Q1 2020 Earnings Call
What are 2020 earnings conference call at this time, all participants are in listen only mode. A brief question and answer session will follow management's prepared remarks. It is now my pleasure to introduce your host Mark graph group Vice President of Investor Relations. Thank you Mr. graph you may begin.
Thank you and good morning, everyone with me on todays call or David Dino, Our Chief Executive Officer, and Chris Meyer Executive Vice President and Chief Financial Officer by now you should have access to our fiscal first quarter 2020 earnings release. It can also be found on our website at Bloomin brands Dot com and the Investor section.
Throughout this conference call, we will be presented results on an adjusted basis, an explanation of our use of non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures appear in our earnings release on our website as previously described.
Before we begin formal remarks, I'd like to remind everyone that part of our discussion today will include forward looking statements, including a discussion of recent performance. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from our forward looking statements. Some of these risks are mentioned in our earnings release other.
These are discussed in our SEC filings, which are available at FCC Dot Gov. During today's call will provide a brief recap of our financial performance for the fiscal first quarter 2020, and a discussion regarding current trends. Once we've completed these remarks, we'll open up the call for questions with that I'd now like to turn the call over to David Dino.
Well, thank you Mark and welcome to everyone listening today.
Our priorities remain unchanged as we continue to navigate these challenging times, we're focused on taking care of our people and serving food in a safe environment that protect both our team members and customers.
We have leveraged our strong off premises business since the pandemic required the closure of our dining rooms. As a result, we have tripled average off premises sales per restaurant since the beginning of March. This is a testament to the strong affinity for brands and the decision to invest significantly over a number of years into building.
Our robust delivery network to complement our takeout business.
These outstanding off premises results have allowed us to keep substantially all of our locations opened during this time.
The goal going forward is to keep a large part of the share gains we have seen in carry out and delivery.
We've also recently began the process of reopening our dining rooms as state and local governments allow for perspective, we had 23 Outback steakhouse restaurants opened for dine in service with restricted capacity during the full week ended may Threerd 2020.
Comparable sales at these locations were down 17% from the prior year.
We are encouraged by these results as of this morning, we have 355 dining rooms open across all brands with limited seating capacity in 10 states.
As these dining rooms reopened we are hearing to strict safety measures. This includes additional sanitation and disinfectants and practices enhanced handwashing protocols use of gloss and facial protection for our employees.
We're also providing contact with payment options for our customers.
These dining room seating configuration has been modified to adhere to social distancing and reduce capacity standards.
Were added convenience, we are leveraging our table management notification system to allow guests to wait in their cars for their table.
These results would not be possible without the terrific work done by our 90000 team members in the restaurants and the dedicated employees in the restaurant support center.
Their ability to pivot to a 100% off premises business has been energizing to watch.
Not one of our employees has been laid off or for loaded either our restaurants or the restaurant support center as resolve the crisis.
Hourly workers impacted by the closure of our rooms have continued to receive pay as we work through the current environment.
This decision has been important part of what is driving results and we're seeing a following benefits first we've been able to retain a highly engaged and motivated and trained workforce second half the dining rooms reopened we have teams ready to go our hiring and training costs are minimal and.
Most importantly.
It was the right thing to do.
Turning to our financial performance, we are tightly managing our cash usage, we have stopped nonessential spending significantly reduced marketing expenses and deferred nearly all of our discretionary capital expenditures. These efforts have allowed us to minimize ongoing cash burn.
Also as previously mentioned our decision not to terminate or furlough any employees will allow us to reopen dining rooms quickly.
Earlier. This week, we took steps to further strengthen our liquidity position through the pricing of $200 million of convertible notes, which is expected to close today. These funds coupled with our reduced burn rate provide additional flexibility to navigate economic uncertainty over the long term.
Liquidity will also enable us to capitalize on opportunities in the weeks and months ahead.
As it relates to our first quarter results, we're on track to deliver a strong quarter prior to the impact of the pandemic.
The strategies to enhance total shareholder return that we outlined on our Q4 earnings call we're working.
Once we have successfully navigated the ongoing crisis and capitalize on our opportunities. We believe that we will be well position to build on our early 2020 success and emerge and even stronger company.
And with that I'll turn the call over to Chris.
Thanks, Dave and good morning, everyone first I'll provide a brief summary on our financial performance for the first quarter versus the prior year.
Total revenues decreased 10.6% to $1 billion GAAP diluted loss per share for the quarter was 44 cents versus 69 cents of earnings per share in 2019.
Adjusted diluted earnings per share was 14 cents versus 75 cents last year and adjusted restaurant level operating margin was 12.5% versus 17.1% last year.
Through the first two periods of Q1 2020, combined us restaurant comp sales were up 2.6% with positive traffic at all of our concepts. In addition, adjusted operating margins were up 100 basis points from last year. It was a strong start to the year, but as we entered March the cobot 19.
Pandemic had a significant impact on our Q1 adjusted results such as sales deleveraging across the TNL driven by the closure of our dining rooms, the payment of $16 million of relief pay in March which impacted the labor line and increases in restaurant operating expenses primarily supplies.
Driven by the shift to an off premises only business model.
As it relates to our cash utilization as the pandemic began to impact our business. We took immediate actions to minimize spending including the elimination of essentially all discretionary expenses.
These actions combined with steadily improving sales performance have allowed us to reduce our weekly cash burn rates to 6 million to $8 million per week.
Now that our dining rooms have begun to open with limited seating capacity. We expect this burn rate to continue to improve.
With respect to near term financial performance. It is important to consider a few key items.
First incremental profitability flow through will be lower in the early days of reopening our dining rooms, as we will incur additional service labor among other items.
There are typically minimum dining room staffing requirements that negatively impacts flow through at lower sales volumes, but as dining room sales increase flow through should return to more normalized levels.
Second we have continued to make relief payments to hourly employees in the second quarter. In Q2, we expect uplift pay approximately $14 million in relief pay net of tax credits available to us under the cares Act, we will stop paying relief pay as each restaurant reopens its dining rooms also our decision to.
Hey, really pay will allow us to reopen dining rooms, with no hiring or training expenses.
Third we have not seen any material disruptions to our supply chain, particularly in key proteins, such as beef poultry as well as seafood.
On the liquidity from earlier this week, we announced the successful pricing of $200 million of convertible notes.
We began evaluating multiple options for raising capital in early April that included discussions with multiple financial sponsors some of whom expressed an interest in the company through our prior strategic review process in the end. However, we concluded that the public convertible market offers the most attractive terms and the lowest cost of capital. These.
Outs in combination with our strong cash position should provide us with sufficient liquidity to navigate these uncertain times over the medium to long term.
As it relates to the exploration of strategic alternatives that we announced last November we have ceased any further steps in that process as we focus on our response to the current cobot 19 pandemic. This includes a suspension of discussions with interested parties with respect to our Brazil business.
Brazil has also been faced with mounting challenges from the cobot 19 pandemic similar to the US our restaurants in Brazil were forced to close their dining rooms and shift to an off premises only model. Unlike the us it is more difficult to execute off premises in Brazil, given that most of our restaurants are located in malls.
Having said that our leadership team has built a carry out business from scratch in just a few short weeks, we're slowly seeing signs that less impacted geographies will begin reopening dining rooms, but just as in the US we will be thoughtful about how we move forward prioritizing the safety of our customers and our employees.
Finally, this past Monday, we successfully closed on an amendment to our credit agreement.
Among the important terms our total net leverage coverage covenant has been waived for the remainder of 2020 in its place we will be subject to a minimum liquidity covenant that we're confident that we can comply with given our strong existing cash position and recent capital raise.
Under the amendment, we will be limited to $100 million of capital expenditures between Q2, 2020, and Q1 2021, we will also be prohibited from paying dividends or buying back stock until our total net leverage returns to be in compliance with our prior covenants.
We are comfortable with these restrictions over the short term until we can eliminate our cash burn and pay down debt to strengthen our balance sheet.
In summary, although this situation has been challenging our strong performance amid this pandemic reinforces the relevance and strong consumer appeal of our brands, we have taken the necessary steps to prudently shore up our liquidity position and we are looking forward to emerging as a better stronger operations focused company and with that.
That will open up the call for questions.
Thank you at this time will be conducting a question and answer session. Thank you Ben to ask a question. Please press star one on your telephone keypad a confirmation Tom will indicate your line is in the question can you.
You May proceed start to if you like to remove your question from Mccann for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star key.
And the interest of time, we ask that you eat keep to one question and one follow up thank you.
Our first question comes from the line of Jeffrey Bernstein with Barclays. Please proceed with your question.
Great. Thank you very much.
My question is a question on a follow up the question in terms of the reopening of the dining room that you've already started to do.
No it seems like the early results.
Our encouraging I think you said comps were only down 17% just wondering if you could share some color in terms of year.
Confidence or why you might be confident and believe in you can sustain that once.
The novelty of the dine in whereas authentic how learnings you've had in those stores. We now have the dine in and the to go just trying to gain confidence in that recovery trend and then I had one follow up sure warning.
First of all.
We have worked tirelessly to make sure when we reopened restaurants, we opened the very safely and appropriately for our customers in our employees and it really helped to have a full staff ready on Andre to go trained as we're open to restaurants net really helped us out a lot. So the team was ready to protocols in place to communicate.
Since we are in place so Jeff we're seeing the.
Gains sustained.
In those states and also we when we move to new States, we are having conversations with our states coming on board talking through the learnings. So as we share those learnings with other states, we get stronger and stronger and stronger understand what's going on I mean clearly people.
Of our brands that the team is doing a fantastic job on the restaurants, and we will comply with all state and local regulations, but we're ready to go and we're going to learn from it and get stronger.
Got it and then just my follow up in terms of the.
Commentary in the prepared remarks about the convertible notes.
Obviously had various options just wondering what led you down that route and I think you mentioned in out of the extra liquidity will allow you to capitalize on opportunities in the near term. So I'm. Just wondering if you could provide some color on what opportunities that might be in fact, I know you mentioned there was some interest and maybe buying weren't buying a piece of the company as part of the prior strategic.
View us on a can call you can add to that would be great as well. Thank you.
I'll start on the on the first baseman I'll turn over to Dave Hey, So I think that with the convertible bond, particularly with the call spread honestly. It was just candidly the lowest cost of capital option available to the company. When you when you add the call spread feature it further improves the cost of capital and makes it no honestly makes it more behave like a traditional.
Bond bond offering and that you can repay the principal in cash.
And it avoids share dilution up to I think the price was up to $16.63. So really cost of capital was the primary motivation also the bond like features that it brings to the table. We're also very compelling.
And Jeff to your second point, we want room to maneuver with our existing concepts.
We want to protect against the market share gains we've had an off premises they've been really strong we want to cab resources to be able to protect that we want resources to be able to optimize our asset base, we want resources to.
Take advantage of that what's coming ahead for us. So that's why we wanted the additional liquidity plus just to have that safety. So we felt good about situation going in the team did a good job raising the extra money and it gives us optionality as we move forward and that with our concepts to make them even stronger.
And any color on that interest of some investor them investing in the company more significantly.
No nothing else really to add there.
Great. Thank you.
Okay.
Thank you. Our next question comes from the line of John Tower with Wells Fargo. Please proceed with your question.
Great. Thanks for taking the question.
Just kind of curious on that last point you made there.
David in terms of cleaning up or thinking about the portfolio in terms of moving forward and improving the existing concepts and potentially optimizing the asset base. What do you mean by optimization of the asset base. It looks like in the first quarter you closed a few stores I mean are you thinking about potentially.
Cutting down some more in the future how should we think about that and then I do have a follow up.
Yes, no when I talk about optimizing the asset base I'm talking about going on the offense, we've done a good job over the years addressing our closures and things and we may have a few by I'm talking more about building our off premise business, even stronger building our dine in business, even stronger that's going on the offence as opposed to doing is more defensive stuff.
Okay, and you gave some qualitative information on Brazil can you maybe help quantify.
What you're seeing right now down in that market and then just in aggregate what you're thinking about for the balance of the year. What are your competitors last night with without and they offered and outlook for the remainder of 2020, where they were thinking that they're not going to be moving back to positive same store sales I'm, just kind of curious to get your thinking there as well.
Yeah on Brazil, Nick performing somewhat similar to our to our Bonefish index brands. They didnt have much of a carry out business, they're down 70.
So if we basically have built to carry out business. There we've tripled I believe almost tripled the delivery business there.
So they've done a really really nice job.
Managing that business. So if it's peering team has done a done a good job capturing opportunities in the marketplace.
In the second question again, yes, it's related to kind of forward looking guidance Oh, yes, yes. It's honestly just too early I think at this point obviously, we're still in the early days of just opening up the dining room. So much of it depends on government regulations, how fast they can ease some of these restrictions that relates to capacity I hopefully by the end of the second hand.
This quarter will be in the in better shape to give some perspective on that but we're just in such early days as it relates to the dining rooms that it's not prudent at this point to give any guidance on the balance of the year alright. Thank you I appreciate it and best of luck. Thank you.
Thank you. Our next question comes from line of John Glass with Morgan Stanley. Please proceed with your question.
Thanks, Good morning, good to hear from everyone. Chris first can you just do the walk on the 68 million on cash burn whats.
What's the breakeven level at the store level on an average weekly sales basis. When do you assuming for just for like weekly Gionee. Just so we can understand the sensitivities around that.
Yes, so I'll give you a little perspective on some of the various buckets.
I will start with sales.
I think we're assuming levels that are at or above current levels with a small contribution from the reopening of our dining rooms, and I think thats why we gave the perspective that we think we can improve improve the burn rate as the dining rooms continue to reopen in our sales improved.
On I guess on the expense side full salaries for field management and restaurant support Center staff.
The relief payments that we've been making should go down significantly as our dining rooms reopened.
Obviously, you'll have increased cost for Cogs and hourly labor as the is the restaurants ramp up.
Minimal discretionary spending with really only maintenance capital in the in the model in terms of that six 8 million.
Will be a small amount of marketing in that number mostly digital and then and I think as it relates to rent that's the other big toggles. So we have obviously, we have really good relationships with our 900, plus landlords and we're proactively speaking to them. So.
Since this pandemic began.
I think theres good the good news on that front as there is pretty broad recognition among landlords that even though we have shored up our liquidity position with the recent capital raise we're still burning $6 million to $8 million of cash a week. So that they also recognize that we're going to be here for the long haul. So they're generally open to having conversations about deferrals and abatements.
But in terms of our liquidity model to give you some comfort ongoing rent payments are contemplated in this burn rate.
And in the go forward liquidity planning just to avoid any confusion. So I think our burn rate. The last thing I would say is just as you think about that six to 8 million. It does exclude any changes in working capital either in payments that we've deferred or deferred to future months or on the flip side any working capital build up as the sales improve.
So hopefully that gives you had the right perspective.
Well just just one additional question on that what is the average weekly sales at the Outback brand that gets you to cash flow neutral.
The store level.
It just depends because here's what I would tell you. So if you look at the weekly sales that we were generating an outback with an off premises only business model. Those levels, we were able to get to that sort of cash flow neutrality, if not at a restaurant level come up and that but then I would say like I said in the prepared remarks as you layer in the dining room.
Labor the initial labor those dollars in the early days aren't quite as profitable so you're going to have to work through a daily several sales level that gets you back to breakeven. So it really just depends I think if you're looking for the right perspective, what I could say is John if you think about our total TNL fully burdened with all of the cost.
Associated with our restaurant support center, all the Gionee layered and interest expense payments layered and you're probably and again, there's so much. The can go into this but you're probably in that down 20% to 25% range before we could get to what I would call cash burn neutrality, so that you're not burning cash on a regular basis, if that makes sense, but yes, that's totally helpful.
Appreciate that and then just Christian and just on the on the off premise business how much of that has been delivery and obviously it was a place last last late last year. The second half of last year's how much is that the pickup businesses delivery how much that is your delivery versus third party delivery any context, there will be really helpful. Yes. So you know as you knew coming into this we had such a.
Strong takeout business and Takeouts still written remains predominantly the the vehicle that the customers are using we're probably about two thirds.
Take out one third delivery at this point and then if you look at the toggle between the two delivery.
Forms either our in house or the third party. It's about 50 50 split between those two and what we're seeing is on the third party is that that new customer that makes it so interesting and when I talked about going on the offensive and doing things I mean, preserving that moving forward, but that's going to be really crucial as we as we go forward in the rest of the earnings and after that.
That's great. Thank you be well thank you. Thanks.
Thank you. Our next question comes from the line John I haven't Keller with JP Morgan. Please proceed with your question.
Hi, Thank you.
You can imagine some of the strategic initiatives, specifically around DNA could be either accelerated or pushback because of cove. It. So I was just hoping you could.
I know, we don't want to get into fiscal 2001 guidance too much but could you think about a fully loaded incentive comp being paid.
Given a number for 21 or 22, just again as there are so many moving pieces and different things kind of become prioritizing the organization just from a dollar perspective.
The first question and then secondly on Brazil.
That was a market that youre growing before.
In terms of units I mean, how long should we expect.
Development, and Brazil to be curtailed and I was hoping if you could give us some detail around the 12 and a half million dollar cash distribution to Brazil. Why you think that would just be a onetime event versus potentially recurring one. Thanks, Yes sure. John I think you know what we really addressed our overhead in February we talked about $40 million over two years.
That's moving forward, we continue to look at going to market in the most efficient effective way possible as a company that will move forward. We've learned a lot. During this process like build off companies may have so we'll continue to manage our DNA appropriately going into 21, it's too early to give a particular.
A number but I can tell you all of our initial initiatives are on track and then probably more so thats going to be a big part of our story as we as we move forward on Brazil.
Move forward in the U.S. and Brazil, but it continues to be a top performer for us.
So and on the Yeah I was going to I'm like no go ahead, John I'm, just gonna give you follow up on that that <unk> exactly on the 12 and a half if we if we could think of course, yeah. So <unk>. So the the perspective you need is first of all Brazil had a had a really strong cash position coming into this we we don't nest a on a regular basis, Brazil is very self sufficient in terms of its funding needs.
So when we made that 12 and a half million dollar investment into the business I think that what we're seeing is is that that can carry them over for some time now as they begin to process of re opening their dining rooms, well you know, we're we're hopeful that they'll have enough cash to tie them over for you know for the foreseeable future. It really just depends though as you get later into the year.
Kind of how you how that plays out in terms of the reopening the dining rooms, and the stabilization of their sales performance.
Thank you.
Thanks, John.
Thank you I next question.
<unk>.
No question Oh, great. Thanks to other here that you're you're all well you did touch on it and I appreciate that it's been only a couple of weeks, but for those 23 outback locations.
Had been open to in restaurant dining since sometime in late April have you seen those same for sales steadily improved have you seen increased demand for that that limited seating capacity any color that you could provide they're just where the paint a picture for us for what it's like <unk> when these restaurants reopened.
The restaurants are very popular where we're meeting the local guidelines.
The dining rooms are filling up and the the sales are sustaining.
So and we'll take those learning like I mentioned earlier to other states, but we're we're balancing the need for safety for our customers and employees with the demand for our restaurants and also we want to make sure. We keep that was off premises gains that we've we've enjoyed so that's what we're trying to do jap as we bounced. These these different things and we'll see you know how the.
States unfold more states are opening up we'll see what happens, but it's too early to say other states right now, but I can tell you with what we've seen so far in Georgia.
And then just as a follow up to that so Texas, Florida, I think are both limited to the 25% capacity what criteria or need to be met at the state level before that capacity. It can be used to let's say 50 50 per cent limitation are you guys aware of all that is that that information out there yeah.
It's it's not out there yet we're aware of the <unk> various states, we keep in touch with state all the time as far as what their plans are will comply with that but we can't speak to the states Jeff as to what their plans are we're just standing on top of his death, we can alright. Thank you guys.
Right.
Thinking I next class.
I like <unk>.
<unk>.
Thanks, everyone's doing well for the restaurants that have reopened at this point had the operating hours in similar to for I mean, what are you seeing I guess when are you, saying most of the demands wondering how that's playing out.
Envision enough demand that it'll start to fill out the shoulder period. So.
It's it's similar if there's nothing really different per se.
I think the biggest thing it's just managing to the local laws and local compliance you know and running into our best of our ability, but it's similar what you would normally see.
Okay, no transitioning customers from the weighed area to the cars seems to make sense and it's an interesting saw what are the customer, saying about that and what did the weights and like.
They they have appreciated it. They appreciate this definitely taken as as a company and we've gotten very very good feedback. There's also appreciate the fact that we've reopened and the weights vary by restaurant, some restaurants or have you can be seated right away and other ones have very very long waits. So it really depends on the location and and what the.
Certain situation is yeah, and <unk> importantly, the customers have shown a willingness to wait yeah.
I. Thank you. Thank you.
Thank you know our next question comes to mind F. Matthew.
He's pretty good question.
Thank you I have two questions, one specifically to the new debt and or how you redid. The components and you said one Q. 21 is when you sort of have to come back to those components kicking in can you just sort of give us a range of where we should think.
That you're I guess, it's an <unk> on an L.T.M. basis would be what you'd have to adhere to not assume it obviously assuming that the cash flow is going to gradually come back returned positive sometime through 20, but not a lot of debt reduction what would be the even though that you would have to or a range of people that you'd have to go to to go about <unk>.
Well I'll give you the the covenant perspective for so the the way. We'll work is is that it you take the Q1 <unk> performance of the company in 2021, you multiply it by four with some adjustments for seasonality because Q1, obviously is going to be the highest seasonality quarter of the year in terms of sales bring profit performance and then you.
That the ratio in Q1 is a 5.5 times to one ratio between net debt to to eat it Ah and then you would go to Q2, and then that steps down to 545 times to 123. It goes down to our original covenant, which would be four and a half times to one so the expectation would be either Q3 of next year.
Back and compliance with the original covenants now as you progress through the year, you just add a quarter of even die and then you multiply. It by you know whatever ratio selling q. too I take you want <unk> plus cue to either die add them together and multiply it by to to get an annualized view and then you tested against that so that's that's really how the covenant will will progress and again we fell.
Really comfortable that will be in compliance with that as we get to key one.
Excellent that's very helpful. And then not lot's been talked about but I think when people talk about 25% capacity coming back to the dining room.
Should we think about that I mean, and your numbers it looks like I'm, just a raw maps, you're coming in a little less than 25 per cent most stores.
As you get sort of muscle memory of how the consumers coming and then using you with that 25% capacity.
What type of work have you done to try and maybe get above 25% sales with potentially from those from that new capacity is there a way to redo the model redo the point of sale or.
<unk>, it's faster speed, the service or get more creative where maybe 25% capacity in the dining room could be certain environment, where 25% of the capacity of dining room could be exceed 25% up a sales left in theory.
Yeah, I think one of the things we've talked about is a simplification of our operations simplification for a menu working on a efficiencies getting table turns we want our kids to be comfortable right, they're happy to be back. So we've got to understand that as well, but I think the table turns that environment and then a clean safe environment, you know, it's going to be important and.
And as I mentioned earlier, maintaining it off premises business between third party delivery, our own delivery network and carry out so that's it'd be a crucial part of it as well we can't forget about that but I I think <unk>. The table turned piece would be the area that we've concentrate on the most.
And then any change to the menu when you reopened I I assume you swim the menu a little bit for the off premise only model how're you bring back the model to the menu back to a full menu or not and that's my last question banking sure we have slim down for off premises and as far as menu plants in the future stay tuned you know we spent a lot.
Time on that thinking about that this was an opportunity for us and just stay tuned property for comparative reasons, we don't want to get into it but we felt.
[laughter], but a lot about it.
Thinking our next question comes from online at Brian's with Raymond He's supposed to your question.
Yeah.
I think some good morning, everyone is doing well you know back to the convertible that offering Chris <unk>, what's the costs for you to enter the call spread and and yet net net what are the expected total perceive you expect to bring in on the node operator, yeah that the costs bread cost about 17 million. So the the net proceeds.
These would be after fees and expenses about $175 million.
Okay great.
Yeah. Appreciate the weekend sales color that you provided on the U.S. business would you be willing to provide that played on the <unk> in recent weeks.
They.
Happy to talk about it, but we haven't Friday detail, but it's been the growth has been very similar to the U.S.S. people have adopted to adopted to the the new model I'm I'm, saying growth from where they started and then we've had two they don't really have a carry out business down there. It's we've had to teach the Brazilian consumer.
And I think the teams on a nice job on that so we're seeing the same kind of games down there up from where they started in Brazil's we've seen in the U.S., but it <unk> much lower based though yeah, the starting point.
Okay, and then last one for me I just wanted to ask about the franchise side of the business. Because you could you give a status update on on temporary closures, either domestically or internationally and maybe some perspective on on the franchisee help. Thank you <unk> franchisee health varies by franchise partner we've.
Just a handful of closures not many and we've been working with our U.S. franchise partners very closely.
And I think they'll come on this very strong, but we've got a great relationship with them internationally. We have we have also worked closely with our partners. We've been very pleased with some of the leading indicators coming out of Asia Korea's doing well for instance, a positive same store sales growth. So we we well.
Watch that obviously and learn from that so Brian it varies by franchisee a handful of closures and we'll continue to M- monitor what's going on over in Asia.
Thank you.
Thank you are next question comes from line at Andrews grants liquid.
He's proceed with your question.
Good morning, you mentioned that you're sharing across the system. Some of the learning from the early states I'm wondering if you could share the <unk> what what some of those earnings are that's number one and number two.
<unk> you know as your reopening the dining rooms, and maybe we start the advertising at some point curious how you're thinking about using values a call to action and there you moved away from discounting onto over the last couple of years is that something that maybe you would use more tactically kind of going forward in this environment. Thanks.
On as far as learning is go it's all about first and foremost safety and health of our customers in our employees I think we're doing a great job there and what what we can do to maintain that we share that we talked earlier about you know table turns we're sharing what some of the menu items are and what people are buying talking about how we preserver off premises.
Business. So all those things you know if we have different trade offs and things. So all those things are being you know being talked about you know as far as marketing going forward you know the digital investments. We may go really pay off working to continue to use that.
Excuse me, how hard we push value and things will be very aware of what's going on the market place, but I think for competitive reasons, we prefer not to talk about that right now, but digital <unk> be a big part of it will invest behind marketing where it makes sense.
And we built a strong digital capability will continue to improve that and we'll watch what the value equation looks like you know for the consumer.
Great. Thank you very much thank you.
Thank you I next question comes from line <unk>.
M. Cam partners for C.B. your question.
[noise] great. Thanks, My call hope everyone is doing well.
As we're starting to.
Yeah.
Even if it's a game on a light on the other side of the horizon, how are you thinking about.
What a pace of rolling thing back in your ability to not just manage for today on digital but step up the investments on that and on the off premise.
And what would you need to see.
Before you can start.
Yeah, but you're comfortable with your liquidity position to start paying down debt to start.
Layering in some incremental costs and also where do you think you have the best opportunities to further streamlined the business not just that the unit level, but also at the corporate Thank you yeah sure.
<unk>, we we raise the funds like we talked about earlier to to make sure we had to liquidity, which we felt very good about all along but also make sure. We had the dry powder to go on the offensive when we have two and so you know investing behind our off premises business investing behind our restaurants there'll be a big part of it and yeah, we'll see the sales come back in the restaurants Chris.
Team will do a great job managing our cash flow and our our debt pay down and will toggle that back and forth based on what we're seeing in the marketplace. That's the the first thing secondly, we've learned a lot. During this process. We've learned a lot about digital we've learned a lot about her off premise business. We've learned a lot about how we can go to market as a company and how we think about.
Out our menus going forward, we're going to use all of those learnings.
To make us and even stronger company as we move forward and 2021 and beyond that includes our cost structure above the restaurants, we want continued to examine that the team did a great job in February identifying some opportunities I think we'll look at how the workflows in the restaurants support center, who does the work how it comes together and will continue to to examine.
In that but we've got a really strong restaurants supports their that's doing a great job managing and working with our restaurants, and but will continue to look at our costs structures any company would as we move forward.
That would you be able to share where your your dined rewards membership is this quarter.
Yes, it's north of 10 million.
And and what did you <unk>, it's grown it's grown during this time. So it's it's it's great to see that's been a powerful program for us and when we can leverage in the future.
And is there anything you can share about just their customer behavior versus the traditional customer behavior and.
Q habit, they're very loyal and and we love them and we're going to continue to work with him are going to continue innovate that program.
Much like I'm, just thankful, we made a a the investments and delivery.
Dine rewards digital over the years to help make this happened because it has paid off for us in big ways, and something where to leverage going forward.
Thinking our next question comes on line <unk>. Please proceed with your question.
Hi, good morning that congratulations on now kind of <unk>.
You really phenomenon the watch from the outside I think curious.
I guess, I'm curious as to whether or not and seen any kind of regional call outs and and how quick rebound has been and I think a couple of it'll be a brands may have introduced off premises. During this time frame and I'm wondering if they're going to keep keep on premise is going forward and and then lastly, as you think.
<unk> these locations reopening I fed the dining room I don't know if you mentioned, whether or not you been able to keep the premise. Since then the dining rooms, and then reopening in terms of they they come to kind of volume increases you've seen.
Sure you know for our for brands you know, we've talked a lot lot about outback and and things and crab as an off premises, but you know bone fishing and fleming's have taken it from virtually nothing going fish had some flemington zero.
I just had the shot give a shout out to those teams because.
We know now that we have an off premises business, especially at phone fish that we didn't think we had before the meal bundles and things had been a big success I really think that's an opportunity for it's going forward and so sharing is we open up the dining rooms, we want to keep as much of this off premises business as possible and we want to be truly <unk>.
The channel whether you come to us in the restaurant, whether you come for carry out where you come from our delivery, where you come from third party delivery. So I I I think at at Bonefish, We've seen it we'll see what happens at Fleming I mean, the team has done a really nice job there as well, we'll see if that says this and especially on the carry outside is is something that's that's possible.
Has restaurants reopen so our goal is to continue to to draw that off premises businesses dining rooms open up to keep as much as a share as possible and and innovate around it and then on the geographic side you know I guess as you would expect there there is a correlation to house sales are impacted the level to the level of exposure to code in the area.
The south is performing stronger than say the northeast of the mid Atlantic.
Mmm thinking.
Thinking I next question comes from line of crack refrain quite with bank of America.
Yeah.
Hey, Thanks for the question I had to just just the first one was on rent. So I guess, we are you.
In the comments on cash for you painful rent is that that where you stand and you're trying to figure out.
How to to mitigate that over time I just was trying to maybe understand what the comments work and then in the states that have <unk>.
Reopened in terms of trying to figure out cannibalization of of dying in two d. off premises business any qualification there on on kind of the or early signs of what you're seeing <unk> the bit that that big pick up in off premises is kind of holding in in the dining decremental or any qualification would be great. Thank you.
Yeah, we are holding a large shit very large share of the in the states. It open very large share of the off premises business and that's why the concert responded like they have even in a 25% you know dine and type environment. So again like I mentioned, a few times on this call. Our our goal is to build off that off premises business as we move forward ads dining rooms, reopen and I'll turn over Christmas.
<unk>, Yeah, I, obviously with 900 landlords you know every conversation is is unique and as I said, we are having constructive conversations or landlords about deferrals and abatements I'm not gonna for competitive reasons get into how much is deferred and how much is debated and when those things play and I get the perspective, I was giving though is as it.
Relates to our burn rate of 6 million to 8 million. We have built an assumption into that that we are paying full rank into the burn rate just so for your you know for your edification, There's no no no well how much is in that burn rate of rent full wrenches into burn rate, but there are ongoing conversations about deferrals and you know and.
And those and and the landlord something very receptive as we indicate.
Maybe just just one of the question on on Labor I I think usually you haven't furloughed any team members I guess <unk>.
For anybody who does that mean and all the restaurants are shut down you you're paying some portion of wages to do every single team member and then or one to shut their dining and then I guess as you've tried to get customer or labor back into the store has there been any challenges in in terms of executing that.
Yeah, I I think you you you kind of answer. The question you ask is yes, we have been keeping our <unk> Rosh was full and our people paid because when the restaurants naturally opened backup we've got a full trained highly engaged team to come back with very little minimal training in hiring costs and.
That's been extremely important to us as we opened backup.
And I think people look at what we've done how we've navigate the crisis, but they'll look out for the long term, how we did it and having these people available and ready to go in highly engages really going to help us as we move forward.
<unk>. Thank you yep.
Thinking I next question comes in line Okay.
I'm, sorry, Jared Garber with Goldman Sachs. Please proceed with your question.
The morning. Thanks for thanks for the question today standard on for Katie You know historically, you guys have talked about some thinking about from relocations, especially for for Outback.
Obviously, maybe someone that's on pause given the current crisis, but just wondering if longer term or you reek thinking that strategy given to strengthen the off premise business that you've seen recently and maybe that's a way to you know mitigate some of those lower quality location without fully moving them. Thanks.
Yeah, I mean, the the additional piece of off premises says helps us really think through.
What the what the restaurants go look like in the future and it'll help within a relocation program you will help us with our economic feel helpless with our restaurant volumes and give us even more optionality to go forward as we you know optimize our acid basic ties back to what I said early in the call about going on the offensive as we go forward and really.
<unk> through our asset base and he's relocations because before all this happened we know that we were getting really strong returns on the relocation now when you add it later in the new learning when you layer in off premises opportunities, where you can really think through in a very creative way, how we take our asset base going forward.
Great.
Thank you.
And this concludes our question and answer session I'll tend to fly back 10 minutes or do you know for any final comment.
Well, we appreciate everybody joining us on the call today, I hope everybody stays safe and healthy as we go forward. We look forward to updating you on the portfolio in our next earnings call. This summer thanks a lot.
Thank you just can christening conference you meet disconnect you lines at this time. Thank you for your participation.
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