All right, we're all set. Good morning, everyone. Welcome to Arcos Dorados 2026 Investor Day. It's really nice to see so many familiar faces in the room. I'd also like to welcome those of you joining us via webcast. Thanks for taking the time to be with us today. Before we get started, I need to read the following safe harbor statement. Today's presentation will contain forward-looking statements, and I refer you to the forward-looking statements section of this morning's press release and the recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances. In addition to reporting financial results in accordance with generally accepted accounting principles, we report certain non-GAAP financial results.
Investors are encouraged to review the reconciliation of these non-GAAP financial results as compared with GAAP results, which can be found in the appendix section of today's presentation, as well as recent filings with the SEC. Woods Staton, our Executive Chairman, will get us started today. He'll talk about reminding us of the keys to success in the QSR industry. Luis and the rest of the team will take you through the pillars of focus that he laid out on his first call as CEO last year. We'll close by quantifying how we expect all of this to translate into long-term growth for Arcos Dorados. After that, we'll take your questions. So get ready, get set, and let's grow. Woods.
Thank you, Dan. Welcome, everybody. It is nice to see all of you here and some of the familiar faces and familiar names. Thank you all for joining us today. Today, we will take you through various aspects of the business to show you why we believe Arcos Dorados is entering a new phase of growth. Before we do that, I think it is important to remember our journey. This is a year of milestones for us. In April, we completed 15 years as a public company on the New York Stock Exchange. In August, we began the 20th year of operations of the current version of Arcos Dorados. In November, we will celebrate the 40th anniversary of the original Arcos Dorados that I opened, which was in Argentina 40 years ago, and it seems like just yesterday.
In each period, we became an integral part of the communities we serve while facing every economic, political, and social change, and there have been many. I am happy to say that we have weathered all of these changes very well. Market share for McDonald's in our markets, the brand we represent, has never been as strong as it is today in all of the 21 countries we operate in. This is thanks to great brand metrics, strong operating performance, and high customer satisfaction scores. The bottom line is we run great restaurants in our markets, be it through the front counter, drive-thru, delivery, or over the 3,000 dessert kiosks that we have. I would like to take a pause here to tell you what I think I am most proud of, our people.
We have roughly 120,000 employees in our system, and we have been selected by the Great Place To Work as the number one best place to work in both Argentina and Uruguay. We are number four in Brazil, and of all the countries in Latin America, we are number four. In other words, these are not dead-end jobs that we create. One of the main tenets I have always espoused since we opened the first restaurant almost 40 years ago, is that we build this company based on meritocracy. Each of the people you will hear from today is here based on merit. Whether they began their career somewhere else or as crew members in one of our restaurants, they are here because they have proven themselves. Each one of them has a level of operating experience and local understanding no other management team in our industry can match.
In fact, Luis here started off as a crew member in Córdoba many, many years ago, and he rose to the level where he is right now as CEO, just like his prior successor, Marcelo. We understand what good, friendly service is, what cooking up good hamburgers is all about. For us, value is a combination of great food, good prices, and especially great service on which the whole business is built. We understand the importance of running great restaurants. For restaurant guests, we are only as good as their last experience with us. This is why we place so much emphasis on being great operators every day of the week and every hour of the day, on consistently offering the best experience in the industry, bar none. When we began, the experience was almost entirely inside the four walls of our restaurants and mainly at the front counter.
Drive-thru was a novel concept with low adoption rates. Delivery was a figment of our imagination. Digital was way beyond anyone's imagination. Fast-forward a few decades, and a great experience extends far beyond the walls of our restaurants. The winning formula in today's QSR industry comes from allowing guests to choose when, where, and how to enjoy their favorite McDonald's, their menu items, and this is an omnichannel business. Today, we want to show you how we have been strategic in our approach. We have a business framework that cannot be replicated easily through our portfolio of modern restaurants, the platform of digital capabilities that we have, the high level of brand engagement, and data-driven decision-making ability. We've worked extremely hard to capture the brand opportunity while also positioning Arcos Dorados for its next phase of growth.
We've invested a lot of cash flow into expanding our footprint while also modernizing the existing restaurant portfolio. We've taken the best the McDonald's system has to offer in terms of tools and know-how, while also developing in-house solutions to meet our specific needs. I don't need to go through a list to convince you that we are living through some challenging times in the world. Fortunately, Latin America is far away from the conflicts and geopolitical events that have impacted other parts of the world.
We clearly have our own issues to deal with. We are also a major agricultural producer with robust consumer economies in all of our main markets. When I think about the three aspects of the business I just described, the best management team in the industry, a deep understanding of what it takes to run great restaurants, and a region with so much potential, I am convinced we are embarking on a new phase of profitable growth for Arcos Dorados and its shareholders. Thank you. Luis, over to you.
Thank you, Woods. Good morning, everyone. When Woods and the board trusted me to become the company's next CEO, I accepted the opportunity and told them I had one main goal in mind: creating value for our shareholders. Today, we will show you some of the key initiatives we're implementing to reach that goal. But before that, we should look at where we are today. More importantly, we need to understand that we're here by design. Each step we took over the last 20 years had a strategic purpose to consolidate our position as the best QSR operator in Latin America. Today, we're operating from a position of strength with more than 2,500 restaurants across 21 markets. We are by far the most digitalized, the most accessible, and the most engaged restaurant brand in the region.
This scale of market penetration is the door to the new chapter of growth we will share with you today. Let me provide you some perspective on what we mean when we say growth. We are part of a global system that generates ideas and tools that we can benefit from. Let me be clear about something. When we implement those ideas or put those tools to work, it will be because they make sense for our business and our region. Because at the end of the day, it is our job, it is our responsibility to increase sales, earnings, and free cash flow as sustainably and as consistently as possible. That brings me back to our goal, creating value for our shareholders and the three pillars of focus that are guiding us into the future.
As you just heard, today's business is about exceeding customer expectations in restaurants, at home, and in the digital space. It means no matter where guests choose to have McDonald's, we need to maximize the experience through menu, quality, service, and cleanliness. These are foundational elements of Arcos Dorados' next phase of growth. Tomorrow's business is about preparing to meet future guest expectations and ensuring we maintain the leadership position long into the future. You'll hear from both Santiago and Male about how we're deploying artificial intelligence and technology throughout the business to drive sales and support strategic decision-making. This is the opportunity ahead. Growing the business is about getting from today to tomorrow. Sebastian will tell you about how we are modernizing and improving all aspects of the development process to increase returns on investment and maximize future cash flow generation.
Philippe will dive into how supply chain can add value through initiatives designed to capture efficiencies and support free cash flow growth. Each of today's speakers will touch on all three pillars, but I want to emphasize that we're all focused on how we will drive the growth pillar to ensure that we increase the value of the company. This will happen through more resilient financial performance, better returns on investment, and a more sustainable level of free cash flow generation. At the end of the day, the core of the business hasn't changed that much. We sell hamburgers. We create moments. We deliver experiences. That is why we're obsessed with running great restaurants. The winning formula in our business starts inside the restaurants. If you operate well, then guest traffic will grow, sales will follow, and profitability will improve. Operational excellence is our most important strength.
But to generate value from this strength, we need to make sure the entire organization is working toward the same goal. This is where digital innovation and technology will help us leverage the operational foundation. Digital as it supports brand strength, sales growth, and guest engagement. Innovation as we develop new tools and capabilities to support the business. Technology as it impacts the entire company, helping each functional area generate efficiencies and unlock value.
Moving forward, we will continue making choices with a strategic purpose, to increase the value of Arcos Dorados. These choices will define the things we will do and those we will not do. We plan to follow what Ray Kroc used to say, that we don't know what our menu will look like in the future, but it's going to be the best-selling menu in the industry. I would add that we plan to do it better and more profitably than we do it today. With that, I will pass it to Mariano to take us through how we are positioned financially to support our growth ambition. Mariano?
Thanks, Luis. Well, good morning, everybody. It is very nice seeing you here. Thank you all for being here today with us. Over the past several years, we have transformed the scale capabilities and economics of our business. Today, I will cover three things. First, how much we have grown since 2021. Second, why we believe this growth is structural and more than just a recovery effect. Third, why our financial position gives us the capacity to keep growing. Operating in Latin America has never been easy. Volatility, inflation, and changing economic conditions are part of the reality of doing business in this region. Against that backdrop, Arcos Dorados delivered strong and consistent top-line growth. Net revenues increased from $2.7 billion in 2021 to $4.7 billion in 2025. That is 76% growth and a compounded annual growth rate above 15%.
This is a genuine business expansion rather than a post-pandemic recovery effect. By 2021, we were already operating at sales and EBITDA levels broadly in line with 2019. From that base, revenue grew in every single year of the period, mainly driven by organic growth and supported by the expansion of our restaurant base. Sales per restaurant grew 60%, with traffic per restaurant up more than 30%. This reflects our ability to attract more guests, drive higher engagement, and generate higher revenue per customer across the existing network. In a region marked by recurring economic and political volatility, consistent growth requires disciplined execution and a long-term view. These results reflect the progress we have made in building a stronger and more resilient business. What is behind that growth? We transformed the company across four dimensions. We scaled a new consumption occasion with the growth of the delivery sales channel.
Delivery expands our addressable market and leverages our existing restaurant portfolio. It allows us to reach guests at a moment when they would not have visited our restaurants, capturing occasions we were not serving before. This channel, which gained momentum during the pandemic, rose from less than 5% of sales in 2019 to 16% of system-wide sales in 2021, and it kept growing. By 2025, delivery accounted for around 20% of sales, and this year, it is closer to 22% of system-wide sales. The result is a channel that brings in more than $1 billion of mostly incremental sales to our system, and is still growing faster than nearly all other channels. We accelerated digitalization and built an omnichannel digital ecosystem that today represents 65% of system-wide sales, almost twice the level of 2021.
This creates a more convenient and personalized experience for the customer and much better data for us. Santiago and Male will talk more about that in a few minutes. We increased brand relevance. We gained four points of visit share and reinforced our leadership position in the region, and we expanded and modernized our network, adding 440 restaurants. Today, nearly 80% of the footprint is modernized. These four dimensions work together and reinforce each other. They expand our customer reach, strengthen engagement, and improve restaurant economics, creating a stronger platform for long-term growth. The business transformation, coupled with disciplined execution, also resulted in strong growth in profitability. Adjusted EBITDA more than doubled from $272 million in 2021 to $575 million in 2025, a CAGR of about 20%. To be fair, 2025 included a significant tax credit in Brazil.
Based on current analyst consensus for 2026, the CAGR for the period would still be 15% in U.S. dollars. This is an impressive rate of growth given the volatility throughout the period. Importantly, we also expanded EBITDA margin by about 2 percentage points. Even excluding one-offs, and despite the royalty step-up of almost 1 percentage point, margin expanded by 70 basis points in the period. Our EBITDA growth was driven by more than just a single factor. About 60% of the EBITDA growth came from higher sales per restaurant. Around 30% came from margin expansion, and roughly 10% from new restaurants. In other words, we increased sales, improved efficiency, and expanded the network at the same time. Again, building a stronger and more resilient business over time. Let's take a look at two important sources of margin expansion over the last few years.
First was payroll, which went from 22.5% in 2015 to 18.9% of company-operated sales in the last 12 months. That is 3.6 points of efficiency and a structural improvement in restaurant economics. This progress came from the way we manage labor and leverage technology to make better decisions every day. Now, almost all our markets work with digital labor management solutions, supported by AI forecasting tools that align staffing with projected demand. Indirectly, the modernization of the restaurant portfolio led to labor efficiencies as well, given how popular on-premise digital ordering has become. These initiatives contributed to higher productivity and a better employee experience. Evidence of this is that we continue to be recognized as a Great Place To Work across the region.
This recognition reflects the strength of our culture today and reinforces our commitment to continue fostering a culture that attracts, develops, and retains young talent across our business. Technology played an important role in expanding productivity, together with new processes, trained teams, and daily routines that changed the way we operate. These new capabilities make the improvement structural and not temporary, and this focus on structural productivity extends beyond our restaurants. The second lever for long-term margin expansion was G&A. Through disciplined cost management, we reduced G&A from 8.3% of revenues in 2015 to 6.4% in the last 12 months, again, reflecting a continuous effort to simplify processes, leverage automation and AI, and remove costs permanently. Every year, we review the P&L line by line, challenging how resources are allocated and whether they continue to support the needs of the business.
When necessary, we have the discipline to adjust the size of the organization as we did at the end of last year. The result is a company that is larger and more capable and at the same time, more efficient. The sales and EBITDA growth since 2021 was supported by significant investments in our restaurants that generated positive results. As of June 2026, we had 2,548 restaurants, 14% more than in 2021. Importantly, much of our expansion came through freestanding units, which are now 55% of the base. We also continued modernizing existing restaurants, raising the share of modernized restaurants from 36% to almost 80% since 2021. As a result, we have built a network that is larger, more modern, and better positioned to serve guests across the region. The transformation is about more than just the numbers of restaurants. Each restaurant generates more value.
Sales per restaurant increased by 73%. Guest counts per restaurant are up 33%, and EBITDA per restaurant more than doubled over the period. In other words, the restaurant footprint is both bigger and stronger. The strength of the business is reflected in both our operating results and balance sheet. Our financial strength has been validated by a full investment-grade rating from both Fitch and S&P. In turn, this supports the lowest financing cost in the company's history. Our net debt to EBITDA leverage ratio has remained between 1x and 1.2x for the last several years, a very comfortable and healthy capital structure. In other words, we have significant financial flexibility and capacity to continue funding growth without significant increasing financial leverage. The market recognizes this strength.
Our 2032 notes trade at a very tight spread of 128 basis points over U.S. Treasuries and less than 200 basis points over McDonald's bonds. This reflects the confidence investors place in our business. The balance sheet is another asset to support continued growth, giving us the flexibility to accelerate when we see a good opportunity, while maintaining a disciplined capital structure. Finally, when we look at our adjusted free cash flow since 2021, it shows our investment cycle. Between 2021 and 2023, we tripled our CapEx from $113 million to $360 million per year. That investment allowed us to accelerate openings and modernize the restaurant base. Adjusted free cash flow reflected the investment cycle, reaching almost $190 million in 2021, when investments were lower, and bottoming as investments peaked. That was the inflection point. Over the last 12 months, adjusted free cash flow recovered to $143 million.
The heaviest part of the modernization cycle is behind us, and we now have a much higher EBITDA base with a stronger structural foundation for cash generation going forward. Every member of the leadership team understands that the most effective way to increase the value of Arcos Dorados is to generate cash flow growth in a way that is more predictable and more resilient to outside factors. That is our main objective. Looking ahead, we see two complementary paths to continue creating value. One is organic growth. A larger, more capable, and modernized omnichannel ecosystem positions us to keep growing comparable sales, at least in line with inflation. It also creates opportunities to further expand margins through technology, productivity, and cost discipline. The other path to creating value is restaurant openings. We see a significant opportunity in the region, supported by a solid pipeline and a disciplined investment process.
Later on, Sebas will describe in more detail how these processes have changed and the positive results we are already seeing. The two engines reinforce one another. A larger and more productive network generates higher returns, and operational excellence gives us more capacity to reinvest cash generation. Both point to the same objective: maximizing adjusted free cash flow generation. To wrap up, over the last several years, we have demonstrated that we can grow, expand margins, generate cash, and allocate capital responsibly in one of the most complex regions in the world. This performance was grounded in a set of competitive advantages that, taken together, are very difficult to replicate. First, the scale. Our size allows us to leverage fixed costs, to negotiate more effectively with our suppliers, and to invest in capabilities that a smaller player cannot afford. Second, access to capital.
Our investment-grade profile gives us access to financing at terms that very few companies in the region can access. Third, execution. We run 21 markets with the same playbook. This allows us to transfer best practices fast and to implement complex regional projects with consistency. Fourth, our management team. This team brings significant industry and region-specific experience, which helps us successfully operate in a region with dynamic consumer economic and political environments. Finally, and most importantly, the brand. McDonald's is the most loved and recognized QSR brand in the region. It gives us relevance with consumers, it helps us attract talent, and it creates opportunities to grow across new channels and formats.
Put the five advantages together and you have a company that can grow, adapt, and execute in a dynamic region. For us, that complexity is not a constraint. It is a competitive advantage. I will turn the stage over to Santiago for a closer look at how we have strengthened the brand, gained share, and introduced new sales channels and menu items to remain at the top of the QSR industry today and into tomorrow. Santiago.
Thank you, Mariano, and good morning, everyone. I want to start by saying that McDonald's is a unique brand in Latin America because of the value proposition it offers. It represents a set of values customers highly appreciate. Clean spaces, delicious, high-quality food, a friendly staff, modern restaurants, just to name a few. It is a perfect place for families to enjoy. Since its arrival in Latin America more than 40 years ago, McDonald's connection with customers goes way beyond food. It's about memories. It's about rituals. It's about a strong cultural fit. It represents consistent quality in all aspects, and most importantly, it is within the reach of everyone. Being a place for families with high quality and affordable to everyone translates into one word that is crucial for business success in the region. That word is resilience.
When times are good, families go to McDonald's because it's an aspirational brand. When times are not as good, families go to McDonald's because it's affordable for everyone. We see the customer landscape changing at an unprecedented pace. We now compete with more categories than ever before. When families or teenagers choose where to spend their money, they now have plenty of options off and online. We know our customers are looking for personalized experiences, so one-size-fits-all marketing programs are long gone. The ability of companies to use customer data correctly to deliver such experiences is now a defining business success factor. Finally, there's a new generation powered by AI that interacts with brands in a whole new way. The attention span has been reduced to a few seconds, and the amount of information consumed is overwhelming, making it harder for brands to break through.
The QSR industry is also changing fast. There are ever-growing number of newcomers, and the usual suspects are better organized and more aggressive, using price as their key traffic driver. In short, there are more players fighting for the same wallet. This context may seem challenging. However, it also represents a set of opportunities. Our business is also changing fast. Here in this slide, the gray bars show how we served our customers back in 2019. The yellow bars show the current reality. Our digital-first thinking and early investments in digital marketing and technology gave us the leading edge in the digital arena in Latin America, making our business truly omnichannel. We know we must operate flawlessly in each of these channels, adjusting the experience to fit the expectations of each channel.
Today, we serve more than 4 million customers per day, and about 65% of them do the orders through a screen. The outcome of such interaction is a rich and broad database. More importantly, close to one-third of our sales are now identified. This means that we have access to a broad set of customer data, and we have the permission from those customers to interact with them and form a relationship. We are uniquely positioned in the food service industry in Latin America. On one side, we are the most recognized brand in the world, and being a part of the global McDonald's system gives us access to unique marketing tools and assets, such as the global sponsorship of the FIFA World Cup that we experienced a few months ago.
On the other side, Arcos Dorados is a company single-mindedly focused on one brand, giving us a local touch with menu items and with marketing programs in all countries where we operate. For example, in Brazil, customers have given the brand the nickname of Méqui. We then use that name to bring to life marketing initiatives in that country. In short, we have the efficiency of a global brand coupled with the effectiveness of a local player, all with unrivaled scale in the region. Our marketing strategy is clear and holistic. It reaches all customer touchpoints and amplifies the business through increased frequency and ticket size and attracts new customers both for the short and the long term. Every one of these five business drivers has a clear job description. Now, I will give you more detail about each one of them. Let's get into it.
Brand trust sits at the base of everything we do. After all, trust is what ensures that we have a viable business for the long term. Being a trusted family restaurant is at the core of the brand proposition. We reinforce this promise through our scale, values, and actions. One small example is a book program we executed this year through which we promote that parents read together with their children. This activity creates a strong family bond and promotes reading habits in children early in their lives. The transparency of our ingredients is another key aspect of building brand trust. Through the Puertas Abiertas program, customers are welcome to take a guided tour of our kitchen in any one of our restaurants and ask any questions they might have. On a yearly basis, more than 1 million guests visit our kitchens, making this a testament of absolute transparency.
Finally, Arcos Dorados is one of the largest youth employers in the region, and these are formal first-time jobs in a region where informality is commonplace. They learn about processes, accounting, teamwork, and many other fundamental skills. Like Woods said a few minutes ago, McDonald's is ranked the number one place to work among large companies in several countries and is among the top four in Brazil and in Latin America as a whole. Youth employment is also a commitment to diversity and inclusion. Everyone is welcome to work at Arcos Dorados. Please take a look.
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Well, let's move to our second pillar: brand affinity. This business driver is about creating a strong emotional connection with our customers. We do this by reaching out to the things they care about. When a great operation joins forces with brand affinity, you get the best customer experience in the industry. Our strategy is not to interrupt our customers while they enjoy the things they love, but rather become part of those things. Formula One is a powerful passion point for many of our customers across Latin America. This is why we became sponsors of Formula One in Latin America. Here is how we are activating this sponsorship to strengthen brand affinity with families. Please take a look.
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Very well. Our menu continues to bring new customers while enhancing quality and taste perceptions with each one of them. In recent years, we introduced across the region the new McCrispy Chicken Sandwich with strong marketing and operational support. The launch was followed by different extensions giving guests options to try and repeat this great sandwich. This action, together with our continued support behind our chicken menu icons, such as Chicken McNuggets and McChicken, has given us a seven-point share gain in recent years in this category. More importantly, McDonald's today is a top player in Latin America's QSR industry in the chicken category. The beef category is our core. Through the Best Burger program, we have enhanced the preparation of each of our iconic beef menu items, such as a Big Mac. This process enhances temperature, taste, and juiciness of these hamburgers and has received very positive customer response.
Thanks to this program, today we have a stronger beef portfolio and a stronger perception of taste and quality. Desserts represent a strong business for Arcos Dorados. Our signature ice cream cone is the most affordable way to have a McDonald's experience with amazing taste and quality. McFlurry is an indulgent proposition for those seeking to try something new or to share with friends. Our innovation pipeline in desserts never stops. This allows us to bring through our doors new customers while increasing frequency of those who already love the brand. This year, Mundialistas leveraged the global sponsorship of the FIFA World Cup. We created beef and chicken sandwiches representing some of the countries playing in the tournament, giving customers an opportunity to have a taste of the world through our menu.
In summary, it is through our menu that we are able to increase frequency of those fans of the brand while recruiting new customers with innovative menu items. Everything under a unifying message of taste and quality. Speaking of value, we have set our sights in continuing to be the value leader in the region. We want to be recognized as the brand that offers the best value for money to our guests. It is more than pricing. It is all about value. To this end, in recent years, we have invested in leading-edge research, technology, and revenue management training. Today, we can say we are making better commercial decisions based on data and achieving the right balance among affordability, traffic growth, and profitability. Most important of all, we are doing this while delivering the best customer experience in the industry.
The last pillar of our strategy is digital, with the McDonald's app as the gateway to a world of personalized offers and experiences. It is the most downloaded and used app in the region and a true competitive advantage. Earning or redeeming points, ordering ahead, getting personalized offers, participating in a promotion to win tickets to go to the World Cup final, or placing a delivery order. All of these features and more are available today only in the McDonald's app. It is through the app that we are able to grow identified sales year after year. As I said, close to 30% of all company sales are now identified. This means that we have data of millions of customers and the authorization from everyone to contact them and form a long-term relationship that enhances frequency. More data means more interaction. More interaction means more personalization.
More personalization means more loyal customers. At the heart of driving identified sales is our loyalty program. With more than 36 million members, it is by far the largest loyalty program in the region, and its performance is on par with leading markets inside the McDonald's global system. The key metrics behind our digital platform remain healthy. We are growing the number of identified customers while at the same time we are growing their average frequency. Plus, we are growing customer value over time. Growing in these three metrics is very difficult to do it simultaneously, but we have found a way to go through it. Following this five-point strategy is delivering measurable impacts. Stronger brand reputation over time. Please take a look at how consumers' opinion has changed for the better.
The green section of these bars represents the percentage of consumers with a high overall impression of the brand. Impressively, we have been able to increase the positive overall impression by 10 points since 2024. Stronger brand equity growing across different brand dimensions. One of the brand dimensions that has strengthened the most has been having great chicken products, which we see as an important growth opportunity. Value for money is an important foundational dimension of the brand. It has also strengthened significantly in the last several years. When we look at experience and taste and quality, when they come together in a family experience, parents feel good about bringing their kids to McDonald's. Stronger brand preference among consumers in the last five years. Since the second quarter of 2021, we more than doubled the brand preference gap compared with our aggregate main competitor.
A stronger market share position on a blended basis across the entire region since 2021. In that period, McDonald's brand market share expanded by more than four points on a blended basis. Importantly, this is a region-wide trend, with all our main markets gaining significant share over the last five years. The most important part to understand is that although we have made good progress as a company, there is still a long way to go and plenty of opportunities to capture. We believe that the tools and capabilities we have developed to get to where we are today are the ones needed to capture such opportunities. I will show you what I mean. Chicken continues to be the largest and fastest-growing category in the industry. We have achieved a strong position regionally, but there is still plenty of room to grow.
More importantly, there are specific countries where we face fierce competition. Having built a solid base will enable us to play more aggressive in this space. We will do so by continuing to leverage our iconic chicken offerings while introducing new experiences to customers, such as the McCrispy chicken strips, among others. Higher market share in chicken will translate into higher restaurant traffic and enhance gross margins. Crafted beverages is the next frontier when it comes to profitable growth. Arcos Dorados has all the right components to win in this space. With a strong operational fit, higher margins, and a continuous pipeline of innovation, crafted beverages will help us sustainably play harder in new customer occasions. In short, we will make McDonald's a destination for beverages in front of Gen Z customers. Finally, in the digital arena, where we have built industry-leading capabilities, we are only getting started. Why?
Because close to 70% of our sales are still not identified, meaning that there is plenty of room to grow. Each loyalty member that redeems points has a frequency five times higher than a non-redeemer. Therefore, the growth potential is very attractive, and we are only scratching the surface here. Powered by AI and our loyalty program, the McDonald's app will accelerate customer engagement and frequency while delivering a seamless digital experience for new generations. In summary, the strategy we have set for Latin America has resulted in a McDonald's brand that is stronger than ever.
Today, we have a value proposition capable of facing the volatility of this region and with a digital platform that is helping us build frequency and loyalty using customer data. The most important fact is that these achievements position us to capture new growth opportunities, such as chicken and crafted beverages. All of this would be impossible to achieve without having a leading edge in technology. So now, Male will show you how technology enhances the customer experience going forward. Now it's time to grow. Male?
Thank you, Santi. Good morning, everyone. It is nice to be with you today. So far, you have seen the results of a business that has changed significantly in the last few years. You have seen a business that has become stronger, more relevant, and better positioned for growth. Supporting the customer experience, the operational improvements, and many of the opportunities ahead is a transformation that we have been building for many years. Behind all of that, there is an integrated digital ecosystem. I will explain how we built that system, why it is difficult to replicate, and how we are using it to accelerate our next phase of growth. It is a story about competitive advantage, strategic autonomy, and value creation. Let me start with the system behind the transformation. We created value by transforming two sides of the business at the same time.
On the customer side, we moved toward a phygital omnichannel model. Leveraging our in-house capabilities, we developed our own mobile app, expanded our digital channels, and created a direct relationship with millions of customers. Every interaction improves convenience, makes the experience more relevant, and generates first-party data that helps us understand our customers better. At the same time, we transformed how we operate internally. We standardized core processes, implemented common technologies across markets, and created a single source of truth for company data. This transformation may be less visible to the customer. Yet it is what allows us to leverage our scale, improve efficiency, and make decisions with greater consistency. The real advantage comes from connecting both fronts. Digital channels create more interactions. Interactions generate more data. Data improves intelligence, and intelligence improves customer experience, business decisions, and operational execution. This is more than an isolated initiative.
It is a self-reinforcing system. Because technology, data, and operations are connected, the system becomes stronger with every interaction, creating a competitive advantage that is very difficult to replicate. The scale of our digital ecosystem is significant. Today, our unified technology and data platform supports all 21 markets. As Santiago already showed you, our loyalty program has reached an impressive scale in a very short period of time. Scale is important because of what it allows us to do. We can identify customers, learn from millions of interactions, and deploy successful capabilities across the region. AI becomes more powerful when it operates on trusted data, a large customer base, and common processes. Because we operate at this scale across 21 countries, every improvement in personalization, forecasting, inventory management, or labor planning can create profitable growth for the entire company. Scale is important because it creates value.
This advantage is the result of a long-term commitment that began before digital transformation became an urgent priority. We moved early and invested in capabilities required to lead the change. We digitized the restaurant experience, built own channels through our app and delivery ecosystem, and created direct digital relationships with millions of guests. A key milestone was the creation of the Arcos Dorados Digital Factory in 2019. That strategic decision gave us the internal capabilities to accelerate innovation, develop company-specific solutions, and scale digital transformation across all markets. We then connected ordering with restaurant operations, modernized our back-office platform, and built a unified data and loyalty foundation. We also launched our data and AI academy, because technology alone does not create value. Organizations create value when they develop the capabilities to apply technology at scale. Each stage created the foundation for the following phase.
Today, these capabilities come together in an AI-enabled operating model, already embedded across the business. Our app is at the heart of our digital ecosystem. This is an asset we own that connects engagement, e-commerce, loyalty, and data in a single platform. Today, the app has reached more than 200 million downloads and supports over 200 million transactions every year, and continues to deliver high customer satisfaction. Most importantly, it now generates almost 30% of our sales. Its strategic value goes beyond transactions. Through loyalty, mobile order and pay, and our own delivery capabilities, the app creates convenience and everyday value for our guests. The app gives us a direct relationship with millions of customers, and every interaction helps us better understand their preferences and behaviors. This intelligence allows us to create more relevant experiences and support future growth.
That is why the app is much more than a sales channel. It is an engagement platform, a data platform, and a growth platform. Our transformation has gone beyond the customer-facing experience. Behind the scenes, we have also transformed our technology foundation. In 2019, we made the decision to move from fragmentation to integration. Different markets with different systems, processes, and technologies. Today, we run on a scalable platform across all markets. We integrated restaurant technology, back-office processes, e-commerce solutions, and data and AI capabilities into a common foundation. We knew this would be strategic. It allows us to build once, adapt locally, and scale across the region. It improves efficiency, consistency, and governance. This is more than a technological accomplishment. It is a business capability that enables a unified data and AI strategy across Arcos Dorados. Our data and AI strategy is built around three value-creating priorities.
First, maintaining and strengthening our centralized data foundation. Every AI capability depends on trusted, consistent, and reliable data. This is why creating a single source of truth across all markets has been such an important achievement. It allows us to operate from a strong foundation and scale intelligence across the region, and is the base on which every other capability depends. Second, turning data into measurable business value. We do not develop technology for its own sake. We apply data and AI where they can increase revenue, improve productivity, strengthen margins, or enhance customer experience. One example is our e-commerce cross-selling engine driven by machine learning. Orders that include AI-powered recommendations generate, on average, around 30% higher tickets than orders without cross-selling. It is a simple example of how data and AI can translate directly into measurable business impact.
The important point is that all of these use cases leverage the same foundation and can scale across the platform we have built. Third, transforming how work gets done through human and AI collaboration. Through operational agents and easier access to insights, we are redesigning workflows and helping teams make better decisions, move faster, and create more value. Together, these priorities connect the foundation, the use cases, and the future operating model. That is how we turn data into a competitive advantage. Over the last decade, we have built strategic autonomy. We own critical elements of our technology. We own our data foundation, and we own the capabilities to design, build, and scale solutions across our markets. This is not about owning technology just to own it. It is about deciding where to invest, which opportunities to pursue, and how quickly we can act. Proprietary technology enables faster execution.
Proprietary data enables better decisions. Internal capabilities give us the flexibility to adapt, innovate, and scale. Our competitive advantage comes from how quickly we can generate a business impact from the things we build. Together, these capabilities make the business more responsive today and better prepared for tomorrow. With the foundation in place, innovation becomes the engine for our next phase of growth. Our approach has a dual mandate. First, and more importantly, strengthen our core business. We want to sell better, operate better, and make better decisions. To sell better, we are using AI to deliver the right offer to the right customer at the right time, moving from mass interactions to more individualized connections. We are also integrating automation into restaurant and back-office processes while expanding AI-powered analytics across the organization. Second, create new source of value.
Our scale, our data, and our direct customer relationships allow us to explore adjacent opportunities and emerging technologies. Throughout this journey, AI acts as a key multiplier of the platform we have already built. The foundation we have built allow us to continue evolving and creating new opportunities for growth. Let me show you one example of what that looks like.
[Presentation]
We have come a long way. Over the last decade, we built a self-reinforcing digital ecosystem where digital channels, data, and AI continuously strengthen one another. We created strategic autonomy by owning the technology, data, and capabilities that matter most to our future. We are turning innovation into a growth engine that strengthens our core business and creates new source of value. The results are already visible. Stronger customer engagement, greater efficiency, better decisions, and new opportunities that can scale across the platform we have built. Mariano, Santiago, and I have shown you how technology is creating value. After the break, Sebastian and Philippe will double-click on how development and supply chain are leveraging technology to drive long-term efficiencies and profitable growth. The foundation is in place. The platform is operating at scale, and we are ready for the next phase of growth. Thank you.
Okay. Let's take a 15-minute break before we start the second half of the presentation. Please be back in your seats by 10:25. Sorry. Yes, 10:25. Grab a coffee, and we'll be right back.
[Break]
Welcome back, everyone. Hope you had a chance to refill your coffees and you are ready for the second half of today's program. If you would not mind taking your seats. For an update on how we are looking to grow the business, I will invite Sebastián Magnasco, our VP of Development, up to the stage to get us started. Sebas?
Thank you, Dan. Good morning, everyone. It is nice to be with you again. Before the break, Male showed you how innovation and technology are changing the company. Development is where technology stops being software and becomes physical. Real restaurants, real corners, real capital. Three years ago, at our last investor update, I told you we would grow faster across Latin America. Today, I want to show you two things. That we delivered and, more importantly, that we rebuilt the process to invest better, to open faster, and to keep growing. Let me start with the results. In 2025, we opened 102 restaurants in 10 markets, our biggest year since the pandemic. This is a regional growth engine instead of one country carrying the rest. So far, this year, we have opened 60 restaurants.
I know you will do the math, but 60 at the end of September is a typical year. Our openings have historically been concentrated in the last quarter, and we still expect 105 - 115 restaurant openings for the full year. The count is not the headline. The headline is that every one of those restaurants was picked, sized, and approved with better information and a much sharper eye on returns. Before I tell you how we grow, let me size the opportunity. In our markets, we have about 0.4 restaurants for every 100,000 people. In the United States, it is 4.0, which is a 10 times gap. Of course, I am not going to tell you that Latin America will look like the United States someday.
Instead, I will use as a benchmark a couple of mature markets we own, Costa Rica and Panama, with similar consumers, similar daily realities at about 1.6 restaurants per 100,000 people. Apply that to Brazil, Mexico, Argentina, and Chile, and you get more than 6,000 long-term opportunities. Let me be clear, this is not guidance. This is not a calendar. It is the road ahead, and we will take it side by side at the returns we require and expect. The road is long. The real question is how you travel it with precision and discipline and, of course, less capital. Coming out of the pandemic, supply was tight, so we grew with one standard format to optimize supply chains. One design, one equipment package, one build. That was the right answer back then. Today, supply is back to normal and the world around it moved.
Costs went up, competition got tougher, customers got more selective, and AI changed how fast and how well we decide. We no longer need one standard to move fast. Now we can move fast and tailor at the same time. That is what we call precision growth. Now we are able to model demand with AI at each site, and we build the format that the demand really justifies. The idea is simple. Standardize the process and the brand standard. Tailor the asset to the site. We know opportunity itself does not create value. We have built a digital development model to convert this opportunity into value. The model is comprised of four steps. First, and most important, is site selection. Everything else literally builds from this first step. We have already mapped more than 1,800 opportunities.
AI demand gap analysis takes us from somewhere in a corridor to one specific corner. Second is accurate demand estimation. Models built on our own restaurant data give us an answer in minutes instead of days, with much better accuracy. Third, we evaluate each business case to ensure we only approve the best investments. Since November 2024, 100% of new restaurant business cases run on the digital platform. No more scattered spreadsheets. Fourth, we design each restaurant for the capacity it will really need. The value is not generated by a single tool. Opportunity is converted into value because these tools talk to each other from the first decision to the last. The clearest example is design. We no longer design restaurant for an average site. We design them for the demand we expect on that specific corner. It starts with 15-minute forecasts by channel and daypart.
Before we draw a single line, we can see where the bottlenecks will be, and just as important, where capacity would sit idle. Then we tailor the equipment, such as grills or fry stations, the whole kitchen, the footprint, and the seating. Have a look at the average freestanding footprint evolution. From 350 sq m in 2024 to 280 sq m projected for this year openings. That is 20% below the 2024 peak, and the seat mix is moving the same way. It is important to understand that this is not just a smaller restaurant. This is the right restaurant for the site. Lower CapEx, smaller footprint, same sales capacity. The same logic is changing how we build. We are moving away from separate two-dimensional plans to one digital model of the whole restaurant. Designs are ready in days instead of weeks.
We are able to catch conflicts on the screen instead of on the site. AI agents are turning our knowhow into company knowledge available to our teams the moment they need it, faster, with fewer mistakes, and much easier to scale. All of this has to show up in the economics, and it does. For 2026, the average investment per restaurant is projected to be 15%-20% lower than in 2024. First-year return on investment should improve by 3 percentage points to 5 percentage points. More restaurants, less capital per restaurant, a better return on each opening. Those three normally pull against each other. Here, they move together. These are structural wins that ensures the quality of each site for the foreseeable future.
Those savings, they come from five elements of the investment model that would change for good, including right-sizing equipment, smaller footprints, and regional sourcing, among others. A restaurant that costs less and returns more. Better returns pay for faster growth, and growth pays for the next round of investment. Another way we are managing volatility is through sourcing. We have localized 21 equipment lines, including grills, fryers, and refrigerators, and four more lines are coming by 2028. This is important when you consider that selected lines have cut unit cost by up to 60%. In Brazil, where import duties are high, 76% of the standard restaurant equipment is already sourced locally. Lower CapEx and faster execution. Before I close, let me take you into the engine room.
[Presentation]
We revealed how we develop restaurants. Three things changed, and all three are structural. The opportunity is bigger. Our brand, our scale, and our technology let us find more sites with much more precision. The cash flow is steadier. We need less capital per restaurants, and we earn more on each one. The model is ready to scale. Invest less per restaurant, open faster, turn every dollar of CapEx into more cash flow. We have the team, we have the tools, and we have more than 6,000 opportunities in front of us. Now is the time to grow. Thank you. Philippe, over to you.
Thank you. Good morning, everybody. I have been with Arcos Dorados for 16 months. My role is to elevate the maturity of supply chain management through its team, its governance, processes, and adoption of technology. We have a clear objective of driving growth, measured in terms of assured supply, profitable sales, number of restaurants, and EBITDA. All that while protecting brand reputation. Supply chain encompasses various disciplines, sourcing goods and services, planning, distribution, logistics, and finally, food safety and quality assurance. My goal today is to show you how supply chain adds value to Arcos Dorados and how critical it is to the company's profitable and resilient growth. Let us start with a snapshot of the context we work in. The supply chain team manages approximately $2.6 billion worth of spend across various categories. These categories, we have direct, which include food, beverage, and paper.
We ship around 60 million pieces of food and paper goods sourced from 480 suppliers. They flow to our restaurants through 26 distribution centers managed by our third-party distribution partners. Indirect spend includes restaurant construction services, equipment, IT, and numerous other services hired to run the company and all the restaurants. Beyond the amount of spend we manage, I think there is a really important number here that you should look at, and that is the amount of product and services that we purchase locally or regionally, and that number stands at 85%. This gives us flexibility and resilience. It is a critical element of our capacity to sustain growth with our local partners and reduce the influence of macroeconomic and geopolitical risks. Let us move on to one of the main categories, which is beef. It represents 24% of our food and paper costs.
For a total of $1.9 billion of total food and paper cost, beef is 24%. It is the number one spend item. Not surprisingly, considering it represents about 80% of our protein sales. On the other hand, chicken accounts for only 8% of the spend, while it represents around 20% of the protein sales. That is the good news, and as Santiago explained to us, we see the chicken category as an important sales growth driver in the coming years. As chicken gains a larger share of sales and the relative difference between chicken and beef prices continues to increase, there is a great opportunity to generate additional profitability. If you follow the food industry, you know there has been quite a lot of cost pressure on beef in our markets. I want to double-click on that.
The increase in Latin American beef prices has been significant over the last 24 months. There are structural issues impacting the industry in several geographies, especially in the U.S. and Europe. This leads to reduced supply, while at the same time, we have increased demand coming in from China. Brazilian beef historically has been one of, if not the least expensive in the world, but that gap with beef prices from other regions is slowly closing. In a couple of minutes, I will show you how we are reducing the impacts of volatility and prices increases. Before we go there, let us look at how beef cost increases contributed to the evolution of prices of a larger basket of goods. On this slide, we are comparing the variation of an index representing market inflation on a basket of the main food and paper ingredients we purchase.
That's the top line on the graph. The line on the bottom shows how Arcos Dorados' actual inflation varied for the same basket of food and paper ingredients. As you can see over the course of the last seven years, a period that includes the recent cost pressure on beef, we've been successful in managing our costs well below the accumulated inflation index. Just as importantly, while the inflation index has been relatively volatile over the period, we managed to reduce significantly the volatility of our input costs. We did this through the relationships, agreements, and pricing protocols we have in place with our suppliers. This is the positive impact of the McDonald's system's famous three-legged stool.
However, the market conditions and the business assumptions have changed greatly over the past several years, this is why we need to take a fresh look at the maturity of our supply chain operations and promote change for growth. Now we've looked at the context we operate in. Let me show you how we're working on to generate value and accelerate profitable growth. We've organized our value creation and protection activities in five main pillars. We have growth, resilience, margin improvement, digital transformation, and lastly, sustainability and compliance. It will be critical for supply chain to perform at a very high level if we're to promote growth via sales and restaurant openings. Product availability, obviously, is a cornerstone of customer satisfaction, and we ensure that availability through innovation, product development, and very well-managed supply operations.
You'll imagine that getting the same ingredient to more than 2,500 restaurants on the same day of a new product launch in 21 markets requires outstanding planning and execution. Out of those five, I'll drill down on three where we think we have the greatest opportunity to drive incremental growth and profitability. Let's start with resilience. You've probably heard this word resilience quite often for this industry since the COVID pandemic. Supply chains have had to adapt from just in time to just in case, and seeking maximum efficiency in cost to maximum product availability with highly shifting demand patterns. Resilience is our capacity to withstand headwinds and disruptions. Inflation, currency fluctuations, tariffs, geopolitical tensions disrupt trade, and increase sourcing uncertainty. The costs of oil, gas, and fertilizers will be impacted for months after potential recovery once the current conflicts are over.
Volatile prices of proteins, packaging, and energy inputs do challenge our cost predictability and management. Lastly, climate adds pressure on water availability and soil health, sorry. We focus on what we can control, and our resilience comes from long-term relationships with key partners, as I said before. Importantly, most of these relationships span a strong local and regional network of suppliers and production facilities. This is one of the advantages of operating in Latin America. Given the strength of the region's agricultural production, we're much less subject to global supply bottlenecks and disruptions compared with other regions of the world. Another significant opportunity within supply chain is to contribute to margin improvement. Obviously, reducing the cost of everything we do is at the heart of what supply chain does day in, day out.
A very disciplined category management platform, coupled with a very robust supply relationship management program, allows us to constantly challenge the assumptions we work with. So whether it is from raw material, production methods, logistics, packaging, and other cost parameters. We have a small group of regional category experts. They identify opportunities and offer a portfolio of initiatives to the market leaders for them to implement locally. Even though we are very proud of the work we have done to manage the cost and volatility of our basket of goods, we believe there are still more opportunities to improve here and where we source our food and paper. This productivity happens in an environment with more ESG requirements and regulations, such as on beef, on farming practices, packaging, and energy. Then finally, we believe the digital transformation will support significant value creation through our supply chain.
Together with Male, we are building the technology ecosystem that enhances our capacity to anticipate, give us access to more reliable data, and reduce inefficiencies. We have already seen productivity gains by using AI in sourcing events. We will soon deploy a new maintenance, repair, and operations platform. We expect it to reduce cost, enhance service levels, and provide better oversight practices as well as on supply performance. We anticipate considerable gains in planning accuracy that I will talk about in the next section. Now that we have seen the five main pillars, I want to give you a taste of some of the core value-adding initiatives for the next three to five years. We know we have to focus on beef, risk management, planning, and last-mile distribution to the restaurants. These will deliver savings, cost avoidance, resiliency, and ultimately, shareholder value.
I will address beef and planning and distribution in more detail. We talked about beef earlier and how it represents about 24% of our total food and paper spend, and how its costs have increased over the past two years. This is a category that we focus on constantly to protect sales and the bottom line. We protect raw material availability by constantly developing a sourcing network. We source mainly within Latin America. This allows us to adapt the routing of both raw material and finished products between the markets based on the most efficient regulatory and foreign trade conditions that we have in the region. We have longstanding pricing protocols and commercial agreements in place with our main vendors. This, combined with hedging practices on both sides of the relationships, provides predictability and reduces volatility of our input costs.
To do all this, again, we rely on our highly qualified vendors and share best practices with the global McDonald's ecosystem. I will address initiatives three and four as together they will transform the way we plan and serve the restaurants. This is probably the largest value creation initiatives in supply chain for the next three to five years. The planning component is enabled by data and technology using a demand signal from the restaurant and multiple sales parameters to project future demand. The information will be shared across the whole supply network end to end, allowing us to ensure supply with high precision, low inventory levels, low replenishment costs, and improving working capital. Automation allows us to completely eliminate the restaurant ordering process. In parallel, we are piloting several operational improvements to reduce friction during the distribution process.
The goal is to replenish restaurants in a completely transparent way, avoiding disruption to restaurant operations, eliminating the use of restaurant crew to stock the goods, and reducing the delivery lead time. Ultimately, all these operational enhancements increase distribution and restaurant productivity, and reduce cost. As we couple both planning and operational improvements, we will transform the distribution dynamics, increase replenishment accuracy, and reduce cost. Now I will wrap up with some key performance indicators that supply chain tracks that we track internally for value creation and protection, which I think should be particularly interesting to this group. They bring us back to those five pillars of value creation and protection that I talked about before: resiliency, profitability, digital transformation, sustainability, and compliance, all that to serve growth. Number one, obviously, is EBITDA contribution that we funnel by providing margin expansion and cost competitiveness.
The second one is inflation mitigation. We protect ourselves against commodity cost, inflation, foreign exchange, labor, and logistics volatility. The third one is product availability that delivers revenue protection and customer experience. Number four, working capital efficiency, enhancing cash generation and capital productivity. The last one, resiliency and sustainability. This obviously reduces earnings volatility while operating responsibly with all the stakeholders. We obviously manage a pretty big slice of the pie, which is why I am convinced we will be able to balance cost and resilience using technology as an enabler to generate and protect value for Arcos Dorados. Now is the time to grow. Thank you very much.
We are back. Before we open the floor for questions, Luis and I want to leave you with some final thoughts. Our value creation framework is built around four metrics: comparable sales growth, EBITDA evolution and margin, return on investment, and adjusted free cash flow. Together, these metrics balance growth, profitability, capital discipline, and cash generation. Comparable sales growth keeps us relevant with the customer and supports market share. EBITDA evolution and margin ensure the growth translates into earnings. Return on investment keeps capital allocation disciplined, and adjusted free cash flow keeps the organization focused on converting results into shareholder value. Just as important, they are also the metrics behind our management incentives. In other words, we measure our performance based on shareholder value creation. Luis.
Thanks, Mariano. Based on these building blocks for value creation, I will close by putting our long-term ambition into numbers. As you already know, every year we provide guidance for restaurant openings and total CapEx. To recap 2026 guidance, we expect 105- 115 restaurant openings and $275 million - 325 million of total CapEx. Our longer-term ambition from 2027 through 2030 is for 550 - 600 cumulative openings in the period, included in a total CapEx plan of $1.3 billion - $1.5 billion. In other words, we plan to open more restaurants each year without significantly increasing the average total CapEx. We will prioritize the higher return investments to capture maximum benefit from the processes Sebastián presented today. If needed, we will adjust the course based on market conditions.
Today, we also told you about how we're applying technology and AI across the entire company, which we expect to drive better sales growth and generate more efficiencies that will lead to improved operating margins. With that in mind, we're also introducing a long-term growth algorithm for total revenue and adjusted EBITDA. This ambition is for an average growth rate trend over the long term and not specific guidance for any single year. We believe we have planned an ambitious but achievable level of growth for the next several years. For total revenue, we are targeting growth in the mid to high single digits, supported by both organic comp sales growth and new restaurant openings. For adjusted EBITDA, we're targeting some additional margin gains that leverage revenue growth. I'm sorry. Can you go back a little bit?
Okay.
Pardon me. That leverage revenue growth to deliver high single to low double-digit growth. As you've heard several times today, now is the time to grow. I'll turn it over to Dan so we can take your questions.
Thanks. We're going to get started with the Q and A session, as soon as we get some chairs set up here in the front. We'll also have a couple of microphones here in the room for those of you that are with us. Please raise your hand, we'll bring you a microphone. Before asking your question, please state your name and the firm you're with. For today's webcast participants, you may submit your questions at any time during the presentation or now, using the Ask a Question box directly below the broadcast screen. Type your question, then click Submit.
We would also appreciate your feedback on today's event through a brief survey available for the webcast participants by clicking the Resources tab at the top of the screen. In-person attendees, there should be a QR code on your table that you can scan, and we're passing out a printed handout as well. The presentation we went through today will be available on the investor relations website later today. Bear with us for a second. We'll set up the chairs and we'll get started with Q and A. All right, so who wants to get us started?
Hey, good morning, everybody. My name is Robert Ford. I am with, excuse me, Bank of America Merrill Lynch. Thank you very much for the presentation and the opportunity to ask questions. With respect to the expansion, Luis mentioned there is an ability to adjust. What is the current agreement under the MFA with McDonald's, and how quickly can you adjust if there is an unforeseen deceleration in the economy?
Of course, we do have a commitment and we have an agreement with them. The relationship is very strong, and we can sit at the table and conversate and have the right conversation if we need to adjust. As we did in the past, we have done that, if you remember, Bob, thank you for the question, that during 2015 - 2017, we sat with them and we had the right conversation. They understood, and we had the chance to reduce the pace of our expansion. We had an agreement with the growth support, for example, until 2024. Those are the examples of that we can really sit with them because the relationship is as partners, as business partners.
Thank you. How are you thinking about the geographic balance of new store openings?
As we have done in the past, for us, we have four to five main markets. 60% of the expansion is going to go to Brazil. Then we have Mexico, Argentina, and Chile. Colombia is starting to be a good opportunity market for us, but I would say that t hose are, that's going to be the balance.
Okay. Thank you very much.
Thank you.
Thank you. Thank you for the opportunity to take questions. Froylan Mendez from JP Morgan. Very interesting chart about how chicken can be a game changer on the gross margin and on sales. My question is, what needs to happen for chicken to even get a more relevant part of the pie, and how does that convey with the overall McDonald's strategy? Is there any specific challenge in the region to have chicken being more important for the belly of the Latin Americans?
Yes.
Right. Thank you. Santi.
Yes. Thank you, Froylan, for the question. Absolutely, chicken is a big growth opportunity for us. We have grown, as you saw, the share in the chicken category significantly over the last five years. We have introduced successfully different products that have made a difference in that category. We have grown our market share in chicken particular more than five points. Today, we are one of the market leaders in the region in the chicken category. We know that the category is growing fast because the category is large, so we need to keep innovating and bringing new experiences to customers. We are currently focused on continuing to push forward our iconic chicken products such as McNuggets, such as McChicken. We are introducing new products to complement our current offering.
One of them is the chicken strips that help us get into new consumption occasions and into the shareable space, which is very important for the chicken category. As of challenges, of course, the chicken category behaves in different ways across the region. We have a very strong position in the south of the region. In the north, the situation is different. We have very strong competitors. I would say one of the challenges is to face strong competitors that have consolidated in the north part of the region, like Mexico, Central America, et cetera.
As a follow-up, do you sense like when you listen to McDonald's, part of the challenge on gaining or on winning the chicken battle is the fact that many of the specialized chicken players use fresh chicken, right? That brings the challenge at the equipment, at the kitchen, at the delivery times, and your products traditionally have been more frozen and cooked at the moment. What is the operational challenge to change that? On top of that, what is your view that chicken could represent as a percentage of sales, let us say, in the next five years?
Luis.
The good news is that we already have bone-in chicken in some of our markets, where it does make sense. It is not new for us. It is more complex at the kitchen level, but it is doable and we have bone-in chicken in Peru, we have bone-in chicken in Costa Rica and Panama and in Trinidad. We are going to apply that category of product if it makes sense for the business. It is going to be part of. Today, we think that the main opportunity in those markets and across the region has to do with the chicken sandwich, McCrispy, strips, nuggets, maybe wraps, for example. All right?
The size of the chicken that can reach your sales?
The size of the chicken that can reach. What is the question?
The size of the chicken can represent of your sales in the next five years. Do you have an ambition with that?
Yeah. The improvement in percentage points was like eight in the last eight years, from 12% to 20% overall, and we think that we can double down on that. The ambition is to go up to, I don't know, 25 points. All right? That is the ambition due to the profit that can bring in the category.
Thank you very much.
If I may, but it depends a lot on the country. You have countries like Peru, Ecuador, where it's huge, Mexico as well. Others, like Argentina and Brazil, where chicken consumption is a lot lower. It also has to do with that, how we can penetrate and how strong our brand is. But it also has to do with bone-in chicken versus the sandwiches. We're having a lot of traction with our sandwiches as well. Bone-in is much more complicated because you have the, as you mentioned, the whole refrigeration thing. So it's a different beast.
Thank you very much.
Good morning, everyone. This is Thiago from Goldman Sachs. Thanks for the presentation. I have two questions. The first one, sorry if I'm trying to be too simplistic, but I think the debate everyone is asking today is how to balance growth with free cash flow generation, right? The title of your event is about growth. It's time to grow. It's not it's time for free cash flow generation, right?
Absolutely, there are a lot of initiatives to protect that. I think Mariano, you mentioned earlier in your comments that so far from your EBITDA growth, it's like 10% is from new openings, then the rest is from organic sales and margin improvements. When I compare your guidance, you are talking about mid to high single digit same stores. Well, mid to high single digit same sales growth versus 5% store openings, store growth, right?
It really seems the dynamics and the drivers of your future growth are changing. Does it mean we should go through cycles of CapEx investments, and at some point over the next 10 years, free cash flow could converge back to zero, how to think about the growth investment plan over the next 10- 15 years. On top of this, if we're focusing that much on free cash flow, what are the usages that we should expect from this excess cash? Thank you.
Perfect.
That's a long question. Do you want to start? Sorry.
Yeah, of course, I'll start. Thiago, thank you very much for the question. When I mentioned how Arcos' numbers were in the last five years, what we can see for the next years, and this was part of the message I try to give, is that in terms of EBITDA, we are doing, of course, everything possible to grow our EBITDA. It will grow because our sales will grow, because our margins will grow. I didn't mention in the presentation, but also part of the increase and the enhancement in free cash flow comes from a lot of focus in terms of working capital, how we work, how we extend payments with suppliers, how we try to manage inventories in the restaurant and distribution centers, how we try to shorten the collection periods using as well new technologies.
We are doing a lot in terms of EBITDA, and here I am talking about the organic part of the business. EBITDA by growing sales and improving margins, and on top of that, cash flow generated by working capital initiatives. That is bringing cash to the business. In terms of CapEx, we gave the guidance that we are going to, if you do the math, $550 million-$600 million in four years. We are going to increase slightly the pace of openings in the coming years. We are increasing openings, but we also mentioned that we will decrease the investment in modernizations because we did a relevant catch up in the past. On top of that, we invested a lot in recent years in technology. The CapEx allocated to technology also will be lower, or we expect it to be lower in the next years.
If you do all that math, what we are seeing is that the improvements in free cash flow that you have seen since 2023, we expect them to continue in the next year. The company will generate cash. If you consider, and that is the second part of the question, if you consider how we allocate our cash, and that is even before free cash flow, because we have our EBITDA, we have operational cash flow. Our first priority is to grow, and we think there is a lot of value that we can add to the company by increasing the number of stores. There are many opportunities, and by having good returns, that is a way that we can increase value to shareholders. That is the first way.
Then, with the free cash flow, we have been paying dividends, a very solid dividend policy and the company has a very good dividend yield. Of course, we have debt. Our balance sheet is very strong, but we need to pay our interest that are excluded from that free cash flow figure. On top of that, then there are different alternatives to use the free cash flow. Either if and only if the possibilities in terms of openings are higher, we can do it.
There are other alternatives. You have dividends, you have share buybacks, all the alternatives that are on the table, and eventually we will decide. We are not there yet. We are building our free cash flow. We are implementing our CapEx growth program, and we are paying dividends. Right now we are very comfortable with our capital structure, how we are allocating cash in the company, and very excited for the opportunities for growth in the coming years.
If I may, a question for you, Woods. Yeah. As the controlling shareholder of the company, how do you evaluate the different return profiles and payback periods between opening a new store or buying back your own shares of a company that is already established? You don't incur the risk of operating new stores. How do you balance this type of allocation?
That's a very good question. The investment that we've done in real estate and in buildings has now reached sort of a plateau. That'll increase a little bit, but I don't think it'll ever get much higher than it is today because there's a rhythm to site selection, and if you go too fast, you start choosing wrong sites, and there's no amount of marketing that'll ever fix that.
We want to avoid that. I think you mentioned technology. We've also done a lot of investment in technology, and there's just so much more than we can do. But there's still a lot of investment necessary there. There's going to be a lot of free cash flow. I don't have the answer for you, but I will say one thing. It'll be in the best interest of the shareholders, and it'll create the best value for you all and for us.
Yes, sir. Thank you very much.
Thank you, gentlemen, for the ladies first. I appreciate. Julia Rizzo from Morgan Stanley. Thank you for the presentation. I think I would like to follow up three things, if that's possible. One, it's on the McDonald's or the parent company Investor Day. They announced the big support for its brand and franchisees across the board. How that affects Arcos. What can we expect from that relationship coming to Arcos Dorados and its shareholders?
The other thing that I was curious about the voice orders. That's very exciting. What is the plan of launching, and do you have it already available in Portuguese and in Spanish? That probably will bring a lot of experiment for the stores and traffic. I hope so with experience. So launch and when. And on the beverages as well, and the menu, if I could. That's the last one, I promise. We saw a lot of effort across the globe in trying to adapt the menu for the new requirements of GLP-1, looking for macros, proteins, and the dietary that changed everyone. How are you seeing that adaptation to the region? How are you guys doing to plan the menu and when, if that's going to happen? Thank you.
All right. You want to take the first one? Well, what I can tell you, I can explain. We are an independent development licensee, taking to the first question regarding that one. Everything that McDonald's presented last week is more focused in the U.S. market and IOM markets. Those are International Operated Markets. Those are France, Italy, Spain, Germany, Australia, and Canada. We do not apply to the support that McDonald's is offering for their franchisees, but it is regarding mainly those markets. They talked about several elements of their plan: hospitality, technology, new designs, and new categories. Having said that, the good news is that we are already very advanced in many of those elements. You heard from Male about technology, for example. You heard from Santiago about chicken and beverage. We already have, as I said, boneless chicken in several of our markets. Hospitality.
Always has been an obsession for us. Service, and since 2016, we implemented a program that was called Culture of Service, that is today benchmark for other markets. Today, I would say that is part of our culture. If we work with the environment, if you have happy crew and managers, you will have a good service for our customers. Then the new designs. We are going to invest in those elements, as I said at the beginning, if they make sense for our business. The second part, I think Male you can take.
Yeah.
Male, you want it.
Yeah. Thank you, Julia, for the question. We are very happy about the development of voice ordering. We really believe it is going to create more convenience for the customers that use the app, and especially if you think about drive-thru. How you could order through the app, without having to digit the order. We are the first market. Argentina is deployed already since two weeks ago.
We have it in English, Spanish, and Portuguese. We are really thinking that this is going to. It just launched, so I do not have any numbers yet, but I really believe it is going to help customers have more convenience. The idea is once that we, as we do everything with the technologies, we test them, see how it works, address whatever details we need to address after the pilot, and then we will scale to the rest of the markets. Because as I said, we have the same platform, so it is just plug and play for the rest to put it. That is basically where we are today.
Let me take the question on GLP-1. Certainly, GLP-1 is in Latin America and is present. However, there are two factors that are unique to the region and to our business. The number one is that the penetration of those products in the region is not as high as in other parts of the world. Part of the reason of that is that the price point compared to the medium income is very high. It is very highest price points. Not all households have access to those products as of now. So it is expensive. The penetration is not as high. Second, if we see the frequency of consumption, at McDonald's is at a point where customers come to McDonald's for indulgence, for an indulgent experience. Again, we do not see the impact of those products, at least in the long term.
For those two factors, we are not seeing a change in behavior, in consumption, in the short term. Now, at the same time, we are looking at what is happening in other parts of the world. The good news is that we have a very high, very rich in protein menu. We have beef. We have chicken. We have fish. We have egg. Those products are easily adaptable to a high protein menu. When the time comes, I am learning from other parts of the world, we will be able to offer customers such products in a very short period of time. So we can react very quickly when the time comes. We do not see it in the short term. Thank you.
Hello, I am Matthew Collin from American Capital Advisory. Also just wanted to thank you for taking the time to speak with us today. Just a fun comment to start. Whenever I listen to you guys or talk to Dan, who has done a great job, I always want to have a hot fudge sundae afterwards. So a hot fudge sundae just kind of popped into my mind. So you are doing a good job there. Two questions. The first one, just maybe for Mariano, kind of digging deeper on what you said before. I think a lot of us have probably been very pleased with sort of the growth in free cash flow this year, and at least for myself, I am somewhat trying to figure out with this greater number of CapEx, can we still continue to grow free cash flow pretty rapidly with EBITDA growth?
Working capital in the past, I think you've been negative working capital. That amount has shrunk. Just how does that change with this higher free cash flow? If you can confirm that we can sort of grow free cash flow in this greater CapEx environment, that would be very helpful for me. Secondly, maybe an update just generally on kind of new store returns. What are the kind of returns we expect? I've always sort of thought of a mid-20s type return. If we can talk about that with the lower capital base, hopefully it's going up, and also how that varies by geography. Does hurdle rate go into your kind of CapEx plans? I thought those development videos were extremely helpful on that. Thank you.
Perfect. Thanks for the question. I'll start. Yes, in regards of how we envision the next years, we envision an EBITDA growth and to continue doing enhancements on operational cash flow by improving our working capital. If you check in the last years how the cash conversion from EBITDA to operational cash flow has been really great, and we expect that to continue in the following years. We are doing, and I mentioned that in the last earnings calls, a lot of improvements as well on tax payments on our ETR, and that we expect, plus the one-off that we mentioned last year from Brazil, that is going to bring additional cash to the company in the next years. So we are expecting that the operational cash flow will grow sufficiently enough to continue generating free cash flow, even though the number of openings will grow in the next years.
Also taking into consideration what I mentioned about other parts of our CapEx, total CapEx, going down. So modernizations and digital investment in digital will probably go down. Not only go down, but also more efficient. We are doing a lot of work, and Sebas mentioned that in his presentation, in reducing our CapEx, not by reducing the number of initiatives, but making each initiative more efficient. Like for example, localizing purchases in each country for local equipment, by doing right sizing for restaurants. There are initiatives to improve our operating cash flow, and there are a lot of initiatives to reduce and make more efficient our total CapEx. Between both of them, we envision and we forecast or we expect, let's put it that way, that our free cash flow will continue to be solid in the coming years.
Having said that, remember that in 2027 we have the initial fee that we need to pay according to the MFA, as we announced. That will be roughly $30 million. That it's going to be a one-off. Actually, not a one-off. It will be the second one 10 years from now in 2037. That will be something exceptional for next year. But having said that, even with that number, we expect our free cash flow to be, of course, largely positive and a very good number we expect for 2027 as well.
If you let me, Mariano, let me add something because this is strategic for us. Like I said, our main goal is to increase the value of the company, and one of the main drivers is free cash flow, generating free cash flow. Today, the biggest opportunity that we have is returns. Okay? We have two levers. One is we're going to target the sales that you already heard about, and we still have opportunities to gain margins in the organic part of the business.
In organic part of the business, and this is our biggest obsession, is to get the returns that we need to get that cash flow that generates that virtual circle to keep on investing, or my main responsibility also is to put the free cash flow on the table of the board so they can take the decisions that we need. Sebas, can you double click on the returns and-
Yeah
If you can explain a little bit.
Usually, we always said we aim for around 20% of return on investment for the first year and cash on cash. Of course, we work with different or with adjusted risk returns based on country risk. At the end, when you add up all the countries and the country mix, we aim for 20%. So far, we've been able to achieve that number in the last years. With the reduced investment, which is a huge effort because, as you know, cost and inflation and construction cost has been rising, so the actual savings is much more than what I presented. What I presented is the offset that we've been able to do to those costs. So we expect, as I shared, a 3 percentage point to 5 percentage point of increase in return on investment at that aggregated level, of course.
Before we take the next question in the room, want to take a couple of questions that came in through the webcast, if you don't mind. One is from Eric Huang of Santander. Eric asks,
"Over the past few years, the company has been able to optimize significantly its payroll costs. Given the labor reforms in both Brazil and Mexico over the next few years, how does Arcos expect to offset the potential impacts from lower working hours? What should be the main levers for profitability going forward when we look into this line?
Okay. Want to talk?
Okay. Thanks, Eric, for the question. Well, as I explained, we are very pleased with the improvements we obtained in the payroll line in the last years, more than 3 percentage points. We reduced the payroll cost by more than 3 percentage points with a set of different initiatives, technology and scaling and staffing properly at the restaurant level. Do we think that we are at the optimal level? No. We can still improve that line by using better technology as AI tools become better and much more accurate. It's amazing that each restaurant has its own demand in terms of sales, and they need to adjust to the crew level according to that, and that will depend on many factors, like weather. In some stores, when it rains, the traffic increases. In some stores, when it rains, traffic decreases.
By having forecasting tools that allow you to predict the weather, to predict different things that are going on around the restaurant, will allow us to staff the restaurant properly. By staffing the restaurant properly, you can have enormous savings because it's as bad to have more people in the restaurant for your sales as to have less people in the restaurant when a lot of people are coming to the restaurant. We are still seeing a lot of opportunities to improve our payroll cost, always keeping in mind what we mentioned about taking care of our employees and making work in an Arcos restaurant, in a McDonald's store, something amazing for our people.
That's, I think. We are very, very proud of having the prizes of Great Place To Work in many of the markets where we operate. Those are the things that, Eric, we are going to continue doing in order to overcome and try to compensate some of the costs related to labor reforms in our main markets. We already had several labor reforms in other markets and the payroll line continued to drop although those. Sorry, Woods.
No, I was just going to add exactly what you were saying, but also there's another element, which is the turnover rate. As turnover rates come down, productivity goes up, and we've seen turnover rates of our crew coming down over the years. That's a way of mitigating these labor laws. You put more people also in because we have flexible hours. Working 44 hours or 40 hours in a week doesn't really impact us that much for the crew. Then just another thing on the returns on real estate to the prior question. The return on new restaurants is 20. The return on re-imaging is a lot lower, four or five. As you've seen, there's a swing going more toward new restaurants versus doing other ones. That's going to help in the return.
Perfect. There was a second part of the question.
There's another question from another investor. Max Joseph asks that we've highlighted beverages as a significant opportunity for Arcos Dorados, and we've seen McCafé growth accelerate meaningfully over the past few years. Could you talk about what you're seeing in the beverage business today? What's driving the acceleration in McCafé? As you think about expanding further across the existing restaurant base, how are you thinking about the economics and returns of those investments in beverages?
Yes, thank you. Thank you for the question. Beverages is a great opportunity for us. Number one, because it is a new consumption occasion. It is highly incremental for our business. Second, it has a very good operational fit with our current operations at the restaurant, so we can produce them with very high quality and with the service times that customers are expecting. Number three, they have attractive margins.
They are incremental and also they help us with our margins moving forward. It is a very good opportunity for us. Lastly, this is a category that faces Gen Z customers, so young customers, younger customers. This also helps us reach out to these younger generations and get them to come to McDonald's more often. Regarding coffee for McCafé, the new beverages also include coffee-based beverages so that the coffee category that we have today has been growing consistently over the last few years, will also benefit from a strong move into crafted beverages, which is the category we are talking about. Thank you.
Great. Thanks, Santi. Maybe move back to the room here for a second.
Hey, thanks. Greg Francfort from Guggenheim. I had two questions. The first one was, you guys have gone through a remodel cycle five years more recently than McDonald's has in the U.S., but they presented a lot of elements of this next plan. I am curious, and you guys are pushing into chicken and beverages, a lot of things similar to what they are doing there. What elements of that plan are you trying to incorporate maybe into your new restaurants, even if you are not going to go through a remodel cycle, that you think might maybe impact the business in Latin America? What aspects are not necessarily relevant to Latin America? Then I have a second question.
Do you want to go, Sebastian, please?
What McDonald's presented as the phase chapter of Next is a new design, both for the exterior of the building and for the interior, as well as a lot of kitchen improvements in terms of layouts and equipment. If you compare that with the traditional McDonald's buildings in the U.S., that's a whole reinvestment, almost a rebuild. That's related to the numbers they presented last week. When you compare that with what we currently have at Arcos Dorados, we have a much more modern restaurant base because when we received the company back in 2007, I always remember this number, 97% of the restaurant base was legacy, the old Mansard Roof. We've been doing a huge catch-up. Our restaurant base is much more modern than the rest of the world, not only in terms of image, but also in terms of kitchen equipment.
We migrated almost all our stores to the previous platform that was called, and probably you recall, Experience of the Future. I would say most of our kitchen are already ready for what's coming with Next. Talking about the interior of the core, what we've seen so far, and we've been able to have a quick glance of the new material in the course of the last convention, it seems to be a smaller investment in comparison to what we are currently doing.
Just to give you a quick example, now we have 15 different decor packages to use at our restaurants. The evolution that McDonald's did with Next, they have just one decor package with four different color palettes. That really allows us to lower the investment. McDonald's is not thinking in a retrofit to the existing restaurant base. The idea is just to keep with the same reimage cycle that we have in the past, but using the new decor. Just to start, we don't have to do a catch-up because we've been doing it during the last 20 years. What we still have to evaluate is the exterior image, which is really new.
We don't have the numbers yet. I have a couple of questions with McDonald's worldwide design. They are currently bidding those, and they are expecting to get good prices because they will do for the first time a worldwide bidding process. Their expectation is that that building model would not cost more than what actually costs now. For us, it would not imply any increase in CapEx because we will just add to our reimaging cycle with the same or lower cost, and we do not need to do any big change inside our kitchens.
Thanks for all that detail. My second question was just this data and digital evolution. I think 65% of your business is now digital, but you are getting maybe around 30%, you are actually able to identify the customer. How do you get that number higher, maybe that latter number? Does it need to be higher to really cause a big inflection in terms of your ability to go really personal? Are we maybe past that threshold where you get a big kind of kick from the ability to process a lot of that data and make big changes with it? Thanks.
Yes. Thank you. Thank you, Greg, for the question. It is a great point. Yes, identified sales is what makes the digital platform work and have greater impact in the business. You are correct. As you saw from the presentation, we have been growing the percentage of identified sales year- over- year. Actually this year, you will see that we are increasing the momentum, and we are going to reach practically 30% by the end of this year. There is still a lot to capture. We are only getting started here. There are a few strategies that we are following to increase that and increase the momentum in how we get behind identified sales. The first one is the loyalty program. The loyalty program is the one tool that helps us engage with customers, both to get more points into your account and to redeem points for products.
In loyalty, yes, the program has 36 million members, but still has a ton of potential, especially in redemption. We are going to accelerate that part of the program and a higher activity loyalty program will enhance rapidly identified sales. Another example, I want Male to jump in, and she should tell us a little bit about agentic promotions which fits right in with this question.
Well, basically, one of the key things about the customers having the app is that we have their data. Specifically, what is it that they purchase? What is the frequency? So with that information, as you saw, we have tons of data of the customers that are in that base. We want to hit the opportunity of being much better in what is the offer that we give to each customer, which is going to help us even more increase the usage of the app. We are working with an AI development to give each customer the right offer with the right product at the correct time, so that this is going to help us catch more customers going forward. This is going to be happening before the year ends in one of our markets. We are really willing to push forward even more identifiable sales, using data.
Hi. Thank you for the event. Alvaro Garcia from BTG Pactual. You mentioned the strategic autonomy of IT, which I thought was interesting. I have two questions on that front. One, how do you think of discounts going forward? You obviously do not want to get caught up in a spiral of discounts, and I think you have done a good job over this past year of trying to wean off of that, but I would be interested in your view on that going forward. Then how do you think of monetizing the platform? You have obviously gone through this investment cycle. To what degree can you monetize those digital investments with your franchisees? That is your own data. That is your own tech. If you can comment on that would be helpful as well.
I think, again, you can.
Yes, of course. I will touch on the first part of the question regarding discounting. Discounting is something that we do strategically. Now we have the database that is important to mention, that has taken quite a few years to build. Having a strong and robust database takes a long time to build. We now have it, keeps growing, but the database we have is very significant. The way we use discounting is by understanding the behavior of a particular customer and giving it a specific discount that will trigger an enhanced frequency. So, for example, if I know that a customer comes to McDonald's twice in 90 days, I know that customer is going to come back four more times during the next year.
The job for the discount in that particular example is to get that person to come a second time, because if he comes a second time, the frequency will increase. Even though it might seem like a big discount to get that second purchase, the lifetime value of that customer will more than pay in that particular example. That is how we are working our discount strategy inside our CRM platform. That example, imagine it millions of times per day.
If you let me just add a little comment. One of the margin gains that we think that we have ahead are from that, because we think that we can monetize and we can do better. Being prudent, being close to our customers, being rational about having a compelling value proposition. We learned over the last five years how the density of the promotion that we need and we have to have in there, either in the delivery channel and in the digital channel, we do have opportunities. Male, if you want to
Yeah. Regarding discounting, to add to what Luis and Santi are mentioning, I just mentioned how we are using data. One of the things we know is what is the willingness to pay of every customer that uses a coupon. With that data, we are going to be improving what are the discounts we give to each customer, understanding their behavior. This is going to be for sure improving and helping the margins as Luis is explaining. Regarding the monetization of the data, I think we have a big opportunity. We have tons of data. We even sometimes meet with other companies that are really pushing and investing big to get customer data. We have a lot of customer data. We have a lot of internal data. I sure believe that we have. I said it, we have a big opportunity going forward.
How do we use customer data much better, and how do we use internal data to, for example, do things with our suppliers like Philippe mentioned? Regarding franchisees, we have a very good relationship with our sub-franchisees. The sub-franchisees are using our tools, and they are helping their business with the tools that we are developing, like our AI tools. This is something we are very close to them, especially Brazil, which is our biggest community. I think we have. We have done work so that the things that we do are not only for our own stores. They are also for them, and I think that is going to continue to be that way.
Great. Thank you. Just one quick follow-up. There's clearly this embedded margin expansion going forward in the longer-term guidance. If you could just break that out maybe by country, if there's one country or maybe one region you're more excited about, or if it was broad-based across the board.
Mariano?
Just setting expectations that we just ran out of time, so we'll take that one as the last question. Thanks.
Sorry.
Alvaro. Yes. Actually, the numbers we presented are on a consolidated basis. There are a lot of opportunities to increase margins in some markets that are kind of behind the average of Arcos Dorados. One of the good things is, and we mentioned this, is how we can bring the good lessons we learn in some markets to the rest of the company. We are becoming faster in doing this. All the digital investments we are doing, the beauty of that, as opposed to, for example, building a new restaurant, when you invest in digital, the tools that you invest are easily applied all over the company immediately. You test it in one market, it works, boom, you have it everywhere, like the app. We have the app working in every single market.
We are very excited how the markets that are with margins a bit below the average of Arcos Dorados can do the catch-up. I will not mention anyone. You know we exposed our results in three divisions. Brazil has the highest margins. We always discuss that. But we are very confident that NOLAT and SLAT will go on Brazil's directions, even though inside NOLAT and SLAT, there are markets which have even higher margins than Brazil, but on a consolidated basis, the two divisions are lower. The numbers we presented are on a consolidated basis, and we are very confident that the whole company will move in the right direction.
Thank you.
Thanks, Mariano, and thanks to all the speakers. That is the end of the webcast Q and A portion of today's program. For those of you who joined us online, please feel free to reach out to me with any follow-up questions. For those of you with us here, please hold onto your seats for just another minute, and we are going to explain the next steps here. Have a great day, everyone who was online with us. Thank you so much.