Q3 2020 Earnings Call

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Good morning, ladies and gentlemen.

And and welcome to the third quarter fiscal year 2020 conference call. At this time, all participants have been placed on listen only mode and the floral open.

And for your questions and comments after the presentation.

It is now my pleasure to turn the floor, but to your host Joe Taylor CFO.

Sir the floor is yours.

Oh, Thank you and good morning, everyone and thank you for joining us I with me on today's call is our CEO Wyman Roberts, and Mike aware, VP finance and Investor Relations.

Hi, My first comment. This morning is we hope everyone participating on today's call is in good health and doing well during this unique time.

This morning, we released a business update related to the last several weeks of our operations as well as our results for the recently completed third.

Order or fiscal year 20.

Well once we anticipated this call would detail another strong quarterly operating performance for Brinker, we are for a period of time living in a different environment.

As a result, our prepared comments from Wyman will focus primarily on recent business performance and trends with less commentary devoted to our third quarter results. We will also provide some insight as to the dining room reopening process now beginning in some regions of the country.

Following the comments, we'll spend most of our time answering your questions about the business.

But before beginning our comments I would remind everyone of our safe Harbor regarding forward looking statements. During our call management may discuss certain items, which are not based entirely on historical facts any such items should be considered forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

All such statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated such risks and uncertainties include factors more completely described in this mornings press release in the company's filings with the SEC and of course on the call. We may refer to certain non-GAAP financial.

All measures that management uses in its review of the business and believes will provide insight into the company's ongoing operations.

And with that said I will turn the call over to Wyman alright. Thanks, Joe.

These R&D challenging times for the world our country, our industry and Brinker, we're focused on moving forward and how to effectively deal with pandemic, but let me first review, how we ended third quarter.

Third quarter start started out strong and was shaping up to be another great quarter for Brinker. If circumstances had remained normal we'd be marking our eighth consecutive quarter of comp sales growth and Knapp track category beat of 2% to 3% driven largely by our focus on growing our off premise business and our commitment to driving traffic.

We've been executing that strategy for two years before the pandemic hit it provided a strong foundation when the world changed for US that was March eight or last day of positive comp sales.

But that strategy sets us up as we plan our recovery.

Since that day as we narrowed our focus to effectively deal with the crisis at hand, we strengthened our resolve to remain as strong viable company through this crisis to us that means three things first keeping our team members and guess safe.

Second getting the most out of the business. We can in this environment and third remaining nimble and building on our strength as we develop our strategy to emerge from this crisis.

Our team reacted quickly to protect our business during the first few critical weeks of the crisis, we took significant cost cutting measures by eliminating non essential spend and delaying our capital projects.

We worked with our vendor partners and our landlords to reduce our near term spend and we reduced payroll across our salary team with the exception of our restaurant managers.

With the reduction in sales, we set up a relief fund and spent more than $15 million to support hourly team members. We couldn't schedule, we provided them a bridge to government assistance programs.

And.

Fortunately, we had to furlough many of our hourly team members. We have kept half of the team actively working to support our off premise business and with the continued acceleration in sales were busy enough that we've already brought back more than 10% of those furloughed team members.

As we start to bring our dining rooms back online we look forward to walk I mean, even more of our team back.

We've navigated through the initial negative working capital environment, and we estimate our average weekly burn rate now to be approximately $5 million, while our businesses, primarily operating as off premise.

We continue to work to ensure we have necessary liquidity to manage our business in this environment.

As of the end of last week, our liquidity was approximately 175 million comprised of cash on hand and revolver availability.

We continue to evaluate opportunities due to raise incremental capital, including increasing our revolver and while we're taking advantage of the tax savings and deferrals that are available through the cares Act we are not participating in the PPP program.

These actions paired with meaningful improved operating performance over the past several weeks give us confidence in our liquidity position as we get to reopen our dining rooms.

For the past two years, we focused on operational execution, both on and off premise, which enabled us to pivot quickly in response to the sweeping changes across the US we became really good really fast or running a takeout and delivery business. Our managers are on the frontline's engaging our team members and guest during every shift thereafter.

Amazing labor maximizing flow through and most importantly, delivering a safe experience our guests can trust I couldn't be more proud of the work they've been doing.

Well this is far from an ideal situation or long term business model. Our team has certainly made the best of it. We're one of the few casual diners, it's been able to keep nearly all of our restaurants open and we've grown our absolute sales every week.

Over the past four weeks Chili's has gone from running close to 35% of our prior years total sales to more than 50% of our total sales would just takeout and delivery.

This is a testament to the quality of our operators and support teams our ability to use direct marketing effectively our strong value propositions and our reliable and consumer friendly technology solutions. Our brands are resonating with consumers during this crisis.

And as we compare ourselves to the category, we continue to stick to continue to significantly outperform black box data shows chili's gap to casual dining last week at 14% a gap that widened every week since the crisis started.

Part of the reason for that performance is our unwavering commitment to keep our guests and our team members safe. During these uncertain times, we've instituted enhanced safety standards to protect our guests and team members and made those efforts visible to the guests to increase their comfort and confidence in us.

I guess receive touchless curbside takeout, and we're providing massing gloves all their team members.

Additionally, our investments in technology offered a competitive advantage for us in this environment because guests can access in ways that are quicker and safer for both them and our team members more than 70% of our restaurant transactions are coming through Olo, which means the majority of our guests are ordering and pain from their own devices for.

The remaining few who pay at the restaurant, we're implementing touchless portable payment in the parking lot.

As we are beginning to reopen our dining rooms in parts of the country. We're prepared for an extended recovery, we're working through operational plans to adhere to CDC state and city guidelines, we're setting up our dining rooms and bars for social distancing, we're configuring takeout areas to accommodate both increased volume and say practices.

We are getting our team ready and training them to protect themselves as well as our guests we have plenty of mass clause and sanitizer, putting our in restaurant touchless order and payment systems in place.

And we're putting systems in place to make sure. Our team members are healthy so guests can be confident when they dine with us.

No one asked where the situation and no one welcomes the people, it's causing our world, but it sounds like these that proof is strong enough to weather the storm of this magnitude.

We are established brands in our communities, Chile has been around for 45 years and Maggianos for 25 years guess know they can trust us to provide great food at a great value in a safe environment and our team has demonstrated their strength resilience and commitment. During this crisis. So I'm confident that whatever environment comes we will overperform just like we have over the past few years.

Ours, and especially during the past couple of months.

No one knows for sure is what lies ahead, but I know this if it's a half a dining room scenario and we will get more to happen dining room than we will when we returned to full dining rooms, no one will outperform us.

We have the best operators in this business, we've invested in the right model and we have the technology respond ever changing environment. We walked into this thing strong we remained strong and we will emerge strong and with that I'll turn it over.

A question.

Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone now.

That will pose your question you. Please pick up your handset is listening and speaker phone to provide optum sound quality.

Please hold them on the only poll for questions.

Your first question is coming from Jeff Farmer.

Great. Thanks Gordon lives.

Great. Thanks, Gordon Haskett for your restaurants that are seeing off from the sales volumes approach what looks to be almost 60% of off premise or pre cobot sales volumes, what are the pros and cons of reopening the those restaurants to in restaurant dining.

At a limited capacity it seems like you can be giving up some some off premise sales when you actually turned on in restaurant dining.

Hey, Jeff well I mean first let me just talk about what it takes to do that kind of volume in a system that wasn't set up for for takeout and delivery of this kind of magnitude so.

It really was a testament to the investment we've been making primarily in technology. When you are used to getting a handful of cars to pull up for taken delivery on a Friday night.

And now turns into 20 or 30 cars into parking lot and you have to figure that out we are operators in our teams did an amazing job Reconfiguring, our table management system for the dining room to work in the parking lot and so those cars became tables, we took our tabletop payment system Presto and converted that.

Technology to be a pay at the car touchless system for those guests that don't pay online, which we still have quite a few guests at call in place orders and so we've got we were very adept at taking our technology and reconfiguring it to to work in the parking lot and so thats system is well established.

With regard to what we think will happen as we open the dining rooms in terms of the tradeoff.

The incrementality to that that will bring we're confident that it's going to be fairly incremental on and so we don't think that the the cannibalization will be large upfront because again all every restaurant is open under as you mentioned some words as restricted capacity.

Guidelines and so we don't see that being a huge issue for us we think it will be incremental it will drive the total sales number we need to get our restaurants to some higher volumes to get to this next level.

In terms of the growing the business back and consumers.

Want to get out to eat and where they wanted to in a safe place and these restaurants are set up to do that for them.

Thank you.

Thanks, Jeff.

Hi.

Next question is coming from Brett Levy.

Your line is live.

Great. Thank you thanks for sharing all the information and again and I'll Echo what you said I hope everyone. Over there is doing is doing all right. Thanks for taking my call I guess, we could just go a little bit further into just how you're planning on reopening.

New units, whether it's just.

Are you going to go with a capacity above below what you think the local jurisdictions are saying to you could have a national approach. How are you thinking that originally and then just.

When you think about the you said you brought back 10% of the furloughed as you're building up sales.

How are you thinking about layering on costs given that we just don't know what that demand is going to look like and you'd obviously like to err on the side of caution both for your people, but also from a financial standpoint, what do you think you need to see to get that cash burn what's what's a fair number once you start reopening the stores to get that cash burn rate.

To a breakeven and I'll turn it to our Q4 there. Thank you.

Okay. Thanks, Brett I'll cover the first part of that question, which is you know what's our system for opening reopening our dining rooms.

Every I'd like I said all of these states and counties are.

Our appropriately.

Limiting the capacities.

So what we've got is a floor plan.

That is.

Laid out for every one of our restaurants. According to their configuration, that's probably around 50% capacity, that's where most of the restaurants are starting but then you have states like Texas, who then are taking it a little bit even more conservative with 25% limits in most cases for the next.

Couple of weeks. So we did then just ex out a couple of more tables. So we have a we don't we earned this isn't a random process. We have a system. We have a team intact. It's working with every operator in every state as they become able to open their dining room to put in the system that puts into the safety.

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The sanitation and those systems in place for safety as well as the restaurant layouts necessary to to provide that distancing. That's so important in these environments.

And it will work, but it's absolutely a systemized approach then gets modified.

For the specific restaurant in the specific marketing and Jochen talk about the costs and how we make sure. We're we're doing this in a cost efficient way, yeah, Brett and good morning.

We will take it extremely disciplined approach to any incremental spend as you kind of go through this process and it's going to be very much guided by those traffic increases that we see.

Again.

Looking how we balanced that to go off premise side of the equation and bringing dining backend.

Well be the incremental spend will lag.

As we kind of move through through those.

Upticks in traffic will be very judicious and turning on.

Some of those non essential Spencer together some of it does come back end inline we want to make sure. The restaurants are obviously airing significant on the side of of being clean and sanitized and cost associated with that.

But I think.

In short, we can manage that price, we scale and systems matter in this in this again. This has wyman had indicated the ability to give our team members of very detailed labor models as they come kind of move back into these systems is an important piece the equation so lots of guidance coming from.

We are seeing giving people the tools and disciplines to be able to manage this has to come back and when I. When I think through that I think the base of the question as to where do you see kind of cash flow neutrality.

From a performance standpoint, I kind of look into the down 30 range down 35% something something in that range. It will depend theres a lot of inputs and it depends that go into the those numbers, but I think.

Thats kind of the range, we would have expectations around starting to move back onto the.

The good side of the cash flows this situation.

Thank you very much.

Your next question is coming from John Ivan go.

Your line is eyes.

Hi, Thank you I think there you two related questions here first.

Obviously, you guys. Most didnt have the financial ability to hold on to all of your workers, but you putting some workers on furlough would actually allow them to make more compensation for a four month period than they would perhaps.

Working in certain jobs within the restaurant ticket you can you kind of talk about that dynamic and your ability or what you think you.

If you wanted to turn to switch back on re attracting some of those workers. If that's something that you think.

Yeah that you can do fairly easily like well as if it was a normal environment. Today's the first you kind of point to talk about that and then secondly on.

Looking at your financials, but I'm sorry, it happened it does look like there is.

Fairly big reversal and I see <unk> in the DNA side this quarter.

Can we talk about.

As I think every company is reevaluated the fixed versus variable cost within their business.

What you think the underlying kind of run rate back to normal.

DNA level as you for your business that because of problem to be able to sit down and go through that.

Hey, John.

Yeah.

Good to hear your voice.

The Tokyo.

From a compensation perspective, and a and the the unemployment benefits.

You know, it's we have mixed feelings about it on the one hand, obviously nobody asked for this for this pandemic nobody asked to have their businesses shuttered and there was nothing we really could do especially given that we weren't being supported with any other government programs to help keep our team members on the payroll so that so we spent $15 million.

The bridge him to unemployment into the to that really funds checks.

And then.

We were grateful frankly that they had some government support with these improved and increased unemployment checks that said.

It's not a sustainable model, obviously for the country and we need to get back to work. The good news is what we're seeing and we brought 10% of those furloughed team members back already is that we're seeing them wanting to come back to work for a lot of reasons.

Financially, it's probably a push as you mentioned it for a lot of our team members. These benefits are are fairly good but they also know that you know they need a long term job and they have a commitment to this company and they've they've been in some cases part of this company for for many many years and they're looking to get back to work, they're not so short sighted to say hey.

I'm just going to take these these benefits and when the job comes.

Ill take a chance that I'll get it later, especially when you look at the potential unemployment situation.

Down the road. So I think we're gonna get passed that I think the other challenges just how strong.

Cove It is in the market so those two factors.

You know are kind of dictating how many people are wanting to come back to work.

But right now, we're bringing them back we're not having a problem staffing our restaurants as we start to reopen.

And Joe you want to smartphones.

John I think as you pointed out that the delta in and year over year DNA of almost 17 is almost.

It's all driven by incentive comp some of that was a little bit of timing a small portion of it is timing related to previous conversations we've had a bad.

Retirement eligible comp being in the first quarter, but 15 to 16 of that have that number is driven by reversals of our existing annual.

Performance comp plans, we obviously are near the end of our fiscal year. So those reversals.

There are more acute in this kind of type timeframe as you reversing once you have been accruing throughout the fiscal year.

But it does show the variability in that number I mean again as it from a go forward basis, I think we'll have opportunities talk about.

What that looks like as we get farther down this path.

We will be reestablishing.

You know programs of that nature as we look to the next fiscal year and we'll talk about that is as we go through go through that process, but.

That is the biggest delta youre seeing in these in these numbers right now.

And I think it'll be a couple of quarters before you would get back to.

Probably a more traditional GNS spend that you've seen if you look at the first and second quarters.

Thank you.

Your next question is coming from David Palmer.

Your line is five.

Thanks, Good morning, and congrats on that that take out business looking very strong there.

First.

First question when they ask you was it was about the timing of the stimulus checks and did that coincide with a step change in your business.

I think really started on April 15, wondering how you're thinking about that as.

Is that it should garage that Mike burn off in are you concerned about that and then I guess on the other side, you're going to start to open up where a lot like restaurants, but imagine starting next week.

Do you envision that being a vast majority of your restaurants by by June being open and what does that capacity versus previous grow those dining rooms.

Thanks.

Hey, David again really good to hear your voice.

Stimulus checks were absolutely a little bit of a boost to the category right. I mean, you can look at everybody's there's a lot of folks that have put out weekly results now through April and you can see that pop, especially on that mid week direct deposit day, where they just hit the direct deposit so in one.

You know in kind of one push a button.

So you got that it seems to be maintaining again every week, we've seen sales grow.

So it wasn't like it was the sugar Russian only lasted a you know for a few days or a week. It's now moving through as I think again, there's a lot of stimulus checks that are still going through the less efficient channels you know.

Whether it's the direct deposit they didn't have as much information on or whether its paper checks. So theres still lot of money that the government is going to be putting out there again I think its goods. It helps to sustain an economy that's in a very.

Unique situation, but it's not the model that we're gonna obviously live under so so we see it having a nice little pop, but not it's not this it's not the.

Foundational thing that we're counting on and I know that gets the driver of the overall results were seed.

And so I think as we think about opening restaurants.

We'll open will buy this weekend, we'll have 300 restaurants over 300 restaurants opened so, Texas, Oklahoma, Utah and parts of Tennessee Open Friday.

We always we already have Georgia opened for two days. So we have a little bit of so we have two days worth of extreme one data point. This looks like we will continue to open with a with the guidance from the states and the governors of the states that.

That said really this the precedent for us to be able to open we are ready.

And it and how we are opening we're being very safe very very.

Systematic about how we do this our restaurants are now planning.

To open obviously this came a little faster than we had anticipated. So we were scrambling a little bit this week to get a you know 300 restaurants open in some cases days' notice, but for the rest of them. There now prepping getting themselves set up for a for restaurant openings and we anticipate.

What do you think Joe Bye.

By June.

The majority of the system, probably will be open I would it I would anticipate that because I think you'll probably see a steady flow of.

Incremental opening plans.

It appears that.

Number of other states have already made indication that those plans are forthcoming yeah, I'd expect to see that as we kind of before but it'll still be there'll be some some levels of probably delay after the other one segment and it'll be very interesting obviously, we along with one of the country, we'll be watching the spread and the cases and if you know these openings or we don't.

No if they're too if they're premature those those are big questions right. Those are questions above our pay grade we we're relying on on the guidance from the people that are running. These are these the government Franklin and we'll we'll monitor that with everybody else in the country to see if were too fast and we'll probably end up dialing it back.

But we're optimistic that the these levels and when I walk into our restaurants and see the spacing and the.

So.

I feel pretty good that the distancing I feel really good the distancing in our restaurants is is safe and that you could feel comfortable in these restaurants, there's there's nobody within six to eight feet of you you you're almost probably appetite so.

That gives us a lot of confidence that we're doing the right thing I think that thing to David and from an opening standpoint is that even within a state you're going to see I think some different approaches based on an urban versus suburban versus rural particularly your bigger states and when you think about <unk> again, the footprint, we have which tends to err on the suburban an excerpt inside of the equation and then some.

The states, great like Texas right grade rural.

Penetrations I think.

You probably have you'll probably see some expediency in some of those openings.

Around the country. So I think that plays well in that regard and Georgia has been a good example, you know of where our size helps you know our dining rooms are fairly large and they give us a lot of room and so when you end up with the Georgia Major Georgia constrain was 10 guests per 500 square feet.

You know a lot of restaurants, especially smaller independent in a lot of urban restaurants.

500 square feet could be your dining room.

A lot fast casual.

You don't have although a whole lot more room than that so with us.

We have.

Significantly larger dining rooms in that so we can put.

A few more bodies in there and that's going to be a constraint for for some of the competitive.

For some of the competition.

Interesting. Thank you.

Yes.

Your next question is coming from Brian background.

Your line is lives.

Hi, Thanks, and good morning.

On that last point, why and then could you on reopening and just see E. Two days into that in Georgia, Obviously did you give a little more detail a context around what that will look like from the guest experience standpoint, whether it be the safety measures that are in place whether it be the spacing that you're going to have in Texas.

Versus Georgia, just maybe some broader context of what it will look like from the guest experience and is there any early feedback I know were two days in but any early feedback on how the customers are using it and what's been the than response, thus far.

Hey, Brian.

So let me just maybe individual for you. So if you walk into our restaurants, the doors in the doors or BMW sanitizer right right there at the front of the doors.

You will be sat at a table and there won't be and the two tables next you for the most part won't be SAP.

And so there won't be a table next you. That's that's that there will be a table, that's usually a sanitizing station.

That has paper towels and sanitizer the table will be clear of almost there won't be anything on the table in the menu will be we're working quickly to get new menus out, but fidelity to be paid paper or there will be.

Easily cleanup bowl menus kind of one or two pagers. So.

The every day every everything that's gone into at the bars will not be sat at the bar top so the bars, we won't have patrons at the bar because that's very hard to distance and it's also hard to regulate so we will have.

Some some some tables pushed up to the bar so the bartender could react with a party interact with a party, but they'd be six feet away or more.

And that's how it feels and so when you walk in again the spacing is there and all of our service will be masks and gloved and.

And they will also have been asked before they can check in several questions about how they're feeling have they taking their temperature that day. We have attempted we have.

The monitor in the in the restaurant that they can use if they haven't and before they can check in NAFTA validate that they feel good and they're ready to to working they haven't come in contact with named everywhere. So we're taking all the steps necessary, we think and I think as a guest and everything we've heard in Georgia over the last couple of days has confirmed that.

The guests that are coming in are feeling good about a billion when talking about what we've seen in Georgia for two days.

Let me just caveat its two days where the day.

38 restaurants on a Monday Tuesday, but here's what we're getting into that yeah, and where I want to things to it I think it's very relevant here is that that we've had operators in restaurants game planning. This for a couple of weeks now so the ability to go into.

The restaurants and worked a floor pant plan, how that have the design teams, helping from a safety and security standpoint understanding. How these flows can work I mean again, we're getting a little we've got some openings happening slightly faster than we thought they might.

But we're prepared for that because of the work again and the back the backdrop in the scale that we can bring as to to the to the operators in helping in this regard first couple of days in Georgia again, we think the dining room piece equation has been incremental we've seen the on an aggregate basis it down.

In the mid twenties is kind of been they the first to today's response the interesting thing is.

And this and there's going to be some great learnings over the next several weeks coming out of these these areas that.

You do see some variance as two we actually have had several restaurants.

With positive comp sales year over year, that's so positive positive comp sales.

So you do get a wide variety of responses, depending again I think some of my comments about the regional flavor and responses in corpus where people's heads might be at from a but there is clearly there's clearly a demand side out there that we're seeing in a number of locations.

I guess really helpful.

Well and just switching back to the weekly cash burn that you gave the $5 million a week can you run through the primary buckets within that burn rate and does it include full rent payments.

It it's a comprehensive number I'm looking at again the entire.

You know revenue and disbursement sides of the equation. So it does include Capex and some of those those things.

It does not include.

Full rent payments, we in April made rent payments that approximated about 50 657.

Percent as of.

Expected ranch, we obviously been working aggressively with landlords and a very cooperate environment too I think I mean again, we're we're pleased with the discussions on what deferrals look like it kind of going forward, but it will be there will definitely be a level a meaningful level of rant incorporate into that and of course those numbers.

We'll adjust Brian.

We now move into.

Into into the new environment. So.

Yes, but it is it's it's a comprehensive behind but besides that.

Alright, Thanks, I'll pass along.

Your next question is coming from Craig frankly.

Your line is lives.

Hey, guys I I two quick questions. The first is can you talk about the like how you're thinking about 2021, and I think a lot of people who are listening to this color or trying to balance maybe a more pressure consumer with significantly reduced competition and I'm curious just what your thoughts are and then and then the other question I had was a key.

All of your competitors have done equity raises the kind of I don't have its shore up the balance sheet or maybe kind of increase the flexibility coming out of this.

Yes, what your thoughts are on the possibility of brinker doing that in.

Kind of balancing raising cash with the dilution that I would bring thanks.

Hi, Greg I'm listening to you know we're in the same boat with everybody else right. What's what's the recovery going to look like is it a V is it a you know.

Who knows so what we are committed to doing is just.

Really performing at the top of the industry in whatever environment. It shows a rare given in a in our physical 21, which starts in a couple of months. So.

I can't tell you I know there will be obviously some headwinds the unemployment situation isn't going to rectify itself overnight, but they're also going to be some tailwinds there are going to be less seats in a in the in the category. I mean, there there are absolutely going to be less bus seeds, and so how that all maps itself out.

How much pressure you get from the front versus a push you get from the back I don't know, we'll we'll start to get a sense for that here over the next couple of months, but.

You know we're kind of.

Going to.

Commit to just performing at the top of whatever environment gets put in front of us.

And Greg to the second part of the question I don't have anything really specific to say.

You any any type of capital raise but.

Again, we kind of start the position being.

Much more comfortable today from a liquidity standpoint, I think the numbers.

We gave you this morning show the ability.

To work through the bridge to the other side of the equation. The bridge is actually starting.

In short order here as we now as we move back into dining room openings I do believe those will be.

Over time positive to the liquidity said, so we're comfortable from a liquidity standpoint.

That being said you know we're monitoring capital markets closely we have great conversations.

With our bank group that today, they're important partners and working through these situations will continue to have those constructive.

Comments, particularly as it relates to some of the incremental.

Availability on the revolving credit.

Well just monitor capital markets as we kind of go forward.

From that.

From an EPS physician.

Thank you guys for the thoughts and good to talk to you.

Great. Thanks for thanks, Greg.

Your next question is coming from Nicole Miller.

Your line is lives.

Thank you good morning could you talk a little bit about the supply chain, while we've heard about plants closing down and I'm. Just wondering if there's going to be ELAD. There if there's any concerns that might materialize.

Or if.

Or not I'm. Thank you.

I in nickel I'm really not right now not near term and again I think if your and I know you are aware, there's a lot of the supply chain issues that are that are out there or because of the lack of demand in the food service sector and obviously you know we're one of the one of the bright spots in that.

Sector that you know, allowing them to produce product it gets to us and again a lot of our protein has already been put up and and we're not we're not doing with a lot of fresh.

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Protein protein so we're in pretty good shape, and we don't see any near term issues. Obviously, if this goes on forever or for a longer extended period of time.

Then there could be something but but in the near term, we don't see any major issues in our supply chain feels pretty confident in that.

Oh earlier, you wake up labor and ability to get in place back into the restaurant across the board and restaurant and retail some premiums have been paid on in the market recently, what's your outlook on labor inflation. Please. Thank you very much for your time today.

Well.

Theres two things that I'll mention one is just a it's been really.

Uplifting to see the generosity of our guests.

During this crisis in the and the level of tips and and I could tell you stories of a multiple stories of guests come in and tipping team members at hundreds of dollars.

And so there's a lot of again a lot of our team members rely on tips and that that piece of the income has has been.

Really done they've done really well with that so they're making good money the ones that are employed with us and with regard to what we're going to need to bring people back so far it hasn't taken a lot again. This is the good news bad news of unemployment so.

It was 26 million people looking for work.

I don't think we're going to have a hard time finding jobs.

Finding people to fill our jobs.

Thats that that's going to have a bigger issue with you know what economic impact of that on the other side, but we were not seeing or don't anticipate.

A big inflationary impact.

Due to this virus or this this crisis.

Thanks, I will say Nicole let me just mentioned one more thing with regard to the people in the restaurant.

Our managers and our and they're doing an amazing job you know when we talk about frontline workers through the pandemic people that are out there, allowing businesses to stay open to keep people employed.

In the face of the pandemic.

Yeah, I couldn't be prouder of the work they're doing.

And because of the financial implications as had on the business.

You know, they're not getting the level of bonuses in some of the things that they've used to get.

Because of just what's happened financially to the economy and our first commitment is to making sure that that we take care of those people and and so we may pay bonuses out.

Two.

To to team members for levels of performance that we typically wouldn't.

During this crisis and that has nothing to do with what we have to do to keep them that has more to do with what we need to do to be to two really recognize the.

The sacrifices they're making during this crisis.

Yeah.

Your next question is coming from Chris Ocull.

Your line is life.

Thanks, Good morning, guys.

First Joe I appreciate the update on that Georgia locations, but I'm wondering if you could quantify the limits to sales recovery as a result of maybe reducing the capacity of those locations.

Well, yeah, Chris again, it's going to depend because as you know you're dealing with typically capacity restraints are based on your occupancy occupancy levels or in Georges case, you got to square footage restriction, but that plays differently in each restaurant and frankly, almost every day part.

Throughout the week, so obviously capacity constrained on a Friday night is different than capacity constraint on a Monday launch yeah. So.

What we'll see the progression of that we'll learn from that as we kind of go.

But different restaurants are going to react differently now they're going to be restaurants that from their traditional operating performance level may not have as much of a capacity constraints.

And then they'll be others that have have a more significant one protecting those busier dayparts. So but you also have the robust to go sides of the equation and we don't expect.

That to go away anytime in the near future again, I think there's we've introduced.

A significant number of gas.

To Chile as a during this this process in particular in Maggianos just had some of the same benefits and folks getting to experience.

The the to go operations and how we perform to their liking in that regard so.

I think you know to the extent that they consumer continues to gravitate towards an off premise environment.

We will benefit from that.

Yeah, I'll just add Chris the tradeoffs are gonna be as Joe mentioned, you know a <unk> really on those high volume time periods, you are going to how much you're going to shift from takeout to dine in and how does that play I also think it's going to be a very interesting dynamic to see how long people will wait for a table. So my hometown here in Texas.

Leeville opened up their patios this weekend.

They have seen in National news and people are waiting two and a half hours to get a patio seat.

Now we have a great table management system that allow people to wait in their cars and we can pay Jim when they're tables ready and I anticipate people wait a little longer to get a seat and to be taking care of in the dining room, where we're seeing people.

Kind of dining our parking lot in the back of their cars in their trucks.

So it'll it'll just be very interesting to see how they play out this summer.

As we get through some of these capacity issues, but overall the tradeoff between dining room and take out delivery will be the dynamic that really matters to overall overall volumes.

And then just one last one wyman how does the company plan to utilize advertising is stores reopened.

Talking about the long waits right now I mean is it.

Is the is it worth using advertising to generate more demand or do you plan to maybe delay that.

Yeah, we're right now.

Really leaning into again this is where all the investments and all the <unk>.

Expertise, we developed over the years with direct and digital and loyalty is a really come in handy in and paid dividends for us and that's what we're leaning into now I think mass and abroad traditional marketing is probably not going to be as effective in this environment, We're where we got capacity demand and we're really be.

In much more targeted and we'll evaluate you know future marketing spends as you know as the environment starts to move but right now we're really doubling down on the digital social and a direct.

Marketing and our teams are doing a great job with that.

Great. Thanks, guys.

Hi, Chris good talking to.

Your next question is coming from Robert Derrington.

Your line is yes. Thank you.

Bob Derrington with Telsey Advisory My question.

I guess, Joe Wyman I'm, not sure who best handles. This typically we've seen you know illness foodborne illness across the industry pop up from time to time and all of a sudden you've got.

Lawyers chasing lawsuits and I'm just wondering how do you minimize that risk or is there any risk of an employee.

Customer, leaving you know and ultimately, saying listen I was.

I got deal by visiting a chili's restaurant in certain locations.

Do you.

Acquire your employees to wear masks.

Take their temperature.

Yeah. It does that vary by store and you know what about consumers you know do require them to where a mask I'm just curious from your your standpoint.

So Bob Yeah, we don't first from our standards or our nationwide and there and we are strictly adhering to them and making sure that that happens and and so its mass and gloves and sanitizer and distancing and we take it very very seriously I think one of the reasons.

If not the most important reason.

As to why we've continued to see our sales grow every week and our GAAP to the category grow every week since the pandemic hit is because of the obvious.

Seriousness, Miss was which we've taken safety and it's visible to our to our guests into our team members and.

Yeah, that's that's kind of non negotiable.

Now.

We do ask them as I mentioned, a you know are they feeling weld have they taken their temperature at the bidding contact that they feel they have to answer these questions before they can clock in and if they haven't taken their temperature and can verify that they believe.

They don't have a temperature we have at the moment or in the restaurant that they can go take their temperature and verify for us that they're they're not a not feeling that so we're doing everything we can on that side and then from a consumer standpoint, we really rely on you know whatever the whatever the restrictions are in the in the in the county or in this.

In the state to state mandates, everyone, whereas masks and then we expect they wanted to be weren't im asking if they don't they were not going to be enforcing a standard above and beyond we know social distancing is the right thing to do and we have so from dispensing set up within our restaurants, while we.

Worked through this next phase so that's kind of how we're dealing with it in terms of how do we deal with future losses were not we're not focused on that we're doing the right thing we know that if we just do the right thing we should be okay relative to kind of everything that you can expect.

In this crazy world of Coven.

It's it's comforting to here, one and as we look at one or the question on the the sales mix of the beginning of April to the most recent trend.

Can you give us some color on how that mix has varied I know that a number of states have allowed delivery oh alcohol per se how have your alcohol trends changed over that time is that one of the key contributors and will that be they're available after other dining rooms reopened.

Well, so first I mean again back to the.

The quality of this team.

You know you told us two months ago that we'd be selling mixed drinks to people in cars.

You know it just was not in anyone's radar screen and as soon as those became viable options in some states being able to sell drinking.

I'm cases being able to sell pack good.

With Margarita kits, we got all over it and our supply chain really supported us in ways that were pretty amazing and we've grown that piece of the business as it represents over a million dollars a week now in sales and has grown nicely and we feel very good about now what the future holds I mean.

Again as most of these things are were temporary or kind of acts that were put in place by the government's and so we'll see how they hold or and how long they hold but as long as they hold we're we're comfortable now we've got a great product guests really enjoy it and and we're having a good a good success.

Yes, selling marguerite as to people in cars.

A president Jay on the ride home with a strong that's a great way to do Oh no no no not in this phenomena throb, Bob Nobody is drinking them and that you got to get some but not the you get home <unk> there. Thank you.

Your next question is coming from John Tower.

Your line is five.

Great. Thanks, just a just a question on the balance sheet, specifically curious to know how long the covenant waivers last that you received and then in terms of thinking that's out along the line of how your business progress is when you returned to the negotiating table with some of the lenders how can we think about your total shareholder return.

And potentially changing given that.

Your dividends and repurchases had been a significant piece of the TSR over the past several years. Thank you.

Hey, John I think as we indicated in the press release relating to the amendment that we received waivers for that the two quarters of that points. So basically would be this quarter and the fourth quarter re established a covenant a mark of on de lever side.

Equation.

4.75 for the first quarter fiscal 20 Watt now so that's that's kind of dynamic as it relates to that and as I indicated obviously ongoing conversations.

With the banks and particularly she started to move now into these next phases kind of understand what that looks like understand what that some of the go forward dynamics and and that includes how you how you structure a covenant package.

In this new environment going forward after that after those timeframe. So a lot of good conversations going on there as it relates to the other part of the question that's.

I think thats a discussion for down the road.

Some of the dynamics you mentioned.

Where suspensions, we'll talk about capital allocation you know on a go forward basis at a at a future time, and how that and how that impacts the TSR question.

Okay, and then just it's great to hear that the majority of your stores are still open but in terms of thinking about your asset base.

You know just giving you an opportunity to potentially I don't want to put it.

Two craftily, but in terms of pruning the portfolio of stores, where are you felt like.

They were marginal with respect to operating relative to the rest of the system is giving you an opportunity to to essentially say the this is time to get rid of them.

Well, John we we do those looks on an ongoing basis I think we talked about a twice a year indepth reviews on performance. We've we've frankly, we've done a good job of incrementally pruning over time. So again this is a.

A new data set as it will create a new environmental that will play into those decisions, but we are sitting with.

A lot of restaurants do you think as you described kind of teetering on the edge I think.

Again, the actions, we've taken to ongoing basis, and the fact that.

Weve cat kept really all the restaurants opened except some that might have been in a physical location that kind of open because of that location.

Speaks well to the condition of the fleet.

Great. Thanks, and good luck with everything.

Thanks, Joe Thank John.

Your next question is coming from John Glass.

Your line is lives.

Hi, Thanks, very much just just a couple of follow ups first I know that franchising isn't as big a piece of your business as it once was but can you comment on the health of your your domestic franchisees as well as maybe some of your your international franchisees as they probably gone through the same issues that the whole that rusty industry is phased.

And can talk about on delivery is there any capacity constrain three or you, noting that third parties, having difficulty getting the capacity drivers to fulfill your demand as others are also seeing that or is up in a pretty it was up in a pretty smooth transition to greater delivery percentage from their perspective.

Hey, John good to hear from you.

Yeah, we're we're our franchisees are performing.

So inconsistent with US with company owned restaurants, you know obviously, we have a couple of franchisees that are unique like our airport franchisee, who is having their own situation relative to the airport environment, but those that are the majority of ours or are similar to two us with regard to their locations in their markets.

They're seeing similar kind of result, so feel good about how the bulk of the franchise bases kind of a weathering. The crisis. The international market is is a much more you know, it's and it's just a much more dynamic situation a lot a lot of closures or and then reopening.

You know again as you've tracked the global markets you know how the pandemic is kind of moved through different parts of the of the world and our restaurants and franchisees have had to deal with that so we've seen more closures in the international markets than we have as a percentage.

In the U.S., but again overall I think there they are faring as well as can be expected are consistent with how retail and restaurants are doing in those markets.

And we were a you know they're working their way through and in some cases there further.

Along.

In the process.

Moving out of the.

Covert crisis, and we are in the U.S.. So it's continuing to monitor it I'm not a huge part of our business. So that's important to note on the international side and it's more volatile, but again, it's it just doesn't impact our overall earnings performance that much.

And then delivery of delivery Yeah, we've got it would no problems I mean, the biggest challenge. We're seen you know the the online World has just you know a you know the demand is been tremendous and they're setting new records every weekend with regard to.

Number of users on the systems and so just a getting all of that to work smoothly and making sure that everything is is kind of working under the pressure that it's been put under as has been probably their biggest challenge.

But we haven't had a problem with a with getting drivers to pick up orders. That's that's not been our issue and we've had really good in our partnership with door Dash. We were just a we're just pleased with it we think is there a great partner and the work we've done over the last year to grow the business and to understand their bid their business.

Our business you know, we couldn't be happier with that relationship.

Thank you.

Yep.

Your next question is coming from Eric Gonzalez.

Your line is lives.

Hey, Thanks for the question and Glenn everyone. You know sounds like they're doing well just wondering if you could discuss how consumer behavior as a change with regards to off premise standards like how much is check size increasing their seats specific items are deals that you're seeing a higher many preference as people experienced the team. Thanks.

Eric It's interesting rights of so first.

Check size increases have been had been there I think as we've seen more families kind of move into this category than than probably were there before.

The.

The biggest challenge in into kind of one of the things that we've talked a lot about you know our comp sales.

When you look at the difference between comp sales income traffic our comp traffic numbers are five to six points better.

Because the to go check and the delivery checks tend to run a little lower primarily because they don't have alcohol sales and why we were pleased with you know the a million dollars a week, we're selling and in Marguerite is to go that's a fraction of what we used to sell when we obviously have a dining room and and a bar and so that's been probably the.

Biggest difference between the mix, what we were seen inside the restaurant an outside beyond that the value propositions that we had so so interestingly when we went into the crisis we thought.

We're going to have to simplify our menu.

Like many have done and then we we actually challenge ourselves to say hey, listen.

Thats creates a lot of problems for our guests who love their favorites and for our supply chain because there's a lot of product out there that if we simplify the menu what's what's gonna have to that product. So we challenge ourselves to run the full menu and we've done that and we've been able to pull that off and still deliver the kind of piano performance that we needed to and the operational side of the.

Equation, and that's partly because our our dining rooms are just to go experiences is complicated, but our kitchens aren't as busy as a they normally been so they're able to pull this off in our operators did a great job our supply partners in our distributors adjusted and we've made all these changes to the system to to make that work for us and so overall.

Our our mix is leaning a little heavier into the value propositions that we have always had.

And that was also really I think a strength of ours. We didn't have to we didn't have to innovate or create a whole lot of packages or new deals or family bundles that we've seen a lot of other folks do we've just ran our menu and our menu has inherent strength in it and that's chili's margins had to make a few more modifications just because of the nature of their you know there.

Sit down dining experience, but for Chili's, we just ran what we ran to eat it and for the most part with the exception alcoholic sales checks kind of lineup.

Thanks, guys. They say there yeah, everyone is we're coming up against the hour. We will go over effort for a short period of time, probably five or 10 minutes I will get through as many of the questions. As we can we know there's a lot of folks obviously you have a chance to talk a individually after the call, but well keep.

On comments by just while it you know we are now we're carrabino round about the next step 10 minutes or so we're cognizant of your time too and if we Miss you are those that have to check off. We appreciate you joining this get.

The next question is coming from Katherine So greedy your line is lives.

Okay, great. Thank you answered just one point of clarification here on when you reopened the dining room, you mentioned, having a one or two page menu is that going to be breads menu or have you figured out a way to come down all the prior menu items on that page. How are you thinking about menu and we'll guide on when you reopened.

Well again, it's going to take US a couple of days to get menus out a in a bridge format, but it will be it won't be it will be the full menu. It the it'll just be in a different layout. So yeah. We don't we don't into because we don't need not changing pictures, yeah, and we're going to encourage guest who that you know listen.

They can always if guests are nervous about menus, you know they can pull up their phone and pull up our app and <unk> and scanner menu from their phone and that's an easy it's an easy way to two to order as well again, so if anyone's nervous or at all not comfortable with where the menu theirs.

There's touchless systems that are be there, yes, that's pretty much a touchless system that we have that they can take advantage of if that's at all important to them [noise].

And then I'm I apologize if you gave the figure.

But I do you have an update on my Chili's rewards members.

These findings are seeing about you know you usually gets into the platform given your digital strength at that site.

The <unk> the the platforms that kind of holding its own we signed up a lot of people into my chili's rewards through our dining room.

And so when we lost our dining room, we did lose a source of.

Acquisition, but obviously that's been traded off with online acquisitions. So net net it's a little bit actually a little bit down, but it's still.

Kind of robust and doing well for us working as hard as it's ever worked yeah. The active database is still over 8 million.

So it's it's it has the capability to do what it needs to do and as we opened dining rooms again, we'll start to grow that we'll get that acquisition vehicle back up and running.

Okay, great active I think there thanks.

Your next question is coming from Dennis Geiger airliner five.

Great. Thanks, guys wondering if you could talk a bit more about new guests and if you have any sense that you could share as it relates to the relative magnitude of newer gas using the branch and maybe just.

On top of that any any sense on sort of customer perceptions and and perception scores over the last couple of weeks and as we kind of think about marrying those two how do you think about the stickiness of new guests that you've seen over the last several weeks. Thanks.

Well every channels a little different right. So I think on the delivery side, where the businesses again, both our takeout and delivery business of more than doubled almost tripled the delivery side of the business. We're getting a lot of new users a lot of people that are.

Experiencing delivery for the first time, and then finding the chili's delivery experience for the first time, so that bodes well all of our metrics through.

Crude that system confirmed that we'd do a good job in that are guesser Appian and that we that we have a good kind of conversion rate.

With regard to new guests with takeout, it's probably not as.

Not as many you know here, here's where the loyal guests of Chili's of are coming to.

Fine that experience that they can trust in count on in these uncertain times and and we see a lot of our loyalty that is where leveraging our loyalty database really comes in a Andean is working hard for us. So we are getting new people into the brand every day, but but.

Kind of it change it's different by category icon.

And we have seen.

Our experience.

So we we have guessed metrics and our guest metrics on delivery and takeout have significantly improved through this process you know really we've improve them.

To a magnitude of 30% better than they were in.

In that channel prior to.

Being a delivery take out only model.

Great. Thank you.

Thanks.

Your next question is coming from Andrew Strelzik.

Your line is lives.

Hey, Good morning, I guess, you know just two questions for me and I apologize. If you excuse me mentioned looking I missed it and you're seeing a lot of the new delivery customers coming to the brand has your mix change between the two channels.

It's still primarily coming through through third party would be the first question. The second one just as we think you know in the post recovery environment about sanitation and cleaning measures or anything like that would you anticipate any structural kind of margin implications as we kind of moved past the recovery guys.

So on the on the first when Andrew I'm not sure I understand your question <unk> all of our delivery comes through.

Sure Dash so to leverage ago.

So are you you're asking about the to go delivery mix, how that how that those two yeah that they both grown significantly the most more than doubled them pushing on triple Oh. The relationship has been the growth has been a little better both absolutely a percentage with to go but the delivery.

Businesses.

Also grown very nicely.

And Joe on sanitation the costs associated.

Again, we would anticipate some some incremental costs associated to those again.

Sanitation and safety are already embedded in the business model, there's probably some incremental level. It will go for some period of time.

But it's it's incorporated and thinking it's going to be very manageable in that regard.

Okay. Thank you very much thanks.

Your next question is coming from Peter Sally.

Your line is lives.

[laughter] great. Thank you and I appreciate all the color you guys provided today I just want to come back to the comment on supply chain. I think you said, you're not seeing any real impacts.

On the supply chain.

With that said you expect or do you anticipate any sort of either deflation or inflation in any particular commodity anything that maybe different than what you guys are anticipating a few quarters ago.

Yes, I think paid or overall, we're seeing a little more or a little less inflation I'd just say so that they expectations on inflation level or are down probably about a percent or so now.

Again, remembering that are contracting is designed to.

Try and mitigate as much volatility as possible so.

So it gives us a little bit more of a steady state there we do expect commodity markets, we'll probably have some some in some areas some higher level of volatility as you kind of move through.

Economic cycle like this.

More protected on one side and and and frankly have the ability in some cases to take advantage of some volatility when we see it in particular in some of the the proteins and how we structure and extend contracts. If we we choose to do that but.

Again supply chains all over it.

And I think as we look farther down the line, probably a little bit better environment overall than what we might have been inspecting expecting a couple of months ago. Yeah. I think the other one that's probably hasn't played out yet is just you know if gas prices continue to stay at these extremely low levels that will rule.

Roll through commodity pricing as well as distribution, obviously, so we'll see how that plays but again more a more upside to the piano than a downside.

Great. Thank you very much.

Your next question is coming from Christopher Carol.

The line is lives.

Hi, good morning, and thanks for taking the question. So it was noted in the release that online ordering accounted for 70% of off premise orders in the most recent monthly data provided so how did that trend since March in Where's that currently running and can you talk a little bit more about how you plan to leverage those digital related.

Trips over the long term thanks.

Well the trend obviously is tripled you know with the business. So we went from a you know a business that was running you know, 18% to 20% to 100% taken delivery and the mix within that is pretty much stayed the same.

You know we get us.

Percentage of our guests.

Protocol in and we as much as we would rather them get online, they're just going to call us and we're happy to answer their phones and to take their order that way. So that's kind of just the difference and I'm sorry, Chris what was the second part of the question.

Yeah, just just asking about how you you know just plan to leverage.

Anymore, these kind of digital relationships.

You know the new ones over the long term.

Yeah, we're always we're always trying to both with within our formats and even with our jordache partner working to create a more what I'll call sticky relationship and more direct relationship of share information for a reason you know we offer benefits through our loyalty programs were always whenever we have an.

Opportunity to to make a connection.

Through one of these vehicles, we look to.

He meant that through a or.

More permanent relationship through through our loyalty program. So that's what we're doing and as I mentioned earlier, we're growing the database through our digital very nicely. It's just been offset a little bit because we don't have that same relationship building opportunity in dining rooms, we look forward to getting that back in the two of those will help us continue to grow our database nicely.

So everybody a week, where we've actually hit that that at that time period that we're going to end.

And the call our apologies to the Q that continues to remain and we Mike is available I will be available will obviously a welcome to continue conversations as we kind of go forward. Thank you for my participating this morning, and I'm sure. We will be talking soon everybody. Please stay safe Yeah, I think you've all for sure thing.

It's everybody bye.

Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your phone lines at this time another wonderful day. Thank you for your participation.

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Good morning, ladies and gentlemen, and welcome to the third quarter fiscal year 2020 conference call. At this time, all participants have been placed on listen only mode on the floor will open for your question of the comments after the presentation.

It is now my pleasure to turn the floor, but to your host Joe Taylor CFO.

Sir the floor is yours.

Oh, Thank you and good morning, everyone and thank you for joining us I with me on today's call is our CEO Wyman Roberts, and Mike aware, VP finance and Investor Relations.

First comment. This morning is we hope everyone participating on today's call is in good health and doing well during this unique time.

This morning, we released a business update related to the last several weeks of our operations as well as our results for the recently completed third quarter fiscal year 20.

Well once we anticipated this call what detail another strong quarterly operating performance for Brinker, we are for a period of time living in a different environment.

As a result, our prepared comments from Wyman will focus primarily on recent business performance and trends last commentary devoted to our third quarter results.

We're also provide some insight as to the dining room reopening process now beginning in some regions of the country.

Following the comments, we'll spend most of our time answering your questions about the business.

Before beginning our comments I would remind everyone of our safe Harbor regarding forward looking statements. During our call management may discuss certain items, which are not based entirely on historical facts any such items should be considered forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

All such statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated such risks and uncertainties include factors more completely described in this mornings press release and the company's filings with the FCC.

And of course on the call we may refer to certain non-GAAP financial measures. The management uses in its review of the business and believes will provide insight into the company's ongoing operations and with that said I will turn the call over to Wyman alright. Thanks, Joe.

These R&D challenging times for the world our country, our industry and Brinker, we're focused on moving forward and how to effectively deal with pandemic, but let me first review how we ended the third quarter.

Third quarter start started out strong and was shaping up to be another great quarter for Brinker. If circumstances had remained normal we'd be marking our eighth consecutive quarter of comp sales growth and Knapp track category beat up 2% to 3% driven largely by our focus on growing our off premise business and our commitment to driving traffic.

We've been executing that strategy for two years before the pandemic hit it provided a strong foundation when the world changed for US that was March eight or last day of positive comp sales.

But that strategy sets us up as we plan our recovery.

Since that date as we narrowed our focus to effectively deal with the crisis at hand, we strengthened our resolve to remain a strong viable company through this crisis to us that means three things first keeping our team members and guess say.

Second getting the most out of the business. We can in this environment and third remaining nimble and building on our strength as we develop our strategy to emerge from this crisis.

Our team reacted quickly to protect our business during the first few critical weeks of the crisis, we took significant cost cutting measures by eliminating non essential spend and delaying our capital projects.

We worked with our vendor partners and our landlords to reduce our near term spend and we've reduced payroll across our salary team with the exception of our restaurant managers.

With the reduction in sales, we set up a relief fund and spent more than $15 million to support hourly team members. We couldn't schedule, we provided them a bridge to government assistance programs.

Unfortunately, we had the furlough many of our hourly team members. We have kept half of the team actively working to support our off premise business and with a continued acceleration in sales were busy enough that we've already brought back more than 10% of those furlough team members.

As we start to bring our dining rooms back online we look forward to walk I mean, even more of our team back.

We've navigated through the initial negative working capital environment, and we estimate our average weekly burn rate now to be approximately $5 million all our businesses, primarily operating as off premise.

We continue to work to ensure we have necessary liquidity to manage our business in this environment.

As of the end of last week, our liquidity was approximately 175 million comprised of cash on hand and revolver availability.

We continue to evaluate opportunity did arrays incremental capital, including increasing our revolver and while we're taking advantage of the tax savings and deferrals that are available through the cares Act we are not participating in the PPP program.

These actions paired with meaningful improved operating performance over the past several weeks give us confidence in our liquidity position as we get to reopen our dining rooms.

For the past two years, we focused on operational execution, both on and off premise, which enabled us to pivot quickly in response to the sweeping changes across the U.S., we became really good really fast or running a takeout and delivery business. Our managers are on the front lines engaging our team members and gas during every shift thereafter.

Amazing labor maximizing flow through and most importantly, delivering a safe experience our guests can trust I couldn't be more proud of the work they've been doing.

Well this is far from an ideal situation or long term business model. Our team has certainly made the best of it. We're one of the few casual diners that's been able to keep nearly all of our restaurants open and we've grown our absolute sales every week.

Over the past four weeks Chili's has gone from running close to 35% of our prior years total sales to more than 50% of our total sales would just takeout and delivery.

This is a testament to the quality of our operators and support team our ability to use direct marketing effectively our strong value proposition and our reliable and consumer friendly technology solutions.

Our brands are resonating with consumers during this crisis.

And as we compare ourselves to the category. We continue decision to continue to significantly outperform blackbox data shows chili's gap to casual dining last week at 14% a gap that widened every week since the crisis started.

Part of the reason for that performance as our unwavering commitment to keep our guests and our team member safe. During these uncertain times, we've instituted enhanced safety standards to protect our guests and team members and made those efforts visible to the guest to increase their comfort and confidence in us.

Our guests receive touchless curbside takeout.

Writing massing go out to all our team members.

Additionally, our investments in technology offered a competitive advantage for us in this environment because guests can access in ways that are quicker and safer for both them and our team members.

More than 70% of prior restaurant transactions are coming through all of which means the majority of our gas are ordering and painful from their own devices.

For the remaining few who pay at the restaurant, we're implementing touchless portal payment in the parking lot.

As we are beginning to reopen our dining rooms in parts of the country. We're prepared for an extended recovery, we're working through operational plans to adhere to CDC state and city guidelines, we're setting up our dining rooms and bars for social distancing, we're configuring takeout areas to accommodate both increased volume and say practices.

We are getting our team ready and training them to protect themselves as well as our guest.

We have plenty of mass cause and sanitizer, putting our in restaurant touchless ordering payment systems in place.

And we're putting systems in place to make sure. Our team members are healthy so guests can be confident when they dine with us.

No one asked where the situation and no one welcomes yet people, it's causing our world, but it sounds like these that prove who is strong enough to weather the storm of this magnitude.

We are established brands in our communities surely it's been around for 45 years and Maggianos for 25 years guest know they can trust us to provide great food at a great value in a safe environment and our team has demonstrated their strength resilience and commitment during this crisis.

Confident that whatever environment comes we will overperform just like we have over the past few years and especially during the past couple of months.

No one knows for sure is what lies ahead, but I know this if it's a half a dining room scenario and we'll get more to happen dining room than we will when we returned to full dining rooms normal outperform us we had the best operators in this business. We've invested in the right model and we have the technology respond ever changing environment. We walked into this thing strong we remain strong.

And we will emerge strong and with that I'll turn it over.

For your question.

Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone now we ask that will pose your question. Please pick up your handset if asuncin speaker phone to provide opcone sound quality.

Please hold the moment really poll for questions.

Your first question is coming from Jeff Farmer.

Great. Thanks Gordon.

Great. Thanks, Gordon Haskett for your restaurants that are seeing off from a sales volumes approach what looks to be almost 60% of off premise or pre covert sales volumes.

What are the pros and cons of reopening the those restaurants to end restaurant dining.

I had a limited capacity it seems like you can be giving up some some off premise sales when you actually turned on in restaurant dining.

Hey, Jeff.

Well I mean first let me just talk about what it takes to do that kind of volume in a system that wasn't set up for for takeout and delivery of this kind of magnitude so.

It really was a testament to the investment we've been making primarily in technology. When you are used to getting a handful of cars to pull up for take out delivery on a Friday night.

And now turns into 20 or 30 cars into parking lot and you have to figure that out we are operators in our teams did an amazing job Reconfiguring, our table management system for the dining room to work in the parking lot and so those cars became tables, we took our tabletop payment system Presto and converted that.

Technology to be a pay at the car touchless system for those guests that don't pay online, which we still have quite a few guests the call in that place orders and so we've got we were very adept at taking our technology and reconfiguring it to to work in the parking lot and so thats system is well established.

With regard to what we think will happen as we open the dining rooms in terms of that tradeoff.

The incrementality that that will bring we're confident that it's going to be fairly incremental on and so we don't think that the the cannibalization will be large upfront because again all every restaurant is open under as you mentioned some are restricted capacity.

Guidelines and so we don't see that being a huge issue for us we think it will be incremental it will drive the total sales number we need to get our restaurants.

Higher volumes to get to this next level.

In terms of the growing the business back and consumers.

I want to get out to eat and where they wanted to in a safe place and these restaurants are set up to do that for them.

Thank you.

Thanks, Jeff.

Your next question is coming from Brett Levy.

Your line is live.

Great. Thank you thanks for sharing all the information and again I'll Echo what you said I hope everyone. Over there is doing is doing all right. Thanks for taking my call I guess, we could just go a little bit further into how you're planning on reopening.

The that's whether it's just.

Are you going to go with a capacity.

But below what you think the local jurisdictions are saying you could have a national approach. How are you thinking about originally and then just up.

When you think about the you said you brought back 10% of the furloughed as you're building up sales.

How are you thinking about layering on costs given that we just don't know what that demand is going to look like.

Obviously like to err on the side of caution both for your people, but also from a financial standpoint, what do you think you need to see to get that cash burn what's what's a fair number once you start reopening the stores to get that cash burn rate to breakeven.

Okay. Thank you.

Okay. Thanks, Brett I'll cover the first part of that question, which is what's our system for opening reopening our dining rooms.

Every like I said all of these states.

And counties are are appropriately.

Limiting the capacities.

So what we've got is a floor plan.

That is.

Laid out for every one of our restaurants. According to their configuration, that's probably around 50% capacity, that's where most of the restaurants are starting but then you have states like Texas within our taking it a little bit even more conservative with 25% limits in most cases for the next couple.

Two weeks. So we Didnt then just X out a couple more tables. So we have a we don't we earned this isn't a random process. We have a system. We have a team intact. It's working with every operator in every state as they become able to open their dining room to put in the system that puts into the safety.

The sanitation and the systems in place for safety as well as the restaurant layout necessary to to provide that distancing. That's so important in these environments.

It will work, but it's absolutely a systemized approach then gets modified.

For the specific restaurant in this specific market and Joe can talk about the costs and how we make sure. We're we're doing this in a cost efficient way, yeah, Brett and good morning.

We will take an extremely disciplined approach to any incremental spend as you kind of go through this process and it's going to be very much guided by those traffic increases that we see.

Again, it's.

Looking how we balance that to go off premise I'd, the equation and bringing dining backend.

Well be the incremental spend will lag.

As we kind of move through three of those.

Upticks and traffic will be very judicious turning on.

Some of those non essential spends as we go there are some of the does come back and in line, we want to make sure. The restaurants are obviously airing significant aside of of being clean and sanitized and cost associated with that.

But I think.

In short, we can manage that price, we scale and systems matter in this and this again. This is why that had indicated the ability to give our team members at very detailed labor models as they come kind of move back into the systems as an important piece to the equation so lots of guidance coming from.

We are seeing giving people the tools and disciplines to be able to manage this as they come back and when I when I think through that I think the base.

Question as to where do you see kind of cash flow neutrality.

From a performance standpoint, I kind of look into the down 30 range down 35% something something in that range. It will depend theres a lot of inputs and it depends that go into the those numbers, but I think.

Thats kind of the range, we would have expectations around starting to move back onto the.

The good side of the cash flows this situation.

Thank you very much.

Your next question is coming from John Ivan go.

Line is live.

Hi, Thank you I think there you two related questions first.

Obviously.

You guys. Most didnt have the financial ability that we hold on all of your workers, but putting some workers on furlough would actually allow them to make more compensation for a four month period than they would perhaps.

Working in certain jobs within the restaurant ticket you can you kind of talk about that dynamic and your ability or what you think you.

If you wanted to turn to switch back on re attracting some of those workers. If that's something that you think.

You can do fairly easily like well as if it was a normal environment. Today's the first you've kind of point to talk about that and then secondly on.

Obviously looking at your financials that I'm sorry, it happened it does look like there is.

Fairly big reversal and I see.

The DNA side this quarter.

Can we talk about.

As as I think every company is reevaluated the fixed versus variable cost within their business.

What you think the underlying kind of run rate back to normal.

DNA level as you have for your business have you guys have probably been able to sit down and go through that.

Hey, John.

Yeah.

Good to hear your voice.

Got it today.

From a compensation perspective, and and the the unemployment benefits.

It's it's we have mixed feelings about it on the one hand, obviously nobody asked for this.

For this pandemic nobody asked to have their businesses shuttered and there was nothing we really could do especially given that we weren't being supported with any other government programs to help keep our team members on the payroll. So that so we spent $50 million to bridge him to unemployment into the to that really funds checks.

And then.

We were grateful frankly that they had some government support with these improved and increased unemployment checks that said.

It's not a sustainable model, obviously for the country and we need to get back to work. The good news is what we're seeing and we brought 10% of those furloughed team members back already is that we're seeing them wanting to come back to work for a lot of reasons.

Financially, it's probably a push as you mentioned it for a lot of our team members. These benefits are are fairly good but they also know that they need a long term job and they have a commitment to this company and they've they've been in some cases part of this company for for many many years and they're looking to get back to work, they're not so short sighted to say.

I'm just going to take these these benefits and when the job comes.

Ill take a chance that I'll get it later, especially when you look at the potential unemployment situation.

Down the road. So I think we're going to get passed that I think the other challenges just how strong.

Cove It is in the market so those two factors.

You know are kind of dictating how many people are wanting to come back to work.

But right now, we're bringing them back we're not having a problem staffing our restaurants as we start to reopen.

And Joe you want it on.

Yeah, John I think as you pointed out they did the delta and year over year DNA of almost 17 is almost.

It's all driven by incentive comp some of that was a little bit of timing a small portion of it is timing related to previous conversations we've had about.

Retirement eligible copying and the first quarter, but 15 to 16 of that that number is driven by reversals of.

Existing annual.

Performance comp plans, we obviously are near the end of our fiscal year. So those reversals.

There are more acute in this kind of type timeframe as you reversing once you have been accruing throughout the fiscal year.

But it does show the variability in that number and again as it from a go forward basis, I think we'll have opportunities to talk about what that looks like as we get farther down this path.

We will be re establishing.

Programs of that nature as we look to the next fiscal year and we'll talk about that is as we go through go through that process, but.

That is the biggest delta youre seeing in these and these numbers right now.

And I think it'll be a couple of quarters before you would get back to probably a more traditional GNS spend that you've seen if you look at the first and second quarters.

Thank you.

Your next question is coming from David Palmer.

Your line is five.

Thanks, Good morning, and congrats on that got takeout business looking very strong there.

First.

First question I want to ask you is it was about the timing of the stimulus checks and does that coincide with a step change in your business.

I think really started on April 15, wondering how you're thinking about that as.

Is that it sugar rush that Mike burn off how are you concerned about that and then I guess on the other side, you're going to start to open up for a lot of the restaurants I would imagine starting next week.

Do you envision that being a vast majority of your restaurants by by June being opened and what is that capacity versus previous grow those dining rooms.

Thanks.

David again really good area voice.

Stimulus checks were absolutely a little bit of a boost to the category right. I mean, you can look at everybody is there a lot of folks that have put out weekly results now through April and you can see that pop.

Especially on that mid week direct deposit day, where that just hit the direct deposits on and once you know in kind of one push a button.

So you got that it seems to be maintaining again every week, we've seen sales grow.

So it wasn't like it with sugar Russian only lasted.

For a few days are weak it's now moving through as I think again theres a lot of stimulus checks that are still going through the less efficient channels.

No.

Whether it's the direct deposit they didn't have as much information on or whether its paper checks. So theres still lot of money that the government is going to be putting out there again I think it's good it helps to sustain an economy thats in a very.

Unique situation, but it's not the model that we're going to obviously live under so so we see it having a nice little pop, but not if not this is not the.

Todays no thing that we're counting on and I know that gets the driver of the overall results were seen.

And so I think as we think about opening restaurants.

We'll open will buy this weekend, we'll have 300 restaurants over 300 restaurants opened so, Texas, Oklahoma, Utah and parts of Tennessee Open Friday.

We are we already have Georgia open for two days. So we have a little bit of so we have two days worth of extra one data point this looks like.

We will continue to open with a with the guidance from the states and the governors of the states that.

That said really this the precedent for us to be able to open we are.

We're confident in how we are opening we're being very safe very very.

Systematic about how we do this our restaurants are now planning.

To open.

Obviously this came a little faster than we had anticipated. So we were scrambling a little bit this week to get.

300 restaurants open in some cases days' notice, but for the rest of them. There now prepping getting themselves set up for for restaurant openings and we anticipate what do you think Joe Bye bye.

By June.

The majority of the system, probably will be open I would I would anticipate that because I think you'll probably see a steady flow of.

Incremental opening plans.

It appears that.

Number of other states have already made indication that those plans are forthcoming, yes, I'd expect to see that as we kind of before it but it will still be there'll be some some levels of probably delay after the other one seven and it'll be very interesting obviously, we along with everyone in the country, we'll be watching the spread and the cases and.

These openings or we don't know if they're too premature those those are big questions right. Those are questions above our pay grade we we're relying on on the guidance from the people that are running these.

The government Franklin and we'll we'll monitor that with everybody else in the country to see if were too fast and we'll probably end up dialing it back the we're optimistic that.

These two levels and when I walk into our restaurants and see the spacing and the.

The.

Feel pretty good that the distancing I feel really good distancing in our restaurants is is safe and that you could feel comfortable in these restaurants, there's there's nobody within six to eight feet. A view you you're almost privatizing. So that gives us a lot of confidence that we're doing the right thing I think that thing to David and from an opening standpoint.

And is that even with an estate you're going to see I think some different approaches based on urban versus suburban versus rural protect than your bigger states and when you think about again the footprint, we have which tends to err on the suburban an excerpt inside of the equation and in some states great like Texas generate great Rural.

Penetrations I think.

You probably have you'll probably see some expediency in some of those openings.

On the countries I think that plays well in that regard and Georgia has been a good example.

Where our size helps you know our dining rooms are fairly large and they give us a lot of room and so when you end up with the Georgia Major Georgia constrain was 10 guests per 500 square feet.

You know a lot of restaurants, especially smaller independent and a lot of urban restaurants.

500 square feet could be your dining room, a lot of fast casual.

Don't have a whole lot more room than that so with us.

We have.

Typically larger diners in that so we can put quite a few more bodies in there and that's going to be a constraint for for some of the competitive.

For some of the competition.

Interesting. Thank you.

Yep.

Your next question is coming from Brian background.

Your line is lives.

Thanks, and good morning.

On that last point, why and then could you on reopening and just.

To date of into it in Georgia, Obviously did you give a little more detail.

Context around what that will look like from the guest experience standpoint, whether it be the safety measures that are in place whether it be the spacing that you're going to have in Texas versus Georgia, just maybe some broader context of what it will look like from the guest experience and is there any early feedback I know, where two days end, but any early feedback on.

On.

How the customers are using it and what's been the than responsible as far.

Hey, Brian.

So let me just maybe pin a visual for you. So if you walk into our restaurants the doors.

The doors or BMW sanitizer right right there at the front of the doors.

You will be sat at the table and there won't be and the two tables next you for the most part won't be sat.

And so there won't be a table next you. That's that's that there'll be a table, that's usually a sanitizing station.

On that as paper towels, and sanitizer the table will be clear of almost there won't be anything on the table in the menu will be.

We're working quickly to get new menus out, but the ability to repay paper or there will be.

Easily cleanup bowl menus kind of one or two pages. So.

Every every everything that's gone into at the bars will not be sat at the bar top.

So the bars, we won't have patrons at the bar because that's very hard to distance and it's also hard to regulate so we will have.

Some some some tables pushed up to the bar so the bartender could react with a party interact with the party, but that would be six feet away or more.

And that's how it feels and so when you walk in again the spacing is there and all of our service will be mast and glove and.

And they will also have been.

Asked before they can check in several questions about how they're feeling have they taking their temperature that day. We have attempted we have a.

The monitor in the in the restaurant that they can use if they haven't and before they can check and they have to validate that they feel good and they're ready to to work and they haven't come in contact with named everywhere. So we're taking all the steps necessary, we think and I think as a guest and everything we've heard in Georgia over the last couple of days has.

From that.

Yes that are coming in are feeling good about it you are talking about what we've seen in Georgia for two days.

Let me just caveat it just two days where that.

38, restaurants on a Monday Tuesday, but here's what we've seen into that yet.

And where I want to things to it the I think thats very relevant here is that that we've had operators in restaurants gain planning. This for a couple of weeks now so the ability to go into.

Restaurants and work to floor Pan plans have the design teams, helping from a safety and security standpoint understanding. How these flows can work I mean again, we're getting a little we've got some openings happening slightly faster than that we thought they might.

But we're prepared for that because of the work again.

And the back the backdrop in the scale that we can bring as to to the to the operators and helping in this regard first couple of days in Georgia again, we think the dining room piece the equation has been.

Incremental we've seen the on an aggregate basis down.

In the mid twenties is kind of been they the first to today's response the interesting thing is.

And this and there's going to be some great learnings over the next several weeks coming out of these these areas that.

You do see some variance as two we actually have had.

Several restaurants.

With positive comp sales year over year, that's positive positive comp sales.

So you do get it.

A wide variety of response it depending again I think some of my comments about the regional flavor and responses in corpus where people's heads might be at from a but there is clearly there's clearly a demand side out there that we're seeing and a number of locations.

That's really helpful and just switching back to the weekly cash burn that you gave the $5 million a week can you run through the primary buckets within that burn rate and does it include full rent payments.

It it's a comprehensive number I'm looking at again the entire.

Revenue and disbursement sides of the equation. So it does include Capex and some of those.

Things.

It does not include.

Full rent payments, we in April made rent payments that approximated about 50 657.

Percent of.

Expected ranch, we obviously been working.

Gradually with landlords and a very cooperate environment too I think I mean again, we're we're pleased with the discussions on what deferrals look like kind of going forward, but it will be there will definitely be a level a meaningful level of rant incorporated into that and of course those numbers will adjust Brian.

We now move into.

Into into the new environment. So.

Yes, but it is it's a comprehensive behind besides that.

Alright, Thanks, I'll pass along.

Your next question is coming from Greg frankly.

Your line is lives.

Hey, guys I I two quick questions. The first is can you talk about.

How you're thinking about 2021, and I think a lot of people who are listening to this color or trying to balance maybe a more pressured consumer with significantly reduced competition and I'm curious just what your thoughts are and then and then the other question I had was.

Couple of your competitors have done equity raises to kind of I don't have its shore up the balance sheet or maybe kind of increase the flexibility coming out of that.

Yes, what your thoughts are on the possibility of brinker doing that and.

Kind of balancing raising cash with the dilution.

I would bring thanks.

Hi, Greg.

Listen we're in the same boat with everybody else right, what's what's the recovery going to look like is it a V is it a you know.

Who knows so.

What we are committed to doing is just.

Really performing.

At the top of the industry in whatever environment. It shows.

Were given in.

In our physical 21, which starts in a couple of months.

So.

I can't tell you I know there will be obviously some headwinds the unemployment situation isn't going to rectify itself overnight, but they're also going to be some tailwinds there are going to be less seats in.

In the in the category I mean, there there are absolutely going to be less bus seats, and so how that all maps itself out and how much pressure you get from the front versus a push you get from the back I don't know, we'll we'll start to get a sense for that here.

Over the next couple of months, but.

We're kind of.

Going to.

Commit to just performing at the top of whatever environment gets put in front of us.

And Greg to the second part of the question I don't have anything really specific to say.

Any any type of capital raise but.

Again, we kind of start the position being.

More much more comfortable today from a liquidity standpoint, I think the numbers.

We gave you this morning show the ability.

To work through the bridge to the other side of the equation. The bridge is actually starting.

In short order here as we now as we move back into dining room openings I do believe those will be.

Time positive to the liquidity set so we're comfortable from a liquidity standpoint that being said, we're monitoring capital markets closely we have great conversations.

With our bank group that today, they are important partners and working through these situations will continue to have those constructive.

Comments, particularly as it relates to some of the incremental.

Availability on the revolving credit and we'll just monitor capital markets as we kind of go forward.

From that business.

From that physician.

Thank you guys for the thought and good to talk to you right.

Great. Thanks, Thanks, Greg.

Your next question is coming from Nicole Miller.

Your line is lives.

Thank you good morning could you talk a little bit about the supply chain, while we've heard about plant closing down and I'm. Just wondering if there's going to be a lag there if there's any concerns that might materialize or if.

Thank you.

I think Nicole.

Really not right now not net near term and again I think if your and I know you are aware, there's a lot of the supply chain issues that are that are out there are because of the lack of demand in the food service sector and obviously, we're one of the one of the bright spots in that.

Sector that.

Allowing them to produce product it gets to us and again a lot of our protein.

Has already been put up and.

And we're not we're not doing a lot of fresh.

[music].

Protein protein so we're in pretty good shape, and we don't see any near term issues. Obviously at this goes on forever or for a longer it extended period of time.

Then there could be something but but in the near term, we don't see any major issues in our supply chain feels pretty confident in that.

Earlier, you addressed labor and ability to get in place back into the restaurant across the board and restaurant and retail some premiums have been paid in the market recently, what's your outlook on labor inflation. Please.

Thank you very much for your time point.

Well.

Theres two things that all mentioned one is just.

It's been really.

Uplifting to see the generosity of our guests.

During this crisis in the and the level of tips and and I could tell you stories of a.

Multiple stories of guests come in and tipping team members at hundreds of dollars.

And so theres a lot of.

Again, a lot of our team members rely on tips.

And that that piece of the income has been.

[music].

Really done they've done really well with that so they're making good money the ones that are employed with us and with regard to what we're going to need to bring people back so far it hasn't taken a lot again. This is the good news bad news of unemployment so.

26 million people looking for work.

I don't think we're going to have a hard time finding jobs.

Finding people to fill our jobs.

You know thats that that's going to have a bigger issue with what economic impact of that on the other side, but we were not seeing or don't anticipate.

A big inflationary impact.

Due to this virus or this this crisis.

Thanks, I will say Nicole let me just mentioned one more thing with regard to the people in the restaurant.

Our managers and our and they're doing an amazing job when we talk about frontline workers through the pandemic people that are out there, allowing businesses to stay open to keep people employed.

In the face of the pandemic.

Yes, I couldn't be prouder of the work they are doing.

And because of the financial implications as had on the business.

They're not getting the level of bonuses and some of the things that they've used to get.

Because of just what's happened financially to the economy and our first commitment is to making sure that that we take care of those people and.

And so we may pay bonuses out.

Two.

To team members for levels of performance that we typically wouldn't.

During this crisis and that has nothing to do with.

Well, we have to do to keep them that has more to do with what we need to do to be to two really recognize the.

The sacrifices they're making during this crisis.

Yeah.

Your next question is coming from Chris Ocull.

Your line is life.

Thanks, Good morning, guys.

First Joe I appreciate the update on the Georgia locations, but I'm I'm wondering if you could quantify the limits to sales recovery as a result of maybe reducing the capacity of those locations.

Well, Chris again, it's going to depend because you're dealing with typically capacity restraints for based on your occupancy occupancy levels or in Georges case, you got a square footage.

Restriction, but that plays differently in each restaurant and frankly almost everyday apart.

Throughout the week, so obviously capacity constrained on a Friday night is different than capacity constraint on a Monday launch.

So.

What we'll see the progression of that we'll learn from that as we kind of go.

But different restaurants are going to react definitely they're going to be restaurants that from their traditional operating performance level may not have as much of the capacity constraint.

And then that will be others that have to have a more significant want protect and those busier dayparts. So but you also have the robust to go side and the equation and we don't expect.

That to go away anytime in the near future again, I think there's we've introduced.

A significant number of gas.

To Chile as a during this this process. Some particular maggianos has had some of the same benefits and folks getting to experience.

The the to go operations and how we perform.

There are liking in that regard so.

I think to the extent that that consumer continues to gravitate towards an off premise environment.

We will benefit from that.

Yeah, I'll just add Chris tradeoffs are going to be as Joe mentioned you know.

Really on those high volume time periods, you are going to how much you're going to shift from takeout to dine in and how does that play I also think it's going to be a very interesting dynamic to see how long people will wait for a table on so my hometown here in Texas Colleyville opened up their patios this weekend.

I have seen in National news and.

People are waiting two and a half hours to get a patio seat.

Now we have a great table management system that allow people to wait in their cars and we can pay Jim when they're tables ready and I anticipate people wait a little longer to get a seat and to be taking care of in the dining room, where we're seeing people.

End of dining our parking lot in the back of their cars in their trucks.

So it'll it'll just be very interesting to see how they play out this summer.

As we get through some of these capacity issues, but overall the tradeoff between dining room, and takeout and delivery will be the dynamic that really matters to overall overall volumes.

And then just one last one woman how does the company plan to utilize advertising is stores reopened.

Talk about the long waits right now I mean is it.

The is it worth using advertising to generate more demand or do you plan to maybe delay that.

Yeah, we're right now really leaning into again this is where all the investments and all the.

Expertise weve developed over the years with direct and digital and loyalty of a really come in handy and and paid dividends for us and that's what we're leaning into now I think mass and abroad traditional marketing is probably not going to be as effective in this environment, where where we've got capacity demands and we're really.

Being much more targeted and we'll evaluate future marketing spend as you know as the environment starts to move but right now we're really doubling down on the digital social and direct.

Marketing and our teams are doing a great job with that.

Great. Thanks, guys.

Chris Good talking to.

Your next question is coming from Robert Derrington.

Your line is now thank you.

Bob Derrington with Telsey Advisory My question.

Yes, Joe Wyman I'm, not sure who best handles us.

Basically we've seen.

Illness, foodborne illness across the industry pop up from time to time and all of a sudden you've got.

Lawyers chasing lawsuits and I'm just wondering how do you minimize that risk or is there any risk of an employee.

Customer, leaving and ultimately, saying listen I was.

I got deal by visiting a chili's restaurant in certain locations.

Do you.

Require your employees to wear masks do you take their temperature.

Does that vary by store and what about consumers you know do require them to where a mask.

I'm just curious from your your standpoint.

So Bob.

Yeah, we don't first from our standards or our nationwide and there and we are strictly adhering to them and making sure that that happens and and so its mass and gloves and sanitizer and distancing and we take it very very seriously I think one of the reasons if not the most important reason.

As to why we've continued to see our sales grow every week and our GAAP to the category grow every week since the pandemic hit is because of the obvious.

Seriousness.

And this was which we've taken safety and it's visible to our to our guests into our team members and.

That's that's kind of non negotiable.

Now.

We do ask them as I mentioned, a you know are they feeling wells have they taken their temperature have they been in contact they feel they have to answer these questions before they can clock in and if they haven't taken their temperature and can verify that they've they've.

They don't have a temperature we have the monitor in the restaurant that they can go take their temperature and verify for us that they're they're not no not feeling bad. So we're doing everything we can on that side and then from a consumer standpoint, we really rely on whatever the whatever the restrictions are in the in the in the county or in this.

In the state to state mandates, everyone, whereas masks than than we expect everyone to be worried I'm asking if they don't we're not going to be enforcing a standard above and beyond we know social distancing is the right thing to do and we have so from dispensing set up within our restaurants, while we.

Work through this next phase so that's kind of how we're dealing with it in terms of how do we deal with future losses were not we're not focused on that we're doing the right thing we know that if we just do the right thing.

We should be okay relative to kind of everything that you can expect.

In this crazy world of Covance.

It's comforting to here one.

As we look at one or the question on the.

The sales mix of the beginning of April to the most recent trend.

Can you give us some color on how that mix has varied I know that a number of states have allowed delivery.

Of alcohol per se, how have your alcohol trends changed over that time is that one of the key contributors and will that be they're available after other dining rooms reopened.

Well, so first I mean again back to the.

The quality of this team.

You know you told us two months ago that we'd be selling mixed drinks to people in cars.

You know this was not in anyone's radar screen and as soon as those became viable options in some states being able to sell drinking.

Some cases being able to sell path good.

With Margarita kits.

We got all over it and our supply chain really supported us in ways that were pretty amazing and we've grown that piece of the business. It represents over a million dollars a week now in sales and has grown nicely and we feel very good about now what the future holds I mean, all again as most of these things are were temporary.

Kind of acts that were put in place by the governments.

And so we'll see how they hold.

And how long they hold but as long as they hold we're we're comfortable now we've got a great product guests really enjoy it and and we're having a good a good success selling marguerite as to people in cars.

A president Jay on the ride home with a strong that's a great way to do Oh no no no not in this phenomena throb, Bob Nobody is drinking them and that you got to get and whatnot. So you get home.

There. Thank you.

Your next question is coming from John how are.

Your line is five.

Great. Thanks, Justin just a question on the balance sheet, specifically curious to know how long the covenant waivers last that you received and then in terms of thinking that's out along the line of how your business progress is when you returned to the negotiating table with some of the lenders how can we think about your total shareholder return.

Potentially changing given that.

Your dividends.

Purchases have been a significant piece of the TSR over the past several years. Thank you.

Hey, John.

I think as we indicated in the press release relating to the amendment that we received waivers for that.

Two quarters at that point, so basically would be this quarter and the fourth quarter re established a covenant.

Mark.

On the lever side of equation.

4.75 for the first quarter fiscal.

20 Watt now so thats kind of the dynamic as it relates to that and as I indicated obviously ongoing conversations.

With the banks and particularly as you start to to move now into these next phases kind of understand what that looks like understand what that some of the go forward dynamics and that includes how you how you structure a covenant package.

In this new environment going forward after that after those timeframe. So a lot of good conversations going on there as it relates to the other part of the question that.

I think thats a discussion for down the road.

Some of the dynamics you mentioned.

Or suspensions, we'll talk about capital allocation.

Go forward basis at a at a future time, and how that and how that impacts.

TSR question.

Okay. Then then just it's great to hear that the majority or stores are still open but in terms of thinking about your asset base.

I was just giving you an opportunity to potentially I don't want us but.

Geographically, but in terms of pruning the portfolio of stores, where you felt like they were marginal with respect to operating relative to the rest of the system is giving you an opportunity to to essentially say the time to get rid of them.

Well, John we do those looks on an ongoing basis I think we talked about twice a year index or views on performance Weve.

Frankly, we've done a good job of incrementally pruning over time. So again this is a.

New data set that it will create a new environmental that will play into those decisions, but we are sitting with.

A lot of restaurants to think as you described kind of teetering on the edge I think.

Again, the actions, we've taken on ongoing basis, and the fact that.

You know we've kept really all the restaurants open except some that might have been and physical location that kind of open because of that location.

Speaks well to the condition of the fleet.

Great. Thanks, and good luck with everything.

Thanks, Thanks, John.

Your next question is coming from John Glass.

Your line is lives.

Thanks, very much just just a couple of follow ups first I know that franchising isn't as big a piece of your business as it once was but can you comment on the health of your your domestic franchisees as well as maybe some of your your international franchisees as they've probably gone through the same issues that the whole at rest of the industry has faced.

And can talk about on delivery is there any capacity constraints. We are you, noting that third parties, having difficulty getting the capacity drivers to fulfill your demand is others are also seeing that or is up in a pretty it was up in a pretty smooth transition to greater delivery percentage from their perspective.

Hey, John good to hear from you.

Yeah, we're we're our franchisees are performing.

Singh.

Consistent with US with company owned restaurants, obviously, we have a couple of franchisees that are unique like our airport franchisee, who is having their own situation relative to the airport environment, but those that are the majority of ours are similar to two us with regard to their locations in their markets and they're seeing similar kind of results.

So feel good about how the bulk of the franchise basis kind of a weathering the crisis. The international market is a much more you know it's it's just a much more dynamic situation a lot a lot of closures.

And then Reopenings you know again as you've tracked the global markets you know how the pandemic has kind of moves through different parts of the of the world and our restaurants and franchisees have had to deal with that so we've seen more closures in the international markets than we have as a percentage.

In the U.S., but again overall I think there they are faring.

As well as can be expected are consistent with how retail and restaurants are doing in those markets.

And we were a you know they're working their way through and in some cases there further.

Along.

In the process.

Moving out of.

Cobot crisis, and we are in the U.S.. So continue to moderate I'm not a huge part of our business. So that's important to note on the international side and it's more volatile, but again, it's just doesn't impact our overall earnings performance that much.

And on delivery of delivery Yeah, we've got it would no problems I mean, the biggest challenge we're seeing.

The the online World is just you know.

The demand is has been tremendous and they are setting new records every weekend with regard to.

Number of users on the systems and so just to getting all of that to work smoothly and making sure that everything is is kind of working under the pressure that it's been put under as has been probably their biggest challenge.

But we haven't had a problem with.

With getting drivers to pick up orders, that's that's not been our issue and we've had really good in our partnership with door Dash we were just.

We're just pleased with it we think they're a great partner and the work we've done over the last year to grow the business and understand that their business and our business, we couldn't be happier with that relationship.

Thank you.

Yes.

Your next question is coming from Eric Gonzalez.

Your line is lives.

Hey, Thanks for the question and Glenn everyone sounds like they're doing well just wondering if you could discuss how consumer behaviors of change with regards to off premise in other words like how much is check size increasing their seats specific items are deals that you're seeing a higher menu preference as people experienced.

Thanks.

Eric It's interesting right. So so first.

Check size increases have been have been there I think as we've seen more families kind of move into this category than than probably were there before.

The.

The biggest challenge and to kind of one of the things that we've talked a lot about our comp sales.

When you look at the difference between comp sales and comp traffic our comp traffic numbers are five to six points better.

Because the to go check and the delivery checks tend to run a little lower primarily because they don't have alcohol sales and why we were pleased with the $1 million a week, we're selling and in Marguerite is to go that's a fraction of what we used to sell when we always have a dining room and and a bar and so that's been probably the.

Biggest difference between the mix of.

What we were seen inside the restaurant and outside beyond that the value propositions that we had so so interestingly when we.

This call at this time, all participants have been placed on listen only mode and the floral open for your questions and comments after the presentation.

It is now my pleasure to during the floor, but to your host Joe Taylor CFO.

Sir the floor is yours.

Well, thank you and good morning, everyone and thank you for joining us I with me on today's call is our CEO Wyman Roberts, and Mike aware, VP finance and Investor Relations.

Hi, My first comment. This morning is we hope everyone participating on today's call is in good health and doing well during this unique time.

This morning, we released a business update related to the last several weeks of our operations as well as our results for the recently completed third quarter fiscal year 20.

Well once we anticipated this call would detail another strong quarterly operating performance for Brinker, we are for a period of time living in a different environment.

As a result, our prepared comments from Wyman will focus primarily on recent business performance and trends with less commentary devoted to our third quarter results. We will also provide some insight as to the dining room reopening process now beginning in some regions of the country.

Following the comments, we'll spend most of our time answering your questions about the business.

Before beginning our comments I would remind everyone of our safe Harbor regarding forward looking statements. During our call management may discuss certain items, which are not based entirely on historical facts any such items should be considered forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

All such statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated such risks and uncertainties include factors more completely described in this mornings press release and the company's filings with the SEC.

And of course on the call we may refer to certain non-GAAP financial measures that management uses in its review of the business and believes will provide insight into the company's ongoing operations and with that said I will turn the call over to Wyman alright. Thanks, Joe.

These R&D challenging times for the world our country, our industry and Brinker, we're focused on moving forward and how to effectively deal with pandemic, but let me first review, how we ended third quarter.

Third quarter Stout started out strong and was shaping up to be another great quarter for Brinker. If circumstances had remained normal we'd be marking our eighth consecutive quarter of comp sales growth and a knapp track category beat of 2% to 3% driven largely by our focus on growing our off premise business and our commitment to driving traffic.

We've been executing that strategy for two years before the pandemic hit it provided a strong foundation when the world changed for US that was March eight or last day of positive comp sales.

But that strategy sets us up as we plan our recovery.

Since that date as we narrowed our focus to effectively deal with the crisis at hand, we strengthened our resolve to remain as strong viable company through this crisis to us that means three things first keeping our team members and guess safe.

Second getting the most out of the business. We can in this environment and third remaining nimble and building on our strength as we develop our strategy to emerge from this crisis.

Our team reacted quickly to protect our business during the first few critical weeks of the crisis, we took significant cost cutting measures by eliminating non essential spend and delaying our capital projects.

We worked with our vendor partners and our landlords to reduce our near term spend and we reduced payroll across our salary team with the exception of our restaurant managers.

With the reduction in sales, we set up a relief fund and spent more than $15 million to support hourly team members. We couldn't schedule, we provided them a bridge to government assistance programs.

Unfortunately, we had to furlough many of our hourly team members. We have kept half of the team actively working to support our off premise business and with the continued acceleration in sales were busy enough that we've already brought back more than 10% of those furloughed team members.

As we start to bring our dining rooms back online we look forward to welcoming even more of our team back.

Weve navigated through the initial negative working capital environment, and we estimate our average weekly burn rate now to be approximately $5 million, while our businesses, primarily operating as off premise.

We continue to work to ensure we have necessary liquidity to manage our business in this environment.

As of the end of last week, our liquidity was approximately 175 million comprised of cash on hand and revolver availability.

We continue to evaluate opportunity due to raise incremental capital, including increasing our revolver and while we're taking advantage of the tax savings in deferrals that are available through the cares Act we are not participating in the PPP program.

These actions paired with meaningful improved operating performance over the past several weeks give us confidence in our liquidity position as we begin to reopen our dining rooms.

For the past two years, we focused on operational execution, both on and off premise, which enabled us to pivot quickly in response to the sweeping changes across the U.S, we became really good really fast or running a takeout and delivery business. Our managers are on the front lines engaging our team members and gas during every shift their optum.

Lighting labor maximizing flow through and most importantly, delivering a safe experience our guests can trust I couldn't be more proud of the work they've been doing.

While this is far from an ideal situation or long term business model. Our team has certainly made the best of it. We're one of the few casual diners, it's been able to keep nearly all of our restaurants open and we've grown our absolute sales every week.

Over the past four weeks Chili's has gone from running close to 35% of our prior years total sales to more than 50% of our total sales would just takeout and delivery.

This is a testament to the quality of our operators and support teams our ability to use direct marketing effectively our strong value propositions and our reliable and consumer friendly technology solutions. Our brands are resonating with consumers during this crisis.

And as we compare ourselves to the category, we continue to stick to continue to significantly outperform blackbox data shows chili's GAAP to casual dining last week at 14% a gap that widened every week since the crisis started.

Part of the reason for that performance as our unwavering commitment to keep our guests and our team members safe. During these uncertain times, we've instituted enhanced safety standards to protect our guests and team members and made those efforts visible to the guests to increase their comfort and confidence in us.

I guess receive touchless curbside takeout, and we're providing massing gloves to all our team members.

Additionally, our investments in technology offered a competitive advantage for us in this environment because guests can access in ways that are quicker and safer for both them and our team members more than 70% of our restaurant transactions are coming through Olo, which means the majority of our gas are ordering and pain from their own devices for.

The remaining few who pay at the restaurant, we're implementing touchless portable payment in the parking lot.

As we are beginning to reopen our dining rooms in parts of the country. We're prepared for an extended recovery, we're working through operational plans to adhere to CDC state and city guidelines, we're setting up our dining rooms and bars for social distancing, we're configuring takeout areas to accommodate both increased volume and say practices.

We are getting our team ready and training them to protect themselves as well as our guests we have plenty of mass gloves, and sanitizer, putting our in restaurant touchless order and payment systems in place.

And we are putting systems in place to make sure. Our team members are healthy so guests can be confident when they dine with us.

No one asked for the situation and no one welcomes the upheaval, it's causing our world, but it sounds like these that prove who is strong enough to weather storm of this magnitude.

We are established brands in our communities surely has been around for 45 years and Maggianos for 25 years guest know they can trust us to provide great food at a great value in a safe environment and our team has demonstrated their strength resilience and commitment. During this crisis. So I'm confident that whatever environment comes we will overperform just like we have over the past few years.

Okay, and especially during the past couple of months.

No one knows for sure is what lies ahead, but I know this if it's a half a dining room scenario when we'll get more of a half a dining room than we will when we returned to full dining rooms, no. One will outperform us we had the best operators in this business we've invested in the right model and we have the technology respond ever changing environment. We walked into this thing strong we remain strong.

And we will emerge strong and with that I'll turn it over.

For your question.

Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone now we ask that will pose your question. Please pick up your handset is listening and speaker phone to provide optum sound quality.

Please hold a moment really pull for questions.

Your first question is coming from Jeff Farmer.

Great. Thanks Gordon.

Great. Thanks, Gordon ask it for your restaurants that are seeing off from a sales volumes approach what looks to be almost 60% of off premise or pre kovats sales volumes.

What are the pros and cons of reopening the those restaurants to in restaurant tightening.

I had a limited capacity it seems like you can be giving up some some off premise sales when you actually turned on in restaurant dining.

Hey, Jeff.

Well I mean first let me just talk about what it takes to do that kind of volume in a system that wasn't set up for for takeout and delivery of this kind of magnitude so.

It really was a testament to the investment we've been making primarily in technology. When you are used to getting a handful of cars to pull up for takeout and delivery on a Friday night.

And now turns into 20 or 30 cars into parking lot and you have to figure that out we are operators in our teams did an amazing job Reconfiguring, our table management system for the dining room to work in the parking lot and so those cars became tables, we took our tabletop payment system Presto and converted that.

Technology to be a pay at the car touchless system for those guests that don't pay online, which we still have quite a few guest that call in place orders and so we've got we were very adept at taking our technology and reconfiguring it to to work in the parking lot and so thats system is well established.

With regard to what we think will happen as we open the dining rooms in terms of that tradeoff.

In the Incrementality that that will bring work, we're confident that it's going to be fairly incremental on and so we don't think that the the cannibalization will be large upfront because again. All every restaurant is opened under as you mentioned some words units restricted capacity.

Guidelines in so we don't see that being a huge issue for us we think it will be incremental it will drive the total sales number we need to get our restaurants to some higher volumes to get to this next level.

In terms of the growing the business back and consumers.

I want to get out to eat and where they wanted to in a safe place and these restaurants are set up to do that for them.

Thank you.

Thanks, Jeff.

Your next question is coming from Brett Levy.

Airline is live.

Great. Thank you thanks for sharing all the information and again and I'll Echo what you said I hope everyone. Over there is doing is doing all right. Thanks for taking my call I guess, we could just go a little bit further into just how you're planning on reopening.

The units whether it's just.

Are you going to go with a a capacity.

Above below what you think the local jurisdictions are saying you could have a national approach how are you thinking aggregate Julien and just.

When you think about the instead you brought back 10% of the furloughed as you're building up sales.

How are you thinking about layering on costs given that we just don't know what the demand is going to look like and you'd obviously like to err on the side of caution both for your people, but also from a financial standpoint, what do you think you need to see to get back cash burn what's what's a fair number once you start reopening the stores to get that cash burn.

To a breakeven.

Turning to our Q from there. Thank you.

Okay. Thanks, Brett I'll I'll cover the first part of that question, which is you know what's our system for opening reopening our dining rooms.

Every like I said all of these states and and counties are are appropriately.

Limiting the capacities.

So what we've got is a floor plan.

That is.

Laid out for every one of our restaurants. According to their configuration, that's probably around 50% capacity, that's where most of the restaurants are starting but then you have states like Texas, who then are taking it a little bit even more conservative with 25% limits in most cases for the next couple.

Two weeks. So we Didnt then just ex out a couple more tables. So we have a we don't we earned this isn't a random process. We have a system. We have a team intact. It's working with every operator in every state as they become able to open their dining room to put in the system that puts in the the safety.

The sanitation and the systems in place for safety as well as the restaurant layouts necessary to to provide that distancing. That's so important in these environments.

It will work, but it's absolutely a systemized approach then gets modified.

For the specific restaurant in the specific market and Joe can talk about the costs and how we make sure. We're we're doing this in a cost efficient way, yes, and good morning.

We will take an extremely disciplined approach to any incremental spend as you kind of go through this process and it's going to be very much guided by those traffic increases that we see.

Again, it's.

Looking how we balance that to go off premise side, the equation and bringing dining backend.

Well be the incremental spend will lag.

As we kind of move through through those.

Upticks in traffic will be very judicious and turning on.

Some of those non essential spends as we go there some of the does come back and in line, we want to make sure. The restaurants are obviously airing significant on the side of as being clean and sanitized and cost associated with that.

But I think you know in short, we can manage that possibly scale and systems matter in this in this again as you know as Wyman had indicated the ability to give our team members of very detailed labor models as they come kind of move back into these systems as an important piece that equation, so lots of guidance coming from.

But they are seeing giving people the tools and disciplines to be able to manage this is the come back and when I. When I think through that I think the base of the question as to where do you see kind of cash flow neutrality.

From a performance standpoint, I kind of look into the down 30 range down 35% something something in that range. It will depend theres a lot of inputs and it depends that go into the those numbers, but I think.

Thats kind of the range, we would have expectations around starting to move back onto the.

The good side of the cash flows this situation.

Thank you very much.

Your next question is coming from John Ivan go.

Your line is eyes.

Hi, Thank you I think there you two related questions first.

Obviously, you guys. Most didnt have the financial ability to hold on to all of your workers, but you putting some workers on furlough would actually allow them to make more compensation for a four month period, then they would perhaps.

Working in certain jobs within the restaurant ticket you can you kind of talk about that dynamic and your ability or what you think you.

If you wanted to turn to switch back on re attracting some of those workers. If that's something that you think.

Yeah that you can do fairly easily like well as if it was the normal environment. Today is the first you kind of point to talk about that and then secondly on.

So looking at your financials and I'm sorry. It happened. It does look like there is fairly big reversal and I see.

And the DNA side this quarter.

Can we talk about.

As I think every company is reevaluated the fixed versus variable cost within their business. What you think the underlying kind of run rate back to normal.

DNA level as you have for your business that because of problem to be able to sit down and go through that.

Hey, John.

[music].

Good to hear your voice.

To Tokyo.

From a compensation perspective in a in the the unemployment benefits.

You know, it's who we have mixed feelings about it on the one hand, obviously nobody asked for this for this pandemic nobody asked to have their businesses shuttered and there was nothing we really could do especially given that we weren't being supported with any other government programs to help keep our team members on the payroll so that so we spend $15 million.

The bridge him to unemployment into the to the relief funds checks.

And then.

We were grateful frankly that they had some government support with these improved increased unemployment checks that said.

It's not a sustainable model, obviously for the country and we need to get back to work. The good news is what we're seeing and we brought 10% of those furloughed.

Remembers back already is that where we've seen them wanting to come back to work for a lot of reasons.

Financially, it's probably a push as you mentioned it for a lot of our team members. These benefits are are fairly good but they also know that they need a long term job and they have a commitment to this company and they had been in some cases part of this company for for many many years and they're looking to get back to work, they're not so shortsighted to say hey.

I'm just going to take these these benefits and when the job comes.

Ill take a chance that at that I'll get it later, especially when you look at the potential unemployment situation.

Down the road. So I think we're going to get passed that I think the other challenges just how strong.

Cove It is in the market so those two factors.

Or kind of dictating how many people are wanting to come back to work, but right now we're bringing them back we're not having a problem staffing our restaurants as we start to reopen.

I'm joined on the smartphone.

Yeah, John I think as you pointed out the delta in and year over year DNA of almost 17 is almost.

It's all driven by incentive comp some of that was a little bit of timing a small portion of this timing related to previous conversations we've had a bad.

Retirement eligible comp being in the first quarter, but 15 to 16 of that that number is driven by reversals of our existing annual.

Performance comp plans, we obviously are near the end of our fiscal year. So those reversals.

There are more acute in this kind of type timeframe as youve reversing what you have been accruing throughout the fiscal year.

But it does show the variability in that number I mean again as it from a go forward basis, I think we'll have opportunities to talk about what that looks like as we get farther down this path.

We will be reestablishing.

We have programs of that nature as we look to the next fiscal year and we'll talk about that is as we go through go through that process, but.

That is the biggest delta you're seeing in these in these numbers right now.

And I think it'll be a couple of quarters before you would get back to.

Probably a more traditional GNS spend that you've seen if you look at the first and second quarters.

Thank you.

Your next question is coming from David Palmer.

Your line is fine.

Thanks, Good morning, and congrats on that that takeout business looking very strong there.

But first.

First question when I ask you, which was about the timing of the stimulus checks and does that coincide with a step change in your business.

I think really started on April 15 wondering how you're thinking about that is.

Is that it sugar rush that Mike burn off are you concerned about that and then I guess on the other side, you're going to start to open up for a lot like restaurants, I would imagine starting next week.

Do you envision that being a vast majority of your restaurants by by June being opened and what is that capacity versus previous grow those dining rooms.

Thanks.

Hey, David again really good to hear your voice stimulus checks were absolutely a little bit of a boost to the category right. I mean, you can look at everybody is there a lot of folks that have put out weekly results now through April and you can see that pop, especially on that mid week direct deposit day, where.

It just hit the direct deposits on and once you know in kind of one push a button.

So you got that it seems to be maintaining again every week, we've seen sales grow.

So it wasn't like it with sugar Russian only lasted.

For a few days are weak it's now moving through as I think again theres a lot of stimulus checks that are still going through the less efficient channels.

You know.

Whether it's the direct deposit they didn't have as much information on or whether its paper checks. So theres still lot of money that the government is going to be putting out there again I think its goods is it helps to sustain an economy that is in a very.

Unique situation, but it's not the model that we're gonna obviously live under so so we see it having a nice little pop, but not it's not this is not the foundational thing that we're counting on and I know that gets the driver of the overall results were seen.

[music].

And so I think as we think about opening restaurants.

We'll open will buy this weekend, we will have 300 restaurants over 300 restaurants opened so, Texas, Oklahoma, Utah and parts of Tennessee Open Friday.

We always we already have Georgia open for two days. So we have a little bit of so we have two days worth of extra one data point this looks like.

We will continue to open with a with the guidance from the states and the governors of the states that that set really this the precedent for us to be able to open we are.

We're confident in how we are opening we're being very safe very very.

Systematic about how we do this our restaurants are now planning.

To open.

We see this came a little faster than we had anticipated. So we were scrambling a little bit this week to get 300 restaurants open in in some cases days' notice, but for the rest of them there and our prepping getting himself set up for a for restaurant openings and we anticipate what do you think Joe Bye.

By June.

The majority of the system, probably will be open I would it I would anticipate that because I think you'll probably see a steady flow of.

Incremental opening plans.

It appears that.

Number of other states have already made indication that those plans are forthcoming, yes, I'd expect to see that as we kind of important but it'll still be there'll be some some levels of probably delay after the other one seven and it'll be very interesting obviously, we along with everyone in the country, we'll be watching the spread and the cases and if you know these openings or we do.

No if they're too if they're premature those those are big questions right. Those are questions above our pay grade we we're relying on on the guidance from the people that are running. These are these the government Franklin and we'll we'll monitor that with everybody else in the country to see if were too fast and we'll probably end up dialing it back.

But we're optimistic that the these levels and when I walk into our restaurants and see the spacing and the.

The.

I feel pretty good that the distancing I feel really good the distancing in our restaurants is is safe and that you could feel comfortable in these restaurants, there's there's nobody within six to eight feet of view you you're almost private-eye needs. So.

That gives us a lot of confidence that we're doing the right thing I think the other thing to David and from an opening standpoint is that even with an estate you're going to see I think some different approaches based on urban versus suburban versus rural particularly your bigger states and when you think about <unk> again, the footprint, we have which tends to err on the suburban an excerpt inside of the equation and then some.

The states, great like Texas generate grade rural.

Penetrations I think.

You probably have you'll probably see some expediency in some of those openings.

Around the country. So I think that plays well on that regard and Georgia has been a good example, you know of where our size helps you know our dining rooms are fairly large and they give us a lot of room and so when you end up with the Georgia Major Georgia constrain was 10 guests per 500 square feet.

You know a lot of restaurants, especially smaller independent in a lot of urban restaurants.

500 square feet could be your dining room.

A lot of fast casual.

You don't have a low a whole lot more room than that so with us.

We have.

Significantly larger dining rooms in that so we can put quite a few more bodies in there and that's going to be a constraint for for some of the competitive.

For some of the competition.

Interesting. Thank you.

Yes.

Your next question is coming from Brian background.

Your line is lives.

Thanks, and good morning.

On that last 0.1, then could you on reopening and just see E. Two days into that in Georgia, Obviously did you give a little more detail a context around what that will look like from the guest experience standpoint, whether it be the safety measures that are in place whether it be the spacing that you're going to have in Texas.

Versus Georgia, just maybe some broader context of what it will look like from the guest experience and is there any early feedback I know, where two day didn't but any early feedback on how the customers are using it and what's been the than responsible as far.

Hey, Brian.

So let me just maybe paying a visual for you. So if you walk into our restaurants, the doors in the doors or BMW sanitizer right right there at the front of the doors.

You will be sat at a table and there won't be and the two tables next you for the most part won't be sat.

And so there won't be a table next you. That's that's that there'll be a table, that's usually a sanitizing station.

That has paper towels and sanitizer the table will be clear of almost there won't be anything on the table in the menu will be.

We're working quickly to get new menus out, but the ability to be paid paper or there will be.

Easily cleanup bull menus kind of one or two pages. So.

Every every everything that's gone into at the bars will not be sat at the bar top so the bars, we won't have patrons at the bar because that's very hard to distance and it's also hard to regulate so we will have.

Some some some tables pushed up to the bar so the bartender could react with a party interact with the party, but they'd be six feet away or more.

And that's how it feels and so when you walk in again the spacing is there and all of our service will be mast and gloved and.

And they will also have been asked before they can check in several questions about how they're feeling have they taking their temperature that day. We have attempted we have.

The monitor in the in the restaurant that they can use if they haven't and before they can check and they have to validate that they feel good and they're ready to to work and they haven't come in contact with named everywhere. So we're taking all the steps necessary, we think and I think as a guest and everything we've heard in Georgia over the last couple of days as.

Confirm that.

I guess that are coming in are feeling good about it you when talking about what we've seen in Georgia for two days.

So let me just caveat its two days, where the in 38 restaurants on a Monday Tuesday, but here's what we've seen in today.

And Brian one of things to it the I think thats very relevant here is that that we've had operators in restaurants game planning. This for a couple of weeks now so the ability to go into.

Restaurants and worked a floor pant plan as you know how that have the design teams, helping from a safety and security standpoint understanding. How these flows can work I mean, I again, we're getting a little we've got some openings happening slightly faster than than we thought they might.

But we're prepared for that because of the work again and the back in the backdrop in the scale that we can bring as to to the to the operators in helping in this regard first couple of days in Georgia again, we think the dining room piece. The equation has been incremental we've seen the on an aggregate basis it down.

In the mid twenties is kind of been they the first to today's response the interesting thing is.

And this and there's going to be some great learnings over the next several weeks coming out of these these areas that.

You do see some variance as two we actually have had several restaurants.

With positive comp sales year over year, that's tell a positive positive comp sales.

So you do get a wide variety of responses, depending again I think some of my comments about the regional flavor and responses in corpus where people's heads might be at from a but there is clearly there's clearly a demand side out there that we're seeing in a number of locations.

That's really helpful and just switching back to the weekly cash burn that you gave the $5 million a week can you run through the primary buckets within that burn rate and does it include full rent payments.

It it's a comprehensive number I'm looking at again the entire you know.

<unk> revenue and disbursement sides of the equation. So does include Capex and some of those those things.

It does not include.

Full rent payments, we in April made rent payments that approximated about 50 657.

As a percent of.

Expected ranch, we obviously been working aggressively with landlords and a very cooperate environment too I think I mean again, we're we're pleased with the discussions on what deferrals look like at kind of going forward, but it will be there will definitely be a level a meaningful level of rant incorporate into that and of course those numbers.

We will adjust Brian as we now move into.

Into into the new environment. So.

Yes, but it is it's it's a comprehensive behind but besides that.

Alright, Thanks, I'll pass along.

Your next question is coming from Greg frankly.

Your line is lives.

Hey, guys I I two quick questions. The first is can you talk about the like how you're thinking about 2021, and I think a lot of people who are listening to this color or trying to balance maybe a more pressured consumer with significantly reduced competition and I'm curious just what your thoughts are and then and then the other question I had was a key.

All of your competitors have done equity raises to the kind of I don't know that shore up the balance sheet or maybe kind of increase the flexibility coming out of that.

Yes, what your thoughts are on the possibility of brinker doing that and.

Kind of balancing raising cash was but the dilution that I would bring thanks.

Hi, Greg I'm listening, we're in the same boat with everybody else right, what's what's the recovery going to look like is it a b is it a you know.

Who knows so what we are committed to doing is just.

Really performing at the top of the industry in whatever environment. It shows a were given in a in our fiscal 21, which starts in a couple months.

So.

I can't tell you I know there will be obviously some headwinds the unemployment situation isn't going to rectify itself overnight, but they're also going to be some tailwinds there are going to be less seats in.

In the in the category I mean, there there are absolutely going to be less bus seats, and so how that all maps itself out and how much pressure you get from the front versus a push you get from the back I don't know, we'll we'll start to get a sense for that here over the next couple of months, but.

What kind of.

Going to.

Commit to just performing at the top of whatever environment gets put in front of us.

And Greg to the second part of the question I don't have anything really specific to say.

To any any type of capital raise but.

Again, we kind of start the position being.

More much more comfortable today from a liquidity standpoint, I think the numbers.

We gave you this morning show the ability.

To work through the bridge to the other side of the equation. The bridge is actually starting.

In short order here as we now as we move back into dining room openings I do believe those will be.

Overtime positive to the liquidity said, so we're comfortable from a liquidity standpoint.

That being said, we're monitoring capital markets closely we have great conversations.

With our bank group that today, they are important partners and working through these situations will continue to have those constructive.

Comments, particularly as it relates to some of the incremental.

Availability on the revolving credit.

Well just monitor capital markets as we kind of go forward.

From that.

From an EPS physician.

Thank you guys for the thoughts and good to talk to you.

Great. Thanks, Thanks, Greg.

Your next question is coming from Nicole Miller.

Your line is lives.

Thank you good morning could you talk a little bit about the supply chain, while we've heard about plant closing down and I'm. Just wondering if there's going to be allowed there if there's any concerns that might materialize for it.

We're not thank you.

I didn't Nicole.

Really not right now not near term and again I think if your and I know you are aware, there's a lot of the supply chain issues that are that are out there or because of the lack of demand in the food service sector and obviously you know we're one of the one of the bright spots in that.

Sector that you know, allowing them to produce product it gets to us and again a lot of our protein has already been put up and and we're not we're not doing a lot of fresh.

For protein so we're in pretty good shape, and we don't see any near term issues. Obviously, if this goes on forever or for a longer or extended period of time.

Then there could be something but but in the near term, we don't see any major issues in our supply chain feels pretty confident in that.

Oh earlier, you addressed labor and ability to get in place back into the restaurant across the board and restaurant and retail some premiums have been paid on in the market recently, what's your outlook on labor inflation. Please and thank you very much for your time point.

Well, there's two things that all mentioned one is just a it's been really.

Uplifting to see the generosity of our guest.

During this crisis in the and the level of tips and and I could tell you stories of Oh multiple stories of guests come in and tipping team members hundreds of dollars.

And so theres a lot of again a lot of our team members rely on tips and that that piece of the income as it's been.

[music].

Really.

They've done really well with that so they're making good money the ones that are employed with us and with regard to what we're going to need to bring people back so far it hasn't taken a lot again. This is the good news bad news of unemployment so.

26 million people looking for work.

I don't think we're gonna have a hard time finding jobs.

Finding people to fill our jobs.

Thats that that's going to have a bigger issue with you know what economic impact of that on the other side, but we were not seeing or don't anticipate.

A big inflationary impact.

Due to this virus or this this crisis.

Thanks, I will say Nicole let me just mentioned one more thing with regard to the people in the restaurant.

Our managers and our and they're doing an amazing job you know when we talk about frontline workers through the pandemic people that are out there, allowing businesses to stay open to keep people employed.

In the face of the pandemic.

Yeah, I couldn't be prouder of the work they're doing.

And because of the financial implications, it's had on the business.

They you know, they're not getting the level of bonuses and some of the things that they've used to get because of just what's happened financially to the economy and our first commitment is to making sure that that we take care of those people and and so we may pay bonuses out.

Two.

To to team members for levels of performance that we typically wouldn't.

During this crisis and that has nothing to do with what we have to do to keep them that has more to do with what we need to do to be to two really recognize the.

Sacrifices, they're making during this crisis.

Yeah.

Yes.

Your next question is coming from Chris Ocull.

Your line is life.

Thanks, Good morning, guys.

First Joe I appreciate the update on the Georgia locations, but I'm I'm wondering if you could quantify the limits to sales recovery as a result of maybe reducing the capacity of those locations.

Well, yeah, Chris again, it's going to depend because as you know you're dealing with typically capacity restraints for based on your occupancy occupancy levels or in Georgia case, you got to square footage restriction, but that plays differently in each restaurant and frankly, almost every day part.

Throughout the week, so obviously capacity constrained on a Friday night is different than capacity constraint on a Monday lunch.

So well, what we'll see the progression of that we'll learn from that as we kind of go.

And but different restaurants are going to react differently now they're going to be restaurants that from their traditional operating performance level may not have as much of the capacity constraint and then then they'll be others that have you have a more significant want protecting those busier dayparts. So but you also have the robust to go sides the equation and we don't expect.

That to go away anytime in the near future again, I think there's we have introduced.

A significant number of gas.

Chile as a during this this process in particular Maggianos has had some of the same benefits and folks getting to experience.

The the to go operations and how we perform to their liking in that regard. So I think you know to the extent that they consumer.

Continues to gravitate towards an off premise environment.

We will benefit from that.

Yeah, I'll just add Chris the tradeoffs are going to be as Joe mentioned you know.

Really on those high volume time periods, you are going to how much you're going to shift from takeout to dine in and how does that play I also think it's going to be a very interesting dynamic to see how long people will wait for a table.

So my hometown here in Texas, Colleyville opened up their patios. This weekend a you may have seen in National news and people are waiting two and a half hours to get a patio seat now we have a great table management system that allow people to wait in their cars and we can pay Jim when they're tables ready and I anticipate people wait a little longer to get us.

And to be taking care of in the dining room, where we're seeing people.

Kind of dining our parking lot in the back of their cars and their trucks.

So it'll it'll just be very interesting to see how they play out this summer as we get through some of these capacity issues, but overall the trade off between dining room, and takeout and delivery will be the dynamic that really matters to overall overall volumes.

And then just one last one wyman how does the company plan to utilize advertising is stores reopened.

When you talk about the long waits right now I mean as it.

It's the is it worth using advertising to generate more demand or do you plan to maybe delay that.

Yeah, We're we're right now.

Really leaning into again this is where all the investments and all the.

Expertise, we've developed over the years with direct and digital and loyalty is a really come in handy and and paid dividends for us and that's what we're leaning into now I think mass and abroad traditional marketing is probably not going to be as effective in this environment, We're where we got capacity demand and we're really be.

In much more targeted and we'll evaluate you know future marketing spend as you know as the environment starts to move but right now we're really doubling down on the digital social and a direct.

Marketing and our teams are doing a great job with that.

Great. Thanks, guys.

That's good talking to you.

Your next question is coming from Robert Derrington.

Your line is yes. Thank you.

Bob Derrington with Telsey Advisory My question I.

I guess, Joe Wyman I'm, not sure who best handles this typically we've seen.

Illness, foodborne illness across the industry pop up from time to time and all of a sudden you've got.

Lawyers chasing lawsuits and Im just wondering how do you minimize that risk or is there any risk of an employee.

Customer, leaving and ultimately, saying listen I was.

I got ill by visiting a chili's restaurant in certain locations.

Do you.

Require your employees to wear masks.

You take their temperature.

Yes, it does that vary by store and you know what about consumers you know do require them to where a mask I'm just curious from your your standpoint.

So Bob Yeah, we don't first from our standards or our nationwide and there and and we are strictly adhering to them and making sure that that happens and and so its mass and gloves and sanitizer and distancing and we take it very very seriously I think one of the reason.

If not the most important reason as to why we've continued to see our sales grow every week and our GAAP to the category grow every week since that pandemic hit is because of the obvious.

Seriousness, Miss with which we've taken safety and it's visible to our to our guests into our team members and.

That's that's kind of non negotiable.

Now.

We do ask them as I mentioned, a you know are they feeling weld have they taken their temperature have they been in contact they feel they have to answer these questions before they can clock in and if they haven't taken their temperature and can verify that they've they've they don't have a temperature we have the monitor in the restaurant that they can go take their temperature.

And verify for us it there they're not a they're not feeling bad. So we're doing everything we can on that side and then from a consumer standpoint, we really rely on you know whatever the whatever the restrictions are in the in the in the county or in this in the states. So if the state mandates everyone wears masks then.

Then we expect I wanted to be weren't im asking if they don't they were not going to be enforcing.

Standard above and beyond we know social distancing is the right thing to do and we have social distancing set up within our restaurants, while we.

Work through this next phase so that's kind of how we're dealing with it in terms of how do we deal with future losses were not we're not focused on that we're doing the right thing we know that if we just do the right thing we should be okay relative to kind of everything that you can expect.

In this crazy world of Coven.

It's comforting to here one as we look at one or the question on the the sales mix of the beginning of April to the most recent trend.

Can you give us some color on how that mix has varied I know that a number of states have allowed delivery oh alcohol per se how have your alcohol trends changed over that time is that one of the key contributors and will that be they're available after other dining rooms reopened.

Well, so first I mean again back to the.

The quality of this team.

You know Buda told us two months ago that we'd be selling mixed drinks to people in cars.

You know it just was not in anyone's radar screen and as soon as those became viable options in some states being able to sell drinking.

Some cases being able to sell path good.

With Margarita kits.

We got all over it and our supply chain really supported us in ways that were pretty amazing and we've grown that piece of the business as it represents over a million dollars a week now in sales and has grown nicely and we feel very good about it now what the future holds I mean, all again as most of these things are were temporary.

Kind of acts that were put in place by the governments.

And so we'll see how they hold or and how long they hold but as long as they hold we're we're comfortable now we've got a great product guests really enjoy it and and we're having a good a good success selling marguerite as to people in cars.

A president Jay on the ride all with a strong that's a great way to do Oh no no no not in this phenomena, Rob Bob Nobody is drinking them and that you got to get and whatnot. So you get home yeah. There. Thank you.

Your next question is coming from John Tower.

Your line is five.

Great. Thanks, just a just a question on the balance sheet, specifically curious to know how long the covenant waivers last that you received and then in terms of thinking that's out along the line of how your business progress is when you return to the negotiating table with some of the lenders how can we think about your total shareholder return.

Essentially changing given that.

Your dividends and repurchases had been a significant piece of the TSR over the past several years. Thank you.

Hey, John I think as we indicated in the press release relating to the.

Amendment that we received waivers for that the two quarters at that point, so basically would be this quarter and the fourth quarter re established a covenant.

Mark of on the lever side of equation.

4.75 for the first quarter fiscal 20 Watt now so that's that's kind of this dynamic as it relates to that and as I indicated obviously ongoing conversations.

With the banks and particularly as you start to to move now into these next phases kind of understand what that looks like understand what that some of the go forward dynamics and and that includes how you how you structure a covenant package.

In this new environment going forward after that after those timeframe. So a lot of good conversations going on there as it relates to the other part of the question. That's I think Thats a discussion for down the road.

Some of the dynamics you mentioned.

We're suspensions, we'll talk about.

Capital allocation you know on a go forward basis at a at a future time, and how that and how that impacts the TSR question.

Okay, and then just it's great to hear that the majority of your stores are still open but in terms of thinking about your asset base.

You know just giving you an opportunity to potentially I don't want us but.

To gradually but in terms of pruning the portfolio of stores, where you felt like they were marginal with respect to operating relative to the rest of the system is giving you an opportunity to to essentially say the this is time to get rid of them.

Well, John we do those looks on an ongoing basis I think we talked about.

Twice a year.

Index or views on performance, we've we've frankly, we've done a good job of incrementally pruning over time. So again this is.

A new data set as it will create a new environmental that will play into those decisions, but we are sitting with a lot of restaurants to think as you described kind of teetering on the edge I think.

Again, the actions, we've taken on ongoing basis, and the fact that.

You know we've kept really all the restaurants open except some that might have been in a physical location that Clinton open because of that location.

Speaks well to the condition of the fleet.

Great. Thanks, and good luck with everything.

Thanks, Thanks, John.

Your next question is coming from John Glass.

Your line is lives.

Hi, Thanks, very much just just a couple of follow ups first I know that franchising isn't as big a piece of your businesses. It once was but can you comment on the health of your your domestic franchisees as well as maybe some of your your international franchisees is they've probably gone through the same issues that the whole that rusty industry is phased.

And can talk about on delivery is there any capacity constraints three or you, noting that third parties, having difficulty getting the capacity drivers to fulfill your demand as others are also seeing that or is up in a pretty it was up in a pretty smooth transition to a greater delivery percentage from their perspective.

Hey, John did hear from Yeah, Yeah. We're we're our franchisees are performing.

So.

Consistent with US with company owned restaurants, obviously, we have a couple of franchisees that are unique like our airport franchisee, who is having their own situation relative to the airport environment, but those that are the majority of ours are similar to two us with regard to their locations in their markets and they're seeing similar kind of result.

So feel good about how the bulk of the franchise bases kind of a weathering the crisis. The international market is a much more you know, it's and it's just a much more dynamic situation a lot a lot of closures.

And then Reopenings you know again as you've tracked the global markets you know how the pandemic has kind of moved through different parts of the of the world and our restaurants and franchisees have had to deal with that so we've seen more closures in the international markets than we have as a percentage.

In the U.S., but again overall I think there they are faring as well as can be expected are consistent with how retail and restaurants are doing in those markets.

And we were a you know they're working their way through and in some cases there further along.

In the process.

Of the moving out of the.

Cobot crisis, and we are in the U.S.. So it's going to do to moderate I'm not a huge part of our business. So that's important to note on the international side and it's more volatile, but again, it's it just doesn't impact our overall earnings performance that much.

And then delivery of delivery Yeah, we've got it would no problems I mean to the biggest challenge we're seen.

The the online World is just you know a you know the demand is been tremendous and they are setting new records every weekend with regard to.

Number of users on the systems and so just a getting all of that to work smoothly and making sure that everything is is kind of working under the pressure that it's be put under as has been probably their biggest challenge.

But we havent had a problem with a with getting drivers to pick up orders. That's that's not been our issue and we've had really good in our partnership with door Dash. We were just a we're just pleased with it we think they're a great partner and a new work we've done over the last year to grow the business and understand that their business.

Our business, we couldn't be happier with that relationship.

Thank you.

Yep.

Your next question is coming from Eric Gonzalez.

Your line is lives.

Hey, Thanks for question and glad everyone. You know sounds like they're doing well just wondering if you can discuss how consumer behavior as a change with regards to off premise in other words like how much is check size increase now there's specific items are deals that you're seeing a higher menu preference as people experienced cooking fatigue. Thanks.

Eric It's interesting right. So so first you know the check size increases have been have been there I think as we've seen more families kind of move into this category than than probably were there before.

The.

The biggest challenge in into kind of one of the things that we've talked a lot about our comp sales.

When you look at the difference between comp sales in comp traffic our comp traffic numbers are five to six points better.

Because the to go check and the delivery checks tend to run a little lower primarily because they don't have alcohol sales and why we were pleased with you know the million dollars a week, we're selling and in Marguerite is to go that's a fraction of what we used to sell when we obviously have a dining room and and a bar and so that's been probably the.

Biggest difference between the mix of.

What we were seen inside the restaurant an outside beyond that the value propositions that we had so so interestingly when we went into the crisis we thought.

We're gonna have to simplify our menu.

Like many have done and then we we actually challenge ourselves to say hey, listen.

That's creates a lot of problems for our guests who love their favorites and for our supply chain because there's a lot of product out there that if we simplify the menu, what's what's going to handle that product. So we challenge ourselves to run the full menu and we've done that and we've been able to pull that off and still deliver the kind of piano performance that we needed to and the operational side of the.

Equation, and that's partly because our our dining rooms are just to go experiences is complicated, but our kitchens aren't as busy as they they normally been so they're able to pull this off in our operators did a great job our supply partners and their distributors adjusted and we've made all these changes to the system to to make that works for us and so overall.

Our our mix is leaning a little heavier into the value propositions that we have always had.

And that was also really I think a strength of ours. We didn't have to we didn't have to innovator create a whole lot of packages or new deals or family bundles that we've seen a lot of other folks do we've just ran our menu and our menu has inherent strength in it and that's Chili's Muslims had to make a few more modifications just because of the nature of their you know there sit down.

Dining experience, but for Chili's, we just ran what we ran to eat it and for the most part with the exception alcoholic sales checks kind of lineup.

Thanks, guys. They say there yeah, everyone is we're coming up against the hour. We will go over for a short period of time, probably five or 10 minutes I will get through as many of the questions. As we can we know there's a lot of folks.

So have a chance to talk.

Individually after the call but.

Well keep going on on comments about as wallet. You now we are you know, we're comping down to about than the next 10 minutes or so we're cognizant of your time too and if we Miss you are those that have to check off.

We appreciate you joining this gets.

The next question is coming from Katherine So greedy.

Line as lives.

That's great. Thank you. So just one point of clarification here on when you reopened the dining room, you mentioned, having a one or two page menu is that going to be breads menu or you figured out a way to content all the prior menu items onto that cage, how are you thinking about menu I'm the guy that.

And then I have a follow up.

Well again, it's going to take US a couple of days to get menus out a in a bridge format, but it will be it won't be it will be the full menu. It it'll just be in a different lay out. So yeah. We don't we don't answer because we don't need not change pictures, yeah, and we're going to guests to that you know listen they can always.

If I guess are nervous about menus, you know they can pull up their phone and pull up our app and <unk> and scanner menu from their phone.

And that's an easy it's an easy way to two to order as well again, so if anyone's nervous or at all not comfortable with with a menu. There's there's touchless systems that are be there, it's pretty much a touchless system that we have that they can take advantage of if that's at all important to them.

[noise] and then I'm.

Yes, if you give or take care.

But I do you have an update on my Chili's rewards members in any findings are seeing about you know you knew that gets into the platform given your digital strength at that site.

The <unk> the the platforms that kind of holding its own we signed up a lot of people into my chili's rewards through our dining room.

And so when we lost our dining room, we did lose a source of.

The acquisition, but obviously that's been traded off with online acquisitions. So net net it's a little bit actually a little bit down, but it's still kind of robust and doing well for us working as hard as it's ever worked yeah. The active database is still over 8 million.

So it's it's it has the capability to do what it needs to do and as we opened dining rooms again, we'll start to grow that well get that acquisition vehicle back up and running.

Okay, Great best of luck. Thank you. Thanks it.

Your next question is coming from Dennis Geiger airline is life.

Great. Thanks, guys wondering if you could talk a bit more about new guests and if you have any sense that you could share as it relates to the relative magnitude of newer gas using the branch and maybe just.

On top of that any any sense on sort of customer perceptions and and perception scores over the last couple of weeks and as we kind of think about marrying those two how you're thinking about the stickiness.

Of new guests that you've seen over the last several weeks. Thanks.

Well every channels a little different right. So I think on the delivery side, where the businesses again, both our takeout and delivery business of more than doubled almost tripled the delivery side of the business. We're getting a lot of new users a lot of people that are.

Experiencing delivery for the first time, and then finding the chili's delivery experience for the first time, so that bodes well all of our metrics through.

True that system confirm that were do a good job in there to guests are appian and that we that we have a good.

Kind of conversion rate.

With regard to new guests with takeout, it's probably not as.

Not as many we know here, here's where the loyal guests of chili's or are coming to.

Fine that experienced that they can trust and count on in these uncertain times and and we see a lot of our loyalty. There's we're leveraging our loyalty database really comes in a Andean is working hard for us. So we are getting new people into the brand everyday but but.

Kind of a change it's different by category icon.

And we have seen.

Our experience.

So we we have guess metrics and our guest metrics on delivery and takeout have significantly improved through this process you know really we've improved them.

The magnitude of 30% better than they were.

In that channel prior to.

Being a delivery take out only model.

Great. Thank you.

Thanks.

Your next question is coming from Andrew Strelzik.

Airline is lives.

Hey, good morning, I guess.

Just two questions for me and I apologize if you.

Excuse you mentioned wishing I missed it is you're seeing a lot of the new delivery customers come into the brand has your mix change between the two channels. A you know is it still primarily coming through through third party would be the first question. The second one just as we think you know in the post recovery environment about sanitation and cleaning measures or anything like that would you anticipate any struck.

Actual kind of margin implications as you kind of moved past the recovery guys.

So on the first one Andrew I'm not sure I understand your question <unk> all of our delivery comes through a door dash so to leverage ago.

Oh, so are you asking about the to go delivery mix, how that how that those two yeah that they both growing significantly the most more than doubled them pushing on triple or the relationship has been the growth has been a little better Oh is absolutely a percentage with to go but the deliver.

The businesses.

Also grown very nicely.

And then Joe on sanitation the costs associated.

Again, we would anticipate some some incremental costs associated to do those again.

Sanitation and safety are already embedded in the business model, there's probably some incremental level. It will go for some period of time.

But it's it's incorporated and thinking it's going to be very manageable in that regard.

Okay. Thank you very much thanks again.

Your next question is coming from Peter Sally.

Airline is life.

Great. Thank you and I appreciate all the color you guys provided today I just wanted to come back to the comment on supply chain. I think you said, you're not seeing any real impacts.

On the supply chain.

With that said Q expect anticipate any sort of either deflation or inflation in any particular commodity anything that maybe different than what you guys were anticipating a few quarters ago.

Yes, I think paid or overall, we're seeing a little more a little less inflation I'd, just say so that they expectations on inflation level or are down probably about a percent or so now.

Again, remembering that are contracting is designed to try and mitigate as much volatility as possible.

It gives us a little bit more of a steady state there we do expect commodity markets, we'll probably have some some in some areas some higher level of volatility as you kind of move through an economic cycle like this.

More protected on one side and and and frankly have the ability in some cases to take advantage of some volatility when we see it in particular in some of the the proteins and how we structure and extend contracts. If we we choose to do that but.

Again supply chains all over it.

And I think as we look farther down the line, probably a little bit better environment overall than what we might have been inspecting expecting a couple of months ago.

I think the other one that's probably hasn't played out yet is just you know if gas prices continue to stay at these extremely low levels that will rule rolled through commodity pricing as well as distribution. Obviously, so we'll see how that plays but again more a more upside to the piano than a downside.

Great. Thank you very much.

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Your next question is coming from Chris or Carol.

Your line is lives.

Hi, good morning, and thanks for taking the question. So it was noted in the release that online ordering accounted for 70% of off premise orders in the most recent monthly data provided so how did that trend since March in Where's that currently running and can you talk a little bit more about how you plan to leverage those digital relate.

She trips over the long term thanks.

Well the trend obviously is tripled you know with the business. So we went from a you know a.

Business that was running you know, 18% to 20% to 100% taken delivery and the mix within that is pretty much stayed the same you know we get us.

The percentage of our guests.

For protocol in and we as much as we would rather them get online, they're just going to call us and we're happy to answer their phones and to take their order that way. So that's kind of just the difference.

And I'm sorry, Chris what was the second part of the question.

Yeah, just just asking about how you you know just plan to leverage you know anymore. These digital relationships.

You know the new ones over the long term.

Yeah, we're always we're always trying to both with within our.

Formats, and even with our jordache partner working to create a more what I'll call sticky relationship a more direct relationship or share information for a reason you know we offer benefits through our loyalty programs were always whenever we have an opportunity to to make a connection through one of these via.

Nichols, we look to see meant that through a or.

More permanent relationship through through our loyalty programs. So that's what we're doing and as I mentioned earlier, we're growing the database through our digital very nicely, it's being offset a little bit because we don't have that same relationship building opportunity in dining rooms, we look forward to getting that back in the two of those will help us continue to grow our database nicely.

So everybody a week, where we've actually hit that that at that time period that we're going to end.

And the call our apologies to the Cusick continues to remain and we Mike is available I will be available will obviously a welcome. The continued conversations as we kind of go forward. Thank you for my participating this morning, and I'm sure. We will be talking soon everybody police stay safe Yeah, I think you've all appreciate it thank.

It's everybody bye.

Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your phone lines at this time another wonderful day. Thank you for your participation.