Americana Restaurants International PLC (AMR) Earnings Call Transcript & Summary

Welcome to Americana Restaurants First Half 2023 Earnings Presentation. My name is Sonika Sahni, and I'm the Head of Investor Relations at Americana Restaurants. Today's discussion will be led by Amarpal Sandhu, CEO of Americana Restaurants; and Harsh Bansal, CFO and Chief Growth Officer of the company. We will conclude with a Q&A session to answer any questions you may have. Before we start, I would like to remind you of the disclaimer on the screen right now in our presentation which applies to this call. I will now hand over to Amar, who will bring in the earnings presentation.

Thank you, Sonika. Good day, everyone, and thank you for taking the time to be with us today. We'll now recap Americana Restaurants' performance for H1 2023, followed by a Q&A session. Our performance is in line with our operating plan as we registered healthy growth across our financial and operating metrics. At the end of the first half of 2023, our restaurant portfolio stood at 2,277 operating restaurants. In the first 6 months of 2023, we added 108 gross new openings. And for the last 12 months, we stand at 262 stores opened, which include 234 openings for our power brands, KFC, Pizza Hut, Hardee's and Krispy Kreme. Furthermore, at the end of H1 2023, we had 84 restaurants under construction. And in July of 2023, we opened an additional 20 stores, and we currently stand at 93 stores under construction. This demonstrates a healthy pipeline and gives us the confidence that we are on track to deliver 250 to 260 net new units in 2023. Revenue for H1 2023 was $1.2 billion, a 7.8% increase year-on-year, underpinned by our continued commitment to expanding our diverse restaurant portfolio as well as the positive momentum achieved in like-for-like sales. The like-for-like revenue growth versus H1 2022 was 7.2% driven by KFC and Pizza Hut performance. The business generated adjusted EBITDA of $291.7 million, a 7.7% increase versus H1 2022. We also maintained a healthy adjusted EBITDA margin of 23.5%, this, despite an increase in carryover inventory costs compared to H1 2022. H1 2023 net profit increased 19.4% to $144.8 million. This was supported by a restaurant portfolio expansion, increased like-for-like sales and a one-off benefit this year due to a legacy tax charge in Egypt amounting to $25.5 million in H1 of 2022. We remain firm and disciplined in our CapEx deployment, contributing 5.6% of H1 2023 revenue, thus allowing us to maintain a healthy balance sheet and a strong overall financial position. With this in mind, we are well positioned to meet our growth and capital expenditure commitments as well as support our dividend policy. Finally, our diverse restaurant portfolio has an industry-leading average payback period of 1.9 years. Moving on to the next slide, we will cover our key strategic and operational highlights. Our good financial performance is driven by our ongoing operational and strategic progress. We successfully launched our first Pizza Hut in the Holy City of Mecca in Saudi Arabia in June, and we continue to expand Pizza Hut beyond Riyadh in the Western and Eastern regions of the Kingdom. We're also pleased to report that we opened the first 2 Peet's Coffee shops in Riyadh last month. We are currently in soft launch phase in the Kingdom. In addition, we opened our third flagship Peet's in Dubai, which is also the second one in Dubai Mall in a premier location. We will continue to build the pipeline in both the U.A.E. and Saudi as we scale up the Peet's brand. We also launched the first Krispy Kreme in Alexandria, Egypt with a flagship Hot Light store as well as an additional 2 Hot Light stores in Tabuk and Taif in the Western region of K.S.A. Our focus on Krispy Kreme in K.S.A. is now to open stores outside of Riyadh. Effective from June 1, 2023, Americana Restaurants has been included in the MSCI U.A.E. Index. As many of you know, this is an important milestone for us as MSCI is widely recognized as an important benchmark for investment decision-making in emerging markets, which includes the regional Middle Eastern markets. We also continued to roll out our proprietary cloud-based ERP system which is Oracle Fusion in 7 key countries of cooperations, namely U.A.E., Kuwait, Qatar, Morocco, Oman, Lebanon and Bahrain. Our focus on growing and innovating Americana's digital platform remains steadfast. We have rolled out Americana kiosk in 5 stores that have been designed and developed in-house using proprietary technology. These kiosks combine world-class hardware and software, delivering enhanced user experience with lower CapEx compared to legacy systems. A feather in the cap recently was Americana being awarded CKE, which is the parent company of Carl's and Hardee's, the Global Award for Digital Excellence for delivering transformational digital experiences. Moving on to the next slide. I want to show you some of the new restaurant openings. The pictures on the left show the recent openings of Peet's cafes in Dubai Mall and Riyadh, and the pictures on the right are the Krispy Kreme Hot Light openings in Alexandria, Egypt and Taif, Saudi Arabia. With that, I'm going to hand over to Harsh who will share the financial highlights.

Thank you, Amar. First, we will go through our portfolio evolution over the last 12 months, and then we will go into the financials. So if you look at the chart on the left, we have opened 262 gross new openings and 227 net new openings in the last 12 months. This puts us very much in the striking range of our earlier guidance of 250 to 300 net new store openings. We had a solid H1 with 108 gross openings and 94 net openings. This is almost double to what we did in H1 of last year. And Saudi continues to be the focus market with the most number of openings in Saudi in H1. If you look at the chart on the right, we have a strong pipeline in place with 171 units between under construction, site approval and feasibility approval. In addition, another 15 sites are under review. This puts us very much on track to deliver on net new restaurant openings of 250 to 260 in 2023. Revenue for H1 2023 was $1.24 billion -- million, as Amar highlighted -- $1,241 million, which is 7.8% higher than H1 2022. This was -- there was a slight seasonality benefit versus last year given both Eids were in H1 this year compared to last year. Contribution from NSOs was at $88 million, while LFL contributed $77 million. Given devaluation of Egyptian pound and Lebanese lira, FX has impacted us by more than 5%. On a constant currency basis, we had a revenue growth of 13%. Overall, dollar revenue growth would continue to be depressed given the ongoing currency pressures we are seeing in Egypt as well as Lebanon. We continue to build on contribution of revenue from stable currencies and power brands. It is at 83% and 94%, respectively. In terms of geographies, we have seen strong performance in U.A.E. and Kingdom of Saudi Arabia. Kuwait and Qatar have been slow in H1 of this year, as Amar also highlighted. Amongst non-GCC countries, Kazakhstan and Morocco have delivered very strong performance. In Egypt, despite our current macroeconomic challenges, we have been able to take pricing and partially passed on the inflationary increases. We expect currency pressures to remain while we are focused on more organic growth and improving margins in Egypt. Here, we have our brand performance between 4 power brands. KFC maintained very strong performance with double-digit LFL in H1. Performance across geographies has been strong, which resulted in double-digit LFL growth. Pizza Hut has outperformed our expectations in U.A.E., and we continue to see a strong LFL growth of 7%. Hardee's delivered 0.7% LFL growth. Performance in U.A.E. and K.S.A. has been robust. However, we are seeing some continued softness in Kuwait and Qatar impacting overall LFL growth for Hardee's. On Krispy Kreme, we have seen strong overall revenue growth driven by new store openings while LFL has been soft. And the factors -- the 3 factors that's largely contributed to this is, one is, competitive dynamics in Saudi; higher LFL base due to country launches in Egypt and Jordan; and on account of new store openings in K.S.A., Kuwait and Qatar, which has resulted in some cannibalization. Moving on from revenue to margins and profitability. We have started seeing positive momentum on cost of inventory from Q2 2023. This is sooner than what we expected as well as what we communicated during our earlier call in Q1. And as you see on the chart, between Q1 2023 and Q1 2022, the cost of inventory increased by 2.2%. However, in Q2 2023, we are already ahead by 0.2% in terms of margin, and we will build on this as we go into H2. We expect the cost of inventory to further go down during the course of the year, and we expect H2 cost of inventory to be better, between 1.2% to 1.5%, as compared to H2 last year. For full year, our cost of inventory is expected to be slightly better in terms of margins on an overall level if you compare that to last year. We have maintained adjusted EBITDA margins despite the impact of cost of inventory in H1, and we are on track to deliver better adjusted EBITDA margins for the full year given positive impact of gross margin in H2 versus H2 of last year. We expect the full year adjusted EBITDA margins to be better, between 0.5% to 0.7% if you compare to full year last year. Specifically on net income, we had a positive impact given a one-off charge of $25.5 million on account of Egypt tax settlement in H1 last year. There was an increase in depreciation on account of new store openings as well as leases, again, driven by new store openings. Also, we have a higher tax charge in H1 due to change in country mix in terms of profitability. Other paybacks continue to be strong and best-in-class. We had a payback of 1.9 years for stores opened in the last 24 months between 1st April 2021, and 31st March 2023. Power brands have maintained healthy paybacks largely in line with what we saw in February 2023. On Pizza Hut Saudi, we are in the expansion stage and focus is more on building brand and AuVs for the next 12 months. On other brands, new openings largely consist of Wimpy's as well as we have opened 2 Peet's stores in Q1. Both are still in a nascent stage, and for the time being, focuses more on brand building. We expect these brands should take at least 24 to 36 months to get to the portfolio-level paybacks. Here we have our working capital and CapEx. So as we communicated earlier, we have been working on reducing our inventory levels which we built during H2 of last year. We have reduced the inventory by more than $35 million in the last 6 months. We are now close to our target [ BIO ] coverage, and we will maintain these levels unless we see commercial reasons to build up stock in some specific categories. Receivables increased as Eid was in last week of June this year, which resulted in high credit card receivables and aggregated receivables. We expect this to normalize by end of the year. CapEx was at $69 million, which has been driven by a higher number of openings. It is expected to increase in H2 given the higher number of openings planned in the second half. Thank you, and now I will hand it over to Amar to wrap it up.

Thank you, Harsh. Looking ahead, we see immense promise in our key markets as we continue to execute our growth strategy. Highlighting a few things. We are on track to grow our portfolio with 250 to 260. Harsh messaged this earlier as well, and this is net new openings in 2023. As mentioned in our earlier calls, we will over index in K.S.A. as Saudi provides a compelling opportunity, not only for power brands, but also for the incubator brands such as Peet's and also Pizza Hut's new launch. In addition, we are very excited about the greenfield opportunity in Iraq with the successful launch of KFC and Pizza Hut in Baghdad in June. Performance has been quite strong. We are proactively managing our business in Egypt, where we remain focused on optimizing operations and expanding franchisor support. We will continue to drive further cost efficiencies through localizing key inputs as we continue to navigate currency-related challenges. The initiatives to improve gross margin are very much on plan. During the second half of the year, Americana Restaurants will continue phase out existing inventory, which was strategically built up during 2022 to counteract global supply disruptions. This initiative, supported by cool off in key commodities, will continue to drive margin expansion in H2 of 2023. And finally, we expect that our strong operational performance, along with our ongoing ZBB initiatives will result in improvement of our net profit margin in H2 of 2023. Thank you again for joining us today, and we are happy to answer any questions you may have.

[Operator Instructions] We have the first question on the phone line from Henrik Herbst of Morgan Stanley.

I had a few questions, please. Firstly, I was just wondering in terms of operating leverage. If we adjust your H1 earnings for the one-off tax charge last year, that didn't grow very much. Your cash flow is going backwards. I was just wondering, it seems like D&A and your lease payments are growing a lot faster than your store base. Can you talk a little bit about both of those 2 items, G&A and then cash lease payments, why they're growing so fast? And what's sort of the right online rate of growth is? And then secondly, about like-for-like growth, there's been a lot of moving parts, I guess, in terms of timing of Ramadan, et cetera. Is the 7% like-for-like growth for H1, is that sort of representative of what you think the underlying business is doing and something you think you can sustain into the second half? And then just a clarification on your margin guidance. I mean, you're tracking, I guess, gross profit margin in Q2 was better than the full year 2022. Just wondering how you -- and you've been saying that gross margin should be better in the second half, I presume versus Q2. And then the other one was when you talk about better -- the net profit margin, what is the base for your guidance improvement? Is that versus Q2? Or 2022? Or H2 '22?

So Henrik, it's always good to hear from you, and we would have been very surprised if you were not the first one to ask the questions. But we will also take this opportunity to remind everyone else on the call, we would appreciate if it's one question at a time and not multiple layered questions. So but from you, we have, I believe, 3 questions. So we have [indiscernible]. So Harsh, why don't you answer the...

Yes, I'm not sure if I captured everything, what you said, Henrik. So first is in terms of you're talking about operating leverage. So if you look at our G&A, our G&A has been pretty flat in terms of -- if you compare as a percentage of sales versus last year. Again, we have been building on some of the new brands as we speak. So there is some investments going on in terms of G&A. And we also had a carryover compared to last year because some of this was actually built in the second half of last year. So we expect to see some leverage in G&A in H2 compared to what we saw in H1 of this year. The second is the depreciation charge on 2 aspects, one is the new store openings because a lot of openings happened in H2, which started hitting our P&L this year. And also because of the leases, the right-of-use assets, in some cases, where we are opening freestanding drive-throughs, we are signing slightly longer-term leases which has resulted in a higher depreciation charge on RoU. But on an overall level, we fairly -- we are confident that even if you take the one-off charge of Egypt aside, we should be able to improve our net income margins in line with our EBITDA margins. And in terms of tax, there was also a slight tax increase because of the strong performance of businesses in Kazakhstan and Morocco and also Egypt if you actually compared to last year. So that's more of a country mix than anything else in terms of slightly higher tax charge. So that's on the leverage.

Yes. Henrik, on the -- on your question on LFL, the first half was 7.2%, and this is indicative of what is to come in H2. There is a slight benefit of both Eids being in H1, but momentum remains steady, and we -- there's no change in guidance that what we provided is mid-single-digit LFL growth going forward.

We now have Harsh Mehta with Goldman Sachs.

I just have one question. Definitely, there was a very strong operating performance for 2Q. But when we look at the geographical breakdown that has been provided in the financial statement, when I look at GCC, all the revenue grew by 16%. Net profit was down 5%. Could you just help us explain what's going on over there? And likewise, when I look at North Africa, net profit has jumped significantly at $6 million a quarter. Is that a sustainable level?

So first, on the North Africa, so there are 2 elements to that. One is we had a one-off charge of $25.5 million in Egypt, which resulted in the net profit of $34.2 million -- a loss of $34.2 million last year. So that is one element. But keeping that aside, we have seen very strong performance in Morocco. And also, we have improved our performance in Egypt. And if you look at our Egypt margins in H1 of this year compared to H1 of last year, we have improved the margins by a couple of percentage points. So there is underlying strong performance in Egypt and in Morocco, which we expect to continue as we go into H2 as well. As far as major GCC is concerned, which includes U.A.E., Kuwait and K.S.A. So our performance in both U.A.E. and K.S.A. has been strong. There has been some impact on U.A.E. profitability just because of the G&A, which is actually currently expensed in U.A.E., which impacts the U.A.E. profitability. In addition, there has been a slight slowdown in Kuwait in terms of sales, which had some impact in terms of profitability. On an overall level, we expect the momentum to maintain, and we are confident in terms of our performance for H2 as well.

[Operator Instructions] We now have Mr. [indiscernible] with [indiscernible] Capital.

I wanted to ask the tax impact on the net profit margins that are going to -- in U.A.E. that is going to happen. So we are expecting tax to maybe get implemented in the next quarter or the first half of 2024, and how do you think that would impact the profit margins of your -- in forward-looking?

So the LFL for us, given our financial year is January December, the profit -- the tax will be effective from 1st January 2024, and this would be applicable for the U.A.E. operations only, and the U.A.E. business would be subject to the tax of 9%. As we speak, we are working through the consultants in terms of the exact impact. And probably Q3 would be a bit more -- we would have a clearer picture and we would be in a better position to give guidance in terms of going into next year. But as of now, what we can say is the impact would be on the U.A.E. operations, and it could be the 9% tax based on current tax law, which has been published. But things are also moving, and we will have a bit more clarity by Q3.

[Operator Instructions] We now have a question online from Nishit Lakhotia from SICO.

I just have one question on the Pizza Hut rollout in K.S.A. What's your target in terms of number of outlets you plan to have over the next 2 years for Pizza Hut in Saudi? And is the -- what kind of payback are you looking at? Will it be on an average 2.7? Or are you expecting a quicker payback in Saudi Arabia?

So Nishit, I think there are 2 questions you have. So first is on our target for the rollout plan. We opened 30 new Pizza Huts last year. And again, this was starting from 0. And then the pipeline [indiscernible]. We started building the pipeline again, and we've opened 12 new Pizza Hut in the last couple of months. And the plan is to continue to accelerate the growth. We focused earlier more on Riyadh and Oman, but now we are going into the provinces. So we are seeing really good response to the brand. We opened in Taif, in Jubail. We've opened in Makkah, [indiscernible] favorable response in the Western region. And we will continue to [indiscernible] any explicit guidance in terms of the number of units, but we will continue to accelerate the rollout. At the time of exit, the previous franchisee had 160 outlets back in 2021. So that kind of gives us a sense of what the market holding capacity is. Your question on paybacks, given that we are in brand launch phase, our paybacks to get to those levels, it would take some time, 24 months to 36 months. We are setting up a new brand, so more investments are required, both in terms of setting up the people infrastructure, building new stores, and also setting up the whole supply chain base, et cetera. So we expect the paybacks to be a little bit longer than the -- what they have been for Pizza Hut in the past, 2.7 years, but we'll get to those levels, probably 24 to 36 [ months ] from now.

We now have a follow-up question from Harsh Mehta of Goldman Sachs.

Just one follow-up question. I remember in 1Q as well, you had mentioned that there was competitive pressure, especially for Krispy Kreme in Saudi and for Hardee's in Kuwait. Is the situation still being the same? And how is Americana kind of trying to respond to it?

So Harsh, the Krispy Kreme Saudi, yes, there are competitive pressures. The market is hypercompetitive, especially in the sweet treats and coffee category in Saudi as, if you're familiar with the market, there are a lot of international players as well as local players in that category. We have shifted our focus away from Riyadh where the focus was for expansion in the last couple of years. And earlier this year, we opened 2 factory stores or what we call Hot Light stores to create hubs in the Western region, one in Tabuk, one in Taif. And we are looking at other provincial towns, which are less competitive based on the response to our Hot Light stores in Taif and Tabuk have exceeded our expectations. And that gives us the confidence that there is -- the brand is still relevant. People love Krispy Kreme. The product is awesome. And so there is a shift in strategy to counter the competitive pressures there. As far as Hardee's Kuwait goes, there are 2 things that happened in Kuwait. One is the market overall is soft this year. There is quite a few restrictions that have been imposed on expat visas from certain nationalities as well as family visas. And so that's one aspect. The other aspect that created pressure in the QSR segment is a lot of the competitors moved to full-service aggregator delivery, or they moved to subscription models where they have completely outsourced their delivery to aggregators. However, we made a conscious and a strategic choice not to do that. We still are on marketplace, and we handle our own last mile, and we do not intend to change that. So that added a little bit of strain on the business. But in the last couple of months, we are seeing some decent recovery on Hardee's and especially, we are confident that we will continue to grow Hardee's in Kuwait. The brand is very strong, execution is very strong, and it has very strong resonance with the locals in Kuwait.

We now have [ Thomas Kurt ] from [indiscernible] Partners?

Just a quick question. Can you give us a spare piece of how many years it takes for new stores to reach full sale for AuVs, please?

So is it Thomas? Yes, yes. Thomas, the ramp-up period is 6 to 12 months.

Is that the average across the group?

That would be the average across the -- again, as we move into newer trade areas, it might be closer to 12 months. If it is mature trade areas, it could take up to 6 months. So I would say that is kind of the range that we see for full maturity.

We now have Shadab Ashfaq from Al Ramz.

I have noticed that you have narrowed down the guidance for FY '23 for new stores from 250 to 300 to 250 to 260. So is this for all the forward years? Or it is just for the particular case in 2023?

This 250 to 260 is specific to 2023 because we have better visibility of the pipeline given how many we've opened, how many under construction, how many sites secured, so we felt it was prudent to give more specific direction for this year.

We now have Patrick Christiansen of Kepler Partners.

Patrick, we -- in case you're asking a question, we cannot hear you.

[Operator Instructions] Unfortunately, we have no audio from Patrick. [Operator Instructions] We now have a follow-up question from [ Thomas Kurt ].

How can we think about the split between the power brands and growth niche and other brands in terms of one net unit growth per annum and also to like-for-likes?

In the foreseeable future, we see the power brand in terms of the weight of net new unit growth. There would not be any material change because the growth brands, let's say Peet's, are still in the nascent stages. Usually, LFL -- and again, there won't be any material impact on LFL as well given the mix between power brands and new brands or growth incubator brands. As new brands launch, usually, the LFL in the first year is not as strong because they are typically going up against their launch year. But then over year 2 or, let's say, year 3 and onwards, it's more normal like.

We now have another question from Harsh Mehta.

Just, again, a follow-up question on the GCC profitability, which was down in 2Q. I'm trying to understand, you mentioned it's about higher G&A cost and a bit of weakness in some markets like Kuwait. Is there also any impact on cannibalization because I do see there's been a very successful store launches, especially in U.A.E., I can see that. And would you consider that's also one of the key reasons driving profitability down on a per-store basis? Should we just assume that pretty much because of the cost and as that gets phased out and as you earlier mentioned in terms of the leverage that you gain off that or the existing SG&A cost profitably, profitability should recover back to growth in the coming 3 quarters?

No, so we have not seen any impact on cannibalization impact. If you look at cannibalization, it's part of our like-for-like. And for example, Pizza Hut U.A.E., we have -- our overall Pizza Hut has a like-for-like 7%, and Pizza Hut U.A.E. has been outperforming despite of the penetration levels and what we have in Pizza Hut U.A.E. So the other piece, which I also want to remind, is that we also expect improvement in gross profit. So the impact of gross profit, which we saw in H1, actually would be other way around in H2. And in U.A.E. specifically, we had the most modest stock in terms of what we were carrying in H1 last year. So that is sort of getting normalized. And once we go into H2, we would see a positive movement in gross margin, specifically in U.A.E. because of the amount of stock we were carrying on in H1 this year on a higher cost was more, and last year, we had a positive impact. So that will get normalized in H2 of this year.

We now have [indiscernible] from International Securities.

I just have one question related to the like-for-like growth. Like as the financials in the presentation, it was stated at around 7.2% during the first half of '23. So as the company continues to add more restaurants in the portfolio, so is this number expected to sustain at these levels? Or we can expect some cannibalization which can, like, lead to a decrease in this number? If you can give some color on that front?

As I said, the cannibalization is already factored into our plans and our guidance. So having said that, our guidance on mid-single-digit LFL growth in the medium term remains in place. So we don't expect any change to that at this stage.

Just one more question. As you have highlighted, company expects to open 250 to 260 net of restaurants within this year. And on an LTM basis, the company has already opened around 262 restaurants. So if you can just give some guidance on how much of these restaurant or what proportion can be expected within K.S.A. or not particularly within the power brands?

Yes. So power brands will over index. K.S.A. will over index. Just to give you a reference point, in 2021, we opened 19 stores in K.S.A. In 2022, we opened 83. And this year, we are targeting well over 100. So K.S.A. will definitely over index in power brands, in general, because they represent such a huge portion of the business and the footprint. So that's where a lot of the growth is going to come from. The new brands, the main focus is on Peet's, right? This year, we are primarily -- we are more in launch phase and brand-building phase. So we are very careful in site selection, how we execute the brand. So it's better to go a little bit slower at this point before we really start ramping up the incubator brands. Pizza Hut K.S.A., of course, we are accelerating the growth because it's a brand that we know well, and it's in a market that we know well.

We now have Patrick Christiansen from Kepler Partners.

Sorry for dropping out earlier so if the question has been asked in the meantime. But I just wondered if you could comment on the competitive environment outside of the coffee and sweet treats in your core markets, Saudi, U.A.E., so Peet's and chicken project space? And just how the consumer is sort of behaving, too, in an inflationary environment.

So the most competitive segment is the burger segment because all the international players are in the region. They are well established. Of course, McDonald's the biggest. So I would say that is the most competitive in the GCC area. Pizza Hut -- pizza is also very competitive, given the many pizza players, both international and local. However, in U.A.E., Pizza Hut is dominant. Americana's Pizza Hut business is significantly -- I would say our AuVs are either double or even more than that 2.5x of the competitors. And the number of units and the competitors are smaller in size, combined number of units with the next #2 and #3. Chicken, we would say that KFC is a class of one. Yes, we know there are some local players. There's no international player of scale or size in the region when it comes to the fried chicken, chicken-on-the-bone segment. There is a very strong local player that all of us know, which is ALBAIK, but their positioning is very different, and their consumer -- their target consumer is very different. They are pure -- in a more low-price leader brand, whereas KFC's positioning is on quality experience and its international brand.

[Operator Instructions] We have another question from the line from [indiscernible] of [indiscernible].

I wanted to ask you about if you could give me an average cost per store as a percentage of revenue in U.A.E. specifically? And another question is about employee turnover. And if you can comment on that and how is it being managed? And what's your expectation of it for the future and its impact on the business in Saudi Arabia as well?

So the -- go ahead, Harsh. You can answer.

Just to be clear, you're asking about CapEx per store in terms of -- as a percentage of sales?

Not just CapEx, the setup cost for one store in U.A.E., If you can give me that specific number on average though. So the cost for one for...

So essentially, it's CapEx.

Just give me a number.

Yes, so it's -- and again, we haven't shared CapEx by country. We can share with you the average CapEx that we have across the portfolio. It's around the $330,000 range.

It won't be very different. Even in U.A.E., it would be similar levels. You won't see the CapEx vary significantly between different countries. If you need it for your modeling purpose, you can assume the number which would be similar to $330,000 per store.

In U.A.E.?

U.A.E.

And your second question...

Sorry. Can you come again?

Your second question was...

Second questions was regarding employee turnover. I understand it was around -- and the number was about 40%. I wanted to just understand the impact of it on the business in the long run. And are you planning to -- is it going to go down? Or is it going to stay the same? If you can comment a bit on that.

So I said the employee turnover, the 40% or in the 35% to 40% is the industry norm. And we track it, we monitor it. Some level of turnover is required and essential in our business. And just to maintain to make sure that we have the right mix of people and also to maintain the average crew member rates in the restaurants. So we are in a good space on the employee turnover, and we have tight processes to monitor and manage that.

[Operator Instructions] I can confirm we have no further questions registered. So I'd like to hand back to Sonika Sahni for any final remarks.

Thank you. Thank you, everyone, for joining us for the call today. If you have any further questions, you can send an e-mail to [email protected], and we'd be happy to address them. Thank you again.