Q1 2023 Denny’s Corporation Earnings Call

Speaker 1: for operator assistance during the conference. Please press star zero on your telephone keypad.

Speaker 1: As a reminder, this conference is being recorded.

Speaker 1: It is now my pleasure to introduce your host, Mr. Kurt Nichols, Vice President, Investor Relations and Finance.

Speaker 1: Thank you, Mr. Nichols. You may begin.

Speaker 2: Good afternoon. Thank you for joining us for Denny's first quarter 2023 earnings conference call.

Speaker 2: With me today for management are Kelly Valade, Denny's Chief Executive Officer, and Robert Verostick, Denny's Executive Vice President and Chief Financial Officer.

Speaker 2: Please refer to our website at investor.denny's.com to find our first quarter earnings press release, along with the reconciliation of any non-GAAP financial measures mentioned on the call today.

Speaker 2: This call is being webcast and an archive of the webcast will be available on our website later today.

Speaker 2: Kelly will begin today's call with a business update. Then Robert will provide a development update and recap of our first quarter financial results before commenting on guidance.

Speaker 2: After that, we will open it up for questions.

Speaker 2: Before we begin, let me remind you that in accordance with the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, the company knows that certain matters to be discussed by members of management during this call may constitute forward-looking statements.

Speaker 2: Management urges caution in considering its current trends and any outlook on earnings provided during this call.

Speaker 2: Such statements are subject to risk, uncertainties, and other factors that may cause the actual performance of Denny's to be materially different from the performance indicated or implied by such statements.

Speaker 2: Such risks and factors are set forth in the company's most recent annual report on Form 10-K for the year ended December 28, 2022, and in any subsequent Forms 8-K and quarterly reports on Form 10-Q . With that, I will now turn the call over to Kelly Vallee, Denny's Chief Executive Officer.

Speaker 3: Thank you, Kurt, and good afternoon, everyone. We're pleased to see 2023 off to a great start with system same restaurant sales growth of 8.4%, consistently strong off-premise sales and improving restaurant margins despite a persistently challenging operating environment. Our leadership team and our operators remain focused on the long-term revitalization of the Denny's brand.

Speaker 3: and on expanding the reach of the Kiki's brand through our five strategic priorities. As a reminder, these are developing best-in-class people and teams, driving profitable traffic growth, maximizing restaurant margins, leading with technology, and growing restaurants as a franchisor of choice. I'll cover each of these as a framework to illustrate our progress and our results this quarter.

Speaker 3: Because it always starts with people, our first strategy is to develop best-in-class people in teams. We experience continued improvement in our ruling 12-month management turnover through the first quarter, once again leading the family dining segment, this time by over 650 basis points. This means our teams are again positioned to take great care of the guests.

Speaker 3: But knowing there's nothing more critical than taking care of our operators, we're now doubling down on our offerings related to education, total rewards, and even mental health. First, set to launch in less than 30 days is our new GAME program, which is about helping our operators gain skills, education, and opportunity. We'll launch a new program where operators can gain a coach to assist them in the process of attaining a GED.

Speaker 3: And we're also leaning into mental health as a key benefit that can help our operators overall be whole and happy.

Speaker 3: We believe the business case is clear. Investing in the development of our people just makes sense.

Speaker 3: Further highlighting our commitment of developing people through our culture, we are pleased to have been recognized again by Newsweek, this time as one of America's greatest workplaces for women. Our second strategic priority is to drive profitable traffic through a relevant and improved guest experience. Our operators here and franchisees around the country have done an amazing job continuing to break internal records and beat the industry and get satisfied.

Speaker 3: year-over-year improvements across all major metrics.

Speaker 3: And finally, our Google rating is improving as well. Currently up to 4.2 compared to 3.8% one year ago. Yes, I said, Danny, he said they 4.2, Google rating.

Speaker 3: Continuing to delight the guests also comes with the need to deliver a more personalized guest experience that drives a sense of loyalty and a connection with our brand. And we're especially excited to announce a new partnership with SparkFly and Ollo to forge a next-generation intelligent customer engagement ecosystem designed to surprise and delight our guests with personalized offers and experiences.

Speaker 3: In the notoriously competitive industry, the forthcoming relaunch of the Denny's rewards program next month will position Denny's as a leader in customer-centric innovation, demonstrating the branch commitment to using data and technology to drive growth and loyalty.

Speaker 3: This last quarter, Denny's also delighted our guests with the launch of our new ITS diner time campaign, squarely leaning into what we've uniquely offered our guests for over 70 years, the reliable comfort of a diner. And we chose the launch that ITS diner time campaign through an innovative and unexpected way, hijacking the cultural conversation around daylight savings time.

Speaker 3: We were encouraged by the initial result of this campaign, amounting to over 75 million earned media impressions.

Speaker 3: The activation also paved the way for a viral moment where Denny's social media mentions doubled, leading to the growth in overall Denny's rewards members.

Speaker 3: And finally, with this new campaign, we also launched a new menu, which features new crevable products like our Mac and Briskett Sizzling skillets, oven baked mac and cheese, oven baked lasagna, and a new Apple Krispies dessert. These new products are selling incredibly well and above forecasted level. All these delicious offerings are now prepared using our newly installed kitchen equipment that allows us to continue to innovate in new and different ways.

Speaker 3: focused on inventory management and waste savings includes some updated kitchen prep steps as well as portioning simplification methods which also facilitate more consistent execution.

Speaker 3: The team is focused and the work continues to identify, deliver additional margin improvement opportunities.

Speaker 3: Our fourth strategic priority is to lead with technology and innovation. Our kitchen equipment installations are now complete and we're already seeing the impact given the launch of the new items I just mentioned. But we're also seeing operational efficiencies as well. Patch cooking breakfast proteins like bacon and sausage, yielding greater product consistency compared to cooking it at the time of order.

Speaker 3: This approach is already saving at least one hour per day of a cook's time during peak periods.

Speaker 3: Additionally, the consistency and quality of those core products is significantly improved, which will only add to the gains we're seeing in our overall food quality scores. In fact, any net sentiment scores related to our food are up over 800 base points from a year ago, while the family dining category saw slight decline during that same period. We also recently completed our conversion to a common network service provider, laying the family.

Speaker 3: vacation systems, server tablets, and QRP. Each focused on consistent operational execution, labor efficiencies, and enhanced guest experiences. I personally witnessed the enthusiastic adoption of the server tablets recently during a restaurant visit to a test location. I walked away more excited about our technology transformation and the opportunity on the horizon.

Speaker 3: Our fifth strategic priority is to grow new restaurants as a franchise or a choice. With over 200 global commitments, our current Denny's development pipeline remains strong, and we believe successful execution against these other strategies will use greater franchise of the interest going forward. In addition, we continue to take a close look at our restaurant image and remodel elements to ensure we are delivering an environment that meets guests' expectations for the modern American diner at a compelling ROI.

Speaker 3: Second, we continue pushing forward on increasing the number of domestic restaurants operating 24 hours, which is currently at approximately 71% of the domestic system and continuing to grow. And third, as we stated before, our all-day diner deals value platform allows us to continuously evolve the menu to ensure we deliver on our promise of everyday value for our guests. We refreshed our all-day diner deals menu in March, including the addition of our ever-popular Super Slam.

Speaker 3: And total value mix in the first quarter was approximately 15% up slightly from the 14% mix we saw in the fourth quarter of last year.

Speaker 3: We will continue to lean into our barbell strategy where guests looking for a deal at Denny's can find it on our all-day diner deals menu While others have the option to choose from our more premium LTO and core menu products

Speaker 3: Now turning to Kiki's Breakfast Cafe, we recently concluded our brand ethos work to better understand what makes Kiki so special to the many that enjoy it every day. This work has helped us to determine our unique position in the segment and its informing decisions on interior decor elements, overall design for new builds, and the overall design for new design.

Speaker 3: and opportunities to enhance product offerings and overall menu design. In fact, we're currently testing alcohol and a new menu design as we speak, which will better highlight what Kiki's customers love, are made from scratch, fresh ingredients, and abundant portions.

Speaker 3: We'll leverage all these new learnings and test results to support accelerated long-term growth within and outside of the state of Florida. And we now have key training and operations leaders in place to ensure we're set up for future openings.

Speaker 3: Finally, we're excited to recently open another franchise Kiki's restaurant in April . We look forward to many more in the future.

Speaker 3: In closing, I'm confident we have the right leadership teams in place at both Denny's and Kiki's. With our experience in dedicated franchisees, operators and shared service teams, we are poised for continued success for many years to come. With that, I'll turn the call over to Robert. Thank you, Kelly, and good afternoon, everyone.

Speaker 4: Today, we'll provide a development update and a review of our first quarter results before discussing our annual guidance.

Speaker 4: Starting with our development highlights, Denny's franchisees opened five new restaurants during the quarter, including four international locations.

Speaker 4: We have also opened one Kiki's franchise location in April and continue to build a pipeline of both developers and site locations as we look to accelerate growth in the back half of 2023 and into 2024.

Speaker 4: Denny's franchisee is also completed 8 heritage 2.0 remodels during the quarter.

Speaker 4: We are currently reassessing our existing remodel elements and expect to begin testing a modern American diner remodel image later this year.

Speaker 4: The goal is to ensure we deliver sales lesson returns that are better than the full service restaurant average consistent with our previous heritage remodel programs.

Speaker 4: Moving to our first quarter results.

Speaker 4: Denny's domestic system-wide same-restraunt sales grew 8.4% in the first quarter compared to 2022, including an 8.1% increase at domestic franchise restaurants and an 11.4% increase at company restaurants.

Speaker 4: Off-premise sales were approximately 21% of total sales for the first quarter.

Speaker 4: This consistent performance is a testament to the strength of our off-premise technology, infrastructure, and innovation support teams.

Speaker 4: Denny's domestic system-wide same-restraught sales growth was primarily due to an increased in-guess check average. For the quarter, pricing, net of changes in discounts and product mix was approximately 8.5% yielding roughly flat traffic.

Speaker 4: As highlighted in our Q1 earnings investor presentation, domestic average weekly sales for Q1 were nearly $37,000.

Speaker 4: This represents a 10.7% increase in average weekly sales compared to the first quarter of 2022, whereas same restaurant sales increased 8.4% relative to 2022.

Speaker 4: The variance between these two metrics demonstrates that while our system portfolio is smaller, it is healthier in generating higher average weekly sales as lower volume restaurants exit the system.

Speaker 4: Franchise and license revenue was $64 million compared to $59.1 million in the prior year quarter. This increase was primarily driven by Denny's franchise restaurants' same restaurant sales growth, in addition to $1.5 million of Kiki's Breakfast Cafe franchise revenue in the current quarter. Franchise operating margin was $31.6 million or $49.2 million in the prior year quarter.

Speaker 4: $25 million were up 21.5%.

Speaker 4: This increase is primarily due to strong same restaurant sales growth of 11.4% at Denny's and $3.7 million of Kiki's breakfast cafe company restaurant sales in the current quarter. Company restaurant operating margin with $7 million or 13% compared to $5.4 million or $12.2% in the prior year quarter. This margin change was primarily due to the improvement in sales for point-

Speaker 4: as we experience 4% inflation during the quarter.

Speaker 4: GNA expenses for Q1 total $20.1 million compared to $17 million in the prior year quarter.

Speaker 4: This change was primarily due to increases in corporate administration expenses, deferred compensation valuation adjustments, and performance-based incentive compensation, partially offset by our reduction in share-based compensation expense.

Speaker 4: These results collectively contributed to adjusted EBITDA of $18.5 million.

Speaker 4: The provision for income taxes was $1 million reflecting an effective income tax rate of 61.5% for the quarter compared to 27.1% in the prior year quarter.

Speaker 4: The 2023 quarterly rate included a 36.6% discrete item relating to share-based compensation. We expect the 2023 fiscal year effective tax rate to be between 26% and 30%.

Speaker 4: Adjusted net income per share was 13 cents. We generated adjusted free cash flow of $12.6 million, which represents over 60% of our adjusted EBITDA.

Speaker 4: Our quarter end total debt to adjusted EBITDA leverage ratio was 3.4 times within our target leverage range of between 2.5 times and 3.5 times adjusted EBITDA.

Speaker 4: We had approximately $275 million of total debt outstanding, including $264 million borrowed under our credit facility.

Speaker 4: Subsequent to the first quarter, we entered into an amendment of our credit facility, transitioning our credit facility benchmark interest rate from LIBOR to adjusted daily simple sofer. This conversion to adjusted daily simple sofer is not expected to have a material impact on our consolidated financial position or results of operations.

Speaker 4: During the quarter we allocated $9 million to share repurchases continuing our commitment of returning capital to shareholders.

Speaker 4: Since beginning our share repurchase program in late 2010, we have allocated over $658 million to repurchase approximately 63 million shares at an average share price of $10.44.

Speaker 4: As a result, at the end of the quarter, we had approximately $144 million remaining under our existing repurchase authorization. Let me now take a few minutes to expand on the business outlook section of our earnings release.

Speaker 4: We are reiterating the previously announced full year 2023 guidance as follows. We anticipate Benny's domestic system-wide same-restraught sales will be between 3% and 6% compared to 2022.

Speaker 4: Given our strong start to 2023, our current expectation is to be towards the upper half of this range, and we look forward to providing future updates as we move through the year.

Speaker 4: We anticipate opening 35-45 restaurants on a consolidated basis, inclusive of 8-12 Kiki's openings, with a consolidated net decline of 15-25 restaurants.

Speaker 4: We are projecting commodity inflation for 2023 to be between 4% and 6%, with roughly 60% of our market basket currently locked.

Speaker 4: We expect labor inflation of approximately 5% for the year.

Speaker 4: Our expectations for consolidated total general and administrative expenses are between $79 and $82 million, including approximately $14 million related to share-based compensation expense, which does not impact adjusted EBITDA. This consolidated range contemplates a full year of Kiki's GNA.

Speaker 4: and assumes fully reloaded incentive plans.

Speaker 4: As a result, we anticipate consolidated adjusted EBITDA between $86 and $90 million.

Speaker 4: In closing, I would like to thank our dedicated franchise partners, restaurant operators, and support teams who have remained focused on our guests and strategic priorities to ensure both Denny's and Kiki's continue to thrive in the many years to come.

Speaker 4: That wraps up our prepared remarks. I will now turn the call over to the operator to begin the Q&A portion of our call.

Speaker 1: Thank you. We will now be conducting a question and answer session.

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Speaker 1: One moment please, I'll be pulled for questions.

Speaker 1: Thank you. Our first question is from Michael Tamas with Oppenheimer. Please proceed with your question.

Speaker 5: Hi, thanks. You know, Kelly, you talked about driving profitable traffic growth going forward. You know, I get this a long-term comment. It's not necessarily about anyone period or quarter, but you know, the traffic was flat in the first quarter against where I think was, you know, an easy comparison. So what do you actually need to do to push traffic into the positive territory?

Speaker 3: But what do you think you need to do differently to get over that hump? Yeah, it's a great question. Thank you for that, Michael. You know, it's a, so we like so many others, you just started the quarter. We know, we know the January and February that there were, there was obviously an own micron impact there. And so it started out sequentially stronger. And it was a bit...

Speaker 3: just launched so we expect that. Those are some of the, you know, this is the first time in a little bit. We've had some new products that are doing fairly well as I mentioned. So we expect that that over time will help us as well. And then we've also got, obviously, all day diner deals for us is there's a big impact. When we are on there and talking about value at a time when consumers need that, we know it helps our traffic as well.

Speaker 5: Yeah, I think you sort of touched on this in the prepared marks and then your answer a little bit. But you know, can you talk about maybe how the first quarter played out relative to your internal expectations and you know obviously I think Robert mentioned being at the higher end of your same story sales guidance. With just the choppiness that we're seeing out there in the macro, what are the sort of risk factors that play that might cause you to not be at the higher end that you guys are closely monitor.

Speaker 4: that somewhat have been easier to lap. So it played out. Towards the end of the quarter, and I think you've heard this commentary on several that have reported it right now, you started to get pretty choppy, frankly, as we move through the roll over a spring break in Easter, that the mismatch year over year presented a pretty difficult read. I would suggest that's the way.

Speaker 4: April is for us is somewhat more difficult to read with regard to the balance of the year and what would prevent us from achieving the higher end of that guidance range. The verbiage in my script with regard to guidance, the biggest item to me, I think, it would be

Speaker 4: staffing unemployment just people being employed right lower unemployment higher employment as long as that holds which it right now it appears to be regardless of what the the rhetoric is about the macro environment i i think we're in pretty good shape so again low unemployment high high employment it would be a good good education

Speaker 4: But even, let's say it does back up, like just conjecture, not the hypothetical. In that environment, we believe we, and it's talked about in the environment right now, we believe that we are the beneficiary of trade downs in the restaurant segment. So again, we don't anticipate that happening.

Speaker 1: Thank you. Our next question is from Erica Zalas with Keeping Capital Markets.

Speaker 4: Please proceed with your question. Hey. Thank you very much. Hi, Eric. Question. Hey, how's it going? The question's about the off-premise business. You know, there's been some headlines out there about DoorDash, potentially penalizing some operators that charge higher money, price them the platform, versus what they charge in store.

Speaker 4: I'm just wondering what the implications for your off-premise might be and assuming this tactic would be implemented and does it make you want to rethink your strategy at all and how do you think your franchisees will just let change? So with regard to that, Eric, we are really bullish about our off-prem business. It's others over the course that's earning season.

Speaker 4: dash idea of the differential in pricing. I guess we'll just cross that bridge when we get to it. We do. We are one that employs a strategy of higher third party delivery pricing that is to offset some of the significant fees that come with that platform. So I guess we will just cross that bridge when we get to it.

Speaker 6: Okay, fair enough. And then maybe just one on inflation, you know, you reiterated your commodity outlook for the last quarter. You know, egg prices have come down fairly precipitously in the last month or so. I'm just wondering, you know, is there upside or sort of downsides of that inflation outlook?

Speaker 4: you know should should that trend continue with the other offsets that we think about yeah that's a really interesting question so we did uh... in my remarks we we came down from thirteen to ten that's q4 to q1 uh... we did at this point uh... reiterate guidance of that four to six percent uh... if you just do the math that's pretty meaningful a pretty meaning

Speaker 4: has improved pretty dramatically and we expect that to improve beef likely will inflate beyond the q1 levels and potatoes are really the the punch in the the stomach so far this year but we are uh... to to make known we are fully locked on potatoes at this point

Speaker 4: I would like to hope that this whole environment continues to moderate and at some point that we could come off that guidance range. There certainly is trending that both in labor and commodities that we are hopeful about. And we would look to update that as students with our Q2.

Speaker 7: Great. Thanks for taking the questions. My first is about the 24-7 operations. And you mentioned you've gone to 71%. I think when you spoke in mid-Several, you were at 67%. At the time, you're adding about 100 basis points a week. So clearly that's slowed. I think from what we're seeing, it really hasn't grown much at all in the last few weeks.

Speaker 7: So the question is, how confident are you in hitting the 90% target that you've laid out before? And I think at one time when we were talking about mid-23 for that target, is that something that you'd expect maybe by the end of 23 or when you expect to achieve the 90%.

Speaker 3: Yeah, great questions and we appreciate that. And you know, so this is an ongoing conversation, it's an ongoing discussion and actually we do feel good about the progress and yet you could look at it and say, you know, subconsciously not as exciting as where we were, you know, the momentum that we did have, although every week we are still adding new locations to that number and there is a lot of promise that we see in the conversations we're having.

Speaker 3: We've basically gone from really segmenting the entire population and having conversations with every franchisee to now showing them profitability analysis, to helping them understand what the market's doing around them. And honestly, the conversations are really positive, very fruitful conversations. So I think the conversation or the comment about kind of the happier I think within Confirm or deny that in the past.

Speaker 3: But we still believe that this is doable for us. Haven't necessarily, we're not necessarily thinking we have to extend any timelines, but it's something that every day we're working on in partnership with our French ID. And frankly, we feel like we're being really good partners to them right now, helping to understanding what it takes for them to do this.

Speaker 3: There's been a lot involved in it. Staffing and retention were the issue. Profitability, we finally are getting some tailwinds. Everyone knows that. So we're finally seeing that, which is helping them also really see the fact that profitability is in front of them with the return to 24-7. The late-night day part is still strong for us. So.

Speaker 4: the and growing and so that business case is there it's just a matter of being good stewards being good partners with them and continuing to have the conversation but our plans are still in place and we are we are working towards that every day yeah and just the uh... just a slight add to that jake with regard to that uh... as you would expect uh... with regard to timing that not really a specific timing but i can tell you that our guidance

Speaker 7: by mid 23, but maybe you think you can, the next couple months get it to 90. But is that what's incorporated? Or is, I think the question is, before we're kind of talking, two to 3% potential boosts, should we be thinking about one to 2% in that guidance now? Or maybe that's really the question, I guess.

Speaker 4: Yeah, I think that this has proven out, Jake, to be as Kelly described, very fruitful conversations in an ebbson flow. The first half of this quarter, we added more of the back half a few less.

Speaker 4: All of the comments that Kelly made are spot on. They're very productive conversations. We will continue to make progress week in and week out. The math that I have done on previous calls that you acknowledge would suggest that going from the 63% that we were added to at the end of the year to the to another.

Speaker 4: there in September and we would still fall within that range. Again, I'm very bullish. I think the business case is absolutely there. I think all of our external benchmarks that we read suggest that the people that get open late night are winners. But that's why we give ranges because it's just not an exact science at this point.

Speaker 7: Great, great, I really appreciate that. You know, just one last one for me on franchise margins. And you know, it was a little bit less than we were expecting than I think the consensus was expecting the absolute margin. Maybe just, if you can maybe help us out as to whether there is anything unusual in the franchise margin in the first quarter and...

Speaker 7: Maybe should we think of the first quarter kind of margin as a good proxy for you expect the rest of the year? Maybe to help us better model that in the future.

Speaker 4: We are technically, we are counting that as a sale of that equipment and it's fully offset below by the cost of that, so that's a zero margin business that could be impacting it. So we'll roll out of that as we move through the balance of the year. So I'm not sure I have a better answer at this moment, but we'll do so to provide better guidance as we move forward. Okay, and then you're just building on that last one, but in my, in my guess this question really, but in terms of your internal expectations, was there anything we're margins about where you expected them? It seems like sales were...

Speaker 7: We're strong, you know, but maybe didn't flow through as much to the margin. So was there anything you know across the the income statement in margins that you that surprised you that the Maybe that won't recur or how do you view the margin performance in the quarter internally?

Speaker 4: Yeah, we margins again very similar to sales. We're pretty much on what we expected. Now that does not mean that they are what we want. Again, with commodity inflation still 10 percent in labor inflation at 5 percent, where we're still we're about the point that we can get ahead of this and we will continue to grow these margins. If there was anything that would have been a slight off to what we were expecting, you could say that the utility is kind of ramped a little bit faster than we thought. But the reality is, it's nothing that we can't overcome. And again, at 13 percent, likely in line with the internal thinking.

Speaker 7: to continue to grow those. Great, thank you so much. Thanks Jake.

Speaker 4: predominantly pricing and most of it rollover pricing. About 75, near 80 percent of that is rollover pricing with a pricing window in January . With regard to mix, it was virtually flat, frankly. So it was really mix driven. Or sorry, really pricing driven.

Speaker 4: uh... we had a pricing menu in march there will be one in June and again in October i think the way to think about pricing for us is that will work that remain strength in the role of a pricing but sequential uh... a decline in the amount that was taken over the course of the balance of the year we were trying to it we as the inflationary pressures moderate naked is a labor and commodities to continue to come down uh... we believe that the pricing should should fall in line with that so uh... strong rollover pricing that will roll off through the end of the year and then what we add march June in October

Speaker 4: our goal is to have that be lower than what was added in the prior year. So sequential improvement as we move through the year. So sequential lowering. And I apologize if I missed this, but what was the kitchen equipment within royalties in Q1?

Speaker 4: prior to the rollout and that was to secure the supply chain. So when we installed it in franchise units, that appears to be revenue to us, but then it's offset down below as a cost to that. So again, pretty much a zero margin business with regard to the kitchen equipment. That begins to go away. We're through it basically through that process. We have ovens, unfortunately, all of our Denny's restaurants now. There may be a little bit of a tail with regard to equipment that didn't get billed, but again, a zero margin business that just kind of complicates franchise margins.

Speaker 7: Good evening. Hey, Todd. Hey, everyone. Two quick questions for me. One, you talked about the early reads on the new menu items and the early signs of success with that platform and the new cooking platform and what it's unlocking for you. As you look towards the June menu or the October menu, how much more can we broaden out new offerings that the new ovens are unlocking since the customer seems to be embracing this newness? How much should that expand as we go through the next two menu iterations? Yeah, that's a great question. We are excited. In fact, this is the strongest kind of new dinner product launch that we've had in, I think we'd say since the pandemic.

Speaker 3: from the new equipment so far. Where are we in that journey? Like how much efficiency are we gonna harvest with these platforms now fully rolled out? Yeah, so it's a great one. It's movie target, right? We've been doing this for several years to get these folks to the point of fully rolling it out. We've watched that. You also were watching that with a lot of noise during a pandemic. But it's obvious when you think about batch, could just simple batch cooking of bacon and of sausage. You're not doing it at the time of service now. So we're able to do that. The quality has improved as I already mentioned, but you definitely have the efficiencies there. We're gonna continue to build on that through leveraging technology with Xenial.

Speaker 3: But just in terms of those efficiencies on that kitchen equipment, it's absolutely helping just speed of service and batch cooking and keeping that quality even, you know, helping that quality be even better than before. But yeah, as I said, it's about one hour in peak periods, you know, in the peak periods of the week, the one hour a day.

Speaker 3: And again, we'll continue to leverage this, we'll continue to look for other technology improvements like our kitchen, video display systems and things that are also being tested now. So we'll continue to find those, look for those inefficiencies rather, and build that business case for leveraging that technology. Okay, great. My last one, I think in the commentary you mentioned that...

Speaker 7: retention and turnover levels have improved at the managerial level. Can you talk about an hourly level? I know staffing feels like it's back in a place that you want it, but how are the turnover levels and maybe the duration of people being in those roles and how much more productive they can get going into some peak periods around key holidays around Mother's Day, Father's Day, graduation season, all that in the second quarter. Thanks. Sure, that's all come in, right? Those peak periods are coming and I think we're in a good place. When we talk about retention and turnover, we talk about hourly even, we're talking obviously company restaurants. So we continue just to see significant strengths there. Our company, they're doing a phenomenal job. So I don't have the tenure or the...

Speaker 3: We measure it and correlate that to really just demonstrate the power of taking care of your people. So pretty excited about what we can see there and what it can do to help us take care of the guests going forward and peak periods, as you mentioned.

Speaker 1: That's great. Thanks, Shirley. You're welcome. Thank you. Our next question is from Jake Bartlett with Truest Securities.

Speaker 4: Thank you, just one quick follow up here. And that's on regional performance. My question really is on California and the performance there. I would have thought that atmospheric rivers would be dampened sales, but seems like California has actually done pretty well. So any commentary on how California has been trending for you? Yeah, Jake, happy to take that follow up. So we did take a look at the atmospheric stuff, the storms that were hitting California. And we teased it out that it had an impact for about a week. And so not material on the quarter itself. When we look at California, they're actually when we look at them in totality, they're actually slightly above.

Speaker 7: made up for training into family dining, but just what are any details you can share on the behavior of the consumers you're seeing it? Yeah, it's a great question. There's a lot in there, and I do think that's fair, exactly how you phrased it. We'd love to benefit a little bit more. When we look at industry data, we actually can see when you just looked at the segments.

Speaker 3: You can see, you know, it went down in March. You can see consumer spending momentum flowing. You can see trade down, as I mentioned, is possible. So all those indicators are there. And yet, when we look at our guess, you know, we went from 14% value incidents to 15. That's not really significant on air talking about value and part of that time.

Speaker 3: So that's not necessarily significant. Check is remained where it has been, also not necessarily signaling to us that the consumer is necessarily changing. And then Robert mentioned this, but the labor environment, if that remains strong, it gives a reason to believe that you can be somewhat optimistic about this.

Speaker 3: in that they are not necessarily changing their behavior all that much. It's about share then. So we have to grab more of that market share. That's the goal. Drive traffic, as has already been mentioned, that is obviously the goal and we've got lots of good things in store going forward to work on that.

Speaker 1: Great. I appreciate it. Thank you. Thank you. Thank you. Our next question is from Todd Brooks with the Benchmark Company. Please proceed with your question.

Speaker 7: Hey, thanks. That's a quick follow up. Robert, I know you're a little opaque about pricing.

Speaker 7: kind of talking about future increases being at maybe diminished levels as the inflation pressures Hopefully wane over the course of this year But can you talk to maybe what's baked into the guidance as far as the pricing waterfall?

Speaker 7: What we should be looking at from a quarterly standpoint just as we're trying to match a traffic assumptions on our side with where many pricing should sit.

Speaker 4: for the next few days. Yeah, that's not working helpful. Yeah, Todd, happy to try to remove some of the opaqueness. Part of the opaqueness, frankly, is that we don't make the pricing decisions for 95% of the restaurants. We help guide that and we help make...

Speaker 4: to drive judicious decisions, but that's part of the opaqueness. Until we get to that cycle, we don't know exactly what that will be. I can tell you that we had two pricing cycles so far this year, one in January , one in March. They delivered between four and 5% pricing in total between them.

Speaker 4: improvement that you that I kind of talked about seeing as we move through a lower inflationary environment.

Speaker 8: That's helpful. Thanks Robert from the panel. Thanks Todd.

Speaker 8: Thanks Robert for coming in. Thanks Todd. Thank you.

Speaker 1: As a reminder, if you would like to ask a question, it is star 1. There are no further questions at this time. I would like to turn the floor back over to Mr. Nichols for closing comments. Thank you, Camilla. I would like to thank everyone for joining us on today's call.

Speaker 9: Thank you so much. Everything else I have on your hands?

Speaker 10: thankright.