Q4 2021 Darden Restaurants Inc Earnings Call
Okay.
Welcome to the Darden fiscal year 'twenty 'twenty, 1 fourth quarter earnings call. Your lines have been placed on listen only until the question and answer session to ask a question you May Press Star 1 on your Touchtone phone. The conference is being recorded if you have any objections. Please disconnect at this time I will now turn the call over to Ms.
Kevin Kallikak. Thank you you may begin.
Thank you Regina good morning, everyone and thank you for participating on today's call.
Joining me on the call today are gene Lee Darden's, Chairman, and CEO, and Rick Cardenas, President and COO and Raj for Nam CFO Andrew.
Reminder, comments made during this call will include forward looking statements as defined in the private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections.
Those risks are described in the company's press release, which was distributed this morning.
In its filings with the Securities and Exchange Commission.
We are simultaneously broadcasting a presentation. During this call which is posted on the industrial relations section of our website at Darden dotcom.
Today's discussion and presentation includes certain non-GAAP measurements and reconciliations of those measurements are included in the presentation.
Any reference to pre Covid when discussing fourth quarter performance as a comparison to our fourth quarter of fiscal 19 and Ian.
Annual an annual reference pre COVID-19.
The trailing 12 months February ending February of fiscal 'twenty.
This is because last year's results are not meaningful due to the pandemic impact on our business as dining rooms closed and we pivoted to go only model during the fourth quarter of fiscal 'twenty.
We plan to release fiscal 'twenty 2.
First quarter earnings on September 23rd before the market opens followed by a conference call.
This morning gene will share some brief remarks, Rick will give an update on our operating performance.
We'll provide more detail on our financial results and share our outlook for fiscal 'twenty..2 now I'll turn the call over to gene. Thank you Kevin and good morning, everyone. As you saw from our release. This morning, we had a very strong quarter that exceeded our expectations as sales quickly accelerated from the third quarter drew.
During our call a year ago I talked about the resiliency of the full service dining segment and the <unk>.
Confidence we had in the industry's ability to bounce back from the impacts of the pandemic.
And we've begun to see.
And come back at strong levels.
As we think about the industry our consumer insights team has done a lot of good work to better understand the size of the full service dining segment.
There are multiple sources of data that offer sales estimates for the restaurant industry.
And the size of the industries and the full service industry, specifically varies considerably across these sources.
This year, we are adopting technomic as our data source, which we believe better reflects the sales contribution from independent operators provides a broader view of the restaurant industry and aligns more closely with the census data.
Going forward, we will be referencing industry data provided by technomic, which sizes, the casual dining and fine dining categories for fiscal 2020 at $189 billion and for fiscal 2009.2019 at $222 billion.
Given the strong demand, we're seeing and the financial health of the consumer.
I'll leave the categories will return to that size for greater despite having approximately 10% fewer units than before the onset of the pandemic.
Over the last 15 months, we have made numerous strategic investments at.
At the restaurant level, we've invested in food quality and portion size that will help strengthen the long term value for assumptions for each brand.
We also made considerable investments in our team members to ensure our employment proposition remains a competitive advantage.
And we've invested in technology, particularly with them within our to go capabilities to meet our guests' growing need for convenience and desire for the off premise experience.
Our business model has evolved and is much stronger today.
As we begin our new fiscal year, we will remain disciplined in our approach to growing sales more specifically our focus is on driving profitable sales growth.
Given the business transformation work, we have done and the demand we're seeing from the consumer we are well positioned to thrive in this operating environment.
Before I turn it over to Rick I want to say, thank you to our team members in our restaurants and our support center. This was without a doubt the most challenging year in our Companys history.
But thanks for your dedication and perseverance, we've emerged stronger.
On behalf of the board of directors and the senior leadership team. Thank you for all you do to take care of our guests and each other revenue.
Dennis.
Thank you gene and good morning, everyone.
Our results this quarter are a culmination of the business model transformation work that gene referenced as well as the simplification efforts we implemented throughout the year.
Significant process and menu simplification at each brand has enabled us to drive high levels of execution and shrink and margins further positioning our brands for long term success.
As we began the quarter our restaurant teams remained disciplined while continuing to operate in a difficult and unpredictable environment.
As restrictions continue to ease in dine in traffic increased our teams successfully manage through it thanks to their focus on being brilliant with the basics, ensuring we provided great food with outstanding service and an enjoyable atmosphere for all of our guests.
This enabled us to deliver record setting results for example, olive garden broke its all time single day sales record on mother's day.
Additionally, both olive garden, and Longhorn Steakhouse achieved the highest quarterly segment profit in their history.
Even if capacity restrictions eased and we were able to utilize more of our dining rooms off premise sales remained strong during the quarter.
Off premise sales accounted for 33% of total sales at Olive garden.
19% at Longhorn and 16% etcetera scratch kitchen.
Guest demand for off premise has been stickier than we originally thought.
This is driven by the focus of our restaurant teams and the investments we made to improve our digital platform throughout the year.
Technology enhancements to online ordering and the introduction of new capabilities, such as to go capacity management and curbside I'm here notification improves the experience for our guests, while making it easier for our operators to execute.
As a result during the quarter, 64% of Olive Garden's to go orders were placed online and 14% of Darden's total sales were digital transactions.
Thanks to additional technology enhancements, we continued to see guests utilize our digital tools, even when they were dining in our restaurants.
Nearly half of all guest checks with settled digitally either online on our tabletop tablets or via mobile pay.
The business model improvements, we've made also reinforce our ability to open value, creating new restaurants across all of our brands.
During the quarter, we opened 14, new restaurants, and these restaurants are outperforming our expectations.
While Raj will discuss specific new restaurants targets for fiscal 'twenty 2.
We're working to develop a pipeline of restaurants and future leaders that would put us at the higher end of our long term framework of 2% to 3% sales growth from new units as we enter fiscal 2023.
Finally, the strength of the Darden platform has helped our brands navigate near term external challenges the employment environment has been an issue for the industry. However, the power of our employment proposition strengthened by the investments we've made in our people continue to pay off as we retain our best talent and recruiting new team members to more.
Fully staff our restaurants.
So while there are staffing challenges in some areas, we are not experiencing systematic issues.
Additionally, the strength of our platform has helped us avoid significant supply chain interruptions.
Our supply chain team continues to leverage our scale to ensure our restaurant teams have the key products they need to serve our guests.
Notably the few spot outages, we have experienced are related to warehouse staffing and driver shortages not product availability.
To wrap up I also want to recognize our outstanding team members. During my restaurant visits I'm inspired by the positive attitude and flexibility you demonstrate every day.
Thank you for all you have done and continue to do to deliver great experiences for our guests now I will turn it over to Raj.
Thank you Rick and good morning, everyone.
Total sales for the fourth quarter were $2.3 billion.
79, 5% higher than last year, driven by 94% same restaurant sales growth and the addition of 30 net new restaurants, partially offset by 1 less week of operations. This year.
The improvements we made to our business model.
Fourth quarter sales accelerating faster than cost growth strong profitability, resulting in adjusted diluted net earnings per share from continuing operations of $2 <unk>.
Our reported earnings were <unk> 76 cents higher due to a nonrecurring tax benefit of $99.7 million.
This benefit primarily relates to our estimated federal net operating loss for fiscal year, 2020, 1 which will carry back to the preceding 5 years.
Sure.
Looking at our performance throughout the quarter. We saw same restaurant sales force is free COVID-19 improving from negative 4.1% in March positive 2.4% in Mark and me.
Restaurant sales for the first 3 weeks of June were positive 2.5% compared to 2 years ago.
To go sales for Olive garden, Longhorn continued to be significantly higher than pre COVID-19 levels.
We have seen a gradual decline in weekly to grow sales. However that decline is being more than offset by an increase in dining sales.
Turning to the fourth quarter P&L compared to pre Covid results.
In beverage expenses were 90 basis points higher driven by investments in both food quality and pricing below inflation.
Reference food inflation in Q4 was 4.2% this last year.
Restaurant Labor was hired at 90 basis points lower driven by hourly labor improvement of 320 basis points due to efficiencies gained from the operation simplification and was partially offset by continued wage pressures mark.
<unk> spend was $44 million of slower, resulting in 200 basis points of favorability.
G&A expense was 30 basis points, lower driven primarily by savings from the corporate restructuring earlier in the year.
As a result, we achieved record restaurant level EBITDA margin for Darden up to 22, 6%.
10 basis points have all pre COVID-19 levels Andrew.
Our current quarterly EBITDA of $412 million.
We had $5 million in impairments due to the write off of multiple restaurants related asset.
Our effective tax rate for the quarter was 12% excluding the impact of the nonrecurring tax benefit I previously mentioned.
Looking at our segments.
We achieved record segment profit dollars and margins at Olive Garden Longhorn.
In this segment this quarter.
Fine dining improved segment profit margins versus pre COVID-19 despite sales declines.
These results were driven by reduced labor and marketing expenses as we continue to focus on simplifying operations, while also continuing to invest in food quality and pricing below inflation.
2021.
No other and despite the challenges of constantly shifting capacity restrictions and uncertain guessing man, we delivered $7.2 billion in total sales.
Actions, we took in response to COVID-19, solidify our cash position and Thats far mall business model helped build a solid foundation for the recovery and resulted in our $1 billion in adjusted EBITDA and over $920 million of free cash flow.
Result, we repaid our term loan reinstated on pre COVID-19 dividend and quickly built up our cash position.
Our disciplined approach to simplifying operations and driving profitable sales growth positions us well for the future.
As a result of our strong performance cash position and the fiscal 2022 outlook. This morning, We also announced our board approved a 25% increase to our regular quarterly dividend to $1.10 per share implying an annual dividend of $4.40.
This result.
The yield of 3.2% based on yesterday's closing share price.
Finally, turning to our financial outlook for fiscal 2022, we assume the full operating capacity for essentially all restaurants, and we do not anticipate any significant business or business interruptions.
The COVID-19.
Based on these assumptions.
Total sales of 9.2 to $9.5 billion.
Growth of 5% to 8% from pre Covid levels same restaurant sales growth of 25% to 29% and 35 to 40 new restaurants.
Capital spending of 375 million to $425 million.
Total inflation of approximately 3% with commodities inflation of approximately 2.5% and hourly labor inflation of approximately 6%.
EBITDA of 1.5 to 1.59 billion.
And annual effective tax rate of 13% to 14%.
Approximately 31 million diluted average share outstanding for the year.
Resulting in a diluted net earnings per share between $7 and $7.50.
And with that we'll open it up for questions.
Yes.
At this time, if you'd like to ask a question simply press Star then the number 1 on your telephone keypad. We ask that you. Please limit your questions to 1 and 1 follow up our first question comes from the line of Brian Bittner with Oppenheimer. Please go ahead.
Thank you good morning.
Gene you stated that Darden is well positioned to thrive in this operating environment and I think that's just a pretty powerful statement, giving all the labor challenges and cost issues that we're hearing from all of your peers. What is your reaction to these dynamics and why specifically do you believe darden is standing out.
The crowd as it relates to the near term impacts from these issues.
Let's start with the on the Labor Force I mean, we've made significant investments over time and our people.
Starting way back when we had the tax reform, we made the choice to invest invest in our people at that point in time, we've invested in our people throughout the pandemic.
Our best people have stayed with us through this we have an attractive employment proposition, we're able to attract people to our businesses to work for us.
We think that we're fairly well staffed right now.
And as you know as the.
It continues to improve we see no reason why.
We are not the employer of choice in our businesses.
I've been pretty pretty clear, saying I think the restaurant industry, who is going to continue to struggle attracting workers, but theres enough.
Hospitality work is out there to staff all of Darden restaurants, if we provide the best employment proposition and not just an employment proposition today, it's about potential growth our ability to promote from within we are promoting a thousand team members a year into management.
We're providing other opportunities through training and going out and opening new restaurants, I think I think our team members really loved the experience and so I think that we're in great shape from an employment standpoint, we'll continue to invest will manage will do we will do a great salary administration to ensure that we're paying competitive wages.
And I think that we have the flexibility to manage the wage inflation because of our margin structure.
And combined with our pricing philosophy, I think we have some room there.
To offset.
That and to be able to increase wages, if we need to as far as food inflation goes I mean, our team has done a fantastic job, we're fairly long on the things that we need to be long on.
And I think using our platform or a scale to our advantage.
Through this has been a big advantage and we feel like we're very well positioned.
To manage whatever inflation comes our way.
In the near term and even in the long term.
Thanks Gene and just a quick follow up for Raj.
We're no longer talking about 90% of sales recapture thankfully we're on the other side of this it feels in your guidance for 'twenty, 2 is 5% to 8% above pre COVID-19 levels. So obviously over a 100% recapture and I believe the EBITDA margins at the midpoint of that guidance or 16, 5% 250.
Basis points above pre COVID-19. So what is the philosophy on communicating investments to us now and in the philosophy on communicating how youre thinking about EBIT margins now that this path for sales above pre COVID-19 levels is so much more clear.
Yeah, Bryan I think as we look at.
Our guidance is let me just start with that and when you think about why we guided this morning for fiscal 'twenty to 'twenty 2.
It implies EBITDA margin growth of between 200 on the lower end to 250 on the higher end.
So clearly our sales so that color.
So all of the flow through we're letting it flow to the bottom line, but we have made some investments continue to make investments and as gene mentioned.
We're pricing well below inflation in fact, I think this morning.
We said, we expect overall inflation to be around 3%.
Our pricing is in the middle of a hard 1 to 2 targeted so we are pricing well below inflation. That's the biggest investment we're making.
But it also gives us some extra extra dry powder. If there was additional inflation that was to come to come our way.
So we do think that 250 is a good target for us now.
As we think beyond that I think we need to better understand the economic and competitive environment.
We hone in on the business model.
I would say based on where we are today.
Back to retain most of that margin improvement we've seen we will see in FY 'twenty 2.
Thank you congratulations.
Your next question comes from the line of Eric Gonzalez with Keybanc capital markets.
Hey, Thanks for the question.
My question is on the inflation outlook clearly there've been some big moves in commodities in recent weeks can you talk about some of the key variables include including that 3% inflation. I think you said 2.5% on the food side and perhaps how that might stage throughout the year do you expect inflationary hiring beginning of this fiscal year before perhaps leveling out towards the end.
Yeah, Hi, Rick.
So yes as you look at inflation, we said commodities is around 2.5% for the full year, but it is the front half of the year is somewhere between 3 and half to 4%.
Then.
Dennis a little bit a taper off a little bit as we go into the back end as I said in my prepared remarks Q4 this year.
Was 4.3%.
Which is where we think as we wrap on that next year, we expect Q4 to be more closer to flat and so that's kind of the cadence and then as you about the drivers of commodity inflation.
It's chicken and seafood chicken and seafood are high.
We're also seeing.
Significant inflation and cooking oil a little bit in dairy and I'd say the other thing is packaging packaging continues to be especially with the resin cost going up packaging is another factor. So all in all those are the big drivers.
Inflation on the commodity side.
Labour side overall labor, we expect to be somewhere between 4.4 and half Mark.
Israel itself, we expect that to be around 6%.
Very helpful. Thank you.
Your next question comes from the line of David Tarantino with Baird.
Hi, good morning.
I'm wondering.
Related to olive garden, or perhaps your overall sales.
How much do you think capacity constraints there still.
Play in terms of weighing down the performance.
I guess relatedly.
You know what do you what do you think the outsider.
Janice is the the restaurants come back to.
Our capacity now.
Now that youre seeing some of the to go sales.
More than you thought they would.
Yes.
And it is very limited.
Capacity restrictions out there there are a few are still a few states and municipalities that have some restrictions on us but.
Got California back last week and we are.
In New York back so the big there's nothing no major market has restrictions.
I think that when I think when we think about where we're at.
From a sales perspective.
We think there's still more room inside the restaurants as we continue to work on we think the work we do with our with our menus and our business model, we're going to help us with throughput.
Which is going to enable us to in these high volume periods get more volume through the restaurant I think Rick comment in his prepared remarks about what the teams were able to do and execute on mother's day.
The biggest the best mother's day, we've ever had before says a lot about our ability to execute and get more people through our restaurants, and our limited time period.
So I don't think we have any capacity restrictions, obviously, we're seeing less sales growth on the weekends than we are when we are mid week, just because there's less opportunity and a lot of our high volume restaurants to to get through extra volume.
So I mean, there's still.
The word I use a law as we're still in search of equilibrium.
And we're not there yet and I don't know when we're going to be there when we see consumers really get into what I would call a normal behavior pattern.
And we kind of get to where we understand what the in restaurant dining is going to be what the off premise is gonna be Rick Rick and his comments talked about.
That we're pleased with where the off premises is leveling out even though it's declining slightly but we you know.
And I said this a while ago.
And I think you guys a lot of you guys disagree with me I think you are right I was wrong.
Some of this off premise was stickier than what we thought and I think a lot of it has to do with the capabilities. We created through the through the pandemic to make it a lot less frictionless, but surgery was searching for equilibrium hundreds understanding when and where the business is going to going to come from I think we're still in the early innings of that I think we still got a lot more upside.
Thanks, Thanks for that gene and then I guess 1 other follow up question on this point as you know.
The GAAP between how longhorn is performing and how olive garden performing relative to pre COVID-19.
This is very significant but I was wondering if you could give your thoughts on why why either longhorn is outperforming by Sun life for Olive garden was kind of lagging.
<unk> for Walmart.
First thing I would say is olive garden's not lagging.
Just ROE with their performance when you're looking at $25.5 restaurant level margins and getting back to pre COVID-19 sales levels.
Amazing performance is unbelievable.
When you look at what's going on in Longhorn, we've been investing in that business for 5 years since Todd's Todd's come back in.
He and his team have just done a great job of improving the value perception.
When you look at where they are where they are and technomic and the ratings that are number 1 in most categories. They've moved from middle of the pack to number 1 and so I think longhorn performance is just a culmination of a lot of work over a great period of time and I also I wanted to also recognize that the whole Steakhouse segment does move.
The whole steak House segment has outperformed the other segments I believe does because they have a stake in this segment has high value perceptions.
So they're definitely getting this segment lift, but they've also done a great job and they're executing at an extremely high level.
Great. Thank you very much.
Your next question comes from the line of Jeffrey Bernstein with Barclays.
Great. Thank you very much.
2 quick ones actually the first 1 just on the.
First quarter.
As we now seemingly exit hopefully the pandemic I think you said June your month to date comps are up 2 and a half I think that's actually identical to what you said from May I'm, just wondering how does that compare to expectations.
You would have expected further acceleration with additional markets like you said, having recently reopened or any kind of thoughts you can give us havent given us full year guidance, just wondering want to make sure with this being the first quarter of lapping full COVID-19 any thoughts on those sales or whether there's any parameters around the earnings that you want us to think about and then 1 follow up.
Yeah.
Hey, Jeff This is Raj. So when you think about the cadence I mean I think.
June I mean, it's 3 weeks.
5%, we feel pretty good about where we are on that day and tons of same restaurant sales.
I would argue that actually a little bit better than what we would actually we had expected going into the fiscal year and then as you look at the cadence of some of these.
Markets open up as the capacity restrictions are lifted we are seeing some movement, especially in California and places like that but when you blend everything at the Darden level.
These brands are impacted them all star brands that are not a big portion of paying a big part of our overall portfolio. So it takes a lot to move that move the needle on our blended same restaurant sales.
And then there are other factors taken <expletive>.
Consideration, especially as you look at work this fiscal 19.
Because we're not doing some of the promotional activity, we're not doing things that will got stimulated demand in the past that we're doing right. So there is that.
We are basically comparing to a level that was different than we had a lot more spend in marketing and all that stuff, but as gene said I think.
Continuation of the same team that we're thrilled with where we are.
And we're also tell with our business model.
The fact that we're able to make investments not only in our people, but also our guests through food quantity food portion and pricing. So we're giving a lot back to the guest.
While giving while actually getting a strong business model.
So I think that that's.
That's how I would I would I guess address the question.
Great and then just my follow up just wondering as you think about fiscal 'twenty 2 what.
Do you think is the greatest risk I mean seemingly are feeling quite good about current quarter to day trends and thriving in the outlook commentary, but in terms of risks to fiscal 'twenty..2 would you say, it's more on the sales or the cost side, maybe where you'd think yourself and or the industry would be most vulnerable as we come out on the other side. Thank you.
The greatest risk still as Covid.
I mean, we're.
I think we are at work.
We're getting to the point, where we think we're getting to the other side of that but when.
When I look at.
We've put out there for guidance.
I think that you know I think we you know obviously, we think we can get we can we can achieve that but I look at the greatest risk is being external not not internal and I don't see risks from a sales perspective or a cost perspective, I think we've got.
We've got the flexibility and we've set this up to have the flexibility to deal with almost anything that is thrown at us with the exception of.
Another outbreak in Covid, where we had to we had to have some restrictions on our business to me that's the greatest risk to what we put forth.
Thank you.
Your next question will come from the line of Chris <unk> with RBC capital markets.
Hi, Thanks, good morning, and thanks for the question.
So just looking at the segment margins holding aside the performance at Olive Garden and Longhorn. The other business segment margin was particularly strong and well above 2019, so curious to hear what some of the key drivers of the performance where in that segment and maybe how much of a factor that segment's improvement as contributing to your 'twenty 2 outlook.
And I know last quarter, you had discussed the improvements et cetera, so any additional color or update there would be great as well.
Yes, so I think as we look at our Christopher.
The other segment.
Point out a couple of brands, where the business model transformation with significant I'll say, it's shattered us. He is a big part of that and Bahama Breeze is another Bryan where we saw significant improvement in the business model and part of this is going back to the simplification, we had a chance to kind of breakdown everything they build back up and kind of figure out a way to transform the business model.
So those 2 brands are primarily contributing.
The significant growth we have in the <unk>.
On a segment and as we look at next fiscal year.
There's still plenty of decent drew all right I mean, when you look at the other segment is about 20% of it so they're not going to be a huge contributor but really due to their size. They are going to be outperforming on the segments.
Margin yeah.
Chris on shutters I would just say that we're extremely pleased where this where this business at this point.
As Raj indicated the biggest improvement in the business model in all of our business came in it came in Cheddars.
We continue to focus on strengthening the restaurant leadership teams to be able to handle the future growth, but overall, we are we're very pleased with where this business is out today and very excited about the potential.
Great. Thanks for that detail now I'll just pass it along here.
Your next question will come from the line of James Rutherford with Stephens. Please go ahead.
Hey, Thanks, I wanted to start off with a technology question for Rick.
Last quarter, you mentioned being in the middle of developing a new 3 year roadmap for technology and I want to just curious if you where you expect to see the biggest returns whether it's.
We are facing in the box online back of the house support center or in some other areas, where the biggest opportunities and priorities for the next 3 years on the tech side.
Yeah, James Thanks for the question.
We have completed our 3 year roadmap and what we're working on and we look at it in a few places but.
Mary.
I would say the primary theme is reducing friction.
So what we're doing with technology is reducing friction in the guest experience and the team member experience and in the manager experience of what we do and so that would mean continue to enhance our off premise capabilities to make it easier for guests to order.
Order repeat orders and to pick up the pickup there.
Premise experience in our restaurants, we're looking at a revamp of our point of sales system. It's a pretty old system that we developed years ago, we're going to revamp that to make it much easier for our team members.
Handel, our guests experience handle the guest experience and to handle off premise and.
And for the managers, we're simplifying the way things look in the back of the house.
Joe a lot of our systems, while they have great backend.
Great back ends.
Our interfaces and is great. So we're working on improving the user interface.
All of those are under the theme of <unk>.
Or do think friction.
Okay excellent and then Raj just wanted to follow up I think last quarter. You said you were sitting at 115000 hourly employees across the company could you update us on where you stand today, and where you view full employment given the demand environment here today.
I don't know that I'm more comfortable sharing the total number of employees at this point, but I'd just say we have made significant progress.
In fact going back I don't know that we see.
If we said $1.15, I think it was a little bit more than that but.
But anyway at this point I'm not so sure we want to get into the exact number of employees other than just let you know that work and we feel pretty good with where we're staffed and we don't we don't see any gaps.
Okay excellent. Thank you so much and congratulations.
Your next question comes from the line of Andrew Charles with Cowen.
Great. Thanks Raj.
Presley raised our dividend, 25% drew a dollar and if you think about the historical 50% to 60% targeted payout ratio.
EPS of $7.33 to 8.8% versus guidance of 7.
Kevin to $7.50.
Help rectify that a little bit, it's just conservatism, reflecting the formal guidance.
Okay. Great question, Let me, let me start with when you think about how we look at our dividend. The 50 to 60 is our target range.
This is why at this point, given where we are with our cash on the balance sheet.
We felt pretty good about going to the higher end of that range. So as you pointed out if you look at 60% than where it is.
Closer to the middle of our guidance. So if you take the middle of our guidance or basically a 61% payout. So that's not that I would argue that's not that different from the 50 to 60, especially given we're sitting on at $1.2 billion of cash flow and we expect to still generate.
Significant free cash flow and at the end of the day, when we look at our business model.
Joe.
The proposed dividend out of out of the dividend that we actually announced this morning.
It's up about 50% of our free cash flow.
Really good about where we are and also just.
What are the target is over time, we had a year, where we bought below the target.
And I think of this as a way to kind of make up for it a little bit of that.
That's fair thank you.
Your next question comes from the line of Jeff Farmer with Gordon Haskett.
Thank you on the Mark.
The earnings call you reported that hourly labor productivity had improved by I think you said over 20% for the system. So I'm just curious 2 things how are you measuring and labor productivity and I think you touched on it a little bit earlier, but how have you driven this level of improvement in productivity.
Hey, Jeff This is Rick yes, we do.
Did mentioned that productivity was about 20% better across the system.
We measured on an hours per GAAP basis, so how many how many guests can we serve per hour.
Per labor hour.
And we're still seeing significant labor productivity improvements as Raj mentioned we.
Had a significant improvement in labor per.
Labor margin, even with inflation.
And the way we did it with what we've been talking about for the last year has continued to improve our processes from the food coming into the back door to getting to the table.
Which means significant menu design work significant work design work, which took a lot of the steps and procedures out of the kitchen.
And what I would say is we are never done with that.
We redesigned our processes over the last year, we have to look at them again and do we have to redesign again, so we're going to continue to do that.
To drive efficiencies, where we should drive efficiencies. So that we can reinvest those savings in our in our in our plate and.
And give a better experience for our guests.
And then just as a quick follow up and I might've missed this earlier I apologize, but of the 25 states or so that have.
The supplemental unemployment benefits early.
What has the hiring or staffing dynamic look like since that's happened in those states.
Yeah, Jeff.
Those states announced something either late May early June that would take effect sometime in June and I think the first day took effect maybe last week.
And you know anecdotally, we've seen a little bit of an improvement in the trends of applicant flow, but we've seen it all across the country not just states that have eliminated the UI, but even states that haven't yet.
It could be because those states that haven't yet are actually starting to open up and so youre going to Seattle can flow, but we feel really good about our applicant flow into our restaurants, where we're hiring.
Net hiring a lot of people every week, we had a record hiring quarter in the fourth quarter and we feel really good about where we are.
Thank you.
Your next question comes from the line of Brett Levy with MK M partners.
Great. Thanks for taking the call and good morning.
I guess just 2 separate questions.
You're obviously talking about some significant EBITDA margin expansion, how should we be thinking about that from a split between the recovery of G&A spending as well as the unit level profitability and does this does.
The progress you've seen of late change what you think.
The longer term.
Feelings are for your restaurant level margin.
And then the second question is on the development side.
We've obviously seen a lot of news out there.
<unk> inflation of labor availability.
Are you what are you seeing on those fronts and how confident are you.
Either the cadence up to 35% to 40% or the ability to reach the higher end. Thank you.
Hi, Bryan let me start and then I'll hand, it over to Rick for the question. So as you look at our margins I would argue.
Yes.
The margin that you saw in Q4, we are bulk of it came from the restaurant level is a little bit G&A I say, a little bit it's actually 30.40 basis points, which is huge so I think.
Look forward I think the way to think about it is.
G&A is probably going to be.
Somewhere around 40 basis points of favorability, but then he is going to come from the restaurant level margins.
I kind of categorize that is that really the restaurant labor and marketing are all going to have any do you see an improvement however, you're going to we're going to continue to see some increase in food cost because of the investments. That's a deliberate choice. We've made and then and so that's how I would kind of categorize that and then the restaurant expenses.
Why it should be a little bit better, but not as significant because.
1, especially because we're not pricing in line with overall inflation, you've got to have an impact on all the line items across the P&L.
Brett on the development side. This is Rick on the development side, we have.
A couple of things 1 is we shut down our pipeline at the beginning of Covid and we restarted the pipeline. During this fiscal year as we saw coming out of that we feel really good about the 14 restaurants, we opened but I would say you know you hear a lot about.
About labor shortages and construction and about product shortages in construction, we're getting it in front of that so were ordering product a lot farther in advance and we used to so to make sure that we've got the stainless steel in the kitchen to do the things that we need to do.
The good news is you're seeing some of these input costs come down.
So hopefully by the time, we're starting to build our restaurants those input costs are more back to a more reasonable level.
That said the margin improvements we've made in our in our restaurants and our restaurant profitability has really helped even if the inflation was where people are hearing about it.
In terms of the cadence of openings as I said, we got in front of this and started ordering product earlier for our restaurants.
Typically open you know mid teens, the restaurants in the fourth quarter and of our 35.30 to 40 restaurants, we're going to open. This year, we'll probably have mid teens in the fourth quarter and the other ones would be kind of spread throughout this fiscal year.
Great. Thank you.
Your next question will come from the line of Lauren Silberman with credit Suisse.
Lauren you may be on mute.
Okay.
We can hear you now you can hear me okay, great. So Joe you.
You talked about to go being stickier than perhaps you. Originally thought are you seeing any discernible differences across markets that have recaptured mark.
Sales.
Then is there anything that you can share on how consumers are using that <expletive> allocation, whether that is a replacement for on premise versus not o'neil.
Well I think the for off premise, they're using it as a home meal replacement or.
Maybe in the workplace during the day.
I think theres no behavioral change there at all.
There's no there's really no difference and what's happening throughout the country is more.
No more restaurants, and more dining rooms open and it's been the kind of the same kind of shift you ticked down a couple of you know a couple of hundred basis points and you pick up more of that up in the dining room.
Again, I think that as I said earlier I just think this I think I'll give you the analyst community credit on this this was this was stickier than what we thought we know we've reached some new consumers here.
And the experience is very very good and so I think said, we don't know words can net out it's going to net out a lot higher than it was pre COVID-19.
I think it's something that's part of our business will have to pay a lot more attention to as we move forward.
Great and just if I could just follow up on running at 2.5% are there any seasonality considerations in gn relative to May are you largely seeing similar average weekly sales.
I'd say the similar average weekly sales once you take out the noise of the holidays.
Thank you very much.
Your next question will come from the line of Chris <unk> with Stifel.
Thanks, Good morning, guys.
Raj I believe you stated that demand came back at a faster pace than cost I was hoping you could elaborate on what those costs were given staffing hasnt been an issue and maybe the impact of that timing dynamic.
Well I'd say a little bit of it was we had to catch up on staffing to the through the <unk>.
As they accelerated faster than we hired but by the end of the quarter. We're in a good place. So there was there was a little bit of that but beyond that I think as you look at our P&L you can see.
Obviously, the marketing didn't grow as we grow as we had sales come in we didn't have.
The level of travel was lot less some of these costs.
We have the other cost is really more around gross costs that we said, we're going to want to bring back.
Especially because we want to kind of have that pipeline of talent for new openings and those costs are we we're holding off on some of these to wait for the sales to get back to the levels. We had we thought.
We were delivering the right level of Meyer.
And so now now that the sales started to the levels that Kevin.
Other pre COVID-19. So all of these costs, we will have we want to put that back into the P&L and that's part of the guidance that we provided this morning.
Can you quantify the impact to the store level labor that from that timing mismatch during the quarter.
I'd say, it's in the 10.20 basis points not huge.
Great. Thanks, guys.
Your next question comes from the line of Jon Tower with Wells Fargo.
Great. Thanks for taking my question, Rick I, just wanted to circle back on a comment you made about unit growth in fiscal 'twenty, 3 potentially being above or sorry towards the higher end of that 2% to 3% range that you.
<unk> historically guided too I'm, just curious how sustainable do you feel that level of growth into the future beyond just fiscal 'twenty 3 in terms of that potentially being a catch up year.
From from this.
This kind of more disruptive period.
And then perhaps you can dig into the components of that growth, obviously, olive garden's that a bigger piece of the.
They gross new store.
Excuse me a bigger piece.
Growth historically, but going forward, how should we think of that relative to the other brands in the portfolio.
Hey, John.
Thanks.
First of all on the sustainability of that growth going forward.
Only thing that's going to that's going to slow us down and growth. After after this kind of ramp up is having enough people to open our restaurants, right, having enough general managers ready and able to open our restaurants.
We believe that we can stay in the higher end of our range for a little while now.
The economic environment could be different in a year or 2 that might change that but we feel really confident that we can get closer to the higher end of our range because of the business model improvements, we've made and it gives us the ability to open even more olive garden's right. So when we were opening in olive garden before we would impact.
Olive garden's around them, but with the business model enhancements olive garden's made we feel even more confident in being able to open some of those Roger to already mentioned cheddars and how much they've improved their business model.
And that has given us more confidence in being able to open more cheddars.
So that gives us the ability to get towards the higher end of that range, but every 1 of our brands has the ability to grow and that's the important thing we've made significant improvements in our business model at Bahama Breeze, well someone asked about the other segment.
I wanted to tell you that seasons 52 has also made a huge business model improvement, even though their sales growth wasn't as strong as at Bahama breeze because of their clientele.
That's all coming back we've opened some pretty darn good seasons 52.
And Lee and we opened a great Bahama Breeze recently, so we feel really good about our ability to open all of our brands and be at the higher end of our range for the foreseeable future.
The economic environment changes.
Got it and then just following up to the comments on the to go business I think you'd mentioned that 64% of the to go on.
To go orders were online.
Just curious to get your thoughts on how you are communicating with those customers today I mean is this essentially opening up a new.
Channel of marketing that you've already put in place or is that something that you're not necessarily doing today, but down the line and harvest.
New marketing channel.
Hey, John because they're ordering online we do get a little bit more information about them than we would on a phone order or other orders.
And that gives us the ability to market to them in the future. We havent really done a whole lot of marketing in the last year right Olive garden has done their TV, because we bought that media already.
We've done some digital marketing just to keep the digital marketing moving but we haven't really started focusing on those new customers and speaking directly to them.
We start thinking that we need to ramp things up that's a great source of.
People in the market to know that weren't coming to us before.
Got it thank you very much.
Your next question comes from the line of Dennis Geiger with UBS.
Great. Thanks, Gina I appreciate the commentary on the industry and the industry size and shrinking supply just wondering if there's anything more that you can share on whether you've been able to identify gains for for your brands from the restaurants that are permanently closed our or if you have any updated thoughts going forward on how you were thinking about your opportunity to gain share from.
From that percentage of supply that's going away.
I think Dennis I think our opportunity to gain share as it gets back to our ability to execute at a really high level.
The fact that we have continued to invest in portion size and quality.
And I think that's the key I think this is all about running great restaurants.
And executing at a high level and I think we have a huge opportunity to gain share in all of our restaurants through drew comp store sales growth and through organic growth. That's why we're excited about the ability our ability to add a whole lot of new restaurants.
That's great and then just kind of building on that just 1 more if I could on on Olive garden kind of just following up on the solid recovery that the brand has seen already if you could talk just a bit more about some of the drivers of the continued <unk> growth over let's say the near to medium term. So I just wanted to make sure that I understand correctly that it's probably not really a function.
Further capacity increases from the brand from here.
But if if if it's kind of specific drivers if it's the marketing that you were just talking about turning that on its potential promotional activities that you have in your back pocket. If it's digital it's probably all of that and more but gene just curious if you could kind of speak to some of those drivers, perhaps Italy I think there's 1 significant driver and that's how we have to improve the capability of the food.
Food.
And we continue to do that by investing in portions and quality of the team is laser focused on this.
I think that's the that's the best driver of overall profitable sales growth.
Thank you.
Your next question comes from the line, it's Peter delay with B P. I G.
Great. Thanks, I just wanted to follow up on Dennis This question.
Gene around around the industry.
I know you said theres been about 10% fewer units coming out of the industry, yet we're seeing him a labor shortage in.
Just curious if youre seeing any sort of benefits on rent or availability of real estate you are anything more specific.
Around development that may be a benefit to darden.
There's tremendous speculation in the real estate market driving prices up.
Okay.
And then just lastly on menu and our menu innovation. How are you guys thinking about menu innovation expanding the menu is the labor squeeze right now and I know you guys said, it's not really as much impacting you guys but.
Is that keeping a little a little bit on menu innovation, you guys still focusing on some of the core.
Any thoughts there.
We're focused on the core.
All in all innovation right now is trying to improve the products.
But the majority of our consumers buy we love that and focus we think we're improving crave ability.
We're continuing to keep our restaurants, simplifying and we're sticking to 1 on 1 off.
We know that the teams have great discipline around that right now and I think that that's a key to our ability to execute at a high level.
As Rick talked about the improvement in productivity.
And it's resulting in these record level, our restaurant level margins.
Yeah.
Thank you very much.
Your next question will come from the line of Nicole Miller with Piper Sandler.
Thank you good morning.
Did you ask about the specialty restaurant group is.
Constant specifically around the higher end I was wondering if you could just kind of give an indication of which brands are above 2019, and which ones. They are slightly below maybe.
Really getting at the ones that are a boss.
What is the likelihood of that structurally being the new run rate.
Or is there some reason that demand could pull back thank you.
Is there any reason why demand with a pullback in demand might shift from suburban to urban a little bit as business travel starts to reignite.
I've been thrilled with the recovery in the last 6 to 7 weeks in fine dining I was surprised how resilient the business wasn't suburbia through through the pandemic.
We've still got 7 or 8 really large restaurants, and what I would call. The heavy urban core that are starting to starting to come back slowly.
But overall I think this business is is doing really really well and the 1 business day starting to come back in the last couple of weeks with seasons 52, which was hit pretty hard when you think about who they are who their consumer was and so you know.
Upscale upscale fine dining is performing well above what we thought it would be and is coming back very quickly as we get our 3 major restaurants in New York City is back up and running and bought in downtown Boston in downtown D. C. Those those 5 restaurants are core to what we do and they're starting to come back quickly.
Anything you would change in it.
He has me comment briefly on the customer profile same gas different gast.
Moving differently coming at different times or just more of the same like it used to be thank you.
I think again, we're seeing a little bit, but you know in the suburban business, we're seeing a little bit more weekend business than what we what we did we've.
We've seen a little bit of shift without the business travel and what mid week looks like.
But overall that dynamic can I go back to the to my overused word or is equilibrium.
Not transitory.
Equilibrium, we're waiting for equilibrium in that business and we're going to get there over the next 6 months to understand what the new norms are but.
I think we've exposed a lot of people to our fine dining brands through this and I think that they really loved the experience.
Thanks again appreciate it.
Your next question comes from the line of Andrew <unk> with BMO.
Hey, good morning, Thanks for taking my question first I wanted to just clarify quickly on the margin commentary. The 200 to 250 basis point improvement is that from an A&D perspective relative to pre COVID-19 levels is that fiscal 'twenty 2 levels, just some context around that and then my.
My other question is just on the off premise business, Yes, I think theres some uncertainty about how to think about the growth of that channel.
After kind of a step function, we've seen over the last 12 plus months ago.
What's the growth rate that you would expect from to go kind of over the next 18 to 24 months or maybe longer truck wherever you want to think about the drivers behind it.
I'll take the off premise Chris' question and then Roger can take the margin question I think on off premise until we understand where equilibrium is and where do we get to balance, whereas the new level. Then we can think about growth. We do think we have more avenues to grow that business. We've learned a lot about that business through the pandemic that we can use.
<unk>.
Think grow it into the future convenience consumers desire for convenience is not going away and I think we can fulfill that need.
With our with our brands and our technology.
And Andrew on the margin question we are in.
Referring referencing pre COVID-19. So I think the way to think about it is our EBITDA margin at the pre Covid was around 14% alcohol I think it was actually 14.1.
The 200 to 215 is related to that.
Great. Thank you very much.
Your next question comes from the line of John <unk> with J P. Morgan.
Hi, Thank you obviously you have you doubled your off premise.
Sales per unit at Olive Garden, basically fourth quarter 'twenty, 1 versus fourth quarter up 19, so that does leave a pretty substantial amount of capacity that kind of remains for on premise dining. So I wanted to ask a few.
<unk> on that.
You mentioned that much of off premise is being used as a whole meal replacement that would suggest I guess, a lack of cannibalization for on premise dining, but can you possibly update those if you know the cannibalization numbers between the percentage of off premise sales that are coming from on premise.
And I guess at this point and Rick do you think it's a opportunity and necessity to basically bring back those on premise customers work with olive garden, just so busy before that maybe people aren't getting to eat at the times that they want but just as you think about.
Getting that off premise sales on premise sales per unit back to the 100% level that you'd previously.
<unk> had in 2019, and if theres anything that you could talk about whether it's age core cohort that level of vaccination state by state what have you that shows different yes.
So it's SaaS of achieving on premise sales 21 versus <unk> 19.
That was that was there was a lot in there I'll I'll I would say I don't want to be brief here is we're going to do whatever we can to drive as much on premise dining inside olive garden as we possibly can profitable.
Unprofitable sales in the dining room, and we're going to try to grow as profitably as we can in the off premise channel.
We also have to recognize that at this point in time, there's still a lot of people out there in our trade areas that arent arent comfortable going into restaurants, yet and so we still have a ways to go to understand where that natural sales level for olive garden is going to low.
Hello.
And a lot to learn and so we.
We haven't been that granular yet to understand who the consumer is we'll get there once we once we reach this new this new place.
But you know our goal is to drive as much business as we possibly can profitable business as we can in restaurants and do as much profitably as we possibly can off premise.
And do you have a sense of.
The amount of sales transfer between on premise and off premise where is that is that data that still needs to come.
This data that needs to come in this day environments. So dynamic.
And when we will need to analyze that we've got the analytics to be able to really.
Look at that once we get to this equilibrium that I'm talking about.
Fair enough. Thank you gene.
Your next question comes from the line of David Palmer with Evercore ISI.
Thanks.
So you can have a follow up on that.
If we assume the 15% sales mix at Olive garden pre Covid was off premise youre looking at something like down high teens on premise on a 2 year basis, if that sounds about right.
What constraints do you think we're on the on premise business in May and is it is it really this consumer comfort that that's driving that decline and how are you thinking about those factors as we go through 2022 I would be curious to hear whether you think there are any constraints that you would imagine to the on premise business getting <unk>.
Back to you say flat or even higher than 2019.
Well I mean, I think you have to you know you have to think about what our promotional.
And marketing strategy was right.
Right now we're just we're out there on TV just doing some brand advertising.
We've been able to remove all incentives and all discounts from the business.
We'll continue to analyze.
When might be bright opportunity to put some of that back in I mean this is a complicated question.
Olive garden has never ever operated at these margin levels.
<unk> volume.
And so we need to we need to move slowly.
And I don't think that we're looking at what capacity was in 19 and trying to triangulate. This the way you guys are talking about it we're trying to drive as much profitable sales as we possibly can.
So you know what.
Just extremely pleased of where this business is and you know we're not going to we're not going to run the business and try to chase an index.
And get back to some level.
And deal with it and look at our business. When you look at our business differently than maybe others are looking at it and I just couldn't be happier where we are.
Position your olive garden business.
The record profitability that this business is throwing off.
Yeah.
I'm thinking back to some of our earlier conversations on these earnings calls and I know you were thinking that day.
That you might actually have this on premise swell, where you would overshoot on the on premise it's.
I wonder if we might be a couple of quarters away from that if the comfort levels continue to build it.
If that happens do you think.
The capacity in terms of labor.
The seats.
The lack of cannibalization from off premise I mean, do you think that that could happen do you still see that potential.
I think I think that is.
Let me just let me clarify 1 thing. This is not this isn't being held back by labor in our restaurants are fully staffed on the weekends.
We're doing our 3 or 4 turns.
And in Olive garden.
I think the issue is.
You know if you told me that we could get back to a 100% of sales in olive garden.
And spend $100 million less in advertising I didn't think we could do that.
And I'm thrilled with where we're at based on what we're spending and how where and what.
Where our profit is per guest at these levels.
We will continue to focus on driving profitable sales growth and where that ends up that ends up.
Okay. Thank you.
Your next question comes from the line of John Glass with Morgan Stanley.
Thanks, very much first just gene back on the industry and your outlook.
Capacity is being reduced your margins are high how do you think about M&A in the portfolio right. Now is this a good time to think about adding brands.
As pricing difficult are you just very pleased with the current business and portfolio that you really don't think about M&A in this environment well we are.
Always talking with the board and senior management about what the possibilities are to add a brand to our portfolio that would benefit from being on our platform.
On our platform and we would benefit that they would come onto our platform. So we're always thinking about that but more so today, we're thrilled with where the business model transformations in our business and we're very happy to invest our capital into our businesses and capture the return that we're getting today on those.
Businesses.
Thank you and Raj if I could just clarify you said you thought in 'twenty 3 you could hold most of the gains in margins that you got this year. Historically Darden has talked about 20 to 40 basis points, maybe a margin gain year on year, just a natural leverage is there. Some reason why 'twenty 3 and beyond may be different like maybe marketing may be arrested you've got to add some of that package.
How do we think about beyond the current year in terms of margin expansion.
I think John that's where I think there's still some time until we get to fiscal 'twenty, 3 and beyond and really I think we need to better understand the economic and competitive environment and just you know we got to get calling on this business model, where we ended the real.
I guess I'll use gene storm of equilibrium is I'm, just kind of really want to get find that but.
But I think where we are today given the dry powder, we have whether it's with pricing or other levers we can pull.
We do feel confident we'll be able to keep most of the margin gains.
And I'd say I like I said, what kind of you know we will let it play out and we'll have more to share on that next time.
Thank you.
Your next question comes from the line of Jake Bartlett with Truth Securities.
Great. Thanks for taking the question gene I was wondering its great to see the recovery with Olive garden, but is there a percentage increase versus 19, it is less than some of the other.
Publicly traded companies that have reported.
Can you just maybe give us a couple of the reasons why you think that is.
I imagine because you were at high capacity in <unk>.
19, or you have less marketing, but maybe just help us understand why olive garden has recovered to a less degree than a lot of the others.
Well, because we're not participating giving away a food through third party channels.
We're not discounting heavily went up we're not just counting our cash like others are through selling gift cards, and we're running a business here to try to drive profitable sales growth. We've got a business is doing over $5 million per average unit volumes in the fourth quarter, we put up 25% restaurant level margins isn't our job to try to drive profitable.
Sales growth.
That's what we're focused on and so there are a lot of reasons why we're not we're not keeping up with what were some of the other people are going there's a lot has changed in 2 years and how they are handling their businesses. Some of them have virtual brands and all this other stuff that's out there I mean, guys you got to get off. This I mean this is the best business in casual dine.
Not even by a little bit anymore, biomarker and were doing $5 million in average unit volume with 25, plus restaurant level margins and growing.
We've got our guests are loving the experience they love the credibility of the food. They love the changes that we made and we're executing at a very very high level I think we're going to continue to grow.
Great no.
I really I'm not chasing an index and we're not chasing where we were in the past.
Loved our position today.
Great I appreciate that.
Ultimately this is a question about the industry and about the cadence of oven.
The comps from April to May to June we've seen.
People are getting vaccinated capacity restrictions being lifted.
Why don't you why do you think the cadence is not increasing why why why why don't you think.
Nabors is your universe may versus April is is increasing but what are the offsets to some of the benefits which are capacity restrictions being lifted and people are getting vaccinated.
I'm not sure I understand we did so we did see sequential improvement throughout the throughout these months. These look like pretty strong numbers as I look at them across we saw it fine dining go from 12 down to 6 in May that's without.
New York restaurants, we've gone from other business day.
From 14 in March I mean, we're seeing sequential improvement.
And again I think that you know as we think about it.
This has been a very very fast recovery and as people start to live more normal.
Normally gets you back to some normal behaviors.
We think it's implied in our guidance that we're going to get back to a pretty good pretty good level here.
Great I appreciate it.
Your next question will come from the line of Jared Garber with Goldman Sachs.
Hi, Thanks for the question Joe.
Gene and Rick you talked a little bit about the technology initiatives and some of the success you are having with the tabletop tablets and I think last quarter. You talked also about how this has maybe attracting a younger consumer to some of the brands I. Just wanted to know if you had any update there on what youre seeing on the consumer side related to some of this technology and maybe if you think the next kind of several years out what are some of the consumer facing.
Technologies do you think you will see or will see enter.
And to the restaurants space and Ian dining room.
Part of the business. Thanks, Hey, Jared. Thanks. This is Rick the you know the investments that we've made it really recently is more about the off premise experience right and so there are just anybody who's come into our restaurants off premise that people that used to come in inside that may not still feel comfortable to come inside or going to off premise and we are.
We're getting a new consumer.
Eddie Cheddars, we have a new new consumer that didn't come to Cheddars before I want to I don't want to get into the details on that which gives us more confidence in their ability. They do have the tabletop tablets.
I'm going to say that their consumer is younger or older because of the tabletop tablets.
They're learning about Cheddars.
So we're going to continue to invest as I said in removing friction to make it easier for our guests to eat.
They want when they want.
How they want and make it easier for our team members to serve them and so that's what we're going to continue to do without getting into the detail on the new guests or if technology is driving new guests I'm not gonna stay technologies driving new guests.
Yeah.
Our next question will come from the line of Brian Vaccaro with Raymond James.
Hey, Thanks, and good morning Gene I, just wanted to quickly circle back on the positive industry view in a post COVID-19 world and kind of ask specifically, how do you expect consumer behavior to normalized as it relates specifically to cooking at home versus ordering in and also how you see that consideration set that may have expanded for the average consumer to.
<unk> casual dining for an off premise occasion, where that was not in the consideration set pre COVID-19 anything in the technomic data or other data to sort of size that opportunity to capture share of previously at home cooking occasions.
Bryan I'm not sure I can quantify that but I think you answered it maybe you answered your question and your question is that.
Casual dining off premise experience definitely got more exposure through Covid and I think people that would've never use that experience, probably because they werent casual dining users Uh huh.
That's a really good option.
For a home meal replacement. So I think that's an area, where you're going to be able to.
You know how low can hold onto this new consumer and maybe you know continue to market to them effectively.
We don't have a whole lot of insight on.
Cooking at home and home meal replacement I do think that.
Youre seeing mobility increased significantly.
Especially in the states that were heavily locked down.
I mean, I spent a lot of time in the north East to last couple of weeks, its very quiet compared to what I see in Georgia, and Florida when I travel.
So the ability still has the opportunity to increase in these in these marketplaces.
I don't know, where I think we still got another 6 to 9 months to understand what.
If we don't have any more problems with COVID-19.
Going to be the normal behaviors that are going to you know develop out of this and whats.
What was you know and adaptive behavior and what was normal.
We'll you know we'll get there over the next 9 to 6 to 12 months and we'll have a better understanding consumer behaviors and then I think you start developing your marketing plans and you get a tactical on how to get to the get to these folks and try to get them into your restaurants or use you as an off premise.
Mhm.
Makes total sense and a quick follow up on the guidance and Raj sorry, if I missed it but what does the guidance embed in terms of G&A and marketing spend in fiscal 'twenty 2 thank you.
We did not necessarily share that detail, but I'll just tell you like I think the G&A as you expect you could expect to get some leverage on G&A and we expect.
Marketing can be significantly reduced from pre COVID-19.
Without getting into the exact numbers. So that's what I'd tell you.
Yes.
Okay.
Yeah.
And I'll now turn the conference back over to management for any final remarks.
Thank you that concludes our call I'd like to remind you we plan to release first quarter results on Thursday, the 20 <unk>.
September 23rd before the market opens with a conference call to follow thanks and have a great day.
Ladies and gentlemen that will conclude today's call. Thank you all for joining you may now disconnect.
[music] zone.