Q4 2020 Denny's Corp Earnings Call
[music].
Good day, and welcome to Denny's Corporation fourth quarter and fiscal year, 'twenty and 'twenty earnings call. Today's conference is being recorded at.
At this time I'd like to turn the conference over to Mr. Curt Nichols, Vice President of Investor Relations and financial planning and analysis. Please go ahead Sir.
Thank you Cody and good afternoon, everyone and thank you for joining us for Denny's fourth quarter and for year 2020 earnings conference call with.
With me today for management of John Miller, Denny's, Chief Executive Officer, Mark Wolfinger, Denny's, President and Robert for Us at getting senior Vice President and Chief Financial Officer.
Please refer to our website at Investor Day, Denny's Dot com to find our fourth quarter earnings press release, along with any reconciliation of non-GAAP financial measures mentioned on the call today.
This call is being webcast and an archive of the webcast will be available on our website later today John.
John will begin today's call with a business update.
Mark will then provide some comments about our franchisees and development and Robert will provide a recap of our fourth quarter financial results and current trends.
After that we will open it up for questions.
Before we begin let.
Let me remind you that in accordance with the Safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
The company knows that certain matters to be discussed on members of management. During this call may constitute forward looking statements.
Management urges caution in considering its current trends and any outlook on earnings provided during this call.
Such statements are subject to risk uncertainties and other factors that may cause the actual performance of that needs to be materially different from the performance indicated or implied by such statements.
Such risks and factors are set forth and the company's most recent annual report on form 10-K for the year ended December 'twenty two.
2019 and.
And and any subsequent forms 8-K and quarterly reports on form 10-Q.
With that I will now turn the call over to John Miller, Denny's Chief Executive Officer.
And thank you Curt and good afternoon, everyone I hope each of you remain safe and healthy since we last year and update on Denny's our.
Our fourth quarter was sitting at the speed of that sales performance since the pandemic began until a resurgence of Covid cases caused states and localities to reinstate stay at home orders and capacity restrictions and December while losing actually at the outdoor dining and California, where 25% of our domestic system is located was a pause and a recovery story.
I'm so proud of how our teams kept up their focus on the future and ensuring that day needs is well positioned for the recovery as restrictions began to lift and January domestic system wide same store sales, thus far in February and have improved to their highest point during the pandemic, despite and having a similar level of capacity restrictions as of <unk>.
September to November timeframe. This indicates the consumers are ready to dine with us again, and assuming around explanations of starting to drive more consumers into our restaurants and vaccination is expected to be available to a high percentage of the population by mid year. We're looking forward to the second half of the year and our exceptional team members and opera.
<unk> are ready to welcome guests back and to more and more of our day.
And this dynamically changing environment, we have been focused on four key guest centric themes reassurance value comfort and convenience will now touch briefly on each of these as guests continue to return to our restaurants. It is more important than ever and we remain focused on the health and safety of our team members and our guests and.
And to reassuring our guests we didn't provide the safe dining experience by consistently executing our enhanced cleaning and sanitation procedures at all customer touch points. We have also provided multiple options for safe experience beyond their dining rooms, including outdoor seating curbside pickup drive up ordering and contactless delivery or <unk>.
Area of focus is that and it is known for everyday value and we believe value will remain important and this economic environment as guests seek to maximize the impact of their dollars on quality of food options for the whole family and we understand the value comes in different forms and we consider our value approach to be of comprehensive balance between price abundance convenience.
And bundled value starting with price value of our well known 2468 and you.
Has strong liquidity with our guests at 14% incident.
<unk>, we continue to feature of abundant value options like our popular Super Slam, which sold nearly 11, big and plates and 2020 and with off premise being a large focus and strive to provide convenient space value to our guests through free delivery and ordering through our web cycle mobile App, which is also induced weak consumer trial.
Additionally, we have seen are dangerous rewards members increased by over 25% since the beginning of the pandemic, allowing us to have more targeted offerings delivering directly to our guests and lastly, we were able to feed nearly 385000 families through our new bundled value lineup of Shareable family meal packs offering a delicious cost ifs.
Active way to feed a family and for our third focus area is comfort, we strive to ensure that they need and is a place where our guests for welcomed and valued when dining with a large family of his party won and we believe our guests view the denny's experience at a time to build connections and the environment that is both inviting and comfortable at.
After issuing multiple streamlines and we began using a full core menu and November providing more comfort food options, even though the menu is approximately 25% smaller than our pre pandemic core menu. We all we will also be launching of comparable size Nucor. Many index wheat that continues to feature of our culinary innovation with New Creek.
<unk> within our bowls and belts categories.
Our operations team has also reinforced the critical need for comfort by reminding our entire system of the rules, we live by including expectations that everyone is welcome to dine at Denny's, everyone is treated like our favorite guests and everyone has shown kindness and respect our established heritage of restaurant image is also we see consistently.
Positive guest feedback largely due to his welcoming and relax deal. Despite the pandemic our shifting completed 22 remodels in 2025, and the fourth quarter and our final area of consumer focus and convenience. We believe our guests will continue to expect technology to bring enhanced value to their dining experience whether in restaurant ortho.
Ralph premise options like our denny's on demand platform, they've also implemented curbside pickup parking signs to deliver a better experience for our guests and team members, while promoting guests control digital ordering from the parking lot and we recently launched our Apple pay for our Denny's on demand for iOS mobile App and continue to promote outdoor dining solutions.
We're at permitting.
We were fortunate to already have an established operating this business through our denny's on demand platform prior to and pin debit.
Average weekly sales for all off premise transactions have doubled since the beginning of the pandemic.
Growing from approximately $4000 per week per store, a year ago to approximately $8000 per week per store and through the first two weeks and fiscal February we've been pleased with our ability to sustain this higher level of off premise sales as dine in transactions has evolved.
We're also excited that our test and learn culture is yield of two new virtual concepts that we believe will provide additional market share opportunities. The first of all of these is called the Burger Dan. This concept of allows us to focus on one of our strengths of great burgers with new varieties of using ingredients already and our pain free cash.
Results have been favorable and suggest the transactions from these tests are highly incremental.
Over half of our domestic locations have signed up to participate and a three phase rollout. The first group launched earlier this month, while the remaining two groups are slated to launch by the end of the first quarter. The second virtual concept called the meltdown features and practice melts with fresh ingredients of this brand is able to utilize of approximately 70%.
A lot of and is currently and our pantry our innovative culinary team was crafted new craveable products, such as the Gilead belt teaching featuring brisket burnt ends with sharp white Cheddar creamy barbecue sauces, and pickles on grilled artisan bread or the talk and Turkey mill, and the Turkey, Bacon and tomato provolone cheese and a premier of spread test results have been.
Similarly, encouraging for the meltdown and over half of our domestic locations are expected to launch starting in the second quarter. These brands provide opportunities at dinner and late night to leverage underutilized labor and kitchen space back over 70% of transactions from on the bird events occurred during the dinner and late night and day parts and closing I sincerely want.
And to thank our leadership team and franchised partners for their continued engagement steadfast resolve and unwavering commitment to this brand I am very much looking forward to this new year and working collectively with our teams to reassure our guests provide compelling value options and deliver the comfort and convenience rguest seat, whether it be our dining rooms on a pad.
And the comfort of their homes with that I'll turn the call over to Mark Wolfinger, Denny's President to discuss more about our franchise and development.
Thank you John I want to Echo your comments about our innovative and dedicated teams and I also look forward to what this brand can accomplish in 2021 and beyond.
Currently 98% of our domestic system is open including over 1000 restaurants of operating with open dining rooms. This is an increase of almost 25% from the end of December however.
However, we still only have approximately one third of our domestic franchise restaurants operating 24 hours a day seven days of week.
While we cannot control of state and local restrictions and the related impact on our sales trends.
We have been working diligently with our franchisees to analyze the incremental sales and profitability potential from expanding for their operating hours.
Turning to development, we are very encouraged that even in the midst of a global pandemic. Our franchisees opened two restaurants during the year, including for restaurants during the fourth quarter.
And this included eight international openings and for different countries, which brought our total number of restaurants to <unk> hundred 50.
Additionally, our system completed 22 remodels during the year, despite new models being deferred until 2022.
And these openings and remodels underscore the confidence and future opportunity as our franchisees see within the brand.
However, the pandemic has also prompted higher closures than our historical run rate.
During the fourth quarter 17 franchise restaurants closed along with one company restaurant, bringing of year to date system totaled to 73 and closures.
Six of these closures during the year were due to lease expirations. The remaining 67 closures related to franchise restaurants with average unit volumes of approximately $1 million prior to COVID-19 of level, which is well below the 2019 franchised averaging of volume of one 7 million.
We believe the pandemic accelerated these closings than we had otherwise anticipated over the next few years.
However, this acceleration should ultimately enhance the overall health of the franchised system, allowing multiunit franchisees to focus on on a more viable restaurants.
As a reminder of the average restaurant requires approximately 70% of.
Seven zero percent of its 2019 sales to cover both fixed and variable cost items.
And though December was challenging for restaurants impacted by additional restrictions. We are pleased to say that on average our restaurants continue to see sequential improvement and profitability.
And with each successive quarter.
This momentum coupled with the initial round of PPP funding was very helpful with almost all of our domestic franchised restaurants.
And stimulus support.
We are currently supporting our franchisees and the references of secure another round of PPP funding and we believe they will be successful again.
And while we anticipate additional closures and we believe we have weathered the worst of the pandemic and are on an upward trajectory towards historical recovery.
We look forward to returning to net restaurant growth and the future and are confident that we will do so backed by our existing domestic and international development commitments, including over 75 commitments from our recently completed of Refranchising strategy.
At the same time, we believe are overbuilt industry will suffer and unfortunate and meaningful rationalization of seats through the pandemic largely at the expense of small and independent full service operators.
And we don't celebrate this prediction and we believe brands that survive will have an opportunity for gaining market share.
We have a proven record of converting existing spaces and to denny's locations and in fact over 60% of our openings since 2011 of them conversions.
These less capital intensive opportunities provide enhanced rois for our franchisees and our experienced development team is already assessing the landscape for future Denny's locations.
I'll now turn the call for Robert <unk>, Denny's, Chief Financial Officer to discuss the quarterly performance Robert.
Thank you Mark and good afternoon, everyone.
I will share a brief review of our fourth quarter results and current trends.
As a reminder of our fourth quarter results include an additional operating week at 2020 was at 53 week year for us.
Domestic system wide same store sales declined 33% during the fourth quarter after momentum in October and November was overshadowed by the reinstatement of stay at home orders and additional capacity restrictions in December.
In fact for the first time since the pandemic began outdoor dining was prohibited in California for approximately 25% of our domestic restaurants are located.
And consequently, California of restaurants weighed on the total domestic system wide same store sales results by approximately seven percentage points and December and five percentage points during the fourth quarter.
Same store sales at domestic restaurants operating with open dining rooms declined approximately 25% for the fourth quarter compared to a decline of approximately 48% at those domestic restaurants operating with closed dining rooms.
Before discussing current trends I want to mention that we will continue our standard practice of comparing 2021 domestic system wide same store sales to 2020.
Additionally, we will provide a comparison of 2021 domestic system wide same store sales to 2019.
And we believe comparing to 2019 will provide a more consistent and informative representation of a recovery.
With that being said we have been encouraged by the sequential improvement in January and February and restrictions have started to ease.
Domestic system wide same store sales for the first two fiscal weeks of February declined, 25%, which is of significant improvement from December.
In addition to the weight of government imposed restrictions on our business. We have also discussed the impact of stores operating with limited hours during the pandemic.
Domestic restaurants, which for opened 24 hours and the fourth quarter had of same store sales decline of approximately 23% compared to a decline of approximately 39% at domestic restaurants operating with limited hours.
While we estimate that our overall same store sales results and Q4 were impacted by approximately 8% to 10 percentage points from restaurants operating with limited hours.
We were encouraged both of sales through the first two fiscal weeks of February declined almost 6% for those of approximately 375 restaurants operating 24 hours with open dining rooms.
Franchise and license revenue decreased 27, 4% to $47 $2 million, primarily due to the impact of COVID-19 on sales at franchise restaurants, as well as as well as fewer equivalent and unit.
Partially offset by an additional operating week.
Franchise operating margin was $21 $4 million for 45, 2% of franchised and licensed revenue compared to $31 8 million or 48, 9% in the prior year quarter.
This margin decrease was primarily driven by the impact of the COVID-19 pandemic on sales and fewer equivalent units, partially offset by an additional operating week.
And.
Company restaurant sales of $32 $9 million were down 32, 6% due to the impact of the pandemic on sales and fewer equivalent units.
And the offset by an additional operating week.
Company restaurant operating margin was $1 $4 billion or for 3% compared to $8 7 million or 17, 7% in the prior year quarter.
This was due to the sales decline and related deleveraging impact of COVID-19, as well as the reduction and equivalent units.
Partially offset by approximately $1 million of favorable reserve adjustment and tax credits related to the cares act and additional and and additional operating week.
Total general and administrative expenses were $25 million.
<unk> to $15 $4 million and the prior year quarter.
This change was due to an increase in share based compensation expense, partially offset by a $3 $1 million decrease and corporate administrative expenses from cost savings initiatives and previous reductions in personnel due to the COVID-19 pandemic, including approximately 900000.
And tax credits related to the cares Act.
These results collectively contributed to adjusted EBITDA of $8 million.
With approximately $2 million attributable to the 50 <unk> week.
Interest expense was approximately $4 $6 million compared to $3 6 million.
In the prior year quarter.
And with the increase primarily due to higher interest related to our recent debt amendment and the amortization of deep deep designated interest rate swap losses from accumulated other comprehensive losses net.
The benefit from income taxes was $100000, yielding and effective income tax rate of two 7%.
Adjusted net loss per share was <unk> <unk>.
Compared to adjusted net income per share of 23 in the prior year quarter.
Adjusted free cash flow after cash interest cash taxes, and cash capital expenditures was $2 1 million compared to $12 $1 million in the prior year quarter, primarily due to and a reduction and adjusted EBITDA and higher cash interest partially offset by lower.
Sure capital expenditures and cash taxes.
Cash capital expenditures, which included maintenance capital were $1 5 million compared to $3 2 million and the prior year quarter, primarily due to the prior year real estate acquisitions related to our 2019, Refranchising and development strategy.
We ended the quarter with approximately $225 million of total debt outstanding including $210 million under our credit facility.
This is the lowest reported balance since entering our credit facility and 2017.
After considering cash on hand, the remaining capacity under our credit facility and current liquidity covenants, we had approximately $82 million of total available liquidity at the end of 2020.
The pandemic has a firm for us the value of a conservative leverage philosophy.
Prior to the pandemic, we would have targeted longer term leverage somewhere between three times and four times adjusted EBITDA.
We are currently more comfortable with a range of between two times and three times.
Turning to our business outlook, given the dynamic and evolving impact of the COVID-19 pandemic on the company's operations and ongoing uncertainty around the timing and extent of and anticipated recovery. The company cannot reasonably provide a business outlook for the fiscal year ending December 'twenty.
2021 at this time.
As a reminder, on December 15th 2020, we entered into the third amendment to our existing credit facility, which reduced the revolver commitment to $375 million with an additional step down for $350 million on the first day of the third quarter of 2021.
Financial maintenance cut financial maintenance covenants, our way through the first quarter of 2021, followed by the introduction of more favorable covenant levels and the second and third quarters of 2021.
Under the amendment, we are prohibited from paying dividends and making stock repurchases and other general investment until we deliver on 2021 third quarter results.
Therefore, we intend to deploy cash towards paying down our revolver as we continue to enhance our overall liquidity position.
Additionally, capital expenditures will be restricted through the third quarter of 2021.
Finally, I want to mention how proud I am of how our field leadership and home office teams have remained focused on serving our guests while also managing business costs to support Denny's recovery through the challenges of the COVID-19 pandemic.
And doing so we have and will continue to leverage the strength of our asset light business model and fortified balance sheet to ensure the success of our dedicated franchisees.
And this brand.
That wraps up our prepared remarks, I will now turn the call over to the operator to begin the Q&A portion of our call.
Thank you if you'd like to ask a question. Please taking by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure that you would be first of all of his turned out to all of your signal to reach of equipment.
Looking at of Starwood, if you'd like to ask a question for you.
And take our first question for MX and <unk> with Wedbush Securities. Please go ahead.
Alright, thank you.
I hear that of remark that in February unit that at both the dining room open and are open 20 per hours.
And those units were down 6%.
And I hear that correctly.
Hey, Nick This is Robert Yes, you did hear that that was for the first couple of fiscal weeks of February. So we continue to make progress on our same store sales results and are really encouraged by the fact that we're at 24 hours with the ability to serve guests on the restaurants, we are really making some headway. So yes. They were both restaurants were down 6%.
You did hear correctly.
And is there any weighted commodity breakdown, we can comp versus the retail comp is it possible that maybe a week day varieties flat, maybe even positive and most of the day weekend of capacity constraints.
At our meeting because they're down six.
The work and we're kind of looking at for data, we have available to US right now and make that may be one that we have to take offline with it with kalo and Kurt.
And frankly, I don't know if we have any insight to what youre, saying, but again <unk> sales in the $24 seven down and are really positive revenue.
And we broke it out and are resolved within the investor deck on slide 13 at.
If you look at that we broke out the ones that half of 24 hour operations I think the key is really pushing forward on the amount of 126 that are more limited right now at.
As opposed to the weekend versus weekday I think theres, a large benefits at getting those restaurants on things and.
We have been working with our Denny's Franchisee Association Board and.
They are fully supportive of the movement towards 2004, seven operations and we.
We are developing.
On the process of developing those flow charts, and I'll kind of that it's been kind of log at the site. If you're in a state that has this level of capacity then we want you to move to 24 hours over this timeframe. So that's really one of the key focuses as we move forward here.
Understood.
And that's pretty amazing and that's where they are those stores.
Regarding the virtual brands.
And obviously.
The dinner and the non breakfast day parts and depending on you've been kind of tackled for for a long time.
And it seems like this could potentially be a pretty warm.
Wonderful.
Two.
The capacity availability during those day parts.
Early indication in terms of what the average weekly sales contribution could be from those from those brands.
And at this John.
We've not given any indication yet and are not ready to guide I would just say that the transactions were incremental and.
And therefore sort of reach the threshold that it made sense to expand the test and then beyond the test to a rollout on a sign up basis. So as we said.
In January and then again affirming on today's call.
About 1000 restaurants, and signed up for Burger, Dan and a similar number.
For to rollout over the next two or three quarters.
For.
I'm, sorry, I'm sorry, it was.
About.
About half of the system.
And I'll, let check the script.
But.
Significant number.
Signed up with the enthusiasm to get it going out where it grows will you have the system behind it and more time and support and that'll be a different matter theres, probably see NAV on a modest texture to continue to roll it.
And on the other long Wall Street retail.
Yes go ahead, and we're going to fall.
Follow up on that I mean, what kind of support over time for those brands do you envision.
I guess.
Maybe at the answer of that.
And we can know exactly where it on box.
Sure.
Sure.
I think if you look at what's happened with the handful of brands that are.
And that have done that.
And then have that had been talking about this more regularly.
And they've had.
They had social media channels and different channels to support this more deliberately rather than just through.
Search to go or to actually agreed. So I think there is a difference between a launch platform, where you discover them and something a little more deliberate and support when you have enough scale.
Understood. Thank you very much.
Thanks, Nick.
Thank you we'll move on to our next question for Michael Tamas with Oppenheimer.
Hey, thanks.
And doing well.
Thank you guys and a lot of sales catalysts in front of you from opening up at late night for the virtual brand and the menu changes we've talked about though you maybe rank order of bucket. How do you think the impact of these will be felt going forward I mean, just from the outside of to use easier to sort of flip the switch on the virtual brands versus trying to give and then.
70% of your franchisees opened at late night hours and it maybe just talk about how you think those sort of play out.
Sure I think Peter where a brand that's been around for 68 years, we've built tremendous equity and late night, we've been talking in the last year and a half since we've had post sort of scale of our heritage remodel program to to continue work on for day parts, and all day diner and or just.
And now wondering into sort of the middle innings on building dinner and late night.
Brand equities beyond just breakfast all day equities. So so the desire for the brand for our whole brand our franchisees to get.
And to continue with our dinner and late night efforts.
As of a.
Frustrated desire because of the pandemic and will extend the limiting hours. So a lot of the a lot of it so I'd say, our priority and order would be expanding of the hours and remember the.
It's part of our brand tradition, we don't lose it and to a long historical built up equity, we don't want to lose and we have hooks and servers that for whatever reason.
Their lifestyle arena on those day parts based on planned family needs and flexibility required for their livelihood. So so getting getting those folks back to work getting those sales back into our system as it is a priority for us.
And remember brands are closed and we are open late night with those virtual brands to be able to provide service that's proven to be of benefit.
For us of unique benefit for us and potential there as well.
And then I'd say.
And remember all of them.
Also I just want to make at this point, there's a lot of those limitations of based on jurisdictional restriction.
Not necessarily franchisee.
And desire to open and so.
And so we staffing as a component of it.
A bigger component I think is just the the permission to do so so those will come and done and.
And then I think right behind that would be because of the high profitability of dine in sales is to build off for day parts of dine in but we don't want to lose what.
And it means to have the high teens low 20 margin of third party delivery to go for in the highway and the high income mentality of at the averaging down the age of our brand.
And remember.
Just in the last for.
And on April till now we've got about 40% of these to go transactions.
At <unk>.
<unk> 45, and it would be the inverse of that for dine in and we're about 40% would be at the age 45, and and boomers and seniors would represent.
60% of done at so so these are beneficial for trial for our brands and so.
Holding on to that share while also building done and will be for next priority and then of course.
Virtual.
And it can be a key component to bill and those those day parts for our brands.
Awesome. Thanks, a quick follow up on that and on another question is there any sort of incentive program to get franchisees to open for late night and I think like you guys are running during the fourth quarter and then on the real question is.
And you talked about for a little while now pulled forward unit closures for future year. So does that mean that maybe as we get through 'twenty, one into 'twenty, two and beyond that but there maybe some of the low average closure of years or how does that sort of.
On play out here.
Hey, Michael of trial, but I'll take the first piece of that with regard to the $24 70 were you are correct. We did have an incentive in the fourth quarter and we did improve the number of units that were open and operating for in the fourth quarter by about 10% with that incentive currently as we have moved into.
For Q1, we.
We have not implemented that incentive.
In fact, our fifth.
Chosen path from this point now has been working directly with our Denny's Franchisee Association leadership gift.
And to get their support and we will be and have already begun working on our DMA meetings designated marketing area of meetings with various franchisees to move in that direction at.
And as restaurant dining rooms continue to open up there and as more and more of an appetite to get to 24, seven and so we will work through that and I do believe that we will be successful with regard to that.
As we move forward, particularly again.
<unk> per views dining rooms.
Get back on plan.
We have of high high sense that we will get back to that and it really is with what John and it really one of extension of what John just steady at least our heritage and we will get back to that.
Michael It's Marc I'll take the second part of your question here and I think it's a real good when it really speaks to I think the other side of the pandemic and.
Just a couple of Factset points here, one of our closing number and in 2020 was 73 I mentioned and my comment of 67 of those were franchised restaurants within any of the use of our average unit volumes of $1 million or less.
Versus 1 million seven average unit volume. So again those of 2019 type of Comparables because of obviously $2020 and the impact of the pandemic.
So at <unk> 67 of the 73 closures will basically low volume stores and just as a reminder to everybody on the phone. If you go back and look at the last five to 10 years, we've been averaging about half that number and closures call at mid 30 range. So basically our closure number has doubled and the current year, obviously because of the pandemic.
We do believe that this obviously was a pull forward of closures and the future because of the low volume aspects of that and again when I look at the other side of this which is the opening of equation as we I think all three of those mentioned in our comments today. We believe there is a drive opportunities down there.
On the side of this pandemic I mentioned, the fact that.
We continue to see a great deal of seed.
<unk> lead in the marketplace and full serve.
A large portion of full serve dining and the U S. As independent players and again, we don't relative or celebrate that situations at clearly creates an opportunity on the opening side.
Especially on the domestic business. So again, we're going to drive the opening number as we go forward and the closure number again as I mentioned, we believe that probably wasn't pull forward, especially when you look at 67% of <unk> 73 were those low volume numbers of $1 million or less and average unit volume.
Awesome. Thanks, guys.
Thanks, Michael.
Thank you we'll take our next question from Jake Bartlett with Trish Securities.
Great. Thanks for taking the questions.
My first one was about off premise mix and the upcoming average weekly sales that you mentioned.
And sometimes we look to Florida to see what the future might look like with much less restriction people getting back to sort of.
Normal a little bit and in terms of the behavior, but I'm curious in stores and tool or maybe others that have.
Less restrictions how have the off premise sales.
<unk> held up and.
And then the 8000.
And kind of an average so if you could kind of break it down to stores and.
And then are kind of have less restrictions and has that.
Does that remain elevated still and those types of markets.
This is John you may want to take that one offline too I have youre sort of the brand wide data and it's and.
Sort of tell you of February to February how smoothed there'll be diamond was.
88% February of Yoga at 66 per share now pick up has gone from seven to 18 third party from four to 14, and so forth and I can give you that information on the year I don't have at my fingertips.
The markets that have been and like at 75 per seat capacity. So that might be a question, we have to address and future release that's of great question.
Okay, Greg and Robert.
And quick add on for that.
Really haven't broken that out specifically the way you looked at it but the one of the things I think to pay attention to it with our comp and.
And we've quoted within my script, how California at impacted the entire quarter I think at was five points on the entire quarter.
And so that would mean other states such as the Texas, and Florida, where there are less restrictions are performing much better and even within that we have still maintains at nearly doubling of.
Of the off premise sales so while we haven't specifically said, what and Florida at the off premise and at what Theyre less restriction at.
Safe to say that growth.
And a higher level of what the where they were on prior years, we wouldn't be able to maintain that doubling so I hope you get kind of get that.
Loose correlation there.
That makes sense and at what I'm really trying to get out of your level of confidence at the off premise sales will remain elevated even as tenders come back into the store.
Right I would say elevated it is a good word this is John again.
But I think again.
Predict precisely what happens and how people work how they office.
And their use of third party and they are there.
Desire to get out all of those things.
Are predicted to be dynamic changes, so I'd say that we've come short.
We will maintain a good portion of this.
But the percentage of going to move around.
As restrictions continue to lift.
Got it got it and then I had a question about the unit growth in 2021, and I know youre, not giving specific guidance, but I think.
You talked recently about I think it was 50 to 75 stores at all.
And that kind of million to below <unk> and that would more kind of.
Potential for closings and I think you've pulled at a guardrail for for closures.
That remains true.
Has that changed with the latest round of PPP. So I'm just trying to understand whether you expect elevated closures too.
And to stay around for the next couple of quarters or.
Has the PPP change things.
Jack It's mark.
And.
Greg question on very broad and months I'll try to sort of taken of part a little bit and maybe John and Robert jump in here as well if I Miss something so I think.
Back again on the on the annual number we had 73 closure of 60 some of those were low volume of $1 million or lessen of UV.
We did mentioned.
And one of our previous calls I think it was and the third quarter call. The fact that I think it was and Robert script actually and Robert mentioned that before we had the question.
One of five somewhere between 50, and 75 more lower volume stores and so obviously some of those closed during the fourth quarter and to take our total number up to 67 closures on a low volume sides and 73 and total 67% of volume.
I think the other part of your question was around PPP and really the second round of PPP, which obviously, we're in the early stages.
Of the application process again were.
Supporting our franchise system and are optimistic about the PPP funding.
I think I would stick probably we're at that 50 to 75 range that Robert provided and knowing that we also closed some during the fourth quarter as well again and average unit volume and $1 million is not universal as far as the profitability of that location dependent upon where you are and the country. So obviously the higher operating environments.
Like the West Coast.
On average unit volumes, obviously of the expectation out there and stronger of the cost of real estate at the cost of labor et cetera, but in other parts of the country.
On a lower volume store and lower below the chain average and again our franchise system average is $1 7 million those stores actually and it would be profitable and different parts of the country. So it's it's tough to provide of universal response.
But again I'll go back to Robert's comments on third quarter that was 50 to 75 more and lower volume stores that was a U S number by the way.
We obviously closed.
Several more during the fourth quarter that took out a number of 67 closures low volume side, and so that number and that 50 to 75 range sort of <unk>.
Fix with some kind of adjustment obviously, the fourth quarter closures. So.
That's a long winded response, but certainly not been for a follow up question and we haven't.
And that's very helpful and then moving to the last question.
And is on the virtual brands, you've mentioned that 50% or are going with one concepts on 50% of going with the other is there overlap between those two and just trying to figure out what would be given the franchise of.
Choice of one of the other ore.
What went into the decision and so is it more of a mutual.
And from separation or and how how did you come on and how is it at 50% of the franchises youre kind of kick.
On each of our two brands.
And that's great question and this is John again, so widespread interest.
And it falls along the typical lines, we have franchisees that are hungry for transactions.
And the trial likely gets turned into test and change and that would be the type of franchisees that we do.
Both brands.
And then we have others at dish.
For.
Complication reasons or store.
Staffing level questions, Michael and just do one of the two and.
And so you get a mixed bag across the whole system of.
How this is being adopted and then you have those let's say, let's let's let everybody else go first and figure out.
All of the challenges of training and inventory and.
And then they want it should jump in after things have been protected at a bit so that tends to be.
And our style of rolling things out.
Wouldn't be seen as a brand mandate.
It is not straight lined and these related.
It's a benefit to help build transactions incremental transaction chart for our system. So we've been pleased with the enthusiasm about it.
System at the same kinds of questions of how things are going and the test stores.
And <unk>.
And again.
There is a fair level of interest and sign up and the early going.
Great. Thank you. Thank you very much I appreciate it.
Thank you, we'll now take our next question from Todd Brooks with CL King and associates.
Hey, good afternoon, or and I hope all of phase as well.
Hey, Tom just follow up Hey, everybody just follow ups at last question.
How unusual it is at and I know you haven't shared results of the virtual brand task, but.
And with new initiatives and in the past how unusual is just the strength of this response from the from the franchisees, where you see half of the base.
Willing to move forward fairly quickly.
Both of the brands.
Alright, well. This is this is very unusual because it's a virtual branch and there'd be no part of our history, we will frankly.
Theres not a real strong precedent and the industry history and to be dosed virtual or host kitchens, I'd say, that's a fairly new phenomenon.
That's been borne some people see it as of race.
They had scaled brands at distribution plus lots of states to get something in there and rent space.
Page and door dash and the other seed as of distraction.
And there are some.
Types of things that if you go first and big.
You can grab a lot of share, but we don't think that the.
We don't think that the results of a couple of prominent and announced brands will be the similar results share of virtual kitchens. We think there are some extraordinary standout people use that as the benchmark they.
And they might be disappointed.
Theres been some extraordinary launches, but we do still think it has a place and when you have and you have capacity and family dining Sunday through Thursday occupied and.
Late night capacity and can can build virtual brands with a small number of skus.
And the wheelhouse of.
Capacity some of our case, we're particularly good at the grille, we have large of that.
Double-wide grows and our restaurants.
We don't have to run down to the prior very often for these options other than that.
Franchise or on your green for new orders.
And for us for cell shape.
<unk> and its all sort of an opportunity ultimately to build brand equity by how things you reveal of discovered to John or to add some of the favorite items into the core menu of denny's so at.
It has a positive.
Benefit to scale brands, and we think it's going to be and this game and participating so there isn't really a bench markets of great question I would say when it comes and enthusiasm at very similar to the norm of who wants to be at the front end of anything complicated buttermilk pancakes and he used to be short of a box net and water.
Versus something more complex larger pancake.
Different statute of size different grid capacity and how much when we took that and all of those things are quite complicated and different than when we first rolled it out of a few years ago and there are those of the early adopters. So I can't wait to get it and other said boy, let me and wait for the and so I'd say its a similar response to that.
And the kinds of things that are just and in an organization, but again and it's.
It's just an unprecedented day and industry history.
That's helpful. Thanks, John and then John you talked earlier about.
And of of reopening flow chart, and the $24 seven operating model and.
I guess it may be helpful.
People look at this 926 units center store and the limited model.
Is there a wake of parse that between.
Operators that would be allowed to open and are choosing not to do it now because of the staffing reasons versus how much of that bucket just would be unable to open or would make sense for open given current restrictions.
Yes, I would say very little this.
Is due to.
A franchisee digging their heels and say I just don't.
And when you do at right now.
I think most of this has to do with legitimate restrictions and the process of sort of marching back towards opening.
And if so the staffing and the logical progression of building at the talent and the capacity would follow suit.
And so.
Think.
Therefore, this is going to happen and a fairly material way as of the year and these restrictions on Paul we're waiting for the colors to change basically and each jurisdiction.
Which makes sense why there wouldn't be an incentive program on us if it is truly capacity constrained and then that final sorry go ahead John.
I was just going to add one point Robert made earlier about how.
And his script Tobey.
Similar results and also of mine.
And.
At two of.
The early go into this year compared to <unk>.
October November and remember that.
And California.
As things have lifted before you had december to buildup dining rooms on the parking lot and then with the recent change here and the middle of winter, So even though.
Even though the list of occurred recently in California at still take out only but the ability to resurrect.
Staff for dining rooms, and I'd say, that's still late and it's still kind of retail. So we've had really strong similar results in spite of the fact that there arent moving.
Dining rooms on the parking lot and reopened as of yet.
Part of the assignment of how you look at it.
Great. That's helpful and then my final question.
And it goes back to what John was asking about with incremental off premise rapid news.
Trying to think about it at a different way if we look at components of off premise and.
If you could talk to curbside and how customers have.
Embrace that because I think of that May you may get an extra densification because your homes, creating a drag through like experience for drives frequency and then if we could talk about your views on outdoors and incremental source of.
And of sustainable off premise revenues as dining rooms, reopen and just out of the 4000 incremental I think theres. Some times of these new initiatives that would be stickier.
Yes.
Livery and.
Transaction.
Yes, I think thats pretty easy to look back in history, and you'll see family dining.
Breakfast lunch dinner.
And late night, and how that breaks out.
Breakfast and lunch sort of makes up the bigger component versus at dinner and late night.
Dinner and late night is when people want to use the patio or maybe early in the morning, and contemporary places, California.
Arizona, and the spring and fall, but on the whole.
Dining on the patio.
And should not of major long term initiative for US is to get through and then Carhop Curbside service at the main point is if I'm coming to pick up and I'm not be using delivery today.
Don't make me get out of my car.
And so different parking lots will have different configurations, and so whether it's curbside delivery carhop quarter from the parking lot and maybe I ordered on the way here through my App kind of Covid, while driving and.
And sort of ballpark somebody make sure we can text and get them.
Point of it is all of those different types of delivery systems very back store, but we believe those are sort of permanent installations for contactless safe and secure.
And Terry and good packaging that holds true for long time for a better dining experience all of those things we think are permanent installations.
For full service.
And frankly for a quicker and pretax cash.
Great. Thank you.
Thank you we'll hear next from James Rutherford with Stephens, Inc.
Hey, Thanks for getting me in here instead of a few quick questions kind of.
Kind of sort of questions have been asked already I was curious on the temporary closures at the end of December 31 units were temporarily closed and then take that it's at a little bit in January and February.
I'm curious what drove that given kind of and what I have seen at it looked like maybe there were two of incrementally fewer restrictions and those months I'm just curious on that front and on a couple of other follow ups. Please.
Hey, James This is Robert Yeah, we have seen a few tick up.
With regards of off if you recall some of the latest data with California's able of just recently begun lifting those restrictions.
With regard to their dining and candidly they are not back and any material way to on Prem dining and I believe we have maybe one unit that is open to on Prem volume. So I think as just a and just the aggregation of the effects of <unk> predominantly in those states, where there hasnt been that on Prem.
<unk>.
And I do expect I don't think that that is an indicator of the closures I do think of and it's more along the lines of what Mark spoke to earlier the flow.
Lower volume units and more and how the 50 and 75.
So on that million dollars of of lost adjusted for what happened as of Q4, how they react going forward. So I don't think thats really an indicator of closures just Moreover, Moreover, a prolonged impossible just really being tightened.
<unk> tightened down with some pretty.
Pretty significant restrictions.
Got it that's helpful. And then I just had two numbers related questions. If I got my math right the royalty rate in the quarter was around three 8%.
Was that some of sort of incentives because of a little bit below the $4. One you historically have Brian and just kind of how to think about that going forward and then G&A was $20 5 million and up a little bit sequentially and year over year and others a lot of components of that so just any help you can provide on on G&A and and took royalty rate going forward. Thank you so much.
Hey, John just Robert John with regard to net royalty rates ACI you are correct that there was in that 38 range.
One of the things that I think of note with regard there was the idea of that with our third party delivery fees associated with the third party delivery, we do not charge of royalty on those although they do come in through the topline so and.
And again, the bodies of compression and Thats not a permanent concession that we have made to our franchisees, but one that is in existence currently and at <unk>.
Really it helps support that really the doubling of our off premise business over that timeframe. So that really is probably the largest.
The largest piece to help you reconcile the royalty rate that we would have typically that for plus as you would see any stated and we move the March from Florida, four and a half.
All of that that impact is on those stores not charging of royalty on those third party fees remind me pardon me on the G&A question, Yes.
Yes, no problem. It was at the G&A was I think $25 million or so this quarter. So at the touch up kind.
At year over year end and sequentially and I'm, just curious kind of at the run rate to go on the go forward G&A and sleep.
And at <unk>.
Excellent question, James and happy to answer I think in large part of what Youre seeing in Q4 is just really some variability on the incentive compensation on how it was recorded and.
And Europe, particularly in that stock based compensation. If you go back and look at the early on quarters.
And we reversed off a bunch of stock based compensation.
The board and came back and modify the couple of the low point of this 8-K is out there that would point to those modifications have been required us to book some of that back up in the back half of the year, particularly into Q4. So when you look at it on an annual basis of maybe.
More sense and if you do on a quarterly basis. If you look at one of the lungs that I called out specifically however was in that at what.
And in the corporate administrative expenses and internally, we call that core G&A that is down.
<unk> over quarter and year over year pretty significantly.
At Taylor money, who works on Curt's team actually included a re.
And really.
On a nice chart on page 33, and the investor deck, and really kind of breaks out the flow of G&A and when you look at it at that that core G&A is down significantly.
And at really a couple of pieces on that slide we call out how it progressed through the savings that we indicated from our Refranchising and development strategy of 28 late 2018 into 2019, and some of the more and the impacts of what we have done through Covid.
I think for really the volatility of existing some of those incentive compensation lines, but the reality is is that core of the core G&A piece.
Salaries at the TNT and as such is down and will continue to be down when you look at that chart.
Very helpful. Thanks, and congrats on the progress you are seeing.
Thanks, Tim depreciated.
Thank you we'll take our next question from John Power of Wells Fargo.
Great. Thanks for taking my questions I appreciate at.
Most of them and answered, but just kind of followed up for some earlier ones on the domestic development commitments can you maybe tie a timeframe for those 75 that were affiliated with the Refranchising commitments really in 2019, and how should we think about those opening.
Over the next three years over the next I don't know.
10 years, and I'm, just curious to kind of at an idea behind that.
Yes, John Great question, Mark and.
Address your comments there on the development agreements and are we sort of we've got north of 75 domestic development agreements again youre absolutely right at that came out of the Refranchising strategy in 2018 and 2019 no.
And normally the way those development agreements work is the first store on and it's a multi unit development of and the first store probably opened 18 months 18 to 24 months out after the transaction closes.
So I'll get to some specific answers on your question.
One of the things that we've done is we've extended time frames for both per remodel of commitments and new store development commitment. So that again and that was part of our and working very closely with our franchise community and be very empathetic with net.
And that Theyre going through from a capital cost standpoint on.
On the development agreements for themselves and they were extended by a year.
And to specifically answer your question.
Significant portion of those new store development agreements of really kick in.
Say 'twenty, two and beyond and actually a lot of them kick in 'twenty, three and 2004 time frame.
And I think probably and a follow up call with Kurt and Kayla and probably give you a little bit more specifics, but that gives you the flavor of those agreements.
Okay. Thank you and then and then thinking about the Remodels themselves already obviously, that's been delayed a little bit of just hit on but because of COVID-19 and everything that's taken place.
Has the plans on the actual remodels themselves have been tweaked a little bit to address perhaps even just the greater off premise mix, maybe easier ingress and egress for customers, obviously, you've now rolled out curbside.
But.
The.
Remodel prototype change and or the cost behind those changed.
And because of what we've seen in the past I guess almost 12 months ago.
Yeah. So.
And that is a great question and you can match the multiple versions of <unk>.
Curbside car hop service.
Dry period tasked with actual windows and pickup windows of ordering windows.
The equipment headsets, and all things required to test those.
And then they enhanced the go stations at the pickup stations inside the restaurant.
For third party delivery companies ease and our share of <unk> all of those things have evolved over the last.
Couple of years and how remodels.
Remodels of bad debt and so each of those are sort of incorporated and along the way. So therefore the latest prototype. If you are a new franchisee for a franchisee would wanted of development agreements and said, what's the latest and greatest we keep those plans fresh and we will refresh those all the time and there are local store options for a number of.
And approaches depending on the size of parking lot.
Ingress and egress.
In terms of additional cost I would say, it's not a material change because it's been evolving over.
And quite a period of time now if some of them put in a fast food style drive to depth of lane and <unk>.
And windows that would be more expensive but.
On average seven or eight minutes appetizer, John other than well that stake sort of.
819 at Cook times, and at full service restaurant and Youre not going to try to put in 50 760, <unk> drive for your type of operation and business should be more of a pickup or or.
And at late Night Security thing and Barcroft in sideways until we call you back up for you to be ready. So so the way supply and a full service application.
Lends itself to our operation and our 24 hour operation.
And with modest changes and cost and modification.
So we do refresh those along the way, let's see I don't think I answered. The full question there I might have missed at peace.
We got most of it sounds like it's going to be.
At about.
Case by case basis in terms of what that franchisee wants the day with the individual location.
Who and what Theres lot will allow them to do so so again the remodel.
Plans and the prototype and the ball of in real time as these initiatives and forward.
Now as far as any texture change.
Two of the remodel heritage two point of does address external and internal imagery and just refreshes of the heritage prototype.
So that program to Mark's point has been delayed but theres still enthusiasm for that version of the brand.
Got it and then.
Just switching a little bit to the virtual brand in terms of how this is going to be communicated for the consumer would it be at brand affiliation to denny's. So will it be the meltdown brought to you by Denny's and the reason I asked that is thinking about some of these options are very successful on virtual platforms.
And how quick can you bring it to your stores and will consumers and then come to your stores if they know what's available there.
And if theres no brand affiliation and.
I'm curious to kind of thing kind of youre handling all of us.
And so some of these things like of grants language and it appears as at melted and also on our menu.
They're all they're identical now.
You're just not overtly denny's, but if you look at the fine print.
It's not really find credit if you look down at the bottom of if you are paying attention at all.
Already claims brought to you by day, so steep customer.
Once the trades sort of make their publications and down if theres anybody and.
And Thats ordering it's just wings at doesn't know comes from Chili's by now.
This is becoming the expectation of the third party delivery companies.
And they expect you to reveal that.
So that.
They don't find themselves and hot water as well so I think the transparency is a consumer expectation.
Would be no different we do expect of bids for brand equities sort.
On the back end of it as more of these things could find their way onto the core mission.
Got it and then just last one for me and I know, it's very early days at the vaccine has been slowly rolling out.
Are you seeing anything perhaps and some of the markets.
That half.
Looser restrictions than say, California.
And youre seeing some of the older guests return.
And to the stores.
Certainly relative to what we've seen over the past several months.
I guess it might be hard to see what they are doing on line, but certainly EBITDA or are you at older folks come back.
I think at this was a little bit of a.
Could never prove at each.
Each day for each jurisdiction.
And has the personality San Antonio and his personality of Miami Beach has got a different personality and Fort Lauderdale, Each township students do behave and you listen to some degree.
This area is a little three or to go out. This area is a little more conservative and of freight it doesn't it does have age.
Associated with it where there is more conservative and less risk, taking among seniors and boomers because of because of the natural risk associated to loans and.
And of immune systems.
And if they are older.
But it does seem that thats.
And very active states.
You see that applied has a little less.
Conservatively, and then and places, where the governors, especially concerned and and and.
The news about it is a little more conservative when you see a little bit more conservative of consumer behavior.
So it's been interesting to watch how that gets applied a little differently.
I do believe that at.
And the vaccines come out and my Mom's got lung disease. She is 84 years old we've been really protective around her and she's got the vaccine she's ready to go right back to St. Francis Hospital and start paying nearby sales like she did every Monday for the last 20 years, there and she's ready to go back and be altered volunteer your church sales I believe.
Bulletproof. So I do believe that that attitude of that generation will prevail and theyre going to be up eight before you note.
Alright, Thank you and best of luck I appreciate at the time.
Thank you. Thank you we'll take our next question from Brett Levy with MK and partners.
Great. Thanks, I appreciate you guys at EMEA.
And in the past you've talked a little bit about qualitatively, how you're different day parts have performed at.
If you would care to share a little bit more color and in terms of.
How is it different.
Okay part of cohorts did and how you did weekday weekend.
And then out of a question on the franchise side.
Sure. This is John and I will let.
Robert add some details on it might not have but if you look at the quarter and you look at the.
The full year of 2020, it's not real different.
And then 2019 of 2018 of our breakfast day parts of about 29 and a half.
For sure of sales for the quarter for the year is right at 29.
Lunches 34, six for the quarter for the year of 35, so the behavior and real similar way, so far and dinners about 19 and at late night of about 16, five and so that makes up the day part mix.
And Robert you might want to comment on the balance of at that question.
Yes, John So when you look at at breath and look at the performance over the course of the year and this is pretty.
The consistent whether youre looking at the quarter of the year, we actually had some pretty good performance on a relative basis into the dinner and late night day parts of both.
Day parts of its trailed at pretty much end in 2020 was that lunch day part.
People react committed to the pandemic, but we're really kind of pleased frankly with how dinner and late night responded in particular with late night and we were pleased.
As we captured more trial.
And people that have that opportunity other locations, we're closing orderly and had the opportunity to come see what we can do of late at night, which involved and many of those franchisees that we've talked about getting back on for $20 seven and the ones that did that really were somewhat rewarded for that so I would say on balance of the dinner and late at night.
<unk> Park.
And ill relatively outperform.
The brick and <unk>.
Sorry, the one store parcel with breakfast kind of holding of them.
And then just thinking at a step further.
You talked about the late night comp of down 6% for.
And for those units able to $24 seven.
What did you see in terms of restaurant level margins for the for the different cohorts, whether it's for 75% plus capacity at 25% capacity those operating.
At 24 seven.
And then just one follow up.
Yes, Brett it's Robert again with regard to that we really had on broken that out what I can tell you is.
And if you think back to when we started talking about the our Refranchising strategy, taking a back end.
Two years now we've talked about getting to 18% to 19% restaurant level margin.
Once we have right sized the portfolio of getting down to the number.
And number of units I can tell you that the complement that make up those margins out today are a little different price and we have doubled on.
Off Prem business and.
And we and <unk>.
As such and we would have additional third party fee we have additional.
And on packaging costs, so that and that that will impact how we look at those 18 and 19% margin, but the reality is sales and procure all here, so and while we haven't given the specific number.
You get closer to flat flat sales for 2019, we'll be approaching.
And those adjusted 18% to 19% levels that we get to and Thats really the driver here is getting the sales and leveraging those backup.
And admittedly they will be impacted by how how much of that doubling of that off premise business that we keep.
And then just one question.
And conversations you've had with the franchise community.
A thought of how they might be thinking about it.
And they've obviously had a change of sisters from PPP and had gotten with assistance from you.
But now they are being asked to return to the normal 24 seven.
Introduce.
And the virtual brands.
At the layer on Remodels and that and now there's all sorts of living sector of <unk>.
Rising minimum wage and how.
Are they feeling of that all of this while still dealing with what could be just turnkey from of fire hose and terms of sales recovery.
Okay.
Well I think in general.
If you and the hospitality business you have you have the rhythm of Remodels development.
And in a way to commodity.
And discussions on a regular basis. So I think that people are tempered for this to say drinking from a fire hose and you're adding on.
Virtual brands third party delivery changes and technology and new remodel scheme.
We've been amazed at how scrappy, our system has been sort of adopt.
Adopting these things and real time, I think of what goes along way as the level of communication. We average weekly steering calls with Rds, Our Denny's franchisee Association leaders of each of our brand Advisory Council and then monthly calls.
With our leadership team with the full Denny's Franchisee Association.
Association boards, and then very active brand advisory councils for marketing supply chain that are on weekly calls for just just all things related to marketing operations Rollouts training schemes.
And I think that commitment to really good communication.
Helps temper.
And what feels like a heightened level of activity.
And recovery.
Going on and the system. We've also delayed Remodels and development dates, which I think gives people a form of relief and understanding.
And.
Yeah.
And then because different parts of the country have different experiences with tip credit wage inflation. We also have a lot of restaurants that have gone through.
Rest of the country is now considering so I'd say our ability to talk about these things on a regular basis is at.
Has helped.
Temper that feeling of at being a fire hose and hopefully that helps I don't know Robert and per market and add anything.
Yes.
And yes, John this is Robert just to add on with regard to I think minimum wage was mentioned within that question from Brett I would tell you that we.
I'll, let John and you speak on the.
On the Denny's philosophy towards minimum wage, but just practically from a from a number of standpoint.
I think the best representation of the.
And the financials related to minimum wages and comes out of California.
Think about it as they've increased their minimum wage kind of in at tempered pace.
Over that timeframe and if you look at that timeframe from us.
California has outperformed the system and during over that timeframe. They had six consecutive years of positive guest traffic not just positive sales of positive guest traffic at the minimum wage was going up so but it was a very tempered way still going on.
And putting money into the pockets of our consumers right and to spend back with us. So we actually have seen the benefit of minimum wage and a tempered way correlate back to what happened in Arizona with on November 16 of election, where they have their minimum wage increased 25% overnight.
Across the entire spectrum of.
Our hourly labor pool, and that was much more difficult to deal with to capture.
And to cover at 25% minimum wage increase even on a dollar of basis, let alone of rate basis required us to take five to 6% to 7% pricing and Thats, just so I'd noticed by our consumer and depth of traffic consequence.
As I mentioned and California.
When you are more moderated and those increases we can cover that with 2% to 3% pricing and golf mob is impactful to the consumer so we and again I'll pass it on John to talk philosophically about minimum wage, but we have seen at within our system in a way that can be beneficial.
And philosophically I would say is that.
We are of brand.
Supports the notion that there is good.
B of bread winner and every family the other day and to make a living wage.
At the St. John we believe that our industry restaurants, and retail are unique but also supports the need to have.
As a starting wage and bill.
And sometimes politically do at odds with each other and rather than being of political lightning Rod. We just are advocates for small business at good sound policy and at.
We always appreciate at wood leadership and the state.
State level revenue level.
Or Congress Senate.
We will give us for listening ear to understand our industry, whether it be tips for wage or the pace of wage inflation. So we wanted to be on the board for a reason.
<unk>.
Thank you I appreciate all the color.
Of breath.
Thank you and that does conclude today's question and answer session I'd like to turn the conference back over to management for any additional or closing remarks.
Thank you Cody I'd like to thank everyone for joining us on today's call. We look forward to our next earnings conference call in early May and we will discussed on our first quarter 2021 and results. Thank.
Thank you all and have a great evening.
Thank you that does conclude today's conference. Thank you all for your participation you may now disconnect.
[music].
Yeah.