Guzman y Gomez Limited (GYG) Earnings Call Transcript

Thank you for standing by, and welcome to the Guzman y Gomez Limited FY '25 Results Webcast. [Operator Instructions] I would now like to turn the conference call over to Mr. Steven Marks, Founder and Co-CEO. Please go ahead, sir.

Thank you. Good morning, everyone, and welcome to our briefing session for FY '25. The global fast food industry worth over $1 trillion in revenue each year is ready for disruption. Consumers have been sold bad food for so long, food that's overprocessed, full of additives and lacking real nutrition. And most people didn't question it, but there was no real alternative. That -- This is exactly why we started GYG with the idea that fast food can be done better. Food that's real, food that's made fresh, food that is full of flavor and actually good for you. Food that's clean with no added preservatives, no artificial flavors, no added colors and no unacceptable additives. It hasn't always been easy, but we have been relentless in the journey to achieve our vision to reinvent fast food and change the way the masses eat. Guests today want it all, quality food, value, speed, customization and a great experience. That's what we deliver every single day at GYG through an operating platform built exactly for this, fresh, clean, delicious food made to order and served fast. Guests are also becoming more discerning about their food choices and regulators are catching up. While most of the industry are scrambling to adapt, we've been preparing for this moment from day 1. But it's not only about clean food or fast service, it's also about values. People want to back brands that stand for something and so do we. For FY '25, GYG's first full year as a public company was a record 12 months as we deliver on our mission to become the best and biggest restaurant company in the world. Highlights include $1.2 billion in network sales, crossing the $1 billion milestone for the first time and representing growth of 23% on the prior year. Australian segment underlying EBITDA of $66 million, up 45%. Group segment underlying EBITDA increased to $52.8 million, up 35% and NPAT increased by 152% to $14.5 million. Finally, we are excited to announce that the Board has declared GYG's maiden dividend, which will be $0.126 per share. This year, we've excelled across our core metrics, reflecting performance built on a relentless focus on food and guest experience. Our Australia segment delivered an exceptional 9.6% comp sales growth. We opened up 32 new restaurants in Australia, a record year of openings. The drive-thru -- the average drive-thru restaurant achieved a strong margin of 22%, and our loved franchisees had an ROI of 50%, which is second to none. This year has been an exceptional year building on a strong track record we've established. And I've got to say we've delivered this growth at a market-leading pace. You might have seen we released a letter on the ASX today, which gives you a good snapshot of how we performed this year. And we've been focused on and -- what we've been focused on and what our expectations are for FY '26 and the next 5 years. If you are a shareholder or considering becoming one, I encourage you to read this letter as it provides detailed insight into how we will continue to build this incredible company. I'll now hand over to Erik who will talk through our FY '25 results.

Thanks, Steven, and good morning, everyone. As Steven mentioned, we've been delighted with the financial performance that we've seen across the business. A key highlight of the result is how strong revenue growth has translated to very strong earnings growth. This operating leverage is a feature of our business model that we expect to continue as we drive significant revenue growth. Here, we can see what GYG's earnings looks like on an underlying basis, adjusting for the impact of accounting standards such as AASB 16 leases, the share-based payments as well as other adjustments such as one-off gains on sale. As you can see, the underlying earnings power of the business is very strong and growing. We saw double-digit growth in all markets this year, anchored by the performance of Australia, which achieved comp sales growth of 9.8%. In Singapore, the launch of our Clean is the New Healthy campaign, along with the addition of 4 new restaurants also fueled sales growth of 40%. In Japan, our network sales continued to grow, increasing 16%. And we will step into more detail on the U.S. later in this presentation, but we have made good progress this year, particularly in the second half. Network sales grew 13%. In the Australia segment, we achieved a strong result of $66 million segment underlying EBITDA. This represents a 45% increase to last year built on network sales growth of 23%. This significant operating leverage reflects continued corporate restaurant margin expansion, the growing implied royalty rate and an above-restaurant cost base that is growing slower than revenue. As I've mentioned earlier, comp sales growth in Australia was very strong at 9.8%. This reflects a continuation of performance at lunch and dinner, very strong momentum in breakfast with a comp of 20% and an acceleration of growth after 9pm, which, of course, is supported by the very successful rollout of our 24/7 restaurants. We expect all of these drivers to contribute to comp sales growth going forward. I'll now hand over to Hilton to talk through real estate, the drivers of our comp sales growth and restaurant economics.

Thanks, Erik. Good morning, everyone. Another key driver of our growth is ongoing restaurant expansion. We're pleased to report that we have a robust pipeline of 98 Board-approved sites as at the 30th of June with 43 new sites approved during the year. This pipeline gives us the confidence in our network expansion plans as we strive towards our target of 1,000 restaurants in Australia over time. When it comes to delivering comp sales growth, we focus on 5 key levers. Throughout the year, we've made significant progress across each of them, contributing to our strong performance in Australia. First, we have remained focused on utilizing the significant capacity within our restaurants. Our dual linear operating model, bespoke stickering system and kitchen delivery system allows our restaurants to absorb increased demand and deliver significant comp sales growth. As an example, our top decile of comp restaurants representing 17 drive-thrus and 1 strip generated average unit volumes of over $9.5 million and restaurant margins over 24%, while comp sales growth was well above the group level. Daypart expansion has also been a key driver. Breakfast has been a particular highlight, delivering 20% comp sales growth. This has been further supported by extending trading hours across our network. 2/3 of our top decile restaurants are open 24/7 and their mix of sales coming from breakfast and after 9:00 p.m. dayparts are significantly higher than the network average. Marketing has played a crucial role in driving comp sales growth. Our campaigns, including Cali Burrito and Nacho Fries, Good Mornings Start with GYG and 100% Free-Range Chicken have generated significant sales momentum. As always, innovation in our menu has always been a focus. This year, we successfully launched Street Corn, Pinto Beans and a Pulled Shiitake Mushroom recipe into our restaurants as well as reintroducing salsa stations, allowing guests to customize their orders. Finally, we've continued to enhance our delivery and digital experience, which now represents 46% of our network sales. Our strong partnerships with delivery aggregators, combined with the strength of the GYG app have contributed to our growth. Overall, we anticipate that these drivers will support the continued sales growth of GYG now and into the future. The strength of our restaurant economics continues to be a feature of the company. Average restaurant -- average unit volumes have demonstrated impressive growth over the year, reaching $6.7 million for drive-thru restaurants and $5 million for strip restaurants. Network restaurant margins were 22% for drive-thrus and 18% for strips, both slightly down as we prioritize providing exceptional value to our guests rather than passing through temporary COGS pressures through menu price increases. With a 9% comp in Australia, only circa 1.2% was price. This is the lowest we've seen in the industry by far. As you all know, the success of our franchisees is integral to GYG. Like Steven, I'm also delighted that the median franchisee ROI was a compelling 50%. Median franchisee AUV also demonstrated strong growth, increasing to $5.4 million. Franchise restaurant margins for the year were 20%, which continues to demonstrate the strong profitability of our franchisees. We're encouraged that a number of the franchisees on relief are very close to rolling off. As a reminder, we support franchisees who are below the target ROI of 20%. Now I'll hand over to Steven to discuss the performance of our U.S. business.

Thanks, Hilton. We've made progress in the U.S., particularly in the second half. As you know, our strategy is to demonstrate proof of concept, which is targeting USD 3 million AUVs to achieve restaurant margins similar to our Australian restaurants. The priority for us is driving sales growth. This is why we're focused on building brand and culture in our restaurants. A significant milestone for us was the launch of Clean is the New Healthy as well as the opening of 2 new urban strip restaurants, connecting GYG with more communities across the greater Chicago area. If we deliver on our food and guest experience, we know that in time, margins and profitability will follow, just like it did here in Australia. As we highlighted at our half year results, we made a deliberate investment in restaurant labor and training to improve the guest experience. This was complemented by the comments of high-performing restaurant operators who have embedded the GYG culture and operational excellence into our restaurants in Chicago. These actions have led to a step change in the guest experience and a significant improvement in sales momentum. We can see this in our comp sales growth of 2.8% and total network sales growth of 57% in Q4. The margin performance during the year reflected this temporary increase in labor as well as 2 new restaurants that we opened during the second half. The progress we have made in the second half provides a strong foundation for continued growth in FY '26. We started the year with comp sales growth of 6.6% in the first 7 weeks of the year. The strong sales momentum in Q4 has already improved labor productivity and margin performance in existing restaurants. This is expected to continue with corporate restaurant margin percentage to improve significantly in FY '26. We will open 2 restaurants this year, including Des Plaines, which opened in July and Bucktown, which will open in the first half. This investment as well as the expanded above restaurant infrastructure is expected to offset ongoing improvements in the profitability of existing restaurants. And as a result, U.S. losses are expected to increase slightly in FY '26. Again, to reiterate our strategy in the U.S. is to build a network of 15 restaurants to prove concept and demonstrate that we can achieve the same attractive restaurant economics that we have here in Australia. We have already substantially built the above restaurant infrastructure to support the 15 restaurants. While the timing of new restaurants may result in some incremental investment, we expect to hit an inflection point as the profitability of existing restaurants improves over the next couple of years. I'll now hand over to Erik, who will speak about our cash flows, capital expenditure and balance sheet.

Thank you, Steven. During the year, we had strong cash conversion from earnings. Adjusting for the impacts of IPO-related costs included in our working capital, our cash conversion in F '25 was 123%. This result did benefit from the timing of payroll and the unwind of franchise construction receivables. Capital expenditure this year was primarily driven by the opening of new restaurants, refurbishments and new restaurants in progress. On a net basis, GYG spent $28 million to construct 13 new corporate restaurants. We continue to see capital expenditure in line with the target restaurant economics that we outlined in the prospectus. Our balance sheet continues to be very strong, providing significant flexibility for future restaurant network expansion, the funding of our dividend and additional capital management opportunities. I'll now hand back to Steven to cover our outlook and guidance.

Thanks, Erik. We continue to execute on our growth strategies, which we shared in May. To understand these strategies in more detail, I encourage you to read our letter live separately today. For the first time, we've shared our outlook over the next 5 years. As we stated in our prospectus, we are on track to build towards a cadence of opening 40 restaurants per year in Australia, of which 60% will be franchise and 40% will be corporate. On average, 85% of these openings will be drive-thru and 15% will be strip. In our Australia segment, our business model is expected to deliver earnings growth significantly ahead of revenue growth. And as a result, we are confident that Australian segment underlying EBITDA as a percentage of network sales will reach approximately 10% in 5 years' time. To recap the drivers of this, corporate restaurant margins will grow as we continue to realize operating leverage in our restaurants. In addition, corporate restaurant margins will also grow as our restaurant format mix shifts towards the higher-margin drive-thru format. Implied royalty rates will also grow as more franchisees transition to the tiered royalty structure. In addition, as franchisee restaurants grow, a greater proportion of sales will attract higher royalties. This should lead to the implied royalty rate reaching above 10% in the next 4 years. And finally, G&A cost as a percentage of network sales will continue to decrease as sales growth drives operating leverage. We expect G&A as a percentage of network sales to be approximately 5% in 5 years. The path to 10% will not be linear, and that is because we will always prioritize making the right long-term decision, even if it means we need to weather some impacts in the short term. We expect FY '26 to be another strong year of growth. We expect to open 32 restaurants in Australia, of which 23 of these restaurants will be drive-thrus and 9 will be strips. We expect FY '26 that segment underlying EBITDA as a percentage of network sales will be in the range of 5.9% to 6.3%, reflecting continued expansion of earnings relative to FY '25. As we've already mentioned, we are very happy with the sales performance over the last 12 months, highlighted by the 9.8% comp we just delivered in Australia. This result is possible because of our relentless focus on exceptional food and exceptional guest experience. In the first 7 weeks of FY '26, comp sales growth have been lower at 3.7%. But let me give you some context. This is not new. To give you a little bit of flavor, over the last 7 years, we've had less than 5% weekly comps 16% of the time. More recently, in the 6 weeks from mid-February to late March 2024, comps averaged 4.7%. Why does this happen? This happens due to the timing of marketing campaigns, promotions or new menu items. We are excited about what's coming up with an incredible menu addition with a major campaign coming in Q2. We are confident that comps will improve from here. With a strong team and a clear vision for the future, we are confident in our ability to continue to reinvent fast food and change the way the masses eat. I want to take a moment to thank our incredible crew, our team, our franchisees, suppliers and guests for their passion and dedication. We are now happy to take any questions you might have.

[Operator Instructions] The first question we have will come from Sean Xu of CLSA.

Could you please just give us a bit more color on your comp sales in Australia? So I guess you're talking about the timing of the marketing campaign. I just look at the last year, the first 7 weeks trading was at 7.4. That's also to do with -- I'm just trying to understand, is there any unusual stuff we need to be aware of? And also, when you say confident to deliver another strong comp sales growth for the full year, are we talking about high single digit now?

Yes, beautiful. Thanks for the question. Every year is a new year at GYG. And when we look at the marketing calendar, our menu innovation, what we do in operations and technology, we look at a 12-month period, a 5-year period and a generational period. So we don't really look at 7-week stints in our business. And nor do we align our marketing calendar and menu innovation from year-over-year. We do it when it's right for the business. And for us, that's always that long-term approach. For instance, we know that at the beginning of Q2 this year, we probably have one of our best menu innovations ever at GYG, which will be supported by an incredible marketing campaign. And then we look at delivery campaigns, marketing campaigns, it's when it fits in right for GYG. We're not -- we wake up every morning here thinking about comp, thinking about double-digit comp always. But we don't look at it in such short period of time, and we're very confident from here on that we'll obviously continue to drive comp and sales momentum throughout FY '26.

My second question is around your balance sheet. It looks really strong at the moment. I'm just curious to know if there's any M&A opportunity you will consider Australia to help drive the growth.

Sean, it's Erik here. Yes, you're right. The balance sheet is very strong and a feature of the business is its cash generation at the moment and it continue to be in the future. We know that, that cash generation will fund our restaurant network expansion plans. We've also just announced the dividend, which we will also be able to cover through that free cash flow. So what we do have is a very strong balance sheet as a result. We're not focused on M&A opportunities at all. we are focused on network expansion of GYGs going forward, both in Australia and across our different markets that we operate. And obviously, in Australia, we have a very significant opportunity as we strive towards our 1,000 restaurants over time. We have flagged capital management opportunities, which may take the form of a special dividend or a buyback as an example.

Next, we have Shaun Cousins of UBS.

Just a question on the EBITDA margin guidance of 5.9% to 6.3%. Does that require an improvement on the 3.7% same-store sales growth? Or could you still achieve that EBITDA margin guidance if your same-store sales growth remained at 3.3%? Conscious that you're confident of an improvement, but maybe just to sort of provide some parameters around what would happen to margins and the achievability of guidance if the first 7 weeks continued on, please?

Yes. Thank you, Sean. So you're right. We do absolutely expect comp performance to improve from here. At the bottom end of the range at the 5.9%, that would be broadly consistent with the continuation of current sales momentum. So that will be the downside of our earnings guidance. And then obviously, as comps continue to improve from here, we would expect to be more at the middle to upper end of that range.

Fantastic. And my second question is just around the 10% 5-year EBITDA margin target in Australia. And bear with me, but we see GYG as a very strong store growth business. You can increase your network by over 4x to the 1,000 milestone. You talked about, Steven earlier that 10% in terms of double-digit same-store sales growth is a business you want to invest in a business which is fast food that's clean and healthy generational. This is a long-term proposition. I'm curious, why do you want to limit yourself with a 5-year EBITDA margin target of 10% because that is arguably reflective of lower growth businesses. I could see you getting that 10% EBITDA margin target if you wanted to slow down the store growth. But I'm curious around why you are seeking to sort of restrict yourself with this 10% EBITDA margin target where investors have signed up arguably for revenue growth rather than margins. So can you just sort of provide some of the basis for providing the target of the 10% EBITDA margin outlook? Because it's a curious message that you're providing to investors.

Thank you, Sean. I really like that question. Because you're absolutely right. We are a revenue-driven business, and we're solely focused on driving value to our guests, growing sales across our network, growing our restaurant network across Australia and across the different markets that we operate. That being said, we do benefit from a number of drivers that are existing in the business today that will improve the margin profile over time, and doesn't require us to change the margin profile or margin settings within our existing restaurants. So what I mean by that? We're not targeting margin expansion by price increases. In fact, we expect price growth to be below our cost growth. And that is because of the fantastic operational leverage we see in our business. Now there are a number of other factors, which Steven highlighted today, that being the increasing mix of drive-thrus in our corporate restaurants, the fact that as restaurants grow, they have natural operating leverage, the fact that more and more of our franchisees are transitioning to the tiered royalty structure, more and more of our franchisees attracting the higher royalty. And then finally, of course, we do have our G&A costs growing slower than revenue. And all of those factors are existing settings in the business, and so there's a mechanical movement that means that margins expand over time. And because there's a few moving parts, we think it's appropriate to give some guidance as to how that margin will develop over time. To emphasize, we will always take the long-term decision, and we're not targeting margin outcomes.

But you are because you've got a guidance that says you're targeting 10% in 5 years' time? You are targeting. Sorry, pardon me. I'm just curious around that.

So I guess what we're saying is as we grow revenue and we drive the network expansion across Australia, and we continue on the settings that we've always had prioritizing exceptional guest value, investing in our business, investing in our restaurant network. The outcome of that, because of the settings we have in the business will be a margin of approximately 10%. That's an outcome. It's not a target.

Okay. And just to clarify that a little more, the -- do you get to -- are you looking at 40 new restaurant openings in sort of 5 years' time? Because my curiosity is -- my question is really around the idea of stores, like if you open more restaurants, you have a negative impact on margins. If you pull back the rate of store openings, you will actually have margins expanding because you'll have a higher proportion of mature restaurants in the network. I'm curious around the broader restaurant cadence. Has that changed at all? Or is it still -- and then will you be at 40, say, by 40 gross openings in 2030, please?

Yes, absolutely. Our intention is still absolutely to -- there's been no change to our restaurant expansion. We're continuing to build towards 40 in exactly the same way that our intention was at the time of the IPO, and we've made significant progress this year. So that's absolutely the case. The other thing to note is as we open restaurants, 85% of those restaurants on average will be drive-thrus, and they do deliver higher margins. So there is a margin expansion over time from that as well.

Next, we have Benjamin Joseph Gilbert of Jarden.

Just the first one, just following up from the stores. Just -- the store guidance for next year, just interested in whether that's a gross -- obviously, it's a gross number, but are you planning any closures? And then just as you look out, I'm just interested, there's obviously a significant number of players talking about big expansion plans in Australia, both existing and new. How much competition are you seeing for sites? And how is that changing the economics in terms of rent incentives, et cetera, that you're able to get?

Yes. Thanks, Ben. So for next year, we're seeing no store closures for GYG. I mean obviously, that 32 number is all new restaurants. In regards to competition, there's always competition, right? I mean the thing at GYG is to make sure that we're better than everybody else. What you'll see sometimes with these newer brands, they're trying to -- I mean, obviously, everything is all about AAA for GYG. But we -- under [ George Mandelz ], we have an amazing real estate team of 10 full-time real estate people. As Hilton mentioned earlier, we got 98 in the pipeline, 88 are AAA drive-thrus. So otherwise, there's players coming to the market, but we're still finding those AAA restaurants. Obviously, they continue to build our pipeline on our way to, as Erik just mentioned, that 40 stores per annum in the next 5 years.

Okay. So not seeing any major pressure in terms of material shifts in base rent just because of that competitive tension in the market.

Yes. No, not at all.

Just final one for me. Just -- I appreciate 7 weeks or 7 weeks, and we shouldn't read too much into it. But you did have a couple of pretty successful campaigns around coffee relaunch and your health focus pushed through last year as well. Just interested in any broader observations around the market at the moment. You've got McDonald's' dropping prices. You've got more competition. You guys have 3 points for delivery, et cetera. Are you seeing any change in consumer behaviors or when you're out there speaking to your customers in the market? Or do you think it is just -- this is just an event -- a period where you haven't had a lot of promotions and we've got to look forward?

Yes. No, we're not seeing anything. Now remember, over the last 6 years, we had 15% comp growth year-over-year, right? I'm talking about 7 weeks. GYG wakes up every morning talking about comp. We know what our calendar looks like for the next 12 months. We're extremely positive that comps will grow from here. We're excited, as I mentioned earlier, about one of our biggest menu releases that we've had in years, which will be followed up with a very strong marketing campaign. It's just timing. We're building a generational business here. So I mean, obviously, every day, we think about comp. We're not -- 7 weeks is 7 weeks. We got 45 weeks, and we got 5 years after that and the generational play. So we're obviously very excited for this financial year '26 and what's to come post that.

Next, we have Tom Kierath of Barrenjoey.

Just maybe a bit further on the price investment that you made in the second half. It looks like COGS to network sales rose about 100 basis points. So I think you finished the half kind of 68.9%. I thought from memory, you're kind of targeting 70% there, so like a 30% -- sorry, yes, a 70% gross margin. Just be interested to hear what you're seeing on the input cost side and whether you're going to keep, I suppose, investing in price, obviously, seen a bunch of competitors lift pricing and whether -- yes, how you're kind of thinking about pricing and input costs?

Yes. Thanks, Tom. You're right. As you've called out, we have -- we did see some temporary COGS pressure, particularly in the second half of last year. We made a very deliberate choice not to pass those price pressures on to our guests. Now many of those price pressures that we faced in the second half have normalized. And so we're in a better position as we enter the new financial year. But there's always ups and downs in our supply chain. And what we -- what that -- it's a fresh fruit business ultimately, and we like it at around that 30%, and we're entering the financial year in good shape there. So as we look forward, we may see some price pressure. If that's structural, we may pass a small amount on to our guests, but that's not going to be the driver of growth for GYG going forward.

The philosophy at GYG is the last thing we do is pass price on. I mean there's so many other facets to our business that we analyze on a daily basis. So the last thing we do is pass on price, which was evident, obviously, last year with -- of that 9.8% comp, 1.2% was price, which is probably lowest in the industry. I mean -- the way we look at it, I mean, we're building a long-term business. So the last thing we want to do is obviously increase price, and we want to create value for our guests.

Yes. That's clear. And the second one, late night and breakfast dayparts are growing really strongly. Can you maybe talk about the margins that you're generating in those dayparts and how much of a drag it is and whether -- maybe when you get to the point of maturity or where the margins kind of maybe replicate or are closer to where the lunch and the dinner margins are?

Yes. Thanks, Tom. As we -- as Hilton mentioned earlier, one of the things that we're really pleased with our 24/7 restaurants is that those restaurants are achieving very significant growth in After 9, as you can see in our comp numbers. But the restaurant margin of those restaurants are well above the network average as well. So we're very pleased with both the sales and earnings performance of our 24/7 restaurants. And that's why it's such an exciting growth driver for us. Now we don't look at margins by daypart across the business. We're obviously conscious of that. But as we've talked earlier to Sean's question, we're focused on revenue because when we drive revenue in our restaurants, we see fantastic margin outcomes, but we're focused on driving those revenues, and that's been very successful for us this year.

The next question we have will come from Bryan Raymond of JPMorgan.

I appreciate a 7-week number, but I think that's an important one today. I just wanted to sort of that a little bit. Just trying to understand if -- where lunch and dinner stand. Just following on from Tom's question around dayparts. They've obviously had phenomenal growth in breakfast and late night 20% plus. If that 16% of sales combined, does that imply lunch and dinner are broadly flat from the same-store sales growth over the past 7 weeks. Would that be a fair assumption to make?

Yes. So I mean lunch and dinner clearly is like it was in F '25 is comping at a lower level than breakfast and 24/7 due to the success of those dayparts. As we've said a number of times already, it's not something that's concerning us because of the timing of our campaigns and we're very excited about what's coming up. So it's not something that we're worried about as we go forward.

Okay. And then just on the -- further on dayparts and more looking forward. I noticed in the -- somewhere in the pack, you talked to 10 conversions to 24/7 in FY '26 coming from 18 total of the Australian network at 30 June. It's about 8% of your network that's 24/7. Where do you think that can get to long term? Can you go faster? Because that's obviously a big driver of comp if you could do that faster? Or is it planning and regulations and other stuff standing in your way there? So yes, keen to understand that. And then just finally, I'd assume a higher percentage of your stores than that sort of breakfast. So if there's a way to sort of get that number, that would be helpful too.

Yes. Great question, Bryan. So everybody knows our drive-thrus are all FDA approved for 24/7. Currently, we have 18. That pace will pick up this year. And the end goal is to have all drive-thrus operating 24/7. And obviously, breakfast continues to grow. Obviously, lunch and dinner remains strong, and that overnight, that 9pm to the following day breakfast is obviously -- is incredibly strong as well. So the goal is in time to have all drive-thrus operating 24/7.

Why aren't more operating 24/7 today then if it's only 18 going to 28 out of...

Well, we have to start -- well, the thing is you've got to build the playbook, right? We got to make sure that we've got, obviously, the food prep down right, the rostering correctly, the cleaning correctly, making sure that we build it. So it's -- like Erik said, adds obviously positive margin and becomes more and more profitable. The great part now is all the franchisees are coming on board, and it probably took us about 6 months to a year to get that playbook down right. We're very confident in what we built, and now we'll look to roll it out quicker.

Next, we have Billy Boulton of Morgans.

I was just hoping if you could maybe give us some commentary around how you're expecting corporate store margin, franchise royalty rate and G&A next year as part of your FY '26 guidance, just some indication of where those drivers are going.

Of course. So while we're not going to break down our EBITDA guidance range, we do expect all of those drivers to contribute to margin expansion in F '26. Clearly, G&A is an area where we expect to realize operating leverage, particularly now that post F '25, we've really got that platform in place and we expect cost to grow slower than revenue and network sales. Our royalty rate will continue to expand due to the settings that we have there, and we have a number of franchisees transitioning on tiered royalty structure and of course, comp growth in our franchisee restaurants. And then corporate restaurant margins expansion will depend on the degree of comp sales growth. But as we've said, we're really confident in that continuing to build throughout F '26. And so we do expect continued margin expansion. Obviously, at the half, we'll be able to share the exact progress that we're making in each of those areas. So we look forward to doing that as well.

Yes. Just to me, it feels like you're not potentially getting much corporate store margin expansion next year based on your guidance. Am I reading like you're getting some, but potentially less than where people were expecting?

Yes. And this goes a little bit back to what we were talking about with Sean earlier is that we're not targeting a margin expansion in a particular year. We're investing for 5, 10 years in a generational business. And if that means keeping prices lower this year to provide exceptional value to our guests, that's what we'll do. So we're not concerned about the margin outcomes that we need to deliver in F '26. And clearly, we've given that range of outcomes. So we're very confident that margins will grow. But yes, the settings are in place, and we'll deliver it throughout the year.