Joey Wat : Thank you, Chen Luo. Let me just point out that the ticket average compared to last year is not exactly the best comparison because last year is during the pandemic. Ticket average is unusually high because people are locked down at home. And when they order, they order big ticket size, right. What is more comparable is we look at the ticket average compared to sort of the more normal year. Although we are – our business is very different compared to 2019, but we can compare the ticket average with 2019. The ticket average is still slightly higher in 2019. So that is sort of more normal. So I ask our investor not to be overly concerned about the ticket average drop compared to last year. And usually when our sales move, the more focused number is always the ticket transaction, TC.
And the fact that our TC grows at almost double digit is a good sign. So in our business, over many, many years, just go beyond one quarter, go through the five years or 10 years, you will see our ticket average is always rather stable. So that hopefully addresses your concern about the ticket average. And, go on….
Andy Yeung : Yeah, let me just address this TA. As I tried to, in the previous remarks, I’m trying to decompose what is driving the TA. Obviously, promotion is a part of that, but it’s only one of the, right. If you look at for example for KFC, today the TA is still higher than what we have seen in 2019, as Joey mentioned. And part of that is delivery mix, right. We have high delivery mix compared to 2019. And then, if you look at compared to last year, we actually will decline in the mix for delivery as people returning to the store. And so that would have an impact on the TerrAscend, because the delivery TA for KFC obviously is higher than the dining component. The other one is, if you look at KFC for example, we also mentioned about breakfast daypart, right.
So last year because of the pandemic, the breakfast daypart was impacted more so than the other daypart. With the rebounds in, breakfast daypart, and which tend to also have more TA. So the increase in traffic for breakfast daypart would also have impact on that. So there’s a number of components. And if you look at our fuel ads, you will notice that it’s actually very stable, right. Compared to last year, only 40 basis points difference. Compared to 2019, 10 basis points. It’s almost flat line, right. So we have ability to manage overall our possibilities, our margins with different drivers for TA.
Joey Wat : Just coming back to lower density of food and paper costs, I mean, I think we have shared in our Investor Day that we’ve been managed, we’re being able to manage the food and paper costs at a very stable number over many years. When there’s some factors driving up the food cost, well such as commodity inflation. We are able to deliver a very stable growth, because of our innovations and using all parts of chicken and being flexible with our supply chain. So we are always quite stable here. And I keep reminding our team internally, the problem, the food and paper cost become a problem is when it becomes too low. That means that we are not giving the value for money, the quality of food and the volume of food to customer. So it’s a relatively stable percentage for the food and paper costs over the many years. Thank you.
Chen Luo: Yeah, thank you, Joey and Andy. So we also have confidence in the management ability to stay agile and take the right measures to address competition and further reach share. Thank you.
A – Joey Wat: Thank you.
Andy Yeung: Thank you.
Operator: Your next question comes from Wilkins Tong from Morgan Stanley. Please go ahead.
Lillian Lou: Hey, sorry, this is Lillian from Morgan Stanley. Can you hear me?
Joey Wat: Yeah, we can.
Andy Yeung: Yeah.
Lillian Lou: Yeah, so I have a question again on margin side, but its different aspects. I think despite all this losing the subsidy impact and normalization of labor, staffing to stores. Is there any impact from acceleration of store expansion to margin? Because I think going forward, we’re going to keep up this expansion pace. So should we kind of rethink about the margin base given such a situation? I just wanted to really kind of get some color on how to quantify the impact of faster unit expansion to margin. Thank you.
A – Andy Yeung: Okay. Thank you, Lillian. So when we look at our net new store opening, they continue to be very healthy. If you look at the overall cash payback period for our new store opening, it’s still three years for KFC and three years for Pizza Hut. In fact, as we mentioned, the small store model actually performed even better. Now, if you look at how they ramp up, obviously there’s a ramp up period for the newest store. We have mentioned large majority of our new store actually breakeven in the first three months and they continue to ramp up through the years. It may have a short-term impact when they just open, because it’s ramping up sales and margins tend to be lower, but they tend to be very healthy, have good economics as they progress into a year or two from the opening.
So there’s no change in the way we look at small openings. The important indicator for us really is to look at how the new stores are performing in terms of cash payback, in terms of economics. And as long as those are good, we’ll continue to stick with our plan. And as we mentioned, we have been quite disciplined about store opening, driven by our investment models and then also from ground up from our market. So we have an automatic acceleration, deceleration based on the performance of the store.
Lillian Lou: Thank you, Andrew.
A – Joey Wat: Yeah, thanks.
Operator: Your next question comes from Anne Ling from Jefferies. Please go ahead.
Anne Ling: Hey, hi. Hi everyone. Thanks for taking my call. Questions regarding the current trading environment. You guys mentioned about being a little bit softer and with sales fluctuation. Would you elaborate a little bit on that? Is it like you’re talking about post festive event, that there is a fall-off in terms of sales performance, regardless of like any promotion or innovative product that you launch or is it because certain day part that you noticed that didn’t really perform as expected? Maybe – or a certain geographical area. Would love to hear a little bit more about, what drives the softness? Is it like, is there anything that we can do about that? Yeah, thanks.
A – Joey Wat: Sure, Anne. So at the high level, I mean, summer was vibrant, particularly July, there’s some tenant demand. So as I mentioned earlier, transportation helped traffic going to increase 50% year-over-year, which is really a good sign. And then comes to the just reason, national holiday during the first half of October. It’s quite interesting here actually. We observe sort of first half and second half during the national holiday. Because this year, particularly this year, the national holiday at the beginning is at the same time as mid-autumn festival. So we see softness during the first half, because after three year pandemic, mid-autumn festival for Chinese people, what do we do? Go home. So, the first half of the holiday, we see massive number of customers going home, go back to see their families, spend time with them.
