Going back to the AUV question before we move on, is there an AUV where you say we're no longer on the knife edge of this conundrum where you lack the money to refresh and lack the money for capex, and you're now healthy and the cycle starts working the other way?

$2 million is a very good number for me. I like $2 million. That is when you start making money. $1.8 million is not too bad—you're getting healthy at $1.8 million and could start making some money. I won't complain about $1.8 million, but $2 million seems to be the sweet spot where you can do the remodels, invest in people, and have some extra money to do other things. At $1.8 million you can still do it, but it's a little tight. $2 million is a good number.

There's not a huge incremental margin. The margins are pretty consistent. It's not like 50%.

No. At $1.6 million, if you do 10%, you're lucky and doing well. At $2 million, you should do 15% to 18%. Don't forget that the two largest costs—food and labor—will probably go up with sales. About 70% of your cost is in food and labor. Rent and other fixed costs represent maybe 15% to 20%. That is where you get your extra percentages—in the fixed costs, which are usually around 15% to 18%. So that is where a lot of the incremental profit goes.

Well, their actions certainly suggest they were not well taken care of. If you have to buy them in and fix them up, and you talk about how now you're going to refranchise them to smaller franchisees, that suggests to me the large franchisee model wasn't really working very well?

I think there is a balance. The large franchisee model can work, provided the franchisee is not too heavily leveraged. Leverage—and specifically the level of interest being paid—is really the issue. I think that has been the problem with Burger King and its large franchisees, which have often been highly leveraged. When a difficult year or quarter occurs—such as during Covid—the impact can be significant, and you can quickly see franchisees going out of business. That said, there are clear advantages to having larger operators, for example those with 50 or more stores. At that scale, they can afford an IT department, achieve certain efficiencies, and attract stronger talent. So I think a mixed approach is not a bad idea. I am not against large franchisees, as long as they are not too highly leveraged. Ultimately, leverage is the key issue.