Q3 2023 Denny's Corp Earnings Call

Okay.

Greetings and welcome to Denny's Corporation third quarter 2023 earnings Conference call. At this time, all participants are in a listen only mode.

A brief question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

A reminder, this conference is being in the closet.

It does now my pleasure to introduce your host Curt Nichols VP Investor Relations. Thank you Mr. Nicholls you may begin.

Good afternoon. Thank you for joining us for Denny's third quarter 2023 earnings conference call with.

With me today from management are <unk>.

<unk>, Denny's, President and Chief Executive Officer, and Robert <unk>, Denny's Executive Vice President and Chief Financial Officer.

Please refer to our website at Investor Dot Denny's Dot com to find our third quarter earnings press release, along with a reconciliation of any non-GAAP financial measures mentioned on the call today.

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

Kelly will begin today's call with a business update then Robert will provide a development update and recap of our third quarter financial results before commenting on guidance.

After that we will open it up for questions.

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.

Constitute forward looking statements.

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

Such statements are subject to risks 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.

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 delayed Denny's, President and Chief Executive Officer.

Thank you Curt and good afternoon, everyone. Thank you for joining US today's discussion will focus on our third quarter results. The continued progress made towards our creative strategies and the growth and expansion of Kiki's breakfast Cafe. After that we will provide updates to our full year 2023 guidance.

After the market close we reported Denny's system same restaurant sales growth of one 8%, while we maintain positive same restaurant sales throughout the quarter same restaurant traffic levels softened as the quarter progressed. This was similar to the China experienced across the industry.

Consumer confidence declined in August and September driven by concerns around rising interest rates and the potential economic impacts of recent geopolitical events, and we anticipate consumer uncertainty and discretionary spending pressure to persist at least in the near term.

Operator: Greetings and welcome to Denny's Corporation Perth Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.

While the operating environment remains challenging we are laser focused on making strategic choices in places. We know we can win and where our guest count on us to deliver such as best in class breakfast and unbeatable value proposition and convenience in the form of off premise options.

Operator: If anyone should require operative assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

During the quarter, we wrapped up our bacon, allium promotion, which delivered quality craveable menu options relevant to our guests our bacon all your platform outperformed our last Bacon Alyea L. T O and exceeded all of our projections following Bacon Elliot, we leaned into seasonal flavors launching our relevance and craveable pumpkin Pecan pancakes promotion, which just ended last week.

Curtis Nichols: It is now my pleasure to introduce your host, Kurt Nichols, VP Investor Relations Finance. Thank you, Mr. Nichols. You may begin. Good afternoon. Thank you for joining us for Denny's third quarter 2023 Earnings Conference Call.

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Curtis Nichols: With me today for management, our Kelli Valade, Denny's President and Chief Executive Officer, and Robert Verostek, Denny's Executive Vice President and Chief Financial Officer. Please refer to our website at investor.denny's.com to find our third quarter earnings press release, along with the reconciliation of any non-CAP financial measures mentioned on the call today. This call is being webcast, and an archive of the webcast will be available on our website later today. Kelli will begin today's call with a business update. Den Robert will provide a development update and recap of our third quarter financial results before commenting on guidance. After that, we will open it up for questions.

Now as we head into the holiday season, we've introduced our Turkey, and dressing dinner and seasonal pies, and we're bringing back our salted caramel banana pancakes, which are seasonally relevant and a guest favorite and next week, we'll be launching our new fall core menu, which will incorporate many of the learnings from our comprehensive research to better understand our core guests as well as help any.

Operational efficiencies and improve margins.

The menu architecture and design amplify what we've learned is most important to our guests and business, while not decreasing the overall number of menu items. For example, we simplified the menu layout by decreasing the number of customization and build your own categories that currently occupy large areas of Dominion.

Those areas will now be utilized to highlight breakfast items and craveable value, while also leveraging and reigniting our equity in such areas as our slam platform, including our new Strawberry stuffed French toast Slam.

Curtis Nichols: Before we begin, let me remind you that in accordance with the safe harbor provisions of the Private Security's 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. Management urges caution in considering its current trends in any outlook on earnings provided during this call. 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. Such risks and factors are set forth in the company's most recent annual report on Form 10K. For the year-end in December 28th, 2022, and in any subsequent forms, 8K and quarterly reports on Form 10K.

This new core menu item has four slices of brioche, French toast stuffed with sweet cream cheese, filling and topped with strawberries strawberry sauce and powdered sugar it can be enjoyed as a slam or Ala carte.

In addition, we're leaning into guest feedback and their desire for varied beverage options such as cold brew coffee.

The fault core menu also incorporates a new pricing model that will help protect our value leadership, while also better enabling franchisees to make smart pricing decisions that are aligned with regional factors and more localized competitive benchmarking.

Lastly, in addition to the food and menu work happening within our four walls. Our marketing team is continually optimizing our targeted messaging delivering across effective channels to drive engagement and awareness.

Now, let's talk about value. We are pleased to see a steady increase in our total value mix total value mix in the third quarter was approximately 17% up from the 16% mix in the second quarter and 15% mix in the first quarter.

Kelli Valade: With that, I will now turn the call over to Kelli Velade, Denny's president and chief executive officer. Thank you, Kurt, and good afternoon, everyone. Thank you for joining us. Today's discussion will focus on our third quarter results, the continued progress made towards our creative strategies, and the growth and expansion of Kiki's breakfast cafe. After that, we'll provide updates to our full year 2023 guidance. After the market closed, we reported Denny's system same-restaurant sales growth of 1.8%.

With growing concerns around consumer spending delivering on our promise of everyday value for our guests is even more relevant than before understanding this need we're choosing to double down on value to improve traffic trends.

We've always been known for our strong value positioning and we're able to drive profitable sales and traffic through our value propositions in.

In addition to our signature Super Slam starting at 799. Most recently, we began testing our original Grand Slam at the unbeatable price of $5 99 in several markets with test results, showing a profitable traffic lift and little impact to check compared to system trends.

Kelli Valade: While we maintain positive, same-restaurant sales throughout the quarter, same-restaurant traffic levels softened as the quarter progressed, this was similar to the trend experienced across the industry. Consumer confidence declined in August and September, driven by concerns around rising interest rates and the potential economic impacts of recent geopolitical events, and we anticipate consumer uncertainty and discretionary spending pressure to persist, at least in the near- term. While the operating environment remains challenging, we are laser focused on making strategic choices in places we know we can win and we're a guest count on us to deliver, such as best-in-class breakfast and unbeatable value proposition and convenience in the form of off-premise options.

As a result, we will be extending the offer to several other markets in the coming weeks.

Next let's talk about the convenience of our off premise business off premise sales were approximately 19% of total sales for the third quarter flat with quarter two.

We feel good about this especially considering that many in our industry are experiencing actual sales declines in this channel even better. Most recently, we started to see an uptick in our off premise sales hitting above 20% by the end of quarter. Three further showing that off premise channels are consistently strong for us and a way to leverage operating capacity at dinner and.

Kelli Valade: During the quarter, we wrapped up our Bacon Elliott promotion, which delivered quality, craveable menu options relevant to our guests. Our Bacon Elliott platform outperformed our last Bacon Elliott LTO and exceeded all of our projections. Following Bacon Elliott, we leaned into seasonal flavors, launching our relevant and craveable pumpkin pecan pancakes promotion, which just ended last week. Now, as we head into the holiday season, we've introduced our turkey and dressing dinner and seasonal pies, and we're bringing back our salted caramel banana pancakes, which are seasonally relevant and a guest favorite.

Late night to a new consumer.

Well, they're delivering convenience through our denny's app or our Burger, Dan and the meltdown virtual concepts families rely on us for great off premise experiences with craveable food options. That's why we remain focused on capturing further off premise opportunities, including current testing of a new virtual Burrito brand concept, we call Banda burrito.

We've been in Alpha testing of Vanda Burrito in 10 locations and based on positive results, we'll be expanding it to an additional 80 locations next month, we are primarily focusing this concept in California and believe it has potential to efficiently expand our off premise business with popular regional flavors, while leveraging many existing skus in our Pea.

Kelli Valade: And next week, we'll be launching our new fall core menu, which will incorporate many of the learnings from our comprehensive research to better understand our core guests, as well as help enable operational efficiencies and improve margins. The menu architecture and design amplify what we've learned is most important to our guests in business, while not decreasing the overall number of menu items. For example, we simplified the menu layout by decreasing the number of customizations and build your own categories that currently occupy large areas of the menu.

In addition last week at our annual franchisee Convention, we unveiled our first complete remodel and new prototype under modern American diner.

Not only does the new prototype feature an improved overall look and embraces off premise with a dedicated pick up area staffed by a dedicated to go specialists.

Kelli Valade: Those areas will now be utilized to highlight breakfast items and craveable value while also leveraging and reigniting our equity in such areas as our SLAM platform, including our new strawberry stuffed French toast SLAM. This new core menu item has four slices of Rio's French toast stuffed with sweet cream, cheese filling, and topped with strawberries, strawberry sauce, and powdered sugar. It can be enjoyed as a SLAM or a la carte. In addition, we're leaning into guest feedback and their desire for varied beverage options, such as cold brew coffee.

So while we're focused on these three areas food value and convenience, we have not lost sight of our other strategic priorities captured in our Crane framework.

At Denny's Crave stands for creating leading edge solutions with technology and innovation robust new restaurant growth as a franchisor of choice assembling best in class people and teams through culture tools and systems, validating and optimizing the business model to maximize restaurant margins and Ella.

Kelli Valade: The fall core menu also incorporates a new pricing model that will help protect our value leadership, while also better enabling franchisees to make smart pricing decisions that are aligned with regional factors and more localized competitive benchmarking. Lastly, in addition to the food and menu we're happening within our four walls, our marketing team is continually optimizing our targeted messaging, delivering across effective channels to drive engagement and awareness.

<unk> profitable traffic through the guest experience and uniquely craveable food.

Touch on creating leading edge solutions with technology, and innovation and assembling best in class people and teams first I'll start with technology and innovation technology.

Technology touches everyone and everything in our business, which is why technology and innovation are part of our plan to win.

Our new ovens, continuing to unlock menu opportunities and efficiencies for US currently about 50 place on our menu are prepared at least in part using our new ovens, including our proteins and our oven baked entrees and desserts, our culinary and operations teams are continuing to learn and explore opportunities to leverage our kitchen equipment further driving menu.

Kelli Valade: Now let's talk about value. We are pleased to see a steady increase in our total value mix. Total value mix in the third quarter was approximately 17% up from the 16% mix in the second quarter and 15% mix in the first quarter. With growing concerns around consumer spending, delivering on our promise of everyday value for our guests is even more relevant than before. Understanding this need, we are choosing to double down on value to improve traffic trends.

<unk> and kitchen efficiencies.

We believe the pursuit of additional efficiencies through our ongoing kitchen optimization programs will be critical as we anticipate further wage impacts, especially related to the fast Act in California, We look forward to sharing more about these kitchen optimization strategies on future calls.

Kelli Valade: We've always been known for our strong value positioning and we're able to drive profitable sales and traffic through our value propositions. In addition to our signature super slam starting at $7.99, most recently we began testing our original grand slam at the unbeatable price of $5.99 in several markets with test results showing a profitable traffic lift and little impact to check compared to system trends. As a result, we will be extending the offer to several other markets in the coming weeks.

In addition, we remain focused on implementing new solutions that not only solve points of friction, but also introduce relevant tools to streamline processes and deliver efficiencies such as QR pay. We're also still testing a new cloud based Pos platform from which we are learning and enhancing ahead of a broader rollout going forward. This will be driven under the.

Kelli Valade: Next let's talk about the convenience of our off-premise business. Off-premise sales were approximately 19% of total sales for the third quarter, flat with quarter 2. We feel good about this, especially considering that many in our industry are experiencing actual sales declines in this channel. Even better, most recently, we started to see an uptick in our off-premise sales, hitting above 20% by the end of quarter-three, further showing that off-premise channels are consistently strong for us and a way to leverage operating capacity at dinner and late night to a new consumer.

The leadership of our new Chief Digital and Technology Officer Ponca departure, we are excited to welcome pockets, who can help us build on the solid foundation already in place, while leading us in identifying new relevant and innovative solutions to serve our guests employees and franchisees in the future.

And of course, we have to talk about our people. We are a restaurant company, but also a people business, which is why it's important that we put people first in everything we do we officially launched our new Denny's gain program in August creating opportunities that may have been otherwise out of reach for our team members gain includes four key areas G. D Accreditation College credits and <unk>.

Kelli Valade: Whether delivering convenience through a Denny's app or our burger den and the meltdown virtual concepts, families rely on us for great off-premise experiences with craveable food options. That's why we remain focused on capturing further off-premise opportunities, including current testing of a new virtual burrito brand concept we call Banda Burrito. We've been in alpha testing of Banda Burrito in 10 locations and based on positive results, we'll be expanding it to an additional 80 locations next month. We are primarily focusing this concept in California and believe it has potential to efficiently expand our off-premise business with popular regional flavors while leveraging many existing SKUs in our pantry.

Artifice patients life skills and career pathways for high school students.

We're really pleased with how the program has been received so far and are optimistic about the positive impact of program may have on attracting new talent and staffing and turnover rates since the launch of the program 17 members have already earned their G. D. While 102 are currently enrolled in the program finally, I want to pivot and talk about growth and the expansion of <unk>.

Now that we have a playbook built on kiki's that articulate what makes this brand. So special we're leaning into that Kiki special sauce to ensure that as we grow we continue to demonstrate a differentiated offering to all of our guests through the new tagline mornings from scratch.

Kelli Valade: In addition, last week at our annual franchisee convention, we unveiled our first complete remodel and new prototype under modern American diner. Not only does the new prototype feature an improved overall look in embraces off-premise with a dedicated pickup area staff by dedicated to go specialists. So while we're focused on these three areas, food, value, and convenience, we have not lost sight of our other strategic priorities captured in our crave framework.

This quarter, we rolled out a new menu design incorporating learnings from the brand ethos work that was concluded earlier this year, the new menu has fewer items, which reduces kitchen complexity. While also providing a cleaner look that allows kiki's to better showcase the high quality ingredients and made from scratch philosophy, it's known for.

The menu redesign has already led to check growth and we're still testing alcohol and several cafes also with promising results.

Kelli Valade: At Denny's, crave stands for creating leading edge solutions with technology and innovation, robust new restaurant growth as a franchiser of choice, assembling best-in-class people and teams through culture, tools, and systems, validating and optimizing the business model to maximize restaurant margins, and elevating profitable traffic through the guest experience and uniquely craveable food. I'll touch on creating leading edge solutions with technology and innovation and assembling best-in-class people and teams. First, I'll start with technology and innovation.

We also continue making brand decisions and leveraging our learnings to support accelerated long term cafe growth within and outside of the state of Florida. We have opened three cafes already this year, including one that opened after quarter end. In addition, we have signed development agreements with current Kiki's franchisees to open four more while we have faced construction.

<unk> and needed to adjust the timelines for several openings. We are extremely pleased with the progress we've made.

Kelli Valade: Technology touches everyone and everything in our business, which is why technology and innovation are part of our plan to win. Our new ovens continue to unlock menu opportunities and efficiencies for us. Currently, about 50 plates on our menu are prepared, at least in part using our new ovens, including our proteins and our oven-baked entrees and desserts. The culinary and operation teams are continuing to learn and explore opportunities to leverage our kitchen equipment further, driving menu innovation, and kitchen efficiencies. We believe the pursuit of additional efficiencies through our ongoing kitchen optimization programs will be critical as we anticipate further wage impacts, especially related to the fast act in California.

We're also excited to bring the Kiki's concept to the Denny's franchise system.

Interesting Kiki's remains high among denny's franchisees and we're excited to announce securing several development agreements. Kiki's is also garnered interest from new franchisees, having held several meetings over the past couple of months with potential new operating partners.

Lastly, we have a new cafe prototype ready to go as we look to bring the winning kiki's experience to a new set of consumers soon.

So as you can see the foundational work we've been doing in Kiki's is starting to drive potential momentum and we're excited for what's to come.

In conclusion, we just wrapped up our annual Denny's Franchisee Association Convention and trade show, which is incredible opportunity for us to gather with our franchisees talk about our business today and rally together for our future we.

Kelli Valade: We look forward to sharing more about these kitchen optimization strategies on future calls. In addition, we remain focused on implementing new solutions that not only solve points of friction but also introduce relevant tools to streamline processes and deliver efficiencies such as QRP. We are also still testing a new cloud-based POS platform from which we are learning and enhancing ahead of a broader roll-up.

We used our time together to share our plans to continue to strengthen and revitalize the brand through new and relevant strategies all under the crave umbrella and we showcased new leadership and bold thinking.

While not avoiding the realities and challenges of the current operating environment, our franchisees walked away with a clear understanding and alignment of the strategies and initiatives that will strengthen both top and bottom line results and continue to grow our brand and they were pleased with our bold thinking.

Kelli Valade: Going forward, this will be driven under the leadership of our new Chief Digital and Technology Officer, Pankaj Potra. We are excited to welcome Pankaj who can help us build on the Solid Foundation already in place while leading us in identifying new relevance and innovative solutions to serve our guests, employees, and franchisees in the feature.

Next time, we'll share further progress against those strategies for both Denny's and Kiki's with that I'll now turn the call over to Robert.

Thank you Kelly and good afternoon, everyone.

Kelli Valade: And of course, we have to talk about our people. We are a restaurant company, but also a people business, which is why it's important that we put people first and everything we do. We officially launched our new Denny's Gain Program in August, creating opportunities that may have been otherwise out of reach for our team members. Gain includes four key areas, GED accreditation, college credits, and certifications, life skills, and career pathways for high school students.

Today, I will provide the development update and a review of our third quarter results before discussing our annual guidance.

Starting with development highlights franchisees opened eight new restaurants during the quarter, including two international locations, while Kiki's opened one franchise cafes during the quarter.

Kelli Valade: We're really pleased with how the program has been received so far and are optimistic about the positive impact the program may have on attracting new talent and staffing and turnover rates. Since the launch of the program, 17 members have already earned their GED while 102 are currently enrolled in the program.

We also opened an additional kiki's franchise cafe in October.

While several kiki's openings expected this year will likely push out to earlier 2024, due to permitting and construction delays outside of our control the development pipeline for this growth concept continues to take shape.

Pretty control has already been secured for 10 future franchised and company operated Kiki's locations. In addition to signed development agreements from current Kiki's franchisees and continued discussions with Denny's franchisees.

Kelli Valade: Finally, I want to pivot and talk about growth and the expansion of Kiki's. Now that we have a playbook built on Kiki's that articulates what makes this brand so special, we're leaning into that Kiki special sauce to ensure that as we grow, we continue to demonstrate a differentiated offering to all of our guests through the new tagline Mornings from Scratch. This quarter, we rolled out a new menu design incorporating learnings from the brand EFOS work that was concluded earlier this year.

Moving forward to our third quarter results Denny's domestic system wide same restaurant sales grew one 8% in the third quarter compared to 2022.

Consisting of a 2.1% increase at domestic franchised restaurants.

Kelli Valade: The new menu has fewer items, which reduces kitchen complexity, while also providing a cleaner look that allows Kiki's to better showcase the high quality ingredients and made from scratch philosophy it's known for. The menu redesign has already led to check growth, and we're still testing alcohol and several cafes also with promising results. We also continue making brand decisions and leveraging our learnings to support accelerated long-term cafe growth within and outside of the state of Florida.

Denny's domestic system wide same restaurant sales growth was primarily driven by pricing of approximately eight 4% net of changes in discounts and product mix.

Denny's domestic average weekly sales for Q3 were approximately $37000, including off premises sales of approximately $7000 or 19% of total sales.

This translates to average unit volumes of approximately $1 $9 million.

Kelli Valade: We have opened three cafes already this year, including one that opened after quarter end. In addition, we have signed development agreements with current Kiki's franchisees to open four more, while we have faced construction challenges and needed to adjust the timelines for several openings, we are extremely pleased with the progress we've made. We're also excited to bring the Kiki's concept to the Denny's franchise system. Interesting Kiki's remains high among Denny's franchisees, and we're excited to announce securing several development agreements.

Franchise and license revenue was $61.0 million compared to $65 $2 million in the prior year quarter.

This change was primarily driven by a $4 $4 million decrease in initial and other fees associated with the sale of kitchen equipment in the prior year quarter.

Franchise operating margin was $31 $2 million or 51, 2% of franchise and license revenue compared to $37 million or 47.0% in the prior year quarter.

Kelli Valade: Kiki's is also garnered interest from new franchisees, having held several meetings over the past couple of months with potential new operating partners. Lastly, we have a new cafe prototype ready to go as we look to bring the winning Kiki's experience to a new set of consumers soon. So as you can see, the foundational work we've been doing at Kiki's is starting to drive potential momentum and work cited for what's to come.

Approximately 330 basis points of this favorable change in margin rate resulted from a lower kitchen modernization rollout impact in the current year quarter.

Company restaurant sales of $53 $2 million were up one 8%.

Kelli Valade: In conclusion, we just wrapped up our annual Denny's franchise association convention and trade show, which is an incredible opportunity for us to gather with our franchisees, talk about our business today and rally together for our future. We used our time together to share our plans to continue to strengthen and revitalize the brand through new and relevant strategies all under the Crave umbrella, and we showcase new leadership and bold thinking. While not avoiding the realities and challenges of the current operating environment, our franchisees walked away with a clear understanding and alignment of the strategies and initiatives that will strengthen both top and bottom line results and continue to grow our brand, and they were pleased with our bold thinking. Next time, we'll share further progress against those strategies for both Denny's and Kiki's.

This growth was primarily due to an increase of zero point $8 million at Kiki's Breakfast Cafe company restaurant sales in the current quarter.

Company restaurant operating margin was $7.3 million or 13, 7% compared to $3 8 million or seven 2% in the prior year quarter.

This margin change was primarily due to lower legal settlement expense improvements in product cost and more equivalent units compared to the prior year quarter.

Commodities continued to improve moderating sequentially from 1% inflation in Q2, 2023% to 1% deflation in Q3 2023.

Robert Verostek: With that, I'll now turn the call over to Robert. Thank you, Kelly, and good afternoon, everyone. Today, I will provide a development update and a review of our third quarter results before discussing our annual guide.

Additionally, we saw slight improvement in labor during the quarter moderating sequentially from 4% in Q2, 2023% to 3% in Q3 2023.

Robert Verostek: Williams. Starting with development highlights, franchisees opened eight new restaurants during the quarter, including two international locations, while Keke's opened one franchise cafe during the quarter. We also opened an additional Keke's franchise cafe in October. While several Keke's openings expected this year will likely push out to earlier 2024, due to permitting and construction delays outside of our control, the development pipeline for this growth concept continues to take shape. Property control has already been secured for 10 future franchise than company operated Keke's locations, in addition to signed development agreements from current Keke's franchisees and continued discussions with Denny's franchisees.

G&A expenses for Q3 totaled $18 $2 million compared to $16 $6 million in the prior year quarter.

This change was primarily due to increases in share based compensation expense and corporate administration expenses, partially offset by a reduction in performance based incentive compensation.

These results collectively contributed to adjusted EBITDA of $22 $2 million.

The provision for income taxes was $1 $7 million, reflecting an effective income tax rate of 17, 6% for the quarter compared to 24, 3% in the prior year quarter.

Robert Verostek: Moving forward to our third quarter results, Denny's domestic system-wide same-restraught sales grew 1.8% in the third quarter compared to 2022, consisting of a 2.1% increase at domestic franchise restaurants. Denny's domestic system-wide same-restraught sales growth was primarily driven by pricing of approximately 8.4% net of changes in discounts and product mix. Denny's domestic average weekly sales for Q3 were approximately $37,000, including off-premises sales of approximately $7,000 or 19% of total sales. This translates to average unit volumes of approximately $1.9 million.

Adjusted net income per share was <unk> 17 cents.

We generated adjusted free cash flow of $12.0 million, which represents 54% of our adjusted EBITDA.

Our quarter end total debt to adjusted EBITDA leverage ratio was 299 times.

We had approximately $259 million of total debt outstanding including $248 million borrowed under our credit facility.

During the quarter, we allocated $65 million to share repurchases, continuing our commitment of returning capital to shareholders.

At the end of the quarter, we had approximately $117 million remaining under our existing repurchase authorization since.

Robert Verostek: Franchise and license revenue was $61.0 million compared to $65.2 million in the prior year quarter. This change was primarily driven by a $4.4 million decrease in initial and other fees associated with the sale of kitchen equipment in the prior year quarter. Franchise operating margin was $31.2 million or $51.2% of franchise and license revenue compared to $30.7 million or $47.0% in the prior year quarter. Approximately 330 basis points of this favorable change in margin rate resulted from a lower kitchen modernization rollout impact in the current year quarter.

Since beginning our share repurchase program in late 2010, we have allocated over $685 million to repurchase approximately 66 million shares at an average share price of $10 43.

Let me now take a few minutes to expand on the business outlook section of our earnings release.

We anticipate denny's domestic system wide same restaurant sales will be between $2, 75% and three 5% compared to 2022.

We anticipate opening 35 to 45 restaurants on a consolidated basis inclusive of four to six kiki's openings, which amounts to a consolidated net decline of 10 to 20 restaurants.

Robert Verostek: Company restaurant sales of $53.2 million or up 1.8%. This growth was primarily due to an increase of $0.8 million at Kiki's breakfast cafe company restaurant sales in the current quarter. Company restaurant operating margin was $7.3 million or $13.7% compared to $3.8 million or $7.2% in the prior year quarter. This margin change was primarily due to lower legal settlement expense, improvements in product cost, and more equivalent units compared to the prior year quarter.

We are projecting commodity inflation for 2023 to be between one and 2%.

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

Our expectation for consolidated total general and administrative expenses are between 75 and $77 million, including approximately $11 million related to share based compensation expense, which does not impact adjusted EBITDA. This consolidated range contemplates a full year of Kiki's G&A.

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Robert Verostek: Commodities continued to improve moderating sequentially from 1% inflation in Q2, 2023 to 1% deflation in Q3, 2023. Additionally, we saw slight improvement in labor during the quarter moderating sequentially from 4% in Q2, 2023 to 3% in Q3. 2020-23. GNA expenses for Q3 totaled $18.2 million compared to $16.6 million in the prior year quarter. This change was primarily due to increases in share-based compensation expense and corporate administration expenses partially offset by a reduction in performance-based incentive compensation.

As a result, we anticipate consolidated adjusted EBITDA of between 85 and $87 million.

Finally, I want to mention how proud I am of our franchisees and the entire Denny's and Kiki's teams, who have remained focused on serving our guests and driving our crave strategic priorities, especially during a period of consumer uncertainty and other macroeconomic headwinds.

In closing we remain confident in the strength of our highly franchised asset light business model, which generates meaningful cash flow, we have a disciplined financial framework, which allows us to appropriately support the transformation of denny's and the growth of Kiki's, while consistently returning capital to our shareholders.

Robert Verostek: These results collectively contributed to adjusted EBITDA of $22.2 million dollars. The provision for income taxes was $1.7 million, reflecting an effective income tax rate of 17.6% for the quarter compared to 24.3% in the prior year quarter. Adjusted net income per share was $0.17. We generated adjusted free cash flow of $12.0 million, which represents 54% of our adjusted EBITDA. Our quarter end total debt to adjusted EBITDA leverage ratio was 2.99 times. We had approximately $259 million of total debt outstanding, including $248 million borrowed under our credit facility.

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.

Thank you.

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One moment please poll for questions.

Our first question comes from the line of Michael Tamas with Oppenheimer. Please go ahead.

Hi, Thanks, Good afternoon, you've touched on this briefly in your prepared remarks, but can you walk through what sort of changed on the same store sales front relative to your expectations was it just a traffic shift that you mentioned across the industry or are you seeing anything else on the average check side relative to what you thought you were going to see it.

Robert Verostek: During the quarter, we allocated $16.5 million to share repurchases, continuing our commitment of returning capital to shareholders. At the end of the quarter, we had approximately $117 million remaining under our existing repurchase authorization. Since beginning our share repurchase program in late 2010, we have allocated over $685 million to repurchase approximately $66 million shares at an average share price of $10.43.

And then Robert if you could just kind of square it's all the way here what is the implied fourth quarter same store sales range I know things kind of get wonky, sometimes it with waiting side, that's down two and a half top one is it around that range or if you could just clarify that would be helpful. Thank you.

Robert Verostek: Let me now take a few minutes to expand on the business outlook section of our earnings release. We anticipate Denny's domestic system-wide same restaurant sales will be between 2.75% and 3.5% compared to 2022. We anticipate opening 35 to 45 restaurants on a consolidated basis, inclusive of 4 to 6 Kiki's openings, which amounts to a consolidated net decline of 10 to 20 restaurants. We are projecting commodity inflation for 2023 to be between 1 and 2%.

Hey, Michael Yes, good to hear your voice to happy to answer those questions.

So when you look at it the same store sales trends are it really is that.

That overall.

Industry that we're talking about nothing really different from our perspective, we saw that really kind of happen at the back to school timeframe kind of the mid to later part of August and really.

Kind of stepped down from that point from the trends that we were seeing in kind of kind.

Kind of persisted that way.

So with regard to that nothing really unique. The reality is is we were really kind of successful with our value driving strategies.

Robert Verostek: We expect labor inflation of approximately 4% for the year. Our expectation for consolidated total general and administrative expenses are between $75 and $77 million, including approximately $11 million related to share-based compensation expense, which does not impact adjusted EBITDA. This consolidated range contemplates a full year of Kiki's GNA. As a result, we anticipate consolidated adjusted EBITDA of between 85 and $87 million. Finally, I want to mention how proud I am of our franchisees and the entire Denny's and Kiki's teams, who have remained focused on serving our guests and driving our crave strategic priorities, especially during a period of consumer uncertainty and other macro wins.

Over the course of that timeframe in fact, Kelly mentioned it in her remarks that we went out with a $5 99 test.

In Orlando that has proven to be really really successful.

The check is holding in that but we drove significant amount of traffic to the point that at that at our franchise convention that Kelly remarked about we had many other of our marketing areas different geographies I want to go in in and further test out that $5 99.

Essentially a little bit higher but the reality is.

Part of that first question, Michael that the check is holding even.

In that but that $5 99 test in Orlando, we've seen the majority of that check hold so really good it really kind of plays to our DNA frankly with regard to our ability to drive say.

Robert Verostek: In closing, we remain confident in the strength of our highly franchised asset light business model which generates meaningful cash flow. We have a disciplined financial framework which allows us to appropriately support the transformation of Denny's and the growth of Kiki's while consistently returning capital to our shareholders.

Sales traffic and profitability through value one of our key key historic tenancy is providing that for our consumer with regard to the guidance that $2 75 to 350.

Matt that we do on that Michael is really we see it as a.

Robert Verostek: That wraps up our prepared remarks.

Functionally down slightly down one ish to up too. So that's the math that we're getting to here in the in the guidance that we issued so again majority of them on the upside to that in Q4, but again if things.

Operator: I will now turn the call over to the operator to begin the Q&A portion of our call. Thank you.

Operator: We will now be conducting a question analysis session. If you would like to ask a question, please press star one on the telephone keypad. A confirmation tone will indicate your line isn't the question queue.

Got worse that we kind of really hedged our bets there with that that range. So that's what we're seeing there.

Operator: You may press star two if you would like to remove your questions from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions.

Okay. Thanks for clarifying that and then on.

On the <unk> development agreement for development agreements for 100 units I mean really impressive considering there's not even 60 units in the ground. Today. So can you just expand upon that a little bit more whats the timeframe on those units, where do you where do you expect them to open and just anything else you can tell us about those agreements and what's so exciting to you about them. Thank you.

Michael Tamas: The first question comes on the line of Michael Tamas with open-imer and call. Please go ahead. Hi, thanks. Good afternoon. You touched on this briefly when you're prepared remarks, but can you walk through what sort of changed on the same store sales front relative direct expectation? Was it just the traffic shift that you mentioned across the industry, or are you seeing anything else on the average check side relative to what you thought you were going to see?

Yeah, absolutely Michael there were encouraged as as you heard and can hear our excitement too. So it's 14 Fran.

Franchisees, so and so that kiki's franchisees, that's a lot of denny's franchisees, we've been expanding and sharing the story about the potential really great opportunities for growth. So we're excited about that you asked about the market. So we've already talked about kind of under construction in the Tennessee market, that's still happening at the company and then we've got others that.

Michael Tamas: Then, Robert, if you could just kind of swear us all the way here, what does the implied fourth quarter, same store sales range? I know things kind of get wonky sometimes with weighting, but the down two and a half top one is it around that range, or if you could just clarify that would be helpful. Thank you. Hey, Michael. Yeah. Good to hear your voice.

Signed agreements for the East coast, as well as Texas and California.

We are thrilled about the excitement around it and as you point out you have to have 100 agreements 14 different franchisees.

Kelli Valade: Happy to answer those questions. When you look at the same store sales trends, it really is that overall industry that we're talking about, nothing really different from our perspective. We saw that. You really kind of happened at the back of the school time frame, the mid to the later part of August, and really kind of stepped down from that point from the trends that we were seeing and kind of persisted that way.

We're just incredibly optimistic about what this little concept can do and really excited to see the support from franchisees ready to talk about it and sign those agreements.

Yes, Michael.

The timeframe of those.

Likely the typically the agreements start with the <unk> give you a year to get the first one in the ground or so.

And then.

The majority of these agreements extend over five years.

Up to up to five years with that so if they are they are lighter the bigger ones are up to five years, the lighter ones would be done in less time, so to Kelly's point, we're really really excited inclusive of the 2014 agreement 11, where denny's franchisees coming into looking forward to coming into the <unk> system.

Kelli Valade: With regard to that, nothing really unique. The reality is is we were really kind of successful with our value driving strategies. Over the course of that timeframe, in fact, Kelly mentioned it in her remarks that we went out with a 599 test in Orlando. That's proven to be really successful. The check is holding in that, but we drove significant amount of traffic to the point that at our franchise convention that Kelly remarked about, we had many other of our marketing areas, different geographies want to go in and further test out that 599 plate.

So finally I had the opportunity at our franchisee convention that I spoke of two.

Literally from the general session stage.

Broadly about the opportunities for Kiki's development will hold another virtual town hall for all interested denny's franchisees at the same time, Dave Schmidt and his leadership team are presenting to the geeky franchisees. This week. So we expect this just to continue this momentum we absolutely believe will continue so it's exciting.

Kelli Valade: Potentially a little bit higher, but the reality is to part of that first question, Michael, that the check is holding even in that 599 test in Orlando. We've seen the majority of that check hold. It really kind of plays to our DNA, frankly, with regard to our ability to drive sales, traffic, profitability through value. One of our key historic tendencies is providing that for our consumer. With regard to the guidance that 275-350, the math that we do on that, Michael is really, we see it as functionally down, slightly down, one-ish to up to.

Awesome. Thank you very much.

Thanks, Mike Thank you Michael.

Thank you next question comes from the line of Jake Bartlett.

Jewish Securities. Please go ahead.

Great. Thanks for taking the question.

Mine is about the same store sales drivers that you see from here on out or the rest of the year and into 'twenty four in 'twenty three and there were some really big ones you have a new menu launch $24 seven was expanding pretty rapidly that was all.

Obviously, partially offset by macro pressures, but what are the big sales drivers that you see that you're excited about.

From from Hereon out kind of going forward for the next 12 months, yes, great. Great question Jay. Thank you. So we haven't so it's funny you mentioned in 'twenty three new menu lines. So we have a completely new menu design that is dropping on November eight and that menu design is very strategic in terms of emphasizing and highlighting our slam equities.

Kelli Valade: That's the math that we're getting to here in the guidance that we issued. Again, the majority on the upside to that in Q4, but again, if things got worse, we kind of really hedged our bets there with Okay, thanks for clarifying that.

Emphasizing and highlighting <unk> ability things all tied to our credit strategies and things we've learned in our recent research so things that we've called out we'll all be highlighted in this new menu really showcasing our fantastic food and a fantastic breakfast items, but all day parts highlighted in addition to that Youll see us with our lots of menu innovation, but in this quarter in particular, you'll see sulfur but.

Michael Tamas: And then, you know, on the Kiki's development agreement for, or development agreements for 100 units, I mean, really impressive considering there's, you know, not even 60 units in the ground today. So can you just expand upon that a little bit more, you know, what's the time frame on those units? Where do you, where do you expect them to open and just anything else you can tell us about those agreements and what's so exciting to you about them?

<unk> pancakes. That's in addition to so we've seen this really great play with where we've got great value with our slam equity that either 799 or <unk> 99, as we said in R. R.

Kelli Valade: Thank you. Yeah, yeah, absolutely. Michael, we're, we're encouraged as, as, as you heard, and can hear our excitement too. So a sport team franchisees, so, and so that's Kiki's franchisees. That's a lot of Denny's franchisees. We've been expanding and sharing the story about the potential really great opportunities for growth. So we're excited about that. You asked about the market. So we've already talked about kind of under construction in the Tennessee market.

Kelli Valade: That's still happening as company. And then we've got others that signed agreements for the East Coast, as well as Texas and California. So we're thrilled about these. The excitement around it. And as you point out, yeah, to have 100 agreements, 14 different franchisees, we're just incredibly optimistic about what this little concept can do. And really excited to see the support from franchisees. Ready to talk about it and sign those agreements. Yeah, Michael, in just the time frame of those likely, typically, the agreements start with the give you a year to get the first one in the ground or so.

We said in our script and in our conversation, but also then people upgrading when they are in to most recently pumpkin Pecan pancakes and then we know the salted caramel pancakes there'll be a big hit as well. So we've got this great barbell strategy in the way that we're emphasizing innovation.

Stuffed French toast is on its way Brio franchise. It has done incredibly well in test and so there's a ton of excitement going on that will launch on November. It also with our new cold brew coffee, so there's new things coming in the way of innovation New things, we're leveraging that we absolutely have already in our pantry and are excited to launch now that we test.

Them thoroughly our pricing model, we've got new pricing structure in place and Youll see that in our November 8th menu. So we've got a really strategic approach to pricing.

Profitable value with the things I just mentioned on a barbell strategy and then finally, we showcased our new remodel with modern diner, and we showcased that in Kansas City, where our convention withheld to really great feedback tweaks that we'll make from here, but we absolutely have.

Kelli Valade: And then the majority of these agreements extend over. So five years up to up to five years with that. So if there's there's their lighter the bigger ones are up to five years, the lighter ones would be done in less time. So it's a Kelly's point. We're really, really excited. Inclusive of the 14 agreements, 11 were Denny's franchisees coming into looking forward to coming into the Kiki system. We also finally had the opportunity at our franchisee convention that I spoke of to just just literally from the general session stage talk broadly about the opportunities for Kiki's development.

New Remodels in play right now under construction, so you'll see that be a part of where we see growth coming from in 'twenty four as well.

And just to add to that Jacob a couple of pieces. We are really really excited about our off premise business. So really down to two tenants right now as Kelly alluded to in her script. We're we're in the process of expanding our band Burrito test concept is within.

Kelli Valade: We'll hold another virtual town hall for all interested Denny's franchisees at the same time stage Schmidt and his leadership team are presenting to the Kiki franchisees this week. So we expect this just to continue this momentum. We absolutely believe we'll continue. So it's exciting.

<unk> 10.

Test restaurants, we're going to expand that pretty significantly.

Here's one that really is in the very beginning stages, but we are very very excited about this is Dennis we have a denny's franchisee right now that is currently in test with.

Michael Tamas: Awesome.

Michael Tamas: Thank you very much. Thank you, Michael.

Michael Tamas: Thank you.

Franklin Junction in as you guys are aware Franklin junction is a leading host kitchen platform. So this franchisee is in test with approximately 20 restaurants utilizing several of their virtual brands.

Jake Bartlett: Next question comes on the line of Jake Bartlett with two security please go ahead. Great. Thanks for taking the question. You know, mine is about the same source sales drivers that you see from here on out or the rest of the year into 24. In 23, there were some really big ones. You have a new menu launch 24 seven was expanding pretty rapidly. That was obviously partially offset by macro pressures, but you know, one of the big sales drivers that you see that you're excited about, you know, from from here on out kind of going forward for the next 12 months. Yeah. Great. Great question, Jake. Thank you. So we have. So it's funny. You mentioned in 23 new menu launch.

And we look to finalize an agreement with Franklin junction over the next several months to expand this test.

And if all goes well really to roll it out more broadly to the entire system. So this would clearly be an opportunity to expand upon our already successful.

Off premise business and it leverages.

As we've talked about with our virtual brands for some time it really leverages day parts that we have capacity to expand into which is that kind of that dinner and continuing to leverage late night, which has really been one of the standout that day part for US is that is that late night day part. So really there is a lot of sale.

Kelli Valade: So we have a completely new menu design that is dropping on November 8. And that menu design is very strategic in terms of emphasizing and highlighting our slam equities emphasizing and highlighting crevability things all pie to our crave strategies and things we've learned in our recent research. So things that we've called out will all be highlighted in this new menu, really showcasing our fantastic food and our fantastic breakfast items, but all day part highlighted.

And traffic driving initiatives that we are quite excited about.

Great. Thank you very much.

Detailed answer I appreciate it.

Kelli Valade: In addition to that, you'll see us with our lots of menu innovation, but in this quarter, particularly you'll see all the banana caramel pancakes. That's in addition to so we've seen this really great play with where we've got great value with our slam equities that either 799 or 599 is. We said in our script and in our conversation, but also then people upgrading when they're in to most recently pumpkin the con pancakes and then we know the salsa caramel pancakes will be a big hit as well.

My other question just on a near term basis.

Robert you mentioned kind of negative one to positive two.

We have two months left in the quarter now so theres pretty I guess, a pretty wide range for with two months left but can you.

Maybe give us a little more detail on the thinking there I think you mentioned that the low end was kind of a maybe a really conservative.

Side, but.

Any detail on where you stand so far your what your expectation within that wide range is what the moving pieces or whether it's really just dependent on the macro environment or.

Kelli Valade: So we've got this great barbell strategy in the way that we're emphasizing innovation stuffed French toast is on its way. It is done incredibly well in test and so there's a ton of excitement going on that will launch on November is all also with our new cold brew coffee. So there's new things coming in the way of innovation, new things were leveraging that we absolutely have already in our pantry and are excited to launch now that we tested them thoroughly or pricing model.

For instance, launching the Grand Slam in any more detail on where you think we could stand in that wide range.

Yes, that's a fair question Jake so.

October to be very transparent sequentially decline from <unk>.

From September.

What would be the what would get you from down one to plus two so there is a macroeconomic effect. There is no doubt about that that plays into that but what are we in control in that so I've mentioned the $5 99 test.

Kelli Valade: You know, we've got new pricing structure in place and you'll see that in our November eighth menu. So we've got a really strategic approach to pricing, profitable value with the things I just mentioned on our barbell strategy and then finally we showcase our new remodel with modern diner. And we showcase that in Kansas city where our convention was held to really great feedback tweaks that will make from here, but we absolutely have new remodels in play right now under construction.

So.

Again, there was much much interest coming out of our franchise convention. So we can really get to that pretty quickly Kelly just talked very eloquently about our new menu. That's coming out next week, we anticipate that to really perform well it really kind of focus.

Kelli Valade: So you'll see that be a part of where we see growth coming from in 24 is, as well. And just to add to that, Jake, a couple of pieces. We're really, really excited about our off-premise business. So, in really down two tenants right now, as Kelli alluded to in her script, we're in the process of expanding our Banda Burrito test concept. It was in 10 test restaurants. We're going to expand that pretty significantly.

He is on on breakfast really are again at the heart of what Denny's is about along with value. So it's the focus on breakfast there. So we'll see how well that place we also.

She also talked about the new pricing schema within that so the reality is is that we do expect to likely pick up some benefit from the way we have a range that menu. There are some differences with regard to the geography right. So you look at the floor.

Kelli Valade: And here's one that really is in the very beginning stages, but we are very, very excited about this. Denny's, we have a Denny's franchisee right now that is currently in test with Franklin Junction. And as you guys are aware, Franklin Junction is a leading host kitchen platform. So, this franchisee is in test with approximately 20 restaurants utilizing several of their virtual brands. And we look to finalize an agreement with Franklin Junction over the next several months to expand this test.

<unk> is down pretty significantly right now in Orlando in and of itself is that but the Midwest is strong south Texas is strong.

California is at the at or just slightly below kind of the averages. So a lot of different pieces that still even though we only have eight to nine weeks left in this quarter, there's still a lot of pieces that could come together that would push it one way or another within that range.

Great. Thank you so much I really appreciate it.

Kelli Valade: And if all goes well, really to roll it out more broadly to the entire system. So, this would clearly be an opportunity to expand upon our already successful off-premise business. And it leverages, as we've talked about with our virtual brands for some time, it really leverages day parts that we have capacity to expand into, which is that kind of that dinner and continuing to leverage late night, which has really been one of the standout day parts forces that late night day part.

Okay.

Thank you Nick.

Question comes from the line of Nick save him, but.

Wedbush Securities. Please go ahead.

Thank you.

You guys kind of hinted at seasonality with back to school trends deteriorating since mid August.

But then the October.

Sequential decline from September what would be like seasonality.

Kelli Valade: So, really, there's a lot of sales and traffic driving initiatives that we are quite excited about. Great, thank you very much for that detailed answer. I appreciate it. My other questions, just on the near term basis, Robert, you mentioned kind of negative one to positive two. We have two months left in the quarter now, so there's pretty, I guess a pretty wide range for two months left. But maybe give us a little more detail in the thinking there.

Do you think whats happening Q3 to date.

<unk> versus.

Just a consumer slowdown or to debbie's consumer slowdown.

Because the.

October sequential slowdown versus September that would actually go against at.

Or at least somewhat go against some industry trends, we're seeing out there.

Yes, that's a fair point, Nick with regard to that.

Kelli Valade: I think you mentioned that the low end was kind of a really conservative side, but any detail on where you stand so far, what your expectation within that wide range is, what the moving pieces are, whether it's really just dependent on the macro environment, or for instance, launching the Grand Slam, any more detail on where you think we could stand in that wide range. Yeah, that's a fair question, Jake. So October to be very transparent, sufficiently decline from September.

We did step down as I alluded to in August.

That kind of precipitate.

Precipitated through September.

And it Hasnt returned yet.

October so we're looking at things such as trade downs within that so we do believe that casual is probably is trading down into us, but we also believe that we are probably trading down into <unk>, a little bit so the impact of that.

We do pay close attention to the benchmark.

Kelli Valade: So, what would get you from down one to plus two? So, there is a macroeconomic effect. There's no doubt about that that plays into that. But what are we in control of in that? So, I mentioned the 599 test. So, again, there was much, much interest coming out of our franchise convention. So, we can really get to that pretty quickly. Kelly just talked very eloquently about our new menu that's coming out next week.

And sales track weekly or two that we look at it routinely.

And again, it's been fairly volatile.

Weeks, we are.

At par with our family dining competitors.

Other weeks, they're floating above us so it's hard to say we are just kind of keeping our head down we know that we are providing a really good guest experience that we measure that through our black box intelligence data. So when you look at net sentiment we are outpacing both the casual dining players.

Kelli Valade: We anticipate that to really perform well. It really kind of focuses on breakfast. Really, again, the heart of what Denny's is about along with value. So, it's the focus on breakfast there. So, we'll see how well that plays. We also, she also talked about the new pricing schema within that. So, the reality is that we do expect it to likely pick up some benefit from the way we've arranged that menu. There are some differences with regard to the geography, right?

And our family dining players in a pretty material way.

We believe it you kind of put that together you keep your head down you get give value you focus on breakfast you you get the right pricing strategies and while this.

In the very short term it may be working against US we really see all of these things kind of coming together to look to look more towards a much brighter future. So.

Got it.

And then just on pricing.

Could you just tell us what the actual menu pricing was I know the eight four commentary is for the whole system and I think thats inclusive of mix.

Kelli Valade: So, you look at the Florida's down pretty significantly right now in Orlando, in and of itself, is that? But the Midwest is strong, South Texas is strong, California is at or just slightly below kind of the averages. So, a lot of different pieces that even though we only have eight to nine weeks left in this quarter, there's still a lot of pieces that could come together that would push it one way or another within that range. Great. Thank you so much. I really appreciate it. Thank you.

They are a way for us to kind of get to the pricing versus mix.

The mix in Q3, and what you expect that to be at least the pricing portion in Q4, and then just with fast act starting in <unk>.

On April one in California, how are you thinking about pricing to offset that margin impact.

Yes, there is a lot in there Nick happy to tease that out for you. So the eight four.

Made up of basically eight.

Eight 6% pricing and let me break that down further for you.

Jake Bartlett: Next question comes on the line of Nick Setyan with Vettus Securities Peace Corp. Thank you. You guys kind of hinted at seasonality with back to school and front deteriorating since mid-August.

It's five 8% current year pricing.

And two 8% carryover pricing.

And then you have mixed discounts and other that are weighing on that by by two tenths. So again basically.

Nick Setyan: But then, you know, I think, you know, what's happening, you know, two, three to date is seasonality versus, you know, just a consumer slowdown or the Denny's consumer slowdown because the, you know, October sequential slowdown versus September, that would actually go against, at least somewhat go against the industry trends we're seeing out there. Yeah, that's a fair point, Nick, with regard to that, we did step down as I alluded to in August.

Two thirds of that is current year pricing a third of it is carryover pricing when you look into Q4, we do roll off.

Other two percentage points of carryover pricing that will roll off in Q4.

But there is basically another 2% of pricing that will be taken next week with that menu. So when you add when you do that math.

It looks to be it looks to us like GTA given these pricing decisions will probably continue to move down in that point range. So we do see Q4 with lower pricing than Q3, and we do believe that that trend will continue into the first.

<unk> of next year, there were two pricing windows last year again, if you recall we were.

Nick Setyan: And that kind of precipitated through September. And it hasn't returned yet in October. So we're looking at things such as trade downs within that. So we do believe that casual is probably is trading down into us, but we also believe that we're probably trading down into QSR a little bit. So the impact of that, we do pay close attention to the benchmarks. BBI and sales track weekly are two that we look at routinely.

The hyperinflation that we were experiencing 22 was very very relevant on people's minds at that point in time. So we took basically 2% and pricing in January another 3%.

In March so that will begin to roll off in Q1, which again should put some downward pressure on overall pricing as we move into into the first part of next year with regard to the fast Act. So that is as you would expect.

Clearly on our minds and what we.

Nick Setyan: And again, it's been fairly volatile. We are at par with our family dining competitors. And other weeks, they're floating above us. So it's hard to say we're just kind of keeping our head down. We know that we are providing a really good guest experience. We measure that through our black box intelligence data. So when you look at net sentiment, we are outpacing both the casual dining players and our family dining players in a pretty material way.

One of the key things that we are focused upon clearly there will be pricing that will be required and we look to take that in a very strategic way, it's not going to be some blanket level pricing should be in the very spirit that we came to the November a very targeted.

Last hit these exist with RMS in these new pricing clusters that we talked about so should be very strategic we will also look to utilize other means.

Nick Setyan: So we believe that you kind of put that together. You keep your head down. You give value. You focus on breakfast. You get the right pricing strategies. And while this, in the very short term, it may be working against us.

Went into the just a minute ago with Jake.

Quite a bit on off premises that whether that be our virtual brands Franklin junction whatever that may be that has been a very beneficial part of our story that we look to continue to drive forward and then beyond that you would look to.

Nick Setyan: We really see all of these things kind of coming together to look more towards a much brighter future. So got it.

For us to do what any good brand would be doing we're looking into automation.

Nick Setyan: And then just on pricing, you know, just could you just tell us what the actual menu pricing was? I know the eight four commentaries for the whole system. And I think that's inclusive of next. Is there a way for us to kind of get to the pricing versus mixing Q3 and what you expect that to be at least the pricing portion in Q4. And then just, you know, with fast act, you know, starting in on April 1 in California, how are you thinking about pricing?

To understand to ensure that the labor that we deploy in California is the most efficient. So we are clearly paying attention to that on if you were just to put your thumb in the air with.

If it was only to come through pricing and nothing else not driving traffic.

<unk> be somewhere in that 3% plus range to just cover fast Act. As you are aware. This is a fast a <unk> initiative, we do believe that it will have repercussions into all of the restaurant industry.

Nick Setyan: So I'll set that margin impact. Yeah, there's a lot in their neck happy to tease that out for you. So the eight four is made up of basically eight percent, eight six percent pricing. And let me break that down further for you. It's 5.8 percent current year pricing, and 2.8 percent carry over pricing. And then you have mixed discounts and other that are weighing on that by two tests. So again, basically two thirds of that is current year pricing.

But right now as we sit here right now our servers with there with tips are materially above $20 per hour.

And our cooks right now are just ever so slightly underneath so we don't all of our labor is won't be exposed to this so.

So on a relative to position the <unk>, where do we believe the majority of their labor will be exposed to that and we do believe that we're at a relative advantage and likely we will have to take less pricing.

Nick Setyan: A third of it is carry over pricing. When you look into Q4, we do roll off another two percentage points of carry over pricing. That'll roll off in Q4. But there is, and basically another two percent of pricing that will be taken next week with that menu. So when you do that math, it looks to be, it looks to us like GCA given these pricing decisions will probably continue to move down in that point range.

Nick Setyan: So we do see Q4 with lower pricing than Q3. And we do believe that that trend will continue into the first quarter of next year. There were two pricing windows last year. Again, if you recall, we were the hyperinflation that we were experiencing in 22 was very, very relevant on people's minds at that point in time. So we took basically two percent in pricing in January and another three percent in March.

<unk>, yes, yes, and yes, that's exactly what I was going to add Robert So you've alluded to it there in your last sentence, but I think youre going to see phosphate <unk> fast casual we've already seen some of those announcements of having to take increased price to cover it because you have to very directly cover it versus an indirect impact that we know will be there and we're not naive to that.

But working with our franchisees.

And really being very focused we haven't excellent employee proposition all across the country and we've talked about our gain program over 100 people are working on getting their <unk> I was in California and celebrated an area director getting her JD with Dennis and we had a huge celebration on that so our industry turn our turnover company ops, including Cal.

<unk>, where we have 20.

Is exceptional and we beat the family dining and casually casualty industry handedly and again, we just keep adding to the value proposition for employees.

Sure.

Nick Setyan: So that will begin to roll off in Q1, which again should put some downward pressure on overall pricing as we move into the first part of next year. With regard to the fast act, so that is, as you would expect, and clearly on our minds and what we, one of the key things that we are focused upon. Clearly, there will be pricing that that will be required, and we look to take that in a very strategic way.

We're really comfortable there and yet we know we will look at everything we have to in partnership with our franchisees automation robotics, while early in our proof of concept on a couple of those things you'll hear us talk more about it because we do feel like theres things that things that we can absolutely do to offset that labor and to help with the business model at a time, where it's really critical and.

Those virtual brands, we've mentioned a couple of times, adding Banda Brito and testing Franco injunction.

Can be sure, we'll look to that market to be able to do whatever we can there first.

Nick Setyan: It's not going to be some blanket level pricing. It should be in the very spirit that we came to the November, a very targeted, where the last hits these exist with RMS and these new pricing clusters that we talked about. So it should be very strategic. We will also look to utilize other needs. I went into the just a minute ago with Jake, quite a bit on off-premises, whether that be our virtual brands, Franklin Junction, whatever that may be, that has been a very beneficial part of our story that we look to continue to drive forward.

Thank you and then just last question for me the margins.

The company owned operating margin was actually much healthier than.

Our thought it could be with comps where they are the company on comps where they are.

Instead of going maybe like one by one line just kind of tell us.

If any of those items kind of exceeded your expectations going into the quarter, where some of that upside came from if there is anything onetime that we need to be aware of.

Hey, Nick this is Robert nothing really of one time nature to call out.

Nick Setyan: And then beyond that, you would look to, for us to do what any good brand would be doing, we're looking into automation to understand, to ensure that the labor that we deploy in California is the most efficient. So we are clearly paying attention to that. If you were just to put your thumb in the air with, if it was only to come through pricing and nothing else, not driving traffic, you'd probably be somewhere in that 3% plus range to just cover fast deck.

Internally.

Kind of a a moniker of term that we've been using internally to four robust margins is called no stone unturned. So we have been looking across that P&L to ensure that the margins remain as healthy as positive. So it really is a focus of ours we've.

Kind of move those forward clearly off the depths of the the previous two years so.

Nothing.

Any significance to call out as one time.

Nick Setyan: As you are aware, this is a fast, a QSR initiative. We do believe that it will have repercussions into all of the restaurant industry. But right now, as we sit here right now, our servers with tips are materially above $20 per hour. And our cooks right now are just ever so slightly underneath. So we don't, all of our labor is won't be exposed to this. So on a relative to position at QSR, where do we believe the majority of their labor will be exposed to this? And we do believe that we're at a relative advantage and likely will have to take less pricing than QSR.

Yeah.

Thank you.

Thanks, Nick.

Nick Setyan: Yeah, and that's exactly what I was going to add, Robert, so you alluded to it there in your last sentence, but I think you're going to see fast food, QSR, fast casual. We've already seen some of those announcements of having to take increased price to cover it, because you have to very directly cover it versus an indirect impact that we know will be there. And we're not naive to that, but working with our franchisees and really being very focused.

Thank you.

Next question comes from the line of Todd Brooks with Benchmark Company. Please go ahead.

Hey, Thanks for taking my questions first question and.

And Robert if I heard you right you are looking for kind of a 100 basis points step down in pricing in.

In Q4, but you talked about and Kelly youre pointing out that.

There is some menu construction and less customization.

Just wondering if the mix impact that was only the 20 basis points in Q3, you're expecting a higher mix impact one way or the other with the new menu launch.

Early November.

Yeah. It's a fair question. So we're optimistic and obviously we went into this we had some external support and in addition to the research we've been doing and doubling down with RMS and even had this design done externally just for fresh set of eyes and the parameters were really highlight our incredible equities highlight credibility highlight the things that.

That our guests always want from US we do not expect at all that the customization should have an impact we've actually just kind of deemphasize it because so much of our menu had the ability to be customized. So we will always customize when asked where just kind of downplay it a hair for.

Nick Setyan: We have an excellent employee proposition all across the country. We talked about our gain program over a hundred people are working on getting their GEDs. I was in California and celebrated an area director getting her GED with Denny's. And we had a huge celebration on that. So our industry turn our turnover company off, including California, where we have 20 is exceptional. And we beat the family dining and casual dining industry handedly.

In the interest of improving and.

And lessening the complexity, so improving operations and lessening the complexity, where we really don't get credit for it. So those are some of the things I think the checks one of the things that we went into this with was really looking at where are where are the best items for not only what the guest is crazy. But then also from a margin standpoint, so that that went into the design.

Nick Setyan: And again, we just keep adding to the value proposition for employees. So we're really comfortable there. And yet we know we'll look at everything we have to in partnership with our franchisees, automation, robotics, while early in our proof of concepts on a couple of those things, you'll hear us talk more about it, because we do feel like there's things that we can absolutely do to offset that labor and to help with the business model at a time where it's really critical.

Lay out front.

Back in everything that we did have that in mind as well so.

While difficult to tell yet we don't expect it to have a negative impact at all.

In fact, we hope there is a bit of upside.

So what we're what we're doing and how we've looked at this menu yes.

Nick Setyan: And those virtual brands we've mentioned a couple times adding Band of Burrito and testing Franklin Junction, you know, you can be sure we'll look to that market to be able to do whatever we can there first.

Yes, but to confirm Todd you are correct in the sequential just from the pricing aspect the sequential one <expletive>.

<unk> that we will likely see into Q4.

Nick Setyan: Thank you. And I'm just last questions for me, you know, the margin. The company owned operating margin was actually much healthier than you know I thought they could be with with Comsword AR to company on Comsword AR You know instead of going maybe like run by one line just kind of tell us if any of those items kind of exceeded your your expectations going into the quarter or some of that you know upside came from if there's anything one time that we need to be aware of Hey Nick this is Rob nothing really of one time nature to call out internally the kind of a a moniker a term that we've been using internally to to for robust margins is called no stone unturned so we have been looking across that PNL to ensure that the margins remain as healthy as positive so we it really is a focus of ours we've kind of moved those forward clearly off the depths of the the previous two years so again nothing of any significance to call out is one time thank you thanks Nick thank you next question comes from the line of Todd Brooks with benchmark company please go ahead.

Okay great.

Second question, just a quick one but didn't hear any update on loyalty I know you launched that in June.

Momentum as far as new membership in any kind of.

Ability through the new platform to maybe stimulate some more frequency of visit yet.

Given the traffic challenges that are out there.

Sure Yes, it's a great question. It's still early we continue to gain more members, we continue to leverage our learnings with both our customer data platform and the C and the loyalty program itself and really look to strengthen that over the coming months.

A lot of what we're doing is just really leaning in to learn what we can about our guests and then to really create those journey than those lanes speaking to them specifically with things that we know they love so.

Lots of ideas and things that Youll see us leverage over the next quarter and to come long term play for sure in terms of having a great rewards program a great loyalty program that really speaks to our guests and give them what they want but yes, it's slowly growing.

And we continue to learn more all the time about our guests on what they want from us and a lot more that youll see coming from us on that soon.

That's great and then final one for me.

Obviously exciting news about the agreements for 100 gigs for Keith you saw kind of an amazing start.

Demand relative to your expectation and if you look at your franchise support infrastructure.

Todd Brooks: Hey thanks for taking my questions first question and Robert if I heard you right you're looking for kind of a hundred basis points step down in pricing in Q4 but you talked about and Kelly you're pointing out that there's some menu construction and less customization I'm just wondering if the mix impact that was only the 20 basis points in Q3 you expecting a higher mix impact one way or the other with the new menu launch in early November. Yeah it's a fair question so we're optimistic and obviously we went into this with some external support in addition to the research we've been doing doubling down with our mess and even had this design done externally just for fresh set of eyes and the parameters were really highlight our incredible equities highlight credibility highlights the things that you know that that our guests always want from us we do not expect at all that the customization should have an impact we've actually just kind of deemphasize it because so much of our menu.

But you've built do you need to kind of manage the amount of agreements that come across the transom here or how are you feeling about the readiness if the demand is.

It seems that it is robust with existing denny's franchisees. Thanks.

Yeah, Great Great question, So always a balancing act there are spread out.

So that we really do.

Feel like we can handle it and we're investing where we need to we've invested in this brand this year to put the right kicking his development team in place we've invested leveraging our development resources to get to that 14, so managing expectations I'd say at this point.

We've exceeded our expectations in terms of signing the 14 that we signed and it's been a steady and really progressive thing that we've been able to do with excitement again from both Kiki's franchisees, new franchisees and Danny franchisees as we've mentioned so yes infrastructure has got to be there. This is this is the.

Todd Brooks: We've had the ability to be customized so we'll always customize when asked we're just kind of down planted a hair for the in any interest of you know improving and less than the complexity so improving operations and less than the complexity where we really don't get credit for it so there's just some of the things I think to check one of the things that we went into this with was was really looking at where where the best items for not only what the guest is crazy but then also from a margin standpoint so that that went into the design the layout. We brought it back and everything that we did had that in mind as well so while difficult to tell yet we don't expect it to have a negative impact at all and in fact we hope there's a bit of upside to what we're what we're doing and how we've looked at this menu. Yeah but to confirm Todd you you are correct it in the sequential just from the pricing aspect the sequential one point decline that we will likely see in the Q4 yeah.

The small, but mighty brands and we're going to be really smart about how we continue to invest and continue to support them leveraging our great franchise of our model.

To do that and then Robert you want to talk about the loan pool and ways to continue to incentivize those franchisees, yes. Thanks, Kelly. So Todd this is kind of a little bit of an add on here I don't think we've talked about this I just signed this.

Within the last week or so, but we do now have a.

$100 million loan pool.

That we put into place a.

A couple of different purposes, the first being.

$25 million for Denny's Remodels, we can talk a little bit more about that but then we have $75 million for additional development 25 earmarked for Denny's development and $50 million earmarked for additional <unk> development. So you till we talk about.

Todd Brooks: Okay great and then second question just a quick one but didn't hear any update on loyalty I know you launch that in June momentum as far as new membership and any kind of, ability through the new platform to maybe stimulate some more frequency of visit yet given the traffic challenges that are out there. Sure, yeah, it's a great question. It's still early. We continue to gain more members. We continue to leverage our learnings with both our customer data platform and the Seattle and the loyalty program itself and really look to strengthen that over the coming months.

Agreements.

We talked and that's really really exciting it's just the first tranche of agreements by the way this doesn't.

It doesn't get US too we will certainly have additional ones that we will be talking about at some point in the future, but beyond the agreements now we have the capacity to help get this done this is a new brand.

And so again.

Once as we get outside of Florida, we're kind of putting our money where our mouth is with with this loan pool that we've just small backstop on the new development pieces and often our loan pools are not utilized all that much other than for a stocking horse for other loans that they can go out and get with their existing.

Todd Brooks: A lot of what we're doing is just really leaning in to learn what we can about our guests and then to really create those journeys and those lanes speaking to them specifically with things that we know they love. So lots of ideas and things that you'll see as leverage over the next quarter end to come, long-term play for sure in terms of having a great rewards program, a great loyalty program that really speaks to our guests and gives them what they want. But yeah, it's slowly growing and we continue to learn more all the time about our guests and what they want from us and a lot more that you'll see coming from us on that soon.

Bank facilities, but we're really excited to not only have the agreements, but the capital in place to fulfill those agreements.

Thanks, and just a quick follow up so you talked about 100 100 units being the first tranche.

And Kelly you mentioned spreading it out so are we.

Managing the demand in waves of bringing it on with new agreements here. So is there is there a backlog behind.

Todd Brooks: That's great. And the final one for me. Obviously exciting news about the agreements for a hundred units, for Keith's kind of an amazing start. I guess demand relative to your expectation and if you look at your franchise support infrastructure that you've built, do you need to kind of manage the amount of agreements that come across the transom here or how are you feeling about the readiness if the demand is, and it seems that it is robust with existing Denny's franchisees.

The 100 sign, but youre, giving that visibility into this brand potentially growing into.

A strong number two over time.

Relative to like a first watch.

Yeah, So Todd it's Robert again with regard to that.

It's not like we're the only amount. This is kind of real time, we are telling you the <unk>.

Development team has really been working hard partnering with the <unk> leadership team to bring this first tranche.

Todd Brooks: Thanks. Yeah, great, great question. So always the balancing act. They're spread out. You know, enough so that we really do feel like we can handle it and, you know, we're investing where we need to. We've invested in this brand this year to put the right Keke's development team in place. We've invested leveraging our development resources to get to that 14. So managing expectations, I'd say at this point, we've exceeded our expectations in terms of signing the 14 that we've signed, and it's been a steady and really progressive thing that we've been able to do with excitement again from both Keke's franchisees, new franchisees, and Denny's franchisees, as we've mentioned.

As Kelly remarked East coast.

As we noted already into Tennessee, and Texas, and California, but as you guys are aware we are in all 50 states right now so.

Again these were the first ones we've signed in this.

As Kelly alluded to the small, but mighty team, we will keep working and as.

As soon as we get the next tranche all lined up.

And ready to go we'll be talking about that also.

And then finally, Robert who funds the loan pool through some straight on that.

It's a third party loan pool, not not our cash here, we only provide a minor backstop to the cash from the third party lender.

Todd Brooks: So yeah, infrastructure's got to be there. This is the small but mighty brand and we're going to be really smart about how we continue to invest and continue to support them, leveraging our great franchise or model, you know, to do that. And then Robert, you want to talk about the loan pool and ways to continue to incentivize those franchises? Yeah, thanks, Kelly. So Todd, this is kind of a little bit of an add on here.

Great. Thank you all very much.

Thanks Todd.

Thank you next question comes from the line of John This with Keybanc capital markets. Please go ahead.

Hi, Thanks, good evening.

Can you just clarify I think you said, 3% pricing too.

Todd Brooks: I don't think we've talked about this. I just signed this within the last week or so, but we do now have a $100 million loan pool that we put in the play, say a couple of different purposes. The first being $25 million for Denny's remodels, we can talk a little bit more about that, but then we have $75 million for additional development, $25 earmarked for Denny's development, and $50 million earmarked for additional Keke's development.

Offset in the fast act with that 3% effective for the system or is that just 3% in the stores in California, and then I have a.

My regular question after you answer that.

Yeah, Eric This is Robert so the 3% is really my kind of kind of the back of the envelope math that we're doing for the company restaurants alone in California. So.

Depending upon volume that could be different.

Again, we will be very strategic with regard to that and we will partner with our franchisees.

As you might expect.

Todd Brooks: So we talk about agreements that we talked in that's really, really exciting. It's just the first tranche of agreements, by the way. This doesn't get us to, we will certainly have additional ones that we will be talking about at some point in the future. But beyond the agreements, now we have the capacity to help get this done. This is a new brand. And so again, we need, once as we get outside of Florida, we're kind of putting our money where our mouth is with this loan pool that we've just had small backstop on the new development pieces.

We see our performance has improved with value.

That's the nature of our brand so we'd look to limit pricing as much as we can but understand what the margin implications are of something like the fast Act. So we will partner with our franchisees to get that right level along with the other pieces that we talked about off premises banner Burrito Franklin injunction test.

Automation all of that will come into play my 3% referenced specifically was with regard to company restaurants in California.

Got it and then maybe a question on the development outlook. It looks like you expect to close fewer units across both brands. Despite opening has made <unk>. So maybe comment on what's driving the fewer closures this year.

Todd Brooks: And often our loan pools are not utilized all that much other than for a stocking horse for other loans that they can go and get with their existing bank facilities, but we're really excited to not only have the agreement, but the capital in place to fulfill those. Agreement. Thanks, and just a quick follow-up. So you talk about 100 units being the first crunch. And Kelli, you mentioned spreading it out. So are we managing the demand in waves of bringing it on with new agreements here?

Yes.

Across the year, Eric we've seen and we measure this through our I aluminum tool that we have in.

40% of the restaurants, we're really going to look to ramp that up to get additional insight over the course of the year, but margins have been improving over the course of the year, you've seen that in our company portfolio.

And again <unk> seen things like commodity inflation clearly moderate over the course of this year labor has been steady in the 3% to 4% range. So again the improvement that you've seen.

Todd Brooks: So is there a backlog behind the hundred sign that you're getting that visibility into this brand potentially growing into a strong number two over time relative to like a first watch? Yeah, it's so Todd it's Robert again with regard to that. It's not like we're don't link them out. This is kind of real time. We're telling you the development team has really been working hard, partnering with the Kiki's leadership team to bring this first crunch.

Year to year in the company P&L in margins really have moved forward into the franchise and again improving margins improving profitability will will reduce the number of closures. So.

We're really excited to see that in the further we can get into.

Next year and continue to drive sales and profitability.

Todd Brooks: And as Kelli remarked, East Coast, as we noted already into Tennessee in Texas and California, but as you guys are aware, we are in all 50 states right now. So again, these were the first ones we've signed in this, as Kelli alluded to this small but mighty team, we'll keep working and as soon as we get the next crunch all lined up and ready to go, we'll be talking about that also. And then finally, Robert, who funds the loan poll? So I'm straight on that. The third party loan poll, not our cash, we only provide a minor backstop to the cash from the third party lender.

That is truly the catalyst of bringing down additional closures.

Got it and then just with the new menu and that new pricing model that you mentioned could you expand on that a bit is the goal to be more thoughtful about the parts of the menu that you take price and that's sort of.

Overall menu architecture that youre looking to.

The goal of the new the new menu.

The architecture.

Yeah, Eric Yes, absolutely that's exactly what it is right. So we look we had a good process in the past, but we've really doubled down on sensitivity by category by item as well as then being really myopic around all of the cost infrastructure across the country right. So so different by DMA different by state.

Todd Brooks: Great, thank you all very much. Thanks, Todd.

Operator: Thank you.

And that is really helping us to kind of stay aligned with our franchisees as we take price going forward. So it's definitely a more strategic approach.

Operator: Next question comes from the line off, Ellie Coons on this with Cuban capital markets, please go ahead. Thanks, good evening. Can you just clarify, I think you said 3% pricing to offset the fast act. Was that 3% effective for the system? Or was that just 3% in the stores in California? And then I have a regular question after maybe you went to that. Yeah, Eric, so this is Robert. So the 3% is really my kind of the back of the envelope math that we are doing for the company restaurants alone in California.

Again, doubling down on the insights that we have by item by category, where we have the most elasticity.

Operator: So it wasn't depending upon volume, that could be different. And again, we will be very strategic with regard to that and we will partner with our franchisees. As you might expect, we see our performance is improved with value. That's the nature of our brand. So we'd look to limit pricing as much as we can but understand what the margin implications are of something like the fast act. So we will partner with our franchisees to get that right level along with the other pieces that we talked about off-premises, Band of Arrito, Franklin Junction Test, Automation, all of that will come into play. My 3% reference specifically was with regard to company restaurants in California. Got it.

<unk> got the most opportunity while not kind of hurting that value proposition. So we feel really good about what we're doing there and I think it will absolutely benefit us as we stay aligned with our franchisees on yes at times. There are things we will have to do but we also we know right. If we can hold.

And we can keep providing that great value in our perception of value is there than.

And then we did than we do well when we know that so that's all part of this new design and architecture going forward as you actually just said so I appreciate that question.

Thanks to all I have.

Thanks, Alright, Thank you Eric.

Yeah.

Thank you next question comes from the line of Brian Malone.

Piper Sandler. Please go ahead.

Hi, This is Ashley on for Brian.

I believe I heard you say in the prepared remarks that you plan to do some company owned development with Keith next year could you elaborate on those plans specifically how many do you anticipate opening and how we should think about the cost to build from a capex perspective. Thanks.

Yes, <unk> this is Robert.

Eric Gonzalez: And then maybe a question on the development outlook. It looks like you expect a close few units across old brands despite opening half as many Kiki. So maybe comment on what's driving the fewer closures this year? Yeah, so across the year, Eric, we've seen and we measure this through our I-Lumen tool that we have in 40% of the restaurants where we're really going to look to ramp that up to get additional insight over the course of year.

The reality is with the <unk> brand and we've talked about this for a little while now as we wanted to utilize.

Company capital Denny's corporate capital to get outside of the state of Florida. So we're doing that in Tennessee right now in Nashville, we have.

<unk> under construction at the moment in in Tennessee.

Also talked about needing to build out some oversight efficiency within some of the markets, where we took over the company cafes down in Florida, Theres not one market typically for US oversight efficiency comes in somewhere around six to eight cafes restaurants, that's what we know from from the Denny's World. So.

Eric Gonzalez: But margins have been improving over the course of year. You've seen that in our company portfolio. And again, you've seen things like commodity inflation clearly moderate over the course of this year. Labor has been steady in that 3% to 4% range. So again, the improvement that you've seen year to year in the company, PNLs and margins really have moved forward into the franchise. And again, improving margins and improving profitability will reduce the number of closures.

We will build out places such as Jacksonville likely put in some capital into into Orlando.

At this point, that's where the capital will be going.

I would expect three time and as the years progress once we build out our markets to become oversight efficient then we will trend back to this.

Eric Gonzalez: So we're really excited to see that and the further we can get into next year and continue to drive sales and profitability, that is truly the catalyst of bringing down additional closures, and then just with the new menu and that new pricing model that you mentioned, you know, could you spend on that a bit? Is the goal to be more thoughtful about the parts of the menu that you take price? And that's sort of just overall menu architecture that you're looking to, is that the goal of the new menu and the menu architecture?

Our highly franchised model.

A good bulk of the capital will be franchisees still the case next year, but on a relative position to what you would have seen in the Denny's world.

We will be going in.

A little bit deeper with regard to opening up kiki's cafes, using corporate capital next year with regard to.

Eric Gonzalez: Yeah, absolutely. That's exactly what it is, right? So we had a good process in the past, but we have really doubled down on sensitivity by category, by item, as well as then being really myopic around all of the costs, infrastructure across the country, right? So different by DMA, different by state, and that is really helping us to kind of stay aligned with our franchisees as we take price going forward. So it's definitely a more strategic approach.

What it will cost to build one of these things were still right sizing that frankly.

Kind of.

That million 2 million two range.

With what we were talking about when we first took this over but we did some exciting work with regard to and Kelly alluded to it a group called other tomorrow did some work for us is where the mornings from scratch tagline came from.

And the reality is as we're building those right now in Tennessee. So in the first ones tend to be a little bit more expensive until you.

Eric Gonzalez: And just again, doubling down on the insights that we have by item, by category, where we have the most elasticity, where we've got the most opportunity while not kind of hurting that value proposition. So we feel really good about what we're doing there and think it will absolutely benefit us as we stay aligned with our franchisees on, yes, at times there are things we'll have to do, but we also, we know, right?

Get some efficiencies and optimize what youre doing so well.

What we will ultimately be building these things for and what we talked about a year or so ago. When we took over key DS.

And we're the first view.

Eric Gonzalez: If we can hold and we can keep providing that great value and that perception of value is there. Then we do, then we do well and we know that. So that's all part of this new design and our architecture going forward, as you actually just said, so appreciate that question.

We'll end up could be slightly different so you may see us invest a couple of hundred thousand dollars more into the first ones until we optimized the built out into the future.

Eric Gonzalez: Thanks.

Great. Thanks, I'll pass it back.

Thank you.

Ashley Bruminger: So I have.

Thank you.

Ashley Bruminger: Thanks.

Ashley Bruminger: Thank you, Rick.

Question comes from the line of Andrew Wolf.

But C L. King. Please go ahead.

Robert Verostek: Thank you. Next question comes on the line of Brian Malin with 5% of please go ahead. Hi, this is Ashley on for Brian. I believe I heard you say in the prepared remarks that you plan to do some company and development with Keke's next year. Could you elaborate on those plans, specifically how many do you anticipate opening and how we should think about the cost to build from a capex perspective. Thanks.

Thank you I just wanted to follow up on the cadence the monthly cadence on the same store sales during the quarter and into October I don't know if you would.

To give specifics I know last quarter, you said July was above.

Little above somewhat above 3%.

So I don't know if you'd be specific and if you can't be specific could you give us at least a sense of.

Which months.

Robert Verostek: Yeah, Ashley, this is Robert. So the reality is with the Keke's brand and we've talked about this for a little while now as we wanted to utilize company capital, Denny's corporate capital to get outside of the state of Florida. So we're doing that in Tennessee right now in Nashville. We have cafes under construction at the moment in Tennessee. We also talked about needing to build out some oversight efficiency within some of the markets where we took over company cafes down in Florida.

In the quarter between August and September sort of had more of the deceleration. So.

Robert Verostek: There's not one market typically for us oversight efficiency comes in somewhere around six to eight cafes or restaurants. That's what we know from the Denny's world. So we'll build out places such as Jacksonville, likely put in some capital into Orlando. So at this point, that's where the capital will be going. I would expect through time and as the years progress, once we build out our markets to become oversight efficient, then we will trend back to this highly franchise model.

Sort of back into where you might be trending now.

Yes, Andrew.

So generally we wouldn't be giving monthly.

Same restaurant sales so to try to pin to your the second part of that it really did slow into the kind of mid to the back part of August 2nd half of August.

And then that perpetuated into September so.

Again July was better than August, which was better than September so that really that cadence really kind of default.

Evolved over the over the course of the quarter I hate to say that and we looked at and again I did I did say that October sequentially decline from September. So we look to kind of turn that with all of these different initiatives that we've discussed over the course of this Q&A.

Okay, I'm, just well I guess it would be.

I'll just try one more time as October was October decline as severe is.

Coming out of July into the last two months of the year or is from late August.

Yes.

Robert Verostek: In the good bulk of the capital will be franchisee still the case next year, but on a relative position to what you would have seen in the Denny's world, it will be going in a little bit deeper with regard to opening up Keke's cafes using corporate capital next year with regard to what it will cost to build one of these things. We're still right sizing that frankly. Kind of that million to million to range with what we were talking about when we first took this over, but we did some exciting work with regard to and Kelly alluded to it.

Look at it.

Looking at Curt and Michael to try to get that and it's just.

<unk>.

It's again.

Not sure how to talk about that.

Give we will give updates on the next call on that Andrew not trying to be cagey, but again trying to live within what our typical practices are with these numbers. So.

Got it alright, well thank you.

Thanks, Andrew.

Thank you.

There are no further questions at this time I would like to turn the floor back over to close Nichols for closing comments.

Robert Verostek: A group called other tomorrow did some work for us. It's where the mornings from scratch tagline came from. And the reality is we're building those right now in Tennessee. So in the first ones tend to be a little bit more expensive until you get some efficiencies and optimize what you're doing. So what we will ultimately be building these things for and what we talked about with a year or so ago when we took over Keke's and where the first few will end up could be slightly different. So you may see us invest a couple of hundred thousand dollars more into the first ones until we optimize the builds out into the.., of Future. Great. Thanks. I'll pass it back. Thank you.

Thank you I'd like to thank everyone for joining us on today's call. We look forward to our next earnings conference call in February when we will discuss our fourth quarter 2023 results.

Thank you all and have a great evening.

Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.

Okay.

At this time, thank you for your participation.

Andrew Wolf: Next question comes from the line of Andrew Wolf, but silking, Peacequake. Thank you. I just wanted to follow up on the cadence, the monthly cadence on the same store sales during quarter and into October. I don't know if you would want to give specifics. I know last quarter you said July was above a little above somewhat above 3%. So I don't know if you'd be specific. And if you can't be specific, could you give us at least a sense of which months in the quarter between August and September sort of had more of the deceleration, so we could sort of back into where you might be trending now.

Andrew Wolf: Yeah, Andrew, certainly. So generally we wouldn't be giving monthly same restaurant sales. So to try to pin to your second part of that, it really did slow into the kind of mid to the back part of August, second half of August. And then that perpetuated into September. So again, July was better than August, which was better than September. So that that cadence really kind of devolved over the course of the quarter.

Andrew Wolf: They hate to say that. And we looked at it. And again, I did say that October sequentially declined from September. So we looked at to kind of turn that with all of these different initiatives that we've discussed over the course of this Q&A. Okay, I'm just, well, I guess I'll just try one more time. Is October was October's decline as severe as, you know, coming out of July into the last two months of the year, or as from late August? Yeah, I'm looking at a, looking at Curt and Michael to try to get that in. And it's just, again, I'm not sure how to talk about that.

Andrew Wolf: We'll give, we'll give updates on the next call on that, Andrew, not trying to be cagey, but again, trying to live within what our typical practices are with these numbers. So got it. All right, well, thank you. Thanks, Andrew. Thank you.

Operator: There are no further questions at this time.

Curtis Nichols: I would like to turn the floor back over to Curt Nichols for closing comments. Thank you. I'd like to thank everyone for joining us on today's call. We look forward to our next earnings conference call in February. Then we will discuss our fourth quarter of 2023 results. Thank you all and have a great evening. Thank you.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. That's good. Thanks at this time. Thank you for your...