Good day and thank you for standing by. Welcome to the Papa John's third quarter 2026 conference call and webcast. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during a session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hands raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today. Amy Ann Turnage, Senior Director of Treasury, please go ahead.

Good morning and welcome to our third quarter 2026 earnings conference call. Earlier this morning we issued our earnings relief which can be found on our investor relations website at ir.papajohns.com under the news and events tab or by contacting our investor relations department. Joining me on the call this morning are Todd Penegor, , and Chris Collins, Interim Chief Financial Officer. Comments made during this call will include forward-looking statements within the meaning of the federal securities laws. These statements may involve risks and uncertainties that could cause actual results to differ materially from these statements. Forward-looking statements should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our SEC filings. In addition, please refer to our earnings release and our investor relations website for the required reconciliation of non-GAAP financial measures addressed on today's call. Lastly, we ask that you please limit your questions to one question and one follow-up. And now, I'll turn the call over to Todd.

Thank you, Amyann, and good morning, everyone. Before I review our third quarter results, I'd like to spend some time discussing where Papa John's is headed. and why I believe we are entering an important next phase of transformation for the company. For decades, customers chose Papa John's because we stood for something distinctive. Not because we were the cheapest option, but because they believed we offered something worth choosing. Quality ingredients, great pizza, and a brand promise that sets us apart. At our best, that promise earned trust and loyalty. But customers' expectations have continued to rise. Competition has intensified. And we recognize that we must move with those expectations in order to continue to earn that trust. That is why today we are introducing Unbox Better. Unbox Better is more than a marketing platform or a short-term initiative. It is our company-wide blueprint for strengthening our brand, strengthening our system, and earning the right to be chosen again and again. Importantly, this strategy is supported by our new marketing framework. which creates operational and financial alignment across our system. With our franchisees and corporate teams moving forward together, we have a stronger foundation than we have had in years to execute a common vision and accelerate our transformation. Perhaps the clearest sign of that alignment is the overwhelming support for this framework, which was approved by a remarkable 98% of votes cast. That level of consensus reflects a shared commitment to the future of the brand and reinforces what we know to be true. When franchisor and franchisee are aligned behind a common strategy, we can accelerate growth, strengthen performance, and create greater economic opportunity across the system. Turning to our third quarter results, while top line performance came in below our expectations, our discipline focused on value, operational execution, and Cost Management enabled us to deliver positive free cash flow. We know that business transformations are rarely linear and Papa John's is no exception. That said, we have a clear path forward driven by our renewed strategic focus that I will detail later. North America continues to be challenged, driven primarily by the same factors we discussed last quarter, including an intensely promotional environment and softer new customer acquisition. Consistent with the pattern we saw last quarter, our carryout business was relatively stronger than delivery, while our first-party delivery channel remains under the most pressure. We also continue to see the same underlying mix pressure, with single pie orders, sides, and desserts remaining a drag, even as orders with multiple pies continue to hold up well. Turning to our international business, comparable sales were down 1.8% for the quarter, with challenges in some of our markets. This was partially offset by continued momentum in the UK, where comparable sales were up 7.2% on a one-year basis and 16.3% on a two-year basis. The pressure came from the Middle East, where the regional conflict has weighed on consumers both directly and indirectly. Trends also remain soft in parts of Latin America and in China. In the UK, strong operational execution and increased media investment continue to build brand awareness. and Momentum, fueled by core product improvement, innovation you would only expect from Papa John's, and franchisee ownership optimization. That consistent growth gives us confidence in our renewed strategy for the North American business as we are using many of the same key ingredients that drove our UK turnaround. Chris will walk you through the third quarter in more detail later in the call. For now, I would like to discuss our roadmap for the future. As I mentioned at the start of the call, Today marks an important milestone in our transformation journey as we formally introduce Unbox Better. At its core, Unbox Better is built around a simple belief. Customers do not owe us their business. We earn it every order, every experience, every day. The strategy is rooted in two priorities. First, strengthen our brand by giving customers compelling reasons to choose Papa John's. Second, strengthen our system by consistently delivering on the expectations we create. Taken together, those priorities create what matters most, customer preference and customer trust. Under each priority, we have business imperatives that will bring those priorities to life, and they form the blueprint for how we will create sustainable growth over time. I will now walk you through our four imperatives that will drive our first strategic priority, strengthening our brand. One, reignite our food so it is worth choosing. As a restaurant company, everything starts with the food, and strengthening the core menu is our number one priority. We are working on and retraining the fundamentals across dough optimization, bake consistency, better toppings and presentation, with better ingredients and consistent execution behind them, every pizza, every time. We are starting now with a system-wide recommitment to those fundamentals, and we are pairing it with a new offer that invites customers to come back, try us again and tell us how we did. Their feedback will guide a steady set of product and quality improvements that we will roll out through next year. Two, bring our brand promise back to life. Customers want authenticity and reasons to believe, so we are grounding that promise in the product truce that set Papa John's apart, including quality ingredients, fresh vegetables, real cheese and our signature garlic sauce. This imperative's focus on the customer experience and the operations behind it, combined with the first imperative's focus on the food itself, ensures every order reflects what we stand for. Three, reset our value equation. Value is not simply the lowest price. It is what customers receive relative to what they spend, including quality, convenience and trust. In a very promotional category, We chose to protect margin over deep discounting, and transactions declined as a result. We are now sharpening our barbell strategy, pairing the signature products customers crave with price points that drive traffic and conversion. We know it will take several quarters of that consistency before customers give us credit for it. And four, deepen our customer connection, and our loyalty members show why it matters. Their comparable sales outperform non-loyalty customers by 10 percentage points. Their tickets are 4% higher per order, and they order about twice as often. We want customers actively choosing us more often and staying with us for longer. We have continued to roll out an AI-powered personalization engine within our CRM platform, which will let us send more relevant offers and deliver value at the moments that matter. But giving customers a reason to choose us only works if you deliver on it. which underpins our second strategic priority, strengthening our system. I'll walk you through the three imperatives that will support this priority. One, deliver on every promise, every pizza, every time. Customers judge us one order at a time, and we know that when we meet or exceed expectations, customers come back. In the third quarter, restaurants in the top quintile of operation scores were 400 basis points ahead of our bottom quintile in comps and restaurant margin. Closing that gap is one of our highest return levers. We are doing that through coaching, earned financial incentives, and a regional franchise business director model that puts more support closer to our franchisees.

Technology supports this work.

We are testing a modern, AI-native point-of-sale platform in a small number of restaurants, and the early read is encouraging. The new POS allows for more accurate forecasting, better labor scheduling, and increased speed and flexibility of deploying offers and promotions. This is achieved by allowing our restaurant teams to spend less time on non-customer-facing tasks and more time focusing on making great food and driving positive interactions with our customers. We expect to have an initial wave of restaurants live by year-end, with the bulk of our U.S. system going live in 2027. More importantly, what we learn now is helping us set up that rollout for success. Lou AI, our AI ordering companion built with Google Cloud, is already making ordering easier. Customers using Lou AI convert at a higher rate and finish their orders faster. and we are improving driver routing for faster delivery and hotter pizzas while simultaneously making operations easier for our team members. Two, bring the brand to more guests. We have partnered with Walmart Express Delivery to become the first national restaurant brand on the platform with orders fulfilled entirely from restaurant locations outside of Walmart stores. This new partnership reaches guests who might not otherwise have Papa John's in their consideration set. We are in early pilot testing this fall. And roughly half of our US restaurant system is now supported by our re-established co-ops, with funded co-op markets continuing to meaningfully outperform markets without one. We anticipate the remaining local co-ops will be established by the end of 2027. To support the success, as part of the new marketing framework, we are increasing local co-op spending to 2%. In addition to the national spend, which we are now adjusting to 5%. In total, marketing spend is now 7% versus 6% previously. Three, build a system where operators thrive. Our success depends on the success of our franchisees. If they are not thriving, customers will ultimately feel it. To further support our franchisees, we are reducing our supply chain margin to 4%. providing 100 basis point margin improvement for our franchisees versus our previously targeted 2027 supply chain margins and strengthening the entire system for the long term. Consistent with what we shared last quarter, this is part of our continued support for franchisees with approximately $35 million of investment continuing into 2027. Support continues into future years at lesser amounts as the supply chain margin steps up to 4.5% in 2028 and 5% in 2029. This improves alignment and gives us more agility in a highly competitive market and supports more cohesive national and local marketing. In addition, we plan to roll back our tech fee from 1.75% to 1.5% in 2027. We view these actions as fuel for growth, strengthening the unit economics franchisees need to compete as a team in their local co-ops. In terms of our supply chain work, we continue to make good progress with $21 million in savings captured year-to-date through the third quarter. As we look ahead, we remain on track to realize at least $25 million in savings this year and at least $60 million by 2028. As we have said previously, these savings equate to at least 160 basis points of four-wall EBITDA margin improvement by 2028 for both company and franchise restaurants. We are also optimizing our restaurant portfolio. Year to date, we have closed 239 restaurants across the system, including 146 in North America, which is nearly half of the 300 North American closures we have committed to through 2027. Early results continue to be encouraging, with strong sales transfer to neighboring restaurants as we close underperforming locations. We know recognition of our improved execution will take time. But we expect the Unbox Better plan to deliver strong returns for all our stakeholders. That is Unbox Better. We have a clearer strategy, a more aligned system, and a focused set of priorities to guide our execution. Our task now is straightforward. Deliver consistently, earn customer trust, and convert that execution into stronger business performance over time. As we continue to focus on operational efficiencies, we remain on track to achieve our G&A savings for the year and we have line of sight to the $30 million of cumulative G&A savings by the end of 2027. On capital allocation, our approach is unchanged. We are prioritizing the investments that support the plan and deliver the highest returns, driving free cash flow and strengthening the balance sheet. Refranchising remains part of that approach and we continue to move toward an asset-light model with company ownership at a mid-single digit percentage of our North American system. We are focused on continuing to maintain a strong balance sheet to ensure we are a good brand steward and support of the overall system. To close, let me bring it back to where we started. Unbox Better is our commitment to reclaim what has always made Papa John's special while modernizing the business for the future. We are strengthening our brand so customers have compelling reasons to choose us. We are strengthening our system so we consistently deliver on what we promise. And through our new agreement with our franchisees, we now have greater alignment to execute those priorities together. We know progress will not come from presentations or plans. It will come from execution. It will come from better products, better experiences, better operations, and measurable results. We start from a strong position on quality as consumers know us for better. Our opportunity is to continue to raise the bar on quality and great service to ensure we deliver on our commitment to better with every order We intend to report our progress against Unbox Better each quarter and hold ourselves accountable along the way I want to thank our team members and franchisees for their ongoing commitment to that mission We are focused on earning the right to be chosen again and again by customers, creating attractive returns for franchisees and delivering long-term value for shareholders. With that, let me turn things over to Chris.

Thank you, Todd, and good morning, everyone. I'll begin by reviewing our third quarter results in further detail, and then I'll share our updated 2026 outlook. Please note that all comparisons and growth rates referenced today are compared to the prior year period unless otherwise noted. For the third quarter, global system-wide restaurant sales were $1.15 billion, down 5.6% in constant currency, reflecting lower comparable performance in North America and international as well as a decline in the global net restaurants on a trailing 12-month basis. Total consolidated revenue for the third quarter was $455 million, down 10.5%, reflecting the impact of refranchising transactions and lower performance in North America. Domestic company-owned revenues decreased $37 million, primarily due to the refranchising of 85 corporate restaurants in the fourth quarter of 2025 and 28 corporate restaurants in August of 2026. in addition to lower comparable sales. Revenues in our North America commissary segment decreased $15 million primarily due to lower volumes partially offset by higher pricing. And revenues in our North America franchising segment decreased $5 million primarily due to lower comparable sales at our franchised restaurants. And finally, all other Business unit revenues increased $5 million, primarily reflecting higher advertising funds revenue driven by discretionary company contributions to the Papa John's Marketing Fund. This was partially offset by lower digital fees. International revenues were flat. Consolidated adjusted EBITDA of $38 million was down $10 million, primarily attributable to the decline in sales and volumes in North America partially offset by lower cost of sales. We captured approximately $7 million in system-wide supply chain benefits during the third quarter through increased efficiency and reduced cost to serve at our North America commissary. Year-to-date through Q3, we have captured approximately $21 million in supply chain savings representing 55 basis points of restaurant margin benefit. North America commissary segment adjusted EBITDA margins were 8.2%, an improvement of approximately 80 basis points, primarily reflecting supply chain cost savings benefits and higher pricing partially offset by lower volumes during the quarter. Domestic company-owned restaurants delivered four-wall EBITDA of $9.8 million and four-wall margins of 7.7%, a decrease of 220 basis points. This decrease was due to lower transaction volumes and higher food costs, partially offset by lower labor costs due to increased productivity and the impact of company-owned restaurant refranchising transactions. Turning to our refranchising efforts, In August, we completed the re-franchising of 28 company restaurants in Orlando, Florida. As we pursue an asset-light model, we remain on track to reduce company restaurant ownership to a mid-single-digit percentage of North America's system. We are actively assessing several additional North American markets for re-franchising, while also evaluating opportunities internationally. We believe these actions will support incremental growth opportunities and strengthen our franchise network by transitioning select restaurants to high-performing franchise partners and we look forward to providing updates as these transactions progress in the future. We are also exploring new formats and distribution channels such as non-traditional locations to expand our footprint and attract new customers to the Papa John's brand. We remain committed to maintaining our strong balance sheet and positioning the business for stronger cash flow generation through sustainable long-term growth enabled by Unbox Better. Through re-franchising, we are creating a more asset-light model. and through disciplined cost reduction and operating model optimization, we will build a more efficient, profitable system. Turning to our balance sheet, at the end of the quarter, our total available liquidity was approximately $500 million and our covenant leverage ratio was 3.3 times. As we continue to maintain a strong balance sheet, which provides us flexibility to support our transformation initiatives. Turning to cash flows. Net cash flow provided by operating activities through the third quarter was $59 million. Free cash flow through the first nine months was $19 million compared with last year's $59 million. This was driven by the timing of compensation payments related to the prior year as well as payments related to our company's enterprise transformation plan The timing of cash payments for the company's National Marketing Fund and lower net income during 2026, partially offset by a decrease in capital expenditures primarily driven by lower company-owned restaurant development compared to the prior year. Now turning to our 2026 outlook. As discussed, we are revising our outlook to incorporate year-to-date results as well as the current consumer and macroeconomic environment. Our guidance now includes the following. System-wide sales decline of approximately 5%. North America comparable sales decline of approximately 8%. International comparable sales growth of flat to up 1%. Gross openings of 40 to 50 in North America and 180 to 220 internationally. Gross closures in North America of 200 to 250 in 2026 and 5 to 6% of the international system. Just City Bidab approximately $175 million, excluding stock-based compensation of approximately $16 million and diluted share count of approximately To provide additional context, our 2026 guidance incorporates approximately $35 million of supplemental marketing and franchise investment, which we expect to continue into 2027 in the form of reduced supply chain margins and digital fees, and approximately $13 million of G&A savings, excluding marketing, for 2026 as we continue to have line of sight to approximately $30 million of cumulative savings by the end of 2027. In addition, for non-operating expense items, we expect net interest between $35 and $40 million, adjusted DNA between $70 and $75 million, and capital expenditures including capitalized software as a service costs of between 70, and $80 million. Overall, we've taken a measured approach to this guidance. It is built upon the trends we are seeing in the business today, and it does not assume any improvement in the current environment. Although we are not building any benefit from Unbox Better into our 2026 outlook, we do expect Unbox Better to support improved trends over time as we strengthen the brand and our system. And with that, we'd like to open the call up for any questions you may have. Operator?

Thank you. And as a reminder, to ask a question, you need to press star 101 on your telephone and wait for a name to be announced. To withdraw your question, please press star 101 again. Please limit yourself to one question and one follow-up. In the interest of time, please stand by while we compile the Q&A roster.

One moment for our first question.

First question comes from Brian Bittner from Oppenheimer. Your line is open.

Thanks. Good morning. First question is just as it relates to the 300 stores that you've targeted to close by 2027, should this number be higher just given the unit economic pressure from system comps this year? And how do you want us thinking about the percent of the U.S. system that's currently sitting on very profitable footing versus not.

Yeah, thanks for the question, Brian. Now, we still feel very comfortable that 300 is the right number. We're in the range of 200 to 250 closures this year. And the reason we feel comfortable with that is the system relief package that we just put in place. So rolling back the commissary margin from what would have been 8% in 2027 back down to 4%. as 100 basis points of support for the system. And now that we're in a good position, as we've caught up on technology and rolling our technology feedback from 175 to 15, that's additional support to the system, as well as the ongoing cost savings that have been put in place from the supply chain perspective. We're still on track, as we talked about in the prepared remarks, to be 60 million plus by 2028. So we do provide a lot of fuel to help the economic model. and in and of itself, those closures where we're seeing really strong recapture rates back to existing restaurants that are in those markets. Those things have given us the confidence that that is the right number and we're trying to really strengthen the system for 2027 to make sure we got the fuel to fight behind the Unbox Better plan. We don't really get into the The details of how the financial health is of the overall system. I mean, our franchisees have various different balance sheets, but we do think this collective relief package, along with a focus on coming back and earning the right to be chosen again and again behind Unbox Better, will put us in a good position to continue to build the health of the system over time.

Okay, those details are helpful, Todd. Thank you for that. And Follow-up is on the same-store sales trend. It seems like the 4Q implied guidance is a similar trend as 3Q down 8-ish. I mean, you can correct me if I'm wrong. But how do we think about how you fight through this promotional intense environment that seems to be impacting the business? And how are you thinking about the opportunity for trends to improve once we turn the page on the calendar and enter 2027?

Well, I'll let Chris talk about kind of the implied guidance in a minute. But as you think about how we're going to play the game differently, I think that is the impetus of Unbox Better. It's really recommitting to what made this brand special in the first place, you know, really modernizing the very best of who we are and strengthen it for today's marketplace and really focused on the quality of our food and executing it well every time so we can earn it. I mean, our customers don't owe us their business. We earn it with every order, every experience, every day. and that is the focus but I do think putting ourselves in a position where we're going to get the co-op stood back up you know we're going to have two percent at least spending at the local level you know national coming back down to five percent it does put us in a position to where we can have a strong national barbell but also complement it and accentuate it at the local level which we have been a bit handicapped on the last few years so I do think that really gives us the opportunity to compete even stronger. Pizza's a game played nationally but won locally, and we're really setting our teams up to connect to the communities that they serve. So that is the strategy and the focus, and that's why we're confident we'll bend the trends. But on the implied guidance of the fourth quarter, Chris?

Yeah, thanks for that, Brian. I just want to reiterate that we took a measured approach to our guidance. It's really based upon our Q3 results and the trends that we've been seeing. It doesn't assume any improvement in our underlying consumer macroeconomic environment either. You're exactly right, though. I mean, with our full year guidance, we're looking at a Q4 that's very similar to Q3 in terms of comps, our revenue, and even our EBITDA.

Thank you both. Thanks, Brian.

Thank you. And our next question will come from the line of Dennis Geiger from UBS. Your line is open.

Hi, this is Paul Hao on with Dennis. Thank you for the question. I guess just to start, can you talk a little bit about any shift you have seen in consumer behavior and specifically if there's any change you've noticed within the lower income consumer?

We haven't really seen dramatic shifts in the consumer. I mean, clearly the K-shaped economy is what everybody's been talking about. Some of the consumer sentiment, consumer trends that we talked about in the second quarter continued into the third quarter. And you heard a lot around the health of the lower-end consumer from a lot of the competitors that are out there. So it has been very similar. I mean, the opportunity that we have is How do we continue to connect with the consumer at moments that matter? And what we've seen is when folks really want to gather around the center of the plate and really want to make sure that they have a celebratory opportunity, whether that's the most recent Halloween or election night or going back during the summer during World Cup, Papa John's is at the center of the plate. We just need to create more opportunities where folks want to trade up to us. with the great quality that we deliver, delivering it consistently time and again.

But we'll see where the consumer goes.

To Chris's comments, we've assumed the same environment moving forward. If things do get a little healthier, that's an opportunity to have us bend some trends moving forward.

Great, thanks. And just to follow up, on the restaurants in the top quintile of operation scores, can you give us a little bit more color on their outperformance and How are you thinking about transferring some of the successful experience to the lower volume stores?

Yeah, the top quintile restaurants outperform the bottom quintile by about 400 basis points on sales and margin. And what we're really focusing on on Unbox Better is really going to raise the floor across the system. So the first area of focus for training is really going out and supporting those restaurants that are in the bottom quintile so we can elevate that floor, create better experiences, and start to close down the inconsistency gap that we have across the system. So we do think that is an opportunity to continue to support our business with a commitment to retraining and the operations teams on that. And we're going to involve the consumer and the customer in the journey. So next Monday, you'll see us launch a bounce back offer, which will be snap a pic, get a free pizza. It's really about capturing consumer feedback on our journey of continuous improvement. So we're going to engage the consumer to help us become even better. Those pictures will be available for the restaurants, and we'll use that feedback from the consumer to help our individual restaurant teams continue to elevate the experiences for our customers.

Great, I appreciate the color.

Thank you. One moment for our next question. Our next question will come from the line of Jim Solera from Stevens. Your line is open.

Thanks. This is Tyler for Jim. A couple follow-ups from earlier. You know, as we think about 27, it seems likely North America comps could remain negative through, you know, at least the first half of the year. You know, assuming the operating environment doesn't improve much, Do you think there's enough traction from your internal initiatives to potentially exit the year with positive comps?

I'm not going to get into 2027 guidance at the moment, but our goal with Unbox Better and the focus on the elements across operations, marketing, and technology is to continue to show sequential improvement in same restaurant sales as we go into 2027. And with the support that we're providing the system, the commissary margin rollback, the technology fee rollback, the work we're doing to drive supply chain cost savings, we do believe we've got significant fuel to fight, especially at the local level as we establish the co-ops.

Great, that's super helpful. And on gas prices, have you noticed any differences in sales trends across markets where, you know, prices have moved substantially higher? And more broadly, are you seeing any changes in delivery frequency?

No, when we look at kind of the regionality, I mean, it's similar to where we've been in the past. You know, we've seen strong performance in the Midwest and in Southeast, you know, Northeast and West where we've got a little different You know, positioning with the brand have been just a little bit softer, but we haven't seen anything that really differentiates on fuel prices across the country. I think we've got to look at all elements of disposable personal income. You know, as the consumer feels a little stressed on disposable personal income, that's when we do see them have an impact on the frequency of sales. and that's what we continue to watch to make sure that the overall consumer gets healthy with more dollars in their pocket, fuel being one of those elements.

That's all on our end. Thank you.

Thank you. And our next question will come from the line of Sarah Senatore from Bank of America. Your line is open.

Hi, this is Grace. I'm for Sarah. Thank you for taking my question. So you started the year matching your biggest competitors on promotions and then pulled back. And then you mentioned protecting margin costs through transactions. So as you sharpen the barbell, where does that balance stand now? And how do you win the customers back without going back to deep discounting? And then I have a follow-up after that. Thank you.

Yeah, I think it's going to be a balance, and it really is. We'll continue to bring out some innovation, and we've got some news coming here in the fourth quarter. But the real focus is on the renovation of the core. What do we need to do to continue to manage the melt points and amp up the flavor of our cheese? How do we continue to optimize our dough? How do we continue to drive improved heat retention for the consumer so we create great experiences on our core product? We will run a healthy barbell, and you've seen us do that more recently with specialty pizzas at affordable price points. The works is out there today at $14.99, but we'll continue to complement that with some pulsing of promotions. During the third quarter, we had a 50% carryout offer and a buy one, get one, but we also have pop-up pairing, which is a good low end of the barbell, but we'll continue to pulse where appropriate with promotions, continue to leverage All the data we have across our 43 million plus loyalty customers to make sure that we've got personalized offers to better connect to them. And then we'll continue to drive the trust and the frequency of our existing customers by really leveraging that data that we have within the loyalty program. But importantly, as I said earlier, it's not just a game played nationally with the franchise alignment that we now have and Co-ops being set up across the vast majority of the system and spending at least 2%. To be able to fight and complement the national message at the local level is a really important tool that we didn't have in full force over the last couple of years.

Thank you. Thank you for that. And then my follow-up question is, You mentioned strong sales transfers from your own closures. Are you seeing anything similar as Pizza Hut closes restaurants in markets where you overlap?

As we look at it, we focus on all closures out there. The world has changed a little bit as delivery is available from all QSR. It's not just delivery from pizza. But we do look and really track, and we've seen it in about 50 restaurants so far, where we've seen some real good sales transfer when we close a Papa John's. And we do watch and see that, not just in the U.S., but across the globe when Pizza Hut's have closed. We've been really focused on recapturing some of those volumes, and that has been an opportunity for us, not just in the U.S., but we've seen it in a couple of markets internationally where they've exited, which has actually created some strong results for us.

Thank you. That's it for me.

Thanks. Thank you. Our next question will come from Todd Brooks from StoneX Financial. Your line is open.

Hey. Good morning, Todd. Thanks for taking my questions. Appreciate it.

Hi, Todd.

First of all, I know we've set up the co-ops. What percentage of the markets have the local co-ops again or have had them for a little while now?

So we've had in the back half of the year about 50% of the system is now set up in a co-op. So the alignment will allow us to get the rest of the system set up during the course of 27, but really push in as soon as humanly possible to get the administrative pieces all set up so they can be working as a cohesive unit.

So the kind of the leading edge of markets that brought co-ops back into the fold and started local marketing activities again. What are you seeing for any sort of same-store sales spread between co-op supported markets locally and the ones that don't have it yet?

Yeah, so what we're seeing is a little over 200 basis points delta on sales performance in the markets that have co-ops. And I would say as we have established the co-ops, they've been working together to compete in the local community, but we haven't fully coordinated How they work locally against the national calendar. So as we reset the field marketing teams during the course of this year, I think we now have an opportunity to really get ahead of the 2027 national calendar and then partner with the co-ops that have been established or are being reestablished to make sure that the message at the local level truly complements and is optimized against the national calendar, which is an opportunity to be even more efficient and effective with the spending. that comes from both the national and the local levels. So that's the opportunity ahead. And you're really making sure that the dollars are spent with some of the best practices across the country at the local level because some folks were spending some dollars during the course of last year that weren't in co-ops. And, you know, I think we just got an opportunity to make sure those dollars work even harder for them, partnering with them as part of working as a team and a unit in their local DMAs.

Okay, perfect. And then my follow-up, you talked about within the brand pillar reigniting the core menu. Just wondering, if you look at the product offering, and I know we got rid of some of the operational rhythm breakers and replaced it with things like toasted sandwiches, but if you're looking at the core menu and wanting to reignite around really the pizza core, it seems like, how are you thinking about the current offering in D.C.? kind of contractions in what you're offering and flexing in some other categories, or how does that play into the overall strategy you're trying to accomplish? Thanks.

That's a great question, Todd. I do think we've got to be super conscious of ops complexity. We've got to set our teams up to really be focused on making great pizzas every time. We removed papadillas and brought sandwiches in to manage the handheld, so that was with less complexity and not as big of a rhythm breaker. What we really need to do is get back into the restaurants, support our teams, retrain them. We know we've got some opportunities to continue to improve heat retention through our hot bags and how we deliver the pizzas with ease to the consumer. The work that we're doing on the new POS system will come with some driver routing optimization to make sure that we can best support Delivery, whether it's coming from our first P or third P, so we can get it to the consumer faster and hotter. And the upgrades on technology in the restaurant with the new POS, you know, our existing POS is 35 years old. And there's a lot of menial tasks that are non-consumer facing that are happening day in and day out. And as the POS rolls out to the vast majority of the system by the end of 2027, It will free up our restaurant teams to spend a lot more time making great pizzas and really being focused on creating great experiences with the customers. So we're super excited that technology can be a big enabler to really focus us with the training and then create the time to create great pizzas. Because we know when we make our pizzas right, the consumer gives us a ton of credit. And we start from a really good position on better. The opportunity is the journey of continuous improvement and inconsistency across the system to really raise that floor, and that's the focus moving forward.

Perfect. Thanks, Todd.

Thanks, Todd.

Thank you. Now, this concludes the question and answer session. I will now turn it back over to Todd for any closing remarks.

Well, thanks, everybody, for joining us today. I just want to say a big thank you to our restaurant teams for the work they do every day to execute at the restaurant level. The franchise community for the partnership as we work to roll forward together and execute Unbox better as one system moving forward as one unit. And to the restaurant teams for the support and commitment to really creating special experiences for our customers with this great brand. So thanks for joining us this morning. Look forward to any follow-up questions as we get together later during the course of the day. Appreciate everybody's time. Thanks for joining.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone have a great day.