Restaurant Brands International Inc. (QSR) Earnings Call Transcript & Summary

Good afternoon, everyone. It's John Glass from Morgan Stanley, the restaurant analyst here. I'd like to welcome you to our next fireside chat with the Restaurant Brands International. I want to, first, before jumping into a dialogue just a couple of housekeeping items to cover. One is, those of you who are on the webcast, there is an opportunity to ask a question, should one occur to you. And I don't cover a topic we'd like further expansion. You can do that by clicking on the Ask a Question button, and I would just encourage you, if you're going to do so, to do so early and often so that I can collate those. And if we have time, I will try to get to those, to as many of those as I can at the end. Secondly, I do have to make a disclosure for you all. For important disclosures, please see Morgan Stanley disclosure website at morganstanley.com/researchdisclosures, and of course, you can contact your Morgan Stanley representative. Well, with that out of the way, I'd like to welcome our next fireside chat -- company, Restaurant Brands International. I'm joined today via webcast with -- by José Cil, who is the CEO of Restaurant Brands International; and Matt Dunnigan, the company's Chief Financial Officer. So gentlemen, thanks so much for joining us, and welcome.

Thanks for having us.

Thanks for having us.

It's our pleasure.

Before getting into the particulars of the business, José and Matt, I thought we could talk about your perspective on the value of a platform within the restaurant industry, i.e., a single company managing a portfolio of brands. And we've seen M&A recently in the space would suggest that the value of those platforms are going up. But -- and -- there are advantages in many places, whether it's scale and technology, scale and number of franchisees. I wonder, José, if you can talk a little bit about where you think the biggest value or competitive advantage is from your platform, the RBI platform? And how you think you can exploit that going forward?

Yes. Thanks for the question, John. Look, we're super excited about the business that we have. We have 3 amazing iconic brands in Burger King, Popeyes and Tim Hortons. And so our focus -- for the -- since the beginning -- since the merger of Burger King and Tims, was to create an amazing company that was kind of focused on meeting consumer needs, meeting guest needs, being a most loved brand and being able to be a growth driver. And so from our vantage point and from my vantage point, in particular, the fact that we're focused on growth, that we have 3 amazing iconic brands that have huge potential for growth in our home markets and internationally, is the starting point. That mindset is really what drives our platform. And we're -- we see a number of different opportunities and benefits of the platform that we have or the scale that we have. I think, first and foremost, we have, in addition to the great brands, we have amazing franchisees, master franchisees internationally as well as franchise partners here in the U.S. and Canada. They form the basis of our ability to execute the game plans that we have and to grow at the rates of growth that we've seen over the last many years. And so that network of partners that's committed to the business, the brands has the same vision we do is really a key differentiator from our vantage point that we think allows this -- our platform to be a unique and exciting growth platform in the QSR space, in the restaurant space. I think in addition to that, we have the ability, given our scale and given our synergies, we have the ability to build and to deploy benefits such as technology or platform around technology, across brands, across markets very quickly. We also have the ability to implement brand focus initiatives around marketing or design consistently and across markets and brands very quickly. So our focus is around growth and the consumer and how that drives, ultimately, our brand values. And we do that through our franchisees, and we do that through synergies that we think are beneficial on the tech and the brand side. Matt, maybe you can touch on some of the other benefits that we see from the platform that we have.

Yes, for sure. Yes. So I would just start off by echoing what José shared. I think as we think about the evolution of our business, first and foremost, I think we're a restaurant growth company, a global growth company and that's how we think about things. That's how we drive our business and how we've been building our plans. And on that point, I think, we didn't acquire Tims or Popeyes simply for the sake of adding another brand to the portfolio. I think it was, because we saw amazing brands where we thought we can bring a differentiated capability to really take them to the next level. But I think, as José mentioned, we do have very significant advantages with our scale, with our multi-brand platform, with our global diversification and the partner network that we have. Across G&A and shared services and also in development, where we have the partners, really great partners that José mentioned, both domestic and international that are great asset to our business and our ability to grow all of our brands. And then increasingly so on the tech side, I think that's emerging as one of the biggest focus areas and an area where we see a lot of opportunity in terms of what we're doing and the learnings that we're generating across our brands and that we can share to drive the business forward. So overall, I think, great platform, lots of benefits, but really focused on driving the brands that we have and driving organic growth.

Thank you for that. I want to -- we're getting some questions on growth and franchisees, but we're going to -- I'm going to cover that in a bit. So thanks for the questions. But let me first just focus on the brands themselves. And I want to start with Tims, in particular. As a holding side COVID for a moment. When we look at Tims over the last couple of years, same-store sales have been relatively modest, 1% may be less and depending on -- and I'm thinking about it on an annual basis. What are the underlying reasons for that in your view? Is it a category issue in Canada, either the category is slow or growing? Or there's some shifts? Is it -- are there internal issues? How do you -- again, prior to COVID, how do you think about what the relative health and the opportunities were for Tims to really experience what could be more substantial comp growth in the future? How do you assess those things?

Sure. The starting point is that Tims is an amazing brand in Canada. It has unprecedented, like, unrivaled penetration. We have one restaurant for every 9,000 or 10,000 Canadians. We've got 2,600 drive-through locations in the country out of 3,900 or so restaurants, which is a 1,000 more drive-throughs than anyone else. We have amazing owners that have been in the business for a long time and very committed to their guests and to their teams and are doing a great job and have been doing a great job for a long time. I think it's important to start there because the business is really phenomenal. The unit economics in the restaurants are great. Some of the best in the QSR space anywhere in the world. But I think the challenges we've faced over the last couple of years has been that we haven't really focused on some of the fundamentals of the business. I think we were kind of focused on trying to drive top line growth with promotional activations and a lot of innovation -- product innovation that was limited in its term, so limited time offers. And we kind of used a challenger brand mindset as we went into managing the business in Canada, where, in fact, we're not a challenger brand. We're the dominant brand. We're the -- we have more than the lion's share of the market in Canada, and we haven't acted as a leader for some time. And so about a year ago, as I started to get much more -- probably October of '19, as I started to get much more involved in the business there with the team, we made some significant changes in team. We did some research, probably, the most significant research that had been done in Canada for Tims in a long time, if ever, if not ever. We went and talked to Canadians across the country from the southernmost point to the northernmost points and really dove deep to figure out what were the issues and the challenges that we were facing and what did we need to do differently to drive growth in that business again. And what we saw and what we heard consistently was that, we have an amazing brand. It's a loved brand. The consumer and the guests in Canada doesn't want us to change radically what the brand stands for. They just wanted us to go back to what we were great at. What made Tim Hortons famous in Canada, which is great coffee, great baked goods, great hot breakfast sandwiches and some of the other dayparts that we had developed over the years. And we haven’t lost touch with consistency and quality and all the innovation and all the limited time offers that we were doing, only exacerbated the situation. So that was one big area of feedback from the consumers in our research. The other was around the experience, modernizing the experience in the restaurants. And so we kind of scrapped everything we had and refocused our teams, worked with the owners. We've rebuilt our team as well, and we came out with a game plan that was basically focused on what made Tims famous, got back to the basics, and we've talked about this quite a bit, but the focus is on elevating the core quality in coffee, in baked goods, in breakfast, eventually moving on to lunch as well and this is really important work. On the coffee side, for example, we've invested in fresh brewers. We've invested in water filtration. These are things that most, if not all, coffee players around QSR -- North American and probably in the globe, moved towards quite a while ago, different holding technology for coffee. We were using 40-year-old technology. We've moved now to fresh brewers, water filtration. There's a wide variety of water quality in Canada. We didn't have water filtration. So we made those changes. We've moved forward with quality changes in product which we think are going to be really important. One of the insights in the research that consumers told us was that, when we make choices on where to go for coffee, Tims is at the top of the list, with no real second in mind. But when food is the deciding factor, we were second and sometimes third in the decision tree, which is really not acceptable for a brand of the quality and the kind of the presence that Tims has in Canada. So investing in quality was a huge priority. And then moving into the modernization of the experience in the restaurants, drive-through is a big part of our business, but really haven't been touched in decades. So we've made investments, and we've announced all the changes we're making around outdoor digital menu boards, investing in predictive selling and all the media -- all the smart technology and decision technology that goes into that. So we're doubling down on the drive-through experience, enhancing that and loyalty being a big part of the modernization equation. We think the combination of all those, which is hard work and is not one of these quick overnight fixes. But that work is going to give us a really good runway for growth of the business for years to come.

And maybe, José, maybe just pausing on a couple of the pieces there. But at a high level, so it's not easy work, as you say, and this is about blocking and tackling, and making sure the brands -- when is it reasonable to start to see effect of these things, right? Does it -- is it -- take consumers a while then to recognize, “Okay, the coffee does taste better because you've made some of these changes?” “No. Is this a 2 to 3-year sort of journey we're on?” Or is this something that the groundwork has been laid and now on '21, you can start to activate it as you get consumers coming back into your restaurants that have been there? What's a reasonable time frame for investors to think about this new approach that you've taken and the effect on sales?

John, we don't put a real time line on it. I can assure you that we're driving hard to see growth in the business. But we look at metrics that ultimately drive and enable the growth in same-store sales and in traffic, things like product satisfaction. So we're seeing movement in product satisfaction around coffee. We're seeing positive feedback in other product metrics that we look at. We see improvements in other operating metrics that ultimately will drive that growth. It's hard to say when things will get back to growth, especially given the additional -- the environment that we're in today, where we've seen a bit of an impact on mobility, actually, much bigger impact in mobility in Canada than we've seen in other places, which has had a corresponding effect on visitation in the morning daypart, which is one of our key areas. So we think there's certainly an opportunity to grow faster, but there's a macro component that we need to manage. And -- but we're focused on executing our game plan. And we think as things kind of open up and hopefully, in the near term, we'll see some growth and some benefits on the business side for Canada. And we'll see that for the long term as well.

Yes. Two other questions relating to that. Years ago, when Tims was a public company, they really talked about their -- the big opportunity was no longer frequency. You had such massive frequency, such outsized market share, it was really about an average check or a gain. And I think over time, the market and companies within limited service have had their eyes open that the average check is a big opportunity in this -- even if traffic is flat. Do you think there -- and I think we've even seen data where Tims average check relative to your peers, understanding your breakfast focus was relatively low. Is that your understanding? Is that a big opportunity for you? You think you can just get more items per transaction, perhaps, higher-priced items per transaction, not raising prices but just mixing up the business?

Yes. Look, I'm a firm believer in traffic. I think that's -- more customers is really the ultimate driver of profitability. And I'm not a believer in driving growth through pricing, but there's certainly opportunities to -- and especially in the Tims business to be able to drive more attachment. And as I mentioned earlier, one of the things we learned is, both in the breakfast daypart as well as even in the lunch daypart, where we have a very large number of transactions that are driven by the decision to have a beverage. And there are no attachments to that, very few from -- the sandwiches are not attached in some cases or whether it's lunch or breakfast. And so that's why it's so important to have awesome products, highest quality products and products that people love and crave because that will drive the decision around food to go to Tims as much as -- and we'll also see attachments to beverage transactions. So we believe the quality work we're doing on the food side is going to have an impact ultimately on check and -- combination of check and traffic. The other big investment, which I mentioned, which I think will have an impact as well on traffic -- on check, excuse me, is the investment on outdoor digital menu boards. The work we're doing with predictive selling, that's a big opportunity. Most others have talked about this that have done it in some of their businesses here in the U.S. and some in Canada, have mentioned good results in terms of check driving capabilities. When you have outdoor digital menu boards, you're able to kind of maneuver the images in reaction to what a consumer is ordering. So if you order a coffee, John, we can add images of something that goes well with that coffee during that daypart, given the weather and given the time of the year. We can also be much more direct and personalized with information around the consumer if we have the ability to identify them as loyalty customers, and we're looking at attaching those -- that technology to our drive-through experience, either through Bluetooth or through scanners, which then allows us to be even more personalized and even more specific in terms of what we offer guests. So there's an opportunity to drive check certainly with product and with technology, and we're investing both of those very significantly.

And then just finally on loyalty in Canada. This has also been a journey. There was a program in place that was frequency based and I think it built a very large database, but I think it ultimately eroded some of the chapters because of the redemptions. You since secured some of that. And maybe just remind us where we are on that journey, are we now at a point where you've got a large user base where you can actually start to activate some of those members. I think it's gone from a negative to a neutral -- maybe it's more recently been a positive for a comp perspective. Where are you on that Tims loyalty?

Just as a reminder, what we did initially, we launched loyalty in March of 2019, and the idea initially was to create awareness and adoption. We sent out a lot of -- millions of loyalty cards, which you're able to swipe and you can get credit for it. But in many cases, those card users were not registered. So we only had about 25% of the users of the loyalty program at the beginning and through 2019 were registered. So we didn't have a big database. We didn't have information on the consumer. We just had swipes. That created -- awareness created adoption. That was a good start for the program. But as you mentioned, it did create a tailwind -- headwind, excuse me, from a comp standpoint, because we were giving rewards, but weren't able to really benefit from those -- from that investment to get information on the consumer and be able to give them personalized offers to bring them back either more frequently or bring them back for different dayparts and different occasions to drive transactions. So the shift in 2020, which we've talked about, is shifting to a more digital program, focusing on registration. And then moving into more personalized marketing to be able to help drive additional frequency from those loyalty guests and for those loyal guests and to be able to drive incremental sales. And what we've seen is coming into the summertime, we had already gone from about 25% registered users to more than 50% or just around 50%. That continues to move in the right direction. And we've been able to start testing and trialing the opportunity to give specific, personalized marketing to the loyalty customers. And that 3% drag has now, as of Q3, shifted to a 1% tailwind. So we've seen a positive movement on the loyalty program and the impact it's having on comps. And we feel very confident long-term that that's going to be a driver of our business. That's going to be the focus of how we market and engage our consumers and our guests in Canada.

That's great. Thank you for that. I'm going to move to the Burger King business now, if I could. We can maybe come back and talk about development holistically and talk about the different brands and I think about development. But just from a sales perspective, we'll start in our home market of the U.S. and the Burger King business, comps have recovered, but they are trailing their peers, right? They were down about 3% last quarter. And yet we rolled over some more challenging compares. So there may be some of that, that work. But can you maybe just step back and explain the broader difference? I'd observe McDonald's has spent a lot of money on their asset upgrade. Wendy's is doing something similar. So what -- is it sort of a similar dynamic where maybe you're focused in Burger King historically on more short-term sales activating programs and now there needs to be a shift to maybe more of a holistic approach maybe. Can you talk through how you think where you are in the Burger King strategy? And why you haven't seen maybe the same extent of the sales lift that your peers have seen at least in the U.S. market?

Yes. We had a good -- the starting point is that we had a really good Q3 in 2019. And so lapping that in 2020 proved to be a bigger challenge than we were prepared for. I do think one of the -- several of the opportunities that we have for the BK business in U.S. are longer term initiatives, structural initiatives, similar to what I mentioned around Tims, in particular, we've remodeled. So if you go back to 2020 -- 2010, excuse me, when the company was acquired and when Burger King was acquired, there was a significant amount of work that was necessary to improve the quality of the assets. And the franchisees stepped up in a big way in '11, '12, '13 and really refreshed the image of Burger King. But things have evolved. And we've -- about 1.5 years, 2 years ago, we announced our move to Burger king of tomorrow. This is an image and design and tech-focused package that we believe is critical for the business long-term with a focus on the drive-through, outdoor digital menu boards with a focus on a more modern exterior and interferer experience, and ultimately creating capacity in the drive-throughs with as many double drive-throughs as we can get, depending on property availability and these sorts of things. So that started, and we've been moving in that direction. We put a pause on that at the beginning of the crisis in order to allow people to kind of prepare themselves to weather the storm. We've reignited that initiative, and that's a big part of our plans for the BK U.S. business. We think it's a critical component in order to really take the business to the next level. I think additional to that is investment around digital. So we've made a lot of progress on delivery, and we're working on a loyalty program for Burger King. We think the way our consumers generally engage with the brand socially and digitally lends itself really well for an awesome loyalty program. But in addition to that, it's going to help us move away from a more promotion-driven value approach. So kind of an in and out approach on value. And have an everyday opportunity and offering through loyalty and also through an in-restaurant everyday value proposition, which our team is working on with our franchisees, and we think that's an important component long term. And then finally, continuing to invest in quality. We started this year with the Whopper, and we communicated for the first time, the Whopper free of artificial ingredients, preservatives and colors. And we've started to invest more in quality and quality messages, highlighting our flame grilling credentials, which nobody else can replicate at our scale. And really focusing on the quality of our product, which we think will allow us to continue to drive love to the brand. We also think it's a relevant and important component for the younger guests, which we think we have an opportunity to engage with. So those are the areas of focus. And then one additional one is a daypart one, which is breakfast. I've talked about that in the past. I don't think we've done a great job of taking the next step on breakfast through components investing in quality and expanding the menu and the offering on food and beverage. And then secondly, is investing in media. Investing in the daypart and creating awareness, both digitally as well as through more traditional media to create excitement around that daypart and ultimately, let that be a driver of growth for the business as well.

Could I just pick up on a couple of threads of things you mentioned, José? Just first, when you talk about reimage the brand as reimaged, but that several years ago. So things have changed. What is the time line in order to -- for this new modernization to really take hold? And the digital menu boards, talking about double drive-throughs, maybe there's some other asset upgrades. I would just observe that others have sort of accelerated their own process through some corporate capital or some other some incentive programs. Where do you think -- is there a franchisee willingness now to really put money back to work in the brand? Or do you have to insert -- what's the right time frame to think about this second new wave of modernization of Burger King in the U.S.?

Well, we announced that for outdoor digital menu boards and the drive-through experience, in particular, for Burger King, we're moving really fast. And so we're targeting end of next year or middle of '22 to finalize the investments around an important -- a very important part of our business. 95% of our restaurants in the U.S. and Canada have drive-throughs. And so the push on -- and the alignment we have with the owners around doing that, outdoor digital menu boards and creating that modern experience in the drive-through, that's going to -- that's accelerated. And we've already seen the benefits of that in some of the restaurants that have implemented outdoor digital menu boards, and we're excited and confident that at being able to have that across the system will have the big impact on our business. And then we continue to work as well on the full image package with new builds as well as remodels, and we think that will come -- it won't be as quick as the drive-through experience, but we're pushing hard and working closely with our owners to be able to do that as expeditiously as possible.

And then my other question on this had to do with -- talking about the value platform. And I think last call you talked about sort of bundled value. So what was it that you identified that you instead of LTOs, you want to focus on sort of an everyday core bundled value offer? Is that right? And where are you in that transition?

I think there's different value. Value means different things to different people. And I think part of it will evolve with how we roll out and evolve our loyalty offering. I think ultimately, loyalty is a way of recognizing your most loyal guests with incentives to come back for more. And that includes some discounted product and experiences that you wouldn't otherwise get, if you're not a loyalty customer. So I think value will be a big driver through our loyalty platform. I think we have -- we were leaders in the bundled value concept, and I think we can refine that and be much more precise about that. And I think there was an opportunity as well to continue to evolve value on the à la carte side. It's a great driver of add-ons for the business. And it's also a good driver for snacking and for other dayparts. So we think there's a broader definition of what value means. In addition to that, I think everyday value includes having a perception of value, even if you're paying core prices, right? So a good sandwich at a -- I'll give you an example, $3.99 chicken sandwich at Popeyes, that's the actual price on the menu board of à la carte. That's a great value. And so for our brands across the portfolio, looking at value in a holistic and comprehensive way, including having good pricing on our core items every day is the way that the team is looking at it, and we're working with our owners and franchisees that way.

I want to -- I do want to come back to this notion of maybe cross-fertilization from brand perspective. But let's just talk about Popeyes for a second. That's clearly been a home run from a product development and then ultimately brand halo standpoint, right? How has the mix over time of this chicken sandwich progressed, such that, are you getting customers who are starting there but are now really just Popeyes fans in general? And how maybe -- how do you measure that? Or how can you help us better understand what is -- particularly as we sort of lap this right now, and then we think about kind of the sustainability of it, how successful have you been to translate this into from a run hit product success to a brand-building exercise?

Yes. Look, it's been -- I've been in the business 20 years. I haven't seen anything like this. I don't think I'll -- I've talked to others that have been in the business as longer and longer than I have, and there aren't too many examples that you can cite to one product launch that has changed a business and a brand as dramatically as the chicken sandwich has. What I think is most exciting about it is that it continues to bring new customers in through the door to try the sandwich but also to try other products in the menu. And so throughout the last 12 months, we've seen growth in all of our platforms. So we're not just seeing sandwich growth and everything else kind of stay stagnant or flat, we've seen our bone-in chicken business grow. We've seen ancillaries grow. We've seen beverages grow. We've seen desserts grow. We've seen other boneless chicken products grow. We've seen our seafood business grow. So it's bringing more people to the restaurants and what we had seen from the data beforehand, which gave us confidence that this was the right thing to do is because that when people try the product, the preference of Popeyes, amongst other chicken QSRs jumps up to the top of the list versus when people don't know the product or haven't tried it. So it's an exceptionally good product. And the products across the portfolio are all best-in-class from what we hear from our consumers. So the benefits of launching this chicken sandwich was that it gave people an opportunity and it actually incentivized people to come in and try this product. And now it's also additional to that, created a kind of a routine base visit opportunity for the business. So Popeyes [ free ] sandwich was a bone-in chicken business. Nearly 80% of the business was bone-in chicken, and that's principally a family oriented, very few kind of single users come in for the chicken they do, but it's not the typical sale. The bulk of the sales come from the -- a package of 14 or 10 pieces of chicken, and that's usually for a family or a group of people. This product allowed us to address the single user, the person who comes in by themselves in a drive-through for lunch or for dinner, late night, and that's a new occasion for Popeyes, which is what's allowed us to see the growth in traffic and sales that we've seen. The challenge for us and where I think we're really well equipped is that we need to continue to execute and focus well on that product. This is not one of those situations where you want to do a lot of promotional activity or limited time offers. We have a great product. We have great loyal following for our product, and we have new customers that are coming in, trying this great product. We have an opportunity to expand the menu over time in areas that we don't have any current offering. We don't have nuggets, for example. And there's -- and tenders, I think, is an opportunity to evolve. Boneless chicken is one of the areas that's fastest growing in the chicken space. So we think there are a bunch of opportunities here for continued growth with the Popeyes brand. The other piece that's important, giving people access to the brand, and we have 2 key areas there to focus on: one is building more restaurants and drive-through locations, in particular. And that's work that we're doing, and we can touch on in a moment. And then secondly, continuing to evolve and improve the experience from a digital standpoint, including loyalty, which is we've seen really good benefits in the delivery business. And we think with a strong loyalty program over time, that's going to be a big driver of frequency and incremental visits for Popeyes. So we're excited, and we think we're just in the early days of this momentum that we've created for the brand.

And just sort of wrapping it up from a brand perspective, how -- when you think about products like the success of the chicken sandwich has been sharing it with other brands, right? Burger King is still a much larger brand and it's in areas where Popeyes is not and you could sell something similar in a Burger King and that would help maybe ultimately introduce the Popeyes brand to that market when you chose to develop? Or is that something you're like, look, that's too confusing, Popeyes is Popeyes, Burger King is Burger King. How do you think about sharing branded items, for example?

Popeyes is Popeyes, Burger King is Burger King, and Tims is Tims. We have brand teams that focus on the brands. They work specifically with their marketing teams and their development teams and their operations teams. They work with their owners and operators and franchisees, and they're incentivized and motivated, and their targets are based on that brand's performance. So we -- we do see opportunities, as we talked about at the beginning of the session. We see opportunities to create synergies with our tech platform, for example, like the kind of the wire frame and the infrastructure of the technology we use for websites and apps, that can be similar. But the -- what the consumer sees, what our franchisees experience, what our teams work on, it's unique to the brands. And we think that's important to maintain it that way.

That's helpful. I want to turn now to the topic of unit development. This is -- we didn't -- we sort of skipped over some of the global aspects of the business, particularly at Burger King, so maybe we can sort of infill it here as well. But look, I think you made the comment in the last couple of calls that you thought 2021 development, at least from an absolute unit perspective, could look like '18 or '19, which is a -- I think from an outsiders perspective, perhaps a bold statement, given that there are a number of other QSR brands that don't have that same visibility. Maybe then, what gives you that visibility? What are you looking at that maybe we don't see? Is it the number of franchisees? Is it the capital they have? Maybe just a little more texture around why you think '21 could be as healthy year as maybe you suggested from a development standpoint?

Matt, do you want to take that one?

Yes, I'm happy to jump in on this one, John. I think we talked about our network of partners around the world. We talked about that quite a bit. We do sit on the Board of many of our JVs of our master franchisees around the world. And generally, we work very closely with all our partners. So I think we have a pretty good level of visibility, really into where we're headed. In terms of building plans and budgets, for coming out of COVID going into next year, restarting pipelines, building pipelines to support future growth and shoring up capital in important areas around the world to support the growth and drive development. And I think more broadly, our network of partners that we have, they've created very large and successful businesses over the past 5 to 8 years, that are really built for growth, right? They're built to drive scale as a means to create value for our partners. So I think our view on getting back to '18, '19 levels of growth next year, it isn't just a random statement. I think it's informed by the progress we've been making with a number of partners, a number of big partners that we have around the world on the BK side. And then on top of that, I think, the other call out is, we have 2 other brands, right, that we think we have huge potential with. And so combining those things, I think it's really a great framework that combines healthy base of Burger King opportunities to return to growth and plenty of runway to go there. Plus, on top of that, as we move forward here with Tims and with Popeyes, we have new markets that we're bringing in. We have categories in chicken and coffee that are the highest growing in QSR categories in the world. And we're just scratching the surface on that. And I think we're also always working through the process of cultivating new partners for the future. And so when we combine all this and the insight that we have working with our partners to set things up for next year, we think we're positioned pretty well to return to strong unit growth in '21.

And maybe, Matt, if I could just follow-up. What is -- this corresponds to a question we're getting just in terms of outside the Burger King business, how are the other brands doing internationally to Popeyes, I think, in early days in Brazil and maybe some other markets. Same thing with Tims in China. How is that early days gone? And how do we think about unit growth in the next year or 2, '21 and '22? Is it still predominantly Burger King-led one would assume? Or are we going to start to see some of these other brands become more near-term meaningful contributors to the overall enterprise unit growth?

Yes. I think on the first question, maybe I can touch on that. I think with the -- we start -- we've seen really good starts for Popeyes and for Tim Hortons in different markets. So we were in China. Tims in China has hit 100 stores already, the century mark in a relatively short period of time. The team there is doing a great job, really building out the brand, doing incredible design work and focusing on great-tasting products. So we're super excited about that. The technology that we're using in the market is great and creating really good engagement with our consumers. So we're -- we have a lot of -- we're encouraged and are excited about the future of Tims in Canada. And see the beginning of the journey has been very positive. Same with Popeyes. We've seen tremendous engagement with the brand, digitally as well as in the restaurants. It's early days. We only have a handful of restaurants, but the start is positive. We just opened our first Popeyes in Switzerland, in a train station near Zurich and the results early on are really encouraging. So we've seen really good momentum in new markets as well as markets like Brazil, where it's been for a bit of time and Spain as well. So the start has been encouraging. Tims in U.K. is off to a good start as well, and it gives us confidence, and it's giving prospective partners as well for other markets, a lot of confidence in the ability to invest in the desire to kind of accelerate growth with those brands. More to come on that for the future. I think the mix, John, in terms of the mix question. Matt, I don't know if you want to touch on this, but I think that will -- we're still working through pipelines and details. BK will continue to be the biggest driver of growth. Certainly, with the presence we have and the number of partners we have across the globe, but the other 2 brands are moving quickly and closing the gap.

That's great. I've got one more question on -- from an enterprise standpoint. And then there's a couple of questions in the audience, we can maybe just do a power round. As I think about the enterprise, again, thinking about the benefit of a platform, technology spend has become a huge issue in the industry, right? And even McDonald's, the biggest of the bigs is thinking about, this is being a multiyear investment, which is going to prevent some leverage from a G&A perspective. All to the benefit ultimately of the business longer term. Do you think -- did you face that same conundrum where you think we're at a point where technology is going to mean so much more to the business, if there's some more significant level of investment in your business? Or do you feel like maybe your approach is different and you -- therefore, your ability to manage those corporate enterprise costs is different than some of your peers?

Yes. We see technology as being a key priority for us. It's why we've made the investments that we've made in people, in structure and capital. It's why we've doubled down on the experience in the restaurants, whether it's through loyalty or drive-through experience and making that a digital one, why that's become such a priority for our business. So we view technology as a key driver of our business. That's the way to engage our guests, to make the experience better and ultimately, the driver of sales in our business. And so we are a key driver of sales in our business. So we're certainly believers in that and are investing in it. We always take an onerous mindset on investment. But I think over the last couple of years, we've ramped up our -- both capital and G&A investments into technology. We've hired a tremendous CIO, who's brought in a bunch of engineers. So we've done the same on the CTO side for restaurant technology. And we're moving on both fronts, we're ramping up our internal capabilities and making the investments where necessary on the restaurant side and the CapEx side.

If you indulge me, I'm just going to give you a couple of quick questions from the audience, and we can make them kind of cycle through them. First is, has the experience of COVID changed your view on how you run the business, specifically as it relates to leverage? So I think it would be leverage at the corporate entity. It might be also leverage from a franchisee perspective. We didn't anticipate this black swan event, if you will, but we had it, and it creates some stress in the system. Does it change in any way the run -- financially the way you run the business or not?

Yes, John, I'm happy to jump in on this one. I think from a corporate leverage standpoint, we think we're very fortunate to have the business that we do in terms of the efficiency and the cash flow that we generate because it leaves us very well positioned to deal with really any sort of environment, including the big impact that COVID had. Even through that, in the second quarter, we still generated positive free cash flow and we've created a capital structure, which is very long term, incredibly flexible and very low cost. And so as it relates -- as I think about leverage and risk in the business, to me, it's really all the function of the cash flow generation and visibility that we have and the flexibility of our capital structure. And so in that sense, we feel very comfortable where we are. There's obviously some temporary pickup in leverage levels as we kind of roll out of the last couple of quarters. But we feel really good about where we are with our balance sheet. And then as it relates to franchisees, I don't think COVID necessarily changes anything per se. I think we've always been pretty focused on making sure that our franchisees are managing the business well and not taking -- not taking on inappropriate amounts of risk or leverage. And we've generally seen through -- again, through the shock of COVID, we've been able to come together with our franchisees and keep the business going, recover sales, make sure that the business had plenty of liquidity and manage through it by also driving profitability improvements. And so as we come out of this, I think we've seen generally across the board pretty good improvement in profitability and efficiencies that were found related to the shock as well as most of our franchisees being in a pretty good, solid financial position with good liquidity, given the pause in CapEx, some of the government stimulus as well as the return to -- the return of sales that we've seen over the past few months.

If I can just -- thank you for that, Matt. I just want to sneak one last one in, which is just has to do with Carrols, specifically in the U.S., you renegotiated your development agreement, I think, maybe some remodels. One, is that indicative of anything broader in the U.S. franchise system? Or is that a specific situation? Does that in any way impact either your plans broadly to remodel the U.S. or achieve those goals or from a development standpoint. Just a quick comment on what that decision or what that announcement means to you as the franchisor?

Yes. I think -- yes, yes. From my perspective, there's no impact on how we're thinking about the U.S. I think that's a pretty specific situation as it relates to Carrols. But we maintain a good relationship, and we have good visibility and good alignment, generally speaking in the U.S. in terms of driving forward the initiatives that José talked about and putting capital behind some of these important things that we're doing with the brand, including the drive-through modernization and outdoor digital menu boards, moving to double drive-throughs and investing behind the brand. So I think going back to your prior question, I think, the performance and the recovery of the brand, it's there, and we feel like we're in a good place in terms of leverage and cash flow within the system. And then also, we think there's good alignment around driving things forward by investing behind some of these initiatives that we think will help us drive sales growth over the coming years.

Matt and José, thank you so much for your time. We ran over a couple of minutes, but I appreciate you staying with us. A wonderful holiday season. Thank you for joining us and for everyone on the webcast, thank you as well. And more to come today on our conference. We've got 2 more days. So please stay with us. And everyone, enjoy. Thanks again.

Thanks so much, John. Appreciate it.

Thank you, John.

You're welcome.