Q4 2021 First Watch Restaurant Group Inc Earnings Call
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Thank you for standing by and welcome to the First Watch Restaurant Group Incorporated fourth quarter and fiscal 2021 earnings conference call. At this time, all participants are
Thank you for standing by and welcome to the first watch restaurant group incorporated fourth quarter and fiscal 2021 earnings conference call at.
At this time all participants are in a listen only mode. Following the presentation. The conference call will be opened for analysts' questions and instructions on how to ask a question will be given at that time.
Following the presentation, the conference call will be open for analyst questions and instructions on how to ask a question will be given at that time.
This call is being recorded today, March 23rd, 2022 at 8 a.m. Eastern Time and will be archived and available for replay at investors.firstwatch.com under the news and events
This call is being recorded today March 23, 2022 at eight a M eastern time and will be archived and available for replay at investors thought first watch dot com under the news and events section I would now like to turn the conference over to Raphael gross partner at ICR to begin.
I would now like to turn the conference over to Rafael Gross, partner at ICR, to begin.
Rafael Gross: Good morning, everyone, and welcome. I am joined here today by FirstWatch's Chief Executive Officer and President, Chris Tomaso, and Chief Financial Officer, Mel Hope. This morning, FirstWatch issued its earnings release for the fourth quarter, and the fiscal year ended December 26, 2021, on Globe Newswire, and filed its annual report on Form 10-K with the FCC.
Good morning, everyone and welcome I'm joined here today by first watches Chief Executive Officer unprecedented, Chris Tommaso and Chief Financial Officer, Mel Hope. This morning first watch issued its earnings release for the fourth quarter and fiscal year ended December 26 2021.
On global Newswire and filed its annual report on Form 10-K with the SEC. These documents can be found at investors docks Freshwatch dot com.
Rafael Gross: These documents can be found at investors.firstwatch.com
Rafael Gross: Let me now first cover a few housekeeping matters before introducing Chris. This conference call will include forward-looking statements that are subject to various risks and uncertainties that could cause the company's actual results to differ materially from these statements.
Let me now first cover a few housekeeping matters before introducing crap.
This conference call will include forward looking statements that are subject to various risks and uncertainties that could cause the company's actual results to differ materially from these statements such statements include without limitation statements concerning the conditions of the companies industry and its operations performance and financial can.
Rafael Gross: And such statements include, without limitation, statements concerning the conditions of the company's industry and its operations, performance and financial condition, growth strategies, product development efforts, and future expenses. Any such statements should be considered in conjunction with cautionary statements in the company's earnings release and the risk factor disclosure in its filings with the SEC, including its annual report on Form 10-K . For more information, visit www.FEMA.gov
<unk> growth strategies product development efforts and future expenses and he showed the statements should be considered in conjunction with cautionary statements in the company's earnings release and the risk factor disclosure in its filings with the SEC, including its annual report on Form 10-K first walk assumes no off.
Rafael Gross: First Watch assumes no obligation to update these forward-looking statements, whether as a result of new information, future developments or otherwise, except as may be required by law.
Obligation to update these forward looking statements, whether as a result of new information future developments or otherwise, except as may be required by law. Lastly, management's remarks. Today will include references to various non-GAAP measures, including restaurant level operating profit restaurant level operating profit margin.
Rafael Gross: Lastly, management's remark today will include references to various non-GAAP measures, including restaurant-level operating profit, restaurant-level operating profit margin, adjusted EBITDA, and adjusted EBITDA margin. Investors should review the reconciliation of these non-GAAP measures to the comparable GAAP results contained in the earnings, in the company's earnings release file this morning. And with that, I'd now like to turn the call over to Chris Tomaso, First Watch CEO and President.
Adjusted EBITDA and adjusted EBITDA margin Investor should review the reconciliation of these non-GAAP measures to the comparable GAAP results contained in the earnings in the company's earnings release filed this morning, and with that I'd now like to turn the call over to Chris Tommaso for Swatch, Seattle and precedent.
Chris Tomaso: Thank you, Ray. Good morning, everyone, and welcome to our 2021 earnings call. Before we begin this morning, I ask that you indulge me as I take a moment to acknowledge something that I'm sure is at the forefront of all of our minds, as it is for our customers and the rest of the world. That's the unfolding crisis in Ukraine.
Thank you Ray good morning, everyone and welcome to our 2021 earnings call.
Before we begin this morning I ask that you indulge me as I take a moment to acknowledge something that I'm sure is at the forefront of all of our minds as it is for our customers and the rest of the world. That's the unfolding crisis in Ukraine.
Chris Tomaso: While there are few words that can capture the gravity of this moment, I can say this. Our hearts are with the people of Ukraine and all those affected by these tragic events.
There are few words that can capture the gravity of this moment I can say this our hearts are with the people of Ukraine and all of those affected by these tragic events.
Now I'd like to move on to first watches performance. We're greatly you've taken time out of your schedules to join US. This morning to learn more about our record 2021, and we're proud to once again be announcing robust results results that exceeded our guidance.
Chris Tomaso: Now I'd like to move on to First Watch's performance. We're grateful you've taken time out of your schedules to join us this morning to learn more about our record 2021. And we're proud to once again be announcing robust results, results that exceeded our guidance.
Chris Tomaso: In 2021, First Watch achieved a significant milestone, surpassing three quarters of a billion dollars in system-wide sales, finishing the year at $750.1 billion. That's up 76.1% year over year and up 34.4% over 2019.
In 2021 first watch achieved a significant milestone surpassing three quarters of $1 billion in system wide sales, finishing the year at $750 million, that's up 76, 1% year over year and up 34, 4% over 2019.
Chris Tomaso: Traffic increases are a true measure of healthy growth, and we experience growth in both the quarter and for the year.
Traffic increases are a true measure of healthy growth and we experienced growth in both the quarter and for the year.
Chris Tomaso: During the fourth quarter, our significant same restaurant traffic growth of 31.9% drove 36.7% same restaurant sales growth. And for the year, our 52.6% same restaurant traffic growth drove 63% same restaurant sales growth. Once again, building upon a long-term trend we established prior to the pandemic, where we had 28 consecutive quarters of same restaurant sales growth from 2013 to 2019.
During the fourth quarter, our significant same restaurant traffic growth of 31, 9% drove 36, 7% same restaurant sales growth and for the year. Our 52, 6% same restaurant traffic growth drove 63% same restaurant sales growth once again building upon our long term trend we.
<unk> prior to the pandemic, where we had 28 consecutive quarters of same restaurant sales growth from 2013 to 2019. Our goal is to break that prior consecutive record as we continue to take market share and we see a long runway ahead.
Chris Tomaso: Our goal is to break that prior consecutive record as we continue to take market share and we see a long runway ahead.
Speaker Change: I've been with this organization for nearly 16 years now, and while we've always executed at a very high level, I don't think I've ever seen our teams executing like they are today in every first watch in all 28 states where we operate.
I've been with this organization for nearly 16 years now and while we've always executed at a very high level I don't think I've ever seen our teams executing like they are today in every first watch in all 28 states, where we operate.
Speaker Change: They make me proud and when Mel and I share our financial results this morning, I want to remind you that these results are accomplished in a in one seven and a half hour daily shift, seven days a week, 363 days a year.
They make me proud and when Mel and I share our financial results. This morning, I want to remind you that these results are accomplished in a in $1 seven and a half hour daily shifts seven days, a week 363 days a year.
Now, let's talk about our continued unit growth.
Speaker Change: As you know, we were recognized as the fastest-growing full-service restaurant company in America for the past two years, and we continue to demonstrate strong momentum.
As you know we were recognized as the fastest growing full service restaurant company in America for the past two years and we continue to demonstrate strong momentum.
Speaker Change: In the fourth quarter of 2020, we opened eight system-wide restaurants, bringing our total openings to 31.
In the fourth quarter of 2020.
We opened eight system wide restaurants, bringing our total openings to 31.
Speaker Change: That's on top of the 42 system wide new restaurants we opened in 2020.
That's on top of the 42 system wide new restaurants, we opened in 2020.
Speaker Change: And I'd like to point out that these new restaurants are not confined to one region. In fact, in 2021, we successfully opened new restaurants across 12 states and 21 DMAs, further reinforcing our confidence in our ability to achieve our previously shared target of more than 2200 restaurants in the US.
And I'd like to point out that these new restaurants are not confined to one region. In fact in 2021, we successfully opened new restaurants across 12 states in 'twenty, one DMA further reinforcing our confidence in our ability to achieve our previously shared target of more than 200 restaurants in the U S.
Despite our rapid growth, we still have more demand than we can serve and I'm happy to share. The steps, we're taking to ensure we're setup to successfully serve that demand going forward.
Speaker Change: Despite our rapid growth, we still have more demand than we can serve, and I'm happy to share the steps we're taking to ensure we're set up to successfully serve that demand going forward.
Speaker Change: First, we're driving the future with the evolution of our restaurant design. Every First Watch contains a consistent set of core brand elements that create a sense of familiarity and comfort for our customers.
First we're driving the future with the evolution of our restaurant design.
<unk> contains a consistent set of core brand elements that create a sense of familiarity and comfort for our customers.
Speaker Change: These are augmented by unique site-specific elements to optimize our operations by creating efficiencies and a seamless experience for our customers and our employees.
These are augmented by unique site specific elements to optimize our operations by creating efficiencies and a seamless experience for our customers and our employees.
Speaker Change: Some of these features include larger enhanced patios, indoor-outdoor bars, dedicated to-go entrances, and back-of-house improvements like double make lines that optimize the significant increase in off-prem sales our restaurants are now serving.
Some of these features include larger enhanced patios indoor outdoor bars dedicated to go entrances and back of house improvements like double make lines that optimize the significant increase in off Prem sales our restaurants are now serving.
These features also allow us to serve more demand and have undoubtedly contributed to the impressive performance of our class of 2021, new restaurants across all geographies. These restaurants have achieved annualized <unk> of $2 million, which is 11% higher than our existing company.
Speaker Change: These features also allow us to serve more demand and have undoubtedly contributed to the impressive performance of our Class of 2021 new restaurant.
Speaker Change: Across all geographies, these restaurants have achieved annualized AUVs of $2 million, which is 11% higher than our existing company of AUVs.
As we accelerate our expansion, we look forward to bringing these elements and further strategic evolution to life.
Speaker Change: As we accelerate our expansion, we look forward to bringing these elements and further strategic evolution to light.
Our updated restaurant design is just one way, we're positioning ourselves to serve more demand.
Speaker Change: Our updated restaurant design is just one way we're positioning ourselves to serve more demand.
Speaker Change: Our focus has remained on taking great care of the customer in our restaurants, and that dedication paid off throughout the year.
Our focus has remained on taking great care of the customer in our restaurants and that dedication paid off throughout the year.
Speaker Change: Our ongoing focus on driving traffic back into our restaurants continue to serve as our North Star during the quarter, just as it did for the year.
Our ongoing focus on driving traffic back into our restaurants continue to serve as our Northstar during the quarter just as it did for the year.
Speaker Change: It guided us to make some strategic business decisions that we believe played a critical role in our performance.
Guided us to make some strategic business decisions that we believe played a critical role in our performance.
Speaker Change: These include our decision not to pare down our menu, our decision to quickly return to our popular seasonal menu program, and our conservative approach to pricing, which Mel will elaborate on in a few minutes.
These include our decision not to pare down our menu our decision to quickly return to our popular seasonal menu program and our conservative approach to pricing, which Mel will elaborate on in a few minutes.
Let's move to staffing.
Mel Hope: I'd like to remind you of the attractive one-shift proposition we offer as leaders in the daytime dining segment.
To remind you of the attractive one shift proposition we offer as leaders in the daytime dining segment.
Mel Hope: First Watch was founded on the premise of having no night shifts, allowing our teams to enjoy evenings with their family or friends.
<unk> was founded on the premise of having no night shifts, allowing our teams to enjoy evenings with their family or friends for nearly four decades, we've offered a quality of life thats hard to find in restaurants and it has contributed to a culture. That's unparalleled in the industry, which is which was acknowledged by our latest recognition.
Mel Hope: For nearly four decades, we've offered a quality of life that's hard to find in restaurants. And it's contributed to a culture that's unparalleled in the industry, which was acknowledged by our latest recognition.
Speaker Change: Just last night, First Watch Chief People Officer Laura Sorensen proudly accepted the coveted Culture at Work Award on behalf of our organization at this year's ADP Meeting of the Minds Conference in Anaheim.
Just last night first watch Chief people officer, lower Sorenson proudly accepted the Covenant culture at work award on behalf of our organization at this year's ADP meeting of the minds conference in Anaheim.
Speaker Change: First Watch has always been a people-first organization, and it's difficult to think of a higher honor than one that recognizes our people and the culture that we work so hard for.
First watch has always been a people first organization and it's difficult to think of a higher honored than one that recognizes our.
And the culture that we've worked so hard to build together.
Speaker Change: Culture is not just something we talk about here, it's really what we're all about. And our leadership tenure reflects that, with our GMs averaging about five years with us, our directors of operations averaging about 10 years, and our regional vice presidents and vice presidents of operations averaging about 15 years.
Culture is not just something we talk about here, it's really what we're all about and our leadership tenure reflects that with our gms, averaging about five years with us our directors of operations, averaging about 10 years, and our regional Vice Presidents and Vice President of operations, averaging about 15 years.
Speaker Change: And while we weren't completely unaffected by the recent staffing challenges, First Watch is considerably better positioned in a challenging staffing environment.
And while we weren't completely unaffected by the recent staffing challenges first watches considerably better positioned in a challenging staffing environment.
Speaker Change: We're seeing great progress, having been better staffed in the fourth quarter than we were in the third.
We're seeing great progress, having been better staffed in the fourth quarter than we were in the third.
Speaker Change: Additionally, our management turnover continues to be about 30% lower than industry average.
Additionally, our management turnover continues to be about 30% lower than industry average and while at the beginning of 2021, we had about two managers per restaurant. We ended the year with $2 six managers per restaurant and have since returned to our pre COVID-19 levels of more than $2 seven managers per restaurant once again filling our talent pipeline to support our.
Speaker Change: And while at the beginning of 2021 we had about two managers per restaurant, we ended the year with 2.6 managers per restaurant, and have since returned to our pre coven levels of more than 2.7 managers per restaurant. Once again, filling our talent pipeline to support our continued strategic unit growth.
<unk> strategic unit growth in fact, we have 124 managers teed up and ready to take on general manager positions for upcoming new restaurant openings.
Speaker Change: In fact, we have 124 managers teed up and ready to take on general manager positions for upcoming new restaurant openings.
We're always taking steps to drive further efficiency and support our people, which brings me to an update on our kitchen display system or <unk> rollout that we talked about previously.
Speaker Change: We're always taking steps to drive further efficiency and support our people, which brings me to an update on our kitchen display system or KDS rollout that we talked about previously.
Speaker Change: Our primary goal with this rollout is to improve back-of-house efficiencies by significantly simplifying our kitchen operations, allowing us to serve more demand, particularly during
Our primary goal with this rollout is to improve back of house efficiencies by significantly simplifying our kitchen operations, allowing us to serve more demand.
Particularly during peak sales hours with long wait times during these high demand hours, reducing friction in our kitchen allows us to increase.
Speaker Change: With long wait times during these high demand hours, reducing friction in our kitchen allows us to increase capacity and welcome more customers into our dining room.
And welcome more customers into our dining rooms are early pilots have shown encouraging results and we're excited about the tremendous potential of this technology upgrade represents.
Speaker Change: Our early pilots have shown encouraging results, and we're excited about the tremendous potential this technology upgrade represents.
Speaker Change: As of today, it's in use in 20 First Watch restaurants, and our IT team is in the early stages of a broad company-wide rollout. We expect to have the KDS system installed in more than half of our company-owned restaurants by the end of this year.
As of today, it's in use in 'twenty, one watch restaurants, and our it team is in the early stages of a broad companywide rollout, we expect to have the <unk> system installed in more than half of our company owned restaurants by the end of this year.
I've shared some of the ways, we plan to serve more demand and I also want to spend a moment talking through a few of our key platforms aimed at creating more demand since 1983, we've been innovating and evolving our menu trying new things and blazing a culinary trail.
Speaker Change: I've shared some of the ways we plan to serve more demand, and I also want to spend a moment talking through a few of our key platforms aimed at creating more demand.
Speaker Change: Since 1983, we've been innovating and evolving our menu, trying new things, and blazing a culinary trail.
Speaker Change: One of our recent and most compelling strategic menu additions is our alcohol platform. Our team's done a great job with the continued rollout. We started 2021 with our crafted cocktails available in 185 of our restaurants, and by the end of the year the platform was in place in 305 first watch restaurants or more than 70 percent of our system.
One of our recent and most compelling strategic menu additions is our alcohol platform. Our team has done a great job with the continued rollout. We started 2021 with our crafted cocktails available in 185 of our restaurants and by the end of the year. The platform was in place and 305 first watch restaurants or more than 70% of our system.
Speaker Change: We continue to see overall beverage attachment lift in restaurants where the alcohol is served. And this program is incremental with accretive margins and little to no targeted marketing efforts put behind it thus far.
We continue to see overall beverage attachment lift in restaurants, where the alcohol served and this program is incremental with accretive margins and little to no targeted marketing efforts put behind it thus far.
Virtually all of our new restaurants are opening with this alcohol offerings and we're expecting to complete the rollout in our existing first watch restaurants wherever feasible by the end of 2022.
Speaker Change: Virtually all of our new restaurants are open opening with this alcohol offering. And we're expecting to complete the rollout in our existing first watch restaurants wherever feasible by the end of 2022.
Speaker Change: When it comes to culinary and menu strategy, our alcohol program is just the latest example of our innovation and leadership. We've said before, our philosophy for sourcing high-quality ingredients is simple. We follow the sun, welcoming each season into our menu with exceptional ingredients and flavors inspired by the position of the sun.
When it comes to color and menu strategy. Our alcohol program is just the latest latest example of our innovation and leadership.
We've said before our philosophy for sourcing high quality ingredients is simple we follow the sun welcoming each season into our menu with exceptional ingredients and flavors inspired by the position of the Sun.
Speaker Change: This paves the way for rotating seasonal menus that are always fresh. It's why you'll find sweet Florida strawberries on our menu right now, during the spring, and tender sweet corn from the Midwest on our menus in August , like you saw in our very popular Elote Mexican street corn hash last summer.
This paves the way for rotating seasonal menus that are always fresh and it's why you'll find sweet, Florida strawberries on our menu right now during the spring and tender sweet corn from the Midwest on our menus in August like you saw in our very popular a low teen Mexican Street corn hash last summer are.
Speaker Change: Our dedication to featuring seasonal ingredients gives our culinary team the opportunity to constantly innovate and fosters the spirit of discovery for our customers and our team members.
Our dedication to featuring seasonal ingredients gives us gives our culinary team the opportunity to constantly innovate and fosters the spirit of discovery for our customers and our team members.
Speaker Change: It also paves the way for expanding menu platforms, like our seasonal juices and shareables. These platforms lay the foundation for what we call guest-elected pricing. At First Watch, we've seen our customers elect to spend more to enhance their experience. We offer craveable new platforms and menu extensions, and these options give our customers a choice to stick to the basics or elevate their brunch.
It also paves the way for expanding menu platforms like our seasonal juices and <unk>. These platforms lay the foundation for what we call guest selected pricing at first watch we've seen our customers elect to spend more to enhance their experience we offer craveable, new platforms and menu extensions and these options gave our customers a choice.
I'll stick to the basics or elevate their branch.
Speaker Change: And when it comes to our culinary innovation, the industry has taken notice as well.
And when it comes to county, our current innovation the industry has taken notice as well.
Speaker Change: Before I pass the mic, I want to congratulate our culinary team on their most recent accolade, a menu master's honor awarded by Nations Restaurant News for our savory seasonal short rib omelet.
Before I pass the mic I want to congratulate our culinary team on their most recent accolade our menu Masters honor awarded by nation's restaurant news for our savory seasonal short rib omelette.
Speaker Change: Chef Shane will accept the award this May at the Drake Hotel in Chicago in the company of our peers and fellow industry insiders. Our team of talented chefs is more than deserving of this recognition, and I can't wait for you to see what they have cooking for the rest of 2022.
Jeff Shane will accept the award this may at the Drake Hotel in Chicago in the company of our peers and fellow industry insiders are team of talented chefs is more than deserving of this recognition and I can't wait for you to see what they have cooking for the rest of 2022.
Speaker Change: And with that, I'll turn it over to my friend and First Watch CFO , Mel Hope, to review our financial results in greater detail.
And with that I'll turn it over to my friend and first of all our CFO Mel Hope to review our financial results in greater detail.
Thanks, Chris.
Mel Hope: First, I want to add my congratulations to our team and reiterate how pleased we are to share these results today.
First I want to add my congratulations to our team and reiterate how pleased we are to share these results today.
Mel Hope: 2021 was an incredible year for us. We've completed our initial public offering in October . And as Chris mentioned, we surpassed 750 million in annual system-wide sales for the first time in First Watch's history.
2021 was an incredible year for us we've completed our initial public offering in October and as Chris mentioned, we surpassed $750 million in annual system wide sales for the first time and first watches history.
As I cover our financial highlights with you. This morning, I am going to begin by walking through some fourth quarter metrics.
Speaker Change: As I cover our financial highlights with you this morning, I'm going to begin by walking through some fourth quarter metrics.
Speaker Change: Total revenues were $162.6 million, which was 48.7% higher than the fourth quarter of 2020.
Total revenues were $162 6 million, which was 48, 7% higher than the fourth quarter of 2020.
Speaker Change: We opened eight system wide restaurants during the quarter, five company owned and three franchise owned restaurants. And as a side note here, our 2021 class of new restaurants have gotten off to a very fast start with an average annualized sales of over $2 million and were responsible for contributing $27 million in restaurant sales for the full year.
We opened eight system wide restaurants during the quarter five company owned and three franchise owned restaurants and as a side note here, our 2021 class of new restaurants had gotten off to a very fast start.
With an average annualized sales of over $2 million and we're responsible for contributing $27 million in restaurant sales for the full year.
Speaker Change: The main driver for the increase in total revenues was our same restaurant's sales growth of 36.7 percent.
The main driver for the increase in total revenues was our same restaurant sales growth of 36, 7%.
Speaker Change: which was driven by two key factors. The first being our traffic growth, which came in at 31.9%.
Which was driven by two key factors the first being our traffic growth, which came in at 31, 9%.
Speaker Change: Dine-in traffic increased 49.1 percent over Q4 of 2020, rebounding to more than 90 percent of our pre-pandemic levels.
And traffic increased 49, 1% over Q4 of 2020 rebounding to more than 90% of our pre pandemic levels.
At the same time, we retained our significantly increased off Prem business, our off premise sales of $34 4 million were higher than the fourth quarter of 2020, which were $33 7 million.
Speaker Change: At the same time, we retained our significantly increased off-prem business, our off-prem sales of $34.4 million were higher than the fourth quarter of 2020, which were $33.7 million.
Speaker Change: The second main driver of our same restaurant sales growth is increased check size due to positive mix and the guest elected pricing Chris mentioned earlier, which carries very attractive margins.
The second main driver of our same restaurant sales growth is increased check size due to positive mix and the guests elected pricing, Chris mentioned earlier, which carries very attractive margins.
Speaker Change: This dynamic is a big part of why we chose not to increase prices in 2021, which has further strengthened our future pricing power and improved our relative value proposition in an environment where the customer is being forced to absorb significant price increases elsewhere.
This dynamic is a big part of why we chose not to increase prices in 2021, which has further strengthened our future pricing power and improved our relative value proposition in an environment, where the customer is being forced to absorb significant price increases elsewhere.
Sure.
Speaker Change: Let's turn the focus of the call to the costs we're incurring in the restaurants. Cost inflation in our market basket increased more than 11% during the fourth quarter compared to 2020.
Let's turn the focus of the call to the costs, we're incurring in the restaurants cost inflation in our market basket increased more than 11% during the fourth quarter compared to 2020.
Speaker Change: which was in line with our expectations. Remember, we didn't increase in-restaurant menu prices during 2021. So as a percentage of restaurant sales, food and beverage costs experienced about 140 basis points of increase versus Q2 of 2020.
Which was in line with our expectations remember, we didnt increase in restaurant menu prices. During 2021, so as a percentage of restaurant sales food and beverage costs experienced about 140 basis points of the increase versus Q4 of 2020.
Likewise labor and other related expenses as a percentage of restaurant sales at 32, 8% trended up by 20 basis points over the third quarter.
Speaker Change: Likewise, labor and other related expenses as a percentage of restaurant sales at 32.8 percent trended up by 20 basis points over the third quarter.
Speaker Change: We have some offsetting items in the accounts, but overall, our labor percentages are settling in closer to optimal staffing levels as a result of the progress we've made with our recruiting efforts.
We have some offsetting items in the accounts, but overall, our labor percentages are settling in closer to optimal staffing levels. As a result of the progress we've made with our recruiting efforts.
Speaker Change: Our fourth quarter restaurant-level operating profit increased to $29.2 million. That's up $15.2 million over 2020 and represents a margin of 18.2%.
Our fourth quarter restaurant level operating profit increased $29 2 million Thats up $15 2 million over 2020 and represents a margin of 18, 2%.
Speaker Change: General and administrative expenses increased $13.3 million to $26 million for the fourth quarter.
General and administrative expenses increased $13 3 million to $26 million for the fourth quarter much of the increase in G&A is due to $7 7 million of charges triggered by the IPO and attributed to equity awards made in prior years under.
Speaker Change: Much of the increase in G&A is due to $7.7 million of charges triggered by the IPO and attributed to equity awards made in prior years under our 2017 Equity Incentive Plan.
For our 2017 equity incentive plan.
Speaker Change: 5.3 million of these charges are non-recurring.
$5 $3 million of these charges are nonrecurring.
Speaker Change: The increase in GNA also includes increases in head count, marketing spend, and insurance costs.
The increase in G&A also includes increases in head count marketing spend and insurance costs.
Speaker Change: Adjusted EBITDA increased to $14.2 million in the fourth quarter from $3.5 million in 2020.
Adjusted EBITDA increased to $14 2 million in the fourth quarter from $3 5 million in 2020.
Speaker Change: The increase in dollars was driven by a restaurant-level operating profit, partially offset by a decrease in G&A costs.
The increase in dollars was driven by our restaurant level operating profit, partially offset by some G&A costs as a percentage of total revenues.
Speaker Change: as a percentage of total revenues, adjusted EBITDA margin was 8.7% as compared to 3.2% in the fourth quarter last year.
Adjusted EBITDA margin was eight 7% as compared to three 2% in the fourth quarter last year.
During the quarter cash and proceeds of the IPO were used to retire our legacy debt instruments, and we entered into a new credit agreement.
Speaker Change: During the quarter, cash and proceeds of the IPO were used to retire our legacy debt instruments, and we entered into a new credit agreement.
Speaker Change: We recognized a $2.4 million non-cash charge for the extinguishment of the old debt. And that charge is reported in the other expense line item in our statement of operations.
We recognized a $2 $4 million noncash charge for the extinguishment of the old debt and that charge is reported in the other expense line item in our statement of operations.
And as a result of these changes in our debt our interest expense decreased by $4 9 million in the quarter as compared to the prior year.
Speaker Change: Changes in our debt, our interest expense decreased by $4.9 million in the quarter as compared to the prior year.
Speaker Change: Our fourth quarter transaction income also includes the recognition of a $2 million gain associated with our agreement to sell out of a lease where our restaurant occupied a site undergoing redevelopment.
Our fourth quarter transaction income also includes the recognition of a $2 million gain associated with our agreement to sell out of a lease where our restaurant occupied a site undergoing redevelopment.
Speaker Change: I'm not going to spend much time on the full-year fiscal 2021 results, since you can see those in our 10-K, except to say that the results reflect a unique year of rapid recovery coming off the 2020 phase of the pandemic.
I'm not going to spend much time on the full year fiscal 2021 results, which you can see those in our 10-K, except to say that the results reflect a unique year of rapid recovery coming off the 2020 phase of the pandemic.
Yeah.
Finally.
Speaker Change: Let's shift the focus to our fiscal 2022 expectation.
Let's shift the focus to our fiscal 2022 expectations.
Speaker Change: Now, given the fact that we're a new registrant and this operating environment is particularly volatile.
Now given the fact that we are a new registrant and this is in this operating environment as well.
Also.
Speaker Change: We believe that we have a heightened obligation to share some forward-looking information that may be helpful. However, I want to caution the listeners that, as we establish our normal practices of discussing guidance and expectations, I do not necessarily consider today's discussion to be precedent-setting. I'm going to begin with the.
We believe that we have a heightened obligation to share. Some forward looking information that may be helpful. However, I want to caution the listeners that as we establish our normal practices of discussing guidance and expectations I do not necessarily consider todays discussion to be precedent setting.
I'm going to begin with the topic of inflation.
Speaker Change: When it comes to commodity inflation, we've indicated previously that we anticipated 4-7% inflation. We're operating above the high.
When it comes to commodity inflation, we've indicated previously that we anticipated 4% to 7% inflation.
We're operating above the high end of that range now.
Speaker Change: For the year, we now expect 10% to 13% inflation. Drivers include.
For the year, we now expect 10% to 13% inflation drivers include.
Speaker Change: increased fuel cost, as well as a few key items in our market basket, including bread, bacon, and avocados.
Increased fuel cost as well as a few key items in our market basket, including bread Bacon and avocados were also seeing increases in the cost of our to go packaging and paper goods, which are impacting costs more given our sustained off prem business.
Speaker Change: We're also seeing increases in the cost of our to-go packaging and paper goods, which are impacting costs more given our sustained off-prem business.
We have fixed commodity prices of key items currently representing more than a third of our market basket with about half of these fixed prices locked in for all of 2022.
Speaker Change: We have fixed commodity prices of key items, currently representing more than a third of our market basket, with about half of these fixed prices locked in for all of 2022.
Okay.
Shifting to labor inflation, we have been and will continue monitoring the environment to ensure our wages remain competitive our.
Speaker Change: Shifting to labor inflation, we have been and will continue monitoring the environment to ensure our wages remain competitive.
Speaker Change: Our back-of-house staff, on average, already make more than $15 an hour, and on average our front-of-house tipped employees take home substantially more.
Our back of House staff on average already make more than $15 an hour and on average our front of house tipped employees take home substantially more.
Speaker Change: Given our restaurants are staffed well relative to the industry and our retention remains strong, we feel good about our competitive wage proposition for employees.
Given our restaurants are staffed well relative to the industry and our retention remains strong we feel good about our competitive wage proposition for employees for the full year, we are anticipating 8% to 10% inflation in our restaurant labor cost.
Speaker Change: For the full year, we are anticipating 8% to 10% inflation in our restaurant labor cost.
Yeah.
Let's shift to menu pricing.
Speaker Change: Historically, we've adjusted our menu prices to offset inflation. So typically, we've taken two and a half to three percent annual increase.
Historically, we've adjusted our menu prices to offset inflation. So typically we've taken 2.5% to 3% annual increases.
Speaker Change: In 2021, however, we made the decision not to increase prices in our restaurants, given the positive effects we've seen from guest-elected pricing, the macro environment, and our focus on continually building traffic. And this decision
In 2021, however, we made the decision not to increase prices in our restaurants, given the positive effects, we've seen from guest elected pricing the macro environment and our focus on continually building traffic.
And this decision paid off.
Speaker Change: In the first quarter of 2022, we did take a 3.9 percent increase.
In the first quarter of 2022, we did take a three 9% increase.
Speaker Change: for our in-restaurant menu prices, which should, to some extent, offset our current inflationary pressures. We've seen no negative impact.
For our in restaurant menu prices, which should to some extent offset our current inflationary pressures, we've seen no negative impact on our traffic.
Speaker Change: Looking ahead, we are confident that we have additional pricing power to offset the additional inflationary pressure I just discussed should we elect to revisit menu prices later in the year.
Looking ahead, we are confident that we have additional pricing power to offset the additional inflationary pressure I just discussed should we elect to revisit menu prices later in the year.
Speaker Change: Our first quarter of 2022 will be complete in just a few days, on March 27.
Our first quarter of 2022 will be complete in just a few days on March 27th.
Speaker Change: Through the first two periods of the same restaurant, sales growth exceeded 29%. Despite the impact of both the Omicron variant and winter storms affecting much of our system in January .
Through the first two periods of the same.
Same restaurant sales growth exceeded 29% despite the impact of both the omicron variant and winter storms affecting much of our system in January sales and margin performance picked back up in February and the momentum has continued into March.
Speaker Change: Sales and margin performance picked back up in February and the momentum has continued into March.
While we're proud of the sales momentum given the effects of the commodity inflation I discussed a moment ago. We're trending only slightly ahead of our fourth quarter 2021 restaurant level operating profit margin.
Speaker Change: While we're proud of the sales momentum, given the effects of the commodity inflation I discussed a moment ago, we're trending only slightly ahead of our fourth quarter 2021 restaurant level operating profit margin.
Speaker Change: As a reminder, our fourth-quarter restaurant level operating profit margin was 18.2 percent and adjusted EBITDA margin was 8.7 percent.
As a reminder, our fourth quarter restaurant level operating profit margin was 18, 2% and adjusted EBITDA margin was eight 7%.
Speaker Change: With regard to our new restaurant openings in the first quarter of 2022, we've opened six company restaurants and one franchise restaurant.
With regard to our new restaurant openings in the first quarter of 2022, we've opened six company restaurants, and one franchise restaurant.
2021 was a rebound year for first watching in 2022, we're returning our focus to driving growth.
Speaker Change: 2021 was a rebound year for First Watch and in 2022, we're returning our focus to driving growth.
Speaker Change: For the full fiscal year of 2022, we expect to deliver same restaurant sales growth in the high single digit.
For the full fiscal year of 2022, we expect to deliver same restaurant sales growth in the high single digits.
Speaker Change: We plan to open 30 to 35 company restaurants and 8 to 13 franchise restaurants.
We plan to open 30 to 35 company restaurants in the 8% to 13 franchise restaurants.
Speaker Change: As our development team has rebuilt the new project pipeline over the past few months, the scheduling of the opening dates is weighted a bit more heavily in quarters three and four, with approximately three company restaurant openings to occur in the back half of the year.
As our development team has rebuilt the new project pipeline over the past few months the scheduling of the opening dates is weighted a bit more heavily in quarters, three and four with approximately.
Company restaurant openings to occur in the back half of the year.
Yeah.
Speaker Change: We expect the combination of the same restaurant sales growth and the new restaurants to drive revenue growth in excess of 15 percent.
We expect the combination of the same restaurant sales growth and the new restaurants to drive revenue growth in excess of 15%.
Speaker Change: And as you update your expectations for 2022, I want to call your attention to the fact that in 2021.
And as you update your expectations for 2022, I want to call your attention to the fact that in 2021, our labor percentages and profit margins were impacted by tighter labor than we prefer.
Speaker Change: our labor percentages and profit margins were impacted by tighter labor than we prefer.
Speaker Change: So in 2022, as we continue to increase our staff to optimal levels, to serve the projected sales growth and support our new restaurant openings.
So in 2022 as we continue to increase our staff to optimal levels to serve the projected sales growth and support our new restaurant openings.
Speaker Change: We expect to return our labor percentage to approximately 34%, which we registered in 2019 prior to the pandemic, versus the approximately 32% that we incurred in 2021.
We expect to return our labor percentage to approximately 34%, which we registered in 2019 prior to the pandemic versus the approximately 20, 32% that we incurred in 2021.
Speaker Change: Based on these considerations, we expect adjusted EBITDA for the full year in the range of $67 to $71 million.
Based on these considerations, we expected we expect adjusted EBITDA for the full year in the range of $67 million to $71 million.
Speaker Change: Capital expenditures during 2022 are expected to range between $60 and $70 million, which represent investments in new restaurant projects.
Capital expenditures during 2022 are expected to range between 60, and $70 million, which represent investments in new restaurant projects planned remodels and in restaurant technology like our new <unk> systems.
Speaker Change: planned remodels, and in-restaurant technology like our new KDS system.
Speaker Change: And now I'm going to turn the call to Chris before we open the lines for a few of your questions.
And now I'm going to turn the call back Chris before we open the lines for a few of your questions. Thank you Matt.
Chris Tomaso: Thank you, Mel. I want to close today by sharing that we're just enthusiastic about the future of the First Watch brand. Our strong foundation has supported our continued positive momentum, and we've built an exceptional track record of delivering compelling results, as you can see from our fourth quarter financials that we just shared with all of you.
Want to close today by sharing that we're just enthusiastic about the future of the first watch brand. Our strong foundation has supported our continued positive momentum and we've built an exceptional track record of delivering compelling results as you can see from our fourth quarter financials that we just shared with all of you.
Chris Tomaso: These results continue to show that we're disrupting the industry and serving a different occasion to a different customer.
These results continue to show that we are disrupting the industry and serving a different occasion to a different customer we're very proud of that differentiation and we look forward to continuing to execute on those strategic goals and to strengthen our position as the leaders in the full service date time dining category again, thanks for taking the time to learn about our successful 2021.
Chris Tomaso: We're very proud of that differentiation and we look forward to continuing to execute on those strategic goals and to strengthen our position as the leaders in the full service daytime dining category. Again, thanks for taking the time to learn about our successful 2021. And with that, I'm happy to open the line for questions.
And with that I'm happy to open the line for questions.
Speaker Change: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time we will pause momentarily.
If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Speaker Change: Our first question comes from Andy Barish from Jeffries. Please go ahead.
Our first question comes from Andy Barish from Jefferies. Please go ahead.
Andy Barish: Yeah, good morning guys. Nice job and appreciate the.
Yes, good morning, guys.
Nice job and I appreciate.
The first quarter and 22 updated guide.
Andy Barish: the first quarter and 22 update and guide.
Speaker Change: Can you, Mel, maybe just tone in a little bit kind of on the dynamics between
Can you.
Maybe just hone in a little bit kind of on the dynamics between.
Mel Hope: you know, the increased inflation, but also now the pricing you're taking and, and how that sort of, um, you know, works its way to the restaurant level margins. So.
The increase inflation, but also now the pricing you're taking in and how that sort of.
Works its way to the restaurant level margins.
So.
Yeah.
In terms of our pricing.
Mel Hope: We, you know, at 3.9% on on price, we're, you know, we continue to enjoy some of the same benefits we have a guest elected pricing during the year. So as the inflation works through, you know, every point of inflation to flow through at that, you know, kind of 18 to 19%.
At three 9% on on price, where we continue to enjoy some of the same benefits we have guessed elected pricing.
During the year, so as the inflation.
Works through every point of inflation and the flow through with the kind of 18% to 19%.
Mel Hope: level is kind of what we've used to defend the margins in terms of when we select our price increases overall, if that's the range of the question.
Level is kind of what we've used to defend the margins in terms of when we select our.
Sure.
Price increases overall, if if if.
That's the range of the question.
Yes, it is and just.
Mel Hope: Just historically, I guess, you know, first quarter has been a strong, you know, kind of profit margin quarter.
Historically I guess.
First quarter has been strong.
Profit margin quarter.
Mel Hope: the pricing in the quarter and could the dynamics this year be a little bit different where
You take the pricing in.
In the quarter and could the dynamics this year be a little bit different where.
Mel Hope: you know, margins are, are, you know, kind of moving up a little bit as we move through the year, just given hope for, you know, decline in inflation as we, we move towards the back half. We, we, we, we took the price increase early in January , so we've been operating most with the price price increase in.
Margins are kind of moving up a little bit as we move through the year, just given hope for <unk>.
Quite right.
We move towards the back half.
We took the price increase early in January so.
We've been operating most or with the price.
Price increase in but.
Mel Hope: But January this year was a little softer. We had the variant spike in Omicron that kind of showed up, softened our January .
In January this year was a little softer than we had the variant spike in omicron.
Kind of showed up.
Softened our January .
Mel Hope: a bit and then where there was also some weather events and frankly some of them hit on weekends.
And then there was also some weather events and frankly some of them hit on weekends.
Mel Hope: You know, which are the big days for us. So January was a little softer out of the gate than we prefer, but we bounced back quickly in February and March as it continued. So probably the bigger impact on our first quarter margin comes, you know, comes more from
Which are the big days for Us So January was a little softer.
Out of the gate than we prefer but we bounced back quickly in February and March is a continued so probably the bigger impact on our first quarter margin comes it comes more from.
Mel Hope: uh, from a little bit of softness in January and the fact that, you know, as a result of the weather off-prem tended to, um, have more of an outsized contribution. And when, when, uh, when the off-prem business, uh, is at that level, then, then, uh,
From a little bit of softness in January and the fact that as a result of the weather off Prem tended to.
I have more of an outsized contribution in win win win.
When they off Prem business is.
Is it that level then.
Mel Hope: Just the cost of delivery packaging and cost of delivery also.
Just the cost of delivery packaging and cost of delivery also.
Mel Hope: you know, has a has a little bit more of a disproportionate impact on the overall margin. And, Andy, this is Chris. I think, you know, you saw and you know, that historically we take, you know, 2.5 to 3% taking 3.9 here based on on the environment that we're facing. Um, you know, a little bit outside for us.
Has a little bit more of a disproportionate impact on the overall margin and Andy. This is Chris I think you saw and you know that historically, we take two 5% to 3% taking three nine here based on the environment that we're facing.
As a little bit outsized for us and to <unk> point, we are keeping that that dry powder.
Speaker Change: And to Mel's point, you know, we are keeping that dry powder of our pricing power in our back pocket as we continue to monitor, you know, the
Our pricing power in our back pocket as we continue to monitor the.
Speaker Change: modity impact specifically for the rest of the year.
Commodity impacts specifically for the rest of the year.
Speaker Change: And thanks. And just before I pass along, are you willing to share kind of the more of the
And then just before I pass along are you willing to share kind of that the.
More of the February March margin range, I mean is it back to sort of the.
Speaker Change: margin range? I mean, is it back to sort of the
Speaker Change: 19-ish levels that you've kind of seen historically.
19 it.
All levels that that you've kind of seen historically.
Speaker Change: Now, what we referenced in my comments was that we were doing only slightly better than the fourth quarter margin. And that was the guidance that we wanted to be sure you picked up on.
Now what we referenced in my comments was that we were we were doing.
Slight only slightly better than the fourth quarter margin and Thats.
But that's that was the guidance that we wanted to be sure you picked up on.
Okay. Thanks, guys.
Speaker Change: The next question comes from Jeffrey Bernstein from Barclays. Please go ahead.
The next question comes from Jeffrey Bernstein from Barclays. Please go ahead.
Jeffrey Bernstein: Great. Thank you very much. Two questions. Good morning. How are you?
Great. Thank you very much.
Two questions. Good morning, how are you.
Right.
Jeffrey Bernstein: My first question was just on the broader 2022 guidance, appreciate all the granular detail.
My first question was just on the broader 2022 guidance.
I appreciate all the granular detail.
Jeffrey Bernstein: wondering as you look out what you think the greatest headwind is to start the year where there might be risk to that guidance whether it's caution around the comps or units or
I'm just wondering as you look out what you think the greatest headwind is to start the year, where there might be risk to that guidance, whether it's caution around the comps or unit Sir.
Jeffrey Bernstein: Presumably lots of inflation. So I'm just wondering what you think is the biggest risk to your expectations as we look
Presumably with lots of inflation. So I'm just wondering what you think is the biggest risk to your expectations as we look through 2022.
Speaker Change: You know, I'd like to think that at this point, we've we've
I'd like to think that at this point, we've we've thought if not over a thought about all that.
Speaker Change: thought, if not overthought, about all the about all the inflation that we're seeing and our plans for the year. So I think that it's mostly captured in our guidance. I don't know if anybody can
Yeah.
About all the inflation that we're seeing in the.
And our plans for the year, So I think that it's mostly captured in our guidance.
I don't know if anybody can completely explain what.
Speaker Change: completely explain what the impacts of war in Ukraine may be or something like that. There's probably a knock-on effect in terms of commodity.
What the impacts of war and Ukraine, maybe.
Maybe or or something like that there is probably a knock on effect in terms of commodity pricing that goes on.
Speaker Change: Pricing if that goes on, you know, if that goes on for an extended period of time, but but Jeff, I, I believe we've worked very hard to build a build an operating plan that that that that takes into account.
If that goes on for an extended period of time.
Jeff.
I believe we worked very hard to build a building and operating plan.
That takes into account.
Speaker Change: uh, the, the, the variables that we see today.
The variables that we see today.
Yeah.
Speaker Change: Understood and then as you think about the the pricing as it relates to inflation and the margin
Understood and then as you think about the the pricing as it relates to inflation on the margin.
I'm just wondering what your thoughts are on the restaurant margin or what visibility you have for the full year.
Speaker Change: Just wondering what your thoughts are on the restaurant margin or what visibility you have for the full year.
Speaker Change: I think he said the 3.9% mitigates that pressure, but I was just wondering, as you mentioned, you have more pricing power in your back pocket. What your thoughts are in terms of.
I think you said the three 9%.
Mitigates that pressure, but I was just wondering as you mentioned you have more pricing power in your back pocket. What your thoughts are in terms of.
Speaker Change: where the restaurant margin plays out this year if you stuck to that sub 4% versus what you might consider.
Where the restaurant margin plays out this year, if you stuck to that sub 4% versus what you might consider.
I think he said yes.
Two value there.
Speaker Change: Yeah, Jeff, we look at that weekly. I mean, that that is, you know, that's how we manage the business. So
Jeff when we look at the weekly.
That is that's how we manage the business so.
Speaker Change: Frankly, what I would say is we're not.
Frankly.
What I would say is we are not.
Speaker Change: We're not reluctant to use some of that pricing power to be sure that we defend our options. We think we've developed a lot of credibility around that pricing power with the steps that we took last year.
We're not reluctant to use some of that pricing power to be sure that we defend gyms.
We think we've developed a lot of credibility around that pricing power with the steps that we took last year or two.
Speaker Change: to hold prices flat and so what I can tell you is we're monitoring.
To hold prices flattened so.
So what I can tell you is we're monitoring.
Speaker Change: our inflationary environment and the broader, the broader, you know, the broader economy as well. And we're going to do our part to be sure that we defend our margins.
Our inflationary environment in the broader the broader.
The broader economy, as well and we're going to do our part to be sure that we defend our margins.
Got it and just.
Lastly, there was no mentioned.
Speaker Change: I presume was a reiteration of long-term guidance.
I presume was a reiteration of long term guidance I'm, assuming that's intact and I guess that would include reversion back to mid teens EBITDA growth maybe in 23 of those fair comments.
Speaker Change: And I'm assuming that's intact, and I guess that would include reversion back to mid-teens EBITDA growth maybe in 23. Are those fair comments?
Speaker Change: Yeah, we haven't stepped away from our long-term guidance. We just didn't want you to get tired of hearing it.
Yes.
We haven't stepped away from our long term guidance, we just didn't want you to get tired of hearing it.
Understood. Thank you.
Speaker Change: The next question comes from Andrew Charles from Cowan. Please go ahead.
The next question comes from Andrew Charles from Cowen. Please go ahead.
Andrew Charles: Great, thank you so much. Very impressive to see the $2 million plus AUVs in 2021, given the new restaurant design and larger kitchens to help with the off-premise orders. It looks like the guidance from doing the math right for 2022 implies that the new store volumes annualize around $1.7 million. So, Mel, can you help kind of explain the implied step down there?
Great. Thank you so much.
Very impressive to see the $2 million plus <unk> in 2021.
Given the new restaurant design and larger kitchens to help with the off premise orders it looks like the guidance if I'm doing the math right for 2022 implied that the new year, the new store volumes annualized around $1 7 million. So no can you help kind of explained the implied step down there.
Yeah.
Mel Hope: You know, I would tell you that probably has more to do with the openings and how much they can contribute during the cycle.
I would tell you that.
Probably has more to do with.
The openings and how much they can contribute.
During the cycle.
Okay.
Mel Hope: I would also say our unit economic model, at least where we, you know, we've been happy with the outperformance of the class of 2021, and so, but our general, you know, our modeling assumption is something a little bit less than that, and we're, you know, we're optimistic that we'll see that, but I'd like to see it before we claim it.
I would also say our unit unit economic model at least where we are.
We've been happy with the outperformance of the.
The class of 2000.
2021.
And and.
And so.
Our our general our modeling assumption is something a little bit less than that and we are and where we are optimistic that we will see that but I'd like to see it before we climate.
Totally get it understood.
Speaker Change: Totally get it, understood. And Chris, question for you. I know you test the seasonal menu in one market a year in advance just to see what works and what doesn't for the following year. Is that still the philosophy going forward as you guys scale? Is that still working for you guys? Are there opportunities to scale that a bit more as well in terms of your testing efforts?
Chris a question for you I know you kept the seasonal menu in one market a year in advance just to see what works and what doesn't for the following year is that still the philosophy going forward as you guys scale. That's still working for you guys or are there opportunities to scale that a bit more as well in terms of your testing efforts.
Chris Tomaso: Yeah, it still works well for us. We have a, I'd call it a...
Yeah, it's still works well for us.
We we have a I would call it.
Chris Tomaso: coefficient, if you will, of what happens in the test market to what will happen nationally. And we continue to monitor that, and it still holds true. And I think as long as it holds true, even as we continue to grow in new markets, I think that's, you'll continue to see us utilize that as our testing protocols. If, you know, when we watch it, we see changes there, then we'll adapt, but right now that's worked really well for us for a number of years.
Co efficient if you will of what happens in the test market to what will happen nationally and we continue to monitor that and it still holds true and I think as long as it holds true even as we continue to grow in new markets I.
I think thats, what youll continue to see us utilize that as our testing protocols.
If when we watch it we see changes there then we'll we'll adapt but right now thats worked really well for us for a number of years.
Excellent thanks, guys.
Speaker Change: The next question comes from Gregory Frankfort from Guggenheim Securities. Please go ahead.
The next question comes from Gregory Frankfurt from Guggenheim Securities. Please go ahead.
Gregory Frankfort: Hey guys, thanks for the question. I have two. The first was just on the pricing. I think you've said that you've seen no impact on the pricing, no pushback on the pricing you've taken this course apart. Is that normal historically? And what is normal elasticity for you guys as you push pricing into the business?
Hey, guys. Thanks for the questions I have two the first one just on the pricing I think you've said that you've seen no impact on the pricing no pushback on the pricing you've taken. This course part is it is it normal historically and what is what is normal elasticity for you guys as you push pricing into the business.
Gregory Frankfort: Interestingly, we've had years where we took price and saw positive results. We've never had a traffic impact that we could discern based on increase in price.
Interestingly we've.
We've had years, where we took pricing so positive.
As a result, we've never had we've never had.
On a traffic impact that we could discern based on increase in prices, Yes, I would say, Greg if you look back at.
Speaker Change: Yeah, I would say, Greg, if you look back at over the years where we take in two and a half to 3% a year and look at that traffic growth that we talked about pre-pandemic, the streak that we had, I think that paints the picture of we've actually continued to grow same restaurant traffic throughout all of our pricing.
Over the years, where we've taken two 5% to 3% a year and look at that traffic growth that we've talked about pre pandemic.
The street that we had I think that paint the picture of we've actually continued to grow same restaurant traffic.
Throughout all of our price increases.
Got it and then maybe just this is Bob.
Greg: Got it. And maybe just as you think about how you are going to look at the pricing this year, is there a normal cadence to when you evaluate or put into the business? Are you changing it this year just given everything that's going on? Are you going to look at it every two or three months and maybe make adjustments that way? Just curious how you're approaching that.
Think about how you are going to look at the pricing this year.
Is there a normal cadence to when you evaluate or put it into the business.
Changing at this year just given the.
It's going on you've got to look at it every two or three months and maybe make adjustments that way just curious how you're how you're approaching that.
Speaker Change: Yeah, so typically, we've taken pricing twice a year. Last year, we deviated from that, obviously. So we're kind of on a new approach here. So we did take this price at the very beginning of this year. And I think it's just because of the unique environment that we're in and really the macro factors involved.
Yes, so Tim.
Typically in his <unk>.
Taken pricing twice a year.
Last year, we deviated from that obviously, so we're kind of on a.
A new approach here. So we did take this price at the very beginning of this year and and I think it's just because of the unique environment that we're in and really the macro factors involved.
Speaker Change: I think we will, it won't be a set time as much as it will be watching the inflation specifically. I mean, I think that's our biggest focus area and then forecasting that and then.
Link.
We will it won't be a set time as much as it will be watching the the inflation specifically I mean I think that's our that's our biggest focus area and then and then forecasting that and then it's about what we think we need to do to as Mel said defend the margin. So we'll just we'll continue to monitor it.
Speaker Change: about what we think we need to do to, as Mel said, defend the margins. So we'll just we'll continue to monitor. It's not a every other month. It's an it's an everyday look that we take and an evaluation.
Every other month, it's an everyday.
Look that we take and and evaluation that we do.
Speaker Change: Got it. My other question is just on the other operating line, up a couple hundred base, I think 250 basis points from where we were running before COVID, how much of that is due to the off-prem business? And as we think about getting a big step down in that line, can you talk about what pieces maybe can be leveraged?
Got it.
My question is just on the other operating line.
A couple of hundred basis, I think 250 basis points from where we were running before COVID-19 .
Much of that is due to the off Prem business.
As we think about getting a big step down in that line can you talk about what pieces maybe can be leveraged.
Speaker Change: as you comp this year and maybe what pieces can't be, just as we think about the magnitude of how much that can come down. Thanks. You zeroed in on the right thing. A good bit of that move is attributed to the cost of off-prem.
As you pump this year and maybe what pieces can't be just as we think about the magnitude of how much that can come down.
Zero in on the right thing a good bit of that move.
<unk> is attributed to the cost of off Prem.
Speaker Change: Um, and, um, you know, the, you know, as, as, you know, there are some steps that we can take to.
And.
The U S.
As you know.
There are some steps that we can take two.
Speaker Change: to work that down, but I think it's going to come in basis and not in, you know,
To work that down, but I think it's going to come in the basin.
Big moves a percentage and low hanging fruit.
Speaker Change: big moves of percentage and low hanging fruit. Understood.
Understood. Thank you guys appreciate it.
Thanks.
The next question comes from Chris <unk> from Stifel. Please go ahead.
Speaker Change: The next question comes from Chris Socol from Stifel. Please go ahead. Good morning, thanks guys.
Good morning, and thanks, guys. This is Patrick on for Chris.
Chris Socol: Yeah. Hey, Mel, how are you? I wanted to touch on development, first of all, and just get a little bit of a better understanding of maybe what you're seeing in that environment and what might cause you to be at the high or low end of the guidance range for the year, just from an external factor environment and what you guys are experiencing. But then two, you know, just what kind of inflation are you seeing in construction costs at this point? And is it something that you expect to push you above sort of that 1.1 million pre-TI build-out cost as you move forward?
Hey, Matt how are you.
I wanted to touch on development first of all and just get a little bit of a better understanding of maybe what youre seeing in that environment and what might cause you to be at the higher low end of the guidance range for the year.
Just from an external factor environment and what you guys are experiencing but then to just what kind of inflation are you seeing in construction costs at this point and is it something that you expect to push you above sort of that $1 1 million pre ti build out cost as you move forward.
Mel Hope: So I'll try to answer those in reverse. First of all, we're seeing about 8% increase in our construction costs right now.
So.
Ill try to answer those in reverse first of all we're seeing about 8% increase in our construction cost right now.
Mel Hope: And I think that, you know, rough math, what do we say, it's about 75 grand a restaurant, something like that. We think the ROI still certainly overcomes that increase. So it's not certainly not anything that we consider debilitating. We're returning on those asset investments.
And.
I think that.
Rough math, what do we say, it's about 75 brand of restaurants on something like that area. We think the ROI is still certainly overcomes overcomes that increase.
So it's not it's not the it's not certainly certainly not anything that we.
Consider debilitating we're doing.
Return on on those asset investments just fine in terms of what we're seeing in term the development.
Mel Hope: just fine. In terms of what we're seeing in terms of the development, look, we have veteran developers who've been doing this for years and managing different kind of climates. This one certainly is, you know, more challenging. They're managing more projects, of course, than we
Look we are veterans.
Developers who've been doing this for years and managing different kind of climate is this one certainly is.
More challenging.
They are managing more projects of course, then we.
Mel Hope: Then we open we have a couple of strengths that I think you know are helpful for us one not, you know, not only the the experience of our of our development.
Then we open we have a couple of strengths that I think.
Our helpful for Us one.
Not only the.
The experience of our of our development teams, but but also since we're such a rapid grower in our space.
Mel Hope: but also since we're such a rapid grower in our space.
Mel Hope: Most of our contractors and equipment suppliers are, you know, eager to see that they continue a good and healthy relationship with us. So perhaps we wind up being first in line on things. And then the other thing is that we, you know, we are closely involved in all of our projects. So if we, you know, if we need to redirect efforts.
Most of our contractors and equipment suppliers.
Are eager to see that.
You'll see that they continue a good and healthy relationship with us So perhaps we wind up being first in line.
On things and then and then the other thing is that we.
We are closely involved in all of our projects. So if we if we need to redirect efforts.
Mel Hope: uh from one to another in order to hit our opening dates uh then uh then we're in a position to do that so so the long and short of it is we're we're well well positioned to deal with uh what is uh
From one to another in order to hit our opening dates.
Then then we're in a position to do that so long and short of it is we're well well positioned to deal with.
What is.
Mel Hope: uh... you know a more volatile environment uh... i think those guys are working a little extra hard this year in this kind of environment we're highly confident in our opening
A more volatile environment.
Those guys are working a little extra hard this year and this kind of environment, but we're highly confident in our openings.
Great. That's helpful and I just also wanted to touch on sort of the traffic breakdown in regards to say youre weekday lunch day part is that becoming a source of traffic growth for you or are you seeing more of an incremental gain at peak times, and just sort of where you sort of see the state of taking advantage of that opportunity.
Speaker Change: Great, that's helpful. And I just also wanted to touch on sort of the traffic breakdown in regards to, say, your weekday lunch day part, you know, is that becoming a source of traffic growth for you? Or are you seeing more of an incremental gain at peak times and just sort of where you sort of see the state of taking advantage of that opportunity to grow that area of the business going forward?
To grow that area of the business going forward.
Speaker Change: I think we're seeing growth across all segments, but it is outsized in the weekdays as we talked about earlier. That's an area of focus for us.
I think we're seeing growth across all segments, but it is outsized in and the weekdays.
As we've talked about earlier, that's an area of focus for us.
Great. Thanks, guys.
The next question comes from Sara Senatore from Bank of America. Please go ahead.
Speaker Change: The next question comes from Sarah Senatori from Bank of America. Please go ahead.
Thank you.
Sarah Senatori: Thank you. Hi, good morning. A question on the pricing power comments that you made. I guess first the clarification, you said you didn't increase in-restaurant menu prices. Did you increase menu prices on delivery or other, you know, some other characterization of pricing?
Hi, good morning.
A question on the pricing power comment that you made I guess first a clarification. You said you didn't increase in restaurant menu prices could you increased menu prices on delivery or or other some other.
Characterization.
Pricing.
Sarah Senatori: some place outside of the restaurant. I just wanna make sure I'm sort of understanding and the follow-on to that is, is that an opportunity? Because you mentioned slightly lower margins on the off-prem channel. So is there a potential to take some incremental price there to cover some of those costs for a customer who might be perhaps a little less price sensitive and more focused on the convenience, on the options?
Some place outside of the other restaurant I, just want to make sure I'm sort of understanding in the follow on to that is is that an opportunity because you mentioned slightly lower margins on the off premise channel. So is there a potential.
Potential to take some incremental price there to cover some of those costs for a customer who might be perhaps a little less price sensitive and more focused on the convenience.
On that option.
Sarah Senatori: So delivery has a surcharge associated with it. And as we have learned the new channel of the business, we've adjusted that surcharge a couple of times in order to be sure that we make that kind of profitable business and line of service that we want to have. So yes, we've had, we, you know, there are some differences.
So delivery has a surcharge associated with it.
As we.
I have learned new channel of the business.
We've.
Adjusted that surcharge.
A couple of times in order to be sure that we be sure that we make that kind of a profitable business and lineup of service that we want to we want to have so yes, we've had we.
There are some differences in the surcharge associated with the.
Sarah Senatori: in the surcharge associated with the the the items that are served outside the outside the restaurant are in the third party delivery, for example.
The.
Items that are served outside the outside the restaurant Anoro.
Third party delivery for example.
Sarah Senatori: And is there any kind of intent to make it ultimately margin neutral?
And is there any kind of intent to make it you know ultimately margin neutral.
Sarah Senatori: Um, we've, we work very hard to make it margin neutral. Now, uh, packaging, frankly, packaging costs have been
We worked very hard to make it margin neutral now.
Package, it frankly packaging cost then.
Sarah Senatori: Uh, pretty profound in the last, uh, in the last three months or so.
Pretty profound in the west.
In the last three months or so.
Sarah Senatori: So it's had it's had an outsized impact on that. But, you know, our certainly our goal is for.
So it has had it has had an outsized impact on that but ours is certainly our goal is for our customers choice to use us.
Sarah Senatori: a customer's choice to use us through the off-premises channel or coming in and enjoying the full...
Through the off premises channel or coming in and enjoying the full.
Sarah Senatori: First watch experience in the dining room is is for it to deliver a similar type margin.
First watch experience in the dining room is.
As for it to deliver a similar type margin but.
Sarah Senatori: But we will evaluate the off-premises surcharges and pricing as part of our overall pricing strategy for sure. Understood. Okay.
We'll evaluate the off premises surcharges in pricing as part of our overall pricing strategy for sure.
Understood, Okay and its over the last year. So last question on this and the same.
Sarah Senatori: In this vein, you mentioned the pricing power and sort of the latent pricing power. I guess historically, there's been a view that consumers don't really let restaurants catch up pricing, if you will. So if you don't take it now, it's hard to take twice as much next time. I guess, how are you thinking about that? And in particular, you mentioned that there have been periods where you've taken price and you've still grown traffic. So the 2021 decision to take
You mentioned.
Yes.
Pricing power and certainly in pricing power I guess historically, there's been a view that consumers don't really restaurants, they catch up pricing. If you will if you don't take it now it's hard to take twice as much next time I guess, how are you thinking about that in and in particular, you mentioned that there have been periods, where you've taken pricing program.
Traffic so.
The 2021 decision to take.
Sarah Senatori: you know, did not take price and then now probably take less price than what we're seeing across the industry. You know, is there sort of any consideration that you potentially, you know, miss out an opportunity, if you will, or is the view that sort of some of these costs are transitory and you're just more trying to cover the cost that you may be structural in nature?
That did not take price and then now probably to take less price and what we're seeing across the industry.
Is there sort of any consideration.
Potentially.
I had an opportunity if you will or is any of that.
Sort of some of these costs are transitory and Youre just more trying to cover the cost that may be structural in nature.
Speaker Change: Yeah, I'll go back to our baseline philosophy of growing traffic. And when when Mel used the words, it paid off. That's what he was speaking to, among other things, is that, you know, even with what would be considered aggressive pricing for us at three point nine percent, as you just mentioned, is well below what the what the industry has done and what the consumer is experiencing. And so.
Yeah, I'll go back to our baseline philosophy of growing traffic and when when Mel used the words that paid off that's what he was speaking to among other things is that.
Even with what would be considered aggressive pricing for us at three 9% as you just mentioned is well below what the what the industry is has done and what the consumer's experiencing and so.
Speaker Change: You know, looking back at 21, our focus was on returning the customers back into the restaurant, getting them back into their normal routines, back into their normal frequency with us. And we accomplished that, I think, much earlier than the rest of the industry did. And so I don't feel like we missed out on anything or that we don't have the ability to catch up. I mean, we're still at a
Looking back at 21, our focus was on returning to customers back into the restaurant and getting them.
Back into their normal routines back into their normal frequency with us and we accomplish that.
I think much earlier than the rest of the industry did and so.
I don't I don't feel like we missed out on anything or that we don't have the ability to catch up I mean, we're still around.
Speaker Change: around, you know, less than $16 per person average, um, you know, putting out freshly prepared food with high quality ingredients. So when we talk about overall relative value, that's where we feel bullish about our pricing power because of the, uh, you know, the offering and the per person average that somebody can come and enjoy a meal with us. And frankly, in in tougher economic times again,
Around less than $16 per person average.
Putting out freshly prepared food with high quality ingredients. So when we talk about overall relative value, that's where we feel bullish about our pricing power because of the.
The offering and the per person average that somebody can come and enjoy our EMEA with us and frankly in tougher economic times again. This is part of the <unk>.
Speaker Change: part of the joy of being around here for 16 years. I can tell you that the last time we were dealing with economic issues.
<unk> been around here for 16 years I can tell you that.
The last time, we were dealing with economic issues, specifically the recession in <unk>.
Speaker Change: specifically the recession in 08-09, we performed very well, again, because of that relative value. And not just the relative value, but the absolute value. Taking a family out for brunch is a lot less than going out for a steak dinner. And so, again, we feel really good about our positioning there. And we're just being conservative because we want to drive more people into the restaurants.
<unk> hundred nine.
We performed very well again because of that relative value and not just the relative value, but the absolute value.
<unk> taken a family alpha branches, a lot less than going out for a steak dinner. So.
Again, we feel really good about our positioning there and we're just being conservative because we wanted to drive more people into the restaurants.
Thank you that's very helpful. I appreciate it.
Speaker Change: The next question comes from Brian Vaccaro from Raymond James. Please go ahead.
The next question comes from Brian Vaccaro from Raymond James. Please go ahead.
Brian Vaccaro: Thanks and good morning, and I appreciate all the color today. Very helpful. Now, on the quarter-to-date comps, the up 29%, I think, year-on-year that you mentioned, just so we're all on the same page, can you help us with what that reflects on a two-year basis compared to Jan-Feb of 20 before COVID set in, or perhaps remind us how your monthly comps trended through the first quarter of 21?
Thanks, and good morning, and I appreciate all the color today very helpful.
On a quarter to date comps to be up 29% I think year on year that you mentioned just so we're on the same page to help us with what that reflects on a two year basis compared to Jan Starbucks 'twenty before Covid said in or perhaps remind us how your monthly comps trended through the first quarter of 'twenty one.
I don't know if I have.
Speaker Change: I don't know if I have all nearby. Do we have the we have the two.
[laughter].
Do we have to we have the two year stack.
Give me just a second Brian .
Speaker Change: And if not, we can just follow up offline. I'm just trying to understand if there's. Two-year stack was 25.3 for Q4.
If not we can just follow up offline I'm just trying to understand it appears to your stock was 25 three.
For Q4.
And I was.
Speaker Change: I'll have to catch up with you on the other stuff if we've, I can either direct you to where we might have either disclosed it publicly or help you get there from our other public information. Okay. Okay. No problem.
Yeah.
I'll have to all have to catch up with you on the other on the other stuff if.
I can either direct you to where we might have either disclosed it publicly or help you get there from our other public information okay. Okay. No problem, we can follow up offline.
Speaker Change: And I guess shifting gears to the 22 CapEx budget, could you provide a little further breakdown between new units, maintenance, and the in-restaurant technology, the KDS? And maybe on KDS specifically, could you provide any more color or perhaps quantify some of the key benefits you expect?
And I guess shifting gears to the 22 Capex budget could you provide a little further breakdown between new units maintenance and the in restaurant technology of the <unk> and maybe specifically could you provide any more color or perhaps quantify some of the key benefits you expect to achieve it.
Speaker Change: to achieve as it relates to throughput and table turns, or perhaps there's a food waste, or benefits to the employee experience, any incremental color on KDS.
Relates to throughput and table turns or perhaps there is a food waste or.
Benefits to the employee experience any incremental color on <unk>.
Speaker Change: So, our new restaurant construction costs before tenant improvement dollars, so the amount, in other words, the amount that gets capitalized probably running about
So.
Our new restaurant construction costs before tenant improvement dollars so the amount.
In other words, the amount that gets capitalized probably running about.
Speaker Change: You know, a million one something would probably be a pretty good, pretty good average that we've talked about in the past.
A million one.
Some of them would probably be a pretty good.
Pretty good average that we've talked about in the past.
<unk>.
Speaker Change: KDS, I think, to roll it out through the whole system, and this is over a little bit longer than a year, is right at $5 million.
Katy, Yes, I think to roll it out through the whole system and this is over a little bit longer than a year is right at $5 million.
Speaker Change: Um, in terms of benefits, I think where it's going to show up is probably, uh, accelerating the, um, traffic through our, in our restaurants. It's, for us, it's, uh, it, uh, creates, you know, more throughput. But I would also say that there's a benefit that
In terms of benefits I think where it's going to show up is probably.
Accelerating the.
Traffic through our in our restaurants.
For us it's.
At Cree.
Creates more throughput, but I would also say that there is a benefit.
Maybe a little bit harder to tease out, but frankly, what we're excited about is that katie's systems are.
Speaker Change: maybe a little bit harder to tease out. But frankly, what we're excited about is that KDS systems are pretty standard in other systems. And as we roll it out, it gives us an opportunity to identify.
Pretty standard in other systems and as we.
As we roll it out it gives us an opportunity to identify.
Speaker Change: to it to identify staff in the back of the restaurant.
Two to identify staff in the back of the restaurant.
Speaker Change: who can make use of the KDS system. And so it kind of opens us up to more staff folks who are capable of executing what for us is a pretty complex back of the house. And so KDS system helps us to identify people who are able to use the KDS system.
Who can make use of the <unk> system.
And so it kind of opens us up to.
Two.
More more staff the folks who are capable of executing what for us are pretty pretty complex back of the house and the <unk> system.
It helps it helps us to identify people who are.
We're able to able to use the system and in fact, where we've where we have used it some of the folks who have come from from other systems have been some of our hour.
Speaker Change: And in fact, where we have used it, some of the folks who have come from other systems have been some of our...
Speaker Change: our best apostles for it throughout the rest of the company.
Our best of Possibles for it throughout the rest of the company.
Speaker Change: Okay, great, that's helpful. And then I just had two quick ones on the guidance, if I could. The commodity guidance that you provided, I assume that reflects quite a bit higher in the first half, followed by a moderation later in the year. But could you help tighten up the cadence that you expect moving through the year?
Okay, Great. That's helpful. And then I just had two quick ones on the guidance if I could the commodity guidance that you provided I assume that reflects quite a bit higher in the first half followed by a moderation later in the year, but could you help tighten up the cadence that you expect moving through the year.
Speaker Change: sort of on year-on-year inflation? You know, right now, I've got to tell you, you know, I'm not sure I have any reason to think that there's going to be abatement in the near term. So, you know, we're going to have to just update you as the year goes on.
Sort of on year on inflation.
Right right now I've got to tell you where.
I'm not sure have any reason to think that theres going to be abatement in the.
In the near term so so.
We're going to have to just update you as the year goes on.
Speaker Change: OK, OK and the the the 22 EBITDA guidance could you help ballpark what level of GNA spend is layered into that guidance?
Okay. Okay, and then the 22 EBITDA guidance could you help ballpark what level of G&A spend is layered into that guidance.
Speaker Change: We haven't guided to, we haven't guided to, to GNA, but there is an increase over, over last year.
We haven't guided to we haven't guided to G&A.
But there is an increase.
Over over last year.
All right I'll pass it along thank you.
Speaker Change: The next question comes from Jared Garber from Goldman Sachs. Please go ahead. Hi. Thanks for the question and certainly really appreciate the
The next question comes from Jared Garber from Goldman Sachs. Please go ahead.
Alright. Thanks for the question certainly really appreciate the quarter to date update on the on the comp and the performance so far this year.
Jared Garber: so far this year. Chris or Mel, frankly, we've had a lot of conversations recently with investors looking at some challenging times, particularly on the lower end consumer as we head into the year. So you made some comments a little earlier on some of the performance, I think, during the recession in 08, 09. Was wondering if you could just dive in a little further there and give us a sense of what you tend to see maybe in some of those times where discretionary spending power might be pressured or inflation is running as positive and maybe fuel prices are a good proxy there in terms of the inflation metrics. But I think one of the questions that we're getting is dining out breakfast sort of the place that consumers look to.
Chris.
Frankly.
We had a lot of conversations recently with with investors looking at.
Some challenging times, particularly on the lower end consumer as we head into the year. So.
You made some comments a little earlier on some of the performance I think during the recession and I was wondering if you could just dive in a little further there and give us a sense of what you tend to see maybe in some of those times where.
Discretionary spending power might be pressured or inflation is running as high as it is and maybe maybe fuel prices are a good proxy there in terms of inflation metrics, but I think one of the questions that we're getting is is breakfast dining out breakfast sort of the place that consumers look to.
Jared Garber: cut spending and obviously that would impact your restaurant performance. So just curious on what you've seen there historically. Obviously this business has been around for a long time and
Cut spending.
That would impact your restaurant.
Sure format. So just curious on what you've seen there historically, obviously this business has been around for a long time and been through some cycles.
Speaker Change: Great question, so I'll just tell you, you know, obviously, it's
Great question. So I'll just tell you obviously, it's it's.
Speaker Change: It's been a while since we've dealt with something like this as an economy, but again, back in 08, 09, it was not kind of what you're hearing from the investors you're talking to from our standpoint. Actually, it was one of our best.
It's been a while since we've dealt with something like this as a as an economy, but again back in <unk> It was not.
Kind of what Youre, what youre hearing from the investors Youre talking to you from our standpoint actually it was one of our best periods ever and back.
Speaker Change: periods ever and back then. And what we saw was, again, what I talked about, I hate to call it a trade down, but it was just a shift. And it's more than just price focused, I think.
Back then and what.
What we saw was again, what I talked about I hate to call. It a trade down but it was just a shift there and it's more than just price focused I think.
Speaker Change: I think when consumers are being diligent about where they spend their dining out dollars, and I should say that even in tough times, consumers want to eat out, they want to gather, they want to have that social occasion, so they start to think about
I think when consumers are being very diligent.
Diligent about where they spend their dining out dollars and I should say that even in tough times consumers want to eat out they want to gather they wanted to have that social occasion. So they start to think about who delivers consistently whose high quality and who delivers a great value and we've always.
Speaker Change: who delivers consistently, who's high quality and who delivers a great value. And we've always, you know, shown up well when when when when that criteria is applied. So that's part of the positioning that we're doing now is to make sure that we are.
As shown up well.
When that criteria as applied so.
That's part of the positioning that we're doing now.
Is to make sure that we are we still fit that bill we're constantly watching our NPS scores and they've been improving and so it's really about delivering an exceptional.
Speaker Change: We still fit that bill. We're constantly watching our NPS scores, and they've been improving. And so it's really about delivering an exceptional customer experience, especially as they're being more discerning about where they spend their dollars. And I don't know if those comments that you're hearing have more to do with.
Customer experience, especially as they are being more discerning about where they spend their dollars and I don't know if that if that.
Those comments that you're here you have more to do with.
Speaker Change: like a QSR type breakfast or stuff. But what we're seeing is families gathering together for brunch as they're dining out occasion for the week or, you know, instead of a big dinner somewhere. So we feel good about that. You know, it remains to be seen how that plays out. But based on our history and what we've seen even over the last year, you know, in the midst of a pandemic, how much our consumers wanted to come back and how quickly they wanted to come back.
Like a <unk> type breakfast and stuff, but what we're seeing is a family's gathering together for brunch as their dining out occasion for the week or <unk>.
Instead of a big dinner somewhere so we feel good about that.
To be seen how that plays out but based on our history and what we've seen even over the last year in the midst of a pandemic how much are consumers wanted to come back and how quickly they wanted to come back.
Speaker Change: gives us great confidence in our positioning going forward here.
It gives us great confidence in our positioning going forward here.
Okay.
Speaker Change: Great, thanks. And then just 1 follow up on the in restaurant technology, the KDS systems. I remember when we were on the on the restaurant tours during the IPO process. Some of the back of house employees were very excited about the, the opportunity to get that installed in the restaurant. So, I know the comment was that you'll have about 50% of the restaurants rolled out with that technology through the balance of this year. Just wondering.
Great. Thanks, and then just one follow up on the in restaurant technology. The caveats systems I remember when we were on the on the restaurant tours during the IPO process. Some of the back of house employees. We're very excited about the opportunity to get that installed in the restaurants. So I know the comment was that youll have about 50% of the restaurants rolled out with that technology.
<unk> through the balance of this year just wondering.
Speaker Change: Maybe, why not more than 50% this year? And maybe is there a way to go faster if there are some real tangible benefits there?
Maybe why not more than 50%.
This year and maybe is there a way to go faster if there are some real tangible benefits there.
Speaker Change: Yes, our desire is to go faster. Frankly, some of it has to do with availability of equipment, especially as it relates to computer chips and things like that. But I'll tell you this, if we can do more, we will. It's just a matter of access to the equipment to be able to do that.
Yes, our desire is to go faster frankly, some of it has to do with availability of equipment, especially as it relates to.
Computer chips and things like that but.
I'll tell you. This if we can do more we will it's just a matter of access to the equipment to be able to do that.
Cool. Thanks, Thanks for the color I appreciate it thank you.
This concludes our question and answer session.
Speaker Change: This concludes our question and answer session. I'd like to turn the conference back over to Chris Tomasso for any closing remarks.
Like to turn the conference back over to Chris Tommaso for any closing remarks.
Chris Tomasso: Thank you and thanks everybody for joining us today. We really appreciate your time and great questions and if you can't tell we're very proud of what we've accomplished here in Q4 and for the whole year and are very excited about what the future holds for First Watch and we appreciate you being along for the ride so thank you very much.
Thank you and thanks, everybody for joining US today, we really appreciate your time and great questions.
If you can't tell we're very proud of what we've accomplished here in Q4 and for the whole year and are very excited about what the future holds for first watch and we appreciate you being along for the ride. So thank you very much.
Speaker Change: Thank you for attending today's presentation. You may now disconnect.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: You
Okay.
Yeah.
Okay.
Sure.
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Okay.
Yeah.
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