Q3 2021 Brinker International Inc Earnings Call
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Good day, ladies and gentlemen, and welcome to the Brinker International's third quarter F. 'twenty one earnings call. At this time, all participants have been placed on listen only mode and the floor will be opened for questions and comments. After the presentation. It is now my pleasure to turn the floor over to your host Microwear VP of.
Finance and Investor Relations, Mike at the floor is yours.
Thank you Paul and good morning, everyone.
With me on today's call are Wyman Roberts, Chief Executive Officer, and President and Joe Taylor, Our Chief Financial Officer results for the quarter were released earlier. This morning and are available on our website at Brinker Dot Com Wyman and Joe will first make prepared comments related to our operating performance and <unk>.
Strategic initiatives, then we will open the call for your questions before beginning our call and it's my job to 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 meat.
And of the private Securities Litigation Reform Act of $19 95.
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.
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 and 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.
And thanks, everyone for joining us this morning, with the rollout of vaccines and full swing and restrictions lifting across the country Rguest pent up demand for a dining experience is being released as well people are finally, starting to feel safer to venture out and spend more so and some of the money they've been saving over the past year.
We're excited about the positive momentum and our economy and the resurgence and our dining rooms. When we last talked at the end of January we were already seen progress and the business. Even as we were navigating of COVID-19 Spike drove another wave of capacity restrictions and our dining rooms.
Just as we started to see numbers of cases come back down we were hit with the winter storm of the century that impacted our restaurants across Texas and the southeast at levels, we haven't experienced before.
But despite the challenges at the start of the third quarter. We ended strong delivering an adjusted EPS of <unk> 78.
And <unk>, Chile sales returning to positive territory from an absolute perspective and.
And we've seen those sales trends continue into April when we look at our more normalized performance of fiscal 19, Chile's sales are up 10% and nearly three quarters of our restaurants of generating meaningful positive results, even though we're still social distancing and wearing masks and all of our restaurants, and we're still operating under capacity restraints across the country.
We believed all along the consumer's increased demand for convenience, we continue post pandemic and it's playing out that way as our dining room traffic increases our off premise business continues to hold strong we expect that when things normalize we will see stronger dining rooms and of takeout and delivery business stronger than it was.
Pre pandemic.
As you think about <unk> and the context of this recovery of scale casuals, playing itself out a little differently.
And we're pleased with the significant improvements in the margin on this business, especially in their dining rooms.
And now it's just a matter of how quickly banquets come back. We know there is significant pent up demand and we are well positioned to meet at we're already seeing signs of social occasions, returning and we feel good about building our corporate business back in time for the important holiday season.
And staying focused on our strategy throughout the extraordinary events of the past year have served has served us well as we consistently outperformed the industry.
And have good line of sight to hit the targets, we were expecting post pandemic at both Chili's and Marciano.
Navigating the past year taught us we can run this business, even more efficiently than in the past and we're committed to keeping our cost structure in line.
We think our category leadership.
Driven by the multiyear investments and our infrastructure and digital capabilities will help us continue to outpace the industry.
We still have a lot of heart for a restructured marketing approach and we'll continue to leverage our digital expertise to connect with consumers and drive traffic.
The subject of labor is clearly top of mind across our industry.
Today's labor market is one of the toughest ones, we've experienced but we have the tools to navigate through it successfully.
While our performance throughout the pandemic enabled us to keep higher levels of staffing and our restaurants, we are hiring more team members than usual to support our increased volumes.
We're also benefiting from our decision to keep our managers onboard throughout the pandemic as they provide the operational leadership to staff, our teams and take care of our guests.
We're fortunate to be able to leverage our scale of digital expertise, we built and are people works team to recruit talent and creative ways to keep our cost structure intact and our guests coming back.
We know the best way to maintain profit margin in this business is through volume. So we leaned into virtual brands as a way to leverage our assets and tap of unused capacity.
It's just wings continues to perform well and we're on track to hit that $150 million target, we set at the beginning of the year.
Almost all of our domestic franchise partners jumped on the opportunity and globally. Several of our partners have already picked it up when users now at nine countries and 160 locations outside the U S, making it a formidable brand and just its first year and.
It's a real testament to our methodical and disciplined virtual brand strategy, we've executed it and leverage it brings to our P&L and to our franchise partners business.
We have the system up and running and we're executing it well, especially during high volumes now we're focused on building the brand and leveraging of the growth opportunities ahead.
We believe takeout holds a lot of potential for us and now that we've invested and the technology and infrastructure to support it and we're working to increase awareness levels outside of the delivery channel.
And we've learned a lot this year with the launch of its just wings that will leverage when we're ready.
For our next virtual brand.
We're pleased with the current results from the expanded test of margin on those classics and we're working through the timing to ensure we're able to support our operators and deliver a great guest experience.
So this has been an exceptional year of learning for us.
Not just with virtual brands, but in many ways. We've learned the restaurant industry in general and specifically our team is full of unbelievably resilient amazing human needs.
And I'm. So impressed by how this team has risen to every challenge that's come our way.
Our stronger for it and we're prepared for the growth opportunities ahead, as vaccination spread across the country and dining rooms fill up as.
As we look forward our ability to navigate through any short term cost headwinds of solid our scale of forward disadvantages in terms of flow Contra.
Contracting keeping our employment base intact, and delivering one of the strongest value propositions in the industry.
Longer term, we see a lot of organic growth potential for Brinker, obviously, we will continue to execute our multi year virtual brand strategy and protect our improved business model and with higher volumes will capture new development opportunities and keep the brand fresh through our remodel program.
I'm proud of our progress on our results the strength of our brands and our line of sight to future earnings performance and with that I'll turn the call over to Joe.
Hey, Thank you Wyman and good morning, everyone.
The third quarter results reported this morning and represent another successful quarter for Brinker and its brands of the quarter definitely had its unique issues I am most pleased with the momentum we are generating as we move closer to a more normal operating environment setting up further success, both this quarter and next fiscal year.
For the third quarter of fiscal 2021, Brinker reported total revenues of $820 million with.
Holiday to comp sales of negative three 3%, our adjusted diluted EPS for the quarter was 78.
Chili's recorded flat comp sales and positive 4% traffic for the quarter with year over year performance improving throughout the quarter.
Regional performance is strong nationwide with a broad range of state markets rebuilding their dining room sales back to higher levels above 75%, let's say when compared to pre COVID-19 performance. We do still have a smaller set of state markets, such as California, and Illinois, which are important markets for us that our earlier and their dining.
And the room reopening process, we anticipate they will follow a similar growth patterns as we move through the next several months.
A couple of items to note related to the third quarter.
First net of holiday flip at the first week with Christmas moving into the quarter, resulting in a negative 1% comp sales impact.
In February we experienced GRE and most unique of winter storm that hit with historic subzero temperatures and power outages for more than a week affecting approximately 30% of our restaurants and.
And material impact of the storm resulted in an estimated $10 $5 million and lost revenues.
A negative impact of consolidated comp sales of one 2% and reduced adjusted EPS of approximately <unk> <unk>.
Once things thawed out our positive progression returned which average weekly sales volume hitting record highs in March.
As we started to lap the beginning of the pandemic and mid March as one would expect comp sales moves significantly positive and are likely to remain elevated for the foreseeable future.
While pleased with this progression we believe a two year comp comparison is of more insightful view of our performance and.
In this regard the consolidated two year comp results for Brinker for the first four weeks of <unk>.
With a positive six 3% driven by Chili's results of a positive 10, 1% for the at the same time frame I would note that chili's is lapping off of a positive two 9% and the third quarter of EF 19.
Increasing sales volumes also favorably impacted margins, resulting in a consolidated restaurant operating margin for the third quarter of 13, 9% compared to 12, 8% for the third quarter of fiscal 'twenty.
And again, the winter storms had a negative impact on raw and reducing the margin by an estimated 30 basis points.
Food and beverage expense as a percent of company sales was 70 basis points favorable to prior year, primarily driven by menu mix as we featured steak on three for 10 and the prior year pricing.
Pricing was slightly favorable and commodities were flat.
Labor expense again as a percent of company sales was favorable at 70 basis points as compared to the prior year.
During the quarter lower dining room capacity year over year resulted in and have reduced hourly labor cost.
And do anticipate hourly labor to increase importantly, along with sales volumes of capacity restrictions lift and certain states.
During the quarter, we meaningfully increased our manager bonus payout impacting margins by approximately 60 basis points as we move to reward this critical leadership level for outstanding performance.
By leveraging our scale, our well established people practices and benefits and utilizing our digital connectivity Knowhow, we are confident and our ability to effectively manage through the current labor market environment.
Restaurant expense was unfavorable year over year by 30 basis points, a reflection of increased off premise cost such as packaging and fees driven by our successful off premise sales channels adverts.
Advertising expense continues and a favorable year over year position as we lean into our digital and loyalty driven driven marketing strategy.
Brinker continues to deliver strong operating cash flow year to date, we have generated $268 million and operating cash flow.
During the third quarter, we used a portion of that cash flow to repay a $115 million and a revolver revolver borrowings, bringing the outstanding balance to under $300 million.
And we anticipate further borrowing and reduction in the fourth quarter.
Holly we are investing significantly into the growth of our brands capital expenditures year to day totaled approximately $62 million. We opened two new chili's during the third quarter and two additional locations and April bringing our total for this fiscal year to 10.
We are moving aggressively to further build our development resources and increase the NRO pipeline, we continue to target expanding new restaurant development to a range of 18 to 22 restaurants a year.
We also are investing and re images of our existing fleet with a particular focus on the Midwest restaurants acquired in early fiscal 'twenty.
Brinker has continually proven to be a leader and utilizing technology to enhance the guest experience and improve operational performance and.
In fiscal 2021, we will invest approximately $20 million of capital and technology and enhances our digital guest connectivity supports our virtual brand growth and improves our in restaurant dining experience.
Now turning to our expectations for the final quarter of this fiscal year we.
We expect both Chili's and March on as to maintain their current favorable sales trends throughout the quarter, assuming COVID-19 cases continue to decline and state and local restrictions continue to ease.
Let me provide some additional specifics for the fourth quarter.
Total revenue is estimated to be and the $950 million to $1 billion range.
Adjusted earnings per diluted share are estimated and the $1 55 to.
<unk> to $1 70 range.
Weighted average diluted shares are estimated to be and the 47 to 48 million share range.
And also as we have previously noted fiscal 2021 includes a 50 <unk> week at the end of this fourth quarter.
As we settle into the last quarter of the fiscal year. We are excited about the momentum we have built from the uncertainty that surrounded the restaurant industry a year ago <unk>.
During the past year of the members of our support teams here in Dallas stepped up and provided innovative solutions to any number of issues since the pandemic changed how we all approach our work.
And our frontline team members and the restaurants of continually deliver for our guests and ways. None of us would have contemplated not too long ago.
We are grateful to both of these groups of team members to combine to lead the casual dining sector throughout this past year.
They are all committed to finishing strong this fiscal year and then carrying the success forward.
And now with our prepared comments complete let's open it up for questions. So Paul I'm going to turn it back to you to moderate the call.
Thank you ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time, we asked a lot of posing your question you. Please pickup your handset of listening on speakerphone and to provide optimum sound quality.
And the first question is coming from John Glass. John Your line is live please announce your affiliation and pose your question.
Sure. Thanks at Morgan Stanley.
First can you just maybe just be more explicit as you think about the fourth quarter versus 19, but the embedded comp for Chile, Chile is are you thinking about.
Waning stimulus benefits of how do you balance kind of what youre experiencing now versus what you might experience.
Throughout the quarter and I had at <unk>.
Follow up on the margin please.
Yes, again, I think John this is Joe and Ed.
<unk>.
And we're thinking about it at a very positive manner I think we're going to continue to see at the same progression that we saw coming out of March and into April.
There is of stimulus environment out there I think that's very apparent and it's more than simply the stimulus checks I think you have again that pent up demand that is getting a lot of.
Publicity and discussion and not only of pent up demand pent up capability to meet that demand on the consumer side of the equation. So we're pretty bullish on where the consumer is and how they will continue to reenter kind of back into a more normalized environment and we also continue to see restaurant.
Reopening and capacity restrictions lifting.
And the progression that we're seeing and and the performance of our restaurants as a percentage of 19 continues to go up materially as we work through each of the months. So I think we will see some some favorable progression there helping to drive.
The successful quarter, we are guiding you to 444.
And just as a fault line.
And then you mentioned labor shortages, obviously it is top of mind can you just talk about how you think about margins over the medium term because of that first of all of labor shortages actually if there are some actually becoming an impediment for example of opening dining rooms and yesterday.
Just talking about what is the gross impact of the delivery costs and the business did you what is the structural layer of cost I know there's other offsets.
Labor costs have been added into this.
And it's the delivery channel both through virtual brands and as your own brand has grown so much.
Hey, John I think the I think there's two questions. There one is around kind of what are we seeing with regard to the challenges with the current labor environment, and then there might be of labor or margin impact of delivery. So let me just talk to the labor situation because I know it's again it is top of mind for really everybody.
Not just in the restaurant industry, but and a lot of a lot of places out there right now as we are and this unprecedented situation with a fairly significant unemployed population and a real challenge staffing. So we don't think Thats, obviously, a long term situation right, it's never happened and as far as I can remember that you've seen this.
Kind of a robust economy and nine to 10 million people out of work and not really aggressively looking to get hired so we what we're focused on is again, leveraging our scale and our systems to staff our restaurants. So that we can provide the.
The support that we need to or to our managers to to open and stay open and provide great guest experiences, but to also make sure that we're doing it in a way that doesn't significantly and and from a long term impact our cost structure and so there are some additional things we're doing to to entice and to recruit but for the most part they're there.
And more variable.
And their incentives to get people to join and not so much about the long term wage rate impact that will live with for a longer period of time. So we feel good about that we also feel good about the fact that we're just not out there as aggressively having to hire.
Because we just didnt cut as many of you know and and we didn't cut any manager. So those are things that are keeping us probably and a little bit of a better situation than maybe some of that didn't kind of fare as well as we did through the pandemic. So again more short term impacts and longer term and we'll continue to monitor this and see how it plays out over the next couple of months.
And then John as it relates to the delivery side of the equation and the virtual brand side of the equation from a cost perspective.
Systemically, what you're really thinking about is delivery fees and packaging supplies and the increments of.
Of that and that's obviously embedded into the modeling we do around the channel itself, but thats looking at company sales Youre talking a couple of percent, they're probably 2% to 3% from our incremental cost standpoint, and then and some restaurants, you will see some additional labor and the equation, but that's that's simply volume.
And so as you see successful volumes at a certain restaurants, you may have additional labor, which clearly is.
The volumes are clearer of what we're driving for and that side of the equation, but I think systemically, that's really the major differences and those and those channels.
Thank you.
Thanks, John.
Thank you and the next question is coming from Nicole Miller Nicole Your line is live please announce your affiliation and pose your question.
Thank you Piper Sandler good morning, I wanted to ask about the comment around development resources. What are those resources is it something to do with <unk>.
And strength or is it just the actual commitment around the pipeline and and what's the incremental cost or not.
And the development resources to accelerate.
Yes, it's Rob.
And the people side of the equation.
We're increasing our development team to make sure that they have the ability to broaden.
Their scope as much as possible around the country there could be some incremental of the around some outsourced.
And our brokerage opportunities and support staff, there, but it's really.
Head count and it's.
I can and I can use one hand, because they can be very effective at there given the right tools and support behind.
Behind their efforts and we want to make sure that theyre at aggressively.
Looking at opportunities on a nationwide basis.
And of 18 to 20.
The goal and the.
The run rate or is that the first step and a continued acceleration.
It is the level, we are getting to.
And I'd put it probably more and the first step then the net run rate as.
As we get closer to that over the next two years and we will continue to evaluate at again, we think there's great opportunity to grow this brand to grow at maybe and some different.
And then ways and footprints.
And we will continue to look at all of those opportunities and we move forward. So there's nothing to say that you can't go beyond that but we'll get more specific with those plans as we get farther down the path, but we definitely plan to get to that level of at least and then.
What happens and the real estate market is going to be critical there as well right and so we know theres a lot of expectation that with the results of the pandemic real estate.
Prices will come down as we just haven't seen that yet and whether or not that comes to fruition, we'll we'll see but if it does that opens up more opportunities. So so theres a couple of things and the current environment. We know, we can grow and depending on which what happens and the future there could be even more aggressive growth.
Thank you very much I appreciate the at least nickel.
Thank you and the next question is coming from Alex Slagle of Alex. Your line is <unk>. Please announce your affiliation and pose your question.
Thanks, Good morning Jefferies.
Follow up on the short term variable incentives around labor I mean, do you think the magnitude will be similar to what we've seen and three Q or should we expect relative and sort of step up into the fourth quarter.
You know I think there'll be a little bit of a step up but it's not going to be meaningful we don't anticipated. We've given you guidance as to kind of how we see the quarter and it doesn't include a huge impact.
To that one of the things we're seeing.
Which is a little bit of a good news for our operators and our some of our team members as well just use more of a little more overtime than we've used in the past and a lot of our team members, especially and the kitchens and the heart of the house.
They prefer to work a few more hours and get the overtime.
And so we may have to use a little more overtime.
And then we would of historically use and and again that's a that's.
As of short term kind of solution to get us through what is a very unique and and.
Really non sustainable situation here with labor.
And I think in the past and we've talked about labor inflation, we've typically.
Looked at that 3% to 5% kind of rate interest of normal conversation, we had about labor inflation and that includes the overtime and training and bonus structures, we deploy will probably be I think and the short run and running at the higher end of that level.
The numbers I talked about for the fourth quarter and bad that thought process into it and we will see it as a as it develops but we're very comfortable we have the.
All of the tools in place to manage through this short term.
Got it and then.
And it's just weighing just now that you've established the strong delivery business on door dash and expanded and the pickup.
<unk> had some website I guess now and at integrated.
Integrated with Google.
And what's the next phase of <unk>.
Marketing for the brand and building awareness outside door at Ash.
You're a little ahead of schedule there at <unk>, we do obviously out of the great Jordache relationship and.
And the delivery side, we've integrated with Google or.
Of our website and our marketing push to two of broader consumer about pickup really hasn't taken off yet.
Kind of going to happen more here and in the fourth quarter as we continue to see what the upside is with the pickup aspect of wings, which we're very optimistic about what we think there's a real nice.
Growth vehicle, there against that brand and against any other future brands. So again a lot of infrastructure work has to go into play to make that happen and we're almost finished with that and then we get to push it to the consumer to see how they react and thats kind of come.
Thank you.
Thank you.
Thank you and the next question is coming from Eric Gonzalez Eric Your line is <unk>. Please announce your affiliation and pose your question.
Hey, Thanks, It's Keybanc you said you haven't seen any degradation and the off premise business as capacity restrictions eased are we to assume that the digital mix of sustained and that mid 40% range.
We have seen some denigration, Eric I mean, we're running and the.
So obviously at the peak, we were and at 100%.
And we're now much we've seen at go from the forties as restaurant dining rooms get closer to that historic.
Historic level.
And it's dropping down and that mid to low <unk> and so we do see some but we think it's going to stay closer to and that 30% range again, if you remember pre pandemic.
We're just starting to push up to 'twenty. So between everything we're doing and all of the different aspects of the business, where we're thinking that it will probably stay at that low 30 range as dining rooms get back to full capacity.
Got it and if I could maybe sneak one and about its just wings at.
Was wondering if you could I know you don't like to discuss the sales mix in particular, but maybe if you could speak directionally about how the sales contributions trended in recent weeks as those dining rooms opened up and.
Are you seeing anything to suggest that you might need to invest more to support that brand.
Things normalize.
Okay.
Yes.
Eric I think again I think the brand is performing as we expected it to perform in the fourth quarter was the strongest quarter of the three.
It's just at third quarter, sorry. This has got a lot of three fingers, just raised and the rooms at the third quarter was the strongest quarter.
And as we kind of learned how to use the brand of ran some of the major sporting events.
But it is trending and how we needed to trend to hit those results at <unk>, We talked about I think there is going to be some some seasonality as you look at this business as you go throughout a year and this is probably one.
We expect it to have a little seasonality in the fourth quarter and match and we're going to see that based on.
The first and first couple of weeks, but again right in line with what we need to do to get those those targets at yeah, and when you think about the fact that really not of college football season last year. So we're excited about what the fall will hold for the brand. It's been a really great year of learning around the virtual brand.
It's to swings and others around how to market them effectively about how they play to different audiences and who the target is.
They definitely we've experimented and tested several brands now and they all have unique aspects to them. So.
And getting those insights of this year has been very helpful. And then obviously getting our restaurants to execute and operationally locked down so that we're as dining rooms picked back up the women's business is integrated.
Seamlessly has been hugely important and something we have been.
Very encouraged by how it's all playing out.
Thanks, a lot alright.
Alright. Thanks.
Thank you and the next question is coming from Dennis Geiger of Dennis Your line is live please announce your affiliation and pose your question.
Great. Thank you UBS curious if you could share some more thoughts on kind of regional performance and specifically, what you've seen in off premise and though.
And as markets.
And maybe kind of touching on.
It's just rings performance and in those markets as well with with the greatest capacity as things.
And reopened Wyman you just gave some good color I think on the.
All of premises trended and what you expect but curious if you could share kind of what you've seen in those regions specifically.
Yes, Dennis by far the biggest.
Variable to regional performance is still.
Far and away.
Restrictions.
And so it's all of the other things.
And we're wanting to talk about are really insignificant to dining room capacity restrictions, so and states that as Joe mentioned, Michigan, and California, Illinois, where we're still seeing some fairly.
Orange and capacity issues.
What's driving the Regionalisation and.
And the states that have been opened more we're seeing obviously much better performance and we anticipated those states see better COVID-19 results and COVID-19 becomes less of an issue of Dell.
There are capacity constraints will be lifted and we'll see that same performance. So we're actually very encouraged about the breadth of the recovery when you kind of factor out.
COVID-19 restraints now of specifically when you think about it as just wings. It's not so much of regional is at almost a market by market and sometimes restaurant by restaurant, there, that's where I was talking about depending on.
And who the consumer is for virtual brand really drives.
And <unk>.
Pete area. So there are there are some regional moves if you were to pull all the way back at the national level, but for the most part where we see the real interesting learning is at the restaurant by lesser and market by market area and Thats net.
Kind of starting to better understand so.
And then with regard to delivery and takeout at again broad based nationally.
Pulling kind of similarly.
Great and maybe if I could just one more wyman curious your thought and given your perspective on kind of industry supply and how are you.
Think of this this plays out going forward and ultimately how the brands benefit from that and I'm not sure if you've seen any kind of.
Discernible benefit yet from supply coming in.
But overall kind of how you how you would think there's some of this benefit you from a market share gain perspective.
Going forward recognizing it might be a little early to make that call.
And really dealing with closures of what I think youre talking about youre talking about number of restaurants, yes.
Okay sure. So thank you.
And we don't have I don't.
Not out there tracking the.
The number of restaurants that are opened now versus prior year. Obviously there is the number is.
And then estimated somewhere in that 5% to 15% range I think and most of our trade areas. It's probably on the lower end I think you know and.
Youre going to see a significant restructuring and major metropolitan areas, obviously, and the New York cities and the and of Chicago's how quickly they come back will be very interesting. There's a lot of stimulus theres a lot of interest and so that but that doesn't really impact our business as much. So we're not really counting if you will on a great.
Tailwind, we're seeing what we see today, we think thats projected bill out into the near future and and we will.
And we'll see what happens with regard to.
Competition, if you will.
As we get past COVID-19, and and things get to be more normal.
I think Dennis one thing anecdotally, we are seeing on the development side of the equation as we.
Cash at net wider is more and more opportunities of looking at sites that are <unk>.
Lowe's to restaurants, and Rand and from other other brands so.
We've seen we're seeing that at a higher rate than we've seen in the past and.
Other data point there to look at.
Great. Thank you.
Yeah.
Thank you and the next question is coming from Jared Garber charge of your line is line. Please announce your affiliation and pose your question.
Thanks at Goldman Sachs.
Can you give a little bit more color on the $20 million Tech investments that you mentioned earlier and how you see that flowing through whether that's in store technology or more sort of mobile and website technology and then also on the on the new unit opens that you talked about.
Any color on maybe shifting and asset design, especially as it relates to potentially supporting and views.
And as digital brands through the Chili's kitchens.
Hey, Jerry.
Moving to walk you through the detail.
The breakdown of it but I will tell you and just one example of some of the things we're excited about or at one of the things we're excited about with.
Technology spend and and Thats the rollout of our handheld devices across the country. So again, we've been working on a handheld solution for multiple years, it's been employed and and over 100 restaurants, but it wasn't quite ready and so we've done a lot of work and we've invested a lot of.
Time, and energy and capital and to getting it right and we now feel like we do have that right and solved with and so we will roll that technology out across the system and that's going to do a couple of things first we think provide a better guest experience. It also allows us to run more efficient restaurants, and the front of the house.
And make more money. So that's of Great Tech Tech investment that we that we will rollout here in the next fiscal.
Full year and that's just one example of what goes into that $20 million bucket and one thing I would add to that to Jerry because I think it's important to understand thats not a one time of unique investment Thats you can pretty much think of that is at run rate from a capital investment standpoint, and one of the and I think the market leading advantages.
We have developed is because we've been very consistent on that level of investment into technology and really now for a number of years or so.
It's building on a base that I think is outpacing.
And many of the industry and mud and giving us a competitive advantage and also supporting that and you know that's the capital spend supporting that as and infrastructure.
Spend that is even at a higher level.
And just making sure we have the development capabilities and the innovation.
To support things like our apps and our websites and our connectivity and.
So it's a technology is just a key component of our of.
Of how we approach the business and those spends are embedded into our base and our thinking going forward.
Yeah.
Thank you and.
The next question is coming from Sara Senatore Sara Your line is line of please announce your affiliation and pose your question Alright, Thank you Bernstein and.
I wanted to ask a bit about at the virtual brands.
And maybe the competitive set there was interest and you see a line of restaurants.
And to that virtual market to utilize excess capacity.
And in many cases, I think we're seeing fairly similar and menu offerings and I guess why.
One could you just talk a bit about the competitive environment there and.
And the extent to which that.
Informs how you're thinking that growth and then two.
And if.
Whether you think that that use case and that those menu items have benefited from pandemic related dine in or out of at home dining similar cadence to what we've seen and pizza.
In enterprise and as we think about as people lead there.
Their homes again some of these I think some of the food categories, and it's probably going to see different dynamics headwinds versus tailwind.
And and <unk>.
Wings, and particular seems like one of benefited thanks sure.
Great question, Sarah I think.
There is two things right that kind of.
Bold and thus if you will around of virtual brand strategy.
One is you know it really is about scale and being able to do large numbers. It's about how many locations can you put out there and and.
Two of 100 restaurants, and the U S. We're able to kind of meet that criteria and so yeah. There's a lot of people doing it but not of lot of people with scale and so they don't really impact you very much and then operationally just getting it right and positioning our brand is not easy and so you know a lot of people can throw stuff out on the internet or put it on a.
On a on our website for a delivery company, but then to execute at right to price at to have a value proposition, that's really compelling and we think our our positioning and the wings business is very strong and we can do that.
And then when you consider our scale to buy and source product and all of the things we bring to the table and just give.
And as competitive advantage, so I'm not too worried about.
And we're coming in and I think the thing that doesn't get talked about the most of it is probably the most important is what's that doing to your base business and are you able to pull this off and I've.
Seen examples of people throwing maybe three or four of virtual brands and.
And it's just very very hard for me to imagine how that execute from an operational standpoint, as they and sometimes as they talk about simplifying their menu and their based concept decided that they just don't kind of go together. So you have to be very diligent about all of that to make it work both from a brand standpoint and.
And from a consumer perspective, so that's kind of how we see at I think theres, a theres going to be some winners and losers and with regard to the product and is it just being kind of artificially pumped because of the pandemic. We don't think so we think the wink business for and.
As an example is a strong baseline business and we don't think we're going to see significant deterioration is.
And as we go back to more normal levels of of.
Restaurant operations and some of our other concepts, we think are probably going to see even more support than that so we don't think we've gotten into anything thats to trend. If you will based on and the pandemic.
Thank you.
Thanks Sarah.
Thank you and the next question is coming from Greg <unk> and Greg. Your line is line. Please announce your affiliation and pose your question.
Sure thing from Wolfe Research, it's actually Fred Wightman on for Greg and the release you guys mentioned that you are meaningfully above 2019 levels for sales and traffic. So I'm wondering if you could just give some context for that 10% quarter to date at Chili's comp that you highlighted and maybe just touch on how you think traffic and check are going at.
Progress over the next few quarters here.
And for Ed.
Currently it's traffic driven and it's and that's by design and we're really leaning in.
And to make this a traffic story it has consistently been a traffic story for over over the last year really and going back really two years before that so.
That's why we're being very diligent and disciplined around pricing.
Now clearly you have of mixed situation.
Over the course of the last year restaurant capacity shutdown and so you're not you haven't seen the alcoholic alcoholic beverages, the apps such as or things of that nature now as you start to reopen restaurants, and we think there is going to be a nice opportunity.
Over year on the mix side of the equation.
The.
So I think that will be some incremental opportunity that flows back end, but by order of most.
Gratified by is if you looked at the traffic numbers.
They line up very very tightly with those comp numbers, we gave you.
So it is of traffic driven story and I think that will continue.
Kind of as we move forward.
Perfect and then you guys had alluded to some uncertainty on the event side at Mashie honors, which makes sense, but is the holiday season, and sort of the line and the sand or your best guess for when that could normalize or are there any sort of market level indicators suggest that could come back sooner than the holiday season and anything.
And it would be super helpful.
Well I mean, I think I think the CDC came out with some new guidelines and maybe as recently as yesterday around vaccinations and people that had been vaccinated and their ability to congregate and larger numbers without masks and so you really.
And we're very encouraged again by first the overall impact.
Fox Nation is having on the country and allowing people to move more freely and we anticipate that as more people get vaccinated that this will improve and people will not only be allowed to but do you feel more comfortable gathering and we're seeing that youre seeing that and to travel industry Youre starting to see this process move its way through and I.
Think you start if you will ticking off okay, well what would be the next thing that would kind of open up sporting events and then.
Social gatherings are going to be very high at that on the top of that list.
So we just anticipate that happening really organically with all of the improvements that are happening through the vaccination process and then corporate we'll kind of follow after that so.
I think again, we're not predicting but if you.
Continue this positive trend with vaccinations I think by us.
By the end of the year towards the end of the year and the holiday season, we could be and a very nice place and people will could feel very comfortable gathering again.
Makes sense. Thank you.
Yes.
Thank you and the next question is coming from Chris O'connell, Chris Your line of life. Please announce your affiliation and pose your question.
Hi, it's with Stifel. Good morning, guys.
Wyman are you seen it's just wings growth rate level off maybe period to period or are there any indications you could see significant growth over the 150 million into next year.
Yes, I think our again, we've talked about at a couple of times of the idea that the takeout on that brand what could be the takeout business.
B.
And what potential do we have when we start to build the brand outside of just the delivery channel that we have today.
<unk> don't know exactly what we're going to find.
Find out here and the very near future, but we just know just in general.
Tumors take out more than they deliver so we have to build the brand awareness and that's going to take a little bit of work but.
If you were to just kind of use of historic.
And the ratios you'd be pretty encouraged that hate our pickup business or a takeout business for this brand could do very well and.
And so we're excited and that'll be the lessons that we've learned here and the next couple of months as to how hard is that how heavy lift as that to get the brand awareness of and what kind of response do we get and so that's where all.
Having I mean again, we're already having people every day and every restaurant come and pick up at <unk>.
And the numbers are fairly small now because we're not pushing our own website and and an aggressive marketing plan, but we'll start to test that so that's where we see the biggest opportunity, but we also know again this was a year of learning around the marketing and so as we start to better understand how this was our first season of sports and it's a very sports oriented product and so.
We will get smarter about okay, here's how we better market or more effectively market against the various seasons as they come around and we're also now very much aware of where our markets that do well versus those are all of software. So all of that learning comes into play to in terms of how do you grow the business going forward.
Do you anticipate being aggressive with the marketing efforts to build awareness or do you think this is something you need to build gradually over time.
Because it could be.
And make the operations a little more complex.
Yes, I think we've got we feel very comfortable about our ability to execute wings and the restaurant at at high volumes again, having gone through our first Super Bowl.
We know theres, a lot of capacity and capabilities and our restaurants to execute this brand at a high level of sales.
And when I when you say aggressive I think we're going to be very targeted.
And very soon.
And we will.
Aggressive and you're not going to see and national AD campaigns, and I'm going to see on and you're not going to see of TV AD with its wings out at on on National TV, and we're going to be very targeted and and our approach to to knowing how to connect to and talk to these consumers.
Great. Thanks, guys.
Yes.
Yeah.
Thank you and the next question is coming from Brian Vaccaro, Brian Your line of sight. Please announce your affiliation and pose your question.
Thanks, Raymond James and good morning.
And of the circle back just on the recent sales trends and I. Appreciate the monthly comps you provided versus 19, but Joe could you help us translate that a bit into average weekly sales. We don't have monthly AWS back and 19. So I was just hoping you could level set where of quarter to date average weekly sales dollars are for each brand.
Okay.
And we're getting.
When you look at average weekly sales again, and and comparing it to 19 as you said you have.
And some different deltas there you don't have.
At the Midwest, and 19, which we have and our current levels and of course wings is and our current levels and Dennis.
Exist and 19, so we've been running very consistently up and those mid <unk> mid to upper <unk> for at <unk>.
<unk> brand.
And then you can layer on for margin as Youre running and the five to two.
$6 million level of kind of on a weekly basis and nice thing is as I mentioned and the script is coming out of.
Here at the storm and you're starting to then build into March you saw these these weekly average sales.
Moving North I mentioned the record levels, we hit and in March and you, obviously had stimulus dollars flowing in and kind of in that mid March and March timeframe, but we've seen a very consistent.
Maintenance of those levels in April.
At seasonally Brian These are our biggest months, yes, so if you're just looking at <unk>.
Weekly sales volumes for Chili's at.
Marciano has big months and the holidays, but for Chili's and the spring are our biggest months and so.
And we're seeing some absolute.
High volumes and we were and are wrapping on those and again that's probably.
And again Youre looking at and overall system, that's probably running on average and the highest <unk>.
From a capacity standpoint compared to.
At that timeframe that you are looking at so again, when you think about California at 10%.
Of the market and significantly markets and places like Illinois, and New Jersey, and and some of the upper Midwest States that are.
Not carrying those levels, yet and we are comfortable they will there is there is upside to that.
The other thing that you'll see Brian It gives us and correct.
Well when you just again at kind of builds off what Joe and just saying about the the constraint. So we are still constrained and our dining rooms are weekend volumes are still being hampered. So we're seeing stronger EF 19 builds if you will weekday because we don't have as much capacity constraints because of those.
Of our.
Those are some of the lower volume day parts and weak parts when you get to the weekend, where the capacity comes and Youre still being constrained and so as of constraints get released we'll see bigger and better numbers again across the system, but especially in those states that are most constrained California.
Illinois and Michigan.
That's great and I guess.
Part of line that a little bit and and into your fiscal <unk> guide it would seem to to embed correct me, if I'm wrong, but it seemed to embed, perhaps a little lower AWS volume and that at.
Chile say for your fiscal <unk> Guide is there a degree of seasonality we should be mindful of as we think about May and June we can obviously see at on a quarterly basis first half of your fiscal year is usually higher than the second half, but is there a degree of seasonality there or just perhaps broader of conservatism as you set the <unk> guide.
And we see how stimulus rolls off et cetera, et cetera, or just wondering how you frame kind of at fiscal <unk> guide a little bit.
And I don't think there is significant.
And on either of those fronts I mean, we're pretty much kind of projecting similar kind of trends that we've seen and April through the rest of the quarter.
As Joe kind of mentioned and and the absolute levels are and the ballpark of what we've just been talking about.
Great and on the effect of capacity. Thank you for that I think you said upper seventies at Chili's, what does that look like and markets like Florida, and Texas are you able to get back closer to 100% or is there a natural ceiling was six foot social distancing and other considerations and place.
Oh, you're definitely seeing and different markets.
And yet there.
We have market share back above 100%.
We have market, we are of a number of markets sitting in the nineties kind of goes.
As you get reopened you tend to to see of move into the 70% of them progressing to 90% of people get more comfortable I think vaccines is driving a lot of that progression.
It's hard to get to a 100, though without fully open and no one's fully opened were not fully opened even if they say they are fully opened we're still doing some social distancing and were still wearing masks and so on.
It gets wide open back to hey.
There are no restrictions and everyone's comfortable there'll be some constraints I mean at its heart heart.
To get to that 80% to 90% and then the takeout businesses is covering it but you know to get all the way back to 100. Because then you got those weekends volumes that you've got at where you need every seat.
And it'll be a bigger challenge, but we're optimistic that that's going to happen fairly soon.
And again running at.
Yes go ahead.
Sorry, sorry to interrupt you there.
Yeah last one I wanted to just touch on the tightness and the labor market. If you have it handy where does your employee count stand at the end of the fiscal third quarter and could you frame. How many employees do you think you need to hire to catch up to sales and then maybe wrap it up into the fourth quarter could you ballpark kind of the onetime hiring and training costs.
So of elevated training costs that you've embedded and your <unk> guidance. Thank you.
Yes, Brian.
And probably followed backup of some of those specific numbers I don't have those those team number of levels again.
We've maintained a level of of.
Staffing throughout this and as a good starting point for hiring consistently really and the 5000 per.
Our team member per month kind of of which is a little bit higher than you would typically see again, a lot of that driven by reopening the reopening trade and should come back and in line and so.
As it relates to that of specific cost number that's getting a little into the weeds.
I'll pass all and thank you.
Yeah.
Thank you and the next question is coming from John <unk>. John Your line is live please announce your affiliation and pose your question Hi, Thank you at J P. Morgan.
A little bit on that last question with labor cost running at the higher end of three to five and.
And obviously, the stimulus money and general that's and.
The economy, what is your thought on menu pricing might we expect a significantly above average menu pricing year at least over the next 12 months and I have a follow up as well.
Hey, John <unk>, good to see and are good to hear you.
We are.
Again.
With regard to any of any of the pressures that were anticipating the good news is for a lot of our cost structure its locked down right, so, especially on the cost of sales side and the commodity side, we're feeling pretty good at good line of sight and we've got.
Some fairly good.
Of course locked down.
So then the labor issues at.
And that you are talking about could could put a little pressure on and as Joe said, we're talking of maybe 3% to 5% is what we're dealing with we like the price and that one the one 5%, but again if anyone's got pricing.
Powder, if you will that they've kept dry it's us we haven't priced at all if you look at our differences between us and the industry on sales versus traffic.
We've been playing the traffic game and we've.
And then really kind of significantly outperforming and working on the traffic piece and and keeping our pricing.
Powder dry and.
So if we need to go a little more aggressive to of pricing.
Situation, we think we can again, it's our last.
Our last option frankly, we like to we like to keep the restaurants busy and we like to give guests great value propositions and and so but we feel comfortable that if this thing were to play itself out a little.
Longer than we think it will or it will be a little more difficult to manage that we have more pricing flexibility.
And in our Arsenal and we absolutely have more than I think a lot of other people do.
Makes sense and there might be and expectations for higher prices from the consumer so it'll be interesting to see how that plays out.
Some of that John.
And Theyre and Theyre, not and I think that one of the things you have to.
The consumer sentiment during the pandemic.
Does.
Consumer was fairly lenient during the pandemic on pricing.
I think as things go back to normal.
And there were two things that they that they kind of gave permission to one was pricing and one was.
Selection and a lot of people took price and cut options.
And consumers kind of understood that there was a pandemic there was all of it but I think and the future they're not going to just kind of like carry those those are things I don't think they carry forward I think they're going to want convenience and everything else, but I don't think theyre going to just say Oh, well it's okay.
Over price and cut my selection and we didn't do either of those things. So that's why we feel really good about where we're positioned.
Understood and the second part of the question and you touched on it was regards to the cost of sales and whether it's a base commodity we're at.
We're shipping costs or what have you, including labor of that exists.
At the driver and the warehouse side, all the things that we're reading about there does seem to be some underlying cogs pressure that is coming at us not necessarily for you and the very near term because of contracts that might be I don't know.
Six or 12 or 18 months away, depending on what your contracts or could you kind of look forward a little bit.
Beyond the fourth quarter and kind of talk about the Cogs environment, maybe highlight some of the more major commodities.
To make us comfortable with your fiscal 'twenty two exposure.
Yes, John again, I do think there are some some pressures at our existing out there and looking at the commentary around those spot pressures is what you typically will see out there that doesn't come into play as you say and and the next couple of quarters because of the contracting of positions. We built so we are protected.
And really across all of our major.
And commodity components for the rest of this fiscal year and then you build a lot of protections into the proteins and things of that nature of as you get.
Through the calendar year end and even added until at the beginnings of calendar <unk>.
'twenty two I mean, there are.
Their distribution channels are still unwinding and those do have impacts from time to time again the nationwide.
Distribution channels that we've established and the relationships we have with those broad line.
Mainline carriers are very solid and our in place and are and are delivering for the restaurants. So.
And again scale matters and support systems matter and this this case and we have.
Just and excellent supply chain group, particularly when it comes to of logistical side of the equation.
It can be and all hands on deck.
The experiences of different from different time to time, but we're working through all of those issues and are not seeing.
The broad based disruptions that you hear about.
From some folks of real pleased with the way that there are performing there, but and again that supply chain will sort itself out.
And I think the disruptions are sporadic more than systemic and and will correct themselves.
End of move forward I think.
John and the two other things you've got to remember with us.
Well first of the distribution issues are really again more market based and not national and and the team is doing a good job to deal with those market based issues and then the beauty of especially the Chili's menu is.
Broad based use of proteins.
Very flexible and a lot of a lot of chicken breast and and again the the commodity market looks fairly good looks like is going to be another good year doesn't look like.
And the grain harvests look solid so those are the things that typically would get you concerned about the longer term. If we're looking at we're looking out into the future.
Things that drive commodity cost <unk>.
A longer term tend to be droughts and.
And it's looking like it's going to be.
A good harvest and so those things bode well and then we will get through some of these labor issues.
Better than most.
Thank you guys.
Thanks, Sean.
Thank you.
And the next question is coming from Jeffrey Bernstein Jeffery. Your line is live please announce your affiliation and pose your question.
Great. Thank you very much from Barclays. Just following up on some earlier comments Wyman you mentioned that.
Our goal would be from and off premise perspective to hold on.
Yes, maybe and the low 30% range versus your pre pandemic of 20%. So clearly that's a healthy 10% Incrementals. If you believe it's incremental to year to year end store. So I'm just wondering if that was to play out in terms of that 10% incremental sales. How do you think about that in terms of the margin outlook.
And would seem like even before COVID-19, obviously getting 10% more sales would help you leverage of fixed costs and give you a better margin, but from COVID-19 in terms of everyone's talking about doing more with less and being more efficient. So what do you see that incremental sales flowing through from a margin upside perspective, whether it's relative to historical highs or however, you think about that incrementally and then I had one follow up.
At.
Yes, Jeff Great question, and I do think Thats kind of center to our organic growth story right at this.
The leverage that we get through a higher sales of lot of that of higher sales are going to be coming through off premise and it's at.
The combination of delivered great margins in and of itself and it and it also allows us to leverage the fixed costs.
And grow the margin from that aspect as well without getting specific to at the numbers are that's the strategy and we're very excited about it and it's playing itself out as we would expect.
We're also not just counting on that we're also as you've mentioned and as others have said there are other things we've evaluated aggressively to rethink to make sure that we're as efficient as possible, while we support our restaurant operators to deliver great guest experiences and and some of those things are.
Are proving to be sustainable as we get back to kind of more historic levels of dining and traffic and thats encouraging.
Got it and then just from a cost perspective.
And then maybe you could just address quickly marketing and G&A.
And our marketing it seems like it would be down year over year pretty significantly with a lot less maybe national TV of late fiduciary outlook on the continued favorability and.
And then as it relates just underlying G&A, what you kind of think of it as the normalized core spend as we now wrap on 'twenty, one and look into fiscal 'twenty. Two what do you think about it is relative to revenue or opportunities from that G&A perspective. Thank you, yeah, I'll, let mark and ill, let Joe touch on G&A. So I think whats sometimes missed and our story is we didn't just cut marketing we re.
We have rethought, our marketing approach and so while if you were to look at maybe the national.
Network TV line item, yeah, it's significantly down, but we've reinvested and we feel like the model. We've been running this last year with the pandemic is pretty much the model, we will run going forward.
And so we're not we didn't just cut those.
And those dollars and not reinvest them now they show up in different places in our P&L. So it's not as easy as just the national and network line, but those those places we were invested and are obviously places we feel much better about the return and we can measure of that return and so it's in those.
Much more effective channels of marketing and so.
We don't.
We anticipate having to or going back to a very aggressive television campaign. If you will on a national basis, we like the model that we're using today.
And then on the G&A side of the equation, Jeff I think.
From a rule.
Rule of thumb without getting specific to feature.
Fiscal year's I think 4% as of as a good benchmark for you to thinking about.
The thing I like about G&A from a strategic standpoint is very leverages <unk>. So I think there is some some opportunity there to that number as we kind of move forward and.
And remember already embedded in that G&A number is.
Significant technology spend that is important to drive the business going forward.
We obviously have all of the compensation programs across all across the support staff and embedded into that program. So.
When we think about how you invest into the business, we're going to have the flexibility to do what we need to do on the G&A side of the equation.
To drive development to drive technology.
Growth initiatives without having to to alter that structure as you kind of and kind of move forward. So yes, I think there is some some.
Definitely it will be one of the points of leverage ability as you build those volumes as you go towards that $3 5 million.
Average average volume level, yes. Another thing we did this year, Jeff kind of along those same line. If you think about manager bonus doesn't drop and G&A, but it shows up and the labor line and we've paid manager bonuses out at a higher level. This year significantly higher by the time of the whole fiscal year is done than we did last year. So through the pandemic we kept them.
Poll at bonus levels, even though obviously, we're making a lot less money and we did that.
And so next year as you try and project out net.
Next year, we don't have a big hold of Phil with regard to manager bonuses.
We anticipate and want to play them, even more but it's not like we cut bonuses.
<unk> down and so now as we grow into next year and things get back to normal we got this.
This significant GAAP to close and so so we feel good again about how we've maintained our cost structure and supported our people through the pandemic and then what that bodes for as sales and traffic kind of come back and not having to kind of.
And again fill some holes.
Great. Thank you. Thanks.
Thanks, Jeff.
Thank you and the next question is coming from David Palmer of David. Your line is live please announce your affiliation and pose your question.
Alright, Thanks Evercore ISI.
A question on restaurant margins.
The margin implied by your guidance and the fourth quarter would seem to imply.
New peak levels already and I don't.
If you think you could endorse this but it seems like it would be near 17% for the quarter, which would be better than your than what we see and our and our model for past fourth quarter.
<unk> margins.
Obviously, it's a weird time staffing levels, partially reopened restaurants. So obviously these may not be indicative of where things would settle out as you get two of fully reopened restaurant base and society gets fully reopened but.
How are you thinking about where your margins can be versus <unk>.
Fiscal package passed peak of around 15% on and accounting adjusted basis.
What are some gives and takes as you're thinking about the your margins and where that can go. Thanks.
Yes, David not going to argue at all with your math on the guidance and the perceived margin.
And you put forward there I think again, we're very optimistic about it and in fact.
More optimistic today than I have.
Was it was a year ago, obviously, but as we continue to see this strategy unfold and.
And the fact that it does drive incrementally from a margin standpoint.
I'm comfortable with the target of being able to get back into those ranges over time and we will.
And again more specifics at for future fiscal year, but definitely upward trajectory is involved.
I would mention too as it relates to the fourth quarter and remember that as of 50, <unk> week, which does create a leverage of all event and that and that last week, but.
And even taking that into consideration and it would not surprise me to see again comparing back to pre COVID-19 days your fourth quarter margins, demonstrating the ability to leverage and move that net margin up nicely above where we were in the past.
Great. Thanks, and just a question on complexity I think there are some questions on this call that touched on and a little bit, but I think there is.
A little bit of and implicit worry one.
Of your answers Wyman and even touched on it and that you are comfortable with one brand, but when I think about things getting to maybe to virtual brands and your own brand has is fully up and running the stresses on the kitchen, you can imagine of Saturday night, maybe they're being moments, where you're freaking out about capacity and.
And I think some others have worried aloud about.
A company like yours pursuing the strategy that you do pursue and that it will jump jeopardize that on premise experience. So how are you feeling about that today and are you.
Still as confident as ever that you have the capacity to deliver when you get particularly to two of busy Saturday night.
Yes, well first of all we are and some busy Saturday nights.
And records.
And right now and and we have.
Of two virtual brands and a number of restaurants and so we're learning the lesson that you are asking about and it's of critical lessened and right and we're feeling good about where we're at and we got some work to do still.
And just really ensure that that's exactly the issue youre talking about is <unk>.
Dealt with and that we're giving operators all of the tools they need and the systems in place to to execute and that's what we're doing and that's again the beauty of of the scale of the beauty of the resources, we have here, both supply chain and our culinary people and our op support people and then you know.
And then of great operators, we have so it's not to be taken lightly and we don't take it lightly and thats why sometimes I think people might be a little bit.
Wonder why we're just not rolling out.
The next virtual brand tomorrow, and it's like Oh, we want to make sure it's absolutely locked down and that we can support our operators so that on those busy nights.
You know, we've got mothers day coming up I mean, you've got to be able to to say, yes. This is doable. The good news is with these higher volumes they get they get labor they get additional labor and that kitchen, and so we can give them at additional person and sometimes it can just be of dedicated person to just doing that if you if you're doing enough volume on our virtual brand you're going to of a.
<unk> Cook just focused on that so all of the other stuff still happens.
Without really being impacted if you set the system up correctly. So that's.
It's really I think the critical question.
Thank you.
Could see it at a good talking to you.
Thank you and the next question is coming from Andrew Charles Like Andrew. Your line is live please announce your affiliation and pose your questions.
Thanks, BMO good morning.
Two quick ones for me I am sorry, if I missed this but on the unit growth side did you say how long do you think it will take to build the development pipeline to get to that kind of twentyish openings that you talked about and then the second thing on virtual brands, obviously, you've talked about it as just wings of $150 million plus but just broadly speaking.
Or a virtual brand to kind of warrant and national rollout is there a sales threshold that you kind of think about either at launch and from a sales perspective.
Over time.
And that you kind of think about in terms of warranty and that level of rollout. Thanks.
So Andrew as it relates to the development side of the question and I expect it to be a stair step over the next couple of fiscal years I think.
We will look to build that pipeline of little bit further than where we've been at.
And next fiscal year 'twenty, two and then 'twenty three I think there's some they're working hard on the opportunities there too.
To see income.
Kind of in line with what I was talking about there. So we'll definitely continue to move closer as we go through this next fiscal year two fiscal years.
And then I don't know Andrew sales volumes on the virtual brand side of the equation.
In terms of when do we see the opportunity give me that question one more time, Andrew I wasn't quite tracking with you.
Yes, I guess I'm just wondering if there's kind of a minimum sales threshold that you think about from a virtual brand perspective than it would have more of a national rollout.
Sure absolutely and.
Yeah, and we have those targets and.
I don't know why.
Let's say of 100, less and 100 million I don't know and I am just put a number out there now but you know you wanted to be significant for all of the reasons. We just talked about in terms of adding that complexity and the restaurant you don't want people to have to work hard at something that doesn't sell so what that number is exactly but it has to be significant and we think 150.
And as significant but we're also trying to grow that.
And.
And the go through the effort and do it right with the systems in place you'd want it to be significant then you've got this issue of okay, well and some restaurants, you may not see those levels of volume and so we still have that opportunity to sell at Thats, a market that doesn't do as well and that and that virtual brand. So, let's not let's not burden that restaurant with that.
And maybe we will find another virtual brand that does better there and maybe we just take that load off of them. So we're going through that whole process and it's and it's.
And again, it's an organic at the kind of.
A learning process that we will continue to to kind of work our way through but yes. It has to be significantly we don't want to we don't want to mess with something thats not.
And does not really going to make a difference.
Okay. That's helpful. Thank you very much alright. Thanks.
Alright that was our last question and.
So thank you everybody. We appreciate you joining us on the call today and look forward to updating you on our fourth quarter results in August.
Thank you everybody. Thanks.
Thank you ladies and gentlemen, this does conclude today's conference call and you may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.
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