Krispy Kreme, Inc. (DNUT) Earnings Call Transcript & Summary

Hi. It's John Ivankoe from JPMorgan. Welcome back to the afternoon session. Very happy to have Mike Tattersfield here today from Krispy Kreme, Chief Executive Officer of this business, extensive experience in the coffee -- bakery segment, but also in a quick service broadly, certainly happy to have him with us today.

And under that context, this is very recently a JPMorgan-led IPO. The company has reported its first quarter, and I think there's a lot for us to talk about today, especially as investors learn that what is a unique story and unique language around Krispy Kreme as people familiarize themselves of what is different and arguably special about your story. So why don't we start there? As part of the IPO process and the follow-up as you can now talk to investors in a fairly free manner, what have been the, I guess, the major misconceptions or misunderstandings of the Krispy Kreme story? Or maybe to view it in a more positive way, what is it that you think investors could better understand to perhaps better appreciate the investment possibilities?

I would definitely do that. So good afternoon, everybody. I look forward to the chat. It's good to be in Vegas. I actually was in this building the first day it opened up from the COVID to actually see how they were going to operate safely to see if we could pick up things on what they were doing. So it's pretty interesting to be here today and see it's open. But one of the interesting things when we looked for the Krispy Kreme of older, 84 years old and where it is today, and it's pretty clear on -- people sometimes confuse us as a restaurant company. They might look at us as a retail company, and really, where we've evolved the business to truly be a doughnut-operating company. That's what we're really focused on. It's one of the pieces that's pretty clear. That's what we do. 93% of what we sell is doughnuts, right? We do it in dozens. The other -- sometimes a lot of folks will talk to me about a coffee company, right? Is that what you do vis-a-vis some of the competitive set as particularly one that is in -- has doughnuts in their brand as well? We -- again, we sell doughnuts. We focus on that energy. We only have in the U.S. 300 shops that produce. And outside in the world, there's another 100 shops. So you can start thinking coffee is a habitual daily ritual. Doughnut is a -- not an everyday treat. The dozens business becomes a pretty unique aspect of what we do. And then one other thing that's pretty interesting is we've evolved the business along the CPG space line, which at one point used to be try to get it out to every single wholesaler. Now it's select wholesalers, fresh. So scarcity matters in the CPG space. And 125,000 doors that are available in the United States of America will probably, at most, be at 5% to 8% over time. When we're there, because it's the route system, we're going to use our theater shops, which are amazing, those doughnut shops, we love them. And so in hindsight if you think about it, it's like a hybrid CPG company with this experiential doughnut company. And then the final piece, I think, that needs some pretty good understanding is this used to be, at least from company-owned operations, most of their operations that they owned were in the Southeast. Today, we own 85% of the United States. Again, that branded doughnut company, so you can actually distribute and get doughnuts to where customers are, be an omnichannel company. But what's also unique is we actually made some pretty big acquisitions in international, right? So we got a substantial international business. We see a significant growth opportunity there, and the core international markets for us are the U.K., which includes Ireland, Australia, New Zealand, Mexico and also Japan.

So the vernacular, even for me, is a little bit clumsy to repeat, but I'm going to do my best with this. There are 114 hubs, which basically are factory stores that you're referring to with spokes, 124 hubs without spokes in the second quarter of '21, hopefully, those numbers are right, in the U.S. and Canada. So I guess, talk about whether that mix of what has spokes and what does not have spokes, if that's the right level, if that is the right number of hubs as you currently see it in the U.S. in terms of what your potential footprint is.

Yes. I mean, we see -- so we see growing hubs on a global basis, about 10 to 15 a year, right, and the geography that we have, again, think of that experiential doughnut shop or factory and then how it gets to an omnichannel approach there. So when you have a -- when you're an 84-year-old system, you're going to have old shops, that there's no route system that you could actually run, but they still do okay performance wise. And they're in the small hub of the community. We are going to focus on doughnuts, right? So expanding those hubs without routes anymore, that's not our interest, right? Our interest is to make sure we're building this doughnut company and doing that not only in the U.S. but in international as well. So today, we're in 31 countries.

As we talk about hubs, and I mean, obviously, we're assuming everyone is very educated and that includes not only distribution to your so-called fresh shops or shops without [indiscernible]. I think it's shops without factories, but very specifically, the DFD doors, delivered fresh daily, in the United States. So let's talk about what that DFD experience is. I mean, you have currently 5,067, I think, at the end of the quarter. You mentioned, I think, 5% to 8% of 125,000. That's a very big range, by the way.

Long term, right, so when you start to think about where you'll take the route system, but scarcity. So the DFD system, right, that you talked about, it's 5,000 in the U.S., a little over 9,000-plus when you take in the globe. We're going to do 800 to 1,000, what we call, points of access. And a point of access can be a fresh shop, which is a shop that has a front space that you could actually have doughnuts that are delivered there and they actually serve customers. But the majority of the points of access tend to be a cabinet or a display in the wholesale channel or the convenience channel, right? Done fresh daily, right, so a route. It's really important that we really build that capability inside of the business, and that's what really transformed this company into really focusing being a doughnut company, and that's where we spend our time.

I would imagine it being very difficult to manage the profitability of a route. So you know the profitability versus the initial costs and maybe some initial high customer response to that in the near term versus the medium term. So how -- what are the systems? And how do you measure that profitability of those 5,000 routes? And how might your current route composition change to become more profitable?

So we get into sales per hub that we start doing. So the routing system that you are in the U.S. were about 45 spokes per hub. Getting those right amount of spokes -- and by the way, in international, there's 71 spokes per hub. And to give you an idea, a hub in the U.S. is about $3.6 million. So we don't think about it as routes in themselves. These are -- we make doughnuts, they go through multiple channels. We leverage that opportunity for the retail shop, and I might have a drive-thru that could have e-commerce attached to it. It then could have a route system, right? So there's one hub that does this. And the international hub actually closed about $8 million. The difference between the United States, and John, you and I talked about it the last time we had a conversation, and the international market, the international development was really focused on building out in urban centers, right? So very, very designed with a lot of population and pretty simplistic to do a pretty intensive route and spoke methodology. As you go to the United States, which has space, you don't have that. You might have it in New York. So New York will actually match up exactly with some of the urban markets. Chicago could do that as well and a few other cities. But the majority are tend to be midsized towns that might -- will not reach 71 spokes. That doesn't mean that they can't be extremely profitable, right? What you end up doing is what does that mean when you start building the spokes in those towns, pick a St. Louis, pick a Charlotte, pick a midsized city and then really focus on how do you build it. As you think about routes, the unique part is as a merchant, right, when you -- we've had a long relationship with a lot of these grocers in one form or another, right? Krispy Kreme in its past did not do fresh doughnut delivery. It actually would deliver doughnuts that were sometimes up to 5 days old, all right? So today, every single doughnut is fresh. It's delivered fresh to along the route system or in the shop or through e-commerce. And so as you're building that route out, you're going to be dealing with customers that already had Krispy Kreme, so it's not necessarily difficult for us to actually go back to that customer because they actually want it in the system, but we don't want all their doors, right? So then it becomes how do you find the most profitable doors? And as you're building a route system, it takes time, right? Because every -- you got to learn about the nuances of customers and what's this customer base and all of those piece, and then you will get into profitability on the route, et cetera, that will measure to make sure that, that is optimized.

And I think that's an important point, and maybe I've missed this before. I mean it's add doors and revenue first and more or less evaluating fixed profitability second. I mean is that...

It is. So when you think about the success international business, which is why we bought the U.K. and Ireland and Australia and New Zealand, they've been doing this for 15 -- they've been doing this for a while. They are fine-tuned into dealing with Tesco, in dealing with 7-Eleven. They just started Woolworths in Australia, right, and just unlocking that flow economic, which just really drives the frequency. So you'd only have so many -- the whole model is about how do you drive frequency to the hub, and then how do you get to points of access, and then how do you then make sure you can drive the profitability, right? So that flow becomes pretty unique. And as we've talked before, some of the margins that exist in the international business are outstanding.

Yes. Especially -- and that's a pure company-operated snapshot and the segment EBITDA margins are in the mid-20s. I mean, so the international is an extraordinary margin. But the U.S. and obviously, the focus on the second quarter conference call, not to belabor this, but the U.S. segment EBITDA margins were probably the single surprise in the second quarter, at least relative to what we had talked about on a pre-public basis. So that's -- I mean, I think probably the opportunity of you added much more DFD doors than you thought, how much that addition of DFD doors actually may have hurt your margins in the near term that may help you in the long term?

You always want to start building your route system when you can, right? This isn't just -- you got to start building the facility in the back of the shop, right? You got to start hiring, you got to start going down and figuring out which customer that you want to start building out. And then you start maximizing, right? And then once you get to a certain -- so in the U.S., if you're talking about a 45 spokes and you're in that range, that incremental spoke, as you start adding those, become really profitable, right? The route starts to really get there, but it takes time to build the route system. So that's why we always -- we just acquired a lot of these cities, Dallas and Houston, right? So these were from an old franchisee that sometimes has a Popeyes and Burger King and necessarily -- they didn't place the shops necessarily in a routing system, right? They just use extra real estate that they add on a pad site. So then we have to start figuring out how does this model work for us. But the great thing is we made the investment, right? We made the -- we've done that. Now it's like, can we run a route system from there? We can, right? So before we add more hubs, first, it's going to be maximizing the hubs that we currently have, and then start driving that.

In international, a major difference is you have approximately 10x the fresh shops as you have factory stores. Within the U.S., it's approximately 1/4. Certainly, that's a very big difference in the ratio, 40x. I mean it's not the exact number, but it's close. I mean do you expect those numbers to converge where -- what about -- what that works so well in the fresh shop model internationally does not translate to the U.S.? I'm assuming that's the case because of how different the numbers are.

So think again the whole urban build-out, right? So how much the depth of the large cities in the international markets where you have the majority of population, we will build out a fresh shop business, and we already have and starting to do that in New York City, right? So if you start to see what we're doing in New York, you'll see fresh jobs start happening, right? So we'll look at those opportunities that are there. The opportunity to build a fresh shop or extensive fresh shops versus cabinets, you're going to make a very thoughtful decision. It's -- the way I think about it, it's a cabinet you're [ manning ] or a cabinet that you're not and how you're thinking through that and what's the partner relationship. And then how and what's the opportunity, the size of town is going to matter. But you will not probably reach where the large international markets are because that's all they did, was build in the largest cities and start from there versus the U.S. It's pretty much spread across the United States.

Okay. Understood. So one of the difficult things is understanding how much COVID benefited your business in '20, how much it hurt your business in '20. I mean you're one of the few, like New York was obviously very tough; other markets, I mean, stores that did not have drive-throughs or presumably fairly tough stores that did have drive-throughs killed it. So like what do you think like in hindsight, what the net benefit or net negative was in 2020 as we think about the second half of '21 in comparison?

Yes. So when you look at -- I mean, I'll do it in 2 stories, right? So the international story, you'd have a -- for example, the U.K. shut businesses down, right? There was no operation, right? So its recovery right now is really lapping a COVID lap. But Mexico -- for New Zealand, which is a shutdown again today as we speak, they were very resilient in figuring out this omnichannel model. If you had drive-throughs, you have access to the customer, they came. They started building dark kitchens in the U.K. as well and in Australia and others, right? So again, you get the delivery system. We're at about 19% e-commerce as a whole on the globe. So that opportunity also really started to kick in. The U.S., the majority of the doughnuts shops that are the producing shops do have drive-throughs, right? So it never really had a deficit, 1 month when everybody was trying to figure out the safety of operations that you must do and make sure that your teams are there. And I would say the biggest benefit we did have as a company is there was no furlough of an employee base, right? So that really mattered. The U.K. is unique on its own, right, because the government was shutting you down and basically compensating all British citizens, right, to not work. But as a whole, when you look at COVID lapping and our organic growth that's happened over 2 years in the U.S., it's consistent. The one thing that I do love about our business, it is an occasion-based business, right? It's -- we're dozens business. 75% of what we sell is dozen doughnuts. We don't know what it's going to mean when people come back to work in the U.S. and there's that office pickup that you might not have, right? We did see a shift in day part, but we saw also a shift in the evening, that doughnuts got used a lot more for dessert, right? So there's this kind of movement now. I think the biggest challenge, and I'm sure you're seeing it across the industry, right, is as you see labor and all of those opportunities really kind of go in and how is that manifesting itself, right, in an omnichannel model like ours where you have so many opportunities of what are you trying to do to get to the customer, right? You got to find route drivers, you've got to find a doughnut maker. If you don't have that, you're really not running your omnichannel. And I think those are pretty unique opportunities for us because of the culture of the company, but we tend to be able to still hire and attract to the business. But it's -- I can tell you this is -- I would never say this is -- you're paying overtime, right? You're incurring higher costs. You're doing things that are pretty unique that the space is doing.

Someone said the industry has actually gotten worse, even through August and end of September. And some of the data, especially with -- the restaurant industry actually lost employment in August and largely that was due to the record number of quits, very high. I mean, what are you seeing in the labor market? I mean one -- I mean just to rephrase what you said, you are able to staff, adjust your staffing expensively. Is that the right...

You need to actually compete in the marketplace, right? If you're not competing in the marketplace and if you can't get pricing power also in the dozens and the occasions-based business that we have, we're able to see that, right? So we were clearly able to see when we took a not-fresh doughnut business in the wholesale channel, and then put the fresh doughnut business, just the same price point as the retail shops. And the consumer understood, right? So that's a significant change in price. It's a dozen, so it's still attractive and affordable. So we spend -- pay attention to that. I think if you're -- as we look at that as saying, do you have pricing power? Can you pay the systems? And it's you're competing with different categories, right? A route driver is competing for a delivery job, right? And what are you trying to do in that space versus a retail person that wants to work in a shop versus a manufacturer that's making doughnuts as a baker as their role? Finding the unique parts of being competitive and the growth story, which is what we have in front of us, is pretty significant to be able to attract talent.

Okay. So have there been -- I ask every question -- every company this question. Have there been staffing issues that have influenced your ability to serve customers, whether retail customer or wholesale customer?

You will always have some opportunities, whether it's pick a location or pick a town, pick a city, but as a whole, we're managing through it very well.

Can we pivot to commodities? I think a number of your larger contracts or your shorter-term contracts rolled off at the end of the second quarter. Can you talk about sugar and shortening and other?

Yes. So we do forward contracts. We balance those. They're out in a year, 2 years out. We have a few that start rolling out in the third quarter, some rollout back of next year, right? So again, it becomes a challenge of can you manage the pricing opportunity that exists in the marketplace as you manage through this as we believe we can.

Okay. I mean it's interesting to juxtapose a dozens business and occasion-based business, as you mentioned. Your -- I think your average customer comes 2.5 times a year, correct me. Your loyalty customer, 4 times a year; your heavy user, 6 times a year. So again, I want to make sure I'm right.

Those are correct.

And yet, the DFD business is more single serve, higher frequency. So...

So it depends. So the DFD still tends to be dozens. People tend to buy the box dozen. They tend to do that or picking -- in the convenience space, it will be where you'll get the single use. So you'll see that much more as an individual-based occasion, right, which is what the convenience space tends to do.

So if low frequency isn't because of pricing because we're talking about pricing, what is your belief or even your highest user customer [indiscernible] go many more times to 6 times a year. But as you know, one of the very original factory stores where I grew up in the South. But what is the issue of getting that frequency meaningfully higher? What could double that frequency across that entire customer cohort?

So a couple of things there, right? So if you think first from the frequency, right, it's about the innovation, it's a relevant innovation that cuts through, right? We're not a big spender of marketing. We really use social media. And we've done 38 billion impressions at one time. That's pretty significant, and just doing some things that we've done this year just with the vaccine with doughnuts have been pretty successful, cutting through the social channels. If you can get the innovation to also match up, we use our glazers, we use our unique items, the Hot Light, the ability to do things in a unique way continue to scale up, look at the marketing opportunity or product things that are unique to Krispy Kreme really leverage those. Unlocking e-commerce, even in a much further way, is pretty significant for us to get more usage. But it's this point of access game, right? So it's difficult to get to a Krispy Kreme. Probably the #1 question I'm asked every single time, I was just in Davidson College,giving speech to their innovation teams and their whole thing was, are you going to open up a shop in Davidson? I'm like, no. But I will put a cabinet inside of the Harris Teeter or something like that down at the location. This is not -- so how do they think about the business. And if you can get that frequency from the use, then this -- that omnichannel becomes a really interesting piece, that you can get the same doughnut that's made at the retail shop, the experiential theater shop. It can be sent through this channel. It can get to the grocer. And then, by the way, you can still segment. You can still do unique things by channel, which is pretty interesting. You can even have different products that you want to have by channel. I'm still using the same hub, right, and then limiting or how you want to use the kind of the merchandise mix, which is really important as to how do you get there. Before, it just used to be in the wholesale business, they just got Original Glazed, and it was 5 days old, right? So this is a very different game that we're shifting to, and that has an opportunity to engage the brand.

Yes. And the difference between that old DSD and the DFD is transformational, especially in the generation of management before you. So yes, I can certainly see that. So most analysts have thought -- almost all analysts that did drive, you're a restaurant analyst, and we always think about flow-through with sales dollars. And we're not in a normal environment because of inflation, but whether it's 30%, 40% or 50%, it's like most restaurants are within a fairly narrow band in terms of profitability on an incremental dollar of sales. Is it just your business is just too complex and too many moving pieces to think about in such simple terms?

So I would say the stability probably in the international business, which has that frequency and that uniqueness already really well defined, much more predictable from how that extra dollar means and how it goes through the channels. As you're building routes, as you're building your omnichannel business, that dollar is either being -- also investing in growth and it's got other things that it needs to scale. So it's not a direct linear thing. Over time, you will have that predictor where you can see how did you get the flow through from A to B. And that's just -- it takes time to build it.

Can I ask you what that international flow-through is?

Well, I don't think we break that one out, right? So...

It's not breaking it out. Your margin is 25%. I assume it's not 20%. So...

It's healthy.

Yes. Okay. Understood. You mentioned unlock e-commerce in a much further way. I've never had the pleasure of being able to order Krispy Kreme on an app. So what is that -- is it just extending the delivery radius, adding additional partners? What would that mean?

So you will -- again, as we -- it depends where we are, right? So if you're in a international, if you're doing large urban centers, right, they're not going to continue just to build a lot of shops. They will build dark kitchens to get capacity so that they can unlock the e-commerce, right? And then they'll leverage that opportunity. That will also happen in a large metroplex in the United States, right? It's how do you maximize the investment of the leverage that you already have there? As you're doing a -- pick Charlotte, it will be based on how far the delivery is, but your discussion of getting to fresh shops, if there was enough volume for a fresh shop to actually justify the foot traffic and everything else, it also serves as another vehicle to actually do delivery from that, right? So we use third-party deliveries. They'd be picking up from there and taking it, right? And I think the real interesting piece that's going to start happening in the grocery business is when you start having that system in those doors, they'll start sending Krispy Kreme delivery as well, right? We don't control that. They do, right? So it comes through their cabinet and through their piece.

So if you're -- I mean, you described nonfresh revenue, maybe we should find -- maybe that's my description, I don't know, but it doesn't sound so glamorous. But it's actually a fairly big number of $56.8 million. So I think one of the things that I heard from you, correct me, your business set of which you are delivering packaged doughnuts. I mean the longer shelf life doughnuts in the Walmart, I think that's not yet an EBITDA-positive business, I mean, which normally, I think, would be a nicely positive margin business. Just talk about the transition of that business and how big that market opportunity could be.

So we launched what we call the Branded Sweet Treat Line last year, right? So it's if you're -- and let me give you the ideation thought. We're only going to have a certain amount -- building 10 to 15 hubs a year, right? You're not going to be building all these doughnut shops everywhere, right? So your route system or your spoke system is going to be fairly limited and scarcity does matter, pricing, et cetera. And you'll only be at that 5% to 8% ACV long term as you build that out. So you won't have access to Krispy Kreme in a majority of locations, right? So then we created a Branded Sweet Treat Line, which is doughnut inspired, right? So it's very high bar, flash frozen, right, and then put through a distribution system. And we wanted to see how it's going to go through probably one of the more challenging retailers, i.e., Walmart, right, in all of their doors, and would get it with tremendous success. So it's more important for us just to get the product out and test the validity, what does the customer say? And it has been received very well. Still manual, right? We're bringing in automation. We're bringing in just improving demand curves, et cetera, that need to happen in that business. And now we're actually extending into another 1,000 -- almost 1,700 doors when you get Albertsons and their version of 17 banners, right? So you're at 6,500. You've got to do this business also with a discipline, right? It's really easy to just say, just roll it out there. It's our brand, right? So we're really protected. We actually are -- we don't -- we're not using co-packers. We're actually there. There's people that are actually doing the manufacturing, but it's us, right? So we're really on top of the quality. We can see the line creativity and the disruptive part that can happen inside of the wholesale space, right? So we see this as a significant way. And in that category, we do see us being a national brand. And if you talk about it in some of the other countries of the world, you probably wouldn't guess, but [indiscernible] right? So I know what 130 million Mexicans would probably want access to. They would probably -- the Krispy Kreme will become that national brand with something like that, that goes through the reach, even while it builds out its fresh doughnut capability in the country in Mexico. You won't get to the full population. And the pricing is still -- you want to be in a space where people want to celebrate, want to have a sweet treat. The sweet treat space isn't going away, it's just people want to say is it worth it.

Yes. And what ACV do you think the sweet treats business could reach in the U.S., if we're quoting 5 to 8 on the fresh?

I don't know yet. We'll figure it out. It would be pretty significant. I mean the desire will be, can we try to become and reach a full national and what does that mean?

If someone were just looking at this on a piece of paper, they would tell you to allocate as much capital as you can on the international business and duplicate those returns, right? So I mean, what other opportunities are there like Australia and the U.K. in particular, whether outside of those markets or within those markets to generate returns as high as they are?

I think Mexico is a tremendous opportunity. We acquired that from a private equity group 2 years ago. And you can see the transformation already happening now, as we speak, to this omnichannel piece. Their latest news hubs that they opened up. Before, they would have opened up a doughnut shop, now they're actually thinking about what's the routing mechanism on it, right, with the drive-through they opened up in the state of Veracruz. I could see them partnering with OXO, if you know that, a brand with 20,000 -- they're not going to be in all 20,000, but they will figure out what it is there, or a Walmart, right, their version of [indiscernible] and that business is significant. They will then -- they are modeled in building out the large cities. They're already there, so it's really scaling. Japan was a venture that the business has been in for, I believe, 14 years. Lotte used to be the owner of it. They weren't really paying attention to what does it mean to open up a Hot Light shop and the opportunity. They have gone after some of the fresh shops. So it's really reestablishing the core DNA of the brand, which is that Hot Light DNA that does the freshness and that experiential piece, and then get to the omnichannel, right? So you have to do those things both. They are doing incredibly -- they continue to do just -- amaze us what's in front of us there. So we see a significant growth opportunity there. The big players that everybody will talk about, the Brazils, the Chinas of the world, those are things that will -- it will always matter. Can you find the right partners? We still franchise, particularly overseas, right? But we do it with an omnichannel approach, right? You're going to -- here's what will take to run Krispy Kreme. That's how it will be. And then we can do it with a minority investor, a majority investment or a full-on investment. So it's unique to the opportunity that's presented to us. Our partner just opened up an opportunity in Cairo. I'm sure that hit the news and everybody saw and that was just -- there's a lot of demand in Egypt, right? So...

How much of the U.S. margin sub-12% to international 25%? How much do you think is structural versus how much do you think is closable?

I think as you continue to get to that whole frequency model, right? So if you go through the frequency point of access there where you match up and reach that opportunity in Europe, you can. And by the way, in some of the markets that we're there today, we already have some markets that are doing fairly exceptional, right? We do -- we have acquired some businesses that actually make no money, right? So they need the route system to actually start to develop. So you're building the route system to drive the margin there. So those will be the things that will continue to get better.

But -- so remind us the intermediate-term goal of U.S. margins or long-term goal of U.S. margins?

I believe we've shared this in our past, but I think something that we can see ourselves in the 15%.

Okay. All right. That's consistent with what we heard, good. I just like to see if...

I always try to get the CEO and see if he said something different than the CFO, right? And just like...

We're webcasting. This count as Regulation FD so we're good.

We're all good. But then, of course, right now, I know Josh is looking and going, hey.

And so the final question, you bought Insomnia, which would suggest that you have kind of your views on the sweet indulgence or the global sweet treats beyond just the Krispy Kreme brand. Talk about whether you can more closely integrate Krispy Kreme and Insomnia, especially with Insomnia's e-commerce and delivery capability with Krispy Kreme and whether the acquisitions would stop with them.

We've got a lot on our plate, right? We got a significant growth story to do in the United States, right? We're not even -- we really now have access to building out 8 of the 10 largest cities in the United States, which we didn't have before. We've got significant growth in international, even the countries that we're in, to do the omnichannel approach. You can see when we open up like Egypt and other places, the right partnership, that the opportunities are there. It's the disciplined approach to actually building this. So when you looked at something like Insomnia that came there and needed to match very clearly culturally, what do they want to do and how they think about the business omnichannel and what's -- can they be a growth company? So we see them continuing to do well. They've just crossed their 200th cookie shop. They're a significant player in e-commerce, continue to do that exceptionally well. The real synergy is about us helping them back office. It's not -- I've done young brands and seen co-branding and all those things in my past. Brands are really powerful when they're true to themselves. And if you could do -- you can imagine, urban -- there's -- collegiate is a very different approach to how they would do things, and the founder is there, right? So if you have the founder that's still there after couple of years, and they still are just as excited as day 1, that's a really good story to have.

Well, maybe he gets to do the fun part of the job and let you do a...

Well, he opened up an Insomnia lab, which is this interesting concept right across from Pat's cheese steaks in downtown Philly, right? I'm like, okay, I'm going to be in trouble both sides, right? So let's try that one.

Mike, thank you so much.

You're very welcome. Really appreciate it. Thank you, everybody.