Thank you. Good morning, everyone, and welcome to our briefing session for FY 2025. The global fast food industry, worth over AUD 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. Most people didn't question it, but there was no real alternative. 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 one. It is not only about clean food or fast service; it's also about values. People want a backed brand that stands for something, and so do we. For FY 2025, 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 AUD 1.2 billion in network sales, crossing the AUD 1 billion milestone for the first time, and representing growth of 23% on the prior year. Australian segment underlying EBITDA of AUD 66 million, up 45%. Group segment underlying EBITDA increased to AUD 52.8 million, up 35%. NPAT increased by 152% to AUD 14.5 million. Finally, we are excited to announce that the board has declared GYG's maiden dividend, which will be AUD 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% comparable sales growth. We opened 32 new restaurants in Australia, a record year of openings. The average drive-through 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. 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. We've been focused on what we've been focused on, and what our expectations are for FY 2026 and the next five 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 you through our FY 2025 results.
Thanks, Steven, and good morning, everyone. As Steven mentioned, we've been delighted at 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 look 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 four new restaurants, also fueled sales growth of 40%. In Japan, our network sales continue to grow, increasing 16%. 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 AUD 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 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 9:00 P.M., 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 five 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 allow our restaurants to absorb increased demand and deliver significant comp sales growth.
As an example, our top decile of comp restaurants, representing 17 drive-throughs and one strip, generated average unit volumes of over AUD 9.5 million and restaurant margins over 24%, while comp sales growth was well above the group level. Day part 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. Two-thirds of our top decile restaurants are open 24/7, and their mix of sales, coming from breakfast and after 9:00 P.M. day parts, 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 Morning 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 AUD 6.7 million for drive-through restaurants and AUD 5 million for strip restaurants.
Network restaurant margins were 22% for drive-throughs and 18% for strips, both slightly down, as we prioritize providing exceptional value to our guests, rather than passing through temporary cost 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 AUD 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 AUD 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 two 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 seconding 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 comparable 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 two 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 2026. We started the year with comparable sales growth of 6.6% in the first seven 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 2026. We will open two 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. As a result, U.S. losses are expected to increase slightly in FY 2026. Again, to reiterate, our strategy in the U.S. is to build a network of 15 restaurants with proof of 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 FY 2025 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 AUD 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 five 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 franchised and 40% will be corporate. On average, 85% of these openings will be drive-through and 15% will be strip. In our Australia segment, our business model is expected to deliver earnings growth significantly ahead of revenue growth. As a result, we are confident that the Australian segment underlying EBITDA as a percentage of network sales will reach approximately 10% in five 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-through formats. 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 four years. Finally, G&A costs, 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 five 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 2026 to be another strong year of growth. We expect to open 32 restaurants in Australia, of which 23 of these restaurants will be drive-throughs and nine will be strips. We expect FY 2026 that segment underlying EBITDA as a percentage of network sales will be in the range of 5.9% - 6.3%, reflecting continued expansion of earnings relative to FY 2025. 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 seven weeks of FY 2026, comp sales growth had been lower at 3.7%. Let me give you some context. This is not new. To give you a little bit of flavor, over the last seven years, we've had less than 5% weekly comps 16% of the time. More recently, in the six 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.
Thank you, sir. If you wish to ask a question, please press star then one on your telephone and wait for your name to be announced. At this time, we'll just pause momentarily to assemble our roster. The first question we have will come from Sean Xu of CLSA Limited. Please go ahead.
Thank you, Keith. Could you please just give us a bit more color on your comp sales in your shout-out? I guess you're talking about the timing of the marketing campaign. I was looking at last year, the first seven weeks trading 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? Also, when you say confident to deliver another strong comp sales growth for the full year, are we talking about high single-digit now?
Yeah, beautiful. Thanks for the question. Every year is a new year at GYG. When we look at the marketing calendar, our menu innovation, what we do in operations technology, we look at a 12-month period, a five-year period, and a generational period. We don't really look at seven-week stints in our business, nor do we align our marketing calendar and menu innovation from year over year. We do it when it's right for the business. 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. When we look at delivery campaigns, marketing campaigns, it's when it fits in right for GYG. We're not, you know, we wake up every morning here thinking about comp, thinking about double-digit comp always.
We don't look at it in such a short period of time. We're very confident from here on that we'll obviously continue to drive comp and sales momentum throughout FY 2026.
Thank you. 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 in Australia to help drive the growth?
Hi, Sean. It's Erik here. Yeah, you're right. The balance sheet is very strong. A feature of the business is its cash generation at the moment and 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. 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. Obviously, in Australia, we have a very significant opportunity as we strive towards our 1,000 restaurants at a time. We have flat capital management opportunities, which, you know, may take the form of a special dividend or a buyback, as an example.
Got it. Thank you.
Next, we have Shaun Cousins of UBS.
Great. Thank you. Good morning. Just a question on the EBITDA margin guidance of 5.9% - 6.3%. Does that require an improvement on the 3.7% comparable sales growth, or could you still achieve that EBITDA margin guidance if your comparable 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 seven weeks continued on, please.
Yeah, thank you, Sean. You're right. We do absolutely expect comp performance to improve from here. At the bottom end of the range, at 5.9%, that would be broadly consistent with a continuation of current sales momentum. That would be the downside of our earnings guidance. Obviously, as comps continue to improve from here, we would expect to be more at the middle to upper end of that range.
Fantastic. My second question is just around the 10% five-year EBITDA margin target in Australia. Bear with me, but we see GYG as a very strong store growth business. You can increase your net worth by over 4x to the 1,000 milestone. You talked about, Steven, earlier there, 10% in terms of double-digit same-store sales growth is in 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 am curious, why do you want to limit yourself with a five-year EBITDA margin target of 10%? 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?
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. Can you just sort of provide some of the basis for providing the target of the 10% EBITDA margin outlook? 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 solely focus 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. 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.
There are a number of other factors, which Steven highlighted today, that being the increasing mix of drive-throughs 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 are attracting the higher royalty. Finally, of course, we do have our G&A cost growing slower than revenue. All of those factors are existing settings in the business, and there's a mechanical movement that means that margins expand over time. 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.
You are because you've got a guidance that says you're targeting 10% in five years' time.
So I.
You are targeting. I'm just curious around that.
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 always have, 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.
OK. Just to clarify that a little more, are you looking at 40 new restaurant openings in sort of five years' time? My curiosity is, my question's really around the idea of stores. If you open more restaurants, you have a negative impact on margins. If you pull back the rate of store openings, you'll 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. We've made significant progress this year. That's absolutely the case. The other thing to note is, as we open restaurants, 85% of those restaurants on average will be drive-throughs, and they do deliver higher margins. There is a margin expansion over time from that as well.
OK, fantastic. Thank you for answering my questions.
Next, we have Benjamin Joseph Gilbert of Jarden.
Hi, Bonnie To. Thanks for taking the question. The first one, just following up on the stores. The store going into the next year, just interested in whether that's a gross, obviously, it's a gross number, but are you planning any closures? 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?
Yeah, thanks, Ben. For next year, we're seeing no store closures for GYG. Obviously, that 32 number is all new restaurants. In regards to competition, there's always competition, right? The thing at GYG is to make sure that we're better than everybody else. What you'll see sometimes with these newer brands that are trying to, I mean, obviously, everything's all about AAA for GYG. Under George Mandelis, 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-throughs. Otherwise, there's players coming to the market, but we're still finding those AAA restaurants. Obviously, to continue to build our pipeline on our way to, as Erik just mentioned, that 40 stores per annum in the next five years.
OK, so not seeing any major pressure in terms of material shifts in base rent, just because of that competitive tension in the market?
Yeah, no, not at all.
Right. Just one from me. I just appreciate seven weeks is seven weeks, and we shouldn't read too much into it. You did have a couple of pretty successful campaigns around coffee relaunch and your health focus pushed through last year as well. I'm just interested in any broader observations around the market at the moment. You've got McDonald's who's dropping prices. You've got more competition. You guys are assuming three points for delivery, etc. Are you seeing any change in consumer behaviors or when you're out there speaking to your customers in the market? Do you think it is just a period where you haven't had a lot of promotions, and we've got to look forward?
Yeah, no, we're not seeing anything. Now, remember, over the last six years, we've had 15% comp growth year- over- year, right? I'm talking about seven weeks. You know, 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. Obviously, every day we think about comp, but not, you know, seven weeks is seven weeks. We got 45 weeks, and we got five years after that in a generational place. We're obviously very excited for this financial year 2026 and what's to come post that.
Good. Thanks, guys. Appreciate it.
Next, we have Tom Kierath of Barrenjoey .
Morning, guys. 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. I think you finished the half kind of 68.9%. I thought from memory you were kind of targeting 70% there, so like a 30%, so yeah, 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, you're seeing a bunch of competitors lift pricing and whether, you know, yeah, how you're kind of thinking about pricing and input costs? Thanks.
Yeah, thanks, Tom. You're right. As we've called out, 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 onto our guests. Now, many of those price pressures that we faced in the second half have normalized, and we're in a better position as we enter the new financial year. There's always ups and downs in our supply chain. It's a fresh fruit business, ultimately, and we like it at around that 30%. We're entering the financial year in good shape there. As we look forward, we may see some price pressure. If it'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.
You know, the philosophy at GYG is the last thing we do is pass price on. There are so many other facets to our business that we analyze on a daily basis. The last thing we do is pass on price, which was evident, obviously, last year with about 9.8% comp, 1.2% was price, which is probably lowest in the industry. The way we look at it, we're building a long-term business. The last thing we want to do is, obviously, increase price. We want to create value for our guests.
Yep, that's clear. Thanks. The second one, you know, late night and breakfast day parts are growing really strongly. Can you maybe talk about the margins that you're generating in those day parts 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?
Yeah, thanks, Tom. As Hilton mentioned earlier, one of the things that we're really pleased with with our 24/7 restaurants is that those restaurants are achieving very significant growth in afternoon, as you can see in our comp numbers. The restaurant margin of those restaurants is well above the network average as well. We are very pleased with both the sales and earnings performance of our 24/7 restaurants. That's why it's such an exciting growth driver for us. We don't look at margins by day part across the business. We're obviously conscious of that. As we've talked earlier to Sean's question, we're focused on revenue. When we drive revenue in our restaurants, we see fantastic margin outcomes. We're focused on driving those revenues, and that's been very successful for us this year.
Cool. Great. Thanks, guys.
The next question we have will come from Bryan Raymond of JP Morgan.
Thanks, and good morning, all. I appreciate the seven-week number, but I think that's an important one today. I just wanted to sort of delve into that a little bit, just trying to understand where lunch and dinner stand. Just following from Tom's question around day parts, they've obviously had phenomenal growth in breakfast and late night, 20%+ . If that's 16% of sales combined, does that imply lunch and dinner are broadly flat from the same-store sales growth over the past seven weeks? Would that be a fair assumption to make?
Yeah, so I mean, lunch and dinner clearly is, like it was in FY 2025, is comping at a lower level than breakfast in 24/7 due to the success of those day parts. As we've said a number of times already, it's not something that's concerning us because of the timing of our campaigns. We're very excited about what's coming up. It's not something that we're worried about as we go forward.
OK. Just on the further on day parts and more looking forward, I noticed in the summary in the pack, you've talked to 10 conversions to 24/7 in FY 2026, coming from 18 total of the Australian network at 30 June. That's about 8% of your network that's 24/7. Where do you think that can get to long term? Can you go faster? 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? Keen to understand that. Just finally, I'd assume a higher percentage of your stores than that for breakfast. If there's a way to sort of get that number, that'd be helpful too.
Yeah, great question, Bryan. Everybody knows our drive-throughs all have DA approval for 24/7. Currently, we have 18. That pace will pick up this year. The end goal is to have all drive-throughs operating 24/7. Obviously, breakfast continues to grow. Lunch and dinner remain strong. That overnight, that 9:00 P.M. to the following day breakfast is obviously incredibly strong as well. The goal is in time to have all drive-throughs operating 24/7.
Why aren't more operating 24/7 today, if it's only 18, going to 28 out of another?
You have to start. The thing is, you've got to build the playbook, right? We've got to make sure that we've got obviously the food prep down right, the rostering correctly, the cleaning correctly, you know, and making sure that we build it so it's like Erik said, man, adds obviously positive margin and becomes more and more profitable. The great part now is all the franchisees are coming on board. It probably took us about six 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.
OK, great. Thanks, guys.
Next, we have Billy Boulton of Morgans .
Good morning, guys. 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 FY2026 guidance, just some indication of where those drivers are going.
Good morning, Billy. Of course. 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 FY 2026. Clearly, G&A is an area where we expect to realize operating leverage, particularly now that, you know, post FY 2025, we've really got that platform in place. We expect costs to grow slower than revenue and network sales. Our royalty rates will continue to expand due to the settings that we have there. We have a number of franchisees transitioning onto tiered royalty structure and, of course, comp growth in our franchisee restaurants. Corporate restaurant margins expansion will depend on the degree of comp sales growth. As we've said, we're really confident in that continuing to build throughout F2026. We do expect continued margin expansion.
Obviously, in the half, we'll be able to share the exact progress that we're making in each of those areas. We look forward to doing that as well.
Yeah, 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?
This goes a little bit back to what we were talking about with Sean earlier, you know, we're not targeting a margin expansion in a particular year. We're investing for five, 10 years in a generational business. If that means keeping prices lower this year to provide exceptional value, I guess that's what we'll do. We're not concerned about the margin outcomes that we need to deliver in 2026. Clearly, we've given that range of outcomes. We're very confident that margins will grow. The settings are in place, and we'll deliver throughout the year.
Lastly, Steven, you made the comment about the five-year target, sorry, the pathway wouldn't be linear. Are we correct to assume that the margin will increase more gradually through the near term and then really start expanding towards that later in the decade?
Yeah, Billy, that's exactly right. One of the things that one of the features of those drivers as you look through them is that they do operate in a way that accelerates over time. A good example is the degree to that format mix shifts over time. As we continue to open more and more drive-throughs, and that being 85% of our revenue, we get a structurally higher margin as a result of that format. That accelerates over time as we deliver more and more drive-throughs. The same goes with our franchisees. As more and more go onto the tiered royalty structure, there's just a greater proportion of sales that attract a 15% royalty as opposed to the 8%. Embedded in those settings is an accelerating margin expansion over time.
OK, thank you, guys.
Again, as a reminder, if you'd like to participate in today's Q&A, please press star, then one on a touch-tone phone. The next question we have will come from Craig Woolford of MST Marquee .
Good morning. Good morning, team. Sorry to hop on about the July number because we don't want to get caught up on such a short time frame. You're suggesting that things can impact, you know, a month like promotions or other. Can you call out things that may have affected July this year compared with July last year so we can understand what might have?
Yeah, sure. July last year, when we look at it, we launched Clean to New Healthy. We had a lot of attention around the IPO. That was a year ago. We had some big delivery campaigns. When we plan out for FY 2026, it's all about the restaurant. Like Erik said, man, it's all about driving revenue, comp, and making sure that our guys can execute. We plan. We don't try to marry up FY 2025 to FY 2026. Like Erik said, man, we're in it for the long run. We know that with this menu product offering, which will be launched in Q2, we'll be a hit with our guests. Obviously, we'll have the same number of delivery campaigns that we did last year. They just may be spaced differently throughout the year. That's why when we keep bringing back this seven-week comp number, we don't manage the business that way.
I know a lot of people may look at it. Obviously, we look at comp every day. We're looking at what will 12 months be. We're very confident that comp will pick up from where it is today throughout the rest of FY 2026.
Understood. Thanks, thanks, Steven. I just wanted to ask a question about slide 16, which has the restaurant economics. What I'm trying to get my head around is the growth in the AUV across the three categories and the network margin performance. Perhaps my major focus is the drive-through, but you had a very good AUV growth of 8.7%. Network restaurant margins fell by 0.6%. Yet at the other end, the other had margin expansion. Just trying to wrap my head around the different dynamics between those two restaurants.
Yeah, the key driver of the decline in the margins for our drive-throughs was the investment we made on behalf of our guests in keeping prices low and providing that exceptional value to them. We did face some short-term pressure and temporary pressure, and we absorbed that deliberately. That's the key driver there. In terms of the differing performance across the different formats, that just reflects the operational performance and performance improvements we are seeing in some of those smaller restaurants. We're pleased with that. Drive-throughs are still where the exceptional performance is being delivered. That's why we're so excited about building more drive-throughs.
Thanks, Erik.
Next, we have Declan Carroll of Wilsons Advisory. Hello, Mr. Carroll. The line has muted itself. We'll then move to the next question, which is Peter Meichelboeck of Select Equities.
Hi, guys. I just had a couple of questions on the U.S. business. Whilst I can sort of see average network sales improving in the second half, it looks to me as though they're still down significantly compared to a couple of years ago. They're at levels quite a bit lower than what you're achieving per store in Australia. I'm just wondering, even if we assume further rollout in the next few years towards the board approval table of 15 sites in the U.S., do you believe the U.S. business can produce a positive EBITDA result with the network sales at those current levels?
We are very confident that over time, as we grow our revenues, profitability will continue to improve. We expect profitability in our existing restaurants to improve this year, and we are already seeing very significant progress as sales momentum continues. In order to deliver the economics that we are targeting, which is the economics in line with our Australian restaurant performance, we need to deliver $60,000 of sales a week in our restaurants, which corresponds to AUD 3 million per year. That is the target that we have in terms of the sales growth that we are targeting in order to build profitability over time. This is the playbook we have seen in Australia over time: we grow revenue and then profitability follows. A little bit of a theme of today's call is that we are not targeting a margin outcome at current levels of sales.
We are building sales and driving revenue into our business. Of course, as sales continue to grow, we expect margins to improve. We have got to be disciplined in making sure that is coming through as we grow, but we are not targeting profitability at current levels. We expect our restaurants to continue to grow sales.
To add, in addition to that, this is exactly how we built Australia. I remember back in the day, having conversations with our incredible board, and the whole point was, let's keep investing in labor to drive revenue. I said to the team the other day about the U.S., we want to build Chick-fil-A revenues, not Taco Bell revenues. The only way you do that, obviously, through exceptional food and service, is investing in the labor in the restaurants to drive revenue. We've been running this business for over 20 years now. We know how to build profitable restaurant P&Ls and economics. The number one thing is revenue. That's why it's great to see revenue up 57% in the quarter, seeing a 2.8% comp for the quarter, followed by a 6.6% comp for the first seven weeks. We're on track. We got the team in place.
We got the culture in the restaurant better than it's been over the last five years. We're very excited for FY 2026 in the U.S.
Great, thanks. Can I just sort of follow on from that for the second question? You've spoken at some length, and it's fair enough around the proof of concept stage that the U.S. business is in. I'm just wondering, now that you're sort of a listed vehicle, et cetera, at what point does the segment move from being a proof of concept to the company then making some, presenting some, making a decision around the business and its long-term targets, et cetera? When could we expect something around that?
As we've said, our proof of concept is to open 15 restaurants in the U.S., targeting average unit volumes of AUD 3 million per restaurant. We're well on our way, obviously, to achieving that. Our focus is around our guest experience, the investment we're making in labor. As we open more restaurants, we achieve more economies of scale. We're building brand. Once we've opened up 15 restaurants and we're delivering those AUVs, we should deliver similar economics to Australia. That's where we're in a position to then really make a decision about where we go from there in the U.S. As we've said before, our board is supportive of our U.S. strategy to open 15 restaurants in the suburbs of Chicago.
Great, thank you.
Next, we have Elijah Mayr of Goldman Sachs.
Good morning, guys. Maybe just following on from the U.S. and just getting some clarity there, I guess. Post the 15 stores, if you guys have rolled out those stores and you haven't reached that AUD 3 million target, is that a catalyst for you to think about the future of the U.S. or potentially exiting the U.S.? Or is that something that's not being considered at the moment?
No, what's being considered, obviously, is the 15 stores that are approved by the board. We will be relentless in driving revenue, excellence in culinary to get us to those levels. I mean, when we get there, as Hilton just said, we're happy to have a discussion on what our plans are. We're just focused on driving, obviously, revenue through our restaurants, increasing the comps with the existing restaurants, and as Erik said earlier, having that P&L become more profitable over time.
Thank you. Maybe just back on the Australian business and on the sites in the pipeline and the restaurants, can you give a bit of color on those incremental 43 sites and the breakdown of how many are coming from existing franchisees and new franchisees? Perhaps, if you're expanding more in the regional areas or weighted more to the regional areas for that outlook in FY 2026 and those stores in the pipeline?
Yeah, so thanks for the question. As you see, we approved 43 restaurants during the past financial year. We now have 98 restaurants in the pipeline, of which 88 are drive-throughs, which obviously is in excess of the targeted 85% that we've addressed. When it comes to our restaurants in our pipeline, the way we think about it, and as we've spoken about before, is we've mapped our restaurants across Australia. Where we have existing franchisees that are expandable and that would request additional restaurants, they're obviously our focus, as well as where the pipeline restaurants are located close to our corporate restaurants. They'll be mainly corporate. From a geographic perspective, our pipeline really crosses across Australia, across all states. We've got a combination of metro sites as well as regional sites. It's really, you know, as we've said before, our target is 1,000 restaurants. We've mapped that across Australia.
We're very, very confident in our ability to continue to open our restaurants, opening 32 restaurants and building up to 40 restaurants for NMO over the next five years.
Thanks. I guess just following on, I understand the pipeline is at a point in time, but it's sort of, you know, a little bit down from the first half. You had some comments around the competition for sites unchanged. Is the quality of sites or the availability of quality sites changed in your view at all, or is that outlook sort of remaining as they're?
Yeah, absolutely. I think the important thing, and as you've seen, is our average unit volumes for our drive-throughs is AUD 6.7 million and our strips are AUD 5 million. You know, those economics are best in class in the country. There's only one brand that does higher volumes than us in drive-throughs, and that's McDonald's. Our strips are the best in the country. We continue to be able to secure those AAA sites because of our AAA revenue. We're in a position where we can pay the rent to secure those AAA sites. We recognize that there's obviously competition in the market. In a number of those situations, we have the competition coming alongside us. We're not solely on one-pad site. Obviously, where it comes to a situation where there's one site available, the likelihood is that we would get that site.
I mean, obviously, from a brand perspective, our brand continues to grow. We're the preferred partner for landlords. They have a lot of confidence around our brand. We bring a lot of traffic to our brand. Obviously, as a brand, we've got a very strong standing in the marketplace.
No problem. Thanks for the question.
Next, we have James Ferrier of Wilsons Advisory.
Good morning, team. Thanks for your time. Could I ask you about store margins, first of all? One topic we covered back at the half result was employee costs and rostering efficiency across the network, particularly the franchise community. I think you made the observation at the time that you felt there was an opportunity for some improvement there. That was one area your franchise coaches were focused on. I'm interested to hear what sort of progress and improvement has been made in that area.
Thanks, James. We continue to be very focused on efficiency in all of our restaurants. Investment into a guest experience comes first. We have very clear plans for our weekly roster goals in terms of how we build up our rosters. We've got great tools for our franchisees, as well as for our corporate restaurants, to make sure we have the right roster in place, particularly with great experienced leaders in our restaurants as well, to make sure we deliver that exceptional experience. The number one thing, again, that improves labor performance is revenue. It comes back to driving revenue through an exceptional guest experience and having the right crew in place. We will continue to realize labor productivity as we drive that sales revenue. We're very pleased with where labor is sitting at the moment across our restaurants, including our franchisee restaurants.
Maybe, James, just to add, as you'll recall, we implemented last financial year in FY 2025 and finished that implementation in FY 2026, a standardized HRIS system across the network, a standardized rostering system across the network, and a standardized payroll system across the network. Obviously, with those systems, and particularly with our rostering systems, that drives a lot of insights as a business across our corporate network, across our bands of restaurants, to be able to provide that value and that value add to our franchisees. As Erik said, our priority is around the investment, is around guest experience. For us, it's about making sure that we've got the labor there to be able to support the growth.
We've always, and from day one, as Steven said, the way this business has been built is investing in labor, making sure that we've got the labor to be able to drive the volumes. When you think about operating capacity in the restaurants, it's all about being able to serve more guests during those peak periods. Having those systems that we have, which are obviously different, we consider a major differentiator compared to a number of our competitors, provides those insights to be able to continue to add value to our business across corporate and franchise.
Yeah, I'm glad you've sort of moved on to that topic because that's essentially where my question was going. It's not so much about can you cut the overall cost of labor in the network. It's more a question of where are you at on that journey to optimize the scheduling of labor such that it facilitates a great guest experience.
Yeah, so I mean, we're well on our way on that journey. I mean, we've been doing this, as you know, for 20 years. The rostering system that we're having in place is a rostering system that we've been using in the business. It was proof of concept before we rolled it out across the network. The insights are excellent. Obviously, that is also part of what we're doing when we deliver our 24/7 playbook, where we can provide those insights to our franchisees. The other thing that we're having a very, very good look at now is with these systems and HRIS systems that we have, we have the ability to have 10-year data across our restaurants.
We can understand where there's value to be added from a 10-year perspective, because obviously, the more experienced team members you have in the businesses across peak periods, the better the results are from a guest experience perspective. I would say that from our perspective, we're kind of best in class. There's always opportunities. Every day, we know we can get better.
OK, that's good. The second question I had was, partly following on from Elijah's question there around the pipeline, you added 32 stores in terms of restaurants approved in the first half, and then for the full year, 43. Only an additional 11 made it through in the second half. I appreciate it's a journey. There are lots of different stages of that process and a rigorous process to get stores approved. I'm curious what stage of that journey you're seeing some slowdown just at this point in time to get the result we've seen in the second half?
Yeah, your point's well made. I mean, as we've said, we are very, very focused on AAA real estate. Our processes are rigorous, and we don't approve sites unless they're AAA sites and delivering on the economics that we target. As we said before, from a drive-through perspective, our target revenue numbers are AUD 6 million. From a strip perspective, it's AUD 5 million. We're targeting 30% ROIs, so we're very strict and diligent in that regard. Importantly, as we've said before, we generally like to have a 20% buffer in terms of pipeline relative to the number of restaurants that we want to open. For example, if we want to open 30 restaurants, we know that we need to have 36 in the pipeline because there can be some movement in that regard.
That being said, as you know, we have 98 restaurants approved in our pipeline, which will open over the course of the next three years, 43 approved last year. To give you an indication, we've approved eight sites in the last two months. There is timing. Things do vary depending on when deals are at. When I look at the pipeline of deals that we're working on, there's a significant pipeline. No concerns from our perspective. We're very, very confident about our ability to continue to open those restaurants at the cadence that we've set out to the markets, 32 this year, building up to 40 restaurants per annum over the next five years. We've got the best development team, in my view, in the country, run by George Mendelis. Our economics are second to none.
Our landlords are super positive about dealing with us, and we're confident about the ability to continue to build our pipeline.
Thanks. That's helpful, Carla. Appreciate your time.
Next, we have Michael Turner of RBC.
Hey, team. Thanks for taking my question. Just continuing on with the U.S., I'm kind of curious how the reception's been to the Clean as the New Healthy campaign rolling out in the U.S. I'm also interested in how those new restaurants in the U.S., how those unit economics are tracking relative to kind of the broader cohort. I'm particularly interested in the Evanston opening because it got quite a lot of attention in the 3Q.
Yeah, great question. Thanks for that, Mike. As we said earlier, we're early in the journey. Obviously, we're building brand. People love Clean as the New Healthy. We can talk all day about our food philosophy and where we think food is going. In regards to the Evanston store, it was our first university kind of opening. Obviously, that's where Northwestern University is, and there were lines around the corner. The store is obviously trading well. We're happy that school's back in session. We've done great things with the Northwestern football team, the entire student body. When we think about our stores here at University of New South Wales and Monash Universities, which are by far the number one revenue stores in those campuses, you're seeing that with these students coming in. I think they love it. There's something besides Chipotle.
Obviously, we can talk about food if you want now. We can take that offline. We're really happy seeing the progress of our Northwestern store. We just opened up a drive-in display. It's early. It just opened, obviously, just a couple of weeks ago. Like Erik said, there's a real investment in labor. The energy in our restaurants has never been better. It's just going to take time. That's Clean as the New Healthy and fast food your mom says yes to. These are all going to be big, big sort of campaigns and philosophies that GYG has always had that will drive growth. It's still early, but I'll tell you one thing, that Northwestern University store is a beauty.
Great, thank you. I know there's sort of been some changes as well regarding kind of the team and the strategy in the U.S. Are you guys quite confident now that you've got the right strategy mix and team in place to kind of succeed?
Yeah, I'll take that one. I think people sometimes forget what it takes to build brand and to build a company. It comes down to people, right? You have to have the right team, right? Everybody's got to be culturally aligned. GYG is a very values-driven business. Over the last five years, getting that team right has taken time. I can say, with hand on heart right now, we have the team in place right now. It's taken years to get right. You can see it, and you can feel the energy in the restaurants. That's why we're very excited. We've always been optimistic about the U.S. just purely based on food alone. Getting that people part right has been essential. Now we've got it right, above restaurant. You can feel what our restaurant managers in restaurants, with our cooks and our crew.
I think that's why we're excited for FY2026.
Great, thank you. One more question. I know there's been quite a few on Australia. Just one more. Just on the Australian store openings, I appreciate you're talking to no closures in FY2026. What about those transfers from franchise to corporate? Can we expect maybe sort of like five transfers or something as part of the ordinary course of business? What kind of multiples do you guys typically pay as part of those transfers? Also, just in terms of closures, in terms of the long-term outlook, I appreciate there's no closures in 2026. Do you think it's fair to assume that there could be some legacy closures over the medium term, like after FY2030, just sort of as part of the ordinary course of business?
Yeah, Michael, sure. Happy to take those. Firstly, when we think about franchisee to corporate or corporate to franchisee, we always think about who is best placed to run this restaurant. We do that when we initially allocate the restaurants, and we continue to do that as we move through the network. There have been a number of acquisitions from franchise. When we do that, we make sure that all restaurants transact at the same fair multiple. Our policy is to, assuming there's a long-term lease in place, is around that five times EBITDA. That obviously provides the franchisee or corporate with a 20% return on EBITDA. Yes, we do expect some more acquisitions. As I said, that's not a target. That just happens to be franchisees putting their hand up and saying that that's the right thing for them at the time. That deals with that question.
Your second one, if you can just remind me.
I appreciate there's no closures planned in this coming financial year. Is it reasonable to assume longer term, there might be some as part of just the ordinary course of business?
Yeah, yeah, it is reasonable to assume that because as we continue to drive our real estate strategy and we find those exceptional drive-through locations, there may be some legacy format restaurants that are no longer the best AAA site for that catchment. I want to emphasize, when we do have closures of restaurants, the AUVs of those restaurants are well below the network average. It's not really material to our overall sales profile or margin profile. Indeed, it's positive to average restaurant economics. It'll be a very small part of our overall financial performance. Okay.
Great. Thank you very much, Tim.
Hey, our last question will come from Benjamin Joseph Gilbert of Jarden.
Apologies. Sorry. Just a quick couple of county questions, Erik. Just how do we think about the share-based payments and that cash rent line moving forward? Because obviously, it both came in a little bit better versus sort of reasonable expectations.
Yeah. Share-based payments is something that reflects primarily the option plan that we've had in place for the Senior Leadership Team and the broader business. We have, in this year's REN report, provided a little bit more guidance as to how the share-based compensation will move over the next couple of years. I encourage you to look at that if you're looking at the share-based compensation over time. That being said, we've also implemented a plan that we're really proud of, which is a share issuance plan to every permanent corporate employee at GYG, including in our restaurants. We're really proud of that. We still expect share-based compensation to continue to decline, but we've provided some additional guidance in our REN report.
In terms of the difference between the impact of AASB 16, as we continue to open new restaurants, we will have a lease profile that effectively is getting longer. As a result, the difference between cash rent and the post-AASB 16 number is expected to increase a little bit. This year was AUD 4 million, the difference between the depreciation and interest expense, and our actual cash rent. It's one of the really important reasons why we look at the business from an underlying basis and exclude the impact of AASB 16 because that is the rent we pay. What the depreciation or the interest is at any one given point in time doesn't impact our restaurant economics, nor does it impact the economics of our franchisees. That's why we continue to focus on that pre-AASB 16 number. We expect that impact to increase a little bit as we go forward.
The cash rent in the segment should be, we should be thinking around sort of a % of corporate sales type measure.
Precisely. Precisely.
Yeah. Yeah. Okay. Appreciate it. Thank you.
This will conclude the Q&A session. At this time, I'd like to hand the conference back over to Mr. Marks for any closing remarks. Sir?
Appreciate you guys all for joining today's call, and I look forward to seeing you all soon.
That does conclude our conference for today. We thank you all for participating. At this time, we may disconnect the lines. Thank you. Take care, and have a great day. We will.