Q4 2021 Red Robin Gourmet Burgers Inc Earnings Call
Good afternoon, everyone and welcome to the Red Robin Gourmet Burgers incorporated fourth quarter 2021 earnings call.
Please note that today's call is being recorded.
During today's conference call management will be making forward looking statements about the company's business outlook and expectation.
These forward looking statements and all other statements that are not historical facts reflect management's beliefs and predictions as of today and therefore are subject to risks and uncertainties as described in the safe Harbor discussion found in the company's SEC filings. During today's conference call management will also discuss non-GAAP .
Financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles, but are intended to illustrate any alternative measure of the company's operating performance that may be useful.
Reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in the earnings release.
The company has posted its fiscal fourth quarter 2021 earnings release on its website at <unk> Dot Red Robin Dotcom.
Now I would like to turn the call over to Red Robin's CEO Paul Murphy.
Hello, and thank you for joining us today.
I'm here with Lynch wine for our Chief Financial Officer, who will review our quarterly results in detail after my opening remarks.
Let me begin with our fiscal Q1, 2022 sales trends before updating everyone on our business initiatives through the first period of our fiscal first quarter comparable restaurant revenue was down one 1% compared to the same period in fiscal year 2019.
Driven by trailing impact of the surge the omicron variant and continued staffing challenges and team member exclusions.
During the second period as Omicron receded guests started to feel more comfortable dining out and we experienced fewer team member exclusions.
As a result comparable restaurant revenues increased to five 3% compared to 2019 levels and we are pleased with our period to sales trends and are seeing this momentum carry into the third period.
When I joined Red Robin in 2019, what are the attributes that I most admired whereas the company's unique brand position in the industry. Our guests are everyday people seeking connection with friends and family across a diverse and multi generational demographic.
While the pandemic has certainly brought forth complex challenges it has enabled us to improve our operating and financial model.
I feel more strongly now than even before that are distinct to red Robin brand equities position us well for future growth.
To complement the company's strengths and its brand equity and identity, we have aligned our strategic initiatives within the following four pillars.
People to be the employer of choice in the industry.
Food to deliver a variety of gourmet burgers and mainstream favorites that our guests love.
Guests experience to create relevant personalized memorable guest experiences and foundation to execute profitable growth platforms.
On the people front, we champion a culture of diversity and inclusion where our people are develop recognize and celebrate it staffing remains our number one priority and it goes hand in hand, with creating a compelling team member value proposition.
Having a properly staffed restaurants in turn enables us to deliver a quality guest experience, which leads both to higher sales and supports our team members in a manner that prioritizes their satisfaction and retention.
We have worked closely with our operators to determine a par staffing level by individual restaurants staffing requirements are.
Our staffing focus begins with being properly staffed at the restaurant management level, and we are making meaningful progress in 2022 hiring approximately 15 management team members per week through the end of our second fiscal period at.
At the end of 2021 we were 93% staffed and salaried manager positions.
And 96% staffed and the general manager role.
Currently we are staffed at approximately 85% of overall par levels.
As the company approaches full staffing in our management positions, we expect overall restaurant staffing improvement to accelerate.
The ongoing demand for Red Robin is very strong.
What we are solving is a staffing issue, which is limiting our throughput not a brand issue.
Our period to sales trends demonstrate that margin will continue to improve as we improve our staffing and restrictions having receded, what's the trajectory of Amazon and our most significant markets.
Enabling us to provide the occasion, our guests expect from my visit to our restaurants.
We recently hired Wayne Davis, as our Chief people Officer, a respected executive who brings robust experience for multiple industries to red Robin.
Wayne is already leading proven initiatives to support individual restaurants, and driving applicant flow, including the use of outsource recruiting assistance to amplify internal resources.
Given the competitiveness of the market with respect to compensation, we are constantly monitoring our compensation policies to ensure that we attract and retain talent.
We are also engaging with our workforce to understand and improve our team member value proposition because compensation alone is not sufficient to ensure a happy workforce.
In fact, we have completed a discovery initiative to better understand what matters to our team members and how we can improve their quality of life and create a sense of belonging and we wont be incorporating these learnings into our culture to further improve these important relationships.
Red Robin's food makes no mistake about who we are we deliver a variety of gourmet burgers and other mainstream favorites that guests love, we have several initiatives underway to further differentiate and elevate our product offerings, including our limited time offer menu items in.
In Q4, we featured our cheese lovers limited time offer lineup, including a cheesy Bacon fondue, Burger and our mozzarella cheese sticks.
The cheesy Bacon Fondue Burger has been among our best performing limited time offers of all time.
Because of its popularity we have continued to offer it as a featured burger on our menu in Q1, which has the added benefit of reducing operational complexity.
Donato Pizza has also proven to be a strong addition to our brand and has more than earned a spot on our menu.
In 2020 , one we rolled out donato as to 120 restaurants, including 41 in Q4.
And ended the year with high quality pizza available at 198 restaurants.
Donato has generated sales of $4 $8 million during the quarter aided.
Aided by an increase in marketing support at certain restaurants, and Donato as restaurants continued to demonstrate strength relative to the rest of the red Robin system for the full year Donato has generated sales of $14 $4 million.
<unk> continues to drive meaningful growth for Red Robin, notably restaurants that have served in autos prior to 'twenty 'twenty. One also continued to grow incremental sales beyond the first year as operations mature and brand affinity grows.
For those that did not encounter supply chain impacts comparable restaurant revenue grew eight 1% in Q4 compared to 2019.
Additionally, during 2021 guest checks that included Donato speech, so were on average over $10 higher than those that did not include pizza.
Both of these metrics serve to demonstrate the potential of our partnership with Donato.
We view Donato, so as a long term success vehicle and nothing is more important than getting it right on day, one at every restaurant, where it is implemented as.
As I previously mentioned as the company works to stabilize operations at restaurants, where staffing is considered to be below par levels. We want to enable these restaurants to focus on on the hiring and training of new team members before adding incremental menu initiatives.
This will ensure our guests receive an outstanding service experience for.
For these reasons, we have moderated our rollout of Donato as to approximately 50 restaurants in 2022 with a kitchen equipment already secured and will complete our rollout to the remaining 150 in 2023.
Recall that a full implementation of Donato should generate annual company pizza sales of more than $60 million and profitability of more than $25 million. This remains our goal, but it will now be a 2024 event as well.
The rollout will not be completed until sometime in 2023.
As we address the trailing impact so the omicron variant and the industry staffing headwinds we are leveraging our total guest experience hospitality program to deliver fun and playful service that is tailored to our guest's time, an occasion and delivers exceptional value to our commitment to bottom.
I'm, a steak fries and beverages, providing outstanding guest experience is as important as it has ever been.
During Q4, we sustained an off premises sales mix of 31, 4%.
Each represents the seventh consecutive quarter of sales that are more than two times pre pandemic levels of approximately 14%.
Because of our value proposition and extensive menu offerings red Robin is well positioned to capitalize on shifting customer behaviors to off premise occasions, which is why we are constantly seeking to elevate the off premises experience through all possible levers.
I'll discuss how we are accomplishing this digitally in a moment, but physically we have increased space for off premises orders through building modifications to improve efficiency and accuracy.
And we'll be continuing these reconfiguration efforts to benefit both dine in and off premises execution.
During Q4, we opened a new restaurant, which utilizes our new prototype configuration. The design enhancements are geared towards improving dine in and off premises and curbside execution, while the optimized kitchen layout enhances efficiency.
We are highly encouraged by the performance of this restaurant as it has achieved average weekly sales of over $80000 through the second period and is tracking to be a well over $4 million restaurant in terms of annual sales.
We are developing our real estate pipeline for resuming modest new restaurant growth.
Leveraging our enhanced prototype design and targeting high return markets, where we have a combination of strong presence and brand recognition.
Turning to our foundation, we have developed several platforms designed to drive consistent and profitable growth. We are investing in these platforms that include our digital ecosystem to support the growth of dine in off premises and catering channels.
Selling our story through compelling messaging has been imperative to red Robin.
Our campaign showcased the soul of the brand and a former I guess of our enthusiastic dedication to delivering a great guest experience.
At the beginning of 2021 we pivoted, our marketing efforts to be exclusive to digital media.
This pivot has been successful for our brand.
Enabling us to efficiently and effectively target and engage with existing and new guests.
Our messaging is focused on communicating our brand promise of memorable moments of connection.
Our digital marquee momentum continued in Q4 with strong digital media returns driving year over year traffic growth.
Our efforts are targeted at driving traffic and sales to restaurants that we're staffed and ready for incremental guest visits.
We leveraged new product news and tailored our messaging to highlight dine in or off premise occasions, taking into account local conditions.
We made further progress in Q4, advancing our digital strategy by soft launching our iOS and Android mobile apps and integrating them with our newly enhanced loyalty platform we.
We have vastly improved our red Robin royalty communication capabilities through segmentation and personalized messaging based upon purchase history, resulting in all time high levels of engagement.
We recently began marketing our new mobile apps to guests, including the more than 10 million members of our royalty program.
Our external marketing efforts showcasing the new apps and enhanced digital guest experience will continue to expand in the coming months.
We are also launching a new website experience in Q1 Bill.
Building upon the improved online ordering experience that launch in Q4.
This new experience will be much more user friendly and creates a seamless digital ecosystem that can drive incremental frequency traffic and guest check.
Let me add that we view, our digital assets as always ripe for improvement and intend to make ongoing enhancements. Subsequent to these launches. These will include Geo fencing, which will inform restaurants when the guest is near for pickup as well as implementing additional payment options to enhance convenience such as Apple pay.
And Google pace.
Our marketing efforts in 2022 will continue to be primarily digitally base, which allows us to target our messaging both by geography and to specific consumer segments in a cost effective manner, we will drive awareness and trial of the new App and website ordering experience, which should lead.
To higher order conversion, while offering superior upsell capabilities.
We will also utilize traditional local marketing to raise awareness and support that donato rollout.
Our virtual brands, which are driving incremental digital and off premises sales offer distinctive high quality products that enable us to fully maximize our kitchen capacity without adding operational complexity.
Three virtual brands are available system wide and across all delivery platforms. We are also in the final phase of launching an additional license brand across our system <unk>.
During Q4, our virtual brands.
Which each target specific demographics collectively generated $8 $4 million in incremental sales to.
To conclude we recognize that we had been hindered in our ability to rebuild sales momentum and maintain or increase profitability as we deal with the ongoing pandemic and staffing challenges and other inflationary pressures affecting our supply chain of course. These issues are macroeconomic not company specific.
Note that the demand for Red Robin experiences dine in and dine out persist as strongly as it does because when we empower the people who make red Robin possible re create memorable moments connecting family and friends over great food, while delivering a fun and playful guest experience is through our key for.
T J <unk> initiatives that we are building the foundation to position us to gain market share and increased guest frequency. Let me now turn the call over to Lance to review our Q4 results. Thank you Paul well, our fourth quarter results were impacted by the AMA crime, various and continued industry staffing and supply chain channel.
I remain confident in our future our improving dine in sales trajectory incremental off premises sales channels and continued dedicated execution of our business strategy together will drive meaningful long term shareholder value.
Turning to fourth quarter result, and a 41% increase in fourth quarter comparable restaurant revenues compared to 'twenty 'twenty was primarily driven by operating our dining rooms at increasing capacity.
Compared to the fourth quarter of 2019 comparable restaurant revenue was down 7% with the sales trajectory that faced headwinds through the holiday season with the onset of the crime strain. However, we have seen an improvement through the second period and into the third period of our first fiscal quarter.
I'm a crime has receded as Paul mentioned.
We delivered our seventh consecutive quarter of off premises sales mix at more than double pre pandemic level at approximately 14% comprising 31, 4% of total food and beverage sales compared to $43 nine and 14% in 2020 and 2019 respect.
Definitely importantly, we have been able to retain the same level of fourth quarter off premises sales dollars in 2021, as 2020 or approximately $85 million demonstrating the lasting improvements made in our off premises sales channel since 2019.
As a percentage of total off premise sales third party delivery represented 54, 8% to go represented 36, 6% catering represented four 9% and Red Robin delivery represented three 6%.
Full year net cash provided by operating activities was $47 $3 million, while cash used in investing activities was $42 $2 million in cash provided by financing activities was one $6 million since the end of 2019, we have paid down $29 9 million.
In that.
We completed our lease re negotiations and restructuring initiatives that we began in 2020 as a result of the COVID-19 pandemic, resulting in 3% to 4% occupancy savings over remaining lease terms on restructured lease that we ended the quarter with liquidity of approximately five.
<unk> $7 $7 million, including cash and cash equivalents and available borrowing capacity under our revolving line of credit.
We intend to continue effectively managing our bottom line and dedicate our free cash flow over the next several quarters to reinvesting in our restaurant infrastructure and systems, while maintaining flexibility to pursue strategic initiatives that will generate profitable sales growth going forward.
Now turning to some of the specifics related to the fourth fiscal quarter Q4, 2021 comparable restaurant revenues increased 41% driven by a 26, 6% increase in guest traffic and a 13, 5% increase in average guest check the increase in average check.
First check resulted from a 7% increase in menu mix, including incremental sales related to check that include denied as pizza.
Four 2% increase in pricing and a two 3% decrease in discount.
Fourth quarter total company revenue increased 41% to $283 $4 million up $82 $3 million from a year ago, driven by operating our restaurants had increased capacities in Q4 and lapping prior year sales more aggressively impacted by the COVID-19 pandemic.
Total company revenue decreased by six 4% compared to the same period in 2019, primarily due to closures of unprofitable restaurant.
Restaurant level operating profit as a percentage of restaurant revenue was 13% and an improvement of six eight percentage points compared to 2020, primarily due to the following rest.
Our restaurant revenue increased $81 $1 million, primarily driven by favorable guest count menu mix pricing and discounting.
Cost of goods sold increased by 220 basis points, primarily driven by commodity inflation and timing of certain rebate and substitute products, partially offset by menu pricing and favorable mix shifts.
Labor costs decreased by 350 basis points, primarily driven by sales leverage partially offset by restaurant labor cost inflation staffing and training costs. Other operating expenses decreased by 170 basis points, primarily driven by sales leverage partially offset by <unk> <unk>.
Increased third party commissions higher off premise packaging cost and increased hiring costs.
And occupancy costs decreased by 380 basis points, primarily driven by sales leverage and savings from permanently closed restaurant and restructured lease payment.
$3 $2 million of transitory labor and other operating costs were incurred due to staffing challenges, including hiring and training costs.
Two products temporarily outsourced janitorial cost one time bonuses and overtime pay.
For the fourth quarter hourly wage increases were in the high single digits.
Effective pricing was three 6% for the full year, given our relatively modest pre pandemic price increases that have been in line or lagged. The industry. We believe we have flexibility to take additional price if needed to mitigate ongoing inflationary commodity and labor pressures. We also expect increased.
Daffiness supply chain transitory costs, extending beyond that fourth fiscal quarter.
Looking forward leveraging our digital ordering enhancements, we expect to drive higher checks by featuring appetizers beverages and other add on items that appeal to specific guest segment, while staying committed to our bottomless promise and core value proposition building on our recent success with new products.
Such as our cheesy Bacon fondue, Burger and Scorpion Gourmet burgers, our menu innovation, we will focus on driving higher check and margin.
Finally, we expect that channel mix will contribute to higher checks as dine in sales continued to recover.
General and administrative costs were $17 $8 million, an increase versus the prior year of $1 $3 million, primarily driven by higher manager and training costs and increased travel cost.
Selling expenses were $15 $7 million, an increase versus the prior year seven $8 billion.
During the quarter, we recognized other charges of $6 $8 million, primarily triggered by the COVID-19 pandemic. These charges included $5 $7 million related to the impairment of long lived assets associated with our excess property $1 million related to restaurants.
<unk> and <unk> $2 million for COVID-19 related costs, including purchasing personnel protective equipment and COVID-19 related sick time for our restaurant team members.
Fourth quarter, adjusted EBITDA was $8 $9 million as compared to an adjusted EBITDA loss of $6 $4 million. In Q4, 2020 Q4 adjusted loss per diluted share was $1.03 as compared to adjusted loss per diluted share of $1.79 in Q4.
For 2020 on March 4th the company replaced its prior credit agreement with a new $225 million five year credit agreement with fortress credit card. The new credit agreement provides for a $200 million term loan and a $25 million revolving line of credit and with the range by.
J P. Morgan Chase as sole lead arranger and sole book runner. The new agreement gives us long term flexibility to strategically invest in our business and create value for our shareholders.
At quarter end, our outstanding debt balance was $177 million and letters of credit outstanding were $7 $9 million. Additionally, please refer to our earnings release that was issued today shortly before this conference call, which introduces our 2022 guidance.
Before I conclude I'd like to thank our entire red Robin team for the results. They are generating despite the significant challenges COVID-19 has brought to our business. We are confident in our ability to meet these challenges and deliver long term value for all of our stakeholders with that I will turn the call back over to Paul.
Thank you Lynn, we believe that our ability to deliver the highest quality guest experience is key to driving top line growth profitability and long term shareholder value with this mindset, we are executing our business strategy overcoming obstacles and pushing ourselves forward.
To a bright future for our brand our team has been incredible and exhibiting their passion for red Robin and finding solutions to help us navigate through the operational pressure points as they have arisen there.
Or why I'm, so bullish as to our direction and appreciate all that they do for our company each and every day and with that let US now open the call for questions.
Thank you.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
If youre using a speakerphone please pick up your handset before pressing the cheese.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble IRA.
Our first question comes from Alex <unk> with Jefferies. Please go ahead.
Hey, Thank you Hey, Paul then.
Thanks.
Yeah Alex.
The jump in the February sales was it was pretty notable relative to like the previous levels back in the fall and then broader trends we've seen.
But I would have expected more headwinds just given the brand's significant exposure into the western states.
Held onto them ask mandates a bit longer than the rest of the country, California, Rolling off, but Washington, Oregon, I guess still to come.
Just wondering if you could kind of talk about what you've seen in those states that had rolled off the mandates.
That's a notable impact.
Well Alex this is Paul it is a notable impact as the as the.
Restrictions.
Begin to roll off and Youre correct, California.
Kind of led the way in.
We had restrictions in Washington State and Oregon and also in <unk>.
In Illinois, there were some pretty strict.
Strict.
Restrictions in Cook County, and then some smaller markets, but now we've seen a.
Just a real change in the sales trajectory in the in those markets as the restrictions falloff and.
Quite honestly, it's something that.
It's pretty impactful.
For the whole market and then for the brand itself. So I mean, we're pleased to see the not only the omicron fading but.
Some of the other restrictions that kind of came in all around it are fading off and.
It is having a real positive impact on our on our business and I would just add Alex that were also seen off premises main pretty consistent but our dine in sales are incrementally building right and that really helps the trajectory and it also will help future flow through as well.
Got it.
And then just a question on the.
The loyalty program and digital bordering assets I mean, red royalty is pretty large I mean, the membership base relative to your size in peer group.
I'm kind of interested you touched on some of that but if you could expand further on the opportunity to leverage this more meaningfully in 'twenty two but if there's any initial results you've seen from that that the new loyalty rollout I know, it's pretty early in the mobile ordering functionality if there's like changes in average check.
Check our frequency or anything else you can comment on.
Well they are.
First of all we're very pleased to have gotten it out the door. So to speak in Q4, both the new App and then the improvements to the overall our royalty program, but.
I think that you know just a few of the things. So the first thing around the new App. It just makes the whole ordering process much smoother much more intuitive.
And so we're very very pleased with that just kind of a couple of stats that in during.
During Q4, we had almost a quarter million new registrations in Q4.
The royalty percentage of revenue was up about two 4% over Q4 of 2019, which is at about 41, seven and the average shut for royalty is about.
About $3.90 higher than a non royalty.
Remember so quite honestly they are just more profitable than the <unk>.
Non members for us so we see that the sales per guest for a royalty members about roughly $134.
For the year and about you know kind of mid <unk> for a non royalty member. So it is a real driver for the brand and what the both I think the App and the royalty program do is allow us to better communicate with that.
You know that royalty member to get to know them better and in the new App. The royalty program is live on that so it just gives them another reason to be a part of the royalty program.
And I think as we mentioned it was a soft launch it's really in this month moving forward that we're going to begin to be more aggressive in introducing it to the marketplace are very.
Very happy with the impact both topline and Bottomline, so far, but we think that much more to come as we.
We get aggressive about frankly marketing it and doing a lot of our initiatives through the app and the loyalty program.
Okay. Thank you for that and then just two questions on the 'twenty two outlook and.
The $80 million to $90 million adjusted EBITDA.
Forecasting.
One I guess on if you could quantify the impact.
From a micron in the first quarter, how that maybe you said it back at all.
If that was material and then just assumptions that you have underlying the recovery of the dining room capacity in off premise stickiness. If you can provide any color on that.
Yeah.
I'll start with Omicron I mean, it's incorporated into the range that we provided as part of guidance.
We saw an impact.
You know in December initially that carried forward pretty much to the month of January and then we started to see trends improve as we've already indicated.
I would say on the dine in business.
Alex and I'll kind of starting mid January we've just seen a nice cadence of dine in improving.
Kind of week over week.
We believe as restrictions continue.
To recede in.
Guest become even more.
Kind of I think attuned to the new normal that I know that that part of the business is going to continue to grow and I think as you know that's our most profitable parts. So we're excited.
To see the impact that that can have notably on the topline, but also on the bottom line as we move through this year so to Lynch point.
And the guidance that we gave that takes into account the impact of omicron certainly in Q1.
Okay.
Okay. Thank you.
Our next question comes from Todd Brooks with benchmark. Please go ahead.
Hey, good evening to you both.
Hi, Peter.
A couple of quick questions. If I may there was a comment that was in the release talking about margin pressures persisting into <unk>.
Fiscal 'twenty, two but the trajectory improves year over year I, just I want to clarify are you guys talking about margin pressures versus fiscal 19 versus fiscal 'twenty, one what what should we be thinking about maybe kind of sequentially exiting out of <unk>.
Q4 of 'twenty, one and into 'twenty, two from a restaurant level margin standpoint.
Yeah, I think what the intention of that language was really to demonstrate that we would see higher inflation in early 2021 and through our 2022 excuse me through the mid part of the year, because we had very low costs in 2020 at the same time period, and then as we got to the middle of the year lag.
Last year, we started to see inflation, so our year over year increases will decline through the year.
And that was really the intention for some of the language included.
I will also say you know, we believe with an improved sales trajectory with improved staffing through this year and with a reduction of transitory costs that will have a sequential improvement on our margins as we proceed through the year.
Okay, great. Thanks, a lot and then maybe to flip it around to the backside of the year right now.
There was a comment that you're looking for restaurant level margins in 'twenty three.
Equal what you generated in fiscal 19.
Can we talk about maybe what that implies for an exit rate I'm just trying to figure out how much of the improvement we see over 20 to getting back there or how much of it is hanging on further recovery in 'twenty three to get back to those high 17% 18% levels.
No.
I would say we would be within a percentage point in terms of the.
The fourth quarter exit rate compared to the 2019 full year margin.
That's very helpful. Thank you and I believe you talked about.
Paul in your verbal comments, the room to take price, but I think in the release you talked about an actual planned.
Price increase can we talk maybe timing and magnitude on that.
Yeah, I'll start and Pat chime in it's going to be in the mid single digits based on at least what we expect right now.
We typically take pricing two times a year.
We're taking it in a little bit more of a blended way in the first half of this year and then likely in the fourth quarter.
We will take another or will have another pricing of that.
Okay, Great and then just one final one and I'll jump back in the queue.
The SG&A guidance, the $145 million to $155 million versus.
123 million.
In 2021 whats.
Driving kind of a little bit of a step function up in spending on those line items.
A few things one is we are planning to spend more in terms of advertising and selling cost.
Well, we really muted some of our marketing efforts and 2021 as we you know we're challenged with staffing and some of our other jurisdictional challenges.
So we'll try to get to more of a normalized spending rate in 2022 from a selling perspective.
And then on the G&A front, we certainly have some inflationary costs related to G&A and we also have a general manager conference that was virtual only.
In the prior year, and then actually the design of some of our stock based compensation is resulting in higher expense recognition in 2022.
Okay, great. Thanks for the detail jump back in the queue.
Our next question comes from Brian Mccarren with Raymond James. Please go ahead.
Hi, Thanks, and good evening.
I wanted to go back to the quarter to date improvement that you're seeing on sales and just to make sure. We're all on the same page could you give us a sense of where average weekly sales are currently running exiting all micron and maybe also remind us what normal seasonality would look like as you move into the spring months.
Yeah, I'll start with normal seasonality, we see a drop in seasonality in January and February and then it starts to pick up in March and April as we get to the spring.
And then in terms of average weekly sales.
Yes.
Okay.
Sorry, Brian I can't remember the number I have to look at some of our details here.
No problem no problem.
So average weekly sales in P. One were almost 52000 and then impede two <unk>.
We're almost 54000.
Okay, Great that's helpful.
I wanted to ask on the staffing front as well and specifically your hourly staffing levels. I think you said around 85% of par levels exiting 2021, and I just wanted to if that's right I. Just wanted to clarify is that par level is that the same as in 2019 or can you frame where your current pars are.
Versus pre Covid, and then could you give any kind of give us a sense of to what degree you've seen staffing levels improve further exiting all microns compared to that 85.
Brian This is Paul.
Par levels are.
Depending on the volume of the restaurant anywhere from 10% to 12% higher than 2019 and that.
He has taken into account the.
The second is the off premise business.
And then.
Obviously.
We see the trajectory that we're beginning to see in the dine in businesses.
I mentioned, a little earlier, we're starting to see.
All week over week improvement in in dine in.
<unk>.
We're starting to see Oh, just I think a couple of things and the numbers I'll speak on.
On the management side.
We feel that we're just just about fully staffed on the management side of the business and have seen the turnover rate there have dropped back down to what I would call kind of a more of a normalized range.
On the team member side, we're seeing a ability to drive more applicants than maybe we did.
During the omicron time.
And we've been seeing a nice steady move on that but it's still a little bit slower as we mentioned in the call we have <unk>.
Engaged an outside resource to help us with team member recruiting.
Basically.
Give internally help our internal teams to.
To help move that along a little bit faster so.
I feel good about the progress on that.
And as I said in my prepared remarks, it's a.
Let's get the management stabilized and where it needs to be first and we feel like we're there today and then we feel like that's going to help accelerate the team member part is we have buttress that with the outside resources and so we're we feel like we're on a good trajectory and that's even going to enable us.
To move quicker and growing our dine in business is dine in is all about capacity just to be very blunt about it.
Yep Yep understood. Okay, and then just lastly for me on the commodity front and sorry, if I missed it but what was your year on year commodity inflation on the basket in the fourth quarter.
It was roughly 9%.
Okay, and then as you think about the mid single mid to high single digit guide for the year, what that cadence looks like first half second half and then could you also give us an update on the percent of your basket that you're currently contracted on and any items of significance that you're currently not contracted on.
Okay, well as it relates to commodities, we believe will be in the low double digit to mid double digit inflationary.
Comparison in quarters, one and two and then it drops down to more of a single digit increase in Q3, and then we think it will be flat to slightly negative in Q4.
From a basket perspective, we have the majority of our commodities locked in.
But really in the middle part of the year, we do have some contracts will be negotiating around bread and Fry oil in particular, and then also some of our condiments like dressing.
Alright, that's great I'll pass it along thank you.
Your next question is a follow up from Todd Brooks with benchmark. Please go ahead.
Okay. Thanks.
One quick follow up.
Obviously real success over kind of the back half of the year with D. L. T OS.
And you talked about continuing cheesy Bacon fondue.
Into Q1, which is plus operationally have we juggle b L. T O calendar, because we're continuing that product and I guess, Paul if you were looking in and wanted to put some qualitative thoughts about what you've got coming up from a new product standpoint.
But we.
We did juggled a L T O calendar slightly in fact.
And a couple of weeks here will be.
Bringing out the next L T O.
From a qualitative standpoint.
The Q2, and the Q3 L T OS I'm extremely.
Just about I think that they're right on the mark in.
I kind of don't want to quite give it away yet because it's.
Also going to be part of the introduction of the.
The new website that we're rolling out and as we start to push the yeah, but I think it's a great product in the last two the Scorpion Burger and the cheesy Fondue Burger I perceive. These next two will be in the same category is certainly in the top 10 of any LTE goes that's a brand has ever done. So I think we are.
Sometimes sometimes it's better just.
Think that with the scale down menu.
Thank the promise that we're getting the L. T OS I think we've hit on a formula that really.
He is helping us to drive not only the top line, but the LTM performance, which also is helping us to drive the profit on that and I think that.
<unk> menu quite honestly, they don't get lost so I'm very pleased with the lineup that we have.
That's great and can you remind us what were running for kind of menu item count now versus where it was pre pandemic.
Well, we took it down about 35% pre pandemic.
The one thing, though that I.
It would be certainly be upfront about is that adding donato <unk> pizza is into locations as we will through the balance of this year into next year does add a few but we have today no intent of driving that number back up because we think the performance of the L. T. OS is helping to keep the menu fresh and <unk>.
Exciting for people and also gives us the ability to react very quickly if they're new trends out there in the marketplace.
That's great and a final one for me you talked about the success would be.
Virtual brand as a sales layer and then I think you mentioned that you're launching a license virtual brand also any details you can give us on that other timing wise or maybe concept or or what's going on there.
Well I think we will be.
Certainly by the end of Q2 fully launched.
With a licensed brand.
At that point, we will be better in a better position to give more detail about it but overall, obviously you saw the contribution rate in Q4 and $8 four so very happy so far with the performance.
I think there is more legs, there, but you.
Todd It's still very early in the lifecycle of virtual brands. We're just trying to see where does it go and quite honestly.
We always fall back to making sure that it doesn't impact.
Our core business doesn't get in the way of executing the core Red Robin brand. So always looking at the complexity of it and.
So so far so good but wed like to see.
So where does that part of.
Kind of third party home delivery, where does that really go.
No I don't think anyone's quite sure yes.
So the long term future of that.
Okay, great. Thanks for the questions.
Alright, and Todd I might just add.
And going back to your G&A question I was remiss in not mentioning variable based compensation I'm being higher in 2022 versus 2021 that was another category.
Okay, great. Thanks Glen.
Yeah.
This concludes our question and answer session I would like to turn the conference back over to management for any closing remarks.
Well, thanks, everybody for attending the Red Robin our fourth quarter call and we look forward to speaking again at the end of the first quarter end.
Look forward to.
Great 2022 take care. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.