Dan Schleiniger: Great, thanks. Marcelo. Chago has a follow up which is and to the extent that we can comment, how are the discussions around the renewal of the MFA agreement with McDonald’s evolving?
Marcelo Rabach: Okay, well, let me begin remembering that the MFA is a 20-year contract that started on August the 3rd, 2007 and goes through August the 2nd, 2027 with a renewal option of afford 10 additional years pursuant to the MFA. We have already indicated to McDonald’s that we would like to renew the agreement, and McDonald’s will determine whether to grant us the option to renew by August 2024. If McDonald’s grants us the option, then we will amend The MFA to reflect any changes to the current terms of the agreement. We are already engaged in conversations with McDonald’s related to this topic, under jurisdiction of the MFA term and expect to have the process concluded by August of 2024 for us, it is stipulated in the MFA. Any announcements related to this topic will be made as appropriate in coming months.
Dan Schleiniger: Okay, so let’s move now to Marcela Recchia from Credit Suisse, who says hi, team, congratulations on the results. And thank you for taking my questions. And she asked what are the main regions in Brazil, that management still sees opportunities for new openings, and I’ll turn it over to you to Luis.
Luis Raganato: Hey, thanks, Dan. And hello, Marcela. Good morning. We still see opportunities of growth in all the Brazilian region. We have opened recently in Sao Paulo with excellent results, but we see great options of openings all across the country. Dan?
Dan Schleiniger: Great. Luis, Marcela has a follow up or a second question, and she asked if we could elaborate more about the market share gains across all divisions. Is it driven more by market consolidation, or are we gaining market share from it — from any specific player?
Luis Raganato: All right. The QSR is expanding its share of the total in our industry, and within QSR the McDonald’s brand is gaining share in all three divisions, not just Brazil, and let me give you at least numbers to a better understanding. And our visit share rose across the region in the third quarter up 3.1 percentage points. In Brazil according to our research visit share increased by 1.8 percentage points with an increase in the gap to the nearest competitor. This gap rose from 16.8 to 20 percentage points. In SLAD, visit share gains 4.6 percentage points, and almost doubled the gap versus the main competitor from 7 to 14.9 percentage points. In NOLAD, visit share increased 1.6 percentage points, increase in the gap versus the main competitor by five percentage points came from 2.5 to 7.5 percentage points.
And I would say that it’s important to say that the revenue growth was driven mostly by higher restaurant volume with modest price increases. And of course with a restaurant experience that is valued by our guests. Dan?
Dan Schleiniger: Thanks again, Luis. Our next question comes from Bob Ford and Ulies from Bank of America. And Ulies says, Aleis Orgothe from JP Morgan has a similar question. Bob says congratulations on the quarter. Can you comment on your food and paper costs and expectations going into next year? And similar to that Ulies who also says congrats on the amazing results, asked what is the cost outlook on how should we think about sequential evolution of costs into the last part of the year and early 2023. So let’s start with that one Mariano.
Mariano Tannenbaum: Perfect. Thank you, Dan. And thank you Bob and Ulies for the questions. First, on the gross margin side, what we are seeing and we have been saying is that this year, we are expecting gross margin or food and paper cost to be about the same as last year as a percentage of sales. Keep in mind that in terms of penny profit, our gross margin increased this year by $120 million compared with last year. So that’s really relevant for us. In terms of expectations on gross margin for next year, what we are seeing is that we see an opportunity there, we are going to follow and continue the proven pricing architecture, we’re not going to increase pricing well above inflation. We think that this strategy has yield incredible results for us so far.
We will continue with digital investments and trying to identify a higher portion of our sales. And we are convinced that will improve our product mix and improve in that way, the gross margin. And finally, we are also expecting a reduction in cost pressures. We are seeing in many of our markets, deceleration of inflation pressures. And there we also see that we have an opportunity. So that’s so far about gross margin this year and what we are expecting for next year. In terms of overall costs that was part of Ulies’ question. We continue to expect full year EBITDA margin from 2019. That was remember around 10%, in 2021 that was around 10.4% to be the base off of which we will expand margins in the medium to long term. As we already mentioned, we think that continuing increasing sales above inflation will give us leverage or no fixed costs that we have at the restaurant level and also with our G&A structure.
Payroll expenses, for example, are now well below 20%. We think this new model where we have delivery growing and drive-thru also growing are giving us benefit of deadline, occupancy and other expenses that have a high portion of fixed costs also, is we are obtaining leverage there. And we also expect to obtain leverage on the G&A and the fixed part of our G&A as we continue to focus on increasing sales. So that’s the outlook for the overall cost and EBITDA margin for next year.
Dan Schleiniger: Perfect. And let’s stay with Mariano and also stay with Bob and Ulies who have a similar overlapping question. Bob asks, and be a couple parts here on the increase in the 10-year growth plan, which I think is more of a potential than a plan at this point. Can you comment on CapEx and unit growth for 2023 and 2024, as well as future periods? To whatever extent but he has some definition? He asked what are we thinking about in terms of models, the split between corporate and franchisee and kind of the overall market holding capacity. Ulies had a similar question where he says in the release, we mentioned 1,000, restaurant opening opportunity. And we describe it at the start of the year. And now it seems conservative. So can we elaborate more on the markets where we’re seeing the larger opportunity? And what could this imply and potential number of additional stores? So yes, lot of concepts there, but back to you, Mariano.
Mariano Tannenbaum: Okay, I will try to summarize all the questions in one answer. When we provide the guidance of the current three-year growth cycle, we said we would open at least 200 restaurants in this period. And around 90% of those would be freestanding units. We also mentioned that we will modernize at least 400 restaurants to the EOTF format. We are not planning to change or to revise that guidance at this point. We are going to held this Investor Day that I mentioned in the beginning of next year, and we will give more information there. But it’s, even though we’re not planning to revise this guidance, we said at least for both items, and again, we will give you more information for this three-year period cycle in the investor update that we will hold in 2023.
Now going to the outlook, looking forward and to the 1,000 restaurants that we mentioned that we could we have the potential to open in the next 10 years. When we reorganized the company to three divisions instead of four. That was in October of last year, we mentioned that we will reallocate our G&A to reinforce the team that will help drive future growth. There we have advanced and all the digital capabilities, but also the development team. And that’s what we have been doing so far. This year, at the beginning of the year we gave guidance for 55 restaurants, were going to open 65 about 65. And with the modernizations was the same case, we announced 75 modernizations. And this year, we are going to end about 100 EOTF modernizations. And we mentioned that the potential openings for McDonald’s restaurants to be about 1,000 new locations over the next 10 years.
But based on the performance that we have seen on the recent openings, more sales per unit all the segment’s growing without compensation among them, higher than average ROIs, we now need that these 1,000 new restaurants are on the low end of that range. We’re not going to revise at this point, again, this 1,000. But we think now that to be those 1,000 restaurants to be the base. Regarding both questions how many units the market can sustain. What again, for us is now at least 1,000 McDonald’s units. We think that the QSR segment is highly and penetrated in Latin America. We believe that around 60% of those could be placed or opened in Brazil. And then we have several opportunities in many of our other markets that also are showing very, very good results such as Chile, Costa Rica, Panama, French West Indies and several others Mexico as well.
Being of course 90% of those freestanding units. I think that covered €“
