Q4 2020 Regis Corp Earnings Call
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Good day, ladies and gentlemen, thank you for standing by welcome to the Regis Corporation fourth quarter fiscal 2020 earnings call. My name is Ryan and I will be your conference facilitator today.
At this time, all participants are currently and I listen only mode.
Following management's managements presentation, we will conduct a question and answer session.
If you like to ask a question during this time.
Press Star one on your telephone keypad.
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A reminder, this call is being recorded for playback and will be available approximately 12 PM central time today.
I would now I'll turn the conference over to business chain SVP of Finance. Please go ahead.
Thank you Ryan.
Good morning, everyone and thank you all for joining us on a called me today, we have few software.
Keep executive officer.
Endeavor.
Executive Officer, Operator, Kristen Sheppard Executive Vice President and Chief Financial Officer, Eric Bakken President of our franchise segment and Adam Amanda Russian our general counsel.
Fortunately Niccolo you there are few housekeeping items I'd like to address.
First todays earnings release in conference call include forward looking statements, but didn't have tried it within the meaning of the private Securities Litigation Reform Act of 1985.
Forward looking statements are not guarantees the performance and by their nature are subject to inherent risks and uncertainty.
It could cause actual results could differ materially from such forward looking statements.
Please refer to the company's current earnings release, and recent SEC filings, including our most recent form 10-K.
For the year ended June 2020 June 32 2020.
For more information on these risks and uncertainties.
The company undertakes no obligation to update or revise any.
Any forward looking statements to reflect events or circumstances that may arise after this call.
Second.
This morning conference call it must be considered in conjunction with the earnings release, we usually this morning, and our previous FTC filings.
Including our most recent 10-K.
On today's call you'll be discussing non gap.
As adjusted financial results.
Glued the impact of certain business events.
In other discrete items.
<unk> non-GAAP financial measures.
Facilitate meaningful year over year comparison.
But should not be considered superior Q.
Or just substitute for our GAAP financial measures.
And should be read in conjunction with GAAP financial measures for the period.
A reconciliation of these non-GAAP financial measures.
For the most directly comparable GAAP financial measure.
He found in this mornings release, which is available on our website.
At Www dot reduce corp. dot com access Investor relations.
With that I'll now turn the call over to you.
Good morning, everyone.
I want to begin my remarks by thanking our stylists community.
Franchise partners and our field in corporate employees, who have all performed.
Yeah, they remarkable and courageous manner during this terrible pandemic.
Hi, I'm grateful to each one of you for your many contributions to our business.
Welcome flooded with these extraordinary unprecedented conditions.
There's little belt at the most important.
The quarter, what's the company's successful amendment of its revolving credit facility in the month right.
And amendment that expires in March of 2023.
Among other things these negotiations removed all prior financial covenants.
Including the net leverage ratio in fixed charge coverage ratio and added a minimum liquidity covenant.
While providing a lender security on the company's assets.
This covenant Lite facility is expected to provide the long term flexibility we need.
To see our transformational strategy through to completion.
And at the same time enable us to successfully navigate the uncertainties caused by the pandemic.
We were pleased with us outcome, particularly given all of the uncertainty related to the pandemic and the state of the economy in North America.
Broadly speaking, we expect the amended credit facility will enable us to move forward.
Move forward to embrace the full potential of our growth strategy.
Which includes among other elements completing our conversion to a capital like franchise platform.
Transforming our company with technology.
Focusing on the values along sector and our core brands.
Emanating costs, while continuing to invest in capabilities needed for a better future.
And upgrading our marketing.
And ongoing digital education efforts.
As to the current state of art Salon operations with the exception the bar salons in California, which opened and then were closed again.
Due to a state mandates.
In several company owned salons, we elected not to open.
Our salons have substantially reopened.
So I understand that governor new some announced on Friday that salons in California can reestablished indoor operations.
Subject to county approval.
We believe this is late breaking good news for us given our significant populations of salons in California.
But as of today, if not then roughly 82% of our total salon portfolio, what's open for business and.
Including both franchise and company owned salons.
First we expect the number of open slots will begin to increase as California, and its individual counties began to reopen.
Excluding the salons in California.
That are temporarily closed to the state mandates.
90% of our franchise salons.
And about 88% of our company owned salons.
Representing approximately 90% of the company's portfolio Pat reopened so normalizing for California folks we are substantially reopened and we just got a little bit a good news on late last week, our governor Newsome.
Thank you would be interested to know that we've been working very closely with our franchisees aren't franchise councils.
And our companies operating teams to identify ideas new ideas to adjust our operations to oppose cobot reality.
While keeping the safety of our stylists and customers as our top priority.
As we previously shared with you we worked with infectious disease specialists at the University of Minnesota to assure that health and safety of our customers inspire was well be at the forefront of our salon operating procedures.
As I mentioned earlier, while adjusting to the impact of this pandemic.
We are trying creative new ideas to help build traffic.
While maintaining social does something and our safety protocols.
For example.
Collaborating with one of our leading supercuts franchisees, we recently introduced an outdoor salon concept in southern California.
In a format somewhat similar to a sidewall cafe.
Well, it's still early days really likes the new concept and believe it may ultimately proved to have a longer term application in other locations and perhaps ranch.
Well, our post cobot volumes are down.
Our scale confers significant benefits that's not shared by most of the Salon sector and we certainly believe the consumer interest and good grooming.
Something that has long term sustainability.
It's important to consider that.
Despite constantly changing external conditions Regis has been around for almost 100 years now.
We have survived in spite of multiple recessions a great depression in the second World War.
I believe that with advances in the treatment of Kogan 19, better testing and the potential introduction of new vaccines in the months ahead.
Our customers and their families won't return to a more normal lifestyle.
That will include visits to our salons.
Although much has changed since we embarked on our multiyear strategy we remain committed.
Our transformation to a capital like growth platform.
We originally believe we would complete our refranchising process by the end of this calendar year and that was the trajectory. However, no unexpected this pandemic and the timing of our transition will likely be delayed a few months by the disease.
Given the impact of the pandemic, we now expect to be substantially complete with the refresh right re franchising effort on or before the end.
Fiscal year 2021, another words.
We think we'll finish the process no later than next summer.
At this point in the transition we also anticipate.
At the onetime cash proceeds generated by this last phase.
Our re franchising process will be lower due to the uncertainty in traffic erosion.
Aided by the pandemic however.
As you May expect.
These assumptions could change depending on the length or severity of the pandemic.
And the potential impact of advances in treatment.
Better testing and the introduction of new vaccines.
Although we have more work to do and must find effective ways to adapt to this new reality, we believe the core elements of our strategy and are continuing evolution.
What technology enabled growth platform will and the long run enhance shareholder value.
In order to support our growth strategy and provide enhanced capabilities to our franchisees.
Andrew established frictionless customer relationships, we kept our promise.
And made a long term commitment to strategic technology investments, which we shared with you today.
In August the company launched its proprietary cloud based lawn management and point of Commerce solution.
Welcome Salon pro.
Open Salon technology, now powers customer facing booking and information delivery on branded platforms.
This follows a wider initiative launch in 2819 to enable booking directly from Google Facebook Messenger and Amazon Alexa.
We overhauled and launch the supercuts mobile app.
Which improves same day check in and the ability of the books services for the following day.
This update represents an alternative to the traditional walk in model that consumers and even some states are demanding particularly in the face of Kogan 19 restrictions and wider consumer preference and finally during the quarter. We also launched the new cost cutters mobile app on iOS and Android.
And a new cost cutters web site.
With the ability to book an appointment up to three days out in the mobile App will also be at the center of brand wide loyalty and rewards programs at cost cutters.
When downloading DAP customers will be able to earn points in our salons for discounts on future services are towards purchase.
Reduces exclusive private label retail products.
And we've also kept our promises regarding expense rationalization in June we took further action to eliminate administrative costs and personnel.
An expected annualized savings of $6 million during the year, we made a number of.
Frankly painful decisions to eliminate non essential gene a cost as we continued our transition to a fully franchise portfolio.
On a full year basis, our DNA expense was approximately $45.3 million lower than last year, primarily due to the transition that company operated salons to franchise.
Salon closures and furloughs, resulting from the Kogan 19 pandemic.
Among other factors.
In closing I want to take a moment to acknowledge the.
Pain and suffering that our nation has endured this year.
Please note that our company rejects racism inequality cruelty and hatred of any kind.
My thoughts and prayers are also with her healthcare workers and first responders.
Or helping fight this pandemic.
The victims of Hurricane Laura.
And our five fighter firefighters in California.
Oh, My God bless them all.
I'm also grateful to each one of you for your continued interest in Regis.
I'll now turn the call over to Carsten who'll take you through the numbers.
[noise] makes you and good morning, everyone.
See you mentioned the last few months have been unprecedented.
We are committed more than ever I Trust strategy, and I guess unfortunate consequences that best pandemic, we continued to be pleased with the progress that right transformation.
We reported this morning on a consolidated basis fourth quarter revenues of 60 million, which represents a 76% decrease from prior year.
And as the result of the government mandated closures of Arsalan.
One in the fourth quarter virtually all of our salons are close.
Franchisees began opening this lines in April in more than half are opened in May and June company on salons began reopening in June.
As additional insight we estimate we lost roughly 105 million of revenue in the fourth quarter do they called it kinda Nick.
We are pleased but as of today approximately 82% of our salons are open across the entire portfolio.
Excluding California salons, nearly 90% in personal lines are open as you mentioned with California reopening that number should increase in the next to me.
We also reported better operating loss was $69 million during the quarter.
Economic disruption caused by the pandemic was a key driver of the spot.
Our management, let's kick to react to the store closures and for I loved the majority of our workforce in April and into May and June to partially offset the loss revenue.
Further we implemented aggressive wage reductions for the small number of essential employees, who continue to work.
Additionally, the company recognized the $23 million noncash long lived asset impairment primarily related to at least assets during the quarter.
The impairment was also driven by the impact of the pandemic.
Fourth quarter consolidated adjusted EBITDA loss of $34 million was 73 million or 186% on favorable to the same period last year and was driven primarily by the decrease in the gain associated with the sale of company owns a line of $27 million and the planned elimination of the EBITDA.
They had been generated in the prior year period, something that 1448 company on salons that have been sold and convert into the franchise portfolio over the past 12 months.
As we promise management has taken steps to align the company's cost structure to materially offset the decline in adjusted EBITDA.
Mark company on slides, we executed workforce reductions in January and doing resulting in nearly 25 million of annualized savings.
We have also significantly reduced our marketing spend.
As I've already noted cobot 19 Pan does that make all contributed to the decline in the fourth quarter adjusted EBITDA.
On a year to date basis consolidated adjusted EBITDA of $20 million was 103 million or 84% on favorable versus the same period last year.
The change include a $20 million decrease and again, excluding noncash good won't be recognition related to the year to date sale in conversion of 1475 company on Salon.
I probably.
Excluding the impact of the gain fourth quarter year to date adjusted EBITDA was a loss of $30 million, which was $82 million unfavorable year over year and my fourth quarter results. This unfavorable variance was also largely driven by the elimination of EBITDA related that's all been transferring company owns lines over the past 12 months.
And the Cobot 19 pandemic.
Of course, as you know the elimination of EBITDA associated with the sold and transfer its company on Salon once the key element of our strategy and the planned event.
Turning now to segment specific performance and starting with our franchise segment fourth quarter franchise royalties and fees of $7 million decreased 19 million or 72% versus the same quarter last year.
Product sales to franchisees decreased 5 million year over year at a $7 million. Both decreases were driven by karmic driven primarily by that but 19 pandemic.
Franchise same store sales were on favorable 20% due to declining traffic as customers learned to navigate a pandemic.
As a reminder, same store sales represent the total change in sales personal lines that were open on the same day each year. So I'm closures are not included in themes ourselves definitely period. We previously discussed with you they'll take some time for the dust to settle in for same store sales to be an entirely reliable metric for our performance.
Let's hope that by the time next year, we cannot rely on these year over year comp comparison as a key indicator of traffic in performance.
Fourth quarter franchisee the cabin million dollars declined approximately 9 million year over year, driven by reduced royalties and product sales did that government mandated flying closures in response to the Kobe 19 pandemic, partially offset by decline in DNA.
Year to date franchise, adjusted EBITDA of $38 million, that's why decreasing by less than a million dollars or 2% year over year. Adjusted EBITDA was favorable year over year until the impact of cobot 19 pandemic it.
Looking now at the company owned Salon segment fourth quarter revenue decreased 109, 95 million or 93% versus prior year to 15 million Cobot 19 was the primary driver.
Along with the year over year decrease of approximately 1476.
Any on salons over the past 12 month, which can be bucketed into three main categories first the conversion of a 1475 company on salons to our asset light franchise platform over the course of the past, none of which 112 or sold during the fourth quarter.
Second quarter of approximately 250 company on slide over the course at the last 12 months, most of which were underperforming salons that.
We closed that lease expiration and are not essential to our future strategy.
And third these net company owned Salon reductions are partially offset by 234 slot that were bought back from franchisees over the last year and 15, New company owned organic site openings. During the last 12 months, which we expect to transition to our franchise portfolio in the months ahead.
Historically the company as waited until we send to close underperforming salons and the current environment. We may utilize our balance sheet to terminate some leases early where the economics justify the decision which will lead the charge early termination fees. However, we believe closing certain salons sooner is in our best interest as they get.
Two of fully franchise model.
Fourth quarter company on Salon segment, adjusted EBITDA decreased $44 million year over year to a lot of 22 million.
Consistent with the comp total company consolidated results.
The unfavorable year over year variance was driven primarily by cobot 19, and the elimination of the adjusted EBITDA. The had been generated in the prior year period and the company on salons that were sold and convert it into the franchise platform over the past 12 month.
And he did a piece that's company on Salon consolidated adjusted EBITDA loss, and 7 million was $95 million on favorable versus the same period last year.
And favorable year over year variance is driven by the elimination of the adjusted EBITDA related to the sold and transferred salons over the past 12 month and called the 19th.
Okay.
As I mentioned earlier management has taken significant steps to reduce costs associated with them.
And it's important to remember that our company and so on performance will continue to be less critical to the future to directory of our business as we continue our conversion to a capital light franchise model.
Turning now to corporate overhead fourth quarter adjusted EBITDA.
Loss of 14 million increase 20 million and is driven primarily by the 27 million dollar decline in that game, excluding noncash goodwill de recognition in the prior year from the sale of in conversion of company on Salon, partially offset by the net impact of management initiatives to eliminate nine.
Core non essential DNA expense.
Finishing cash proceeds during the fourth quarter declined approximately $36 million or approximately 33000 personal line compared to 49000 personal on a third quarter fiscal 20.
The company is still committed to its conversion to an asset light franchise business model and expects to substantially be substantially complete with the transition no later than the end of fiscal 21.
The monthly, but then we had originally expected.
We do believe the economic uncertainty created by the pandemic has and May impact.
The number if he wants to be so all the pace of sales to franchisees and we expect trophies personal line to continue to be claim.
However, given the lack of visibility related to the length or severity of the pandemic. It does not possible for us to predict the outcome of her friends.
Our refranchising we.
We do remain confident that we will get it done however, the timing and cash proceeds are still uncertain.
We have tried to be conservative in our estimates and we'll keep you posted as they gain more knowledge regarding the impact of the pandemic to re franchising in the months ahead.
Please remember so I'm proceeds are included in cash from investing activities. So they are not included in a reconciliation of operating cash flows to adjusted EBITDA.
As you mentioned in May we amended our revolving credit facility that expires in March 2023.
The amendment provided relief for the maximum consolidated net leverage covenant and minimum fixed charge coverage coverage ratio.
Liquidity position as of June Thirtyth 210 million. This includes 96 and a half million a bit of available revolver capacity and 114 million of cash.
This compares to a liquidity position of 241.5 million as of March 31st a reduction of 30 minutes $31 million or approximately $10 million per month.
We continue to believe that the successful amendment of our credit facility will provide the long term flexibility, we need to see our strategy through to completion and enable us to successfully navigate the uncertainties caused by the pandemic.
I agree with you. This is not pivotal event of fiscal 20.
And in my view greatly increase the probability of our long term success in this uncertain environment.
Please be aware that refinancing our credit facility with very challenging, but your management team and the credibility of our strategy proof both true equal to the task.
Since the onset of the pandemic I can report that we have greatly increased our internal focus on all liquidity matters.
It has not always been easy, but we're being aggressive on all fronts to preserve cash until visibility improves.
This does include but not limited to an intense review of all company payables on a weekly gave it basis.
No dollar leaves the company without my personal approval.
Formalizing a company policy for collection of any pass through them on from our franchise partner.
Historically Regis has had very few problems with unpaid rent or royalties from our franchisees.
However, we recognize that the threats exists in the new normal and we intend to take appropriate steps [laughter] interest of our show up there.
Ongoing negotiations with our landlords to seek rent abatements deferrals or permanent rent reduction this aspect of cash management will not be short term project.
Continue into the foreseeable future, including proactive negotiations that we see now.
For example, we have recently been successful and securing various accommodations from Walmart in order to better support our smartstyle and cost cut her salons in Walmart locations.
We are fortunate to have a collaborative long term relationship with Walmart and greatly appreciate their partnership in the circumstance.
Finally, we are proactively managing cash payments for suppliers wherever it's possible to do so.
So in summary, when it comes down to liquidity at region, you can be confident that cashes clean.
Oh, the second half of fiscal 20 has proven to be Unprecedent in period and reduces history. We remain excited about the investments. We've made in technology. In particular were pleased with the I guess launch of opens on pro proprietary back office on management system designed to help our franchisees run their business in a more active manner.
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When combined with the launch of our upgraded customer facing mobile apps and the launch of our private label merchandise line my confidence in our strategy and the company's future continues to grow.
As I said earlier I believe it was a long term potential in viability of our strategy that enabled the successful outcome of our refranchise refinancing effort.
We are committed to the completion of our transformation and believe we remain well positioned to generate long term shareholder value as we transition the company to its growth phase and they come in calendar year.
And if our nation received a vaccine and improved treatment for this terrible virus I also believe your customers will ultimately return north lines with their families.
In closing our thoughts start with all of you and your families for safety and all being in the months ahead.
Certainly unusual time.
But all of us at reduced remain focused on long term value creation for our shareholders our franchise partners and our employees.
I'd like to thank all of your for your continued support and interest in Regis.
And I'll turn the call back to Ryan for any questions Brian.
Thank you human testing.
A question and answer session will begin at this time for any questions. Please press star one when your telephone keypad begin to withdraw your question that have started to.
Pretty questions Star one.
We'll take our first question today and that is from a Laura Champine loop capital. Please go ahead with your question.
Thanks for taking my question its really on the mall based salons I think you disclosed in the release. It. There's still 166 of these that are company owned what's the unlikely faith in time horizon, there and if you can give us a sense of how long those leases.
Extend from here that would be great. Thanks.
I'll take the first part and then I'll let.
Eric address it but you know we launched a two thank you for the question we approach.
The mall based along than the normal course, yes, we do the rest of the company owns a long portfolio.
And our tendency is to walk at salons that a granular level.
Asked we re franchising and move them to franchise partners.
So it's typically not.
Likely that we'd make a broad based assumption based on those loans.
Sometimes we close them, sometimes we sell them, sometimes we bundle them with.
Other deals that we're working on and move them into the hands with partners.
But with that said all that Eric add to that and clarified.
Yeah. Thanks, you, Laura our plan with them all the salons.
Customer portfolio, So we plan to have.
By the time.
And in our fiscal year in June and that will be a combination of transferring stores.
Owners, and and where it makes sense working something out the landmark too to exit again, where it makes sense. So our plan.
James the rest of our portfolio and we had relatively short lease term on these as you know we have not been extending them for some time show or lease terms is grizzly limited and that gives us optionality in terms of exiting the location were transferred energy franchisee.
Understood and then if I can just ask about the financial impact of the new Pos system and how long you think that'll take to fully rolled out across the chain.
[noise] I'll take the first part we've always looked at.
The investment in our technology as a long term undertaking.
Consistent with.
The multiyear strategy and transformation.
And in all of our technology investments, what we're trying to.
Better and I do franchisee run their businesses.
Calls were clearly dependent upon their results.
And on our mobile apps were trying to establish frictionless relationships correctly with the consumer.
So I think we've described this past is a.
Measured rollout.
Oh, Yeah, we've moved carefully.
And of course.
Well the franchisees may have.
An existing agreement with other providers and we certainly want them to abide by whatever service contracts. They haven't played.
And at here to the terms of those agreements. So it's a I'd look at this absolutely.
That's why you're undertaking and I think whose described it [laughter].
Feel that way, but.
Understood. Thank you.
You're welcome.
Thank you we'll take our next question and that is from Steph Wissink with Jefferies. Please go ahead with your question.
Thanks, Good morning, everyone on human Christian a quick question on the comp performance. It actually came in somewhat better than I would've expected and I think Christian you mentioned that's for comparable day to day opening so salons that were open on a comparable day last year I, but it was down much less than I would've anticipated can you talk a little bit about that.
Aggression of comps during the quarter, maybe what you've seen quarter to date as your salons have reopened are you finding that your recovering some of that lost revenue and maybe reengaging, even a new customer.
And I'll take the first part of that and say stuff that not yet we were not seeing.
The kind of recovery that we had hoped for and I think that's probably the commonsensical reasons for that and you know schools are open around the country and we always said.
Then the beneficiary kids going to school families coming in and get their hair cut.
Most offices on headquarter headquarters buildings were still closed around the nation.
And I think you know people are zooming around and zoom [laughter] being a little more casual.
People are aren't quite as a well groomed yes. They were 1.1 office, but so what is what's happening for US is we're seeing a lot of variability.
In the traffic levels literally from day to day in week to week and.
And we don't have.
The kind of visibility that we need yet.
No what that outcome would be I think I would say still uncertain.
I don't think it's a permanent condition that you know as I said earlier.
So much of this is hung around the impact for hangs around the back of those pandemic if we get.
Better treatments and if testing improves and God willing we get this vaccine.
I really do believe people are going to return to.
I think people are anxious to return to a more normal life I don't think they will I think they're anxious to do it and I think companies or.
Our ready to reopen their headquarters.
And when that happens shopping.
Look I didn't go back to their normal rooming patterns and get the haircut colored and all that kind of stuff, but right now it's the visibility is not great and.
In traffic has not returned to our historical levels, Eric you can build on that.
Yeah. Thanks, you Hi stuff, we are focused on his extensively on growing.
That's what we're looking out in.
You know I would say most of our owners are now looking.
Revenue growth from a week to week basis or from a pay period to period basis as opposed to looking back.
Higher year on so many things have changed that it is important to push the numbers for it and grow the business. Both in terms of traffic on as well as comps and so we're looking at things like how do we grow ticket.
For for customers that are coming into the salons.
We are focusing more on color. That's an important aspect of what we're doing today were heavily focused on those that are in the shopping centers. They made the decision to come out of their home and get out.
So we're really trying to be scrapping in how we deal with those folks lender to post it on the windshield or.
Three signage, which cities and landlords are much more open to today than they were in the past. So we're heavily focused on growing the growing traffic, but also growing ticket with our existing customers.
Right, that's great I to follow up questions. The first he was just summarizing you've got a lot of digital initiatives going on I think I heard you talking about digital training certainly marketing has pivoted more digital and social and then the rollout of open Salon TRO, it's kind of a digital engine core engine for your franchise.
Partners can just talk about overall, what you're thinking about the horizon may look like for transforming the technology of the company at the franchise site level as well as at the corporate level.
Sure.
And you're right called that out stuff it is a.
Digital Revolution, and Regis and.
In my own experience and in readers may prove to be.
Perhaps a different or faster than my own experiences, but you know.
Technologies cultural.
[laughter] not just you know operational or.
And not just the tech itself. It just takes time for human beings to embrace and convert.
The new technologies, but they they do and I can remember.
Stuff that I greatly resistant greatly resisted giving up my Blackberry, because I've loved that Blackberry.
And for several years I would not give that Blackberry up I was used to using that I understood. It I'd run my business, where the Blackberry for many years.
And then somebody put an Android in my hand, and I said, you know like thinking why not use this android. So when you have you know human beings adult involved a corporate it in the field and we have franchise partners, who have been very successful running their businesses and then a historical way for 20 or.
30 years, it takes a little time, but.
I still think that.
A year from now two years from that what companies come out very different.
As it relates to the utilization of forward leaning technology.
Interact with customers.
And to run their local businesses.
We're building.
We're building those great capabilities and we're still at the at the at the very a front end of that ER launch process and I, it's gonna be fun to watch this because I think it's going to help rapidly.
And make the company a better business than it is today <unk>.
<unk> easier to do business with stuff both for it's gonna be easier for customers to do business with us and I think overtime as the franchisees are going to embrace it.
And they're going to find it it enables their local operations as well.
Okay, Great last one it's a question for you just on rent deferrals to your franchisees I think that during the early onset of the pandemic you had afforded your franchisees couple of months of deferral.
<unk> any update on the standing of your franchise network any risk around.
You know franchisees now passed the P. P P.
Government assistance any risk to that franchise base, where your needing to step in and potentially remediate.
Thank you.
Yeah, and there as it relates to defer all as I just I clarify, we we did not suffer any any brand with the franchisees do some deferral of of royalty payment. So you know, but as it relates to franchise.
These were obviously could get very close eye on on this topic can you not well continue to do so because I think you know the next few months, we'll never be telling as it relates to.
What that's right it looks like.
Yeah, and I would add stops there.
There's always risk without but.
The reality is we're pushing very hard.
Our franchisees team concessions from landlords and you know you looked at Walmart ramp, that's mostly variable and and we're working closely with Walmart to make sure that you know that we don't get password and likewise and working with virtually all of our franchisees to assist them where they need it actually.
I mean, a favorable rental from the landlords.
And Eric we retain third party advisors to help those process right.
Yeah, we did we engage JLL Jones Lang Lasalle to help us terrific team there that we worked with in the past and they've been helpful. Along with you know a an outstanding group internally. That's also working with many of our franchisees.
And I think Eric it's fair to say, thank you agree with US that this process is gonna go on for some time because.
The.
You know stuff you know as well as anybody on this call.
Havoc that's occurring right now on commercial real estate, so I think that with the passage of time.
Opportunity to gain concessions improves.
And particularly when we get the lease renewal, Eric and that a good way to think about so this isn't some short term project it'll go on for wall.
That's what it will continue on for you know I would say several years.
Alright, thanks for the information guys.
You're welcome.
Thank you. This concludes the Q and a portion of the call I will now turn the conference back over to Hugh.
Thank you everyone a four year.
Kind participation today no.
Brent extended our best wishes, new and their families since I got blessing God's blessings. During this pandemic no. We hope you all stay safe.
No well keep everybody on the call remark Watson printers. Thank you everyone Bye bye.
Ladies and gentlemen, this concludes our conference call for today, if you wish to access the replay for this presentation. You may do so by visiting reaches Corp, Dot com and the Investor Relations section of the website or by dialing 1888.
203111, too with an access code of 93935 to nine. Thank you all for participating in today's call and have a nice day all parties may now disconnect.
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