Q3 2022 Chuy's Holdings Inc Earnings Call
[music].
Good day, everyone and welcome to the Chili's Holdings third quarter 2022 earnings Conference call.
Today's call is being recorded at this time all participants have been placed in a listen only mode and the lines will be opened for your questions. Following the prepared remarks if.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
On today's call we have.
His lopp, President and Chief Executive Officer, and Jon Howie, Vice President and Chief Financial Officer of <unk> Holdings incorporated.
This time I'll turn the conference over to Mr. Howie. Please go ahead Sir.
You operator, and good afternoon by now everyone should have access to our third quarter 2022 earnings release, if not it can be found at our website at Ww Dot <unk> dot com in the investors section.
Before we begin our formal remarks I need to remind everyone that part of our discussions today will include forward looking statements. These forward looking statements are not a guarantee of future performance and therefore, you should not put undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we.
We expect we refer all of you to our recent SEC filings for more detailed discussion.
Risks that could impact our future operating results and financial condition.
That all the way I'd like to turn the call over to Steve.
Thank you John Good afternoon, everyone and thank you for joining us on our third quarter earnings call. Today, we are pleased with our third quarter results, which started somewhat slow in July due to a record heat in Texas, but finished with strong topline momentum in August and September . This positive trend has continued thus far into the fourth quarter and we believe.
Our philosophy of offering fresh made from scratch food and drinks at an incredible value continues to resonate with our guests and is driving it is the driving force behind our growth.
During the third quarter, we implemented a $3, 5% price increase that we believe maintains the balance between protecting our store level margins, while maintaining the superior value proposition. Our guests have come to expect from choose even with this price increase we believe the value gap relative to our peers remained strong in <unk>.
The profitability. Our team continues focus continued focus on cost management and operating efficiencies resulted in a $17 five restaurant level operating margin, representing a 300 basis point improvement over 2019.
Moving to key aspects of our four wall operation, we continued to make progress on hiring and staffing our restaurants during the quarter through a number of initiatives, including our newly implemented mental health and personal counselling benefit we've been able to continue to improve our team member retention rate with a positive benefits to our guests.
Additionally, our team members for team member referral bonus program has continued to improve our flow of new applicants.
We sustained our.
Our positive momentum in our off premise business during the quarter mixing at approximately 26% and remaining above our target mix of low to mid Twenty's. We are pleased with our team's off premise execution and we remain on track to complete the rollout of our catering program system wide by the end of the year.
Turning to menu innovation in late October we introduced chewy knockouts are <unk> to our guests.
<unk> platform allows us to introduce quarterly specials specials, consisting of old favorites and exciting new items that are offered on a limited time basis, we believe our <unk> create excitement and additional awareness around what differentiates <unk> and is a testament to our commitment to menu innovation and variety.
Starting in late October we introduced items, such as Macho Burrito.
Boom boom, Enchiladas, and our new <unk> fried chicken tacos as part of the <unk> platform. We are also curated additional new items for our next CK al and the first and second quarter of next year, and we look forward to sharing our new innovations in future calls I can assure you. We are just getting started.
During the quarter, we continued our market initiatives with a heavy emphasis on digital media, including the use of Tictoc organic influencer programs on Instagram Youtube video advertising and promotional advertising partnership with door Dash. Moreover, in conjunction with our CK offer CK.
<unk> offerings, we will partner with chase to launch a new campaign campaign. This month as part of their chase.
Ultimate rewards program, along with our new website, we believe our marketing efforts will allow us to reach a broader audience group and more effectively connect with both new and returning guests.
Moving onto development plan, we expect to open two new restaurants in the fourth quarter for a total of three new restaurants openings for fiscal 2022 due to supply chain delays, our Fayetteville, Arkansas restaurant originally expected to be a fourth quarter opening we will now open in early 2023 additional.
Ali we are planning on closing one restaurant in the final days of 2022 at the end of the lease term as we have already developed another restaurant and a more desirable location for the trade area.
As we look forward to our fiscal 2023.
Were initially expecting to open between six to nine new restaurants with a focus on markets, where our concept has proven with high <unk> and brand awareness 2022 has shown us that the development timelines are more challenged in the post pandemic world, especially with ongoing supply chain delays that remain out of our direct control.
As a result, we're tampering tempering our forecast to account for this as we want to set a reasonable achievable target, but one that we believe still represents the most units. We have developed in the last four years, we will continue to work to secure additional openings as we progress through the year.
Finally, I'm excited to announce that we accelerated our share repurchase program, which we completed in October . Additionally, as you can see in our announcement. This afternoon. We are pleased to announce a new $50 million share repurchase program, which demonstrates the strength of our financial position and our commitment to long term shareholder value with that I will.
I'll turn the call over to our CFO , Jon Howie to discuss our third quarter results in greater detail.
Thanks, Steve revenues for the third quarter increased four 7% to $106 7 million compared to $101 9 million in the same quarter last year. This increase was primarily related to an additional 21 operating weeks from new restaurants opened subsequent to the third quarter of 2021.
For the third quarter of 2020 to off premise sales were consistent with the third quarter of 2021.
To add approximately 26% of our total revenue in total we had approximately 261 operating weeks during the third quarter of 2022 comparable restaurant sales in the third quarter increased two 6% versus last year, driven by six 2% increase in average check.
Offsetting by three 6% decrease in average weekly customers.
Comparable restaurant sales increased <unk>, 5% versus 2019, turning to expenses cost of sales as a percentage of revenue increased 280 basis points to 27, 3% driven by an increase in cost of beef chicken as well as fresh produce cheese and grocery items.
Overall commodity inflation during the third quarter was in line with our expectations at approximately 21% and partially offset by menu price increase taken during the year based on the current market conditions, we expect our fourth quarter commodity inflation to decline to the high teens as compared to 2021.
One.
Labor cost as a percentage of revenue increased approximately 120 basis points to 34%, primarily due to hourly labor rate inflation of approximately 10% at comparable restaurants as as well as an improvement in our hourly staffing levels as compared to last year. This.
Partially offset by menu price increase taken during the year as we continue to.
To look at the remainder of the year, we expect hourly inflation to remain at elevated levels of approximately 8% for the fourth quarter of 2022 as compared to 2021. In addition to a continuation of year over year.
Staffing level increases.
Operating costs as a percentage of revenue increased 160 basis points to 16, 3% due to higher restaurant repair and maintenance cost and increase in credit card fees and insurance expense as well as cost pressures on utilities and to go supplies marketing expense as a percentage of <unk>.
Revenue increased 30 basis points to one 4% as the company reinstated its digital advertising campaigns across the nation.
Our occupancy cost as a percentage of revenue decreased 20 basis points to 7% as a result of sales leverage on fixed occupancy expenses and.
In general and administrative expenses decreased to $6 7 million in the third quarter from $7 million in the same period last year, driven by lower performance based bonuses, partially offset by an increase in management salaries higher legal and professional service costs as well as an increase in recruitment fees as a percentage of <unk>.
Revenue G&A decreased 60 basis points to six 3% in summary, net income for the third quarter of 2022 was 5 million or <unk> 27 per diluted share compared to $6 million or <unk> 30 per diluted share in the same period last year during the third quarter of 2022.
<unk> $1 2 million or <unk> <unk> per diluted share and impairment closed restaurants, and other costs compared to $4 million or <unk> 15 per diluted share in the same period last year. The decrease was due to a reduction in the lease termination expenses and related impairment charges as well as a reduction in rent and holding.
Costs paid on closing restaurants as the company continues to exit out of these leases taking that into account adjusted net income for the third quarter of 2022 was $5 9 million or <unk> 31 per diluted share compared to $9 1 million or <unk> 45 per diluted share in the same period last year.
Moving to our liquidity and balance sheet as of the end of the quarter, we had $84 1 million in cash and cash equivalents, no debt and $35 million of availability from our credit facility.
During the third quarter of 2022, we repurchased approximately 558000 shares of our common stock for a total of $12 8 million. In addition, subsequent to the end of the third quarter. We purchased an additional 327000 shares for a total of $7 8 million, which completed our existing <unk>.
$50 million repurchase program.
Steve alluded to earlier, given our strong financial position. We are pleased to announce that the board has approved a new share repurchase program effective October 27th with authorization to repurchase another $50 million of our common stock turning to our 2022 outlook. We now expect to open three new rest.
<unk> for the full year, two of which are slated to open at the end of the fourth quarter.
Net capital expenditures are now expected to range between 30% to $32 million restaurant Preopening expenses are now expected to be approximately one $8 million to $2 million and we still expect our effective annual tax rate to be between 12, and 14% so with that I'll turn the call back over to Steve.
Thanks, John .
We believe we have put <unk> on the right path for long term shareholder returns driven by our operational excellence sizable development opportunity and thoughtful capital allocation driven by the strength of our balance sheet through it all we will continue to provide our guests with a unique chili's experience through high quality made from scratch food and drink offered it.
At an incredible value.
Lastly, I would like to thank all of our team members, who are being the backbone of choice I am proud to be working alongside them every single day with that we're happy to answer any questions. Operator, Please open the lines for questions.
Thank you we will now be conducting a question and answer session. If you'd like to ask a question you May press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the Q4 participants using speaker equipment. It may be necessary to pick up your handset before pressing the star key are fair.
First question comes from the line of drew North with.
Robert W. Baird. Please proceed with your question.
Great. Thanks for taking the question I wanted to ask about recent sales you mentioned positive momentum has continued into October but are you willing to quantify for US here just to level set October trends relative to August and September and then perhaps maybe elaborate on what you believe has been some of the key drivers to improve.
Sales momentum and the sustainability of those drivers as we look to the balance of the quarter and into 2023.
Sure drew I would just say I'll give you kind of the cadence of sales during the quarter.
And then we will leave it at that and say that it's kind of continued into the fourth quarter, but we saw soft sales as we said in July are about flat sales to last year.
And then the approved in August to three 5% and then in September to three 9% over 2021, and those have continued into the fourth quarter.
What's driving those.
Number one is staffing staffing in the stores is definitely here.
Improved throughout the quarter also we're talking about.
Our uptick in our social media as far as getting out there as being top of mind awareness.
That would be the.
The top two and those are before we started our CK L programs too yes, those are very new and we don't really have results to share at this time.
Okay. That's helpful and while I know, it's early I guess I wanted to ask how Youre currently thinking about the inflation outlook for 2023.
As it relates to both commodities and labor.
Are you still seeing the 18% to 19% restaurant margin target or the 300 to 350 basis points about 2019 levels in the cards.
With the inflation levels as they are and.
And we've said this in previous quarters.
We would expect to achieve those once this inflation kind of starts decreasing and gone back to some normal rates I think we could see those but as this continues to progress.
Those might be a little hard to achieve this year I mean this quarter, we did achieve 300 basis points.
As far as what we're expecting for next year and inflation, obviously, we're going to wait until closer to the end of the year.
Into the fourth quarter.
But we again try to lock in 40% to 45% of our commodities.
Alright, that's helpful I'll hop back into the queue.
Okay. Thank you.
Our next question comes from the line of Chris <unk> with Stifel. Please proceed with your question.
Thanks, Good afternoon guys.
Hey, Chris.
Yeah. My first question just relates to development.
Steve I'm, just curious what you've learned this year and what changes you may have made either.
Either to planning or project management or whatnot, but to just give you the confidence that you can open six to nine units next year yeah.
Thanks, Chris Yes, we are.
<unk> been working on for a while and again if you guys remember back in 2018, I think we opened about 10 of our 10 or so so we've been there and done that but the key thing for US is we're really focused on the five.
The states that would probably been in the longest.
Starting with Texas and most of our growth will be in those states and the five we did expanded to two more but we're talking about Texas, Oklahoma Nashville, Ohio one.
What am I missing Johnny.
Arkansas, Arkansas, Arkansas, and Oklahoma. So that's what we'll be doing most of our development. We know those areas very very very well we have updated it all our east side information and earlier this year.
Chris We also brought on a.
Our new head of director of <unk>.
Real estate.
That's joined US so we're getting out in front of it and we're pretty good.
The key thing for us as far as its not so much finding the sites, it's really the supply chain of the sites, whether it would be just getting through the staffing issues on the city levels as far as getting through planning and zoning and all of that and also just getting the equipment, whether it be HVA see coolers and all of that.
And the lead time and type of stuff like that is really plagued us.
On a daily basis, as we're moving through the projects, but the sites itself, though there I will tell you most of the sites that we're looking at probably in the next year is probably ground up I'll tell you it's been a little difficult to find a lot a hermit crabs, what we're continuing to look at that but we feel pretty comfortable with our pipeline.
Well the openings be spread pretty evenly in 'twenty, three or is there any kind of.
Is it going to be more back loaded I'm just curious how we should be modeling. This I, yes, I think it's going to be Chris a pretty evened out quarter to quarter to quarter to quarter. So we will try to balance it out per quarter, yes, okay, and some of those ones that we've pushed Chris into.
Fayetteville are going to be in.
F.
And then we will open up pretty steadily over the last half.
Okay, and then how will have the <unk> mixed in and how does the cost profile of these items.
Compare to kind of the current product mix I'm, just trying to get an understanding if if these would be accretive to gross margin. If you saw people mixed towards these.
These types of limited time offers yeah, yeah, Great question, Chris We just a week into it I Hope you go buy and try some.
We started a week ago and these probably are the price points and the mix of very very similar to our current menu.
I said in my last call I think on the last quarter as we move forward specifically in quarter, three and four of next year, you're going to see it.
Two out of the three items would probably look very much like the price points within our current menu the mix would be very similar to the cost of sales will be very similar we probably starting then we will have one bar bell approach to one of the items that will be probably be a little bit higher priced I'll, let people order up if they'd like it probably something that you wouldn't see jump onto the menu.
In the future, but it would be a barbell approach and that would be more in the second half of next year. So I'm not anticipating any major cost of sales or a major mix movement as far as <unk> go.
Okay, and then just lastly, and I have received a digital.
Digital advertising on the most recent one.
And I have been receiving more digital marketing from <unk>. This year and I'm. Just wondering if you could share any kind of stats you may have on how effective digital marketing has been for the company and driving transactions.
The philosophy behind most of the digital marketing, Chris as you know it.
Really it has to be top of mind awareness and a market group. So that's kind of what we've really looked at it for the first half we really have only just been.
Basically we until we did the starting to see chaos. There was really no news, except top of mind awareness. So it's a little bit too early to give you the stats and say that we're really move the needle with it besides of just making sure. The awareness of choice is out there right now.
Okay, great. Thanks, guys. Thank you.
Our next question comes from the line of Joshua Long with Stephens. Please proceed with your question.
Hey, Jonathan Thank you for taking my question, Hi, How's it going.
I appreciate it I appreciate the color on the trends through the third quarter and then understanding the momentum has continued here into <unk> would it be possible to just talk high level or whatever detail you could provide for <unk> 'twenty one what the cadence looked like just as we think about kind of a normalizing consumer activity and just any sort of year over year.
No volatility that might have been in there from omicron Delta any of those other things that you.
Hopefully, we don't have to talk about G too much going forward.
Sure I mean, we actually had a pretty strong December on the chronically didn't start until maybe the last week or two of December and then the first quarter was really affected by that so we are rolling over some pretty decent numbers. When you are looking.
Looking at 2000 and are looking at the fourth quarter.
One.
As far as leverage though talked a little bit about that we have definitely decreased leverage in the fourth quarter.
Generally.
In cost of sales as you know we continue.
To have pressure there. So I mean, we would expect probably 20 to 30 bps in there in the cost of sales line.
Probably another 2030 bps over two over Q3 in the Labor line and then the Big one is operating expenses, which has a lot more fixed cost and so theres, probably about 50 to 60 bps.
Net operating line. So those are hopefully that answers your question as far as sales and then operating leverage.
That's very helpful and when we think about some of the moderation that you called out for the inflation or just the inflation for the basket heading into <unk> or are there. Some components. There that are you seeing a little bit of relief is that a function of some of the pricing that you've taken here lately.
Well, we are seeing a little relief like in chicken and some things like that but thats being offset by what we're experiencing in lettuce and Tomatoes, right now and Theyre talking about that all through the fourth quarter lead us.
In almost all time highs right now and Tomatoes are are up as well over the last eight weeks by about 60%. So.
And I think they will continue as that.
That.
That crop was hit hard in Florida. So those are those are things that are kind of offsetting some of those favorable things.
That's helpful.
Last one for me as we think about just the environment we're in with.
Steady labor inflation, and then also some of the permitting delays when he talks about their supply chain delays that are impacting new unit development is there a silver lining to that to some extent does that give you a little bit more time or flexibility in building that labor pipeline, which is important to support the longer term unit growth there.
Just any sort of thoughts there in terms of how that pipeline is shaping up in.
For some of those key positions either front of house back of House, Yeah. We're very pleased as I mentioned in the script that.
Rather well and through this quarter.
Until our I'd say, we're about 90%, 95% staffed and all our units, which you never ever staffed and the units are you always constantly hiring so we're pretty feeling pretty comfortable over the last quarter, we've gotten very comfortable.
Starting to run our restaurants very efficiently with the proper staff. So we're pretty happy with that I don't know if I can never say that is a silver lining I don't look at it that way.
Again, it's just something that we are attacking every single day.
Helpful. Thank you so much.
Okay.
Our next question comes from the line of Brian Vaccaro with Raymond James. Please proceed with your question.
Brian Hey, Brian .
Thanks, guys. Good evening good to hear from you.
Can you just remind us when the three and a half I think it was three to three 5% price increase was taken during third quarter.
Right at the beginning of the third quarter.
Brian .
This is kind of early to mid July .
Exactly okay.
Great Great and then on labor.
Staffing levels continue to improve could you I guess provide more color on what youre seeing from a turnover perspective, and just maybe even more interestingly progress youre, making sort of training new members and rebuilding the culture sort of within your restaurants.
Any additional perspective on how kind of key guest metrics are trending as a result of that.
The key for US is we've always had very low turnover at various especially compared to the casual dining industry I think are.
Our management turnover is right around that $25 25 to six.
Range and our hourly turnover right approximately around 100%.
Again, the key for US has always been and what we've talked about the most is we work on retention and we don't mark on turnover and retention and keeping our employees are is huge for us and that's been a key thing for us and it's definitely work.
Yeah.
Okay, and I guess last one for me just on on a lot of companies. It's really on the other Opex line. There's a lot of companies seem to be experiencing sort of unprecedented pressure on utilities and repair and maintenance in recent months can you help frame how far above normal the levels that we're seeing in flying.
We're currently running there's obviously different dynamics within each but then maybe also how long do you see some of these dynamics playing out over the next couple of quarters.
Yes, I think utilities alone has been close to 30% to 50 bps and then.
And then when Youre looking at.
The repairs and maintenance, obviously, that's that's more volatile, but thats been a probably.
Another 20 or 30 bps.
And would that be versus sort of pre COVID-19 levels, John or is that sort of a year on year that you were given those basis points.
I would say that as well.
What ive given you is year over year.
Year over year.
But when Youre looking at our operating expense compared to 2019, Youre looking were up.
200 and.
150.
Over over 2019.
And a lot of that is about 100 bps of that is really related to delivery fees.
Yes.
Thats recorded in there and you know our strategy that we've had over the last three years is to really get some margin neutral out the back door. We finally accomplished that and so as we increase those revenues or the prices for third party delivery, obviously that ultimately increases our fees as well.
Alright, Thats very helpful. Thank you.
Thank you.
Our next question comes from the line of Nick <unk> with Wedbush. Please proceed with your question.
Hey, Nick.
Hey, guys great quarter, just a couple of clarifications.
The pricing was six 6% in the quarter or was that actually six 5%.
So we're just slightly worried about 60 75, all in pricing with our two price increases one in February and then one in July so pricing in the menu today is about 675% to seven.
And that's today is in Q4 is going to be 600 classes to seven what was or was that what it was in Q3 that was what was all in Q3 and will be in Q4.
Got it okay.
And then the next pricing is then.
<unk>.
Yes, yes, it will be February of the upcoming year period too.
Yeah.
Are you thinking about just being a little bit more aggressive too to offset inflationary pressures in the first half I mean, I know everybody across the industry was a little bit more patients this year.
That everyone's kind of catching up.
What's your philosophy on it.
Right right, Yeah, right now, we're really didnt doing going through our competitive analysis in all our markets and that will continue right up through the end of the year to look at what everybody else is done we feel pretty great about our value and we definitely feel we have some some room, if we needed to.
And so that's a key part for us, but right now we're going to wait until we get all of that info, who don't want to leave money on the table, but we don't want it and the value is a key deal for us as we move through 2023, So I don't have a go.
Great answer for you as far as what I'm planning on doing it until I get all the research in.
Sure.
And John when you talked about the deleverage numbers earlier that was sequentially quarter over quarter rate that was not year over year correct that's quarter over quarter from Q3, Thats. Historically, if you look back in 2019 that was kind of similar to what we had from a leverage standpoint back then.
Okay. Thank you very much.
Thanks, Nick.
As a reminder, its star one to ask a question. Our next question comes from the line of Todd Brooks with benchmark. Please proceed with your question.
Hey, Thanks, and good to talk to you guys.
Just a couple of tag ends here, if you're talking about staffing improvement being an unlock for the same store sales momentum can you remind us what staffing levels were Q4, and Q1 last year and <unk>.
Walk through what the Omicron experience was I know it wasn't a much in Q4, but as you got to Q1 what.
Kind of exclusions looked like if you had to constrain the menu and operating hours I'm, just thinking you've got a much better staff position knock where do we don't have something as disruptive Soma krona it should be a nice driver.
Our sales.
Yes, I mean, that's what we're looking for in the first quarter most of our omicron hit hit and kind of the first first and second period and so.
Just to remind you.
Our staffing levels was probably I think it was about 85% to 90% then but.
What we did was there are several stores that we just had to close down.
Or closed down.
To delivery only because we lost enough.
The fact that we had to.
To close the restaurant down two to go only so we did have that I can't I don't have at my fingertips, how many actual days we lost.
But it was.
It was fairly significant so.
If I can get you that.
Great and then my last one is.
Steve you talked about catering being rolled out system wide by the end.
This quarter, but can we talk about trends I hear the catering.
Stronger than pre pandemic for a lot of operators now seems to have a lot of momentum what are you guys seeing as far as percentage of mix and maybe uptake in the newer markets that you've been rolling out.
John you get the percentage of mix yeah.
Picked up for us over the last two quarters and it is continuing we're real excited about what we think it can do for us obviously through the holidays.
Good day, a year ago on the holidays, but.
<unk> seen an uptick in <unk>.
<unk> of sales on that right up in that range.
If I remember correctly, two 6% which is.
It is a nice nice increase over a year ago and over 2019, obviously.
That's great. Thanks, guys congrats on the quarter. Thanks Todd.
Sure.
Our next question comes from the line of Andrew.
<unk> <unk> with BMO capital markets. Please proceed with your question.
Great. Good afternoon, thanks for taking the questions.
My first one is just.
If you could kind of speak to just the consumer spending environment and what youre seeing.
Obviously, I understand the accelerating comp trends, but just.
Was there anything either regionally or the way that.
Customers are treating your menu or anything like that obviously youre promoting the value and enhancing the value, but just anything that youre seeing that you think might be creeping in there.
We're not.
We really haven't seen a change.
Changed whether it be demographically or anything as far as that goes we might have seen a little bit.
Less incidences on alcohol sales, a little bit, especially in the beginning of the period and as it moved in a quarter.
With the weather.
Lack of patio sales because of the hot weather in Texas.
But overall no and regionally if there's really no difference menu mix is really not a whole bunch of different during the quarter. We definitely added a few of the items back in.
From the third quarter and you did see some menu mix change because of the items, we added back in but nothing that was that would toss any any more about where that's going.
Okay, Great and then.
<unk> touched on the catering side, but just more broadly on off premise.
Stable as a percentage of sales year over year.
As we've seen the kind of macro evolve in <unk>.
It's about taking pricing on delivery.
Diamond has.
Walt as well can you just talk about how you're thinking about driving that business going forward.
Yeah.
Does it change kind of your view on where you think that maybe ends up over time or just any color on more broadly on off premise.
Ability there.
Yes.
As we've mentioned to you everybody before I, we've been so consistent over the last year year and a half and are our to go sales in and off premise sales has been amazing in that.
Per week per week, and that two 1% to $2 $3 million every single week for the company and.
And that's continued to move and as we've always said we felt before.
Before the pandemic, we are in that 12% to 14 range I think last quarter. We finished right around 26% with almost double that John now has consistently said that we're expecting at that level out as we increase the dining room sales and move them back inside the four walls.
Maintaining a low to mid 20 range.
The caveat on that is we might have a little upside. If we can continue to really rollout and really work hard on their catering. So we're pretty much still there and thats, where our goals are and we're pretty excited about the consistency of that and the key thing that we're always looking at is obviously the convenience.
Huge and it's one of our pillars and Thats. The key thing and we think our convenience it's easy to get to go as a quick casual.
Or anywhere else you are going to go so we're pretty excited about that as a as a continued part of our business exactly where it's at.
Okay, Great and then just the last one for me I know over the last year plus.
Getting some of the commodities locked those discussions have been challenging.
Just.
I'm curious how kind of the tenor of those conversations is evolving now as you try to look at 'twenty, three and maybe the commodity markets have evolved as well.
I guess what.
R R.
Puts and takes really narrowing or those conversations become easier or is that still.
Your ability to kind of go whether it's farther out or get the get the prices that you'd like.
Well I mean, it's a great question.
We continue to have those tough conversations because.
Absolutely right its volatility a lot of the vendors don't want to go too far out and so we're continuing to have those discussions were very pleased.
Like I said earlier to have gotten the heat.
The heat of beef out through the third quarter.
We are again working on on the ground beef now we don't lock in our chicken is a fresh product and we can't lock in our produce obviously, because thats fresh product as well.
But again you are right I mean, those are tough, but we continue to have those and we're going to strive to continue to get at that 40% to 45% level.
Sure.
Great. Thank you very much.
Thanks.
There are no further questions in the queue I'd like to hand, the call back over to Steve Hislop for closing remarks.
Thank you so much John and I. Appreciate your continued interest in choosing will always be available to answer any and all questions again. Thank you stay healthy and have a good evening.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.