A&w Foodrvices Of Canada Stock

Hello, everyone. Thank you for joining us, and welcome to the A&W Food Services of Canada Q3 2026 Earnings Call. [Operator Instructions]

I will now hand the call over to Susan Senecal, President and CEO. Please go ahead.

Thank you, Chase. Good morning, everyone, and thanks for taking the time to attend our call today. I'm Susan Senecal, President and CEO of A&W Food Services of Canada, and I'm joined this morning by A&W's Chief Financial Officer, Kelly Blankstein. Today, we're presenting A&W's results for the third quarter of fiscal 2026, which was a 12-week period that ended on September 6, 2026. We will also be introducing A&W's new mission and corporate strategy, which we announced alongside our third quarter results.

Before we begin, as a reminder, remarks on this call may include our expectations, our future plans and intentions, including statements regarding our new mission and corporate strategy that may constitute forward-looking information within the meaning of applicable securities laws in Canada. Such forward-looking information is based on estimates and assumptions made by management regarding, among other things, general economic and geopolitical conditions as well as the competitive environment. Actual results may differ materially from the conclusions, forecasts or projections expressed by the forward-looking information.

We refer you to Food Services' Q3 2026 MD&A and fiscal 2025 Annual Information form, both of which include a summary of the material assumptions made by management as well as risks and factors that could affect A&W's future performance and our ability to deliver on the forward-looking information. We also refer you to Food Services' Q3 2026 MD&A for definitions or reconciliations of any non-IFRS financial measures mentioned in today's call. Our Q3 earnings release, financial statements, MD&A as well as our fiscal 2025 annual information form are each available on Food Services' SEDAR+ profile as well as on our investor website at www.awinvestors.ca.

We're pleased to report that A&W achieved same-store sales growth of 1.8% for Q3 2026 compared to 1.4% in Q3 2025 and has us achieving positive same-store sales growth in 6 of the last 7 quarters. A&W Smashed burger, which we introduced as a nationwide limited time offer at the end of Q2, ran nationally for 5 of the 12 weeks in the quarter and continued to resonate strongly with guests. At its peak, A&W Smashed burger drove same-store sales growth of 15% in a single week, and it was the primary driver of our same-store sales growth in Q3. System sales increased 3.8% to $497.6 million, reflecting both our same-store sales growth and the growth in our restaurant network.

We continue to focus on growing restaurant counts across Canada. And in Q3 2026, we opened 9 new A&W restaurants, bringing year-to-date new A&W restaurant openings to 21, 7 of which were opened in partnership with Suncor. We ended the quarter with 1,113 A&W restaurants and a further 26 restaurants were under construction at quarter end. We remain particularly focused on expansion in Quebec and Ontario, and we're encouraged by the progress of our new lower-cost freestanding restaurant design with additional locations either newly opened or under construction.

We also continue to build on momentum with Pret A Manger. During the quarter, we opened our second franchised Pret shop at Vancouver International Airport, bringing our total to 4 Pret shops in Canada. We're very encouraged by the strong early performance at Vancouver International Airport and the consumer demand for premium grab-and-go options. We have secured leases for additional locations and are actively pursuing new sites in Calgary, Vancouver, Toronto and Montreal and continue to expect 3 to 4 franchise Pret shops to be opened by the end of fiscal 2026, in addition to the 2 corporate locations we operate in Toronto.

Before I turn things over to Kelly, I'd like to take a few minutes to introduce A&W's new mission and corporate strategy, which will guide our priorities, our investment decisions and our operating plans in the years ahead and provide the framework against which we will report our progress. First, why are we evolving our strategy? The consumer business and economic environment for the Canadian QSR industry has changed significantly in recent years. Elevated cost of living have affected households unevenly. Many guests have become more value conscious, while others continue to spend on premium experiences.

At the same time, there is sustained consumer interest in quality QSR and a new generation of guests who discover food through social media and expect novelty, bold flavors and globally inspired options and which is becoming an increasingly important share of QSR visits. We see this as a significant opportunity for A&W, and our strategy has evolved to seize it.

Our new mission is to transform A&W to become #1 in Canada for today's generation of QSR fans, delivering scroll-stopping food with iconic taste and quality, effortless convenience and a consistently excellent experience that drives return visits, success and opportunity for franchisees. This mission reflects our focus on building relevance with a new generation of QSR guests while remaining true to the taste and quality that have defined the A&W brand for 70 years. It also reinforces something we firmly believe that sustained guest loyalty and franchisee success go hand-in-hand.

To deliver on our mission, we have established 3 strategic directions. The first is to expand and extend A&W's position as a leading burger brand to grow market share, capture many more visits from the fastest-growing consumer groups and enhance success for A&W franchisees. This means boosting interest and appeal through distinctive menu innovation, including premium beef burgers, chicken, plant-based and globally inspired offerings.

The success of A&W Smashed burger is a strong example of what distinctive innovation can do for guest counts and average check. It also means delivering a consistently excellent experience that inspires guests to return more often, building on the gains we are seeing from our 5-star operating system, the A&W mobile app and our A&W Rewards loyalty program.

The second direction is to continue to support new restaurant growth, including developing new restaurant formats and business models that broaden access to franchise ownership and create additional opportunities for franchisees. Our lower-cost restaurant design and our continued focus on improving restaurant-level profitability are important foundations for this growth.

The third is to be ready for Pret and more. We plan to grow the Pret brand, Canada's only premium grab-and-go concept, by opening additional shops in airports, city streets and other pedestrian locations across Canada. We expect that this expansion will occur primarily through the franchise model. We will also evaluate other complementary brands that offer opportunities for growth.

Importantly, the principles that have served A&W well remain central to this strategy, including our franchisor capital-light business model and our commitment to keeping the cost of becoming an A&W franchisee affordable. And our Climate Goals, which have guided how we work together for more than 50 years, identify the behaviors that we believe will enable us to succeed in achieving our mission.

Under our new corporate strategy, we will measure our progress using the key performance indicators we already report, including same-store sales growth, system sales growth, adjusted EBITDA and the total number of A&W and Pret locations. And we look forward to reporting on the execution of our corporate strategy in our future quarterly and annual results.

With that, I'll now turn things over to Kelly, who will take us through A&W's financial highlights for Q3.

Thank you, Susan, and good morning, everyone. I will be providing an overview of our financial results for the third quarter ended September 6, 2026. Total revenue for the quarter was $79.3 million, an increase of 11% or $8.1 million compared to Q3 2025. This increase was driven by higher equipment and turnkey revenue due to opening more restaurants in Q3 2026 as compared to Q3 of 2025 as well as having higher service fees, distribution revenue and advertising fund contributions, all of which are driven by system sales.

We opened 6 more A&W restaurants and 1 more Pret shop in Q3 of 2026 than we did in Q3 of 2025. And 3 of the 9 new A&W restaurants opened in the quarter were turnkey restaurants compared to 1 of 3 in Q3 of 2025. The Pret shop opened in the quarter was also turnkey, further contributing to the growth in revenue in Q3 2026 over Q3 2025. For those unfamiliar with our turnkey program, these are new restaurants that are constructed and then sold to franchisees upon completion with revenue recognized in the amount paid by the franchisee for the restaurant. Because the number and timing of turnkey openings varies, turnkey revenue can fluctuate from quarter-to-quarter and year-to-year.

Service fee revenue also continued to benefit from the ongoing migration of A&W restaurants from a 2.5% to a 3.5% service fee rate. As of September 6, there was approximately 120 franchised A&W restaurants still at the lower 2.5% service fee rate. System sales increased 3.8% to $497.6 million, driven by growth in our total restaurant count and same-store sales growth of 1.8%. As Susan mentioned, our same-store sales growth was boosted by the success of A&W Smashburger promotion this quarter.

Operating costs for the quarter were $40.5 million, an increase of 27% or $8.7 million, and this increase largely reflects the cost of sales associated with the additional restaurant openings in the quarter as well as a $3.4 million increase in marketing-related costs incurred by A&W's advertising funds, which is largely a timing difference. General and administrative expenses were $11.4 million, up 5% or $0.6 million over Q3 of 2025, driven by higher professional fees due to timing differences and additional resources to support the expansion of the Pret brand.

Income before income taxes increased by $2.8 million or 12% to $26.4 million, largely as a result of the increase in revenues described above. Net finance expense decreased by $0.5 million, reflecting a lower average debt balance and a reduced interest rate on the operating loan. We also recorded a $2.1 million unrealized gain on our interest rate swap in Q3 2026 compared to a $1.4 million unrealized loss in Q3 2025.

Net income for the quarter was $19.5 million compared to $17.6 million in Q3 of 2025. Net income per share was $0.80 and $0.80 per diluted share compared to $0.71 per share and $0.71 per diluted share in Q3 of 2025. Adjusted EBITDA for the quarter was $26.6 million, an increase of $0.8 million or 3% from Q3 2025's adjusted EBITDA of $25.8 million due to the increase in revenue, partially offset by higher operating costs and G&A expenses. Adjusted EBITDA margin decreased approximately 260 basis points to 33.6% from 36.2% in Q3 of 2025.

Turnkey and equipment revenue carries a lower margin than our other revenue streams, so the higher proportion of revenue coming from turnkey and equipment revenue in the quarter does have a downward effect on adjusted EBITDA margin and is temporary and a timing difference. On a trailing 4-quarter basis, adjusted EBITDA margin for Q3 2026 was 33% versus a 4-quarter trailing Q3 2025 margin of 33.5%. Our outlook for fiscal 2026 remains unchanged from the guidance we provided on March 1 -- March 5, rather, and includes achieving adjusted EBITDA within the range of $103 million to $105 million, up from the $100 million achieved in 2025.

We are also forecasting our guidance ending fiscal 2026 within the range of 1,112 to 1,120 A&W restaurants, up from 1,094 at the end of 2025. We expect to achieve system sales growth in the range of 2.5% to 5% compared to 2.8% achieved in 2025, and we also expect to achieve same-store sales growth in the range of 0.5% to 3% compared to 1.2% achieved in 2025. So again, our range forecast for the year remains unchanged from our March 5 guidance.

Turning to the balance sheet. We have continued to deleverage, reducing our net debt to adjusted EBITDA ratio to 2.2 at the end of Q3 2026 from 2.3 at the end of 2025 and 2.4 at the end of Q3 2025. Free cash flow for the quarter was $19.5 million, an increase of $2.5 million from Q3 2025, primarily due to timing differences that resulted in a lower use of working capital. We declared a cash dividend of $0.48 per share in Q3 2026, which was paid on September 29 of this year. And we remain committed to maintaining the current level of quarterly dividends for the foreseeable future.

As a reminder, on March 18, we announced that the TSX had approved a normal course issuer bid that allows us to purchase up to 600,000 A&W shares over the 12-month period beginning March 20, 2026, and ending on March 19, 2027. We launched the NCIB because A&W's management and its Board believe that from time to time, the market price of A&W shares does not reflect A&W's intrinsic value and that repurchasing shares is an attractive and appropriate use of corporate funds. Year-to-date, we have repurchased and canceled 61,000 common shares under the NCIB and have 23.9 million common shares outstanding.

With that, I'll now turn it back over to Susan for some closing remarks. Thank you, everyone.

Thanks, Kelly. In summary, Q3 2026 delivered another quarter of positive same-store sales growth, growth in adjusted EBITDA and net income, strong new restaurant development and continued progress with Pret A Manger. The continued success of A&W Smash burger shows what happens when we bring guests distinctive premium value, exciting food with iconic A&W taste and quality. Today also marks an important step for A&W as we introduced our new mission and corporate strategy.

Our focus is on becoming #1 in Canada for today's generation of QSR fans by growing our leading burger brand, supporting new restaurant growth and new formats that create opportunity for A&W franchisees, growing in our strength as a franchisor of Pret and more. We believe that our new strategy builds on A&W's strengths and positions us well to drive return visits and market share and deliver continued success for our franchisees and growth for our shareholders. We extend our gratitude to our shareholders for their ongoing support and appreciate the hard work of our employees, our franchisees and partners.

With that, I'll turn the call over to the operator for questions. Thanks very much.

[Operator Instructions] Your first question comes from the line of Logan Reich with RBC Capital Markets.

I thought the comment in the press release about evaluating more complementary brands is interesting. Is adding brands beyond the A&W and Pret logos a direction you see the company heading? And how do you balance adding new brands versus executing against the A&W Pret growth opportunities ahead of you?

Thanks for the question, Logan. Clearly, for us, our A&W success has fueled sort of our interest in other ways that we can extend our success as a franchisor. But clearly, A&W is our focus and the focus of this strategy is success for franchisees, success for the brand, continued growth and continued extension within Canada, where we know that we've got lots of A&W fans that aren't able to get A&W as conveniently as they would like. So that is the focus of the strategy. At the same time, the experience we've been having with Pret and our early success really helps us understand that potentially there could be other opportunities, and we just wanted to signal that we are on the lookout for such opportunities should they exist.

Got it. Okay. That's very helpful. And then the other part of the -- or one of the other parts of the strategic priorities you touched on is just how the QSR industry has changed in recent years. I mean I think this is something that across the space in multiple markets we've seen.

Can you just expand on like what you're seeing in the industry? And then what changes to the business you're doing to address those, whether that be menu or marketing or value? I mean, clearly, the low income is under pressure here. I mean, is there any are you moving in the direction of maybe a more barbell value and premium approach? Or just any further color there would be helpful.

Sure. I think as we look at the economic situation, clearly, all of us would love to see Canadians doing better, better in their lives, better with disposable income, better with discretion and so on. But the reality is that there is pressure throughout the market. And that's not, in our opinion, likely to change very quickly or very much in the next few years. So we really have focused on how does value fit in. And we're really thinking about how we deliver premium value. It's affordable prices, but along with the quality that A&W is really famous for.

And if you think about the other side of things, there are certainly lots of guests, including some guests that might be under economic pressure, but really want to enjoy something different, they're attracted by things, interested by things. Drinks have become a bigger part of how consumers are viewing sort of a fast food occasion. So we're looking at all of those opportunities as well for people that are in a mood to kind of really indulge themselves and that exists as well. So there's kind of 2 parts to the market, and we're looking at both of them.

Got it. That's helpful. And I guess just on the beverage comment, a lot of your peers have been rolling out more beverage platforms, and we've seen the rise of the specialty beverage retailers. Is adding to the portfolio of beverages something that you're focused on currently? And just what could that potentially look like? Obviously, you have the physical infrastructure in the stores to maybe support a more operationally intense sort of platform? Just curious any color on the beverage side of things.

Sure. Well, as you know, we've been -- we launched lots of new beverages and have really been learning a lot about the beverage market. And through this strategy, we really want to create even more focus against really delighting guests with the kinds of beverages that they can have at A&W while continuing to understand and really internalize the fact that Root Beer is really at the core of our beverage success, and it's something that guests come back for again and again. So I think on both sides of that, new and innovation as well as really focused on our core beverage offerings, both sides of it, I think, will be important in the years to come.

Okay. That's helpful. And then I guess just broadly across the industry, obviously, the macro backdrop has not been supportive for restaurants generally for quite some time now. Just curious what you've seen through the quarter, just industry-wide, consumer-wide and how that has trended through Q3 and then maybe into Q4 would be helpful.

Sure. I'll comment a bit more on Q3. Q4 is still new enough that I don't really have a great barometer of how things are going. Certainly, in Q3, what we saw was some positives were domestic travel. We did see some uplift from that. On the other side of things, people are still reticent to spend, especially families for whom every few cents on a meal kind of adds up -- and so I think we've had that balance through the summer of innovation, and we had our float promotion that did well.

But at the same time, we were very conscious of offering value through our coupon offers and through our mobile app to make sure that we were addressing the affordability needs of so many Canadians at this time. In terms of the industry, we do track things, and I think we're performing at or slightly ahead of the market as far as we can tell.

Got it. Okay. That's helpful. And I guess just like how that progressed through the quarter? I mean, oil prices have a bit of pressure and the longer oil prices are high, it continues to weigh on the consumer. I mean, do you see any deterioration in the underlying environment through the quarter? Or has it been kind of stable?

I think here, we've seen -- I mean, there's certainly been volatility in things like gasoline prices, but it feels like consumers are sort of setting aside -- mentally setting aside the money that they need to drive around and get to work and get to school and all of those kinds of things. So we've not seen sort of a distinct difference through the slight volatility of oil prices.

But I think the fact that they're high and that they're consuming more and more of the wallet of a consumer is certainly a factor in terms of how people view their discretionary income and their caution in terms of not wanting to go take on debt or any of those kinds of things at this time. So they're trying to balance their budgets, and that's admirable. At the same time, we know that it's very difficult, especially during times like back-to-school when there's more expenses coming into the household.

There are no further questions at this time. I will now turn the call back to Susan Senecal for closing remarks.

Thank you, Chase, and thanks, everyone, for attending our call today. We look forward to updating you on our results for the fourth quarter and fiscal 2026. In the meantime, if anyone has questions that were not answered on our call today, please do feel free to send a follow-up e-mail to [email protected]. Thanks again.

This concludes today's call. Thank you for attending. You may now disconnect.

Hello, everyone. Thank you for joining us, and welcome to the A&W Food Services of Canada Q2 2026 Earnings Call. [Operator Instructions] I will now hand the call over to Susan Senecal, President and CEO. Please go ahead.

Thanks, Keith, and good morning, everyone. Thanks for taking the time to attend our call today. Sorry, my tongue got twisted up there. I'm Susan Senecal, President and CEO of A&W Food Services of Canada, and I'm joined this morning by A&W's Chief Financial Officer, Kelly Blankstein. Today, we are presenting A&W's results for the second quarter of fiscal 2026, which was a 12-week period that ended on June 14, 2026.

Before we begin, as a reminder, remarks on this call may include our expectations, future plans and intentions that may constitute forward-looking information within the meaning of applicable securities laws in Canada. Such forward-looking information is based on estimates and assumptions made by management regarding, among other things, general economic and geopolitical conditions as well as the competitive environment. Actual results may differ materially from the conclusions, forecasts or projections expressed by the forward-looking information.

We refer you to Food Services' Q2 2026 MD&A and fiscal 2025 Annual Information Form, both of which include a summary of the material assumptions made by management as well as risks and factors that could affect A&W's future performance and our ability to deliver on the forward-looking information. We also refer you to Food Services' Q2 2026 MD&A for definitions and reconciliations of any non-IFRS financial measures mentioned on today's call. Our Q2 earnings release, financial statements, MD&A as well as our fiscal 2025 annual information form are each available on Food Services' SEDAR+ profile as well as on our investor website at www.awinvestors.ca.

We're pleased to report that A&W achieved same-store sales growth of 2.1% for Q2 2026, making it our strongest quarterly performance in terms of same-store sales growth in more than 2 years. In Q2 2026, we continue to offer value-based promotions. And at the end of the quarter, we introduced a smash-style burger as a nationwide limited time offering.

A&W was the first Canadian QSR to offer a smash-style burger at this scale, and it's resonated strongly with guests, driving increases in both guest counts and average check. And it was a significant contributor to our same-store sales growth of 2.1% for the quarter. The success of our recent promotions demonstrates our strength in marketing and innovation.

We continue to focus on growing restaurant counts across Canada. And in Q2 2026, we opened 8 new A&W restaurants, bringing the year-to-date total new A&W restaurant openings to 12. We remain particularly focused on expansion in Ontario and Quebec and through our partnership with Suncor. We're also excited to have reached an important milestone in our Pret A Manger expansion. On June 12, we opened our first franchised Pret shop located at Vancouver International Airport.

We have secured additional leases and are actively pursuing new sites in Vancouver, Calgary, Toronto and Montreal, and we continue to expect 3 to 4 franchised Pret shops to be opened by the end of fiscal 2026. With that, I'll now turn things over to Kelly, who will take us through A&W's financial highlights for Q2.

Thank you, Susan, and good morning, everyone. I will provide an overview of our financial results for the second quarter ended June 14, 2026. Total revenue for the quarter was $70.8 million, an increase of 3% or $2.5 million compared to Q2 of 2025. This increase was driven by higher service fees, distribution revenue and advertising fund contributions, all of which are linked and driven by system sales.

These increases were particularly offset by lower equipment and turnkey revenue due to fluctuations in the timing of turnkey restaurant openings and the sale of equipment to franchisees. For those unfamiliar with our turnkey program, these are new restaurants that are constructed and then sold to franchisees upon completion with revenue recognized in the amount paid by the franchisee for the restaurant. Sometimes, however, restaurants are built by franchisees themselves, such as in the case of Suncor, so turnkey revenue can fluctuate from quarter-to-quarter and year-to-year.

System sales increased 3.9% to $469.7 million, driven by growth in our total restaurant count and same-store sales growth of 2.1%. As Susan had mentioned, that same-store sales growth was our strongest in over 2 years and was driven by the success of our burger promotions during the quarter, which increased both guest counts and average check and demonstrates the effectiveness of our marketing and menu innovation.

Operating costs for the quarter were $37.2 million, an increase of 3%, in line with the growth in franchising revenue. General and administrative expenses were $13.1 million, up 18% or $2 million from Q2 2025. This increase was largely related to the cost of hosting our biennial A&W National Convention, which was held in Q2 2026, but did not occur in 2025 as well as higher employee compensation and the addition of resources to support the expansion of the Pret brand.

Income before income taxes decreased by $1.2 million or 7% to $16 million, largely as a result of the increase in general and administrative expenses I just described, partially offset by the increase in revenue. Net finance expense decreased by $0.5 million, reflecting a lower average debt balance and a reduced interest rate on the operating loan. We also recorded a $1.5 million unrealized loss on our interest rate swap in Q2 2026 compared to a $0.8 million loss in Q2 of 2025.

Net income for the quarter was $11.7 million compared to $12.5 million in Q2 2025. Net income per share was $0.46 or $0.46 per diluted share compared to $0.51 or $0.50 per diluted share in Q2 of 2025. Adjusted EBITDA for the quarter was $24.4 million, a decrease of $1.1 million or 4% from Q2 2025 adjusted EBITDA of $25.5 million due largely to the increase in general and administrative expenses related to the national convention we just spoke about.

Adjusted EBITDA margin decreased 260 basis points to 34.5% from 37.1% in Q2 2025 as a result of the decrease in adjusted EBITDA and that increase in revenue. Our outlook for 2026 -- fiscal 2026 remains unchanged from the guidance we provided on March 5th and includes achieving adjusted EBITDA within the range of $103 million to $105 million, up from the $100 million achieved in 2025. It also includes ending fiscal 2026 within the range of 1,112 to 1,120 A&W restaurants, up from 1,094 at the end of 2025.

We expect to achieve system sales growth in the range of 2.5% to 5% compared to 2.8%, which was achieved in 2025. And we expect to achieve same-store sales growth in the range of 0.5% to 3%, which is compared to 1.2% achieved in 2025.

Moving quickly to the balance sheet. In 2026, we have deleveraged and reduced the net debt to adjusted EBITDA ratio from 2.3 at the end of 2025 to 2.2 at the end of Q2 2026. The CapEx to revenue ratio was 1.2% for quarter 2 of 2026, up 30 basis points from 0.9% for Q2 of 2025. In Q2 of 2026, we invested capital in plant and equipment to modernize 2 of our corporately owned and operated A&W restaurants, leading to an increased capital investment in plant and equipment in this quarter of 2026 as compared to the same quarter in the prior year.

We declared a cash dividend of 48% -- $0.48, rather, per share in Q2 2026, which was paid on June 30, 2026, and we remain committed to maintaining that current level of quarterly dividends for the foreseeable future. As a reminder, on March 18th, we announced that the TSX had approved a normal course issuer bid that allows us to purchase up to 600,000 A&W shares over the 12-month period beginning on March 20, 2026, and ending 1 year later on March 19, 2027. We launched the NCIB because A&W's management and its Board believe that from time to time, the market price of A&W shares do not reflect A&W's intrinsic value and that repurchasing the shares is an attractive and appropriate use of corporate funds. We repurchased and canceled 18,350 common shares during Q2 2026 under this NCIB. I'll now hand it back over to Susan for some closing remarks.

Thanks, Kelly. In summary, Q2 2026 showcased the strength of our marketing and our menu innovation. The success of the smash-style burger promotion is a great example of what happens when we bring an exciting product to guests at the right value. We remain focused on our strategic initiatives, including operational excellence through the 5-star operating system and delivering value that resonates with our guests.

We continue to see benefits and incremental gains from the investments we have made in the A&W mobile app, including our loyalty program, A&W Rewards, and our 5-star operating system. We also remain focused on menu innovation and new restaurant growth, particularly in strategic markets and through our partnership with Suncor. We're very proud of the milestone we reached with Pret A Manger this quarter, opening our first franchise shop at the Vancouver International Airport. We are very pleased with that shop's early results and look forward to continuing our expansion of Pret with 2 other airport locations already under construction. We extend our gratitude to our shareholders for their ongoing support and appreciate the hard work of our employees, franchisees and partners. With that, I'll turn the call over to the operator for questions.

[Operator Instructions] Your first question comes from the line of Logan Reich of RBC Capital Markets.

I guess just starting out, there are some headlines of an outbreak here in some reports just starting here in the U.S. I guess just any color you guys can give on any sort of potential exposure you have to maybe some of the suppliers or some of the products that have been attached to the outbreak here over the last few weeks?

No. Fortunately, none whatsoever.

Okay. That is good to know. And then I guess just next, can you just give, like, a state of the union or an update on the consumer? I mean there's been a lot of macro headline volatility in energy prices impacting consumer sentiment and inflation. Can you just give us some color on what you're seeing most recently with your consumer, maybe broken out by income cohorts or geographies and specifically relating to gas prices?

Sure. I'm not sure how directly I can relate it specifically to gas prices. I mean gas prices have increased and been a bit volatile, frankly, across the country. So that's definitely having an impact on disposable income. I'd say particularly in areas where people's cars or vehicles are necessary for their work or for getting to work or even for their work, farming and other types of activities where there's some high fuel usage. But I do think that all consumers in Canada have experienced some form of compression in terms of their disposable income and also their certainty about the future.

And so we see that in things like consumer confidence and so on, kind of, having settled in. And I would say that it feels like the population in general is settling in for a bit of a long haul in terms of pressure, whether that's from, sort of, things they know about today, like, gas prices or whether that's worries about things like interest rates or job losses or unemployment or any of those types of things that might be upcoming. And so it does feel like the population is generally hunkered down.

We do see regional differences, particularly in -- I wouldn't say it's even west, east, or north, south, kind of, thing, but even in the surrounding markets where there's key economic drivers that have been impacted by the economy or by things like tariffs or by things like consumer -- reduced consumer spending in their sector of the economy. Those are most concentrated in Ontario and to a slightly lesser degree, Quebec, but they do occur in provinces right across the country.

So it feels like there's a bit of a subdued consumer sentiment, I would say, and certainly a very big consciousness about spending and thoughtfulness. And so therefore, not -- impulsiveness is a decrease and thoughtfulness and careful consideration about things like value and making sure I get value from my money when I do decide to spend it is the attitude, I think, that we see most commonly.

Okay. Got it. That is very helpful. And then the -- I think the Smash burger performance was interesting in the quarter, and it seems like it drove a significant portion of the comp in Q2. Is there any way you can, sort of, break out the impact from the Smash burger to get -- just give us any color on the sort of underlying comp trend? And then just any, sort of, call outs you guys would have on LTOs in the back half of the year that you currently have on the road map?

Sure. Yes, definitely, our smash-style burger was a hit with consumers. I think people in the summertime, especially, are looking for something to do, looking for something to try and Smash burger has certainly been a popular menu item in all different kinds of places and trending. But our ability to provide it with great value, affordably, quickly was certainly welcomed.

In terms of numbers and how many and so on, any time I think we run a really successful beef burger promotion, it really does hit the right note, and we do see spikes in sales of those products at that time. But Smash is a little bit special. So I would say that, that was a really nice wave for us. And it did, as you say, impact the entire quarter, even though it was only there really for the last period of the quarter.

Okay. That's helpful. And is it still running through Q3? Have you given a, sort of, end date on that?

It ran for 7 weeks, so about half through Q2 and the other half through the beginning, early part of Q3.

Okay. Got it. And then just last for me. Just any update on the loyalty program, how that's performing? I think you've shared some metrics on that program previously. Just curious if there's been an update there as the program has been out for just over a year.

Yes. We continue to be happy with continued uptake. It takes time for these things to hit the phone, I guess, you'd say. And we're seeing continued growth. And so the growth is pleasant. We're also starting to see our ability with greater adherence to the loyalty rewards program, our ability to start to use some of the data from that program to understand our consumers' needs a little bit better and to use the information and to make us more effective. So we're starting to see success on both sides, both uptake as well as our ability to leverage what we're learning and to get more responsive in terms of consumer demand.

There are no further questions at this time. I will now turn the call back to Susan Senecal for closing remarks.

Excellent. Thank you, Chase, and thanks to all of you for attending our call today. We look forward to updating you on our results after the third quarter of 2026. In the meantime, if anyone does have a question that wasn't answered on today's call, please do feel free to send a follow-up e-mail to [email protected]. Thanks again. We'll talk to you soon.

This concludes today's call. Thank you for attending. You may now disconnect.