MTY Food Group Inc. (MTY.TO) Q3 FY2025 Earnings Call Transcript & Summary

Good morning, and welcome to the MTY Food Group 2025 Third Quarter Results Earnings Call. [Operator Instructions] Listeners are reminded that portions of today's discussion may contain forward-looking statements that reflect current views with respect to future events. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. For more information on MTY Food Group's risks and uncertainties related to these forward-looking statements, please refer to the company's annual information form dated February 13, 2025, which is posted on SEDAR+. The company's press release, MD&A and financial statements were issued earlier this morning and are available on its website and on SEDAR+. All figures presented on today's call are in Canadian dollars, unless otherwise stated. This morning's call is being recorded on Friday, October 10, 2025 at 8:30 a.m. Eastern Time. I would now like to turn the call over to Mr. Eric Lefebvre, Chief Executive Officer of MTY Food Group. Please go ahead, sir.

Thank you and good morning, everyone. I'd like to begin by expressing how proud I am of MTY and our franchise partners for the discipline and resilience in executing our strategy even amid the volatile environment. As I also mentioned in the past, MTY's team remains laser-focused on driving organic growth through positive same-store sales and net unit growth across our portfolio. Combined with greater efficiency and scale, these efforts should translate into meaningful EBITDA growth over time. With our asset-light diversified business model, we believe MTY is well positioned to navigate this challenging macro environment and to continue delivering long-term value. During the third quarter, we achieved an important part of that objective by delivering a net gain of 15 locations supported by a robust pipeline of new locations and continued interest from our franchise partners to further invest in our brands. Cold Stone Creamery, Wetzel's Pretzels, Planet Smoothie and Thai Express continue to be key contributors while many of our smaller brands add locations regularly and also contribute an important portion of the overall number. With momentum building, we are well positioned to continue expanding our network steadily over the medium and long-term. MTY system sales remained stable at $1.5 billion. Same-store sales, on the other hand, have not reached the level we aimed for last quarter. But I'm encouraged by the sequential improvement in the U.S. driven by Cold Stone and sweetFrog, 2 brands at their seasonal highs during the third quarter and continued strong performance by Village Inn. Canada same-store sales were largely flat during the quarter. Many street-based brands performed well, including our breakfast concepts and Sushi brands, but that was offset by a 2.5% decline experienced by our mall-based locations. Looking ahead to the start of Q4, we've seen continued volatility in the U.S. similar to the trends experienced so far in 2025, while our Canadian operations are showing signs of improvement across most of our banners. Although this reflects just 1 month of the quarter, it reinforces the importance of our diverse portfolio as we navigate these market dynamics. Turning to our digital channels. Digital sales grew 1% in Q3 and now represent 19% of total sales. The slight moderation in growth is primarily due to Papa Murphy's system sales decline. Papa Murphy's drives approximately 40% of its sales from online transactions. So a decline on Papa Murphy's carried significant weight on the consolidated number. Excluding Papa Murphy's and the impact of foreign exchange, consolidated digital sales increased 3% during the quarter over prior year. We see significant opportunity to increase our digital penetration over time, and we believe our investment in people, infrastructure and technologies along with brand level initiatives are enhancing the off-premise guest experience while building a long-term growth engine. Digital also enables us to leverage data-driven insights for more targeted marketing, stronger customer loyalty, delivering scalable impact across both our large and emerging banners. While most of our U.S. brands are already well into their digital journey, we're only scratching the surface in Canada with significant improvements coming in the next few months as our data infrastructure reaches the required level to activate the value of the data we own. At MTY, innovation is at the heart of what we do. It's just about new menu items. It's about finding smarter ways to engage guests, streamline operations and drive incremental traffic across our brands. From digital tools that simplify ordering and enhance the off-premise experience to data-driven marketing and bold menu concepts, our teams are continuously experimenting and scaling what works. This approach helps us stay ahead of -- in a competitive value-conscious market while driving the top line growth and operational efficiencies. We remain confident in the underlying strength of our brands and the resilience of our business model. At the same time, we are mindful of external factors that could affect near-term growth. The prolonged U.S. government shutdown could delay SBA loan approvals, which are an important source of financing for some of our franchise partners and as a result, could temporarily slow the pace of new restaurant development. The shutdown could also impact the availability of SNAP benefits, which may put pressure on consumer spending, particularly for low-income guests. I'd like to take a moment to walk you through some of the key objectives and initiatives underway at Papa Murphy's. As part of our ongoing efforts to strengthen the brand and position it for long-term success, we've made the difficult but strategic decisions in partnership with our franchisees to close a certain number of underperforming locations over the last year. This allows us to focus our time, resources and support on markets and stores where we are seeing the strongest growth and guest engagement. These actions ensure the brand is on strong footing and remains healthy, sustainable and well positioned for future expansion. A recent example of this successes is our opening in Deer Park, Washington. The newly opened location currently generates sales of more than twice our brand's average unit volume. We're also making targeted investments in marketing, including exciting collaborations like our recent partnership with Mike's Hot Honey. Additionally, one of our most impactful initiatives on the horizon is the relaunch of the Papa Murphy's loyalty program. This updated program transitions from a surprise and delight structure to a rewards-based [ system ] designed to both attract new guests and increased visit frequency among our loyal customers. Aggressive incentives will be offered to customers to generate interest around the relaunch, which should offer an opportunity to reconnect with some guests and reengage them with the brand. Other initiatives include menu optimization, cue rationalization and an entirely new lineup of exciting pizzas launching next year, all aimed at driving innovation, simplifying operations and enhancing the guest experience. We're confident these strategic moves will drive continued momentum and growth for the brand. Papa Murphy's team is focused on building a stronger, more agile business, one that honors our heritage while evolving to meet the needs of today's guests and tomorrow's opportunities. While we are on the topic of Papa Murphy's, I would like to announce the departure of Adam Lehr, who was the Co-COO for the Barbecue Holdings in Papa Murphy's divisions. Al Hank, who was Adam's Co-COO, will take the solo lead for the division. We wish Adam the best of luck as he becomes a franchise owner for Famous Dave's Barbecue and Champs Restaurants. On a different topic, I'd like to highlight the significant progress we've made on our ERP implementation, a cornerstone initiative that will drive efficiency and scalability across MTY. Our Canadian go-live was completed on time and on budget. And we are now in the first phase of the U.S. rollout with the final phase scheduled for December. We remain confident in our time line and are applying the lessons learned in Canada to ensure a successful transition. Already, the system is enabling us to develop tools that improve visibility, streamline processes and enhance efficiency in every part of our operations. I want to take a moment to recognize the exceptional work and efforts of our head office teams, whose dedication has been instrumental in achieving this milestone. With that, I'll now turn it over to Renee, who will discuss MTY's financial results in greater details.

Thank you, Eric, and good morning, everyone. Normalized adjusted EBITDA came in at $74 million for the third quarter, up 3% year-over-year compared to the same period last year. This was aided by the recognition of a $5.8 million employee retention credit from the U.S. government, which pertained to the 2020 and 2021 period. Excluding this credit, normalized adjusted EBITDA would have shown a modest year-over-year decline. Our franchise segment delivered results that were in line with the overall business performance with a 2% decline that mirrors the trends seen in same-store sales, while margins for the segment remained stable at 56%. Canadian revenues for the segment decreased by 2% to $36.4 million, mainly due to lower sales of materials to franchisees, partly offset by higher recurring revenue streams. Meanwhile, in the U.S. and International segment, franchise operations revenue also saw a modest 2% decline to $64.4 million, driven mainly by an unfavorable foreign exchange variation. On the expense side, operating costs in Canada went up by $1.4 million year-over-year to $20 million, mostly due to normal inflation on wages and increases in consulting and SAP implementation costs. Meanwhile, I'm happy to report that in the U.S. and International segments, operating expenses decreased by 4% to $25.6 million. Looking ahead in the franchising segment, we expect the higher quality of new stores opened and those about to open, along with the efficiencies from our ongoing initiatives to drive franchisee EBITDA growth at a pace above same-store sales growth levels. Normalized adjusted EBITDA of the corporate store segment came in at $13.1 million, up $3.8 million from last year. After normalizing for the $5.8 million employee retention credit, EBITDA was softer this quarter, reflecting a decline in sales and a higher cost of goods. That said, we view these pressures as temporary and in most cases, addressable. We remain confident in our ability to manage these effectively and drive improvements over time, and we expect this segment's margins to be closer to the high single-digit level experienced last year. Canadian corporate store revenues decreased by 4% to $10.8 million due to a reduction in the number of corporate stores. While U.S. and international revenues declined by 1% to $107.7 million due to a 2% reduction in system sales. Operating expenses for the Canadian segment decreased by $0.5 million to $10.9 million, while the U.S. and International segment decreased by 5% to $94.5 million. The U.S. decrease was due to the recognition of the $5.8 million employee retention credit received, partly offset by a higher cost, reflecting a higher number of corporate store locations. Food Processing, Distribution and Retail segment delivered revenue growth of 19%, driven by a shift in our retail model from a licensing agreement to vendor on record for some of our products as well as successful promotional activities and the higher volumes across our core retail products. Looking ahead, we see meaningful opportunities for both revenue growth and margin expansion as we continue to build scale and strengthen our presence in underpenetrated markets. Normalized adjusted EBITDA for the segment reached $4.9 million, down 6% from last year with margins coming in at 10%. The decline in the margin was primarily due to the result of the move from a licensing model to being the vendor on record for certain products. Turning our attention to net income attributable to owners, it amounted to $27.9 million or $1.22 per diluted share compared to $34.9 million or $1.46 per diluted share in Q3 2024. The decline was mainly due to a $6.2 million net impairment charge on intangible costs related to one brand in the U.S. and International segments and 3 brands in Canada. Moving over to cash flows. MTY's asset-light model continues to generate strong free cash flows, providing meaningful flexibility to reduce debt, pursue strategic acquisitions and enhanced shareholder returns, all while continuing to invest in the long-term growth of our brands. In the third quarter, cash flows from operations were $39 million compared to $66.4 million in Q3 2024, representing a decrease of $27.4 million. The lower-than-expected amount mainly reflects a temporary working capital decrease tied to delayed invoicing for the retail segment during the SAP rollout. To ensure accuracy and establish a sustainable process, invoicing was pushed to the later part of Q3 and is now fully up to date. We expect full collection on the amounts outstanding at quarter end within the next month with no material risk as all the receivables are related to major retailers and grocers in Canada. Cash flows before noncash working capital items, interest and taxes were $73.6 million compared to $71.4 million in Q3 2024. On a trailing 12-month basis, free cash flow net of lease payments stands just over $120 million, representing roughly 14% of our market capitalization. This underscores both the strength of our cash generation profile and the attractive value of our shares. We ended the quarter with net debt of approximately $602 million. Considering our strong cash flow generating ability, our debt-to-EBITDA of approximately 2.3x is the level of debt that gives us flexibility to make acquisitions should the opportunity arise. And with that, I'd like to thank you for your time and turn it back to Eric for closing remarks.

Thanks, Renee. Before we move to questions, I want to emphasize that MTY is built for resilience and growth. With our asset-light model, strong cash flows and diverse portfolio of brands, we are well positioned to navigate near-term challenges and capture long-term opportunities. Our focus remains on driving efficiency, accelerating store development and investing where we see the strongest returns. With the strength of our people and the proven power of our model, we are confident in MTY's ability to deliver sustainable growth and last shareholder value. Thank you for your time, and we will now open the lines for questions. Operator?

[Operator Instructions] With that, our first question comes from the line of Vishal Shreedhar with National Bank.

I wanted to get your perspective on the net location growth. Last quarter, you noted more than 100 locations under construction. And this quarter, there were 96 openings. So how should we [ think the ] pipeline going forward?

Yes. The pipeline remains really strong. I mean, of note that I'm sure our construction teams are listening now, we took possession of a large number of locations in the last few weeks. So the pipeline remains super strong for the next year or so, even the next 18 months. So I'm really happy with where we stand in terms of our pipeline and franchisee engagement is really good. So what you're seeing? I mean there's going to be seasonal highs and lows on new store openings, but the pipeline remains as strong as it was at the end of last quarter.

With respect to the employee retention credit, should we expect more of that? Or is it more of a onetime benefit in this quarter?

Yes. That was -- the largest amount has come in. That was the largest one we were expecting. There might be some more coming in Q3 and Q4, but it's not going to be of the magnitude of what we received in Q3.

With respect to the menu prices that were talked about last quarter in the U.S. corporate stores, were those enacted? And did that help profitability to the extent [ envisioned? ] And was there an impact on traffic? And how should we think about pricing going forward?

Yes. We did take price on certain brands, predominantly Village Inn and Famous Dave's. For Village Inn, there was no impact on traffic. We're really happy. The brand is doing well. We seem to have really, really good momentum with that brand. With Famous Dave's, I mean, the impact was good. I don't think there was an impact on traffic. The problem we have is those commodities that we sell at Famous Dave's keep soaring in prices. So if you just look at the price of beef, for example, the cost of brisket for us is going up rapidly. So we do face some issues. Ribs are getting more expensive as well. So we can increase prices only by so much, and then we need to figure out ways to control our prime costs. And unfortunately, the market is not going in the right direction for our proteins at the moment.

Okay.

And your next question comes from the line of Derek Lessard with TD Cowen.

So a couple for me. You did have a pretty good pop in same-store sales in Canada in Q2, but it looks like they softened again in Q3. Just maybe if you could talk about what you're seeing in terms of maybe the consumer dynamic in your restaurant network?

Yes. If we dissect Q3 a little bit more, we see that it's really the mall locations in Canada that hurt us a little bit more. So the fact that same-store sales turned negative for the quarter, I don't think it means anything in terms of the consumer. It probably speaks to the incredible weather we've had and that people are not necessarily going to malls as much, which I don't want to blame weather for everything, but I mean, it's factual that our mall locations declined in Q3 more than anything else. So we're doing pretty good with the other types of locations -- so I don't think we should draw conclusions on where the consumer is just based on that Q3.

Okay. That's fair. And maybe just switching gears to the U.S. Obviously, there was a sequential improvement there. I think in the press release, you did talk about Cold Stone and Wetzel's improvement there. So just maybe talk about those concepts in particular and whether the improvements that you've seen are -- how you think about in terms of sustainability.

Yes. I mean, the U.S. market is a little bit more volatile. It reacts to different situations a little bit faster than what we're seeing in Canada. Cold Stone is still a great brand and Wetzel is still a great brand. So I have no doubt that in the long-term, those 2 brands are going to be successful. Now will they respond positive -- respond positively or negatively to certain inputs, probably. Like the rest of the market, but I remain super confident. What we're seeing so far in Q4 is a little bit of the same, where we see some really good periods and then some troubles here and there in sequence, where we can't really explain it by anything we're doing. So it really responds to different inputs that the market is receiving. But overall, I mean, if you look at our Q3, it was an improvement for most of our brands with the exception of Papa Murphy's that struggled a little bit more. So I mean, overall, the portfolio looks good. I mentioned during the more formal part of the call that we have a number of initiatives going on for Papa Murphy's. The relaunch of the loyalty program is really important. It's coming -- it's going live with a soft launch now and there's going to be more aggressive marketing around it at the end of the month. And we're pretty positive for that brand. So overall, things are looking good. I mean, we do have some work to do with a number of our brands. But overall, it's looking positive.

And at Papa Murphy's is it -- is it issues tied to competitiveness within the pizza vertical? And I guess how close are you to getting that store base stabilized?

Yes. For sure, it's a very competitive space with the pizza. You look at our competitors and they're -- I mean, they all admitted to invest, over-investing in marketing in the last few quarters, some of them $30 million, $40 million. So that's something we can afford to do. So we need to compete differently. In our case, I mean, the space is competitive, we remain positive on the brand. We have a lot of new things that are coming also for next year that we can't necessarily announce now. But pretty pumped about what we're doing with the brand, and it's looking really good. What we're seeing also at the moment is we have some franchisees that are pulling out a little bit of their local marketing efforts. And as you know, Pizza is very marketing-driven. So as soon as you close the tap, you see the sales going down right away. And unfortunately, some franchisees are just not putting their money into their businesses at the moment. So we're trying to work with them to have the right material and have the right campaigns for them to be, I guess, motivated to deploy some capital and invest in marketing. So we're working on that. But other than that, the brand is generally doing well. Will there be more store closures in the future? Probably a few, but I think you're not going to see closures of the magnitude we've seen in the last 2 years. Hopefully, we're getting close to stabilization there. And we're also going to be opening more stores as the pipeline is developing. Our sales team is doing a really good job, and we should see the pace of opening pick up next year. So obviously, that happens gradually, but now we're starting from very little openings to almost none. And now we're seeing some momentum picking up, and we're going to have more openings in '26.

And your next question comes from the line of Ryland Conrad with RBC Capital Markets.

I guess just starting off on retail. Could you maybe unpack the strong performance there? Are you rolling out more products or seeing distribution gains? Or is that mainly driven by just the shift in consumer spending from out-of-home to at-home dining?

Yes. I mean you need to look at the increase in revenues 2 ways for retail. One of them is just driven by a shift from a licensing model to a vendor-on-record model. So it's not really -- the fact that our revenues are increasing by that much doesn't necessarily mean we have great performance there. And -- but we do have great performance when it's all said and done. We have some really good opportunities in that market. We have some really good products and the team is doing a fantastic job now expanding the network of stores where we deploy our products. I think we've made some changes in the organization last year in Q4, and we continue to evolve that organization and as our pipeline is growing and as we get traction with more initiatives, we should see significant growth in that space. So really happy with where we are now. Numbers might be a little bit misleading this quarter just because of the change in model. But overall, it's a great business, and it's 1 of the areas of our business where we see the most growth for the next few years. So we're really happy with where we are.

Okay. And then just shifting gears a bit to M&A. I guess with the macro pressure that we're seeing across the U.S., can you just provide us an update at a high level kind of what you're seeing with the current M&A environment and just whether seller expectations have begun to normalize at all and how that pipeline is progressing?

Yes, where it's interesting. The market is very dynamic. There is a good amount of deal flow at the moment. So it's just a matter of finding the right deal for MTY. There's been a lot of corporate store networks that were not necessarily interesting for us. There's been a lot of fixer uppers, a lot of Chapter 11 situations where this is not necessarily what we're focused on. But I feel like the market is starting to be in a better place now. And it's just a matter of us to be at the table for those right deals when they come and to be able to make them cross the finish line. So market seems to be a little bit more favorable at the moment for MTY and we'll see what it -- I mean there's no guarantee it's going to lead to anything significant in the future, but there's also a better opportunity now than there was maybe a year ago.

And your next question comes from the line of Michael Glen with Raymond James.

So just on CapEx, Eric, your CapEx spending has come down. It was notably quite low in the fiscal third quarter. I'm just trying to get a better sense with the corporate stores that you do own, is this level of CapEx sustainable? Are there some pent-up projects that you're going to have to start to look at next year?

No. I mean we've been saying that CapEx would normalize this year for a long, long time, and we're delivering on that promise. I mean we don't normally give guidance, but that was one area where we said that CapEx was going to be the way it is. So this is normal CapEx now. We're doing what we have to do at our manufacturing plants, and we're doing what we have to do in our corporate stores. So it's not like we're underinvesting in anything. So no, we're actually refreshing a few stores at the moment. We try to do it very cost effectively, and we try to be disciplined with that. But there's no pent-up CapEx coming. So the level you're seeing now is the normal level going forward.

Okay. And just on -- you referenced the lower expenses -- lower expense levels. Is there -- can you better describe is there a broader expense initiative that you're going after here within the organization?

Yes. I mean you've known MTY for a long time. This is a review we do continuously try to be more effective and try to stretch every dollar to go a little bit further. So this is part of what we do. I mean we've -- over the last -- also over the last 18 months, we've restructured a number of our departments. We've consolidated a number of different things. We see also SAP enabling maybe some lower expenses in some areas. So it's a continuous process at MTY. We never take it for granted that we're at the right level, and we're always trying to be more and more disciplined with our expenses. So there's no specific initiative that I can announce or that I can point to, but it's a continuous effort that we're trying to reduce the amount of external help. We need to reduce the number of consultants, try to maximize every employee we have. And now with our investments in technology, I think we're going to be able to make everyone a little bit more efficient in the company, and that should result in some savings as well. So -- but there's no specific initiative.

I guess I've never known the company to be overly egregious on the expense line. So I'm just curious where you're finding incremental buckets, it must be hard to find.

There's always something.

And then just circling back to M&A. I know that you do keep your sort of criteria list rather broad, but like what -- if you're looking at opportunities I guess, probably more in the U.S., like what -- can you describe what represents something that would be ideal for you to go after?

Yes. Well, the one thing is we'd like to go into franchise systems as much as possible. Corporate stores, we don't hate corporate stores, but we also like franchise better. So this would probably be the one criteria. And then obviously, you want to look at type of food, type of market you're going into and try to find an area where there's probably more room to grow and probably an easier environment. But there's no specific criteria. I mean there could be some really good targets in the wrong -- in the wrong areas that would be very cost effective, so that -- that might be one or there could be some really good growth companies that would be a little bit more expensive, where we can see a longer runway. So that could be another one. So I mean, it's all about the return we can generate for shareholders in the end. And this is how we look at it. So we're pretty agnostic in the type of food, the geography. I mean the one thing where we're probably less agnostic is where we want to go into franchise systems.

[Operator Instructions] Your next question comes from the line of John Zamparo with Scotiabank.

I wonder if you could talk a bit more about franchisee profitability. There's some new disclosure on that from your prepared remarks. Maybe first, can you just remind us of the visibility that you have on this metric and has the ERP system helped with that?

We have visibility for some of our brands. We don't have visibility for all our brands. So in many cases, we have some tools like Crunchtime or ProfitKeeper, for example, where we're going to be able to track profitability a little bit better. And that applies for some of our larger brands like Cold Stone and Papa Murphy's, for example. So we do have access to franchisee profitability. And I mean there's always some franchisees that are doing extremely, extremely well, franchisees that are struggling a little bit more and a large number of franchisees that are operating at expected profits. So that's the normal. And this is -- what we're seeing now is no different than what we were seeing before. For the other brands, we'll work with the annual financial statements that we're getting and also with our theoretical models. We know how much rent franchisees pay, and we know how much they should have in food costs and labor costs. So typically, we have a pretty good idea of where our franchisees stand. And I mean, it's a daily battle for all our brands and all our operations people. We need to make our best effort to help our franchisees be profitable with their business. And what we're seeing now, I mean, is a good validation that what we're doing is right. We have a lot of current franchisees who want to reinvest in the business, and a lot of these new stores we're opening are coming from existing franchisees. So it tells me that although we might not be perfect, we're doing a large number of good things and that we're helping franchisees be profitable.

Okay. That's good color. And does SAP help with that? Or is that separate what that's contributing?

Yes. That's not SAP. That's one of the aspects SAP doesn't cover. It's not scoped in. It's -- we have other tools, other technologies that enable that. It doesn't mean one day it won't be in there. But -- because franchisees numbers are not our numbers, typically, we try not to mix the two. So I suspect that we'll keep that out of SAP.

Okay. And it sounds like you're relatively optimistic on being able to grow overall franchisee profitability even if the outlook on the sales environment is maybe more moderate. Are there plans to take out costs within the 4-wall operations?

Yes. I mean this is what we do on a daily basis. We need to -- we need to do a great job at purchasing, a great job at trying to help our franchisees maximize every product that they have in the store. We have some better practices, best practices, let's say, for example, that you shouldn't bring in a SKU in a restaurant if it doesn't have at least 3 uses. So those are the types of initiatives we try to come up with where we're trying to obviously bring some new innovation but try to innovate with the existing SKUs. So innovate within the box we already have and where we need to bring in new SKUs, and we'll need to maximize them and use them a little bit more. So those are the types of initiatives we're trying to come up with. We're also working with a number of our suppliers to try to help us reduce the labor needed in our restaurants. So a certain number of prep, for example, some items can be prepped with our suppliers. So we don't have to do a new store to have better volume to automate maybe some of these functions. So there's a number of different initiatives we look at to try to do that. AI is coming into the staffing also. It's been -- it's been a thing for maybe 5 or 6 years, but it's obviously getting more refined now. So we're trying to have the proper level of staffing at every hour to try to, again, take out costs in the restaurant and maximize the staff when they're in the restaurant. So this -- but it's ongoing initiatives. So I can't say it's one thing. We're not one initiative we're doing now. It's something we do every day.

Right. Okay. Switching gears to the small business administration loans. I wonder if you could say historically what percent of U.S. store openings have relied on this program?

Oh, the vast majority of them.

Okay. And typically, what percent approximately of total funding would come from that program? Is it significant? Is it a small contributor?

Yes, the funding does not come directly from the SBA. The SBA is more a federal program that will guarantee a certain portion of the loan for banks to loan. We have the same program in Canada, it's SBL in Canada. So it's the same type of program where the government guarantees a portion of the loan to incentivize the banks to support small businesses. So it's the same thing in the U.S. And if SBA loan doesn't get approved, it's a little bit harder for the banks to lend the money without having that government support.

Okay. Understood. A couple more. On the openings this quarter, these skewed fairly heavily towards the nontraditional format. I wonder if you could add some more color there. Was that 1 or 2 banners, which the reopening of previously closed stores? Anything you can say there?

No. Well, it's -- Wetzel's is a brand that will have more non-trads where we might open, for example, in the Walmart or we might open in -- we used to open more in Macy's. You can open food trucks, for example, or airports or campuses. Those will all be categorized as non-traditional. So it's a pretty large bucket you have in there that will skew non-trads. So it's mostly from volume of non-trad mostly from the Wetzel's. We also have some coffee shops that are opening in other locations that might be considered non-trads as well. So you'll see that. But I'll say it's mostly Wetzel's.

Right. That makes sense. Okay. And then lastly, I wonder how you're thinking about the buyback. You were not active in Q3. You referenced in your prepared remarks that you're pretty pleased about where leverage stands. I wonder what investors should expect on the buyback over the next year, particularly given valuation levels and where does this lie in your list of capital priorities?

Yes. I mean, it's something we discuss all the time. We made the choice last quarter to focus a little bit more on our debt and put a little bit more money on debt repayments. Paying down debt helps us build flexibility, whether it is for buying back shares through the NCIB or even an SIB. It gives us flexibility if we find attractive opportunities out there. So -- I mean, we like buybacks. We also like reducing our debt. So it's a balance right now. I'd say we'd probably expect that at least for today -- at least for the next quarter, we should probably expect that we're going to keep focusing on debt, and then we'll reassess regularly as we always do.

Thank you. And showing no further questions at this time. Ladies and gentlemen, this now concludes today's conference call. Thank you all for joining. You may now disconnect.