I'm comparing to what we have in 2019 because, of course, 2020, 2021 are not good references because of the pandemic. But if you see the results of Mexico, the Mexico team made an extraordinary job here from 85% to 66%. So this is like breaking all of these paradigms regarding the level of turnover that we can have. And of course, learning from all the markets, Argentina always with the best turnover results. Colombia pretty, pretty good, Chile -- so we are making this like a turnover committee. Each brand in every market, they have their own plans. And of course, the plan has to see comprehensive in terms of the way we treat people and the compensation that we offer and the store environment, it has a lot of things. But at the end of the day, when we see these -- and even though when we have extraordinary results of our sale in Mexico, 66% turnover means more than 20,000 people that leave the company every year. And we always wonder what's behind those stories. How can we better learn about what we should be doing. And again, the same artificial intelligence technology that we are using to hire, to screen candidates, to schedule job interviews and to streamline process, that same technology we're using it now from this year on in order to connect directly to every person that we hire and be asking them through the chat bot how are you feeling, what do you need, are you receiving the proper training so that we can anticipate to potential problems that are happening store by store and by district. And we provide those reports, of course, to our business leaders, managers so that they can learn in order to solve the problem store by store. So we are confident that we're going to continue improving this and making sure that the business is able to really offer customers the extraordinary service experience that we want to. And very connected to this, the second result that we're looking for in terms of people capability means to have the best store managers in the industry to increase sales. We have extraordinary store managers. Actually, in a couple of weeks, we are going to give this award that we've been giving since 2016 to the store manager of the year. And when we receive nominations, those are incredible stories inspiring stories, we have wonderful people. But we want to make sure that, that wonderful people is in every store, and we still have, of course, room for opportunity. When you walk in a store, you immediately can tell if you have a good store manager or not. And of course, we've always known this. And we've always said that the store manager is the most important position for the company, but we want to strengthen that, and we want to approach it in a different -- with a different perspective. This business is all about the store manager, the store manager guarantees the good experience for the people and for the customer, but we would always look at it as how do we have to prepare them in order for them to provide to the business, all these things that we need. And we're changing that now. We want to make sure that if we wanted them to take care of the people, the first that has to be [ feel ] that we are taking care of them is the store managers. So that's a switch in the strategy, and it's important. And what we're doing is defining, building a governance framework that we're going to provide to all of the markets and all of the brands regarding how we should manage that position, in terms of the success profile, the personal development and well-being, the professional development and making sure that compensation is very competitive and strong enough for the store manager to build equity for the future for their family. So we're very excited about this, it's like we imagine in the role and making sure that no matter the brand, no matter the country, all of the store managers for Alsea really have the best experience working for us. And when we have that, of course, we can expect the results in terms of people and customers. These KPIs that you see here are only from Mexico. We are still building this across the rest of the market. But how are we going to measure the result of if we have the successful store manager, of course, with their performance, which right now is around 87% store manager turnover and we have a lot to learn here. For example, if we take a look at, we are getting in Argentina, extraordinary turnover with 9%, but we are getting in Mexico, 38% turnover. So we have a lot to connect and learn from the package. We compare how much do we pay in base salary, in total compensation, and we still have room for opportunities. So we are going to be taking a very close look at all this having the store manager as a key element of the people capability. And finally, the top team, the top management team. We want a diverse and competitive team in order to continue our talent data base and taking a much closer look to the development opportunities for the top 30 group and the top 100, which would be basically all of the director level positions in all of the countries. We know that we have to strengthen our talent management process, and that we have opportunities in building a success force. That's a top priority for the Board. And we allocate a lot of the time to that. And we are trying to learn and strengthen that process each day. So basically, what we're going to focus on is learning about the gaps that we have versus best practices in terms of talent discussion, talent development and continue making external benchmarking with potential candidates that we might be interested in having them with you. And all of us, every year, we are accountable to presenting them, what's my potential successor and what am I doing to develop him or her so that really we can assure that continuity of the strategy. And a third pillar of that is continue working with Armando in the redesign of the organization to build bigger roles. The CEO of Alsea is a very complex role, a big role, and we have to make sure that there's more than one leader potential position where we can have positions covered, okay? And our main key KPIs for the talent strategy to management positions with succession plan, beside the results for 2022. 81%, if we are between 80% and 85%, I think we are making a good job. The internal sourcing of director level position, 79%, that's excellent. We have from the top management and one level below and 79% were appointed internally and that's great because that's a very good indicator that we are developing internal people. Key talent retention, we have opportunity there, 83%, but we would like to be around 95%. Female directors to have more women represented in leadership positions. Right now, that's the metric, 23% but we already make this public announcement that by [indiscernible]. And leadership impact, this is a metric that we have where everybody direct reports evaluate us as leaders and to make sure the impact, we have 13 attributes, where we have to set the example. And again, 3.8 out of 5, and we would like to have 3.9 by 2026, a couple of years to strengthen. The top team alignment, I am going to show you this, there we are. How are we making sure that we are all aligned to the main success metrics of the business. This is an overview of how we do this. In general terms, the compensation mix for the top management, 50% fixed compensations and 15 with a long-term incentive. How do we pay the annual bonus? It's based depending on your role and your place in the organization, but more or less, it's 25% of that on group performance indicators, financial indicators and then 50%, what we call the perimeter, the perimeter depends -- it's the business unit where you have the most, the biggest impact or the most important impact. And finally, your performance [Audio Gap] out of the annual bonus. And last year, we launched a long-term incentive, which we are calling Bono Crece, 3-year based on return on equity and earnings per share, Okay?

Thank you, Cory. Good morning, everybody. Our Alsea supply chain is a key pillar of the strategy and a competitive advantage for our stores and brands. So now I want to share with you a video. [Presentation]

Like it. Okay. Thank you.

Yes, Miguel, I'm fan of your job and your team.

Thank you. In Mexico, we operate a 5PL operations integrated by DCs, transportation, manufacturing, replenishment and also procurement. We operate more than 2 subsidies around the Republic. Today, we just finished our migration to Oracle Cloud that will allow us to update our warehouse management system, transportation systems and also we're implementing voice picking that will allow us to increase productivity at the same time to be more efficient towards store service. Also, we're working very close to our vendor community to increase our Backhaul program. Today, our Backhaul plan to take it to 10% in the following 2 years. On network planning and design, we use [indiscernible] that is the most updated systems around the world. As we are committed to sustainability, this system not only will help us to reduce the weight average distance, increase our drop size and also be more efficient, it also will help us to reduce the amount of fuel and make an impact on the CO2. As we operate a multi-temperature and a multi-brand in the market, and also to control this, we have a control tower that allow us not only to work the [indiscernible] of the truck, also will track the amount of coal that we have in each truck and also the amount of speed and make more efficient our truck drivers. Also, we have a plan with the school of driving inside Alsea to develop the new truck drivers of the future. So today, 90% of the hiring is inside and 10% is outside for truck class KPIs. And let me show you that -- for instance, for the price list for the last 4 years, Alsea had been the market, having a better price comparing with the food and beverage index in Mexico. Also, we have a better stock availability of product and service to our stores. We have increased 100 basis points for the last 4 years. Productivity, something very key for our business have improved more than 44% and interpretation for quality team. Here, I want to show you how the global supply chain is integrated. As I just told you, Mexico is a 5PL and in the rest of the regions, we have third parties, they operate 2 and 3PL. All the operations are selected and certified under high standards of operations, but much better of quality and food safety. We have been doing benchmark since last October to elevate the bar of the operations. This is aligning practices and make much better use of the scale of Alsea today. In procurement since last October, we're working a global strategy under the promise think global, but add local, okay? Our total expense of all the countries is around $1 billion. And we found out that 30% is representing of the top 20 global raw materials. So the cost -- so we already have some hedgings are around $240 million in raw materials that will impact this year. So we try to control the cost and also have a positive financial impact. Globally, last year, Alsea have a minus 3% in wage average inflation in other countries with a global food beverage index and in Mexico, 13.5%. The main key raw materials are cheese, bread, oil, proteins and also we included packaging. On the food quality, we have a very strong program on quality assurance. There is a supplier program approval development that implement for food and packaging too that take consideration for safety, quality and also social responsibility. We are pushing that all our vendors have a global food safety initiative. There's also -- we have a surveillance program that really to follow up after the inbound they open product with our labs that we have our own labs and also with third parties. We do some tests of microbiology, psychometrical and also application for product suppliers randomly. All our [indiscernible] are certified with SQF. Also, our internal system of quality assurance has been proved to be up to the challenge with international standards. And afterwards, I think we're very happy and proud to share with you that the logistics team has been with award -- with the Mexico Logistics award based on the supply chain network redesign that we did in 2021, and we applied it in 2022. Thank you very much.

Good morning, everyone. It's great to be here. And the idea is on this chapter to talk about the overall global commercial strategy for the company. And before getting started, 3 key messages that I wanted to share. The first piece is usually when we talk about digital [ mega ] complex, so I will try to keep it simple, connective and down to earth to the business to our team members and our customers. The second key message is Armando shared the importance on the evolution of our strategic business, and one of the key pillars is a commercial strategy. And we need to further drive our commercial strategy to become progressively more global. And that is important to drive conversions, to accelerate opportunities and to actually drive further growth. We've got opportunities on the same brand across geographies, on benchmarking best practices and winning the same geographies across brands. And the third message is it's not only about what we've got and what we have done, but it's also to have the right balance between what we have done right and the opportunities to come and how we can do it better. So in a nutshell, I'm getting down into the presentation, when we think about digital customers and KPIs, first, let's get back to the key concept. Digital customers are the ones related to our delivery pillar, either being on our own delivery or through aggregators, and also digital customers are the ones considered through our loyalty or CRM programs. So in total, in the 3 geographies, we've got in simple numbers, around 10 million customers, 40% of those are in Mexico and the rest is evenly spread between South America and Europe. Those digital customers today account for around 30% of our total sales in Alsea, adding up in 2022 of around MXN 19 billion, growing around almost 32% year-over-year and representing around 50 million orders in 2022. But now again, talking about brands and which are our key businesses, thinking about Starbucks, well, we have grown almost 44% in our digital sales. And today, our sales penetration in Starbucks is around 22%. And when we look at Domino's, we have grown around 19%, clearly more penetrated as we do have our own delivery, and we do have around 42% sales penetration. We will highlight also the restaurant segment, high penetration in Europe, quite good in Mexico and growing 36% with 25% penetration and the final segment around a Burger King or our hamburger business. So when we think about digital, it is mostly about data. And when we think about data is how do we get analytics and insights behind the data. And within that, it's important for us to be -- to have a focus and simple agenda again. So there are many 3 pillars that we need to further drive with the scale across the brands and the geography. The first one is market research. And we need to have a clear deep understanding. It's not only about the general market share. So we know our general market share. Mexico, 17%; South America, 10%; Europe, 14%. But it's all about how do we get more granular. So within each country, each brand, we need to get further down to each geography and each location and the channel and the moment of consumption, and understand which consumers are buying our brands, which consumers are not buying our brands, which consumers which are not buying our brands, which is the bottleneck on them having a relationship with us. Are they stacked on the consideration, have they tried our brands and they have not become loyal, how do we make our regular customers even more loyal and understand how our brands are strong on some attributes and we've got opportunities on some others and make sure again that this pillar is clearly consistent across brands and across geographies. So we are able to have a full market reading on a global consolidated footprint. The second pillar, Armando clearly highlighted that at the beginning and pricing and revenue management is key. And we do recognize that inflation has been challenging, but it's also important to have a more evolved structured pricing and revenue management strategy that clearly will impact as an opportunity to improve our profitability, and it's mostly about making sure that our price lists are optimized. And when we do tiering, we clearly become more structured between socioeconomic level, location, competitor presence and even we segment that, it's not the same for a Starbucks on the price elasticity of [indiscernible] the price elasticity for a high-end ice beverage. So clearly, depending on the structured product segment, consumer location and moment of consumption, we can get that opportunity on an improved basis, and that's another key pillar. And the third piece, it is mostly when we talk about customer and digital analytics, it is mostly about how do we move from transactions into relations, and how do we move it from transactions to relations and to drive customer growth through frequency. So what we're going to see is how we are moving to customer lifetime value segmentation or recency, frequency and monetary segmentation and how we are evolving through understanding better preferences and moments of consumptions, and how do we get into a better personalized market in either being product, communication or personalized over some promotions. So connecting the third chapter on the CRM and loyalty strategy and again, in simple terms, which are the key pillars. So the first piece is, let's locate where CRM and loyalty is on the customer journey. So clearly, we've got an overall -- on the upper right, we've got acquisition. Actually, we drive marketing campaigns, and we are becoming more and more efficient. And since the moment the customer has their first transaction in one of our stores with one of our brands, that's the moment the CRM and loyalty chapter starts. And the CRM and loyalty chapter is all about how we grow the value of the relationships of our customers. And usually, there is around 2 to 2.5x more frequency on our customer that we do have the data and we do have the relationship, and we do have those customers on a digital platform compared to a non-digital customer, when we only know the transaction, but we don't know who the customer is. And the way we are going to evolve is the first pillar is recency, frequency or monitoring. In simple terms, customer lifetime value. And it's all about, in simple terms, the value of a customer is how much the customer has spent with us on a period of 1 year to give the value of that customer. Obviously, we measure frequency in a shorter period of time. And we look to low, medium and high frequency depending on the brand. We measure that in simple terms, in monetary by the average ticket being below the average and being above the average. And the whole high-value customer is going to be the top value with high frequency and high average ticket, and you can see a simplified segmentation between low, medium and high value. The importance of this is that we are evolving on this segmentation strategy for all of our brands and for all of our geographies. So we are able to get learnings across brands and across geographies. And progressively, we are getting into understanding which are the customers that have not bought us in the last 90 days, have not bought us in the last 180 days, which are the customers that we are losing and why we are losing those. And by learning from that, we can evolve on becoming more targeted Danish market. Also, we are going to evolve on the second pillar on what we call personalized marketing. It's also important, not only important what the customer bought but what the customer has not bought and what they do not know about the brand. And that's where we need to pick up their preferences on the day-to-day routine, but also to highlight the value of the brands on our new operation. And the final piece is about customer satisfaction and how we relate the customer satisfaction in every point of transaction to build up the relationship with them. And a positive feedback, what do we do about it? A negative feedback, what do we do about it, is part of the overall CRM strategy. So getting from the general strategy into the more specifics, and there are important changes that we are going to drive moving forward on this chapter. And as we shared, we are going to get back-to-back with our global partners and truly to accelerate the agenda to become the best in class. So within that agenda, the first chapter in the Starbucks on our loyalty strategy is going to be fully focused and solely focused on Starbucks Rewards. And we are going to expand -- and I'm going to expand in the coming slides what that means, which is the potential, and for us, which is the potential to grow. Armando mentioned SDS, and we are going to share that in further detail. The second piece is Domino's. We know that Domino's has a piece of the pie rewards. And it can have different formats and it can have different rules adapted to different market realities. So yes, same piece of the pie existing U.S., exist in multiple countries in Europe, not necessary exactly the same rules, but those being adapted to the reality of each market. But important is to have the common platform and to drive the learning through that common platform. The third piece is we do acknowledge that in the restaurant segment, we have been investing a lot in the world platform in Mexico. Also, we do acknowledge that our evolution in the restaurant segment around CRM and loyalty has been very important in Europe, and we are looking to converge those on a common CRM and loyalty platform on the restaurant segment for the entire Alsea. And the final chapter, we can see in Burger King, the mighty key examples on mighty key penetration and just launched it, RBI on 1.5 years in Brazil. Within 1.5 years, they've got more than 25% sales penetration. So when we back it up, you can see that our current penetration below, and this is our reality. And this is the balance between our reality and our opportunity. So today, in Starbucks, we are around -- total, we have 14% penetration in the loyalty. And we are going to see that if we benchmark that with U.S. 50% penetration in U.S. as a benchmark, and we are going to tell that history. Similar situation in Domino's, 50% to 60% penetration because the loyalty program is fully embedded on the e-commerce and fully embedded on the delivery platform. So imagine the opportunity. And imagine each of those customers actually spends the double with us that have been non-digital customer and not having the data of the customer. And that's basically on the CRM and the opportunity. So now the second pillar, I mentioned that loyalty is one of the pillars of digital, the other key pillar is delivery. And when we open delivery, and we were talking about this in a balanced way. There is a usual contrast on shall we go fully with the aggregators, shall we go fully with our own delivery. And it's not about in reality, one or the other, but how we build an overall delivery strategy, understanding the role of both aggregators and our own delivery. And understanding that the aggregators is a channel that is growing, the consumer is selecting, that, in general, is here to stay, and we need to make sure that we capture our fair share and we capture customers, which are not necessarily loyal to our brand. Usually customers that are highly loyal to our brand get on the brand on e-commerce and in the brand-owned applications such as example of Domino's. So the balanced role of our own e-commerce and deliver is how whilst we are getting nonloyal customers from the aggregators and our fair share, we make sure that we deliver the best high value through our own e-commerce and delivery platforms. And when we talk about loyalty program, it's going to be on our platforms, and that is going to get the right balance on capturing the full delivery moment consumption opportunity. So when we look into the specific numbers, you can see on the upper left on around 42% Domino's. Down below, you can see the distribution between our own delivery, aggregators delivery, and a bit on the opportunity just to highlight that's only the opportunity on aggregators, okay, and is looking to the representation that we need to capture in the relative short to midterm on our fair share. But in Domino's, obviously, mostly concentrated on the strength of our own delivery, but opportunity to almost double our presentation on aggregators. When we look into Starbucks, similar situation, and you can see that across the different sales penetration and across a different mix of brands. So that's a bit on the -- the key message is on the overall delivery strategy. And again, the role on both aggregators that we've got to play and the role that -- and the clear strategy and the highest value that we need to deliver through our e-commerce as a mid- to long-term bet. So now from the general key aspects getting into a couple of specific cases on our largest brands that we wanted to share. So we peaked Starbucks, Mexico. So a couple of specific KPIs. In Starbucks, Mexico, you can see down below the real evolution on sales penetration, digital sales penetration between 2019 and 2022. So 2019, we're 25%; 2022, we are 35% penetration in Mexico. When we look into Starbucks Rewards in Mexico, last year, we have grown 50%, whilst the overall business grown 36%. When we talked about the number of customers that we've got in Starbucks Mexico, we are talking about a bit more than 700,000 customers that are accounting for that 35% of the total sales. The opportunity is huge. And even -- not only in the size of customers to capture, but also when we look into the spread of those 700,000 customers, we also got opportunities to -- there are customers that actually bought us once or twice in the last 90 days, and there is an opportunity to also increase our -- their frequency. But when we look into their average frequency, again, what happens is that on average, they've got to double the frequency, and they spend on average the double the value versus a nonregistered and a non-digital customer. So when we look into the opportunity and in the outlook, well, U.S. got 56% digital penetration, okay? And with the overall acceleration that we are driving with the Starbucks digital solution global platform that I'm going to show you in the coming slides, we do clearly see the opportunity to, in the coming 5 years to get to that benchmark level, not only in Mexico, but actually driving that forward across Starbucks and across Alsea markets. So when we talk about Starbucks digital solutions, what do we mean and again in simple terms? Well, it's a technology and digital solution that is comprehensive and is looking to connect in a better way with customers and team members, what we call partners in Starbucks. And when we talk about partners or retail or a store, it is as important to improve our relationship with our customers, but it's also evenly important to make sure that our team members got the best operational technology. So they are able to focus more time with our customers to deliver the best experience that they have the best systems to manage the store to focus on the relationship with the customer and even to manage inventory. And the second big chapter is what we call the app, which is the customer-facing app, to have improved our loyalty, CRM and personalized marketing. And the third big chapter is about analytics and insights. So where we are today in this. So were reviewed with Rafa and Armando, just as a complementary reference, we are in the process of developing the rollout for this in Latin America. In Latin America, will mean around an investment of MXN 340 million only for Latin America. And it's going to be a progressive implementation between the different countries. So we are going to start Paraguay, Uruguay, Colombia and down the line in the coming 12 to 18 months, all the LatAm markets are going to be rolled out, okay. And it's going to be a progressive rollout per market, but it's also going to be a progressive rollout by main components, the core, the app and insights analytics. So on the balance side, also in Europe, we have implemented what we call the bundle 1 or the retail and the core solution and also evolving throughout this year on the Starbucks app and analytics and insights and better CRM capabilities. So we're going to show a video to illustrate in a lively and simple terms, what is the Starbucks digital solutions. [Presentation]

So that's basically Starbucks digital solutions. I hope that you really like it and that really illustrates in simple terms, what we are looking for. So now the other chapter about Domino's, our other big global brand. So again, picking up Mexico, I think that it is actually great news that in our largest market that we do operate with Domino's. In the second largest market in volume in terms of pizza globally, we actually progressively and accelerating our market share growth. So you can see on the upper side, we're gaining share 1.5% on last year versus 2021, knowing that there is high intensity of competition, knowing that there has been known challenges on the overall inflation cost. So couple of KPIs in the same trend. Our sales penetration, digital sales penetration in Mexico is in corporate stores around 45%. We have grown our sales in Mexico in digital channels 26% year-over-year. On our overall business, the growth has been 13%. So that's a clear signal of acceleration. In terms of only Mexico, we are having 2.9 million active customers. And again, when we measure about frequency and compare that frequency to the overall average of the frequency of the brand, it is 3x the frequency and 3x the value because the average ticket actually is relatively the same. And again, when we look down below the evolution between 2019 and today, so 2019, we're having 26% sales digital penetration. 2022, we ended up with around 45%. When we look in U.S. as being the best benchmark, and we are going to talk about how do we get again back to accelerate becoming the best-in-class. The horizon of U.S. is around 70% of the sales are digital. And that's our horizon. And the whole key point is how do we accelerate towards that horizon from where we are today. And similar to SDS and similar to the concept of becoming global, becoming the best-in-class, having common platforms and actually driving acceleration through simplicity and conversions, the chapter in Domino's is called Domino's Cloud. So it's one e-commerce for the entire Alsea and one e-commerce platform. The second big concept is it is literally the same source code and the same system than Domino's U.S. literally, knowing that it's the best-in-class. There is a lot of people developing and investing the best-in-class technology within Domino's U.S. Clearly, we want to ensure the best experience and making sure that it's not only about one-shot investment. But every time that been in the last source code is, let's say, that U.S. has the latest innovation rather than being 3 to 5 years delayed, we are going to be 3 to 6 months delayed. And that's the whole difference. It's about continuous innovation and continuous improvement and how do we drive that forward. So similar to Starbucks solution, the key pillars of Domino's Cloud is: there are 2 chapters on the left side, FLEX and inventory app, which is it's all about how we further facilitate our operations at the store, and we become -- we make them more efficient, and we make those easier for our store managers, like Cory was mentioning. The second chapter, which is Digital Shoulder Surfing. It is -- Digital Shoulder Surfing is, in simple terms, a way to predict what the customer is going to order, okay, in digital platforms. And PIECE of the PIE loyalty platform. And when we talk about GPS, we do acknowledge that that's an opportunity on us, and we need to catch up. And as part of this deployment, we are catching up very quickly. And then talking about ADVANCED MAKELINE, mostly of our pizza business is about the rush hours and the pickups. And getting connected with ADVANCED MAKELINE is how technology is going to -- how this Domino's Cloud platform is going to help us to actually predict what do we need to further prepare in those big times to actually make the stores even more efficient and make our service even faster than what we are doing today. So before getting into another video, let's get into the concrete reality not only the PowerPoint, is where we are today with Domino's Cloud. So -- we've got mainly 3 key markets. Now we expanded 1 store in Uruguay, but it's Mexico, Colombia and Spain. So we already implemented the web version in Mexico and Colombia. So that is right. We are going with the app versions live in Mexico and Colombia between April and May and rolling out the rest of the technology in Mexico and Colombia by the end of Q2 and start the development and ending up a full rollout for the entire Alsea by the end of 2023 on this overall solution that we are presenting. So we've got another video about Domino's Cloud and what it's about. [Presentation]

So that was basically from my side. Thank you so much for listening, and thanks for the time. Okay.

I have been part of Alsea for the last 10 years. I started in Chile, leading first Starbucks, then the whole portfolio in Chile, and then I moved to Mexico. And since last year -- August last year, I am back in Europe, back in my hometown in Madrid, in Spain, leading our portfolio there in Spain and the other countries in Europe. Of course, all the strategies and ideas that have been explained by my colleagues by Cory people purchasing and logistics and for sure, digital and technology. All of them apply to Europe as well. Yes, we are a truly global company, and we have -- we are in close contact, and we have the same strategies. What I have seen when coming back to my city and to my country, it's a huge opportunity in Europe for us, for Alsea, with our portfolio. And besides the opportunity in technology and digital that Pablo explained, I wanted to focus on the opportunity in terms of store count in -- number of stores, yes. There are possibilities for our brands to grow in Spain and in Europe. Today, our portfolio is composed of 7 brands in Spain and mainly just one, that is Starbucks. In the other countries in Europe, in France, in Portugal and Netherlands and Belgium, we are opening the first Starbucks store this year. And the opportunity, I would say, is in all brands, but mainly in 3 of them. The biggest opportunity is with Starbucks. Starbucks is doing very well in all our geographies and in Europe, for sure. The opportunity is bigger in France because the market is much bigger there and our penetration is still low. But there are opportunities in Spain, in Portugal, Netherlands, and for sure, in Belgium. We will talk a little bit later about France. The other opportunity that we have is with Domino's Pizza with -- we are close to 400 stores at this moment, but we are still the #2, the second in the line in the Pizza market in Spain. And for sure, we want to be the #1. We will do that in the coming years. There are opportunities to penetrate in smaller cities and to organize new openings in the big cities as well. Domino's is doing very well in Spain. And the third opportunities, big opportunities with a local Spanish brand that is called Vips. We have Vips in Mexico as well. This is a very interesting phenomena in Spain because it's a local brand. It's -- it was born in Madrid in the center of Spain. We have 150 stores. We defined Vips as in Italy. It's a place. It's a fantastic magic place where you can go. We open early in the morning at 8:00 and we closed late in the night, 12 or 1 a.m., and you will find people there all the time, having breakfast, having lunch, dinner, after lunch whatever. Yes, so there is a very nice atmosphere in this brand. It started, as I said, in Madrid, in the center of Madrid, very successful there. In the last year, we have been opening more stores, more Vips stores in the surroundings of Madrid with a very good success and in other cities in Spain. One thing that surprised me about Spain, now that I'm back there is that it used to be -- Spain, it used to be more about Madrid and then Barcelona and then the rest. But today, there are several prominent cities growing very, very fast in Spain, like Valencia in the East, the whole East Coast of Spain is doing very, very well. The South, Malaga, Sevilla. In the North, Bilbao. So there are opportunities to go to -- we are present in some of those cities, but there are big opportunities to grow there. So we are going to be, for sure, busy in this and coming years in terms of opening new stores. When we talk about France, we were acquiring the French market from Starbucks in -- at the end of year '19 -- '18, yes. '19 -- '18, yes, at the end of '18. And as I said, probably here is our biggest opportunity. It's a huge market. We don't have clear direct competitors. Of course, you can find cafeterias and bakeries there. But Starbucks is doing very well. Our team there is performing fantastically. They started applying the rules that have made us successful in other countries trying to -- of course, to boost sales, but having cost into control. We found opportunities in terms of maintenance, for example, or other opportunities in terms of the management of the real estate portfolio. We found there are many flagships or stores in, let's say, in expensive places where -- where we want to be for sure, but there are opportunities with Starbucks to be with different formats of stores in different places, almost everywhere, yes. We have been diversifying this portfolio. We are [indiscernible] the main street or the high streets and the commercial centers. We are opening new formats, as I said, kiosks or for example, by the end of this year, beginning of next year, we will be opening the first drive-throughs in France and in other countries in Europe. It's interesting to see that in the Americas and particularly in Mexico and other countries, this is -- these kind of stores, those drive-throughs are very powerful, and they are doing very good business. And in Europe, we are still to start with that, yes, we are -- we are today maybe a couple of steps behind in Europe, which is, let's say, a very good news. I see it positively because once we implement in Europe what we have been doing in the other countries, and this is coming right now, this is going to make us very successful. What Pablo mentioned about delivery, about Starbucks Rewards, et cetera, applies for sure to Europe. In France, we have been running the program, Starbucks was for 2, 3 years, but it was not on the -- not the top level of Starbucks Rewards. We reached that by the end of last year. We saw in -- we are seeing in a couple of months that our tender, the percentage of sales that are coming from Starbucks was doubled from 8% to 16%, suddenly, yes. And we see a very good trend for this program. And about the other countries in Europe, Spain, Portugal, the program is right -- coming, so we didn't have it, is coming this May. So -- and again, we see a lot of growth coming from those digital tools. Delivery is another opportunity. Imagine that while in Mexico, for example, in Starbucks, our delivery accounts for almost 10% of our sales, in Europe is less than half of that, yes. Maybe we have been in the past a little bit conservative in terms of delivery, we are not anymore. There is huge potential for delivery in Europe and not only for Starbucks, for all our brands, yes. And finally, I wanted to share with you the 2 main headwinds that we have been navigating the last year that were the cost of energy, first of all, and then the inflationary, the high prices of -- the high cost of product, yes. In terms of energy, we had a very good situation last year till June. We had a nice -- a very convenient, very competitive agreement in terms of electricity purchasing. But unfortunately, this finished by 30th of June last year, and we had to start buying energy in the open market. So that meant that we were buying for EUR 40 a kilowatt, and we started suddenly growing buying in the open market for more than EUR 200, EUR 250, even EUR 280 per kilowatt. There was a crazy situation in Spain and in Europe the last year. We were navigating that. We were trying to find exploring possibilities by the third party, and we feel and we have been advised by experts in the market that is not the best moment. It was not that -- it's not yet the best moment to engage with covering the cost of energy. It's still better to buy in the open market. Compared with EUR 280 per kilowatt, we are, today, as we speak, buying the kilowatt for EUR 100, some days below EUR 100 per kilowatt still, of course, higher than those EUR 40 that we have in the past. But much better than last year. And what we are seeing is that the future -- the price of the energy should go to levels close to the ones that we have before the crisis. So we are watching the market. We are seeing what is going on. And we believe that in a matter of 1, 2 years, we will be having much better and more competitive prices than we had in the past. And about the increase of costs, which was something that happened globally. Well, the strategy was to try to -- I mean was to compensate and to trespass part of this impact to our customers, but very carefully trying to keep -- for us, the most important thing is to keep our customers coming to our stores. We were suffering on the average -- an increase of our cost in the level of almost 15.5%, and we were -- we managed to trespass to our customers 8.5%, 9%, depending on the brand was more or less. And this was more or less on the similar level than our competitors, yes. This year, still there is a problem of inflation in Europe. The situation looks better than -- fortunately than a year ago. We -- as Pablo explained, we are trying to be more sophisticated in how to deal with prices, trying to find better strategies, more clusters, more differentiated clusters in our geographies. Notice that we are -- I mean Spain and France as well, our main 2 countries in Europe, those are favorite touristic destinies, yes, for people. So depending on the area of the country, depending on the season as well, we can do things with the prices that will not be at the expense of the number of transactions. We are very focused. We have always been in terms of innovation, product innovation, yes. Innovation is key in the European market because it's very competitive and very mature market. So you have to offer to give to your customers new reasons to come to you and try new products. But at the same time, this same innovation give us the possibility to trespass part of the cost without having our customers suffering just because our customers are accepting and buying very well new proposals with a good quality even if sometimes they are more expensive than the one they had before. So although we -- I mean this inflationary situation was eroding last year our margin. We expect that in the -- between this and next year, we will come back to the level of margins that we had before the crisis. Yes. Thank you. And I give back to Armando.

I just want to here highlight a little bit what is that we're market holding capacity in the whole market, in the whole region. And -- I mean we have a white space still of about 2,500 stores. There, you see 880 in Mexico. What about Europe and South America? This was a story that we just did [indiscernible] So at the end, we can -- I mean we can -- out of a Starbucks if we reach that market holding capacity. Starbucks, we will be at 38% in the weight of the stores in our company. Domino's 32%, then the Casual and Family Dining division 21%. And then I broke it down a little bit to see if we reach that market holding capacity, what will happen in Starbucks. So Starbucks Mexico will be [indiscernible] of the pie, 35% in Europe and 21% in South America. So I will give you a little bit more in the next slide how this will look for the openings to 2027. The Starbucks, this is a little bit of the plan. I'm not going to dip in completely in the key strategies for every [indiscernible] but I just want to take a look of the units that we have of December of -- just last December, we closed the year with 1,661 units. For our plan for 2027, it will be open around 140 -- 138 stores per year in these brands. That will be -- 86% will be corporate. As you know, in France, and we have some license and franchisees. That is the only country that we have that formula. That represents about 14% of the portfolio. And then it will put us again in the 43% stores that it will be placed in Europe, 36% in Mexico and 21% in South America. If we go to the Domino's Pizza, what will happen, and we are planning to open around 127 stores per year. That is around 633 in the next 4 years. And we do have in all the 3 countries that we operate, we are franchisees. So that will be -- 46% will be corporate, 54% franchisees. And this is how it will look the pie in Europe 17%, Mexico 68% and then South America with 14%. And last and not least, this is going to be the Casual and Family Dining business with, of course, less growth, but we still going to open 15 to 17 restaurants per year, 17%(sic)[ 75% ] are corporate, 25% franchisees, that will be in the total portfolio, how much in Europe, in Mexico and South America. Only those -- mainly these stores are open for year are in a bit sustain those -- that's the most -- the brand that we are seeing a better opportunity, better average weekly unit sales, better margins. So we're going to strive in that concept. Rafael, why don't you show us a little bit of an update and then we'll come back to give you an update of the how we're doing in the year now.

Thank you, Armando, and thank you for joining. The debt profile as of December 2023. As you know, we issued a U.S. bond at the end of 2021, USD 5 million U.S. bond with hedged to Mexican pesos. And then in January last year, we issued European -- euro bond of EUR 300 million to refinance all the bank debt that we had, almost all the bank debt. Then on that credit that's still alive in Europe, we have some restrictions. Restrictions in terms of CapEx and restrictions in terms of liquidity. And last December, we took out those restrictions and now we have the normal covenants for this kind of bank credits, only gross debt-to-EBITDA and interest coverage. Last year, we paid MXN 2.1 billion for the amortization of credit that we had for 2022. And for 2023, we have amortization of MXN 1.3 billion, MXN 1 billion, it's in Europe. And MXN 300 million, it's in Mexico City. We're going to pay the MXN 300 million that we have in Mexico. And we are working to refinance all the bank credit that we have in Europe, trying to back-end the amortization that we have in Europe, not just MXN 1 billion, but all the bank credit that we have in Europe, trying to amortize more in 2025 than the amortization that we have in the next years. At the end of 2023, the debt will be around MXN 27.4 billion; in Mexico, MXN 18.4 billion; in Europe, MXN 8.9 billion. If we don't refinance, the debt will be MXN 9.9 billion in Europe and in Chilean pesos, it's only CLP 12 million. The cost of the credits is 9.8% with 70% of our credits, it's a fixed interest; and 30%, it's variable interest. So one of the main strategies of the company is to deleverage the company as fast as we can. You can see that the deleverage of this company because of the incremental EBITDA that we generate every year and also the amortizations of credits, we deleverage the company pretty fast. In our projections, we are going to be in 2x net debt to EBITDA in 2 years. You see that we have in our team pretty clear the main strategies to achieve this guidance. So we have to have this operational excellence with our store managers. We have to achieve the best cost for our products. We have to implement all the digital and loyalty platforms to achieve this guidance. In terms of openings for 2023, will be around 180 to 200 corporate stores, mainly in the most profitable brands, there are Starbucks and Domino's. So around 50% of that number will be Starbucks and 20% will be Domino's Pizza. Then sub-franchisees, around 70 to 90 new sub-franchisee units. Also mainly in Starbucks and Domino's Pizza. In terms of CapEx, the CapEx will be around MXN 5.5 billion. I'm going to break down the CapEx in the next slide. Same-store sales, growing 14% to 17%. This is in local currency. And total growth in terms of revenues, around 13%. In terms of EBITDA margin and EBITDA growth, EBITDA growth pre IFRS16 will be around 15% with an EBITDA margin of 13%. With these numbers, revenue, 13% increase and a 15% increase in terms of EBITDA. The amount of EBITDA that we are going to achieve is going to be around MXN 10 billion for the whole year. With this, gross debt to EBITDA will be around 2.8x and with a return on equity close to 19%. Numbers post IFRS16, EBITDA growth of 10% with an EBITDA margin of 20%. Gross debt to EBITDA, 3.3x and a return on equity close to 23%. The breakdown of CapEx, as I mentioned, openings -- corporate openings between 180 to 200. So the percentage of the CapEx for these new openings will be 37%. And the -- in terms of remodeling and modernization of our units, will be 17.5%. This gave us an increase of sales because every time that we remodeled or modernized the units, it was an increase in terms of sales of around 15%. And then we have maintenance, 28.4%. We are putting a lot of focus to have in a pretty good shape our units, so we are investing 28.4% of this CapEx in maintenance. And then Technology and Others. We mentioned we are going to invest in Starbucks Digital Solution for this year, around MXN 200 million. The total amount is around MXN 340 million. So the other part is going to be for the next year. And we are putting some things in terms of Digital and Technology. We are going to put all the Burger King kiosk -- digital kiosk in Mexico and South America, that also give us an incremental ticket of around 20%. Then we are going to implement the -- all our clouds and the SDS. In terms of capital allocation, after this investment in terms of CapEx, also the excess in cash that we have, we are buying back some shares. Last year, we bought back around 18 million shares that it's around 2.2% of the total shares that we have. So we are also looking to buy back this year around MXN 500 million in terms of buyback of shares. We canceled the shares that we bought last year. We're in the process of this cancel of the shares that are going to be for sure in April. And I think that's it. So Alberto?

I just want to finalize because there's -- because -- and then Alberto will finish and then I [indiscernible] back. But just to tell a little bit how are we doing, you ask me a little bit, so how things are doing. We are just finalizing the quarter in a week. So things look better than the numbers that Rafael sent, but I have to tell you that but I guess it's that soon a way, but we are facing a same-store sales of 24% let's say, from last week [indiscernible] but a final number there is going to be 17%. And there is -- Starbucks in Mexico is facing up to date, 32% increase in sales in same-store sales. Also very glad to see that Vips is growing fastly now than any other restaurant run in Mexico with 15% in our -- against our, of course, brands that we have in the restaurant business. And Europe is also up 17% same-store sales, just framing that Spain and France eyeing that 29% and 27%. So things look a lot better in -- for our full -- And that one is mostly driven by traffic. 60% of that amount is driven by traffic. We don't see from some of you that I saw yesterday in a quick chat, we were asking what about inflation? What are you looking? I mean we are not seeing any prices or any emergency calls that we saw last year about pricing. We have a very steady, as Miguel said, we have the most important raw materials really closed or negotiated already to the end of the year. Labor, we already know what was the rate increase in Spain, the rate increase there. So I think we are very ready for what coming. I think I have the main thing -- driver is very clear. No, that is our operational excellence, focusing the people. That is what makes us the difference in Alsea. Of course, a profitability company and focusing the CapEx allocation is very clear where the CapEx allocation has to be in geographies, in brands, same-store sales and organic growth. We have that ahead of us. And we have the talent, we have the brands and we have the space to grow. So I think that is -- and of course, what Rafael said, earnings per share, I have it very clear for my Board what has to be reduction of debt. We have it very clear too, and of course, a return capital to shareholders. So those 3 topics I have it very clear and that's going to be my focus in the next year to come. Okay. So thank you. And I pass the word to Alberto.

[Foreign Language] Well, thank you. I know most of you. We've been here many, many years together. And what I want to tell you is that we've been working 32 years in this company altogether since day 1. And as you can see, we're trying to build a better company every day and everywhere and with every decision we take. And we've been hearing you very well about the corporate governance that we should have in a company. But just remember that this is a family company that was created 32 years ago, family still owns about 40% of the company. So sometimes, it's very complicated to follow the rules of corporate governance in terms of tenure of the members of the Board. But what we have done in the last years, we have reinforced and now in my new job only being the Chairman of the Board, we have reinforced our corporate governance in the company. As you probably heard, we just invited 2 new women to our company. Our Board is integrated by 12 members, 7 of them are independent and 3 of them are women. So we are meeting most of the ESG corporate governance recommendations. We are also focused on the ESG in our Board. We are very clear that ESG and our goals for 2030 have to be met. We just share it with the public. And I think we're going to make it happen. We're also clear about succession. I know this is a concern for most of the investors of the company. So we're focusing on making sure that the next CEO of the company will be an internal that comes from the company and is very well prepared. We are also focusing on making sure that everything that has to do with the future in terms of -- and you just heard people, everything that has to do with people, everything that has to do with supply chain, everything that has to do with technology, everything that has to do with operations, everything that has to do with our finance is very clear for our directors. And I think it was a great idea from Armando and the team to come all of them here and be in front of you guys to answer any kind of questions that you have. I think it's the first time we have so many directors in the company. And I think it shows you the intention that Alsea has as always, to be open, to be clear and to be in front of our shareholders, always try to generate value. So the only thing I want to say thank you. I'm going to leave this for question and answers. And in my new role as Chairman of the Board, you may be -- or you can be sure that all our job in the Board is to generate value for the shareholders, to take care of the company and our team members, and obviously, to meet all the regulations in terms of corporate governance and ESG. So thank you very much, and I open for questions.

Two questions. First, on HR, right, and all these plans to reduce turnover and increase benefits and compensation and so on and so forth. So how should we think about that together with all the payroll pressures we're seeing, especially in Mexico, minimum wage increase and increase of contribution to pension funds. So how should we think about that from a margin perspective? And how can you offset that from a gross margin perspective? And the second one is for Rafael. Rafael, just on your guidance, what kind of MXN average effects are you thinking for 2023?

Well, for 2023, I didn't put for net -- these projections. I'm putting MXN 20.6 for -- its an average for the whole year, MXN 20.6.

Yes. And regarding your first question, it's through productivity. We are continuously reviewing the labor model that we have in the stores, and it's always a challenge making sure that we have the people where we have the peak hours but not when we don't need them most. So it's always thinking about that. We always say that we should have less people, but better pay [Foreign Language] in order to make sure that labor versus sales is in a healthy position. And we all -- we are acknowledging not only in Mexico but in Latin America as well, all of these labor reforms. And -- but I would tell you, we're not worried about that because I think that our business is going to be better sustained for the midterm and long term if we really have that compensation in a better place. So I mean, you cannot sustain business with low wages or bad wages. So -- but we are working in order -- at the same time, to be very productive. Yes.

Well, [indiscernible] just to tell you, in that labor ratio, the technology that it comes with BK, with Starbucks, with Domino's, one of the main inbound technology that is going to have is the scheduling for all our partners. The efficiency in the scheduling that we will have, and we are working with [ Cronos and Wilco ] with 2 other vendors in the U.S. that we already have it in Starbucks since 2 years ago. That has given us a precision of how we need and the hours we need to pay. So I think that is the efficiency that we will see now. [indiscernible] sales are going that high that we need to help to get that demand. So we need to be careful of where to put [indiscernible] key because sales are just still in a good horizon up, so be careful of that.

And I would say, if I may, that -- another thing that is going to help us in terms of productivity is the new selling channels, yes. When we talk about deliveries, for example, for our restaurants, where we are delivering the food, you don't need the waiters there using the time with the customer. Or, for example, MOP, this solution that Starbucks is bringing to order in advance, yes, and then to go and pickup. For example, when I think about Burger King is very fashionable in Europe, and I think in the Americas as well, the idea of not interacting with the -- I mean the people self-attending themselves in those digital kiosks. They are coming several channels that are softer in the cost of labor to our cost.

Álvaro García from BTG Pactual. Two questions. The first one for Pablo. To what degree are you working with the brands themselves on data management. I'd love to hear some examples maybe of how you're working with brands on data, and two, on capital allocation, Rafael, you mentioned the plan is to delever as fast as you can. You mentioned there is 2x target in 2 years, which is great to hear. And I was wondering maybe how the sort of strategic committee was thinking about M&A going forward. It's been a focal point for you guys over the last 15 years. I was wondering if there's less of that in conversations these days.

Okay. So the first question, thanks, Alvaro, for asking. If I understood well, is to which extent are we working with brands and data, right?

With Domino's and the Starbucks of the world?

Data, yes. So let me pick the 2 main chapters that I explained in the presentation and expand on those, and we take it up from there. So within Starbucks, as I shared today, Mexico got 35% sales penetration, lower percent on the total Alsea Starbucks. And the whole ambition is how do we get to the Starbucks Digital Solution on this rollout that we are working back-to-back globally with the Starbucks international on this rollout between LAC and Europe to get us from our current sales penetration to the aspiration of the 50% penetration in the coming years. So more specifically, what that means in terms of data itself. So when I talked about data, nailing that down on an example is -- now we are bringing all the Starbucks Rewards on our customer lifetime value segmentation, which was the main pillar -- the initial pillar and getting that similar segmentation value approach across all the geographies. And by doing that, with the second pillar is, we are starting to be much more active on engaging those customers with personalized communication based on their value and their preferences. And clearly, the combination on enabling technology, but also evolving the way we do marketing in the way -- using data in the way we explain is going to accelerate us towards the horizon of the 50%, driving increased customer frequency through that engagement on the Starbucks chapter. I would say, in Domino's similar situation, on -- again, being consistent on the customer lifetime value. We shared in the video that in Domino's between Mexico, Spain and Colombia, we've got around 5.5 million customers. Still room to go -- and to grow 42% digital sales penetration account -- the horizon is around 60%, even when we look into U.S. 70%. And similar chapter, we've got the customer data, we know where they do transact, what they do to ask, but it is as important what they do not ask for. So if someone likes on the Domino's, usually pepperoni, but it's important for them to know the rest of the specialty or if there is additional offers or there is a product innovation or if they prefer a different type of pizza or size of pizza on the weekends or the weekdays and different moments of the day. So that is the combined factor between using the data and personalization in a similar approach.

[Foreign Language] All those questions, you are thinking of on your own, [indiscernible] or are you working alongside Domino's on...

So the data in terms and the way we are working, we are working back-to-back with Starbucks International and globally [indiscernible] and with Domino's International and globally based [indiscernible] okay? And the whole approach is, we are truly looking to become the best-in-class with them, working back-to-back with them, to make sure that we truly accelerate the best practices, learning and copycat very quickly with them. And once we get there, then we look to further -- to have further incremental value. But again, we need to reduce the gap that I mentioned between being what 3 years delays to become 3 months delay, okay.

Regarding M&A, as I said, we're very clear about the goals of the company. Armando and the team just presented the market holding capacity that we have. And as you can see, it's huge. So the Board decided that the strategy is to focus on organic growth and saturate our market holding capacity in those markets and focusing the brands that are generating more return for us. So the company is not distracted at all in anything that has to do with M&A today.

Antonio Hernández from Barclays. My question is regarding for this year and so far, it looks like you're doing a great job [indiscernible] consumer-wise, looks like there's a solid trend, and you provided some guidance. But in terms of pricing versus sales mix, how much do you think it will help pricing versus sales mix this year? And where might you see, for example, more pushback from consumers in terms of passing through cost increases via price?

I mean the story that we're doing, and it's already finalized in Europe with a third-party that is helping us [indiscernible] the price management evolution. And it's not already in Burger King, the whole country for Mexico, RBI did it with Simon Kucher. And we are knowing what is the elasticity, where we have more room or space to grow. We already saw that delivery pizza has more complex elasticity there. There, we have already in top. We are working with a big promotion and carry out, for example, for the [indiscernible] so we know what is the price target, depends on the geography regarding price. But to tell you, the best thing is the traffic is on. So we are, I think, 70% or 65% of the increase that I told you right now that we are running the first 12 weeks are by traffic. So that is the good news. I mean probably we are doing a comparison in Europe, there was Omicron in the first 8 weeks. And in Mexico, probably if we were running the first 5 weeks with 70% of capacity in some cases. But now that we are open, it's just a matter of now traffic. And with this, we did just launch a Frappuccino promotion just 4 weeks ago -- 3 weeks ago in Starbucks. We never sold -- we had a record week in Starbucks, crazy numbers in the week #9, I think #8, #9. So it's just -- it's been traffic -- [indiscernible] that has been traffic. So -- same as Vips. And just to add on top of Armando, whenever we talk about pricing and revenue management, we are looking to maximize the value. So it's not only about increasing prices, is to have the right price to maximize the sales and profit. So it might be the case on that journey that we are finding actual opportunities on reducing some prices in some locations, but to maximize sell some profit and to get the better balance between orders and traffic like Armando was saying and overall sales. And what is starting in Spain is something that like we described, we are looking to progressively roll out in the rest of Alsea Americas, okay.

Is the near sharing has been relevant for the company. I mean as you get the raw materials now from other regions? And have you had any like supply chain problems that have been solved? And would it have like any benefit on the cost?

Okay. I think the overall supply chain constraints around our countries have been fixed around 12 months ago. All the Navy carriers costs have been dropping down dramatically. What we're seeing that the cost of fuel have -- goes up, and that's impacting us. And the availability of the products have been very good. So today, we cannot say that we have an impact in constraints about out or not getting the amount of volume that we need for our brands.

What we're seeing is in the north part of Mexico, the increasing sales are better than I told you in the average. So I don't know, I mean, there's some money going on to the northern region of the country. There are 4, 5 states, and we've seen the volumes and also a little bit more complicated to get some labor there. So it's been -- the economy there has -- is looking strong and bigger than we had thought. We are -- right now you're telling where we opened stores, if I tell you the 55 or 60 stores that we already have locomotive pipeline now, most of it, say, 60% on that region, 60% or 80% are Starbucks drive-throughs, no, because we are finding those volumes are just probably 30% higher than the one that we used in Mexico City. But the type of sites and land that we're getting there, a lot, lot cheaper than any other places in Mexico, Guadalajara or Monterrey. So I think that's good news for us.

And as it has been -- as it does make sense now to hedge the energy costs in Europe, in other raw materials, have you been able to increase the amounts of hedges for other raw materials as they have been more stabilized? Or are they still very volatile, so you have to have like short months of hedges.

It depends on the raw materials, for example, cheese. We got a specialty [indiscernible] It will allow us to buy in the springtime where the low cost will have an excess of milk in the United States and they have an excess of production in cheese. So every raw material is a bit different. We have hedges for around 24%, 25% of the total spend for the year. But we see in the third and fourth quarter, better numbers in coffee and [indiscernible] in oil -- flower. And everything, it's we [indiscernible] market exchange. We follow those index, and we see that train is going down. So hopefully, it will come.

I will have to get back to the question. So I think it's important. In the past year, you've seen Alsea doing a lot of M&A, and there were some comments about Alsea buying if -- growth and not necessarily getting the return or the margins, that we should. And we heard -- and obviously, after COVID, we have analyzed our opportunities, and the Board has decided that in our plan, you will see a less complicated company in terms of number of brands we might -- and you might see, rather than buying new businesses, we will be selling some of the brands that will not get the critical mass and we're not for -- I said critical masses thousand stores. And because if we're going to build 200 stores per year, 250 stores per year, any brand that will not reach 100 stores, it might be small for us. So what you will see in I'll say, is focusing on the big brands as they presented the product, and you saw it today. I mean, we are focusing on the big brands. We are focusing on growing those big brands, while pay multiples of 4, 5, 8, 9, if we can open stores at CapEx, and we have so many opportunities to do that with great returns, and that was part of the strategy by in Europe. So we had a lot more market capacity, especially with the brands that they are giving us better returns. So really, you will see the company focusing on what you saw here, and the company will not be distracted in any acquisition, we -- that will not be the brands that we have today. But even that, we are not looking today. I think we have to analyze our CapEx allocation better. We're spending about half of our EBITDA and CapEx every year or more than that. And we believe that at least half of that should be in organic growth, not necessarily so many maintenance. And obviously, dividends is an issue that we want to take care. That is an issue that we want to take care also. And I think, the company has a very good cash flow to attend all of those at the same time. So I think, that's what you guys are going to see. And also the Board has asked the administration that we want better margins. The company can generate better margins, and that's what we're aiming for. So I think, you're going to see a change in the way the company will be operated from now on.

Hector Maya from Scotia Bank. I just want to better understand your mindset change because we have discussed it, throughout the years I'll say as one of the main drivers for the company has been M&A. And, I remember that when we were in the middle of the pandemic, there were several discussions with you about probably selling a brand selling assets, the core geographies. And I remember that you were very firmly believing in your path, in your growth. And in how you operated restaurants and you said, "Hey, we're not going to do this. We know the market holding capacity. We know that there are many opportunities now, with the pandemic to continue expanding because competitors are closing. So, I just want to understand what was like the breaking point for you to say, "All right, we're going to hear what you're saying. We're going to stop going for M&A, probably focusing more on margins." And also understand, I mean, if you are hearing the market in that way, what is stopping Alsea in hearing the market, in terms of corporate stores versus franchises because that is also one other way in which you could increase your margins. So, I want to understand that, and then I have another question.

I don't think we have changed. If you remember in the last 3 years, we have sold several brands. We sold CPK. We sold the operations of P.F. Chang's and we closed some of those in Brazil. We closed the one -- we saw about in Argentina, Colombia. So we have been clear with the strategy in terms of taking all the small brands out of our portfolio. When we -- for example, what we bought Vips in late 2018, we closed wagamama immediately. We sold also a Spanish brand that we have [ Tapasicanas, Lavatca ]. So I don't think our strategy has changed. I do believe, what has changed is that we found out and as you saw today that in markets like France, the opportunity is so big still. And in brands like Domino's, and even in Burger King, the opportunity is so big that it's more profitable to focus on those brands, rather to get this structure in another word in other brands. And it's also true that we -- through the pandemic, we saw that the global brands were a lot more resilient than the brands that we were operating locally. But we still have very good locally brands like Vips or Foster's or Vips in Spain that are performing incredibly well. But if you see all of -- do you see '21 and '22, our best performance brands across all our geographies was Domino's and Starbucks. So I don't think -- I think this has reaffirmed our strategy rather than change our strategy. Also in terms of franchising, the model is there. You saw how many stores of franchisees were going to open. But remember, we don't have the rights to license or franchise that Starbucks brand in Latin America. We only have that in Europe and not necessarily in Spain either, only in what we call Clover, which is in France and Benelux because it's the model we bought it with. But even with that, we will be buying some of those stores, and we are trying to have less franchisees in the France market. So we're giving them territories, so we can grow to that. But we understand, and I agree with you 100% that franchisee, it's a very good business, and we're trying to do that every time more for the company, but both at the same time, corporate stores and franchisees. So it's not changed.

Got it. And also in terms of the opportunities that you're describing around geographies and best practices, I mean, probably those -- I want to understand if those opportunities have increased throughout the years? Or what is enabling you right now, to be able to go for those opportunities, particularly in Europe as you were describing before?

But I think, the opportunity is more how we do it vertically. Because I'm not talking about opportunities of other brands. I'm talking, how can we leverage what he is doing, for example, in Starbucks in the pricing development issue, we're doing vertically in the 11 or 12 countries that we operate. SDS, we're doing vertically completely. So all the strategic commercial, human resources, supply chain and growth in stores, we are very aligned by brand. We didn't talk each other as much. Now the whole -- we work together with wholesales, I do the same with Santiago [indiscernible] with Francisco there. we manage a whole Starbucks brand like one now. So that is going to in data, for example, we're going to do the same. In insight analytics we're going to do the same, the same we're doing in Domino's. So that's giving us a lot of leverage now how to work for -- so that is what I call the best practices, how can we manage it around the world.

And also taking care of the schedule we have today, we closed the negotiation with the Coca-Cola and Pepsi altogether in the same..

And if I can add something -- you say, okay, opportunities we have always got opportunities. There are some opportunities that are, I would say, bigger today. One of them is everything connected with delivery technology, digital, CRM, loyalty. Those were opportunities several years ago. Today, those are big opportunities. And in some markets, huge opportunities because we are a little bit behind. Other opportunities, I would say, are the same, for example, in terms of innovation, products, et cetera. This is something that was very important in Europe before, and is very important today. And from my point of view, the idea that was here explained that we want to focus in -- all brands are important, but some of them are more important, more profitable and they have more space to grow than others. And to focus on those bigger opportunities, in terms of growth of number of stores. This is something that is helping us today, more than before.

You have to -- sorry to jump here. You have to remember that Alsea was buying market share. I mean, it's the market holding capacities. When we bought at the end of 2018 -- and early 2019, when we bought Europe, remember that we bought Grupo Vips, which had Starbucks in Spain and Portugal, but we also bought Starbucks in France and Benelux. And if you saw the growth, we have more than 1,000 stores to be built in those markets. Unfortunately, '20 and '21 happen what has happened, and we have not been able to really capitalize that opportunity, and that's exactly what we're doing today.

And the last one, I promise. There is this aggressiveness now, with other players in Mexico going for loyalty. I'm talking about FEMSA with Oxxo. Is there a way for you to partner with them to try to explore alternatives? I mean, you also have the footprint relevant footprint in Europe. We also now have a footprint in Europe. So is there a way for us, to think about a partnership there in loyalty?

No, they already went -- we already are in talks of them. As you know, they are doing a small pilot test there in Monterrey of coffee, completely different what we are in their own brand. That's not our consumer. For sure, the Starbucks consumer is completely -- we don't -- we partner with the partners that really create value to our group now. But no, I don't see that we partner with anybody in the Starbucks or in the Domino's, we can have somebody here in this stage, Delta is with Starbucks. And there's 2 other partners with Starbucks. But we don't see it to be doing something with tens or something like that.

Yes. And having said that, the strategic alliances is a key pillar on our overall CRM strategy, like Armando was saying is, but with the right partners, to bring the right complementary value to our businesses. So clearly, the specific case that you asked a question, is not necessarily that case that we are going on all further down. But there are many other cases that like Armando was saying Delta, how that translates on Mexico potentially and to bring value for Starbucks rewards are some other key strategic partnerships that we are exploring to bring more value to our customers. But it needs to be incremental, complementary value to our customers and brands, as part of our CRM loyalty strategy.

Yes. So I was thinking about, I don't know, Burger King, Domino's Pizza. We already have 25 million users with Oxxo Premia. So probably, I don't know if there's a subsegment there for Domino's are working.

Let's start -- I mean, that specific example that you did, it's right now start working. They are not -- they don't not -- there's no place yet, I mean, giving results now. But we will -- I mean, with Coke or Pepsi whatever we are a good partner with them. We will look at it. That makes sense. -- if that makes sense, we'll capture those opportunities. Again, they approach us. We had initial conversations. We have open dialogue, I would say, but it's not only that opportunity. There are many other opportunities on generating a broader coalition value. And we need to make sure that we also keep the right priorities with the right focus, okay? Because there are many opportunities. It's all about how we prioritize them. and what we capture behind our core strategy. So again, we are in continued open dialogue with them, but there are some other opportunities that we are also looking, but just whilst keeping the focus on what we need to build. -- in the short term to the midterm to actually drive us into the next level.

Sergio Matsumoto from Citi. For the logistics part of the business, what parts of those can you outsource to third parties or conversely, what parts would you want to keep in-house when you look into the future, and you see Alsea with more scale, and perhaps more complexity and customers demanding higher service?

I will tell you -- Sergio, thank you. The logistics in just only pleased that we have logistics that warehouse, the own logistics, manufacturers like 5 PLs in Mexico, the rest of the countries, as we know, 2 years ago before in Colombia, we did a 5 PL. We sold our distribution centers to action lock. Now they are distributors. They do the logistics. But in the Domino's side, where we have Domino's, we do the manufacturing the dough.. We do produce the dough and starting producing dough, and doing it for 30 years, that we're starting. So what about the sandwiches? Can we do build the sandwiches? Like I said, that's a super great advantage with big margins with that sandwiches that we do in Spain, they got sold in Benelux, in Belgium, in all the stores in France with great quality, great innovation, R&D. So for us, doing right now, we would say that the big key that we didn't have it before, it's manufacturing,the manufacturer of cakes, salado dulce, it's just a great advantage to have that arm in that say, no, I mean I won't see it if I don't have it. I mean, it's just main -- and in Mexico, the distribution, the lack of distributors there. We don't do the distribution for Burger King, for example. It's done by a third party. So there's only 2 or 3 players that does distribution. And I think, being doing it by ourselves, that makes us a great advantage. And with Miguel and the team having that productivity. I shared some numbers of DPI U.S. regarding the cost for them to distribute in the U.S. versus the cost of all distributors in Mexico, and we are way better numbers than them. So I think, as soon as the we see it, but I think we are in the right model to do with.

And I think also to add to Armando says, in Europe, we have a good operator [indiscernible] is the best in class in Europe. We took a lot of best practices 3, 4 years ago with the benchmark. Now we're beating them. And today, we'll do benchmark locally with the top 2, 3 food service logistics operators. We can say that we are 35% less cost-effective than the we have comparable numbers. So definitely, in Mexico, we have a competitive advantage. Even though, we went to a third party, we're going to lose those margins.

And regarding the manufacturing, we do believe it's a competitive advantage. We definitely believe that in our biggest brand, which is Starbucks, we have today the best price available. We are importing presents from Europe in Mexico vacant stores, I was in a store here yesterday in Washington, watching the presents. And believe me, our presents a little better than the ones that at least they are using now in the U.S. because we do vacant store. And we really believe that strategy alliance that we have done with robust, we put our food program in Mexico in the next level without having to import it from Europe, which is what we are doing today. So I do believe that the capabilities for manufacturing, and that was the big changes that we did in France. As Armando said, today in France, the sandwiches are made in our factory in Spain that came when we bought Vips. And I just visit the factory and the capabilities that we have in terms of manufacturing food for our food case, particularly in Starbucks are a big competitive advantage to have consistency, quality and price in so many stores and give us capabilities also to grow at the pace that we are growing, specifically in that brand. So I think we should -- I mean we are restaurant operators. But, if we need to be in the other part of the service and supply chain, I think we should be only what it makes sense.

Bob Ford, BofA Merrill. Cory, in one of your slides, you referred to a fair income gap of 77% in Mexico. Now I was just wondering, if you could explain that, please. And then, Pablo, how do the economics of the Starbucks and Domino's digital solutions compare with what you have in-house? And what are the performance differentials of the Starbucks and Domino's platforms relative to [indiscernible]?

Bob, can you repeat the question, please?

So one of your slides, Cory, it had a fair income gap of 77% in Mexico, and I didn't understand what that meant. I don't think we touched on it in the conversation.

With different income, yes. What we do in Mexico is we take information from [indiscernible] regarding what's the well line in even start. And that is an amount of money that is required for a family of 2 people that are actively working in order to support 2 more. Yes. So that figure right now is around MXN 8,600. And the income of our people doesn't necessarily need that amount. So 77% of, I'll say, our work with in Mexico earn that, but we need to increase. And the goal that we have for this year is 83%, which we're talking about 1,600 more people, mainly from Domino's and Burger King that we can take them to that level of income. So it's -- for us, it's a very important thing, as you can see. And basically, the main challenge is located in Mexico. We are reviewing with our partners Europe do minimum wage meet that, but in Mexico, the minimum wage does not meet that. So that's why, we have to continue designing the compensation scheme of the people in the operation with additional income, bonus or special ratifications, et cetera, so that we can get to that line. And the goal, of course, is having everybody on the fair income line.

Of course, thank you. So I take the second part of your question. So there are like 2 chapters. You make a broader question and then I'll charter first chapter related to Starbucks, second chapter related to Domino's. So getting back to Starbucks, which are the key differentiator against our current situation, okay. In terms of -- and how those economics works. So first, we don't have the last -- let's say, the last high-end version best-in-class integrated digital and technology solution for Starbucks today in Asia. We don't have that. And examples of that is, today, Mexico, we've got around 35% sales penetration and Jose Luis was expecting -- was referencing that into France that we had around 8%, a few months ago, after implementing one of the bundles or models or stars for everyone where people do not need to get money into their cards, but tie it up to their credit cards, and that's more flexible and open, and that jumped from 8% to 16%, in just a couple of months. So the whole point is having the common platform for all the markets and with the latest technology, get us on a common next level versus our current situation. And again, I referenced Mexico, which is local solution, France that is getting the first bundle of the global solution. And when you get down into Argentina and Chile, again, asset of local solutions that we need to get into the global level. The second big difference is in the way we are approaching, we are engaging -- and Alvaro made a question, we are engaging back-to-back with our global partners to truly become the best in class, and not reinvented well, and built on top of their best practices. So that's a huge difference versus where we are today. To close the chapter on Starbucks to be even more specific, I presented on the slide like see 3 different main building blocks on Starbucks, like the operational at the point of sale at the store. Our point of sales is not simple in today. It's not our record today. It's not the best performance for many of the partners, and we are having opportunities to improve that and to improve the timing and performance and to make sure that our partners truly dedicate or focus in front of our customers by having the best technology at the point of sale. And similar thing applies on what I mentioned on the app and the analytics and insights, and how that relates to the overall CRM strategy. The economics, and that will apply also between Starbucks and Domino's. What I can say and we did, it's been long time, long negotiations to make sure that we do not only become the best in class, as I mentioned, on the scope that we are chasing with our partners. But it's been long negotiations with them to make sure the economics are also competitive against other benchmarks, that we've done. And even comparing, if we have done that ourselves or with other alternatives. And that was -- that has taken us, I would say, quite a long time to make sure that we tackled the details. And similar case happens with Domino's, I would say, today in Domino's, I presented the 45% corporate digital penetration in Mexico, 42% globally. We don't have the same e-commerce platform in Mexico today than in Spain and different in Colombia. So 3 different e-commerce, 3 different platforms, to some extent, different customer experience and not even being back to the global best-in-class practice. By moving to the U.S. source code, we get into the latest best practice in terms of the user experience, and that is only the code. And then today, we don't have GPS. We don't have digital shoulder survey. We don't have the best-in-class inventory management platform, which is world-class coming from U.S. and not even talk about potential innovations that I mentioned and signaled, as advanced pipeline and to predict the rush hours being a critical component on our service and our customer satisfaction and truly delivering in better times. And in both cases, once we are there, the road is only going to accelerate because again, instead of being like 3 months, 3 years delayed getting back 3 months delayed. And the final piece, I would say, on economics is, again, we tend to think on economics, at least personally, I responded on cost. But it's also important to highlight that also in the economics is every customer that we've got the data in the way we have been performing and looking to improve that better, is 2x or 3x the frequency on a digital customer versus a non-digital customer. So when we look in to improve value on our customers on a per customer basis, the opportunity is huge. And that is going to connect with organic growth and same-store sales, okay?

Alejandro Fuchs from Itau. Two quick questions from my side. The first one is on the SAT. I wanted to know if there's any updates, or where we are in the process with them. And the second one is on competitive dynamics in Mexico. It looks like the start of the year is very good, very solid. Could we say that the risk of trade down maybe from QSR to more informal part of the street food maybe market. Is that past cost? Or do you still see that as a risk maybe going forward?

In terms of the SAT with the acquisition of Vips in Mexico, there's nothing new. In May last year, we start with the litigation. And right now, we are in the process. The attorney stole that it's going to be -- or is going to take us around 2 more years to end this now. But we are confident that we are going to have a positive resolution for us.

Yes. And that segment, I don't see it. I mean, we see that trend is very complicated that we will see a loan, especially that when it comes right now, we measure sales and we are putting the promotions, and we're doing the commercial things right in order not to find there is going to be a decline in the sales or [indiscernible] -- so I think with the things that we have exactly that new app that is coming in the next 4 weeks for Starbucks or Domino's, and we're going to launch it in a big way to increase digital sales that has to be getting a better momentum. In the Vips, we are looking the opposite way, if the trends are higher than we expect. And I think, the budget that we have for second quarter we're going to achieve it in better results because the first quarter budget that we have, we're on -- we are up a good number now. So I don't see, any things that can be complicated for achieving the first semester at all, I mean, in terms of demand policies. There's no -- we are ready for it, and I don't think it's going to be different.

[indiscernible]. So you laid out the opening -- store opening plan to 2027 for Domino Pizza and the Starbucks member. Can you share the forecast framework, and the key assumptions behind it? How you drive get this conclusion for store open?

So where to open you mean?

No, how you get this number? What's the key assumption behind?

Okay. At the end, we do I mean, a market holding capacity by region, okay? We already know where the white spots that we can open stores. In the Domino's side it's easier because at the end, we have a delivery in geographies. So at the end, where can we -- there's white spots for making a delivery units. So that's a lot easier. But on the other hand, we have tracked our map with the whole regions in Starbucks, for example, where can we held as the Starbucks store doing some economics in income, population, traffic. We map all the shopping centers where we map sold at airports in the case, where can we map. And we already see where it's going to be the capacity in the next 3 years. At the end, like I told you just a little bit, we -- everything has a return on investment target. If we do -- no matter what brand we open, the less 25% EBITDA against investment. So we are targeting that 2 or 3 years now in Europe of our return on investment in France and probably 3 or 4 in Starbucks in Domino's. So I think, we have mapped the whole region and the all countries where can we build more stores and how. And we put a here, which ones first. drive-throughs now, for example. I will say, where we are not aiming to open stores in businesses, in corporate office, for example. That's -- we are not. We rather open in the drive-through segment that is getting a quite double the sales than it used to be. So that's how we track it a little bit.

Just a follow-up. When you look at the white space, are you considering the competition landscape as well, penetration rate of the competitors, whether that's...

And at the end, we are here with the people of Starbucks this week, my people of development, seeing the model that these guys use. We have another model that is taking care in Asia. And we have a model in Mexico, in Mexico and the information that we have is a lower -- we don't have as much information, real information. But we've been in that 20 years that we've been here with Starbucks, we will really putting in place formulas and information with able to monitor and with competition, a lot of things that we put in the mix in order to predict sales. I mean, that's the hardest or the only thing that we don't know here is the prediction of a sales unit that we will open. You know the rent, you know the cost, you know the fixed cost, you know everything, but those are predictions. In the market holding when the heating rate that I call, we are very aligned and doing well there.

I think, we have a couple of questions online.

[Operator Instructions] The first question is from Mr. Rodrigo Alcantara from UBS. Please, go ahead.

Thanks for taking my question. Can you hear me?

Yes.

So the first one would be, I mean, on Starbucks and Domino’s Pizza, you had done an amazing job congrats on that. Just curious to pick your bid on the later thoughts on Vips Mexico. Over the last few years, we have seen you guys implemented initiatives to try to rebounded the brands. At some point, we were in talks of the remodelings, then we got the pandemic. And I just got a bit lost on where do we stand for that brand? It's not part of the growth question right now, but it's still like kind of 15% of your sales a mistaken. So just curious about your thoughts on Vips? And also for Rafa, just to complete the cash parcel here or cash balance but for 2023. Just curious if you -- besides the CapEx and all the other expenses, you foresee any other meaningful outflow in terms of cash -- perhaps on the working capital level, suppliers in 2022, you receive an inflow of MXN 2.3 billion, perhaps we may see a reversal in 2023 on that line. Just also curious here on the working capital, what do you -- if you foresee any pressure to you, Rafa? Those would be my questions.

So in terms of the free cash flow that we are projecting for the full year 2023. As I mentioned, the EBITDA to be around MXN 10 billion. Then we have the cost of all the bank credits and the cost of the commissions of the credit cards, they are close to MXN 3.4 billion. Then we have the taxes of around MXN 1.3 billion, and working capital positive around MXN 400 million. So with all of this, we are going to be positive in terms of free cash flow, operational free cash flow of MXN 200 million. After that, as I mentioned in terms of the capital allocation, we can buy back shares of around MXN 500 million and pay the amortizations in Mexico, MXN 300N million. And if we can refinance the European bank credit, that will be only MXN 300 million, that we're going to amortize in terms of the bank credits. So this will be the free cash flow for the year. At the end of last December, we end with a MXN 6 billion, in terms of cash. So after this amortization of the credits -- and the buybacks were going to be negative free cash flow for around MXN 700 million. And depending the refinance of the European credit.

Rodrigo, regarding this, as I mentioned, the recovery because mobilization of course, that brand was very effective mobilization aspect, especially we have a lot of restaurants based in areas with businesses like it's aggressive, fairly downtowns in cities. But like I said, in traffic, just in the first 12 weeks, we are 80% up last year. It's only 20% that comes for ticket average. We did some come back to some promotions or some campaign in Mexico that is still on, with some good price entries that is called Los Clasicos, and that is working very well. I mean, we see -- I mean, traffic right now is the -- I get said, 10% up, a whole actually, the first 3 weeks of the year, we had better sales than any other weeks before of last year. So we are on track. We're on track in costs. We are on track in the labor management tool. So I think, the Vips segment in Mexico, it will be back on track where were -- what it was before in 2019. Remodels, yes, we are only 60% of our restaurants of our portfolio, it's in remodelation. We are doing around 30 remodeling or image this year in that brand. And as soon as we do our reimage the sales go 15% to 20% up and they have a payback of 25%, more or less. We are putting around $300,000, MXN 5 million to MXN 6 million in each store that we do we reimage or remodel.

Yes. in on what Armando responded and part of your question was related to which extent this is a priority for us. So again, to reemphasize, Vips is our brand, and it's clearly on the top priorities of our agenda. And clearly, there are clear symptoms on very positive results. And we do -- we will keep on working on evolving the brand value proposition forward to make sure that we don't only get the recovery results that we are having, but those are consistent from the short term to the midterm. And there are some learnings that we are getting from Jose Luis was sharing the great results on Vips Spain, okay? Vips Spain 3 to 4 years ago, was in a similar, not the same, but similar situation on Vips Mexico, a bit today. And we are making sure as a company that we capture those learnings across we are making sure as a company that, that strategy is reinforcing our business strategy on the recovery to put bids were, is service. But it's clearly on our top priority agenda.

Thank you very much for your questions. Our next question is from Mauricio Santos from GBM Asset Management. Please go ahead.

Thanks for the presentation. I was just wondering what makes more sense, what's more profitable between investing in stores or investing in digital? And how much room of maneuver do you have considering that you have to honor your franchisee agreements?

Okay. So it's not one or the other, is to understand which is the role that one and the other place. So like the team and Armando was describing and Alberto was sharing, we are looking to the main origin of our growth is going to be same-store sales and organic growth and how we are evolving and are concentrated on our current sold performance. So digital plays a key role on that space, making sure that we capture more customers, that current customers we can be seal and become more frequent, and we increase the value of the sales on an omnichannel strategy that we presented. Obviously, there is a complementary role on the remaining 20% to 25% on the growth rate related to opening, white spaces, on further consolidate our brands where we do operate to make sure that, that also makes the growth of the brand presence on existing geographies, but with the right balance. And again, that connects with the multiple opportunities that we presented, again, picking up on Jose Luis, as an example, in France. Yes, we've got an opportunity to become more digital, but we don't capture the opportunity on the white space on the stores in France, we are not going to get the brand into the next level as a brand overall presence consolidation. So that's what I would say.

If I can just say saying the same, it's both Mauricio. I mean having more stores, filling those white spaces and having at the same time the best technology. This is part of the same virtual cycle, that help us grow in a more profitable way. So we need both of them.

And this stands -- the value proposition is like that. This is the value proposition of this brand. And either you want to go to the store that's fine, you want to make a line that's fine. [ A barista ] wants to put your name that fine. But if you want to go digital by MOP and just take it and go to delivery, I need to give you all the ways of the channels or you can do delivery. I mean, that's up to the customer that wants to buy the type of customer, the time of the day. It depends what you like and when you want it. But for us, we're going to make it easier, and we have to be in the -- our value proposition is where the client is how he wanted and where he wanted.

But you have made the exercise, let's say, the numbers you released were impressive, at least for both Domino's and each customer, you managed to engage to the digital cloud model generated multiple times more revenue now, compared to the customers at just. So it would seem to me that, okay, you need to continue growing at all the white space or this capacity to growth. But isn't it more profitable to grow through the digital platform lever up the store capacity you already have?

At the end, we need to have the stores in order to supply the demand. And then in the stores, that went this morning and the start that we have here, demand that big demand in print was pretty heavy, pretty heavy. And if they didn't do that balancing in MOP, the line will be up to the street. So that is a little bit a way of doing it now. You do MOP, the store is there, your product is ready. Just fast by, and we have time to put it in the order in the way that it arrives. So I think that digital is just part of the question of an efficiency that we need to have, and capture better and more customers all the time. Yes. But the proof of the focus of digital -- you are right. The majority of the growth is going to come from semi-store sales. To realize that, we need to become more digital and need to become more [indiscernible]. So that's a balance, and that's a fact that is consistent with our strategy. That's what I would say, yes.

Although it's not reflected on the capital budgeting at least for this year, you're spending much more on stores compared to technology?

Yes. Around 37% is going to be for the new openings. And in terms of IT projects, and other projects that are not only digital, it's around 16%.

Yes. But again, it's not only the absolute or the proportional numbers, but how one reinforces the other. So every new store that opens with a new technology, we'll have a better return on investment because we are realizing the full potential on a new level on same-store sales. But what we are putting on investment on technology just to be very clear is, what we fully need to realize the full potential on all of our footprint for all of our stores for all the functionality that we presented, to look for the full potential opportunity. And -- but we are also generating economies of scale behind that on this global approach.

So it's more like, it increases return on investment. That's sort of how you manage it?

Exactly to increase same store sales on a per store basis. And obviously, the investment in technology compared to the CapEx in the stores, the right way to look at that is, if we are making sure that we are covering the full potentially on the [indiscernible] that we presented. The answer is yes. And those leverage on our investment, okay?

Our next question is from Mr. Jeronimo De Guzman from INCA Investments. Please go ahead.

I just had a few just follow-up questions on some of the stuff, you mentioned on the holding capacity and the opportunity for growth. Just wanted to understand what drives that higher estimate that you have for holding capacity when you look at Starbucks and Domino's versus what you see for Burger King? And then also, when you talked about your unit growth plans, I was just curious about what drives kind of that decision of company-operated versus sub-franchisee and why that percentage is higher for -- is pretty high for Domino's in terms of how many you want to sub-franchise versus operate yourself?

Thank you for the question. It's just regarding how are the contracts of the rights that we have and working, for example, in Mexico, we are -- we don't own the master franchise for franchise. We are a sublicense that owns ex territory that is more in the region of Mexican City, Monterrey and Guadalajara, and some of the [indiscernible]. So that is a little bit what are we explaining -- there's a market holding. We own Chile and Argentina, the whole region owned by us in a master license. And in Spain that we only have 55 restaurants of Burger King. And as you know, we don't have the right RBI spending that want to have the right. So that's a limitation of growing regarding that brand, especially in Mexico and Spain. Regarding, of course, the Domino's Pizza, we have it by region, and we already have a concentrate in Mexico. For example, we know very well. We have half of the -- 45% of the portfolios franchise, they do have regions, and we already said where we did already said with franchisees to see, where are they going to build storage in the last 5 years. That are really part of the trade area where they are, in states or city. So that's how we come with this number, talking to them about how it's going to be their plans for growing. That's how I came with that number.

But is there kind of like a decision in terms of like where does it make more sense for you, and economics-wise to sub-franchise these stores versus operating them yourself?

I think the first one, I would tell you is it makes sense with two things. First of all, that is in area that store, we are not opening in single series 1 store, it doesn't make a critical math for our and go to a city that we can offer 4 or 5 stores. We don't go there. We let that city is being owned by a franchise. And also, we see economics if that store doesn't make EUR 20,000 for do example, EUR 20,000 a week or more, we don't operate that store. We'd rather put it as a franchise unit, and that is a little bit -- that model that we are working first in an operational sense, that it makes sense for us to go to that store, single stores in one city for us, we are not good and open those kind of units or a low-volume stores, and we are not -- we are not the right partner to open that one.

Jeronimo, in terms of Europe, Domino's is the same story. I mean, the smallest cities and towns usually are good places for the franchisees. They are usually from there, they know the place they know the people around. So they are very successful in places, where we would need more time to go or, for example, another example that Alberto was mentioning is France, yes, the opportunity is huge. We have sub-franchisees that are in France with Starbucks because Starbucks allows us to do that in France. And what we do there, the strategy is to give them some territories and to push them to open stores there -- open Starbucks stores there, while we are concentrating in other territories, and we together, we build faster and better growth.

Okay. Yes, that makes a lot of sense. And I guess, the other question I had was within kind of these plans, you mentioned that there's -- yes, you want to focus on the larger brands that have can reach this critical mass like Starbucks and Domino's. But, I just wanted to ask just in a broader sense, kind of where does that leave a lot of these casual dining brands. You still have a very big portfolio of cash flow dining brands that don't have that critical mass. So kind of where do you stand on those? And what are your plans for those?

Fortunately, I will tell you that fortunately, those brands are accretive to the portfolio. I mean they have better margins than the QSR business for us. If you saw the report that we did from last year, all the brands that we have in next 4 brands of casual dining, their EBITDA store level with 21% to 25%, and -- so that's a pretty amazing number and a good number. The barriers for entry in that category is a little bit harder. So we are, like I said, -- we are building 17 or like 20 stores, restaurants in the next year, but that's not going to be our focus. And we will see, if we can leverage that from the portfolio, that will be an option. Yes, there will be an option. And we will see if that can be possible in the next year or so.

Sorry, what do you mean by the last comment that you could consider kind of selling these?

I mean, in the near future, if those -- if there is somebody of course, someone that really wants to take that decision, and we will look at it. But I think right now, they are accretive to the portfolio. If we build a store of our restaurant, we ask them the same or more is the return on investment target that is 25% to 30%. We fortunately do not have any of those brands, any contracts that we will lose the rights, if we don't open x amount of stores. We are already in a good position of the stores that we have. And all those contracts are well signed in development situations, I mean. So we are very open or stocking with somebody, if there's going to need. We are in -- to be honest, in Chile, we have 2 P.F. Chang's, and we have 3 Chili's that are in the market, people really know that we are exiting our franchisees already know that we're exiting those markets. It's very open, and we are considering any options in the near future.

Okay. That makes a lot of sense. And yes, I guess, no rush in there, very profitable as well. And in terms of margins, and my last question was just in terms of that guidance that implies basically 2023 versus 2022, maybe some slight expansion in margins. I wanted to see if there were any more details you could provide on that, in terms of kind of how does this look by regions because my understanding is maybe Europe is still facing some of these pressures, and maybe other markets are offsetting. So kind of how does that look when you look at the regions?

You compare margins by region? You will see that this first semester in Europe because of the energy and part of the cost -- [ food ] cost it's going to be less margin, than the one that we had last year. Then LatAm will be positive in terms of margin and Mexico, it's going to be almost flat. So -- and you will see a better performance quarter-by-quarter because of the compression that we will have with the margins that we have in Europe because third quarter was pretty bad because of the cost of energy and the fourth quarter also, the energy, it was higher than the cost of energy that we are projecting for this year. But we're going to be almost flat, or a little bit higher than the EBITDA margin that we had last year.

That was the last question. I will now hand over to Mr. Armando Torrado for final comments.

Okay. So thank you very much for -- I hope you get a little bit more, as the detail we were probably more detail than we should be, but I have in the group here. I think it's important. It's important. The last 2 or 3 times that we were here, we were talking more about external situations that we're engaging our problems in the pandemia and everything else, how to come back. And I think today, we're talking just about our business, about how the things look in the future, the opportunity that we have, the team that is leading this company, and where are we going to focus the best and how we're going to make it happen for you. So thank you for being here. Thanks for investing in Alsea. And I just want to say thanks also to Salvador because I think it's his last R&I, he's taking another opportunity, Salvador, thanks for all these times. Thanks for all these year. I hope to see you. This is your house like always.

Alsea would like to thank you for participating in Alsea Day 2023. You may now disconnect.