Q1 2023 First Watch Restaurant Group Inc. Earnings Call
Speaker 1: District 3arts paint D Reduce Teddy See us every time.
Speaker 2: All participants will be in the Sonolimode. Should you need assistance, please send your conference specialist by pressing the star key followed by zero.
Speaker 2: After today's presentation, there will be an opportunity to ask questions.
Speaker 2: To ask a question, you may press star then 1 on your touch tone phone.
Speaker 2: To withdraw your question, please press star then 2. Please note, today's event is being recorded. Now I would like to turn the conference over to your host today, Steve Marotta. Mr. Marotta, please go ahead.
Speaker 3: here today by First Watch's Chief Executive Officer and President Chris Tommaso and Chief Financial Officer Mel Hoeck. This morning, First Watch issued its earnings release for the first quarter 2023 on Globe News Wire and filed its quarterly report on Form 10Q with the SEC. These documents can be found at investors.firstwatch.com.
Speaker 3: Let me first cover a few housekeeping issues 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. Such statements include, without limitation, statements concerning the conditions of the company's industry and its operations, performance and financial condition, growth strategies, and future expenses. How you are making your businessatic decisions today is definitely something very interesting and realize and apply to the lives of people in the community who need it.
Speaker 3: Any such statement should be considered in conjunction with cautionary statements in the company's earnings release and the risk factor disclosure in our filings with the SEC, including quarterly report on Form 10Q. 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.
Speaker 3: in the company's earnings release filed this morning. And with that, I would like to turn it over to Chris. Thanks, Steve. Good morning, everyone. I'd like to start by addressing yesterday's announcement that we acquired six franchise restaurants in the Omaha market. As we speak, we have a team of first-watch leaders on the ground.
Speaker 4: ensuring a seamless transition as we onboard more than 200 new team members. We've previously shared our interest in and intend to acquire franchise-owned restaurants as an element of our long-term growth strategy.
Speaker 4: As of today, we have 14 franchisees who operate 109 restaurants, and of those, 60 are subject to purchase options. Our franchise-operated restaurants perform in line with our company-owned units, and these 6 are no exception.
Speaker 4: Now I'd like to shift to our great first quarter results, which reflect our focus on serving more demand.
Speaker 4: Arizona.
Speaker 4: Systemwide sales were 264.7 million up 24% versus prior year and total revenues were 211.4 million up 22% versus prior year. Our restaurant level operating profit was 44.1 million resulting in a margin of 21.2% and adjusted Yvdda was 27.4 million up 42% versus last year.
Speaker 4: I could not be proud of our teams and their delivery of one of the best quarters I remember over my time here at First Watch.
Speaker 4: We achieve same restaurant traffic growth of 5.1%, which once again outpaced our competitive set. This traffic growth helped drive same restaurant sales growth of 12.9%.
Speaker 4: We delivered an exceptional quarter, despite the difficult March comparison we alluded to on our previous call.
Speaker 4: When we look at March and that tougher comp, I think it's important to note that we did not see a deceleration and our average weekly traffic counts actually held steady throughout the quarter.
Speaker 4: Compared to pandemic highs, we did experience a softening of off-prem, similar to others in the industry. However, this was offset by growing dining room traffic as more and more people see us as a place to gather and connect with others.
Speaker 4: on strengthening our operational acumen to help serve our consumer led demand.
Speaker 4: Their focus on controllable and predictable restaurant level operations helps us leverage increased sales.
Speaker 4: And while the macro backdrop may be changing and potentially become more challenging, we continue to be highly confident in our long-term outlook based upon steps we've taken and decisions we've made leading up to this point.
Speaker 4: As a reminder, while others were aggressively taking price in 2021, we maintained our pricing structure through the entire year with a focus on increasing customer counts, which resulted in us earning incremental market share.
Speaker 4: action scores remain strong, and our value scores continue to show that the customer is recognizing our outstanding dining experience. In short, the future is bright. And finally, I'd like to end by proudly sharing two impressive recognitions from independent third parties that we recently received related to the first watch experience in brand.
Speaker 4: In March, we were named by Forbes as one of its 2023 customer experience all-stars, joining some remarkable brands that were highly ranked by consumers for loyalty and customer experience.
Speaker 4: What made me proud is that first watch was chosen completely unated for more than 2,000 unique brands, making the recognition that much more special.
Speaker 4: and the number four overall brand. After four decades of being the best kept secret in the restaurant industry, it's exciting for me to see others begin to take notice of the experience that our teams are delivering every day. And now I'll turn it over to Mel to discuss our first quarter financial performance in greater detail.
Speaker 5: Thanks Chris.
Speaker 6: Good morning.
Speaker 7: As Chris mentioned, our first quarter was strong. Our comps benefited early in the corner from the holiday calendar shift and the fact that we were rolling over periods impacted by the Omicron variant in 2022.
Speaker 7: And as we shared on our last call, March was a more formidable comparison, though average traffic levels stayed consistent throughout each month of the quarter.
Speaker 7: Same restaurant sales growth was 12.9% for the quarter driven by the same restaurant traffic growth of 5.1% which exceeded our own expectations.
Speaker 7: Total revenues were 211.4 million, which represents a 22.1% increase over the first quarter of 2022.
Speaker 7: Our food and beverage costs were 22.4% of sales in the first quarter compared to 23.1% in a similar period last year. We experienced inflation of about 3% across our market basket, which was lower than we anticipated and driven mostly by decreases in our...
Speaker 7: are making here as our labor expenses is a percent of sales improved throughout the quarter.
Speaker 7: Labor remains an area of great attention as our teams adjust to sales volumes and wage increases.
Speaker 7: while embracing new tools and processes to optimize these costs.
Speaker 7: Restaurant level operating profit was 44.1 million for the quarter with a margin of 21.2% and compares favorably to the 19.6% restaurant level operating profit margin in Q1 of 2022.
Speaker 7: The improvements reflect both labor efficiencies as well as leverage due to the increased sales.
Speaker 7: Generally, administrative expenses were 22.7 million approximately 3.1 million higher than in the first quarter of 2022 primarily due to the increase in headcount to support our growth.
Speaker 7: Adjusted EBITDA was 27.4 million, with a margin of 13% exceeding our own expectations for the first quarter.
Speaker 7: The better than expected results were split evenly into three categories.
Speaker 7: First was discretionary G&A spending that was delayed until later this year.
Speaker 7: Secondly, he was the combination of favorable commodity costs and our operator's success with improving the labor efficiencies. And third was our built-in caution about the formidable March comparison.
Speaker 7: We opened 10 new system-wide restaurants during the quarter, four of which were company-owned and six of which were opened by our franchise partners. As a reminder, our company-owned restaurant development schedule is heavily weighted toward the end of the year, the fourth quarter in particular. As our second quarter has begun the month of April ,
Speaker 7: We're reiterating same restaurant sales growth at 6 to 8% in 2023 with positive traffic growth for the full year. We're reiterating our expectations of openings between 38 and 42 company owned restaurants and 10 to 12 franchise owned restaurants. We plan to close three company owned restaurants, resulting in a total of 45 to 51 net new system-wide restaurants.
Speaker 7: We now expect commodity inflation to be in the range of 2 to 4%, which is lower than our original expectation of 4 to 6%.
Speaker 7: We continue to expect hourly labour inflation to be in the range of 9 to 11% with an overall restaurant level labour inflation in the range of 8 to 10%.
Speaker 7: And we now expect a blended tax rate in the range of 33 to 36 percent.
Speaker 7: We continue to estimate capital expenditures totaling between 100 and 110 million, not including the capital outlay associated with yesterday's acquisition of franchise-zone restaurants. And then at this point, given our strong first quarter performance and the acquisition,
Speaker 7: 19%
Speaker 7: adjusted EBITDA, we expect a range of 80 to 85 million which is up
Speaker 7: from the original range of 76 to 81 million. The franchise acquisition favorably impacts 2023 total revenue growth by approximately 1% and adjusted EBITDA by approximately $1 million.
Speaker 7: While we don't guide to quarterly results, we believe it could be helpful to share some of our planning considerations for the balance of 2023.
Speaker 7: As we mentioned on our last conference call, we expect a just a debit dot to be weighted toward the first half of the year more explicitly. We expect over 55% of our just a debit dot will be earned.
Speaker 7: The last conference call, we expect a just a debit dot to be weighted toward the first half of the year. More explicitly, we expect over 55% of our just a debit dot will be earned in the first half of the year.
Speaker 7: and given our planned ramp of both pre-opening expenses and GNA investment in the third quarter, third quarter adjusted either dot is expected to be about the same as it was in the third quarter last year.
Speaker 7: As a reminder, 2023 is a 53-week fiscal year for us. Our fourth quarter will be a 14-week quarter, and we expect the impact of that extra holiday week to be a roughly 10.5 million in sales, and 2.5 million in adjusted EBITDA.
Speaker 7: For further detail on the first quarter, please review our supplemental materials deck on our investor relations website beneath the webcast. And with that, we'll be happy to open the lines for questions.
Speaker 7: For further detail on the first quarter, please review our supplemental materials deck on our industry relations website beneath the webcast. And with that, we'll be happy to open the lines for questions.
Speaker 2: Yes, thank you. At this time we will begin the question and answer session. To ask a question, you repress a star then one on your touchtone phone.
Speaker 2: If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star or the two. This time we will pause momentarily to assemble the roster.
Speaker 2: As warnings first question, constant Jeffrey Barnes, Dean with Barclays. Great. Thank you very much. Two questions. The first one. Good morning.
Speaker 8: the first one on your comments about April .
Speaker 8: We've heard from a number of others that it's been noisy, but stripping out the shifts, sounds like you mentioned, that you're seeing some signs of pressure on the consumer. I'm wondering where perhaps you are seeing that. I mean, obviously the first quarter results were.
We're very strong in ahead of expectation. Just wondering, maybe you can share some apospecific commentary or maybe where, directionally, you're seeing somewhat of the pressure. How you recognize it, there is some pressure coming down, and then I had one follow it.
Most of the transaction pressure seems to be in the off-prem business. Are there any metrics in terms of maybe where off-prem was at its peak or trough for what's gone on at least over the past few months?
I don't have a long history of where it is in front of me, but...
The decline has been pretty sequential for since about the middle of the quarter. At the same time, our dining room traffic has continued to be recovering from pre-pandemic levels. So there's a little bit of an offset going on there. And Jeff is Chris. We're...
To be clear, we're not seeing anything from a consumer behavior inside our restaurants, you know, that you would typically see in, you know, with check management. Our beverage attachment is actually up, you know, in our shareables have remained steady. So, as Mel said, the only, we're really responding more to commentary about the macro environment in general.
at least around the commodity side or even a little bit based on your guidance. I was wondering if you can maybe share from a pricing perspective. What you were running in the first quarter, whether you think you're seeing any resistance and maybe what your outlook is for the rest of the year, whether you plan on taking more or what pricing would be if you didn't take any more. Thank you. First, for the first quarter we were carrying just under seven.
and it has been some concern that food at home is now being reigned in and maybe restaurants
are considering being a bit more cautious just to not be glaringly above food at home.
Yeah, if you remember we've been pretty conservative on our pricing so from an absolute standpoint we don't consider where we are to be in an aggressive position. We still feel like we're lagging when you look at what everybody's taken over the past 18 months to two years so we still believe we have pricing power.
You know, it's not contemplated in any of the guidance that we put out today, but you know, we feel really good about where we are from a relative value standpoint and you know, also from a just an overall environment standpoint. So, you know, we're just, we're following through on what we said about, you know, people looking for experiences, people looking for consistency and value and our pricing is a big part of that. Next slide.
Understood. Thank you.
Thank you. Thanks.
Thank you. And that's Question Constance Sarah Sanitora with Bank of America. Great. Thank you very much. I wanted to ask about the off-prem business and just sort of see if I understand. Is that because the pricing differential, you think that that is perhaps weighing on that?
And I'm wondering if there's a way to shift those consumers. I know off-prem has been viewed as incremental. But some way to shift channels, perhaps you keep the customers with first watch, whether it's the dining room or some kind of carry-out option. So.
try to understand kind of the dynamic that would affect off prem more than on-premise. And then in terms of the outlook for commodities, that was actually the inflation rate was probably half I guess what we had expected. So I know you mentioned avocados in pork, but is that something where you could see continued benefits just because I don't think either one of those in your top two, but it seemed like a pretty meaningful.
They were divergence from at least what we had anticipated. Yeah, thanks, Sarah. This is Chris. I'll take the first one. I'll let Mel take the second one. So my opinion is that the off-prem business is frankly the new check management.
you know, kind of bellweather. So for years, our industry focused on, you know, check management as signs of the consumer, you know, perhaps feeling some pressure. And, you know, let's just be honest, the delivery third party delivery occasion is very expensive. And...
It doesn't surprise me that that's where we see, and not just with us by the way, as you've seen with almost everybody in the industry, where the consumer is starting to pull back. It's a discretionary occasion, and I think that's where you're starting to see it. So, not a surprise to us. We're happy to have more people in our dining room, frankly.
And we've been accommodating and leading into the third party as the consumer has kind of gone that way, but not a surprise that that's the first place that would feel some pressure in an environment where there's pressure on the consumer in general.
And in terms of commodity, we did enjoy some better costing and we adjusted down with our expectations in terms of the full-year inflation. I guess I would say that we're still paying more dollars than we were last year. It's just that the pace at which the inflation has grown.
has seems to be slowing down rapidly. So I do think we expect that there's gonna be some continuation during the year.
I understand. Thank you. And then just Chris on the off on the off prem pressure and that makes sense is check management. But I know three P does and give you a ton of information about those consumers. But like are you able, you know, are you able to talk to them directly again are there ways for you to serve?
bring them in into the restaurant or continues first watch even as they try to escape some of the really high fees associated with delivery.
Yeah, I think we believe the same thing we believe when the off-prem was growing and that is that it's an incremental occasion for us, a unique customer. Again, I think it's an actual occasion that is falling by the wayside. You know, if over the last two years...
You know, third party or off-prem was a way to introduce first-watch food at least to a new consumer and then perhaps as they become, you know, a little more discretionary and not doing those third-party occasions if we wow them with the food like we believe we did. Hopefully they will come in and give us a try in the restaurants where we can really...
to turn them into a raving fan. But for right now, we still think that's an incremental visit as our dining room traffic grew alongside the third party. So as always, we're focused on our in-restaurant dining experience now more than ever. Understood. Thank you very much.
So but for right now we still think that's a incremental visit as our dining room traffic It you know grew alongside the third party so As always we're focused on our in-restraint dining experience now more than ever Understood. Thank you very much. Thanks
Thank you. And the next question comes from Brian Brick-Harrer with Raymond James. Thanks and good morning. I just wanted to circle back a little more. Make sure I understand what you're saying on recent trends. The year on year comparisons can be confusing and a bit disorienting. So.
I guess I was hoping to look through it kind of a sequential lens and and it sounds like your your sequential transactions remain strong through April , but then you noted some some some fraying if you will or drifting on the off premise side. So did dine-in transactions are they still holding up well in April ?
And are there any changes also worth noting in terms of day of the week or time of day trends that might offer any insights?
is also worth noting in terms of day of the week or time of day trends that might offer any insights?
I don't know about day part kind of data. I don't think we've spoken much publicly about that, but with regard to the trend in April , the dining rooms, I mean, even going back to Sarah's question a moment ago, I think we are already converting a number of customers to dining in our restaurants with the off-premises business.
because the dining room has continued to be fairly stable in terms of traffic. April was, as I mentioned, choppy. It was choppy in all the channels, but the dining rooms held up pretty well, but it just the April traffic.
seem to just kind of bounce around a little bit and we often see that in our in our April's as we come off the first quarter.
Okay, that's helpful. And I wanted to ask about MIX also. It seemed like MIX returned to some pretty healthy levels in the first quarter numbers. And I'm curious how your alcohol sales mix performed in the quarter after I think you recently expanded the offering for the first time on the alcohol side.
the restaurants that have the program. So really not a big shift there. And the second part of your question about the LTOs, I think it's been fairly consistent year over year and quarter to quarter. Although, you know, Q1 is usually a good one for us because it's our jump start and people have their New Year's resolutions. So not a big shift there. I think the LTOs are a big one.
over time, it's always been something you've talked to us about as a potential. But how did the transaction come together? Does this franchisee have other stores that they could potentially sell? And what were the proceeds or what was the transaction? What did you pay for the stores? Thank you. So this franchisee, we purchased the six stores that this...
French Aussie had the six-person watch restaurants of French Aussie had and we repurchased development rights and other intangibles along with the restaurants and the total proceeds we paid were a little over eight million dollars.
Very helpful. I'll pass it on.
Very helpful. I'll pass it on. Thank you.
Thank you. And the next question comes from John Tower with Citigroup. Great. Thanks for taking the question. In terms of thinking about a franchisee acquisition, I don't know how many you've done in the past, but I'm curious to know how these stores typically progress. You actually gave us the accretion numbers, but you did just mention the idea of...
repurchasing the development, right? So how many more stores could we see from this market coming into your store set? And how, you know, when you open these stores, are they, are these stores generally in line with your existing system right now with respect to profitability and sales? So, first of all,
We've got a history of doing a lot of these over the years. So so we've brought in franchise restaurants into the system for Decades and that's that's been part of the way the company has has grown
In terms of the size of the market, what did you signal in something to me? Yeah, I mean, it can probably hold another 5 to 8 in that market as we sit here today. And they typically perform very similar to our legacy comp restaurants in terms of sales.
Oftentimes they'll have different technology than we do, and so to completely integrate them, we'll add some of our technology or our controls, our protective items in the restaurants but for the most part.
beyond the purchase. We don't have to invest a great deal. And John , in general, our franchisees have done an incredible job of introducing the first-watch brands to markets that we probably wouldn't have gotten to as quickly as doing it with them. You know, the restaurants look and feel exactly like a company-owned restaurant.
know we're predominantly company own and and want to move that way got it makes sense thank you and and then just shipping to the sales piece and i know hit on this quite a bit so far in the call but i'm curious
You mentioned that in-store dining to traffic at least continues to hold up relatively well. I'm just curious, you know, thinking about going forward to the extent this choppiness persists in the May, June and for the balance of the year. I know historically as a brand you don't do any discounting or significant promotion.
Can you kind of help us think through what you might do as a response to a potential slowdown on the traffic side in the business? So one of the things Chris says that I like the phrase that we don't do anything unnatural. The brand, you know, our focus is on being successful.
over the long term will continue to focus on quality products and service and and entrees. We've always been very careful about pricing and so I think given our history of being attentive to our customer.
with regard to pricing, I think we're already well positioned. If there is inflation or a recession that causes people to be more discriminating, but I do think that when people become more discriminating.
about where they're going to use their dollars, that they are typically choosing restaurant brands that they trust. And I think we're well trusted, which puts us in a good position to face that if we were to experience a deep inflation.
or excuse me, but I appreciate it. I appreciate it. I'll pass it on. Thank you. And the next question, is a concern cameraman, Eric, with our Jeff rates.
Good morning guys. Rick Woodenwick
Good morning, good morning guys.
Yeah. Just just a couple of expense questions. Yeah, I mean labor made good progress sequentially, but with still up year over year. I mean, I know you know, staffing's better and you've made some changes in, you know, in some of the in-store labor allocation and positions. Is this kind of a good?
rate to think about on a go-forward basis in terms of percentage of sales. That's a good question. We get it pretty often. I think when we are able to manage labor in the restaurants.
at 33% and below. That's a pretty good target for us. And so I think we still have some work to do on the full year, but we don't want to do anything that in any way degrades what we know to be a gracious.
experience that the customer enjoys in the restaurants and so we're careful not to try and drive out too much there. So pushing it toward you know 33% and below is kind of where we target. I think that's where our best restaurants tend to run.
Gotcha. And then anything on the the occupancy line, I mean that you know, click down pretty noticeably below a percent of sale, you know, other than the leverage in the flow through from the strong sales.
It's mostly that. I mean, it's mostly that just the leverage on sales. Okay. I think that covers me. Thank you. Thank you. And then ask question. Chris O'Call was Steve. Yeah. Thanks. Good morning guys. I have a follow-up question around the acquisitions. Chris, and I understand that somebody had a lot of experience acquiring franchisees, but it does sound like this is becoming a higher priority than maybe it was a year ago. I'm just curious if there's been any changes to kind of to drive that decision.
There's no, there's no rules. I mean, I would say the timing is this. You know, we've been public now for a year and a half. And in our first year after we did the IPO, we focused entirely on...
building back the company operations to pre-pandemic type performance. And we wanted to be, you know, we wanted to be exactly who we were. I mean, frankly, we wanted to focus on our own company growth. We knew the acquisition opportunities relative to the options weren't going to go away.
And so we thought being predictable during the time that we were a new public company and recovering from the pandemic that being heads down on our own company operations was the first and most important priority.
And so now I would just say in the fullness of time, this one acquisition was a good opportunity for us, and we're delighted to have brought it off.
That's a good explanation. Does this change mail the timeline of when you expect the company to be generating free cash flow?
Not, I mean, look not materially. I mean, you're talking about an $8 million purchase here. And the rest of the, so this transaction on its own doesn't shift anything.
I was thinking more about the being opportunistic acquiring franchisees. It's just going forward. The timeline around generating free cash flow is that influencing the decision on whether to acquire franchisees.
I think we've view them as a good investment for the near-term and long-term. So it doesn't, I mean, our free cash flow timing isn't really influencing.
influencing that, we just see them as a great 30-year investment and an efficient use of the company's capital. Fair enough. And then I had one other question around Minumix. Chris, I was just wondering how you're thinking about managing the Minumix this year with the seasonal menus and the alcohol program.
Are you using more, do you think you need to be more cautious around trying to drive favorable menu mix in the current environment? Are we being more cautious? Is there anything you think you need to be, do you think you need to be more cautious around trying to increase the check average with the seasonal menu and with the alcohol program this year given that what you've seen recently?
No, I think our focus is more on the value versus the actual price. So we'll continue. Look, menu innovation has been the hallmark of our success for so many years. We're actually going to lean into it to be honest with you. So you'll see us innovating around the alcohol program. You'll see us innovating around the shareables.
even more. And that doesn't necessarily mean higher price. A lot of times we'll introduce items that maybe are the same or lower price but deliver higher margin. And that works really well also. So, yeah, we're not being cautious around that at all. We haven't changed these or strategy or philosophy.
Our biggest challenge, frankly, is how to outdo ourselves when we look year over year with the success that we see in those seasonal menus is, you know, what are we going to do to top that? So, you know, our team is challenged, but they're up for the challenge and we've been doing it for a long time.
Great, thanks guys. Thank you. And then that's a question of customer memory Frankfurt with good and high securities. Hey, thanks for the question. The first one, it was just that labor and you guys are one of the few that are guiding up kind of closer to 10% labor inflation. And then.
Are you, or hearing from others that turnover seems to be starting to break a little bit? Are you seeing that as well in your restaurants and is that having any impact on entry level wages and just curious what the dynamic is out there? Our turnover has...
been in decent. I think we still view it as an opportunity. But for the last year or so, we've seen some of the turnover metrics for our hourly employees begin to improve over time. But we still have work to do there. Most of the wage inflation that we see is where we have a regulatory increases in minimum wage that are due in some of the states.
new restaurants looks like. Yeah, the, uh, truthfully, the return profiles haven't haven't changed. If you, uh, in fact, if you look at our investor deck on the website, Grog, we have a unit economic, uh, page that shows generally the range that we are investing in the restaurants now with.
net of alliances, but the returns are roughly the same that they've been since you and I began to start talking years ago to three-year restaurant level operating profit is still targeted that 18 to 20 percent.
Got it. That. And then just maybe the last one for me is a lot of the commenter and the call has been off-prem generally. I'm curious. Are you seeing a different dynamic within delivery and takeout? I think this quarter takeout slowed pretty similarly, but as you look to 2Q and your expectations for the rest of the year, are the comments more around delivery? I would think takeout would hold up in.
If the consumer was pressured, but just curious, he thought from that. I would say a lot of our, this may be a little bit of an anecdotal answer to this, but I think a lot of our takeout customers are also our dining room customers. So as we've seen our dining rooms increase, even our takeout business has declined in terms of those volumes. You understood. Okay, thanks, thanks, the thoughts, appreciate. Thank you. And the next questions are for Ryan Rick here with Raymond James. Hi, thanks. Just a quick one on the commodity outlook that I could.
I call it 45 to 60 days forward is probably a good analysis. But for the poor year, it's just the eggs and the potatoes. The eggs specifically ask about, I think we're probably favorable to spot rate now and as the flux repopulate.
And we understand that that should be targeting kind of middle of the year. So we should be within 45 or 60 days of those being repopulated. Our back half of the year, we may be a little bit unfavorable to the spot rate, but we're still overall. We've got secure supply and we've got fairly good pricing on our eggs.
Very helpful. Thank you. Okay. I think that's the end of our questions. So thanks for your time today. I appreciate it. We're proud of our continued excellent performance and our ongoing operational enhancements that's positioning our restaurants to serve more demand. Thank you.