Good morning, everyone, and thank you for joining me for MTY’s 2019 third quarter results conference call. The press release and MD&A with complete financial statements and related notes were issued earlier this morning and are available on our website at mtygroup.com and on SEDAR.

Please be aware that we will refer to certain indicators that are non-IFRS measures. You can refer to our MD&A for more details.

I also remind you that all figures expressed on today's call are in Canadian dollars unless otherwise stated. Before I begin, I would just like to remind you that this is the first full quarter with the contribution of Papa Murphy's in our results.

While the second and third quarters were historically the strongest quarters for MTY given our large exposure to the ice cream and frozen foods categories, the acquisition of Papa Murphy's will partially offset the seasonality pattern going forward as its operational peaks and valleys are almost exact opposite of Cold Stone’s. The third quarter of Papa Murphy's is by far its weakest generating approximately 13% of its annual EBITDA, while Q4 is by far the strongest quarter with approximately 3 times the EBITDA of Q3.

Let's start with a brief overview of our network. Consolidated same-store sales grew by 0.3% during the quarter.

Canada posted a positive same-store sales growth for the eighth consecutive quarter with a 0.7% growth. Quebec, Western provinces, and the Maritimes continued to show positive same-store sales growth with respective growth of 1%, 0.7%, and 3.8%.

However, Ontario had a slight decline of 0.6% mostly due to weakness in mall sales. Same-store sales in the United States posted a second consecutive quarter of growth with a 0.6% increase as our initiatives continue to bear fruit.

As you know, our exposure to the West Coast is important. It represents 52% of our total U.S.

system sales. We're pleased to report a growth of 0.2% in that region.

And as far as the East Coast is concerned, the region's performance remained strong with a 1.3% increase. We continued to experience negative same-store sales growth in our stores located outside of North America.

However, the magnitude of the decline has subsided. After three quarters of high-single-digit declines, we posted same store-sales decrease of 5.4%.

The decline is primarily attributable to our stores in the Middle East, where economic conditions remain very difficult, and in Asia where we were impacted by some factors that are out of our control, but that should not affect the long-term profitability of our locations. Network sales for the third quarter were up 36% to $1,076 million, making this the first quarter in MTY's history to exceed $1 billion in system sales.

The growth is primarily attributable to the recent acquisition of Papa Murphy's, which generated 21% of our sales during the quarter. The net organic change in our network sales was a negative $5 million for the quarter with the favorable impact of positive same-store sales being more than offset by the net store closures experienced so far in 2019.

On a year-to-date basis, the net organic change was a negative $5.3 million. To put things in perspective, the organic decline represents 0.2% of our system sales on a year-to-date basis.

We finished the third quarter with 7,441 locations, as we acquired 169 locations of Allo! Mon Coco, and Yuzu Sushi.

During the quarter, we also opened 84 new locations across Canada, U.S., and international, up 25% compared to last year, while we closed 157 locations. Of this number, 17 closures resulted from two brands being completely closed in the Middle East and 22 were the result of underperforming Papa Murphy's.

The closures of Papa Murphy's are in line with the indications we had provided to the market following the acquisition of the network, which were that we believe approximately 100 Papa Murphy's locations were going to close over the 12 to 18 months following the transaction. We will work hard to prevent as many as possible to close.

Finally, the geographical distribution of our locations remained in line with last quarter with 55% in the U.S., 38% in Canada, and 7% international. On a year-to-date basis, our mall exposure continues to decrease going from 23% of our sales in 2018 to 18% of our sales in 2019.

In the U.S., that exposure went down from 10% to 7% of our sales, and in Canada, the proportion went from 31% to 27% of our sales. Now, let's discuss MTY's financial results.

We're pleased with a record-setting third quarter. Our EBITDA increased 8% to reach a historical high of $41.8 million compared to $38.8 million for the same period last year.

The increase was mainly driven by the results generated by two recent acquisitions, Papa Murphy's and also sweetFrog, which was acquired last September and for which Q3 is the high season. The increase in EBITDA comes from the 44% increase in our revenues to $163.1 million, which was offset by a 63% increase in our expenses, both of which are mainly attributable to recent acquisitions.

When analyzing our quarterly EBITDA performance, you should keep in mind the following points: First, the third quarter is the softest quarter for Papa Murphy's. It represents approximately 13% of the total EBITDA generation for the year.

Second, as I mentioned last quarter, our franchise segment is impacted by the investment in additional people and resources required to generate organic growth going forward as well as by the additional resources required to deliver the new accounting standards. And finally, when compared to last year, the food processing and retail division was down.

The decrease was attributable to the timing of certain deliveries, which will happen in Q4 this year, but happened in Q3 last year. Q4 of 2018 was generally weak for that division and we should be considerably stronger this year.

The contribution of this segment remained relatively stable in the past few quarters on a sequential basis and will continue on that steady growth pattern going forward. The net income attributable to shareholders increased to $22.9 million or $0.91 per share for the third quarter of 2019 from $22.1 million or $0.88 per share for the same period last year.

Turning now to liquidity and capital resources. In the third quarter of 2019, MTY generated cash flows from operating activities of $27.2 million compared to $28.2 million last year.

The slight decrease is mainly due to higher interest payments due to the Papa Murphy’s acquisition as well as higher income tax payments that are attributable to payments of balances in the U.S. during the third quarter.

Excluding the variation in non-cash working capital items, income taxes and interest paid, operations generated $42.3 million in cash flows from operations compared to $39.1 million for the same period last year. The increase is primarily driven by EBITDA.

Free cash flows for the quarter were $26.7 million, down slightly from $27.9 million last year. And again, the decline is mainly due to higher interest payments and tax payments.

Subsequent to the end of the quarter, we amended our credit agreement, which resulted in an increase of the authorized amount of $700 million. While the maturity of pricing terms changed, the remaining terms were mostly unchanged.

At the end of the quarter, $545.9 million was drawn on our credit facility. The good news is that this new amendment was negotiated at lower interest rates which should result in savings of about $3 million per year at current levels.

MTY ended third quarter of fiscal 2019 with a healthy financial position. As at August 31, MTY had $43.7 million of cash on hand and a long-term debt of $570 million in the form of holdbacks on acquisition and bank facilities.

To conclude, we will maintain a focus on maximizing shareholder value by adding new locations for some of our existing concepts, integrating our recent acquisitions, seeking highly accretive acquisitions, and deleveraging the company. Subsequent to the end of the quarter, we announced that we signed an agreement to acquire 70% interest in Turtle Jack’s Muskoka Grill, COOP Wicked Chicken, and Frat’s Cucina, three casual dining concepts operating in Province of Ontario.

The transaction is expected to close in the next few weeks. With that, I thank you for your time and I will now proceed to answer your questions.

Just maybe a question around your commentary on the EBITDA margin, some of the drivers of that. I think you indicated that part of it is accounting statements and part of it is going to be some of the investments.

Can you maybe talk about how we should think about Q4? And what the potential restatement impact could be on even prior year?

Because I think, this quarter, there was I think borderline about 10 percentage points step down in the prior year EBITDA margin as a result of the restatement. So just trying to get a better handle on the impact of the accounting side of things?

Good morning Sabahat. Well, in terms of the margins, there’s a few things going on.

Obviously, we’re still happy with our franchising margins. In Canada, we’re at 54% franchising, in the U.S.

we’re at 48%. So, we’re happy with those margins.

I mean they are pretty strong. Obviously, Cold Stone’s big quarter was this quarter, so that helps the margins and next quarter is going to be Papa Murphy’s big quarter so that’s going to help the margins.

So, I mean, without giving guidance I can say that I don’t anticipate our margins for franchising to be significantly different or at least not significantly lower than they are for this quarter. And then there’s the retail portion.

Obviously, the margins this year were lower than last year for retail and the weight of the retail division now on the total business of MTY is getting bigger. So obviously, that pulls down on the margins.

On a consolidated basis, even though in terms of dollars that we're bringing to the bottom line, we're still very happy with that line of business and we're going to continue to push and drive the business through more sales. And then there's the corporate stores obviously.

The corporate stores are what they are. They generate lower margins.

So, I mean -- and you know it's always the same thing. I am not necessarily comfortable discussing the margins on the consolidated business.

I'd rather go segment by segment. But yes, so I don't see any reason for drastic shifts.

I'm not sure in terms of accounting change why that would have an impact on the margins at this point, especially not between Q3 and Q4. But maybe if you want to refine the questions and direct me to something more specific on the accounting that you would like to explore, but I don't see a reason why Q4 would be very different from Q3.

So, yes, so it was along the lines of just the Q3 ‘18 margin under the restated accounting versus what it was when you reported it last year. I was thinking part of that might be driven by IFRS 15?

There's a little bit of IFRS 15 for sure. Don't forget also, last year, we changed the way we account for the retail division.

We went from a net to a gross way of delivering information. The bottom-line is the same thing, but obviously that pulls on the margins because when you account for it net you have a 100% margin on that part of the business, and obviously now we don't have that anymore.

And there's also a Casa Grecque distribution center that was added to that business that we didn't have last year. So again, that's a slightly bigger amount of dollars that are produced at low margins.

But again, it's dollars that are bringing to the bottom line, so that pulls down the margins. There's also another aspect of the consolidated margins that I didn't address.

But there's a promo fund that are now accounted into as revenues and expenses. In the past, they were balance sheet items.

So that always has an approximately 5% impact on the margins going down because that's a 0% margin item.

And then just on the Papa Murphy's. You said the closures were in line with expectations this year.

Can you maybe talk about some of the initiatives that you're undertaking there since you acquired the business? And so your outlook based on what you have seen over the last few months for that platform?

Yes, so well, the biggest thing we had at Papa Murphy's is we needed to complete the management team. We had two people leave the company when we did the transaction.

So we just -- our new marketing person just started with the company last week, so now we have a full management team. So that was the first step I think to getting things done and getting traction with the business.

So now we're reassessing a lot of different things on operations for Papa Murphy's. There has already been changes that have been made to try to optimize the operations of the franchise stores, but also the corporate stores, as you know there's over 100 of those.

So we're trying to focus more attention on those, bringing them to produce better income for us and we're also in the process of refranchising as many as possible of these corporate stores, and we've had some really good feedback from the franchisee community, and I think we're going to be able to franchise those and put them in good hands, so that they produce optimally. So, that's the main items that we've been working on.

Obviously, we have to work on the technology aspect of it. We are launching our loyalty platform, so it’s being tested now and should rollout completely in January and there's a few different initiatives that will come to market very soon.

So, hopefully that will help the business drive the results as we're expecting from it. But all-in-all, as I said in my previous calls, I think the plan that the management team at Papa Murphy's had is still very valid and it's just a matter of executing that plan and continuing to drive the results that are coming from that plan.

So, I mean, we have the full team to do that and we are going to reassess a few things here and there, but the plan was there and it up for us to execute it.

And then just one last one from me. Can you maybe talk about what you're seeing with the just a broader consumer across the U.S.

and Canada, in your markets. I mean the comps look to be slightly above positive in both of those markets, but are you seeing any -- did the trends change across the quarter?

Are there any other banners that are maybe doing a little bit better? Just want to understand the consumer uptake in both of your major markets?

Yes. Well, I mean, it was a pretty steady quarter.

In Q3 sometimes we have one or two good months and one or two bad months in the quarter and we aggregate the results. In this case, it was pretty steady.

The three months were very similar. So, we didn't see any major shifts in how the consumers are behaving.

The early data that we have in September seems to be indicating that it's continuing along the same patterns. So I don't know what October and November are going to have in store for us, but seems pretty steady at the moment.

I'm not seeing any major shifts in how the consumers are behaving one way or another.

Maybe we can take a few steps back here and just get your assessment, Eric, on -- in the quarter, things that you were pleased with and things that maybe you'll put a little bit more effort on in the quarters ahead? Just high-level bullet points.

Yes. Well, in general, we're pleased with obviously same-store sales.

And as I’ve mentioned on pretty much every call since we started doing calls last year, the major focus for us at the moment is to fix the operational metrics for most of our brands and we're making good progress there. So, we are really happy with some of the progress.

We are happy with 84 open stores in the quarter. We are happy with the same-store sales being positive for U.S.

and Canada. So, those are good metrics that we want to put some emphasis on.

Obviously, the recurring streams of revenues in Canada are very positive, so that's the bread-and-butter for the business. In the U.S.

we've been declining a little bit, but all-in-all I think it's under control. So, lots of good indicators pointing in the right direction.

If I look in the more negative aspects because you're asking, obviously, I'm not happy with the store closures. There are Papa Murphy's stores that have closed that we expected.

There is also 17 stores that are closed by one of our franchisees in the Middle East for two brands and that are removed from those markets. We're disappointed with that and we need to bring more attention to those stores that are fragile to try to make them more profitable and try to save them as much as possible.

So that’s an emphasis of ours. I know, you probably have had time to look at the new disclosures we’ve put together, when it comes to store closures, but I think it’s pretty interesting.

And it tells a little bit more of the story than what you had in the past, so hopefully, you’ll be able to read into the data a little bit better than what we allowed you to do before.

Thank you for that additional data. I could see it, but I have to review your points early.

Last quarter -- and I know it was a very little of the quarter, but last quarter you gave us some early insight into Papa Murphy's same-store performance. Wondering if you could give us a little color on that in the quarter and just the same-store and maybe also Cold Stone as well just given the materiality of that business in this quarter?

Yes, well it continues to behave in pretty much exact opposite ways. When we have warm weather, we sell a lot of ice cream, we don’t sell any Papa Murphy’s pizza.

So, it’s very -- the negative correlation is pretty strong there and this is what we saw in Q3 when we had warm weather, Cold Stone was performing really well. And when we had the warm weather, Papa Murphy’s was struggling a little bit and this is -- Cold Stone was very strong in the quarter.

And it was also very strong in the month of September which is the month after quarter end and Papa Murphy’s was suffering a little bit from the warm weather in the Northwest part of the U.S. and in September it was the same thing.

So, I mean all-in-all, it’s very dependent on weather. They’re behaving in opposite ways, which is not surprising.

If we went the other way we’d probably have to ask ourselves question, but yes this is -- for those two brands it’s performing as expected given the weather patterns.

Okay. So -- right.

Noting the weathers, it would be fair to say Papa Murphy's may be a little bit negative on the same-store and Cold Stone a little bit positive on the same-store. That'd be a fair -- okay...

When the weather is normal, that’s what we will expect. I think the summer was pretty steady in terms of weather in the U.S.

so that’s probably normal summer for us.

Okay. In terms of organic EBITDA growth, I think, you gave us that negative $3.4 million and maybe this isn't the right question for the call, but just wondering if management considers that metric to be key.

I know as I look through your disclosure, there's some transient things in there like non-material differences or consulting and stuff like that. So is that an important metric that management looks at or would you more look at the variance in recurring revenues and expenses in the corporate store EBITDA cadence?

Yes, we look at both. But I can tell you the management team is compensated on organic growth in EBITDA.

So they’re -- everybody on the team is looking at that metric. So, it is an important metric.

We want to have that metric being positive in terms of organic growth in EBITDA, organic growth in free cash flows, organic growth in systems sales that’s really key for us. And that’s part of everyone’s compensation.

So, we’re all aligned there. We do have a negative organic growth this quarter after two quarters of slightly positive organic growth.

And obviously, we want to bring it back to positive organic growth in Q4. We do have a line of sight on the certain number of things that will help us, but obviously we need to do a better job but keeping our stores open and keeping -- we need to keep the cadence on store opening, we need to keep the cadence on same-store sales while we're doing that.

Okay. And I think I may -- you may have alluded to this last quarter in terms of your insight to provide this color, but on the same-stores, is it predominantly traffic basket or both on an aggregate basis?

Yes, there's a large portion of it that's basket. The traffic for some of our brands is up, for some of our brands it’s down.

But yes, when you're under 1%, you have to assume that most of it is going to come from your basket size and that's the reality for us.

I just wanted to follow up on the questions about the organic EBITDA. I think you guys put that out a bridge there.

I just -- I wanted to talk about maybe two factors, there seems to be a little bit of weakness in the corporate restaurant category, corporate store category and then I think you alluded to higher OpEx for people and resources. So can you just give us a little bit of color on both of those categories and, kind of, where you see them playing out over the next 12 months?

Yes, that's a good question. For the corporate stores we are slightly weaker than last year.

There’s -- it's really a tale of a few stores only. So we are addressing those.

Those are some stores that are struggling, that we need to address, some of them need to close, some of them need to be managed better, some of them need to be put in the hands of a capable franchisees if we're not finding the right people to manage those stores. So there's certainly a part of that.

There's also some stores that are suffering from roadwork. I'll give you an example.

We have a store in Oakville on Lakeshore and there's machinery that's literally blocking the door so the customers can’t go in. So I mean there's -- we're losing a lot of EBITDA with some of these stores and some of the roadwork that's going on.

Hopefully for the winter some of it will subside, but we don't have any guarantees for that. There is -- also last year we sold our -- most of our Pinkberry stores we had in New York City and those stores -- and Q3 was the strong quarter for those stores.

So they were extremely profitable in Q3. But for the rest of the year, it was a slightly more difficult operation for us to manage, especially trying to manage an operation in New York City from an office that's based in Arizona.

So those stores were franchised and they do produce much better results within the hands of the franchisee. But obviously for Q3 it makes our EBITDA looks like it's declining.

And can you maybe quantify the -- I think, you alluded to earlier, like, we're hiring some folks and we're investing in the accounting standards. Can you maybe quantify that amount for us?

No. I mean, I can tell you where we invested people, I mean I won't quantify the amount but we did invest in more resources in the development groups.

Because we believe that if we want to open stores with the number of brands we have, it's not fair for the selected few people. We had to try to sell everything and franchise all these concepts and do it well for all of them.

So we did add a certain number of people and we finally completed our team a few weeks ago, I think two or three weeks ago. So we had been looking for some people in certain regions for a longer time, so that's done.

We've added a certain number of people also in our supply chain and procurement group, where we think that we can bring more value for our franchisees and for the corporation by having a little bit more people, given the expansion in the number of brands we have and the complexity of our business. It's getting a little bit more -- it's a lot more work, so we have added people there.

And obviously, we have a lot more people in accounting just because of the new accounting standards. Just to give you an idea, we had to hire 13 temporary people just for IFRS 16 just to be able to deliver that and that's on top of IFRS 9 and IFRS 15 that are also there.

So obviously that's bringing a lot more resources into the company and I mean they're not optional. So, in a nutshell, that's where we added people.

Okay. That's really helpful.

I see you guys called out a bit of weakness in Ontario from the malls. Just maybe a little bit color there, is -- maybe which malls that would be?

I am just wondering if you think that could be a start of a bigger trend there?

Yes, not sure it would be wise for me o tell you which malls we were weak in, George.

I guess, the category maybe.

No. I think in general, the malls we're slightly weaker in Ontario.

I wouldn't read too much into it. It's hard to really drive conclusions from one quarter for one territory.

So we need to wait a little bit longer to see if it was related to some external noise or if it was related to the performance of the malls themselves, which we've been seeing in the past few years, especially in Canada that the malls are still strong. And we still believe that the malls are good businesses for us, but obviously we're tracking the data with a lot of attention, because we want to make sure that if there's a shift in how the malls behave, we are going have to be reacting very quickly to make sure we don't end up in trouble in a few years.

But as I mentioned on the call, our exposure to malls is getting lower and lower, especially in the U.S. but even in Canada the percentage is getting lower.

So, I think that's a natural way for us to look at things.

That's helpful. And just one last one if I may on -- I am just wondering if there's a reason why the Papa Murphy's corporate stores underperformed the rest of the network, I guess, from a same-store sales perspective?

And can you maybe just share with us like a timeline as to when you think you can, kind of, franchise those corporate stores?

Yes. Well, in terms of corporate stores, I think in general, our corporate stores underperformed the rest of the network, and I think the reason is pretty simple, when you have a franchisee in the store, it's always better than having the corporation try to manage them.

They have more attention to the little details. They get involved in the communities.

They really put all their energy in there. They make sure that everything is top-notch in terms of purchasing, in terms of scheduling, in terms of everything.

When we try to manage a corporate store from a distance while we manage the rest of the franchise network, it's hard for us to do as good a job as our franchisees would and we're just not wired properly to manage corporate stores at the moment. So, it's not specific to Papa Murphy's that the corporate stores underperformed the rest of the network.

It's pretty widespread. Now when it comes to Papa Murphy's because of the number of stores we have, we have restructured the operations team to put more emphasis on these corporate stores and put more energy to bring them to par and hopefully recover and bring them back where they should be, especially the ones where we’re not going to be refranchising stores.

For the ones that are being refranchised, we have agreement signed with two groups that are taking a cluster of stores for given territories. We have another agreement that seems to be coming close to being signed also.

So I think between Q4 and Q1, we should be at least 50% of our corporate stores, should be franchised for Papa Murphy’s.

Just going back to the International segment, definitely, good to see an improvement directionally in same-store sales growth. But can you talk maybe a little bit more about what you think could be done to continue to improve or what you're already doing in terms of strategy?

You already mentioned the -- some of the closures there. Is it just a matter of closing underperforming locations?

Any additional color will be helpful.

Yes, well first I’ll comment on you saying we’re improving directionally versus the previous quarters but for me anytime we have a negative we’re deteriorating further than the previous quarter. So, negative is less but it’s still negative.

So, I want to bring it back to positive. There’s a few things going on in the markets where we’re at.

Obviously the Middle East economies are really struggling other than few countries, but the countries where we are -- seem to be struggling the most, so UAE, Saudi Arabia, our stores are struggling for the most part. Bahrain is also struggling.

And the closures you’ve seen are coming from those countries. We try to help our partners as much as possible to make the stores profitable.

We’re working with our partners on the supply chain. We’re working with our partners on a certain number of things to try to help them make the stores profitable and weather the storm.

Eventually the economies are going to come back and we’re going to do better. So, for the Middle East it’s still tricky.

We have a few stores in Asia also that are struggling and this is for the most part external factors that we can’t control. So we have malls being under severe construction.

You have roadwork, you have all these things that are affecting the stores but that normally should come back to normal at some point next year. So, again it’s a matter for us of trying to weather the storm and trying to do as well as possible to help our franchisees survive while the problems last, and hopefully, still be there when the more shiny days come and that the stores can recover to the level they were before.

So, in that regard then have you been -- have you implemented a lower royalty rate or royalty rate -- royalty fee relief in order to help franchisees in that region?

No, we try to work on different things. Royalty relief usually is -- it’s a very temporary solution but it doesn’t help in the long run.

So instead of doing that we’re trying more to help them improve profitability with supply chain, and improve profitability with marketing material, innovation if we have a chance. So, we’re trying to help them with more long-term solutions that will drive the traffic, that will drive the customers into the stores instead of going for a quick band-aid solution that really doesn’t solve anything.

Okay. And I suppose I would ask you how long you think it will be negative for that it'd be almost impossible to say?

Yes, I wish I had a good answer for that but especially for territories that are outside of North America, it's a little bit harder for us to have the right visibility and a good take on the economies. It would be -- I don't think it would be right for me to try to predict how the Dubai economy is going to do next year or the year after.

They have the global expo in UAE next year, how much traffic that's going to drive I'm not sure. So there’s a few things going on.

There is World Cup in Qatar in few years, how much traffic that's going to drive I don't know. It is going to drive traffic before the event for the construction or is it only a specific to when the event is going to happen, I'm not sure.

So, I wish I had an answer for that but I don't.

I'm just turning over to different topic here on M&A. I'm just wondering when it comes to valuation, have you seen multiples in Canada and U.S.

for deals starting to move higher on average? Have you found that you've had to pay more for some of your deals?

Any color on when it comes to valuation.

No, I think the multiples went up a few years ago when there was -- when the IPO market was very hot for smaller companies. I think now that the IPO market has become more normal, the multiples have come back to a reasonable level and they're pretty steady.

Obviously, bigger assets tend to come at higher multiples and that's a function of having more people interested, including private equity groups. But since we're not going after large targets for the meantime, we find that the multiples are in the right spot.

Most of it falls in the normal MTY range, multiples that we're going after. So we're happy with the multiples the way they are at the moment.

And just one final question from me with respect to the food processing and distribution sales. Obviously, we're seeing very strong growth in that.

Can you just discuss a little further? You already alluded to it in your prepared remarks, but maybe in more detail of what we expect in terms of the growth and the contribution in either for Q4 if you're able to give those specifics or just generally, when we look out to the future?

Yes, well, for Q4, there is -- obviously there is the distribution and food processing portion of the Casa Grecque acquisition, that's going to be our fourth quarter. So we didn't have comparables last year for that business, so that's going to be an addition and our retail business is really doing well at the moment.

Our sales are increasing fast and we're looking at the portfolio. We're happy with the products we have, with the launches we have scheduled for this quarter and next quarter and even after.

So we're seeing really good growth there. I think Q3 of last year was an anomaly in terms of the margins.

And when you look at Q4 of last year the margins really leveled off and it was an offset between one quarter and the other. I think this year we are a lot steadier.

So you're going to see continuous growth in that segment where we're driving the normal margins. But the business keeps growing quarter over quarter, so I'm expecting a good Q4 and a good Q1 of next year also with the retail business.

I was just wondering if you just can remind us what concepts are in the Middle East and Asia and maybe the -- if which ones are doing better than others?

Yes, we have a lot of concepts. In Asia, it's mainly Cold Stone, but we have a lot of concepts in the Middle East.

We have Cold Stone, we have Vanellis. We have a number of other concepts that are there and lower number of stores.

We have Papa Murphy's also in UAE. We have Van Houtte, we have -- Thai Express is there.

So, we have a number of -- we probably have about 12, 15 concepts in the Middle East. But the two main ones are really Vanellis and Cold Stone.

Those are the ones that have the highest volume of business. And in terms of Middle East, I don't think anybody is doing great at the moment.

And in Asia, obviously, it’s Cold Stone driven.

Okay. Thanks for that.

And let me just drilling back that on the U.S. side, I was wondering if you can explain like two things.

One, there was a big jump in sales of goods. And then second, EBITDA margin came in at 24% and that's down significantly from 36%, sequentially, like last quarter.

Just wondering what the dynamic is there and what we could expect in terms of normalized margins?

Yes. Well, in the U.S.

the sale of goods is coming from the corporate stores of Papa Murphy's. We just added over 100 corporate stores.

So, that obviously we are selling a lot of goods there, which are not the normal franchising revenues that you’re used to see and that will drive the margins down also. If you look at the margins on a consolidated basis, that's going to drive the margins down.

Our corporate stores are profitable with Papa Murphy's but they don't generate the margins the franchisor would normally generate. That’s a higher volume of revenues, the higher volume of expenses to generate profit dollars, and whereas franchising obviously, it’s low volumes but have high margin items.

So, that's the main driver for the decrease in the margins. I mean, there is no secret there.

The more corporate stores you have, the lower your consolidated margins are going to be.

Okay. That explains like the 12% -- roughly 12% difference is all corporate stores.

Yes. For the most part, that's what it is.

And may be if -- may be you should talk about the partnership you guys announced back in July with DoorDash. Has there been any impact on same-store sales, maybe talk about the economics there and just -- and it was unclear if this was only a week promo or just say a bigger rollout.

We have partnerships with DoorDash with SkipTheDishes, with Uber, with Grubhub. In different regions or different brands, we are going to have different partnerships.

But we are in partnerships with all the major aggregators. It does have an impact on same-store sales.

These aggregators do drive some additional traffic into the stores. It's hard to measure how much of it is incremental versus if we don't do anything.

But for the moment, it seems to be for the most part incremental. So, we are driving business.

We have a few brands that are more successful than others with the integrators and they're generating some really good results. We have some brands that are in the process of launching with them and we have some brands that are not as relevant as others for the integrators that are not producing large numbers.

So, we're assessing the situation. We're trying to make most of our brands friendly for aggregators.

We're also trying to work with our franchisees to deliver the products and then logistically it's not easy to operate in the store when you have all these aggregators. So, we need to work on that also to make our operations a little bit more adjusted for that new reality.

And I guess more specifically, like how do you view I guess Papa Murphy's in the context of what’s become an extremely competitive market, some would say irrational and with some of the bigger players in that segment seemingly getting a lot more aggressive whether it’s true fortressing or significant marketing and -- or throwing more marketing and promo dollars at it?

Yes, well Papa Murphy’s has a better product than all these guys, so we need to keep focusing on that product. I think trying to compete with Domino’s on price and on convenience and on everything is not necessarily the way to go for us because we won’t succeed.

So, we need to focus on something else. We need to focus on our product.

We need to restore the innovation pipeline to bring new products to the market. And we need to make ourselves convenient and we are delivering with DoorDash.

And then more and more the customer are getting used to it, we’re seeing a good trend on online ordering also for our products. So we need to make ourselves convenient.

We need to make ourselves easy for the customer to get to and we need also to make our pizza deliverable, even though it’s not baked doesn’t mean you can’t deliver. So, I mean we need to do all these things, and we need to work on that product to be -- to stay relevant in our market.

The major players like Domino’s and Pizza Hut and the other guys, I think have won a lot more stores and we do lot more marketing resources than we do. So we need to compete on something else and the quality of our product needs to be the center of what we do.

And then, I guess where do you think you are in that, that evolution in terms of differentiated product or quality of product?

Well the quality of the product is there. So we are there, where we need to work as to make sure that customers understand that we have a better product and also for some customers to remember that we have a better product.

We are in 1,400 locations in the U.S. so we are conveniently located in many different places and we just need to drive the customer through the door, and make them use our product again and they’ll really enjoy it.

And to a certain extent, Pizza for a lot of people is more about convenience and so it’s a very functional meal when you drive in, when you order your pizza. I think for Papa Murphy’s the key is to be more than functional but to be -- create some emotional links with our customers between the product and the family and the customers and everyone, to make sure that the customers do go for that option.

Is there -- do you have any expectation of having franchisees install ovens and have like a fully cooked product, or are you sticking with your current strategy?

Yes, it’s a conversation we have all the time. There’s always a discussion.

There’s a few things that we need to consider in there and the first one is, if you want to install an oven first there’s a large cost for it. The layout of the stores is not built for it, and also you need to have an exhauster stem, you need to have a certain number of different things so, installing an oven might seem simple but it’s not as simple as it looks.

And the other thing is, we don’t want to create too much confusion with our customer. If we start baking in some stores and not baking in other stores, the consumer will walk in, they’ll be disappointed because we don’t bake in the restaurant, or they’ll be surprised and we just don’t want to create too much confusion.

So if we did it, I think we’d have to cover entirely certain markets with it and in the franchise environment it’s always difficult to cover entire markets with an initiative like that.

Okay, and maybe just one final one from me. You did mention in your remarks that you had some initiatives in Canada that were beginning to bear fruit.

I was just wondering if you can maybe talk a little bit more about these and what you're doing specifically in this area?

Yes, well, we are conducting a deep dive on each of our brands. We have a lot more focus on how each individual store is performing, how it’s performing in its environment also and what we can expect from that store, what the store needs in order to perform.

We are also doing deep dives on the brands themselves to make sure that the brands are still relevant, that they remain relevant in the long run. We've had a number of initiatives going on and some are starting to come out of it where we question pretty much everything from the logo to the food offering to the design of the stores to the way we market our products.

And we've done a number of those. Some of those are still going on where we did a little bit more work.

But some of them are starting to come out and it's really interesting to see what comes out of these things, when it comes out of these deep dives. It's a huge effort for the teams to do that.

But once they're done, I think it's going to really make our lives easier for 2020 and 2021 and after.

And I guess my final one is like where are you in that whole deep dive process?

Well, it's going to be continuous now. So I don’t want to have a deep dive and then let it go.

So we're going to do deep dives on a continual basis now. So there's probably going to be more and more diagnostics being run of all of our brands of all of our stores now going forward.

So we're putting -- obviously we're putting more efforts into that and it's not something that we want to stop. It's something that's -- we need to question ourselves all the time, we need to listen to the market all the time, the markets are changing faster now than they were even five years ago.

So we need to adjust to that also. The consumer expects different things and their taste shifts quite rapidly.

So I can't say we're 50% through or 75% through because the reality is we're always starting over.

Yes. Thank you, everyone.

Thanks for joining me on the call. I look forward to speaking with you again at our next quarterly call for year-end 2019.