Tortilla Mexican Grill (LSE:MEX) — Company Update

0:00 Good afternoon, and welcome to the TORTILLA MEXICAN GRILL PLC company update presentation. Today's recorded meeting, investors will be in listen only mode. Questions are encouraged and can be submitted any time by the Q and A tab situated on the right hand corner of your screen. Just click Q and A, scroll to the bottom, type your question and press send. Company Company may not be in a position to answer every question it received during the meeting itself. However, company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Andy Naylor, CEO. Good afternoon.

0:29 Good afternoon. Thank you for the introduction, and I'm delighted to be back talking to to everyone again so soon after our latest update. So we'll start with some quick intros, and then we'll talk you through the exciting work that we've been doing lately. So for those that don't know me, I'm Andy. I'm the CEO of TORTILLA. Been at TORTILLA for seven years, and I probably met lots of you before previously. So I'll hand over to Brandon and Maria. So hello. Welcome. I'm Maria Denny. I'm the CFO at TORTILLA, and I've joined about four months ago and met some of you throughout our investors presentations back in April.

1:07 Hi. I'm Brandon Stevens. I'm the founder of TORTILLA. I've been with the company for seventeen years. Great. Well, we're gonna move on. We've got a short video, and then we'll we'll we'll crack on with the agenda.

2:22 Okay. So we're gonna start with a quick transaction overview from me, and then Brandon's gonna go into a bit more detail on the specifics around the Fresh Burritos opportunity. And then Maria will take us through the financials, and we'll talk a bit together about the our game plan and how we're gonna execute the transaction. So starting off, I mean, it's an understatement to say I'm I'm hugely excited. Well, we're hugely excited by this transaction. What an opportunity for us. Great great opportunity. We've we've bought our largest competitor business in Europe, a business called Fresh Burritos. They have 32 sites, 13 of which is company owned, the rest of franchise, with a consideration of just under £4,000,000 We're going to talk a lot more about Fresh Burritos, but it's a great business with some really cracking locations in France.

3:16 So a bit around the strategic rationale. We've talked a long time about our aspirations in Europe, and so it's really exciting to be talking about what we've what we've executed here. But it really is this first point is the most important. It's a springboard for a big franchising growth across Europe for us. We've talked about that for a while. We've got a successful franchise business already, and we know that it's gonna work well in other countries as well. It allows us to expand more rapidly than it would through greenfields of organic rollout. And from a financial point of view, it's better strategy in our opinion. And it gives us access to immediate scale economies, stronger margins, and also, we're planning to build a central production kitchen, which we're going to talk about.

4:04 It also is a good way of minimizing the market entry risk and creates something which we can showcase to future franchise partners rather than having something just entirely theoretical. And there's some great brand synergies, similar products that we sell, similar equipment, and similar customer demographics, and I said earlier, prime prime locations. So just to quickly whiz back to our Vital five, which we talked about a couple of months ago, making great progress on Vital five, but to focus on the fourth and fifth strategies, clearly, this acquisition really delivers on these particular initiatives. We do already have a international a very successful international business with a quality franchise partner in The Middle East, But this is an opportunity to really own the quiddity in Europe, and it gives us a great foothold into that market.

5:04 And as a lot of the sites are franchising nature, it really delivers on initiative number four as well. So just looking at the opportunity about the international development. As you can see from the bar graph there, we've become we are already the largest burrito business in Europe by quite some way. Clearly, buying the second largest, it gives us an incredible pole position for charging forward on our European growth story. There's some statistics there around how exciting it is around Mexican and QSR growth generally. We're seeing and we believe that the grab and go takeaway delivery market is going to continue to grow considerably in Europe, but also Mexican food is growing, as you can see from some of the competition that's listed on this page.

5:56 I think there's something around as well to highlight that people think of France typically as being a country which perhaps isn't suited to fast food and grab and go. They're definitely wrong. This biz this country is has a phenomenally successful QSR fast food scene. I mean, it's just the largest McDonald's market in Europe. And you can see from some of the other brands listed on here across Europe, generally, grab and go and fast food is is is really booming, and and, clearly, we want to kinda capture that opportunity in the Mexican space. A question that we've had in the past on these sessions actually when we talked about international growth is, you know, we've had pushed back at times where, you know, Chipotle have made a success in The US next to the next to Mexico, so they understand the food. And I feel it's really important to highlight that it's not just in The US where it's been really successful.

6:57 If you take the Australian market, actually, which has been the new lately with the recent IGO of of Gisman and Gomez, that market they've got over 500 sites in in in Australia, and Australia is clearly nowhere near Mexico. And I think it highlights that there is this desire to try Mexican food, and and and it and it ticks all the boxes for people in terms of the taste, the customization.

7:21 We're clearly in the really strong market leading sort of poll position in Europe. And so whilst these other businesses are charging forward with their growth there, we think we're in a position to really own it in Europe. And and, yeah, just to talk a bit more about franchise. Let's see. This has always been, for us, something that we're really interested in. By buying a a business that we have, what it does is it does give us something we can immediately showcase to new partners. When you need a new business and they're interested in working with you, one of the first things I want to see is what do the box economics for store p and l look like, and where am I gonna get my food from? There are they're two fairly early stage questions. With the approach we're taking, it becomes not just a theoretical exercise, but we've got a p and l we can show to partners and show the EBITDA and the conversion.

8:15 And also, having the supply chain set is enormously beneficial. So we think it's a really good way of ticking that box. But, also, it creates the structure needed, the franchising structure. We're buying a business with a substantial franchise presence already, and having that in place gives us the ability to launch into that more quickly. And it creates a quicker path to profitability. I think a lot of businesses over the years that have expanded in Europe, they've had a lot of success by buying smaller businesses and then using that as a as a platform for growth. And it it's quicker than a greenfield rollout, no doubt. We've got a strong model, as I said, for franchising with the central kitchen, and that's what we're planning to replicate in France. And, hopefully, we'll find some great partners further down the line with that journey as well.

9:04 And lastly, just to touch upon it, a lot of our food comes from Europe already. So there's some really interesting supply chain synergies that will not only benefit the French and the European businesses that we're we'll be creating in those franchise partnerships, but it will also provide us with some benefits in The UK business as well in terms of increased buying power. So really exciting stuff around for us. So over to Brandon to talk a bit more about the opportunity. Thanks, Andy.

9:34 This slide shows some information about the Fresh Breeders Estate. As you can see, there's a big cluster of sites right around Paris, but they're actually distributed throughout France. My colleague and I, fellow nonexec director, Francesca, have been around to each of the sites in in France. We've seen all the sites. They are in some great locations. The founder, Timothee, Fresh Burritos, did a fantastic job of not only securing sites in some of the top shopping centers, but also finding high street locations that are colocated next to some of the best QSR brands that are out there. There's some examples of some pictures here. They've also done a great job of fitting out these sites with a decent design, slightly on the more kind of cliched side of design, but with strong mechanical and electrical, strong kind of basic infrastructure in place, which has allowed us to put together a plan for conversion that's gonna make sure that it's not too expensive.

10:33 So the location synergies, say, swift conversion,

10:36 you know, similar operational platform. The nice thing about burrito shops, even more so than even sushi shops, is that we operate in a very similar way with an assembly line platform with a a warmer and hot oil and cold oil and so forth, fitted out restaurants. They these sites already have kiosk solutions, which we'll use to great effect, and they have similar product offer. One important aspect that Andy alluded to is we have managed to secure a bit of a dream location with our central production kitchen. So in Lille, we have been able to secure a fully fitted out former ghost kitchen venue that's 1,400 square meters, so around 1,500 15,000 square feet. Most of the CapEx that we'll be spending on that is just additional equipment, but not too much else, not much refurb that needs to be done. That provides an incredible distribution opportunity for not just France, but also Benelux and Northern Germany.

11:35 Important to understand that one of the things that we've we've we see as an opportunity here is we are buying in a state, and there are definitely some challenges with the operations that we see as opportunities to improve unit economics considerably. So touch on first the franchise side of things. You know, one of the challenges that Fresh Burritos has had in the past is that they have a large number of independent franchisees managing all of those, putting in place the right operational processes and controls and everything, I think has been a slight challenge. We have extensive franchise experience with Compass, with SSP, and other brands, and and so we have the right kind of brand bibles and operational bibles to be able to make that a success. One of the other challenges Fresh Burritos has faced is is around food quality, which we'll get to at the bottom, but you'll see outsourced frozen supply chain. So all the food is made in an outsourced location, actually in in Ireland, shipped over frozen, so the reheating is is required, and it it it doesn't kinda hold well.

12:37 What we'll be doing is putting in place a fresh central food production facility in Lille, as we mentioned, and that quality should be a lot better. And, also, we should improve our margins because we're making it ourselves rather than outsourcing. Operational inefficiencies exist, so the process there doesn't include some of the food warming processes that we have, and that results in an extra couple of steps that result in a long fulfillment time, whereas we're gonna be doing this within ninety seconds with the the with the right set of ingredients. Lack of brand resonance. So the the the brand itself, without wanting to be too negative about it, there is a bit of kind of Mexican Mexican cliche. Cliche. We're looking to do something that's a bit more California cool and a little bit more in keeping with the tradition that we have that we think has resonated well over here.

13:24 And then the last part is around the limited menu. So with fresh burritos, they're they're going with

13:31 menu a that doesn't include the kind of some of the normal traditional things that we put into these into these burritos. We're going with our our menu, which is a little bit more comprehensive. It has the right additional things like nachos and quesadillas and things like that.

13:50 Thank you, Brandon. So I think as Andy started off with saying that this is really the first step in the springboard into Europe. It's also important to understand that this deal on its own is a really strong good deal, expected to return 35% on net capital employed on a mature adjusted EBITDA. So but before I go into the sort of fresh burrito financials, I want to talk you through the actual transaction. And we are acquiring, as you stated before, 13 owned stores in France, the full franchising rights initially including 19 Fresh Burrito franchisees and also the Fresh Burrito IP. This for €3,950,000, which can split 2.71 through a cash consideration and the remaining €1,240,000 in a debt rollover.

14:42 The whole cash consideration as well as the conversion of the stores to the TS stores will be funded through taking out a further 4,200,000 from our existing credit facility with Santander. That still means that we have significant EBITDA headroom in our covenant and remain at a sort of acceptable, healthy leverage position for the future. So the financials of Fresh Barita then. So once some of these stores we acquired have been quite distressed over the last year, year and a half, in 2023, the whole state that we're acquiring returned €9,000,000 worth of turnover and made a loss of 100 k at a at a before tax level. So we expect that once we get the central production kitchen up and running and converting the stores and investing in training and so I would still be loss making for this

15:35 year, reducing our group EBITDA at around 500 k for 2024. Going into 2025, we're expecting to see a top line of €10,000,000 from the French business and generating around 500,000 in adjusted EBITDA growing in after twenty four months of maturity to 15,000,000 turnover and 2,500,000 EBITDA. And that

16:01 sort of quick EBITDA turnaround will come from increased sales and improved margin conversions. And I know Andy and Brendan have spoken about this, but it's mainly, first of all, the central production kitchen in Lille that we expect to be fully operational by q four this year, starting to see the supply chain operational efficiencies and benefits flowing through to the p and l in higher margins already from the start of 2025. And whilst we're also utilizing our purchasing power of getting better prices from our suppliers as we're trading in many of those in The UK as well.

16:38 Secondly, we're converting all of the 13 stores in France to TORTILLA stores throughout this year, expecting to have them all converted before Christmas, which will again behind that, we're putting a robust marketing plan in place, which is in all of that spend, including numbers, obvious quotas, so I can to really push for the through the size. And thirdly, and absolutely not last, is that we're creating a specific European team to really support the conversion and the sustainable growth of the French business going forward. This will be headed up by our current non exec, Francesca, who will become the chair of our support in France. And Francesca has a very extensive experience of brand development, franchising, m and a and finance within the hospitality businesses in France.

17:28 She will also be joined with our newly appointed non exec director for the French support, Ed Guilds, who again comes from a hospitality background. He's currently the or has been the VP for development

17:41 and franchising of France KFC. And we've also appointed a new managing director with a really strong hospitality background who will join us in the autumn of this year. And we're keeping the current founder and CEO, Timothee, on board as an adviser to the French board to ensure we have that sort of smooth handover process.

18:04 To make sure that we also have a continuity, we're keeping most of the Fresh Burrito employees on board. And with that, we also have a set up a predicting in The UK who supported us, sort of, knowledge transfer and training of our sort of UK TORTIL standard operational model and would that be there to support until we have fully recruited a French head office team to support the business in in France and Europe. I think on that note, I'll hand it back over to Andy to summarize before we open for questions.

18:39 Yeah. I guess just to summarize, he says the top rolling, rolling, rolling. This is a huge one a day for TORTILLA in the business. I mean, this is a transformational acquisition in our opinion. We were already the leading player in Europe, and this is really sort of furthering that position and, continues our exciting growth journey that we've been on over the last few years. So it really does, as the first point says there, it consolidates our position. We're in the pole position, and we're going to keep driving forward on the burrito journey in Europe.

19:11 As we said all along, this isn't the start of a corporate rollout of our own. That isn't our plan. Our plan has always been a capital light European franchise story. As we've explained in this presentation, this is a really good way of kick starting that. So that's why we we talk very much about it being a spring pop board. But it gives us the franchising infrastructure in another country that enables us to launch into other other

19:39 places nearby. And as you those who even know, Lille, it's very close to the border of other European countries, so it's very easy for us to start moving our food into other countries, which which we'd love to target to. Gives us some really prime locations. I mean, some of their locations are some of the best locations in France. We're really excited about that. Some of the best shopping centers, transport hubs, high street. So lots of things for us to just jump straight into on that. And as we said, to take advantage of the Olympics,

20:09 CPQ CPK or the central kitchen is secured, and we're trans transport our own expertise that we've got, as I said earlier, we've got the team. Very important, I think, as a business that we don't overstretch the UK team, so we spend a lot of time forging a separate team with some really strong people that are part of the business. We've got some ex TORTILLA employees coming back that that now live in France. So we're really pulling on a network of people that can that can make this work, and and I think that's the most important thing in terms of execution risk is making sure that we we can really we can really deliver on this. So, yeah, really exciting opportunity for us all around.

20:54 And, yeah, we've been working on this for a long time, so we're we're delighted to finally be able to announce it to to everyone. So that brings us to some time for some q and a. Fantastic. Fantastic. Look, thank you very much indeed for the presentation, and as you say, for q and a. As you can see, we've had a number of questions submitted throughout today's presentation. So if I may just ask you just to click on that q and a tab, and where appropriate to do so, if you could just read out the question, give you a response, start at the top, and I'll pick up from you at the end, please. So the first question I can see that, I think, Brandon, this one for you, is to discuss the planning, the cost of the timeline of the central production kitchen and and, obviously, it has a location or it'd be identified, which I think you already answered part of, but maybe a bit more about the the timelines and planning for that. Yeah. The the binding agreement is is in place, and the lead we we should have that up and running.

21:50 The the lead time on it is really around the equipment, so it's gonna take about sixteen weeks for us to get in the main pieces of equipment. We we will then need a bit of time just to get that set up and and operational, and then we should be we should be there. So we're looking at around the October, November time frame.

22:13 Yeah. Please talk about your broad capital allocation approach in terms of hurdle returns sought. So I think it's it's an interesting one, this one, because it's it's two it's really two parts. One was obviously acquiring this business and looking at the return on capital, as I said, being strong for this on its own, 35%. But the key thing here is is also that sort of springboard in for the in for the future. So when we're looking at the investment in the CPU, once that's the actually, that cost is included in that 35% return on capital, as said, that is a a bigger bigger investment as with 1,400 square meters compared with the around 500 square meters we got in The UK. We got huge capacity there to to grow for the future. So it's it's sort of hard to see this deal on a on a deal on its own. But but as I said, we will obviously monitor and report how this business is doing now going forward on its own and in combination with The UK business.

23:10 Okay.

23:15 Can you speak to whether you plan to rebrand the fresh burrito stores, the Sattiya Sattiya stores, if your franchising is expected to be the fresh burrito or Tattiya brand, etcetera? Yes. So the answer is that the corporate owned stores will be rebranded into tortillas. And as was mentioned before, they will they should be converted over before Christmas. We feel confident about that. We've got a full schedule of conversions, a team in place, etcetera. So that's all looking very good. The franchise stores will be working with the franchisees. They're under no obligation to have to convert over. They if they want to convert over, we're very keen for them to do so. There'll be capital investment that's required in in order to upgrade their

24:00 infrastructure to convert over to the TORTILLA brand, etcetera. And we also need to make sure that the franchisees are of the caliber with their operations that they're not negatively impacting our brand. So we need we'll be working together with them. Francesca and I will be going around all of France to see all of the franchisees in the coming weeks and to talk them through the conversion. We actually have a call scheduled with them, an all hands call, a little bit like this, tomorrow afternoon, actually, to to get things rolling with them.

24:29 I'll I'll take the next one. What's the what was Fresh Barites got wrong in recent years? I think it's a good question. I think the probably the principal things that have been challenging for them is is one around product quality and and making sure that's absolutely at the top of the agenda, and and we know from our own business that at the end of the day, the product is what the customer is buying, and you have to have the absolute best quality food. And and as a result of

24:59 having an outsourced supply chain, it's it can be difficult at times to control that to the same extent you can if it's within your gift to control. So I think that's one area. But also then linked with that, I think there's it's been challenging for them to have the buying power to to combat the inflation like we have. We obviously came into this higher inflation period with a stronger core state and volumes behind us. And as a result of that and our exciting growth, we were able to negotiate and and and and and get better deals. And and I think the this business has struggled to do that. I mean, I think fundamentally, it's a it's a lot to be said for the French market, which is why we're very excited about it. We know that they spend a lot of money on eating out, and the average unit sales in France are some of the highest in Europe. But also, there's, you know, there's some structural advantages. They don't pay business rates in France, and there's a there's a 10% VAT rate on hot food. So these things versus The UK model are are big big advantages.

25:58 So we're very confident about getting the uplift on margin and then also the uplift on sales by having our better operational practices implemented in our in our in our stronger food food offer. Worth adding to that that management has mentioned to us previously that they think they push too hard on pricing. And so with the supply chain and and and the kind of purchasing power that we have, we should be able to put in the right pricing at the right gross margin. The next question is around CapEx and whether we the owned and the franchise sites need CapEx to be spent. And, yes, we are expecting to spend CapEx on kind of, like, the 13 owned sites to have bigger sites, and we're looking at between 100 to €140 per site depending on how the investment rate of the sites will will be needed. And that's, again, included in the calculation of the of the 3,500 tenant on capital employed I mentioned before.

26:51 And whether the franchisees decide to convert or not will be on

26:55 their own board and their own CapEx, at least as it stands, we're not at the moment planning to support something on that. It's worth mentioning that the CapEx is to be spent primarily on equipment and just doing things in the way that we end up doing those things to to provide better food and also just on brand version. But the infrastructure is already there and very impressed with, you know, the level of fit up that they have.

27:18 I think someone's asked about the total cost of conversion. He said, I have 1,500,000. Yeah. That that sort of info. I've got that so I can compare that. And then on TORTILLA, we'll obviously also fit that as CPU, like, I mentioned earlier. Mhmm. How will you get sales up 50 to 60% in two years, I think it says? Yeah. We have a new franchise. One thing there's there's obviously the growth trajectory that over time, but if we look at just unit sales, so the 60% not sure exactly where that's come from. Maybe that's in the numbers. But that is we we are looking at kind of 50% plus from 2023, but, actually, it's only about 35% plus versus 2022 before sales are just slowed down a bit.

28:10 So when we look at benchmarks versus taking over other burrito shops and seeing the

28:14 increase that we've seen with the takeover of some of the the SSP Mexican brand and also with the Chilango Mexican brands. We've seen sales uplifts that actually exceed that considerably given the quality of the product and the lack of throughput where they we're very confident of those numbers. And quite frankly, from my standpoint, I think we will exceed that considerably. And the numbers we're talking about at the moment is from the current acquisition does not include future franchising opportunities or going into any other countries that we've sort of not yet announced. This is the numbers I've talked about earlier is completely from acquiring that 13 own sites and 19 franchisees. GRILL So there's a question here about will the franchise sites also convert to TORTILLA talked a bit about this already and the costs associated with that.

29:09 I think it is something that we need to look at. We'd love we'd obviously love to convert them to TORTILLA there's two things, really. One is they they need to know what's in it for them to do that. And so by us demonstrating the increase in sales of the corporate stores by conversion and also the profitability, if we can find a way to supply them food more cheaply, it it would make a lot of sense for them to convert. But equally, we need to make sure that their standards are sufficiently strong to not provide us with any concern that they can't deliver. So it's gonna be, you know, something that we're gonna be working out over time, but we we would love to convert as many of them to TORTILLA as possible. The main differences between The UK market and the French market from a customer expectation perspective, there will be some slight variations. We will have the same chicken. We will have the same sour cream and guacamole and things like that, but there are nuances in the French market. So for instance, there's a preference for desserts.

30:08 There's a preference for kind of bundled items that have a full meal. This is one of the reasons that we brought on Gilles, who's an incredibly experienced operator in France and also the gentleman who can't date just yet as our as our managing director, both who have extensive experience and and are involved in the process of ensuring that we have the right the right product and service for the audience. There's a question about how much headroom is left in our bank facility after this investment and when the facility is due due for renewal. So after this investment, we still have 2,800,000 left at our current facility with Santander, and that is running for another yes, still another couple of years up to September 2026 before that is up for renewal. And with with current cash flow forecast, we expect to have all of our loans with Santander paid back well before launch.

31:09 What is the cost of the CapEx for this for the CPU? Okay. We Brendan said before, we the the site is really good as it is. So the main thing there is to kit it up with equipment we need. So we only estimate around £600,000 investment in fully making that operational, which is obviously for such a large site and the the the patient role is is very good deal. We've assumed that that goes live in q q four. Q four. That's right. Yeah. Biggest barrier to doing that any earlier, really, given the sites fitted out is just equipment lead time, which in catering equipment post post post COVID is there are long lead times on some of the kit, but we've we were we're making good progress on that, and we have a plan to obviously move move as much of the production over as quickly as we can.

31:59 The next question is about when most stores are kiosks and will have a significant cost related to existing employees. I'm not sure whether that's related to you're asking whether there's gonna be any sort of mass redundancy. And if that's the question, then we're not planning any mass redundancies at all. And we would we're the employees will still be required to roll the burritos even if you operate with with kiosks. I I think yeah. I wasn't sure whether if if kiosk was being used from the IT kiosk standpoint or from a small small unit standpoint. But at the moment, this is one of the other challenges that we have that they have is they have moved to a to a kiosk ordering only mode, so a digital only mode without any visibility of the food and without any real interaction with the with the staff. We'll be moving that those kiosks to the back wall so that you'll still be able to order, but you'll a hybrid model where you can also order from the from the staff, have a full customer experience.

32:53 We'll be speeding up the throughput, as we mentioned, and the and the fulfillment time, and we think that's gonna be a a much more rewarding experience and also one that creates more emotional connectivity with for the consumer. Can you confirm the reason for increasing loss in the first year? Is this related to CPK cost and the marketing cost? It's it's sort of a combination. So we obviously have been trading it for half a year. And during that half a year, all 13 stores gonna be each of them closed for at least about a month whilst we're converting the stores and training up the people there. We're also having, obviously, the changes in the supply chain going on with us running from current supplies into the CPK.

33:39 And we also have a project team that's there to really support the transition period. So there's additional cost that it will not be like going forward. So all of these sort of combined is really why we're why we still think we'll make a loss. And then when we get into that, as I said before, next year and we have the CPK fully fitted out and operational, we straight away will start seeing, you know, a significant increased margins coming through. Yeah. And although it's a different market, clearly, obviously, we have the experience from buying Chilango to to know and be able to model once you shut the doors, refurbish it, get the team trained up on the new the new model. We we have I guess, it's not a complete guess is what I'm saying is that how this process works. We we have we have some good experience of doing this previously now.

34:29 Do you anticipate opening new French outlets? If so, when and how many? Take that on. Get out to you. You you can yeah. Yeah. So our our focus at the beginning is gonna be to take over the sites, convert them, roll them, operationalize them, build the brand, and get efficiencies, and have a model that gets into cash flow positive territory as quickly as possible. From there, there isn't a huge plan to roll out owned stores. As Andy has mentioned and also Maria has mentioned, we'll be looking at a franchise model and building on the franchise network that we already have. We've had a lot of conversations behind the scenes with loads of franchisees about potential franchise opportunities throughout Europe, and this provides a perfect ground for it.

35:17 So for everybody out there, this this isn't just a French a France deal. This is a European deal that we're really looking at. So from there, once we get our stability in place, we'll be looking to roll out. I think the business plan is is kind of ten, five in the first couple of years and then 10 moving forward. I think to revisit that, Francesco will be able to address that with us. But but, yes, we'd be looking to ramp up the French and then other country franchise units over the next couple of years. You you guide to mature, say, to first rate of 15,000,000 turnover within twenty four months, which is two times the turnover already delivered in 2023.

36:02 What are the building blocks on this high sales growth volume, price, site, etcetera? I can pick that up. Yeah. Can pick that up. Some of what's built into there is the growth that we just mentioned from the franchise units. And so, know, it isn't a doubling of own of same store sales. As we mentioned, it's it's about a 50%, 60% increase in same store sales versus 2023, but that is only a 35% increase in same store sales versus 2022 when things were a bit stronger. We think a one third increase in sales for the same stores given limitations of their operations in food is I I I don't wanna go so far and say it's a no brainer, but we we're incredibly confident of that. The rest of it is from growth and and building the franchise network. I think just to add, it will be volume driven, There's a question there around volume price. Our view is very much a volume volume thing rather than the pricing thing. Obviously, we're very keenly priced in The UK market, and we'll obviously be doing a lot of work to assess whether or the price point of the fresh burritos offer at the moment is the right price point. It may be that it's too high.

37:11 It may be that it's too low. So that's part of what we'll be we'll be working on too. Initial inclination is that the price point can come down while still having a higher gross margin due due to the purchasing power and also making the food through our essential production kitchen. Yeah. And if you if you're speaking that up, it's obviously from making a loss in 2024,500,000, it's the three sort of million EBITDA turnaround. You have around 2,000,000 of that would be coming from higher volumes and around 1,000,000 will be coming from better margin conversions. I think that sort of answers the next kind of question as well. So I think that is the end of all of the questions. Fantastic. Thank you very much indeed for asking those questions you can from investors. And of course, company can review all questions submitted and we'll publish those responses in the investment company platform.

37:57 Before redirecting investors to provide you with their feedback, I know it's particularly important to you and the team, Andy, may I just ask you just for a few closing comments, please? Yeah. Well, hopefully, what we've told you today has got you as excited as we are about it. I mean, it's this is a really transformational day for for TORTILLA. We've always been really excited about franchising, and and we think this is a really, really smart way of going about launching into a new market. We think it's less risky than doing it via a long sort of organic rollout. So we think that it ticks a lot of strategic boxes for us, and it's a very smart, way of gaining some sites quick. And as I said, there's some really exciting stuff going on, not just in The UK and Europe, but look at the Australian market, The US.

38:42 There is a big move towards Mexican food. To be sat in pole position here, we're feeling really excited by that. And as I say, I hope you are all too. Thank you very much indeed for updating investors today. Could I please ask investors not to close the session? It should be automatically redirected to provide your feedback in order the team can better understand your views and expectations. It's going take a few moments to complete. I'm sure it's greatly valued by the company. On behalf of the management team of TORTILLA MEXICAN GRILL PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.