STATE OF THE CONSUMER The NPD Group, Inc. | Proprietary and confidential U.S. Consumer Economy Improving Economy Food and Retail Challenges Major economic indicators point to recovery, as consumers Cost increases for certain expenditures are shifting consumer are more confident, income is on the rise, and GDP posts gains budget priorities, and changing demographics create headwinds Consumer confidence has remained high Healthcare and other spending categories 129 for the past year are taking a greater share of our budget Restaurant prices have risen faster than Disposable personal income reached a new high household income Consumer spending growth is the leading contributor Our aging population is reshaping household to gains in GDP dynamics and influencing consumption patterns Consumers exhibiting an Soft but improving retail Result interesting shift in spending Can the food industry spending across a broad to the experiential—like find a way to tap into range of consumption- activities or entertainment oriented categories this trend? The NPD Group, Inc. | Proprietary and confidential 2 Canadian Consumer Economy Slow but Steady Economy Food and Retail Challenges Major economic indicators broadcast a mixed signal Cost increases for certain expenditures are shifting consumer budget priorities, and changing demographics create headwinds Groceries, utilities and the basics are the costs that Consumer confidence has remained high consumers are most worried about in their 116 for the past year, but is down this month household budgets Restaurant price increases have steadied after a jump Debt to Disposable Income ratio reached a new high in 2018, as grocery prices now begin to rise Population growth is being driven by immigration, Unemployment remains at a historic lows shifting the generational and ethnic landscape Result Soft retail spending across a The low exchange rate and the The foodservice industry broad range of recovering US economy are is slowing, and needs to consumption-oriented helping to bolster the tourism find new ways to categories industry recapture momentum The NPD Group, Inc. | Proprietary and confidential 3 Committed Consumption Consumers have greater committed spending today, leaving less money for retail and foodservice purchases. Traditional Monthly Expenses New Committed Monthly Expenses Auto Payments Amazon Prime Loans Cell Phone Credit Card Debt Netflix Insurance Hulu Gas Spotify Utilities Costco Membership Food Stitch Fix Subscription Cable/Satellite TV Meal Kit Phone Microsoft Office Gym Adobe Cloud Suite Newspaper/Entertainment Lifelock The NPD Group, Inc. | Proprietary and confidential 4 COMMERCIAL RESTAURANTS IN NORTH AMERICA The NPD Group, Inc. | Proprietary and confidential 5 Foodservice Traffic - Globally Since 2014, Canada has outperformed all other foodservice markets tracked by NPD. Meanwhile, the U.S. and many European countries remain in a +1% growth world. Global Traffic Change Index 2014-2018 115 110 105 100 95 2014 2015 2016 2017 2018 Great Britain France Germany Italy USA Australia Canada Change expressed as a percent of 2014 level Source: NPD CREST 2014-2018 The NPD Group, Inc. | Proprietary and confidential 6 Size of Commercial Restaurants U.S. Canada $496 B +3% $62B +4% USD CAD 77 B 0% 7.5B +2% visits visits $6.46 +3% $8.24 +2% USD CAD 664,000 0% 65,000 -1% stores stores Source: The NPD Group/CREST®, YE Aug’19; Note: Includes commercial restaurants and retail foodservice, except store count data ReCount US Spring ’19, ReCount CA Dec’18 The NPD Group, Inc. | Proprietary and confidential 7 Traffic Share by Segment: U.S. & Canada Markets In Canada, the FSR segment is outpacing the total market; meanwhile, the reverse is happening in the U.S.. PCYA PCYA Total Market 0%100% 2%100% QSR 62% 1% 68% 2% Midscale Dining 6% -3% 13% 4% Casual Dining 11% -1% 9% 2% Retail 21% 0% 9% -2% PCYA: Percent Change vs. year ago “++%”= >15%, “--%”= <-15% Source: The NPD Group/CREST®, YE Aug’19 The NPD Group, Inc. | Proprietary and confidential 8 Two Hot Industry Topics Across North America Each are still relatively small in size, but growing trends in both countries. Digital Health & Wellness: Plant Based The NPD Group, Inc. | Proprietary and confidential 9 Food verticals are in the early stages of e-commerce 44% E-commerce— U.S. Retail Penetration 41% 29% 29% Similar 24% 23% 24% 21% rate in 19% Canada 17% 10% 6% 4% Toys Auto Video Video CPG** Games Beauty Office Apparel Presgge Presgge Small Footwear Supplies* Appliances Technology Accessories Commercial Food Commercial CPG** Commercial Office Auto Toys Small Prestige Apparel Footwear Accessories Video Technology MediaMedia Entertainment Food Supplies* Appliances Beauty Games Entertainment *Excludes Commercial Channels 12 months ending Dec’18 **CPG number sourced from Accenture “Winning in the Digital Channel” Source: The NPD Group/ U.S. Consumer Tracking Service, except office supplies and beauty: Retail Tracking Service ***% of buyers online via NPD ‘s Car Care Track (POS) , consumer electronics: Checkout Tracking The NPD Group, Inc. | Proprietary and confidential 10 Digital Orders Have Been a Source of Outsized Growth Average annual growth rate 2014 to 2019 -0.8% Total Restaurant Traffic +24% Digital Orders +1.8% Total Restaurant Traffic +34% Digital Orders Digital Orders = Mobile app, Internet, or text message (all for pick-up or delivery) Source: The NPD Group/CREST®, YE Aug’19 The NPD Group, Inc. | Proprietary and confidential 11 Digital is Growing Across Service Modes Digital orders are also growing for ON-PREMISES and CARRY-OUT occasions 35% & 55% (U.S./Canada) of digital orders are DELIVERED Source: The NPD Group/CREST®, YE Aug’19 The NPD Group, Inc. | Proprietary and confidential 12 Millennials and Gen Z are driving digital usage Growth sourced to Gen X and Boomers, too Source: The NPD Group / CREST The NPD Group, Inc. | Proprietary and confidential 13 A majority Apps provide of restaurant app a path to users keep improved three or fewer consumer restaurant apps on experiences their phone via 1-1 marketing Source: The NPD Group/Digital Evolution of Foodservice The NPD Group, Inc. | Proprietary and confidential 14 Most-Used Restaurant Apps in the U.S. 60% 40% restaurants third-party Top 20 most-used apps for restaurants shown top to bottom and left to right Source: The NPD Group/Delivering Digital Convenience The NPD Group, Inc. | Proprietary and confidential 15 Delivery aggregators are making an impact Aggregators are growing at the expense of restaurants’ own digital delivery platforms and helping operators connect with younger generations. Share of Digital Delivery Orders: Total Commercial FS Share of Digital Delivery Orders: Total Commercial FS Other/ Other/ Don’t Know Don’t Know Restaurant app/website Restaurant app/website YE August 2018 70% 4%4% 22% YE August 2018 49% 25% 11% 16% YE August 2019 68% 5%5% 22% YE August 2019 34% 34% 17% 15% Source: The NPD Group/CREST®/YE Aug’19 The NPD Group, Inc. | Proprietary and confidential 16 What are consumers pairing with French Fries? TRADITIONAL FRIES SWEET POTATO FRIES SPECIALTY FRIES Most Commonly Paired With: Most Commonly Paired With: Most Commonly Paired With: In the U.S., CSDs, Chicken This holds true for This holds true for Sandwiches, Nuggets, and Roast Beef both countries! both countries! Sandwiches are the top 4 items Total French Fries = Traditional (Traditional + Poutine), Sweet Potato Fries, Specialty Fries (Curly/Waffle/Wedges) Source: The NPD Group/CREST® YE Aug’19 The NPD Group, Inc. | Proprietary and confidential 17 CANADIAN OPPORTUNITIES The NPD Group, Inc. | Proprietary and confidential Areas of Opportunity: DIVERSITY AS A BREAKFAST AT FSR THE GENERATIONAL SHIFT GROWTH ENGINE The NPD Group, Inc. | Proprietary and confidential 19 Areas of Opportunity: DIVERSITY AS A BREAKFAST AT FSR THE GENERATIONAL SHIFT GROWTH ENGINE The NPD Group, Inc. | Proprietary and confidential 20 Immigration is accelerating, driving population growth at 4x the rate of natural growth this past year Canadian Population Growth (‘000) 600 Canada’s Immigration Plan: 450 Million over Immigration +13 years 300 150 India Phillipines China Natural Growth 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Source: Statistics Canada The NPD Group, Inc. | Proprietary and confidential 21 The composition of the immigrant population is changing with 30% of all recent immigrants under the age of 25 Distribution by Age of Immigrants (%) 65+ 100% 25-64 Under 25 75% 50% 25% 0% All Immigrants Recent Immigrants 2011 - 2016 Source: Statistics Canada The NPD Group, Inc. | Proprietary and confidential 22 The Asian Population continues to be a stronger portion of foodservice traffic, especially in the 18-34 cohort Asian Ethnicity % Traffic of Commercial Foodservice 21% 13% 13% 6% YE Aug 15 YE Aug 16 YE Aug 17 YE Aug 18 YE Aug 19 Total Asian Age 18-34 Source: The NPD Group Canada/CREST® YE August ‘19 The NPD Group, Inc. | Proprietary and confidential 23 Menu preferences reflect ethnic diversity Top Commercial Foodservice Top Food Items Asian Demo Non-Asian Demo 1. French Fries 1. French Fries 2. Burgers 2. Burgers 3. Breakfast Sandwiches 3. Breakfast Sandwiches 4. Donut 4. Chicken/Turkey 5. Chicken/Turkey 5. Donut 6. Chicken Sandwich 6. Pizza 7. Pizza 7. Chicken Sandwich 8. Thai/Korean/Viet/Other 8. Side Salad 9. Non-Fried Vegetables 9. Muffin 10. Rice 10. Hash Browns/Home Fries Source: The NPD Group Canada/CREST® YE August ‘19 The NPD Group, Inc. | Proprietary and confidential 24 Areas of Opportunity: DIVERSITY AS A BREAKFAST AT FSR THE GENERATIONAL SHIFT GROWTH ENGINE The NPD Group, Inc. | Proprietary and confidential 25 The 45-54 cohort now represents the greatest foodservice traffic Commercial FS Traffic By Cohort (MM) Age 25-34 35-44 65+ 18-24 Source: The NPD Group Canada/CREST® YE August ‘19 The NPD Group, Inc. | Proprietary and confidential This cohort has higher disposable income and will more often bring children ➢ Household income is the highest of any other cohort ➢ Still has teenagers living at home ➢ Over 1 in 5 visits to an FSR includes the kids ➢ The FSR restaurant choice is more likely influenced by a kid more than any other cohort Source: The NPD Group FSR Report/July ‘19 The NPD Group, Inc.