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Good morning. My name is Emily, and I will be your conference operator today. At this time, I would like to welcome everyone to the conference call for Recipe Unlimited 2018 Fourth Quarter and Year-End Results. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time.Before turning the meeting over to management, please be advised that this call contains certain forward-looking statements that are based on current expectations and are subject to a number of uncertainties, risks and other factors, which may cause the actual results, performance or achievements of Recipe to be materially different. For further information identifying risks, uncertainties and assumptions and additional information on certain non-IFRS measures referred to in this call can be found in the company's management discussions and analysis and annual information form available on SEDAR. I will now turn the meeting over to Frank Hennessey, Chief Executive Officer of Recipe Unlimited Corporation. Mr. Hennessey, you may begin your conference.
Thank you, Emily, and good morning, everyone. Thank you for joining us for our Q4 and Year-End 2018 Conference Call. With me this morning is Ken Grondin, our Chief Financial Officer.As always, I'd like to thank the entire Recipe team, including our franchisees and front-line associates, for their contributions in 2018. It's been through hard work and a collective desire to improve the experiences we provide to our guests, and we have moved our overall business forward in the year. Today, I'll be commenting both on Q4 2018 and on the 2018 fiscal year. As I do this, I'd like to remind everyone that there was an extra week on both the fourth quarter and fiscal year 2017 compared to the same periods in 2018. As well, the Pickle Barrel acquisition closed November 30, 2018, partway through Q4 2017, and the Keg merger closed February 22, 2018. And so these deals will be driving a portion of year-over-year variances being discussed today.2018 was a highly productive year for the company as we continue to deliver strong financial growth. Most notably, we made substantial progress towards our 2020 to 2022 long-term financial targets. We strengthened the quality of our restaurant portfolio. We progressed on our multiyear effort to elevate the experiences we create for our guests. We merged with The Keg. We acquired Marigolds and Onions. We achieved positive Same Restaurant Sales. We significantly increased our free cash flow. We reduced our debt, and we renamed the company from CARA to Recipe, thus beginning a new chapter in our growth story.In fiscal 2018, Recipe achieved $3.4 billion of system sales, Same Restaurant Sales growth of 1.3% and an increased operating EBITDA to $219.6 million, with corporate franchise and retail and catering segments all improving on both their contribution dollars and as a percent of sales. Net central contribution as a percent of sales was down, primarily as a result of adding The Keg, which operates with higher net overhead costs and makes royalty payments to The Keg's royalties income fund. We view this as an opportunity, and we are continuing to progress on unlocking financial synergies from The Keg merger. As mentioned, within the year, we merged with The Keg and acquired Marigolds and Onions. Also during the year, we repaid $116 million of debt. And I want to emphasize that this $116 million debt repayment is more than $104 million that we drew from our credit facilities to fund the merger with The Keg in February 2018. Our year-end debt-to-EBITDA ratio was 1.68x compared to 2.2x at the end of Q1 2018, demonstrating our ability to quickly delever based on the strength of our recurring free cash flows.In 2018, our free cash flow before growth CapEx, dividend and NCIB was $164.1 million or $2.66 per share on a diluted basis compared to $144.3 million in 2017 or $2.42 per share, an increase of $19.8 million or 13.7%. Recipe's significant free cash flow provides us with the financial flexibility to consider alternatives for capital deployment, including growth investments, strategic acquisitions, enhanced shareholder returns through dividend growth and share buybacks as well as investments in our core businesses to help our franchise partners through initiatives such as renovation incentive programs, investments in technology in supporting guest experience as well as ongoing training and marketing support. On the point of enhancing shareholder returns, in 2018, we purchased and canceled 634,850 Recipe subordinate voting shares for a total consideration of $16.2 million. And yesterday evening, we announced that we increased our quarterly dividend by 5% to $11.21 per share.Turning back to our performance in the quarter and year-to-date, in 2018, total System Sales increased to $905.4 million in the quarter and $3.4 billion for the full year. This compares to $774.9 million and $2.8 billion in 2017, respectively, representing an increase of $130.5 million or 16.8% for the quarter and $635.8 million or 22.9% year-to-date. The sales impact from the additional week in 2017 was $48.2 million.System Sales increased as a result of the additions of Pickle Barrel in December 2017, The Keg in February 2018 and positive Same Restaurant Sales of 1.3% compared to the same 52 weeks in 2017. In the quarter, Same Restaurant Sales decreased 0.2% compared to the same 13 weeks in 2017. While disappointed with SRS, we are pleased that our corporate franchise and retail and catering segments have demonstrated year-over-year growth in absolute dollars and as a percent of sales in both the quarter and year-to-date. We were also pleased with the progress we have made on our guest experience metrics. We have seen meaningful positive improvement, but we must stay disciplined to our 4 Pillar operational strategy of improving the quality of our food, quality of our service, improving the value of the experience and creating an ambience that people enjoy.Operating EBITDA was $64.5 million for the quarter and $219.6 million year-to-date compared to $58.5 million for the 14 weeks ended December 31, 2017 and $191 million for the 53 weeks ended December 31, 2017, an improvement of $6 million or 10.3% for the quarter and an improvement of $28.6 million or 15% for the year. The estimated operating EBITDA impact from the additional week in Q4 of 2017 was $3.5 million, increasing the 2018 improvement over 2017 for the quarter to $9.5 million or 16.2%, and on a 52-week basis to $32.1 million or 16.8%. The increases for the year were driven by Same Restaurant Sales increases, improved contribution from the corporate franchise and retail and catering business segments, improved contribution from Original Joe's and the addition of The Keg in February of 2018.Operating EBITDA margin on system sales before The Keg royalty expense was 7.5% for the quarter compared to 7.6% in 2017. Operating EBITDA margin on System Sales after The Keg royalty expense was 7.1% for the quarter. Operating EBITDA margin on System Sales before The Keg royalty expense was 6.8% compared to 6.9% on a year-to-date basis in 2017. Operating EBITDA margin on System Sales after The Keg royalty for the year was 6.4% compared to 6.9% in 2017.While the corporate franchise and retail and catering segments achieved year-over-year improvements in their contribution margin rates, The Keg's higher net central overhead costs and the royalty payments in The Keg Royalty Income Fund in the medium term will reduce Recipe's operating EBITDA margin on System Sales below our long-term targeted 7% to 8% range.In Q4, operating EBITDA after the royalty payments to The Keg Royalty Income Fund was within our long-term target range of 7% to 8%, an improvement over our Q2 and Q3 results. This improvement is a result of earnings efficiencies that are beginning to materialize in some of our acquired brands as a result of the fourth quarter being our strongest sales quarter, particularly within our retail and catering segment as it relates to the sale of Recipe branded products in retail and grocery. In 2018, we added a new pie production line at our St-Hubert plant in Québec, significantly increasing our production capacity. Beyond the quarter, we will continue to focus on increasing the earnings efficiencies of our assets and our increased sales base to grow operating EBITDA as a percentage of System Sales back within our 7% to 8% target range by 2020 to 2022. And at this time, I'm going to turn it over to Ken for a review of our financial results.
Thank you, Frank, and good morning, everyone. My overview will refer to our fourth quarter and full year financial statements and MD&A issued last night, both of which are available on SEDAR.Total gross revenue was $328.2 million and $1.2 billion for the 13 and 52 weeks ended December 30, 2018 compared to $240 million and $832.7 million in 2017, representing an increase of $88.2 million or 36.7% for the quarter and $359.2 million or 43.1% for the year. The increases in gross revenue for the year was primarily a result of positive SRS, the Pickle Barrel acquisition in December 2017 and the addition of The Keg in February 2018. The estimated impact from the additional week in 2017 was $10.5 million in gross revenue.Operating income was $26.2 million and $126.9 million for the 13 and 52 weeks ended December 30, 2018 compared with $40.3 million and $128.7 million, representing a decrease of $14.1 million for the quarter or $1.8 million or 1.4% year-to-date. The change in the quarter and year-to-date reflect operating EBITDA improvements of $6 million and $28.6 million, respectively. However, these improvements were offset by the impact of increased restructuring costs related to the expected cost to exit the company's IT data center lease, noncash impairments recorded in the quarter and higher depreciation and amortization expense from The Keg and Pickle Barrel and The Keg royalty expense related to the addition of The Keg. The Q4 restructuring provisions should result in future operating income increases from reduced home-office, franchise bad debt and rent subsidy costs.Net interest expense and other financing charges were $2.8 million and $11.9 million for the 13 and 52 weeks ended December 30, 2018 compared to $3.5 million and $12.5 million for the 14 and 53 weeks in 2017, a decrease of $700,000 and $600,000, respectively. The decrease is related to interest income from Keg partnership units, offset by increases in interest expense related to the additional borrowings made for the Pickle Barrel and Keg transactions.At the end of 2018, Recipe's debt-to-EBITDA ratio was 1.68x, down from 2.2x at the end of Q1 2018. At this debt level and with strong cash flows from operations, the company has the ability to consider more growth opportunities while continuing to reduce its debt and opportunistically repurchasing its subordinated voting shares for cancellation under the NCIB.Earnings before income taxes has changed from $37 million in Q4 2017 to $15.4 million in Q4 2018, as increased earnings from The Keg and the corporate franchise in retail and catering segments and a reduction in net interest expense were offset by a $7.9 million increase in restructuring costs related to the expected cost to exit the company's IT data center; a $4.3 million increase in noncash impairments; $7.9 million increase in the fair value changes related to noncontrolling interest liability; and the exchangeable Keg partnership units recorded in the quarter; and higher depreciation from the addition of The Keg and the Pickle Barrel.Adjusted earnings for the 13 and 52 weeks ended December 30, 2018 was $34.9 million and $123.2 million compared to $36.3 million and $117.1 million for the 14 and 53 weeks ended December 31, 2017, a decrease of $1.4 million for the quarter and an increase of $6.2 million for the full year. Excluding the impact of $2.6 million in net earnings from the 53rd week in 2017, the change in 2018 would have been an increase of $1.2 million for the quarter and an increase of $8.8 million for the full year. Additional 2018 operating EBITDA of $24.2 million from The Keg, higher contribution from the corporate franchise, retail and catering segments, improvements from Original Joe's and the addition of Pickle Barrel in 2017 was offset by an increase in interest on long-term debt related to the Pickle Barrel and Keg additions; increased depreciation expense from the addition of corporate restaurants, primarily related to the Pickle Barrel and Keg additions; and an increase in current income tax expense of $1.3 million for the quarter and $3.2 million for the year.Adjusted diluted earnings per share for the 13 and 52 weeks ended December 30, 2018 was $0.54 and $1.92 compared to $0.59 and $1.88 in 2017, a decrease of $0.05 per share and an increase of $0.04 per share, respectively. The changes relate to the key drivers of adjusted net earnings I just described.Now turning to segmented results for the quarter and year-to-date. Total contribution from corporate restaurants was $21.5 million and $80.5 million for the 13 and 52 weeks ended December 30, 2018 compared to $12.3 million and $42.5 million for the 14 and 53 weeks ended December 31, 2017, an improvement of $9.2 million or 74.8% for the quarter and $38 million or 89.4% for the year. The increases for the year are primarily driven by Same Restaurant Sales increases, the increases in a number of corporate restaurants, including the additions of The Keg and Pickle Barrel. However, the estimated impact from the additional week in 2017 was $1.5 million. For the 13 and 52 weeks ended December 30, 2018, total contribution from corporate restaurants as a percentage of corporate sales was 10.7% and 10.7% compared to 9.8% and 9.7% in 2017, respectively. The addition of The Keg, which operates corporate restaurants within our target range, was offset by lower percentage contribution rates from Original Joe's and Pickle Barrel corporate restaurants that operate at lower contribution levels, which we view as an opportunity to improve.Total contribution from franchise restaurants was $26.6 million and $99.3 million for the 13 and 52 weeks ended December 30, 2018 compared to $24.1 million and $84.4 million for the 14 and 53 weeks ended December 31, 2017, an increase of $2.5 million or 10.4% for the quarter and $14.9 million or 17.7% for the year. The increase was related to increased royalty income as a result of franchise sales increases and the addition of The Keg. The estimated impact from the additional week in 2017 was $1.6 million.The effective net royalty rate for the 13 weeks ended December 30, 2018 was 4.3% compared to 4.2% in 2017. For the 52 weeks ended December 30, 2018, the effective net royalty rate was 4.2% compared to 4.0% in 2017. Recipe's standard royalty rate is 5%. There are brands acquired since 2014 which charge different standard royalty rates; in particular, St-Hubert, which charges 4% as its standard royalty, and The Keg, which charges over 5% when considering its total portfolio.The retail and catering segment consists of sales related to the manufacturing and distribution of fresh, frozen and nonperishable food products under the St-Hubert, The Keg and Swiss Chalet brand names as well as under several private label brands. Retail sales are impacted by orders from franchise restaurant locations and by the volume of orders generated from retail grocery chains. Catering sales relate to food and beverage sales from Recipe's catering divisions, operating under the names of Pickle Barrel, Rose Reisman and Marigolds and Onions. Catering sales are impacted by the number of customer orders and the number of event and venue contracts obtained by the catering divisions.Total contribution from the retail and catering segment for the 13 and 52 weeks ended December 30, 2018 was $8.9 million and $19.5 million compared to $6.6 million and $15.3 million for the 14 and 53 weeks ended December 31, 2017, an increase of $2.3 million or 34.8% for the quarter and $4.2 million or 27.5% for the year. The increases are primarily driven by sales increases of the Swiss Chalet branded products, increases in frozen pot pies from the addition of the new pie production line and the addition of The Keg retail business in February 2018.The Central operations segment consists of sales from the company's off-premise call center business, representing fees generated from delivery call ahead web and mobile-based meal orders, property and equipment rent and vendor volume rebates reduced by Central overhead costs and net Keg royalties paid to The Keg Royalty Income Fund. Central segment contribution, before the net royalty expense, for the 13 and 52 weeks ended December 30, 2018 was $11.3 million and $32.6 million compared to $15.5 million and $48.7 million for the 14 and 53 weeks ended December 31, 2017, representing a decrease of $4.2 million or 27.1% for the quarter and $15.1 million or 33.1% for the year. The decreases for the quarter and the year are primarily related to the addition of The Keg, which operates with higher net overhead costs.Total Central segment contribution, before the net royalty expense, as a percentage of total System Sales for the 13 and 52 weeks ended December 30, 2018 was 1.2% and 1.0% compared to 2.0% and 1.8% in 2017, a decrease for the quarter and a decrease year-to-date. The decreases are primarily related to the addition of The Keg.During the 13 weeks ended December 30, 2018, under the company's NCIB program, Recipe repurchased and canceled a total of 568,613 subordinated voting shares at an average price of $25.51, representing approximately $14.5 million in aggregate costs. Year-to-date, 634,850 subordinated voting shares at an average price of $25.53 have been purchased and canceled at a total cost of $16.2 million. And lastly, as Frank mentioned earlier, yesterday evening, we announced that for the 13 weeks ended December 30, 2018, this company declared a quarterly dividend of $0.1121 per share for subordinate and multiple voting shares outstanding. This represents a 5% increase over the quarterly dividend paid in 2018. The dividend will be paid on April 15, 2019 to shareholders of record at the close of business on March 29, 2019. This concludes the financial commentary of the call. I'll now turn the discussion back to Frank.
Thanks, Ken. On our last quarterly call, I highlighted the importance of developing a service culture within our organization to drive our future success. We have close to 60,000 associates working in almost 1,400 restaurants and offices, supporting 19 of Canada's favorite brands. And while our brands are unique, the culture, values and leadership that drive the delivery of a great guest experience are one. Shaping our culture through strong talent and leadership development is critical as we align ourselves towards designing and executing a solid strategic plan across our organization. With that in mind, I am pleased to welcome our new Chief People Officer, Julie Denton, to our leadership team. Julie joined Recipe in January and is responsible for leading the charge of people development strategies across our organization as well as program supporting talent acquisition, leadership development, training, rewards and recognition programs and overall employee engagement to help us build a stronger company with shared values and a network of outstanding restaurant leaders. 2018 was a busy year with a lot of change and many great accomplishments. For the 52 weeks ended December 31, 2018, total System Sales grew to $3.4 billion, and operating EBITDA grew to $219.6 million, both well within our revised 2020 to 2022 to target ranges that were communicated after the acquisition of St-Hubert. Digital sales, sales through web and mobile applications, increased 20.1% for the quarter and were up 50.4% for the year. Mobile sales were up 30.2% for the quarter and 88% for the year. In 2018, we opened 61 new restaurants. We closed 57 poor-performing locations and we've renovated 70 restaurants, strengthening our portfolio and improving the quality of our sales.The sales growth initiatives for 2019 will focus on continuing to improve the experience for our guests in whatever means they choose to dine with us. Therefore, we will continue to invest in both our dining rooms and in our growing off-premise channels. By optimizing and reducing menu complexity, we are improving both the quality of our food and our speed of service, which is necessary for both of our primary channels. In 2019, our focus on improving the overall restaurant experience continues. Restaurant renovations, combined with improved service and menu offerings, will amplify both ambience and value for our guests. To accelerate the pace of our restaurant renovation program, in 2018, we launched a renovation incentive program for both Swiss Chalet and Harvey's to assist franchisees with the cost of major renovations. This program has been very well-received by the franchisee community, and we expect an acceleration of renovations, particularly in Swiss Chalet. We will also be rolling out some new digital technologies that will enable our franchisees and corporate managers easier means to manage their restaurants and improve their unit economics.In the fourth quarter, our retail division improved sales by 8.8% versus Q4 2017, despite the extra week in Q4 2017. Retail margins also improved to 10.5% of sales in Q4 2018 versus 8.5% in Q4 2017, a 23.5% or 200 basis point improvement. For 2019, we expect continued growth in this segment with new product lines emerging over the course of the year and particularly new products under the Montana's banner. To further strengthen this growing segment, we are pleased to announce that in December 2018, Recipe acquired Marigolds and Onions, a leading full-service, liquor-licensed catering business in the Greater Toronto area. M and O is known for their exceptional quality and service and is a great addition to the Recipe family. Al and his team served us yesterday at the board meeting, and I can attest to the exceptional quality of both their food and service, and we're really excited to have them.Our business has earned and reearned one guest at a time. The best way to improve our overall Same Restaurant Sales is to continually improve on our 4 Pillar operational focus of improving quality of food, improving quality of service, value for the experience and having the right ambience that makes people want to come back. In 2018, we began to utilize various means and digital tools to allow us to measure our performance on these metrics down to each individual guest. Some of those metrics include our in-the-moment survey that a guest completes during the payment process. The simple question of, would you recommend us as for completing your payment process, enables our team to measure performance by every guest location of the day. We receive, on average, over 1.2 million surveys per month. Utilizing this information and other scorecard metrics enables us to train our teams, our franchise partners on specific and targeted areas of opportunity for that individual restaurant. This then allows them to deploy the appropriate action to improve the guest experience. The result, which we obtain through our social media monitoring tool, has shown a meaningful improvement of guest satisfaction over the last 180 days. These results are encouraging and validate that while our 4 Pillar strategy is in the early days of activation, we are heading in the right direction. And while talking about these 4 Pillars may not always sound exciting, it is crucial in operating successful restaurant brands for today and for the future. On the note, I'll turn it back to Emily to open it up for any questions.
[Operator Instructions] And our first question comes from the line of Peter Sklar from BMO Capital Markets.
Could you explain the charge for the data center and why you're prematurely ending the lease? Are you redomiciling the location?
Hi, Peter. It's Ken. The data center was a facility we inherited, and it was since set up well before 2013. It's a -- it was a -- really set up as an alternate data operation site for a kind of different business model. So we've actually moved most of that operation to our head office, and we're looking to sublet that facility. So expecting the sublet cost to -- sublet recovery to be less than our current rent cost. We took a provision for that shortfall to the end of the lease we talked about in 2018.
Okay. And then, Ken, what was the $6.8 million impairment charge? What did that relate to?
It relates to certain restaurant locations, where -- and we measure every quarter restaurant locations, and whether the fixed assets, the carrying value of those assets is higher than the profits we expect from those restaurants. So there's roughly 6 sites that we took impairment charges on at the end of the year, including some Keg sites as they get onto our quarterly measurement routine.
And are these restaurants that are closed or still open?
No, they're still open.
Yes, okay. Frank, can you talk a little bit about the SRS? It was below the level you achieved in the third quarter. You've kind of alluded to a couple of banners that may be performing poorly. Can you just give us some thoughts on that? Is it the consumer or particular issues within some of your banners?
No. I think -- well, in the quarter, I think we anniversaried on some pricing from the previous year and also kind of the rollout of aggregators. We're also somewhat cognizant of some of the macro factors and in the economy in general. I think we're taking a relatively conservative position on pricing and price inflation going into '19, so that we can -- our focus is really on trying to drive more guests. So I wouldn't say there's any one particular banner. I think Alberta, Newfoundland had tougher quarters, probably consistent with some of the things that are going on in those regions.
Okay. And then just -- my last question, Frank. Why is it that the company likes the event catering business? You've really got the acquisitions there. It seems to me that there's so many -- so much going on with Recipe and its banners. As you say you're in the early stages of everything you want to accomplish. I'm just wondering while at the same time you're diversifying into event catering, which in the overall scheme of things looks like it's a relatively small business compared to your family dining and QSR banners.
Yes. I mean, first off, I mean, outside of it, we have a pretty good margin business. We're already in the catering business with Pickle Barrel. I think when you look at kind of how the entire kind of eating industry has changed, whether it's more off-premise business, our core restaurant's getting better in that off-premise business. And how do you keep food hot? How do you make sure that you have a quality experience that travels over time? Not just is there just good fundamental businesses in Marigolds and Onions and Rose Reisman and Pickle Barrel catering, but there's also a lot of transfer of knowledge that we can get from those businesses, and particularly their chefs and how they plate and how they do things and how they translate to make sure you have a quality product that can serve 5,000. And over time, there's some earnings that we can gain from that as well that will help our core business as we -- again, these off-channel -- off-premise channels are continuing to grow. So I understand the comment, but there are -- there's some logic beyond just the margin of how we can integrate into our overall business.
Our next question comes from the line of John Zamparo from CIBC.
I wanted to follow up on the franchisee renovation incentive program. I can't recall, is this something you've done before? And maybe you could share at least some of the terms of it in terms of what you might contribute on a percent basis. Is there a maximum dollar amount? Is it all upfront in cash? Or is it in rent release? Maybe you could just talk more broadly about that.
Yes. I mean, there's been renovation programs, incentive programs of different forms in the past. I mean, this one is -- basically, it's for dining rooms only, guest-facing areas only. It's 20% of the rental costs to a cap. There's a dollar cap, and it's paid back. So it's not an offset to royalties, and it's kind of credited back to the restaurant over a 12-month period once the restaurant reopens. And so, again -- this is, again, kind of accelerating some of the renovations, particularly in Swiss Chalet and Harvey's. These programs work. It kind of demonstrates our belief and commitment to these brands, and the program works very well. Again, like I said in my prepared comments, it's been well-received, and we expect some meaningful renovations out of those banners.
Okay, that's great. Maybe we can move to Original Joe's and Pickle Barrel. You commented in the earnings release about improving their corporate margins because of purchasing synergies and labor management tools. What would you say is the reasonable time frame to expect these restaurants to be operating at a level that you're happy with?
I want to avoid getting into time lines. I would say that we have a -- we sit with these teams on a monthly basis. We are constantly looking at those opportunities. And it's about balancing what's the right thing for the brand, with making sure we're doing this efficiently as possible. I think if you look at -- probably go back to St-Hubert and what was expected to achieve when the acquisition was done. And they have done a great job of achieving the savings that were stated at the time of that acquisition, and we would expect the same and perhaps faster cadence on those banners.
Okay. I just want to follow up on the prior question about the catering acquisition. I appreciate your commentary on that. Is this something we should expect to be -- it sounds like it is, but I just want to confirm. Is this something we should expect to be a greater priority moving forward for just the M and O brand? Or is it beyond that? And could there potentially be more M&A in the catering space for you?
I don't know if we expect to see more in this space. But I think you know, with something like M and O, for example, one of the -- they have an event. So they've been the caterer to Rogers Cup in the past. Just being constrained to Toronto is -- because of their size is -- there's the limit systems in Toronto. So Rogers Cup actually operates at the same time the women and men operate in Toronto and Montréal. So it gives them an opportunity to expand. Again, I think that this was a good opportunity. There was some natural synergies with our other catering businesses that we have. And again, that ability and transfer of knowledge on helping us in our other businesses, I think, will play. But I wouldn't expect to see us doing a lot more in that space.
Okay, that's helpful. And last one for me, more broadly on the M&A environment. Your balance sheet is in very good shape compared to franchise periods. Can you talk about your views of the M&A picture right now? Would you deem it more a lack of opportunities? Or is it something that asking prices are too high?
I would say that we're -- again, we talk to everyone. We're always keeping our eyes and our ears open, but our primary focus at this point is on the businesses that we have and making sure that we're focused on driving that better experience and getting our portfolio, our current portfolio, refreshed. So that's our primary driver. And we can be opportunistic when the right opportunities come along out there. But that's not -- it's not a burning platform that we have to do an acquisition. If the right opportunity comes along and it's consistent with multiples and deals that we've done in the past, we'll do that. And in some cases, you've seen in St-Hubert and Keg they may pay up for some of these, but generally, we've stayed within the range. And I wouldn't expect that to change.
Our next question comes from the line of Elizabeth Johnston from Laurentian Bank Securities.
Just when it comes to catering, I had a follow-up question on this topic. When it comes to a longer-term strategy for this business, would you ever envision these catering companies you have now or even an expansion in the future being able to produce any branded food from some of your other restaurants, let's say, and you -- and be catering using a Swiss Chalet banner, just as an example, is this something that you might envision longer term?
I can -- let me answer it this way. We want to make sure that all of our assets are effectively and efficiently utilized. As I said, the consumer is changing, evolving very quickly, and having kitchens in different places around cities is not a bad idea and a bad thing as we look to service those markets. So yes, catering, in and of itself, is a healthy and a good margin business. But of course, if there's a way that we can be -- more efficiently use those assets, that's exactly what we're going to do.
Okay, great. And just going -- turning to different topic on the retail sales. you already highlighted, that year-over-year, the growth of roughly 9%. Even considering that extra week that you have in the quarter last year, are you able to break out what's the largest driver of that? Was it really the contribution from Pickle Barrel or others or volume growth? Or was it really the new products added in the state to where you would plant in Québec? Just want to get a sense of the ranking order of the key drivers on that growth year-over-year.
I think you would say that, first off, we've put in that new pie line. So it allowed us to get capacity and production up in a busy time of the year. That was a pretty big component. But also, it's really -- it's a product rank quarter, is the non-St-Hubert retail sales of Swiss Chalet in the market have really been important. And don't -- let's not forget, we also have some Keg retail sales as well. So -- but I would say that probably, the biggest growth aspect in the short term will come from our other banners as they merge into the retail sector.
Okay. And let me think about the kind of the growth trajectory. And I know you highlighted, at the end of this year, I believe you're going to add a new rib line. Is this the kind of growth rate that you think is reasonable, given that the new product is expected to come on board?
I think we have -- I mean, as you know, I'm always reluctant to give guidance. But I do think that there's a pretty long runway on retail on different things that we can do, and also that -- how we can continue to optimize the plant. The more that we have better margin products, I think, gives us an opportunity to highlight those. And if we need space, we can always, first, maybe remove items that don't deliver the margins we want. So it's -- and it's a well-run, it's a well-managed team out there in Québec. They do a great job. And they work very, very closely now with the brands here to make sure that we -- the products that we produce up in grocery is consistent with what guests would expect when they go into our dining rooms. The other aspect that they can look at is, is there someway that they can help us in some of our restaurants, just with some of the foods that we're preparing that's going to be more efficient? So again, we talked about businesses and business lines and margins, and all are very, very important, but one thing that we can't lose sight of, this kind of goes back to the catering side, is the intellectual capital that some of these businesses have. And that transfer of knowledge about how do you run a more efficient operation is an example that we can utilize inside of our core restaurant business.
Are you able to give us roughly a percentage of what capacity you're currently running out at those facilities?
We have lots of room.
Okay. And as it pertains to the expectation for CapEx, are they in conjunction with the new rib line or just as a whole? Can you give us a sense of what we should expect for 2019?
Yes. I think we have -- we'd probably give you some guidance of $60 million on CapEx for 2019, roughly.
Okay. And just one more for me. In terms of the closures, talking about underperforming locations in this location that didn't fit longer-term strategy. I mean, you talked a little bit about last quarter locations in Western Canada. Can you give us a sense of what kind of locations are closed this quarter and what we might be able to expect for 2019?
Yes. So I'm going to try to get off the roundabout on this front back because I want -- just give me a minute here, and I'll explain what I mean. As you have restaurant brands, and we're talking about Swiss Chalet, Harvey's and some of our brands that have been successful and around for many years. In some locations, as their leases come up, it may just not make sense to continue to operate that restaurant in that market. It may be that you need to move it down the street and premises before a block or 2 blocks. And so when we get into this -- well, how many new restaurants, when we g to those net new, it may not sound completely meaningful when we're just looking at it as an aggregate number. What we are focused on is what the quality of those sales are and having a refresh network that makes sense. So we're going to -- again, we opened 61 new restaurants last year, which was a pretty significant achievement because we also were closing restaurants in the net number, it doesn't look that impressive. But the overall quality of sales, of those sales, is dramatically different. So we're -- I think you're just going to continue to see us do that. We're not going to open restaurants just for the sake of opening restaurants if we don't believe that they can be successful, obviously. We have partners. We have responsibilities. But you will continue to see us work on refreshing our portfolio, whether that's through renovations and/or we close one and we open it up again in the same market.
Our next question comes from the line of George Doumet from Scotiabank.
Frank, I'd like to focus a little bit on Ontario. I think we're up a little bit last quarter. I think you mentioned that. Is that still the case? And anything you can comment on that geography? And I think weather was particularly challenging during the start of Q1, right?
Yes. I remember my comments today were roughly on -- are all on Q4 and '18 year-to-date. I think as it relates to Q1, we -- first, we don't give guidance. I think that it -- I think anyone who lives here and looks out their window can certainly see that winter this year has been probably significantly different than last year. We're certainly not immune to the impacts of weather. But our focus, again, has been on control of what we can control and give people good experience. Because if you don't -- it doesn't really matter if you have snow, ice sleet, wind or a sunny day. You won't be successful. So that's been our focus. But it's nice to see a nice, bright sunny day today.
Okay. Maybe just kind of shifting over on the renovation program. I was wondering if you can share with us the franchisee response so far. I know it's early days, but the $5 million plan to renovate 106 locations, the uptake there, and I think you mentioned Harvey's as well, are there any plans to maybe add some other banners there, too?
We'll look at it as it comes along. As I said, I mean, it's -- there's a tremendous amount of activity ongoing right now on the renovation front. The reception of our franchisees, who want to sign up, are -- is significant. There is a process that you have to follow when you're doing a renovation. There's a few other things that you have to make sure you have in place. One of them is a lease that has term. In some cases, we may gave go back for some early lease renewals. So you need to have a lease that has term and you need to have a franchise agreement that has term. So there's a little bit of a process there. But again, our teams are well down that path. This is something that, frankly, we just reviewed at -- yesterday. So again, I think with Swiss Chalet, in particular, it's going to be a very, very busy renovation year. And I see that kind of over the next couple of years on both those banners.
Great. That's helpful. And just one last one, if I may. Just looking at the Milestones banner particularly, there's been some efforts there to improve the offering. Can you maybe talk a little bit about how that's trending along and where you expect that banner to be positioned maybe in a year or 2 from now?
Well, I think David and the team are continuing to work on Milestones. So I think you'll start seeing some of the newer restaurants. Probably some -- from an ambience side, you'd probably see some -- a little bit different touches to Milestones. It has kind of positioned itself as a little bit more premium. I think the food service is certainly getting better there. Team's pretty engaged, but, again, that's -- again, taking the influences and a lot of that learning and that knowledge transfer that I was talking about earlier from what you get from The Keg, which arguably does it the best. And they're working on transferring that into the Milestones. And again, it's early days, but we're getting to see some effects of that.
And there are no further questions at this time. I will turn the call back over to Frank Hennessey for any closing remarks.
Okay. Well, thanks, everyone, for attending the call today. Stay warm, and we will speak to you again at the -- for our Q1 conference call. Thank you, everyone.
This does conclude today's conference call. You may now disconnect.