Q3 2019 Earnings Call
Please note that today's call this being recorded.
During the course of this conference call management May make forward looking statements about the company's business outlook and expectations.
These forward looking statements and all other statements that are not historical facts reflect management's beliefs and predictions as of today and therefore are subject to risks and uncertainties that described in the safe Harbor discussion found in the company's FCC filings.
During the call at the company will also discuss non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principle. What are intended to illustrate alternative measure of the company's operating performance that may be useful a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures.
To be found in the earnings release.
The company has posted its fiscal third quarter 2019 earnings release, the supplemental financial information related to the results on its website at www Red Robin Dotcom and the investors relations section.
I would like to turn the call over to Red Robin CEO Paul Murphy.
Thank you for joining us today.
Our job join Red Robin just.
Good morning.
Copies transformation and to be here on my first earnings call alongside.
For our Chief Financial Officer, and good Thompson, our Chief Operations Officer Officer.
Jonathan <unk> SAR, our Chief concept officer is also with us today.
During the question and answer Kerry.
Let me begin recognizing pattye Moore for her hard work and dedication to red Robin over the past 12 years.
She will be retiring from the company.
I guess sort of red Robin in various capacities first as a board member that sportswear and more recently asked in terms see go.
During her tenure at RBC go which began in April .
And the exact 15 effectively focus the organization on key priorities that are building business momentum.
Underscored by improving operating and guest satisfaction metrics that we can well to build upon first.
I've been out Red Robin for almost five weeks now since joining I've been busy immersing myself in every aspect of the business. So I can better understand our current challenges and opportunities.
Hi way our progress today.
I just want to accomplish in 2020 and beyond to drive results.
In the course of my due diligence I addressed several red Robin restaurants spoken with general manager.
Team members and our franchise partners and listen to their viewpoints and suggestions with an open mind.
Surprisingly.
Came away from just interactions that for us.
No Terry.
Those are designed to be part of the wanting organization.
These positive experiences have only reinforce my conviction in Red Robin.
In the future of this great brands.
Strategically there's been a lot of work done thus far.
Secondly, as it relates to our most important priority.
Further strengthening and transforming the dine in business and Husky and when will address in greater detail. Shortly we are continuing to gain traction and our turnaround efforts.
That's right and that's where do the company has concluded well spans the Refranchising program.
Based on our analysis, we blame supply in creation opportunity to shareholders from Refranchising well be much greater wants to operating fundamentals and the business [laughter] further strike.
And the support capabilities for friends or franchising and hats.
We move towards these objectives, the company will allow tariffs and reassess its opportunities and options in this regard.
My role in the near term celebrities my turnaround experience and take Red Robins Park business, so that slow.
Drive additional approach.
And thereby enhance value for all stakeholders.
Therefore decided become more acclimated to red Robin.
I'll be deeper and more nuanced understanding other brands.
Worked closely with the board.
Exactly your team and team members to fine tune our strategy along with the specific initiatives that support our mission.
I tend to develop the cherish strategic vision and robust transformation plan that will serve as our road.
Leveraging the building blocks already in place.
Red Robin is an iconic American brand with tremendous potential I'm confident we can we capture our brand reputation.
Operational excellence and by extension the loyalty and frequency of our guess.
He's asking rents are fundamental to growing sales.
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With that I'll turn the call on the game to review operations gain.
Thank you want and good afternoon, everyone. That's Paulo mind, our most important priority is to continue to stabilize and further strengthen the dining business.
Since the start of 2019.
Operations as lead into four key areas of focus that we had that besides with consistency and measured with enthusiasm.
First is higher trade enriching.
As we have previously discussed improving the dining guests experience starts with hiring the right people.
Turning to properly and being fully staffed particularly that the general manager level.
Our operations leadership and human resource teams continue to make real progress against these initiatives.
At the outset of 2019, we were short over 100 managers across the system.
By the ended the third quarter, we were essentially fully staffed at the manager level.
Our manager turnover numbers are now at best in class levels for casual.
Now with more fully staffed management teams, we're also able to reduce the churn up managers between locations and provide a better and more stable experience for teams.
The resulting benefit is apparent in the progress we have made an hourly turnover numbers, which improved again in the third quarter as they have throughout 2019 in sharp contrast to the continued deterioration in turnover and snapping metrics seen throughout the industry.
Our hourly turnover numbers ended the third quarter better than casual dining industry averages once again and moved closer to best in class.
These important leading indicators have been critical to building engagement of our team members a key component of the sustained improvement in our operational execution and business performance.
Next is badger front of house engagement.
We know we can improve the overall guest experience deliver better wait times reduce walkaways improve our cleanliness and effectively identified unresolved potential problems by establishing a better presence of our managers on the die.
And my having managers to host and during peak hours.
This focus is work.
Overall guest satisfaction, which had declined throughout last year to a low point at the end of Q4 2018 has continued to improve throughout 2000, Nike rising again to its highest level in three years.
Core.
This leading indicator is critical to leveraging the full service that differentiates casual dining from other segments of our industry.
Our jersey engagement and loyalty targets.
Next is managing the shoulders to peak to peak.
We continue to focus on shifting the labor investment from overstaffed shoulder hours to understand peak hours, allowing us to improve throughput on our busiest chefs, thereby capturing a greater sales opportunity that is available during those times.
Our continued focus on stuff I think that's you know that improvement again in Q3 on guest ratings for speed of service the temperature the execution of our bottomless promise and restaurant.
This area of focus is a key part of delivering great guest experience, while maintaining strong labor productivity.
And in Q4 to support our fast growing off tennis channel, we will be adding labor hours during our busiest shifts a decision they'll provide residual benefit to our dining experience as well.
Finally, delivering on the promise of maestro.
This effort focus is our kitchen managers on active coordination of the fast and accurate delivery high quality food at the optimal temperature.
That's true results, we've seen a sharp improvement in ticket times, which in the third quarter. We're over 90 seconds faster than they were when we first rolled out the Maestro program early in 2000 meeting.
In addition to the improve speed, we're concentrating our cautionary focused on improving the consistency and quality of our core many products such as our burgers chicken bonds and of course, our signature bottomless steak fries.
We are emphasizing the reduction of complexity in our heart of house, all of which have contributed to improved guest ratings for <unk>.
And piece of experience throughout 2019.
This area of focus is crucial to recapturing the gift uptime promise that has historically differentiated red Robin from our competitive set.
The best long term sustainable means to drive sales and rebuild our dining business is to hire and retain great managers.
I'm in the same restaurant to provide consistent leadership and create a great environment for our team members.
And then these team members will in turn deliver that great experience forget.
It will build future loyalty and free.
We're thankful for the efforts of our operators on recognize their progress.
While we know there's a great deal work to do the initial pieces have been put in place and the leading indicators of manager staffing hourly turnover and guest satisfaction are all continuing to trend possibly.
Not surprisingly our business results are improving.
We look forward to continued progress as we move forward with that I'll turn the call Berlin.
D. and good afternoon, everyone, if we turn around our performance and Investor.
We are encouraged by our improving sales trajectory in the third quarter 2019 comparable restaurant revenue increased one point.
Marking the third consecutive quarter of improved <unk> <unk>.
The Q3 improvement.
At 4.7% increase in average check partially offset by 3.1% declining guest traffic overall pricing net of discount.
1.5% well, it's 3.2% next increase was driven by our menu promotional strategy, but in places.
Lower tavern back at higher entree.
That's July rely start new omni channel creative campaign, all the fall highlighting the emotional connection shared over a meal at red Robin and featuring our signature bottomless steak right. The new campaign received consumer scores that are among the highest recorded for our friends and well above.
Industry benchmarks, and importantly had a significant positive impact on our traffic trends. We also rolled out our new all in one menu, which combines our everyday offerings with seasonal promotion, highlighting our new and differentiated gourmet burgers last year, we promoted.
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Q3 total company revenue decreased.
HM 294.2.
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<unk> sales growth continues to be meaningful and rose, 37.3% in Q3, representing 13.2% of total food and beverage sales traffic and closed smaller.
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Q3 restaurant level operating margin was 16.1%.
70 basis points versus a year ago, driven by the following factors cost of sales at 23.8% flat versus a year ago as higher commodity costs were primarily offset by lower tavern, Max and benefits.
Menu simplification, we believe our cost to sales will improve in the fourth quarter compared to the third quarter due in part to the benefit of favorable new contracts now interplay.
Restaurant labor costs, 36.2% and favorable 90 basis points versus a year ago, due primarily to higher average wage rate higher and manage our staffing level within the restaurant.
Other operating costs increased 30 basis points to 15.3% due primarily to third party delivering commission, partially offset by decreases and utilities that other restaurant expenses.
You can see cost decreased 60 basis 0.28, 0.6% due primarily to 13 net locations back close to the third quarter 2018, partially offset by sales de leverage general and administrative costs increased 80 basis points to 6.5% I've told rabbit.
Due primarily to interim CEO expenses and lower incentive based cost in 2018, partially offset by decreases in professional services and travel selling expenses increased 190 basis points to 6% a total rabbinic deep.
Hi, Merrily, two an increase in national and local media spend to support our new creative campaign that launched in July Preopening costs decreased point $4 million due to the suspension restaurant opening.
Net interest expense and the other $1.5 million lower versus the prior year due primarily to a larger gain and our deferred compensation plan app that compared to the same period a year ago as well is the reduction in interest expense our weighted average interest rate was 5.1 person that.
Our effective tax rate was 74.1 perspective that the change in the effective tax benefit, but due primarily to lower income in the current year.
During the quarter, we recognized net other games at $1.8 million, which included the benefit of $3.9 million related to favorable lease termination.
And with our closed restaurants.
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These benefits were partially offset by $1.3 million and board and stockholder matter Cod point $6 million, an executive transition severance cost and point $3 million, then executive retention costs Q3, adjusted EBITDA was $14.7 million compared to 24.
$2 million in Q3, 2018, and Q3 adjusted loss per diluted share.
24 cents as compared to adjusted earnings per diluted share.
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Now turning to the balance sheet, we invested $11.9 billion Capex in Q3, which was primarily related to facilities improvement corporate and system cost and new investments in information technology in October we completed the rollout of handheld Pos terminal.
Along with headsets and printers that generate.
Contained menu items detailed.
Mr Waters, or sticky media will enable our team members to deliver an even better guest experience.
We ended the quarter when $20 million in cash and cash clubs that are lease adjusted leverage ratio was 4.55 times and we were in compliance with all debt covenants during the quarter, we drew $7.5 million on our revolving credit facility, resulting in a quarter and outstanding debt.
$188 million. In addition to letters of credit outstanding a $7.5 million. We also bought back across approximately 28.9 thousand shares for a total of approximately $1 million. This is consistent with our previously stated goal of offsetting.
The dilutive effect of our equity compensation program over the course, the poor acquirers as we utilize cash flow primarily to reinvest in our business and to reduce.
While we returned a bit but to sustainable growth.
We have updated our guidance for 2019 as published in our earnings release after.
Taking into account year to date results and updated estimate S.G.N. and Capex.
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Got it.
We currently anticipate a full year tax benefit of approximately $11 million $13 billion and full year cash tax payments of between $3.5 million and $4 million can do that but what we indicated throughout the year. We continue to look back.
Positive comparable restaurant revenues in the fourth quarter. It is important to note that we won't be lapping significant prior year discounting in the fourth quarter 2018, as we move into the fourth quarter 2019, which we expect will negatively impact comparable guest traffic a positive.
The impact from March and we took 80 basis points in price at the beginning of the fourth quarter and anticipate we won't deliver 180 basis points of Chris Pride in the corridor lower year over year discounts will further positively impacted P.P.J.
Catering continues to be an important growing failed category with material long term potential delivering 74% year over year growth and third quarter. Our sales team is focused on among other things driving business to business National account the parting recurring caterina occasion.
And refining our core catering menu, including expanding our carbonated beverage France, we continue to expect higher third party delivery sales as we recently added a new service partner to the majority of our system. We are continuing to pilot outsourced deliveries for orders placed part by our gas direct.
The with Red Robin, allowing us to control the ordering experience retain order in guest history leverage our royalty platform and lower costs associated with third party delivery market like.
Turning to our real estate portfolio. We recently made the strategic decision to exit company operations in Canada due to a lack of integrated system near term capital investment needs, That's standard financial performance and an operating footprint with inherent inefficiencies and.
Getting supply chain supervisory and corporate support.
One restaurant has already Bang close and five other restaurants and the Edmonton Ariad will close in the coming week. We're currently in discussions with an experience restaurant operator to acquire and franchise. The remaining 12 restaurants in British Columbia with an anticipated closing by early 22.
Morning.
Third quarter year to date, the Canada restaurants generated $31.6 million in restaurant revenues and point $9 million at restaurant level operating profit.
We continue to assess our real estate portfolio work on ever find prototype for future development and focus on implementing profitable sales catalyst to generate consistent and growing financial result.
So let me wrap up by thanking our red Robin team in the restaurants and at the home office for their significant contribution towards the improvements we are seen in our business as we invest and build this favorable long term foundation to create value for our shareholders with that I will turn the call back over the top.
Alright, Thank you Linda Red Robin clearly is on the right.
Strengthening operations transforming the dining experience and significantly growing off premise sales.
Encouraged by the brands ongoing traction made possible by an exceptionally dedicated red Robin team.
And I believe we are in the early stages other turnaround process I look forward to share in a few more detailed thoughts on my strategic vision, an action plan FDIC Our conference in January and now without we'd be happy to take any questions.
Thank you at this time, we will be conducting a question and answer session. If he would like to ask a question. Please press star one on your telephone keypad.
Confirmation Tony will indicate your line is in the queue. You May press star to if he would like to remove your question from the Q.
Participants using speaker equipment and may be necessary to pick up your handset before pressing the star keep one moment. Please while we poll for questions.
Our first question comes from the line of Chris Ocull from Stifel. Please proceed with your question.
Thanks, Good afternoon, guys. Paul a couple high level question about how you're thinking to turn around May play out over the next few years I mean do you do you envision or you think there's going to be a need to make a lot of investment and the restaurants and then secondly are you thinking about additional unit closures or.
Or.
Any other well, mainly just closures as you execute the turnaround strategy.
Well I've kind of answer that two ways first Oh, yeah as we look at the next two to three years.
There will be some investments, but they'll be investments.
And initiatives that we believe we'll be able to drive not only the topline, but the bottom line results and then more close away. The regard for the brand no somebody other investments will just be frankly around execution I think that's one thing that the.
Brand has been focused on the last six months sure certainly start to see some traction from Oh, we Oh, we have a lot of runway there.
Made some investments in terms of put in the the handheld cenveo servers.
Hence Oh wait I think scoreboard guest service model, which should help us through the Oh really helps on the execution on level.
In terms of.
No.
Store closures, you know I think that smart brands always are looking at their portfolio.
Voice ascertaining, what's the best use of the resources that they they have and.
So we'll take a look at as I'm not certainly don't anticipate.
You mean wholesale a closure is going forward, but you know will be strategic and then take a look over the next two or three years, you know any stores that we think or are hurting the system are driving it down.
Thank you and then just Oh, there's been a red Robin has benefited quite a bit from third party delivery a in off premise.
Sales, what's your view on how third party delivery, what kind of roll it should play at Red Robin is there going to be more emphasis on its less emphasis on it more on the in store experience or the dine in.
Channel.
Help us understand your view of how third party delivery is going to play out for Red Robin.
Well.
I think its purpose I was saying that to focus on dine and that the gain this team has had over this.
Past few months, a you know working to maintain the dining there's still no 85, 86% of.
The business away made to ensure that we keep up you know advancing execution against that and cheaper improving outperformance.
I certainly believe overtime that we can stop the erosion in there and Oh lease just to be flat on the transaction side there.
On the off premise side.
That's where the guest seems to be going Oh red Robin.
If you look on the catering side, we're doing a very nice nice job there on the to go Oh people coming in ordering that's always been a strong part of the business as weve entered into the.
Third party certainly has been a a bit of a new driver I think we still have a little bit of weren't to do in terms of how we're executing against stuff, but no I think third party delivery is as much defense. So for US as is often service because you want to make sure that people are always considered in Europe .
Brand when they're looking at a oh place to do business work. So we will continue along that lines, but work as other brands are doing to make sure that its no more profitable. They are an occasion as this now.
Thanks, guys.
Our next question comes with a line of Alex Slagle from Jefferies. Please proceed with your question.
Thanks for the question I know the company has been working on some deeper consumer insights work in recent months and wondering if you're sort of happy with the results that or yeah. There are more that you want to explore in understanding the guest needs and.
If there's any initial results you could share with us.
Hi, This is Jonathan I'll take that one we are pleased with the progress there. It is an ongoing projects that we don't do not have results to share out with you on.
But with a with Paul will join organization, we've engaged with him and his team.
It's really involved in this work as well and I'll just say for now that we're pleased with the the star we've gotten there and were diving deeper were also as we mentioned on previous calls enhancing our capabilities combined guess data to access guess data through record upgrading our loyalty program.
Hmm have capabilities and the deeper insights that we're currently gathering we'll be able to give you an update on on the next quarter.
Alex This is Paul.
No what I really like.
That they have that's been done here at Red Robin is is.
The addition of consumer insights.
Team into the brand a coupled with business insights so I'm happy with the work that's that's being done against the consumer side of the business and what are the insights with a brand can can use to really focus the things that we're doing a focus the things that we know will drive.
The business and drives the regard Oh for Red Robin among the consumer base and frankly removed the obstacles that they are saying, maybe an obstacle to them using the brand. So I think we're on the right track with that I was pleasantly surprised that it was already underway and I look forward to really produce some guy.
Great results there have been help us to be able to move forward as we enter into 2020.
Thanks, that's helpful and then on the the new creative campaign additional media spend it seems like that was successful in driving the topline momentum. If you could talk to the degree you expect to explore continuing elevated marketing spend in the near term and if you think that's that's worth it.
Got to start up and again, we were out we're very pleased with the launch of the new campaign. The response from our gas was quite positive in multiple forms of research now we pulled our guests on we really as we talked about on the last call were.
It's all about campaign through consumer insights seeking to establish.
Emotional connection with our gas that our brand has traditionally a one on the and represented reported GAAP and what our guests really no one barbell red Robin.
Got everything that we've seen thus far indicates that the campaign is delivering on that.
Alex This is Paul again.
We're not tag teaming but.
Yes, and my first couple of weeks when I made phone calls to the.
The members of the franchise committed that are on the franchise Advisory Board one thing that I thought was amazing is that to a person. They all said that they so we're behind the new advertising campaign. They thought it was a recapturing so a red Robin and as you know no.
Franchisees can be highly critical of any advertising that we're doing.
So it hasn't to a person, saying hey. This is this is new red Robin is not all are we moving forward boat work reestablishing that 11 tissue.
Or red Robin users.
That was a huge testimonial for some people who are generally no.
Our little kinda glass half full about advertising.
Great. Thank you for that.
Our next question comes with a line of Gregory Frank Frank <unk> of Bank of America. Please proceed with your question.
Hey, Thanks. Thanks for the question <unk>. My first question was maybe just on advertising on a go forward basis and.
We should think of that steps back down and kind of the mid four range or if you get given kind of what you're seeing on the on the spend that you put in the third quarter and the response on the traffic side, if that's going to stay at an elevated level that I had a couple of questions. Thanks.
I'll start and and the team can jump and I'm right. Now you know what we did during the current years, we did allocate some of our marketing expenses more so to the third quarter, while we launched a new creative campaign and we will continue that campaign certainly into this quarter and beyond.
I believe our expenses for this quarter will be a little bit.
Compared to last year, and we are in the process of finalizing our 2020 plan.
But there could be a nation some increases in selling expenses.
We can fully support all the channel a profitable fail.
Trying to garner in the coming here.
Well that's really helpful. Thank you and then and then just two other questions I had one was where you stand in terms of rent renegotiations I think I know that's been an effort.
For the brand for at least a the recent past and then the other question was just.
What are you seeing on the turnover side. If you can give any more clarity and I'm kind of it seems like a few of the casual dining chains have talked about a little maybe a little bit better labor environment than the past and I guess I'm wondering what you guys are seeing out there in terms of hiring and how specific that is to red Robin. Thanks.
Hey, Greg.
On the Red renegotiation side are you know obviously, we view every.
Lease renewal as rent renegotiation opportunity.
We continue to lead into that.
And address that hasn't come along.
And we were as as you know able to address some of the sites through closure early in the year that high rent as a percentage of sales.
Allowed us to make some of the progress that you've seen in this quarter on the occupancy costs.
In terms of turnover, we continue to see pretty strong progress on our turnover metrics.
That's really continued since the start 2019, we'd made we look better versus industry metrics on the manager side, because that's where we paid most hard attention first and now we're starting to see the benefit on the hourly turnover side that we thought would follow on as we had more stability or the general manager lateral became more.
We believe we've got a better environment in a more engaged hourly team member group, which is resulting in continued declines in turnover, which we like and we expect to continue.
Thanks for the perspective appreciate it.
Our next question comes from the line of John Glass of Morgan Stanley . Please proceed with your question.
Thanks first can you talk a little bit about the tavern double its percentage menu mix this quarter and maybe just more philosophically I think it you know ran a bit hot in the past and that's or hurt mix and now you're benefiting from it maybe not being is important so I don't know what the balances. So maybe talk about this quarter, specifically I don't know Paul or gears when his thoughts on Monday.
How you think about that going forward.
Yeah, well I'll start time, just in terms of what the mix what for the quarter, we did see Taberna Burger Max that 9%, which certainly below the levels. We saw through last year I think that peak at 17% at some point last year and let me just asked my colleagues here.
When you addressed.
No not resolved at all time and yeah we.
Your question on how we see are progressing and and what were lower manager and toward we believe that pattern is going important item on our venue.
Seek value in different ways across our menu.
But we're really pleased with the balance that we have across our our Burger categories. Currently our finest is at its highest ever I'm sure third quarter continuing on on so we're pleased with a with the new menu introduction, we had in the third quarter the increase.
Sales of our finest mix and the sustaining of our year over year reduction in tower. So we see that likely going forward with tavern, maybe reducing a little bit more but staying pretty close to the mix now we currently have across our burger portfolio.
Thank you and then just on Labor you said your room back and fully staffed up on them I think it we said it was a manager level what I just like it labor dollars per store. It was down a lot last year, particularly in the third and fourth quarters. It's now running like 5% up year on year again simple calculation is that the way we should think about it now you don't want to.
You got some inflation you certainly don't want to reduce any head count now right. So is it the best way to think about labors cut its going to run it low to mid single digits from here on in at least for the near term.
Yeah, John what you're seeing on the labor side now is our productivity was flat year over year. So what we're seeing on the labor cost right now has more to do with the wage rate growth and the fact that were more fully staffed manager level that we were a year ago.
We would expect next year due to be fully stats at the manager level against you wouldn't see the seems sort of growth in that piece. So now you're really just talking about the we treat grew up impact, which we think directionally.
Yes.
Oh, I'm, sorry, you dropped out, but what is a wage growth <unk> hourly wage growth right now.
Right now our average wage rate had inflation of about 5% for the quarter and so we think that will continue for the time being.
Okay. Thank you.
As a reminder, if he would like to ask a question. Please press star one on the telephone keypad.
Our next question comes from the line of will Slabaugh of Stephens Inc. Please proceed with your question.
Yes. Thank you at a question on sales momentum you mentioned on the last call I believe in the quarter to date period, you are running around flattish into the numbers imply nice ramp into ended the quarter. What are you most attribute that to whether it be the implementation of the new marketing campaign or or comparison door or something else that maybe we haven't discussed his in depth.
I think it's a combination and I've got our Chief concept officer in Chief operating Officer here with me today, and obviously I think got efforts around the new creative campaign really that see sequentially.
He did our analysis at the effectiveness of the campaign at least in the initial window as well is the consumer testing, we did and it back up the implementation that we touched on and then he certainly offer does tend to be ongoing improvements we've seen on the execution side. So we certainly hope if we're inviting guests.
Back into our restaurants, there coming that they're having a great experience and they will increase our frequency and affinity accordingly.
Yeah, well this is Paul I I really think it is it's a combination of things of course, if you ask the marketing guys always going to be marketing, but.
If you ask the ops got it stops, but it really is it's taken a holistic approach and making sure that as we invite people into experience red Robin that they they get.
It really strong experience and that we give them the the red Robin a brand promise.
Continuing to make really I think nice strides to their operational execution and you know from my standpoint, I think that the messaging in the a creative campaign was was right on point was not just about price. It was about really the big <unk> I think that we Ricky.
Captured the so are the red Robin brand in the messaging through the the false campaign and I think that resonated with people and they came in them and they they experienced is beginning to match, what they expect and and pretty soon it's certainly our 10 thats experienced goes above and beyond them.
We're exceeding their expectations at that point people.
Become very loyal.
No Red Robin nights ago.
If that's even a word but.
Thanks for that and just a quick follow up good one other comment that you made around cost of sales can you talk a little more about the contract benefits that you expect to receive or at least what type of impact we should expect to see from those.
Oh, I guess I'd like to shy away from quarterly guidance I caught the sale, but I didn't want to indicate that we do believe our trends.
Well.
The third.
I mean.
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Okay. Thank you.
Your next question comes from the line of Jeff Farmer of Gordon Haskett. Please proceed with your question.
Thank you on the loyalty program, how have you leverage that membership date in recent quarters and.
How do you plan to sort of do things differently in 2020 with all that data you have.
Great now this is Jonathan so first of all a lot of the insights that we shared with you that guy interactions across the business to improve our results and I'm just not our strategy are driven through what we gather through our loyalty program. So.
Got it definitely Howard has incredibly played a role played a role.
Campaigns development it plays a role.
All of our initiatives.
As we upgraded the program, we're already starting to get some of the benefits of the upgrades of the technology through enhanced segmentation that has just begun.
And what that really does is allows us to personalized offers a eventually getting more down to a one on one one to one communication with our gas understanding their behaviors and really fulfilling their needs.
Rather than blanket blanketing them with offers that go out 2 million got better time, So we really see a lot of potential there to get closer target is to understand their specific needs and tailor our services and products to them accordingly.
That's helpful. And then are there any stats that you can share I'm on visit frequency from these loyalty numbers versus.
Some of the non loyalty members.
No no shot at a high level.
Our our loyalty program draws a significant number of incremental visits per year versus got that are not number of all loyalty program not although no over the.
Last year as our traffic has been.
Talent, both groups I visited must frequency.
The loyalty program has enabled us to sustain a much closer frequency year over year I'm done for our non loyalty guests and and so it really has played a role in helping us through what had been a good of a tougher period for comps.
Now as we are starting earlier ends of our turnaround we see here I'm just reading the way forward I suppose groups, that's where you're into increased frequency across both groups.
And then just last question I apologize if I Miss the split on the last earnings release, you did provide same store sales through the first four weeks of the three Q did you sure why it looks like you chose not to share. The first four weeks before Q with this release.
Yeah, I think a couple things one it certainly we want it does show an improvement in our trends than I think you now with the results in the third quarter, we have shown that continued trajectory.
The second point is in the fourth quarter compared to last year. There are many nuances associated with the individual a period. So what I did and live I'm sharing the current period. If I wanted to give you a better impression of took a corridor and what we did it from today that we are expecting you know pod that sale.
Growth for the current corridor.
Okay. Thank you.
Our next question comes from the line of Brian Vaccaro of Raymond James. Please proceed with your question.
Thanks, Good evening.
Just to circle back to the advertising spend and I believe there are differences and what do you book, a each quarter with whats deployed into the market and could you clarify sort of year on year comparisons on weight or spend in the third quarter versus prior year and just what your expectation is in the fourth quarter in terms of actual dollars working in the.
Market.
Indicate and and we certainly confirm those that are filing today, we did spend more and national and local media in the third quarter compared to the prior year. We also had some additional project cost that did impact our results in the third quarter.
I believe in terms the spend for the fourth quarter, we are spending a little bit less in terms of overall selling expenses and that also pertains to national and local media and Uh huh.
Okay, that's helpful and.
Moving to the off premise sales I think he said it was little over 13% in the quarter. What was the contribution of third party delivery within that mix and could you also speak to the growth in delivery in the I think it was 330 units are so that have had that in place versus the last 12 to 18 over the last 12 18 months are you seeing organic growth into year two.
In those units.
Yeah, So right now delivery represents 5.4% up our food and beverage sale.
And we have seen on incremental sales in the second year, but we feel about our third party debris initiative.
Okay, and then last one could you just give an update also on what you saw in mall versus non mall.
Same store sales performance in the quarter.
[noise], yes, they continued to be worse by 300 or I actually let me start with sale 260 basis points worse than sale now that's been fairly consistent throughout the current here.
Okay. Thank you.
Our next question comes from the line of Gregory Frank for of Bank of America. Please proceed with your question.
Hey, Thanks, I said to two quick follow ups, one I may have missed it but can you give what commodity inflation was in in the quarter. The third quarter and then and then a separate question maybe just just in terms of.
How you're thinking about the the debt leverage going forward and.
When and.
I know you guys did the renegotiation to give yourself flexibility on the on the leverage portion of the or leverage piece in the next maybe three months, but.
As you think about the maturity and maybe extending the maturity going forward I think it rolls off and 2021 can you talk about how those negotiations have got model and how you're thinking about leverage overall for the business. Thanks.
Yeah, absolutely so starting with 'em commodity inflation for the current corridor, we are seen as low single digit inflation. I'm. However, we are seeing some positive impact associated with the tavern, Max being favorable as well as our menu simplification initiative, which is improving.
Our cost of sale and also management of waste at the restaurant level in terms of our credit facility, Yes, you've got the maturity date correct in the middle part of 2020, our current facility. That's mature we had begun to speak to our lenders about a new fit.
His ability that we will likely put in place early to mid next year.
And in terms of debt right now I think the company continues to utilize excess cash flow not only for investment back into the best bet, but to really lowered the leverage Chile, you know like a greater.
We think you know we should we should lower leverage.
Helpful. Thank you very much.
[noise], we have reached the end of the question and answer session I will now turn the call back over to management for any closing remarks.
Well, obviously, thanks, everybody for joining us today and.
We look forward to speak into on the next call have a good day.
Good bye.
This concludes todays conference you may disconnect. Your lines at this time. Thank you for your participation have a wonderful day.