Q4 2023 Denny's Corporation Earnings Call

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Operator: Greetings. Welcome to Denny's Corporation fourth quarter 2023 earnings. At this time, all participants on the list and only, a question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the presentation, please press star zero on your telephone.

Greetings and welcome to the Denny's Corporation fourth quarter 2023 earnings Conference call.

Time, all participants are in a listen only mode. A question and answer session will follow the whole presentation. If anyone should require operator assistance during the conference. Please.

Let's start zero on your telephone keypad.

Operator: Please note this conference is being recorded. I'll now turn the conference over to your host, Curt Nichols, Vice President of Executive Relations and Finance. Maybegin.

This conference is being recorded I'll now turn the conference over to Yahoo, Curt Nichols, Vice President Investor Relations and Finance you may begin.

Curt Nichols: Good afternoon. Thank you for joining us for Denny's fourth quarter 2023 earnings conference. With me today for management are Kelly Valade, Denny's President and Chief Executive Officer, and Robert Verasco. Denny's Executive Vice President and Chief Financial Officer, please refer to our website at investor.denny's.com for our fourth quarter earnings press release, along with the reconciliation of any non-GAAP financial measures mentioned on the call today.

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

With me today from management are Kelly for late Denny's, President and Chief Executive Officer, and Robert rustic.

Robert Rustic: He is executive Vice President and Chief Financial Officer.

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

Curt Nichols: 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 fourth quarter financial results for commenting on. 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 may constitute forward-looking statements. Management urges caution in considering its current trends and any outlook on earnings provided during this call, as said statements are subject to risk.

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

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

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

Speaker Change: 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.

Speaker Change: Constitute forward looking statements.

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

Speaker Change: 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.

Curt Nichols: 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 8K and quarterly reports on Form 10Q. With that, I will now turn the call over to Kelly DeLade, Denny's President and Chief Executive Officer. Thank you, Curt, and good afternoon, everyone. Thank you for joining us today.

Speaker Change: 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.

Speaker Change: And in any subsequent forms 8-K and quarterly reports on Form 10-Q.

Speaker Change: With that I will now turn the call over to Kelly delayed Denny's, President and Chief Executive Officer. Thank.

Kelly Denny: Thank you Curt and good afternoon, everyone. Thank you for joining US today, we were pleased to close out 2023 was solid domestic system wide same restaurant sales of one 3% in the fourth quarter, reflecting sequential improvement throughout the quarter.

Kelly Valade: We were pleased to close out 2023 with solid domestic system-wide same restaurant sales of 1.3% in the fourth quarter, reflecting sequential improvement throughout. And because of that improvement in momentum, we delivered system-wide same restaurant sales growth of positive 3.6% for the full year, which was above the high end of our previously guided range, a satisfying achievement given the operational challenges the industry endured again in 2023. In fact, Denny's same restaurant sales outperformed the full service industry benchmark for both the fourth quarter and for the full year, an impressive statistic.

Kelly Denny: And because of that improvement in momentum we delivered system wide same restaurant sales growth of positive three 6% for the full year, which was above the high end of our previously guided range is satisfying achievement given the operational challenges the industry is doing it again in 2023 and in fact any same restaurant sales outperformed the full service industry benchmark for both the fourth.

Kelly Denny: Quarter and for the full year, an impressive statistic for sure looking ahead to 2024, we entered the new year with a clear focus on what we know is resonating with our consumers and a laser like focus on our three strategic areas of focus. These are the best in class breakfast with craveable items, and unbeatable value proposition and convenience in the form of.

Kelly Valade: Looking ahead to 2024, we entered the new year with a clear focus on what we know is responding with our consumers and a laser-like focus on our three strategic areas of focus. These are a best-in-class breakfast with craveable items, an unbeatable value proposition, and convenience in the form of unique off-premise. We spent last summer cascading these new strategies to our franchisees, culminating with a comprehensive unveiling of our new playbook and our annual convention in October. By November, we put these strategies in play with bold moves; with a new menu, new food innovation, and an unbeatable value proposition, Playbook is now working and is providing momentum for this. First, let's talk about our craveable breakfast items and new menu. According to recent Yelp data, there were nearly 6,000 new restaurant openings in the breakfast and brunch category in 2022.

Kelly Denny: Unique off premise options, we spent last summer cascading these new strategies to our franchisees, culminating with a comprehensive unveiling of our new playbook and our annual convention in October <unk>.

Kelly Denny: Remember, we put these strategies in play with bold moves with our new menu and food innovation and an unbeatable value proposition. The playbook is now working and is providing momentum in this new year.

Kelly Denny: First let's talk about our craveable breakfast items and new menu. According to recent Yelp data there were nearly 6000, new restaurant openings with the breakfast and brunch category in 2023, clearly theres, an enormous demand for breakfast, coupled with consumers wanting breakfast items whenever it suits them. This is obviously our sweet spot we are America's diner, after all and we own breakfast.

Kelly Valade: Clearly, there's an enormous demand for breakfast, coupled with consumers wanting breakfast items whenever they're available. This is obviously our sweet spot. We are America's diner, after all, and we own breakfast. Our November menu launch showcased that breakfast leadership in a big way, as we leaned into our unique, ownable equities with our SLAM platforms, including our new Strawberry Stuffed French Toast SLAM, now made with our delicious premium brioche.

Kelly Denny: Our November menu launched showcase that breakfast leadership in a big way as we leaned into our unique honorable equities, when theyre slam platforms, including our new Strawberry stuffed French toast Slam now made with our delicious premium brioche French toast and guests are clearly loving it given their reaction to this launch as we are selling over 150 total French toast.

Kelly Valade: And guests are clearly loving it, given their reaction to this launch, as we are selling over 150 total French toast plates per week, per restaurant. Additionally, this menu launch was a key activation point in our new playbook in that we revamped the look and the feel of the menu as well and leaned into what's most important to our guests while being focused on ease of execution for our audience. Specifically, along with new product innovation, we simplified the menu layout while minimizing customizations and the build-your-own categories on the menu.

Kelly Denny: <unk> per week per restaurant. Additionally, this menu launch with a key activation point in our new playbook and that we've revamped the look and the feel of the menu also and leaned into what's most important to our guests while being focused on ease of execution for our operators spin.

Specifically, along with new product innovation, we simplified the menu layout, while minimizing customization and the build your own categories on the menu. This not only allowed us to highlight our most popular and most craveable items, but its simplified operations without any impact on the guest or to guest preferences. This new menu also led to margin improvements given our strategic approach to highlighting our most.

Kelly Valade: It's not only allowed us to highlight our most popular and most craveable items, but it simplified operations without any impact on the guests or on guest owners. This new menu also led to margin improvements, given our strategic approach to highlighting our most profitable items and ones we know to be... Finally, the recent menu also incorporated a new pricing model that will help protect our value leadership, while better enabling franchisees to make smart pricing decisions that are aligned with regional factors and more localized competitive. The new pricing structure and approach will help us minimize traffic erosion when we do raise prices, as we now have a heightened focus on the elasticity of certain menu categories and options. At a time when the guest is still extremely sensitive to price increases at the grocery store and in restaurants, this strategy and focus is well-timed and will continue to help us with our goal of smart menus and smart prices.

Notable items and once we know to be guest favorites.

Kelly Denny: Finally, the recent menu also incorporated a new pricing model that will help protect our value leadership, while better enabling franchisees to make smart pricing decisions that are aligned with regional factors and more localized competitive benchmarking the.

Kelly Denny: The new pricing structure and approach will help us minimize traffic erosion. When we do take price as we now have a heightened focus on the elasticity of certain menu categories and items at.

Kelly Denny: At a time when the guest is still extremely sensitive to price increases at the grocery store and in restaurants. This strategy and focus is well timed and will continue to help us with our goal of smart menu smart pricing.

Kelly Valade: And importantly, this improved approach will also be critically important in California as we work to offset the potential impact of AB-1228, formerly known as... This quarter's results were also aided by our approach to leading with value and leveraging our increasingly successful barbell. Our original Grand Slam, starting at the unbeatable price of $5.99, was featured nationwide starting in late November with positive results.

Kelly Denny: Importantly, this improved approach will also be critically important in California, as we work to offset the potential impact of a b 12, 28, formerly known as the fast Act.

Kelly Denny: This quarters results were also aided by our approach to leading with value and leveraging our increasingly successful barbell strategy. Our original Grand Slam starting at the unbeatable price of $5 99 was featured nationwide starting in late November with positive results. We believe we brought this compelling offer to the guests at the perfect moment, helping them balance holiday travel and shopping Noah.

Kelly Valade: We believe we brought this compelling offer to the guests at the perfect moment, helping them balance holiday travel and shopping, knowing they could count on Denny's for the best breakfast out there at an incredibly compelling price. The guests responded well and quickly as we saw traffic and sales trends increase, and we immediately noticed share gains against both family dining and cash. Mix on our value platform remained consistent at 17%, but we grew check with premium offerings merchandise in the restaurant, which is proof positive of our successful barbell strategy where some guests are indeed coming in for our value equity, but others are ordering more premium. In addition, we remain focused on providing convenience through our off-premise business, and we sell pickup here on a year-over-year basis.

Kelly Denny: They can count on Denny's for the best breakfast out there at an incredibly compelling price. The guests responded well and quickly as we saw traffic and sales trends increase and we immediately noticed share gains against both family dining and casual dining mix on our value platform remained consistent at 17%, but we grew check with premium offerings merchandise in restaurant, which is.

Kelly Denny: Proof positive of our successful barbell strategy, where some guests indeed are coming in for our value equity, but others are ordering more premium options.

Kelly Denny: In addition, we remain focused on providing convenience through our off premise business and we saw pick up here on a year over year basis also.

Kelly Valade: Specifically, off-premise sales were approximately 20% of total sales, up from 19% in the past. We feel good about this sales mix, considering that many in our industry are actually experiencing sales declines in the past. For us, these channels provide a unique opportunity to leverage operating capacity at dinner and late night to a distinctly new consumer. For these reasons, this will continue to be a part of our strategies, which is why we're leaning into testing our third virtual brand, Banda Burrito, and why we're leaning into a test with Franklin Junction, a global leader in branded virtuals. We should be able to speak to both of these tests in more depth at our upcoming calls, but we continue to be hopeful and encouraged by the results we're seeing so far.

Kelly Denny: Specifically off premise sales were approximately 20% of total sales up from 19% in the third quarter, we feel good about the sales mix considering that many in our industry are actually experiencing sales declines in this channel.

For us these channels provide a unique opportunity to leverage operating capacity at dinner and late night to a distinctly new consumer for these reasons. This will continue to be a part of our strategies, which is why we're leaning into testing our third virtual brand with Vanda Burrito and why we're leaning into a test with Franklin Junction a global leader in branded virtual restaurants, we should.

Kelly Denny: To be able to speak to both of these tests in more depth in our upcoming calls, but we continue to be hopeful and encouraged by the results. We're seeing so far now.

Kelly Valade: Now I'd like to provide updates on some of our other priorities captured in our CREATE. Here we'll focus on technology and innovation. Please, with our recent progress on our new cloud-based POS platform, as we are now moving forward with installations in all company restaurants, expected to be completed by the second quarter of this year with franchise restaurants. This foundation will enable improved kitchen visual systems, or KVS, server handhelds, and QR pay, resulting in more consistent operation execution, labor efficiencies, and enhanced. In addition, our culinary and operations teams are continuing to lean in and explore opportunities to further leverage In fact, next quarter, you'll see new exciting products, which will leverage our new ovens as the primary cooking. Importantly, we've also seen improvement in our food quality scores year over year, and a high percentage of this improvement can be attributed to our new kitchen. And, of course, we have to talk about our people and our guests.

Now I'd like to provide updates to some of our other priority is captured in our Crane framework here will focus on technology and innovation first we're pleased with our recent progress on our new cloud based Pos platform. As we are now moving forward with installations in all company restaurants expected to be completed by the second quarter of this year with franchise restaurants to follow.

Kelly Denny: This foundation will enable improved kitchen, visual systems, or KBS server handhelds, and QR pay resulting in more consistent operation execution labor efficiencies and enhance guest experiences in.

Kelly Denny: In addition, our culinary and operations teams are continuing to lean in and explore opportunities to further leverage our ovens and other kitchen equipment to drive menu innovation and kitchen efficiencies in fact next quarter, you'll see new exciting products, which will leverage our new ovens as the primary cooking platform importantly, we've also seen improvement in our food quality scores year over year.

Kelly Denny: <unk> and a high percentage of this improvement can be attributed to our new kitchen equipment and of course, we have to talk about our people and our guests. We're extremely proud of the progress we have made with our people programs, including the launch of our game program. This last year, we're impacting lives and careers by offering education Entertainment for all as a result, we continue to see improvements in staffing.

Kelly Valade: We're extremely proud of the progress we have made with our people programs, including the launch of our game program this last year. We're impacting lives and careers by offering education and attainment for all. As a result, we continue to see improvements in staffing and reduced turnover rates. In fact, management turnover for 2023 improved 400 basis points compared to 22 and was approximately 400 basis points lower than GuestXM Family Dining Index, formerly Black Fox. As for the guest experience, our overall 2023 net sentiment score was 41% compared to 32% for the family dining segment and 23% for the overall restaurant industry. And our Google ratings continue to improve, as we recently reached a 4.3 rating. I can't say enough about the progress of both our teams and our guests, as we have our company and franchise operators to thank for taking such great care of our guests always.

Kelly Denny: <unk> and reduce turnover rates at Denny's and.

Kelly Denny: In fact management turnover for 2023 improved 400 basis points compared to 22 and was approximately 400 basis points lower than guest X M family dining index, formerly Black box intelligence.

Kelly Denny: As for the guest experience. Our overall 2023 net sentiment score was 41% compared to 32% for the family dining segment and 23% for the overall restaurant industry and our Google ratings continue to improve as we recently reached a 4.3 rating.

Speaker Change: Can't say enough about the progress of both our teams and our guests as we have our company and franchise operators to thank for taking such great care of our guests always their continued commitment to delighting every guest has appreciated and apparent.

We also continue to remodel restaurants with our heritage 2.0 program, while testing the next evolution of our prototype which will lean into our unique diner image with a modern updated and fresh look.

Speaker Change: Early results from the modern diner test are strong with positive marks for unique brighter yet warm approach to a modern diner.

Speaker Change: Sales and traffic results are also promising well full results from this test to share soon and will begin incorporating the modern diner remodel program into the mix in the back half of the year.

Kelly Valade: Their continued commitment to delighting every guest is appreciated and appreciated. We also continue to remodel restaurants with our Heritage 2.0 program while testing the next evolution of our prototype, which will lean into our unique diner image with a modern, updated, and fresh look. Early results from the Modern Diner test are strong, with positive marks for a unique, brighter yet warm approach to a Modern Diner.

Speaker Change: Finally, I want to pivot and talk about the growth and expansion of Kiki's breakfast Cafe. We are thrilled to have opened our first <unk> location outside the state of Florida, a couple of weeks ago in Hendersonville, Tennessee, just outside of Nashville. Despite opening during a snowstorm sales were strong for the first week and continue to be impressive. We also recently held an official Grand <unk>.

Speaker Change: Turning ceremony for the new Cafe, receiving a warm welcome as we were joined by the Hendersonville community, including the mayor of the city chamber and local businesses.

Kelly Valade: Sales and traffic results are also promising. We'll have full results from this test to share soon, and we'll begin incorporating the modern diner remodel program into the mix in the back. Finally, I want to pivot and talk about the growth and expansion of Kiki's Breakfast Café. We are thrilled to have opened our first Kiki's location outside the state of Florida a couple weeks ago in Hendersonville, Tennessee, just outside of Nashville.

With this new location, we debuted a new cafe design, an updated look and feel that was developed through our learnings from last year's brand ethos work. It's a beautiful design highlighting the things unique to <unk> that we know that our guests love warnings from scratch is a prominent tagline and our unique positioning which serves to highlight our core differentiators of fresh from scratch cooking daily made.

Speaker Change: With the highest quality ingredients operating great abundance.

Speaker Change: We've also now launched a new menu in this location and in all existing Kiki's restaurants as menu offers a simplified approach with less items and a focus on what we know Kiki's does best in addition, the alcohol program test was a success and a system wide rollout now is underway. This program will become a brand standard and a requirement for all new cafe openings for us.

Kelly Valade: Despite opening during a snowstorm, sales were strong for the first week and continue to be improving. We also recently held an official grand opening ceremony for the new cafe, receiving a warm welcome as we were joined by the Hendersonville community, including the mayor, the city chamber, and local businesses. With this new location, we debuted a new cafe design, an updated look and feel that was developed through our learnings from last year's brand ethos. It's a beautiful design highlighting the things unique to Kiki's that we know our guests love. Mornings from Scratch is a prominent tagline in our unique positioning, which serves to highlight our core differentiators of fresh from scratch cooking daily made with the highest quality ingredients offered in great

Speaker Change: This has been a critical year of building a strong foundation for the brand and integrating the kiki's brand into the portfolio of Denny's.

Speaker Change: Incredibly pleased with the progress President Dave Schmidt has made as he has built a strong team cemented a unique position in the a M breakfast segment and a competitive differentiator pop that will allow us to win in new markets This year and beyond.

Speaker Change: As a reminder, we have a franchise disclosure document in place and 14th signed development agreements for over 100, Kiki's cafes across multiple states 11 of those with Denny's franchisees and three with Kiki's existing franchisees. We expect this number to grow and will soon be talking about many more our approach to kiki's and our early results are in line with our expectations.

Our strategic intent and purchasing Kiki's was to compete in this highly fractured yet steadily growing daytime eatery segment, we have the unique opportunity to leverage our motto franchise or approach and our strong network of franchisees and both brands to grow exponentially and capture market share.

Kelly Valade: We've also now launched a new menu in this location and in all existing Kiki's restaurants. This menu offers a simplified approach with fewer items and a focus on what we know Kiki's for. In addition, the alcohol program test was a success, and a system-wide rollout is now underway. This program will become a brand standard and a requirement for all new cafe owners.

Speaker Change: We are well on our way with the work we have done so far.

Speaker Change: Finally, we have been laser like in our focused approach to understanding what the guests love about cookies and the results here are also phenomenal Nike's brand 2023 overall net sentiment of 54% significantly outperform the family dining index of 31%. In addition to significantly outperforming the segment in scores for service ambiance and intend to return.

Kelly Valade: For us, this has been a critical year, building a strong foundation for the brand and integrating the Kikis brand into the portfolio. We're incredibly pleased with the progress President Dave Schmidt has made as he has built a strong team, cemented a unique position in the AM Breakfast segment, and a competitive, differentiated path that will allow us to win in new markets this year and beyond. As a reminder, we have a franchise disclosure document in place and 14 signed development agreements for over 100 Kiki's Cafes across multiple states, 11 of those with Denny's franchisees and three with Kiki's existing franchisees.

Speaker Change: This tells US we have a winning formula and a brand that guests absolutely love the future is bright for a small but mighty Kiki's brand.

Speaker Change: In closing 2023 marked another year of resilience for our dedicated franchisees operators and support teams and we look to build on our achievements in 2024. This past year, we honored our past celebrating our 70 years in the business at Denny's and we chartered a clear path to winning for the next 70 years we.

Kelly Valade: We expect this number to grow, and we'll soon be talking about many more. Our approach to Kikis and our early results are in line with our expectations. Our strategic intent in purchasing Kikis was to compete in this highly fractured yet steadily growing daytime eatery. We have the unique opportunity to leverage our model franchisor approach and our strong network of franchisees in both brands to grow exponentially and capture the market. We are well on our way with the work we have done so far. Finally, we have been laser-like in our focused approach to understanding what the guests love about Kiki's, and the results here are also phenomenal.

Speaker Change: We couldn't do this without the strong partnership and collaborative approach with our incredible franchisees and owners. They are the reason we pushed to deliver our best everyday they deserve it and our guests deserve. It. It's clear we have the right approach to win in today's environment with committed leaders and partners and a game plan for our two unique incredible brands Prime for growth and continued momentum for 2012.

Speaker Change: Four and beyond with that I'll turn the call over to Robert.

Robert Rustic: Thank you Kelly and good afternoon, everyone.

Robert Rustic: Today, I will provide a development update and a review of our fourth quarter results before discussing our 2020 for annual guidance.

Robert Rustic: Starting with development highlights.

Our brands opened 32 combined restaurants in 2023, marking the highest number of openings since 2017.

Kelly Valade: The Kiki's Brand 2023 overall net sentiment of 54% significantly outperformed the Family Dining Index of 31%, in addition to significantly outperforming this segment in scores for service, ambiance, and intent. This tells us we have a winning formula and a brand that guests absolutely love. The future is bright for our small but mighty. In closing, 2023 marked another year of resilience for our dedicated franchisees, our operators, and support teams, and we look to build on our achievements in 2020. This past year, we honored our past, celebrating our 70 years in the business at Denny's, and we chartered a clear path to winning for the next 70 years. We couldn't do this without the strong partnership and collaborative approach with our incredible franchisees and owners. They are the reason we push to deliver our best every day. They deserve it, and our guests deserve it.

Robert Rustic: Within the quarter Denny's franchisees opened seven new restaurants, including one international location.

Robert Rustic: This resulted in 28 Denny's restaurant openings for the year flat with 2022 and consistent with pre pandemic company rates.

Kiki's opened two franchise cafes during the quarter, resulting in a total of four cafes for the full year.

Robert Rustic: As Kelly noted we also opened an additional Kiki's company Cafe in late January in Hendersonville, Tennessee, marking the first cafe outside of Florida.

This marks the first of several company cafes, as we plan to utilize company capital to develop oversight efficiency in various markets within and outside of Florida.

Robert Verasco: It is clear that we have the right approach to win in today's environment with committed leaders and partners and a game plan for our two unique and incredible brands, Prime for Growth and Continued Momentum for 2024 and beyond. With that, I'll turn the call over to Rob. Thank you, Kelly, and good afternoon, everyone. Today, I will provide a development update and a review of our fourth quarter results before discussing our 2024 annual guidance, starting with development. Our brands opened 32 combined restaurants in 2023, marking the highest number of openings since 2017. In the quarter, Denny's franchisees opened seven new restaurants, including one international location. This resulted in 28 Denny's restaurant openings for the year, flat with 2022, and consistent with pre-pandemic openings. Kiki's opened two franchise cafes during the quarter, resulting in a total of four cafes for the full year. As Kelly noted, we also opened an additional Kiki's Company Cafe in late January in Hendersonville, Tennessee, marking the first cafe outside of Florida.

Robert Rustic: In addition, Kiki's currently has four cafes under construction with several others in permitting and site approval phases.

Moving to our fourth quarter results.

Robert Rustic: Denny's domestic systemwide same restaurant sales grew one 3% in the fourth quarter compared to 2022 anchored by a one 5% increase at domestic franchised restaurants.

Robert Rustic: Denny's domestic systemwide same restaurant sales were three 6% for the full year 2023 exceeding the performance for eight of the nine years prior to the pandemic.

Robert Rustic: Denny's domestic systemwide same restaurant sales growth was primarily driven by pricing of approximately seven 5% along with a product mix benefit of approximately 3%.

Robert Rustic: Denny's domestic average weekly sales for Q4 were approximately $38000, including off premises sales of approximately $8000 or 20% of total sales.

Robert Rustic: As a result average unit volumes for 2023 were approximately $1 $9 million.

Robert Rustic: Franchise and license revenue was $61 $3 million compared to $66 $5 million in the prior year quarter.

Robert Verasco: This marks the first of several company cafes as we plan to utilize company capital to develop oversight efficiency in various markets within and outside of Florida. In addition, Kiki's currently has four cafes under construction, with several others in the permitting and site approval phases. Moving on to our fourth quarter results, Denny's domestic system-wide same restaurant sales grew 1.3% in the fourth quarter compared to 2022, anchored by a 1.5% increase at domestic franchised restaurants. Denny's domestic system-wide same restaurant sales were 3.6% for the full year 2023, exceeding the performance for eight of the nine years prior to the pandemic. Denny's domestic system-wide same restaurant sales growth was primarily driven by pricing of approximately 7.5%, along with a product mix benefit of approximately 0.3%. Denny's domestic average weekly sales for Q4 were approximately $38,000, including off-premises sales of approximately $8,000, or 20% of total sales.

Robert Rustic: This change was primarily driven by a $5 $3 million decrease in initial and other fees associated with the sale of kitchen equipment in the prior year quarter.

Robert Rustic: Franchise operating margin was $31 5 million or 51, 4% of franchise and license revenue compared to $31 6 million or 47, 6% in the prior year quarter.

Robert Rustic: Approximately 430 basis points of this favorable change in margin rate resulted from the completion of our kitchen modernization rollout during 2023.

Robert Rustic: Company restaurant sales were $54 million compared to $54 4 million in the prior year quarter.

Robert Rustic: Company restaurant operating margin was $5 4 million or 10% compared to $6 8 million or 12, 6% in the prior year quarter.

Robert Rustic: This margin change was primarily due to $1 $8 million in legal costs in the current quarter, partially offset by improvements in product cost compared to the prior year quarter.

Robert Verasco: As a result, average unit volumes for 2023 were approximately $1.9 million. Franchise and license revenue was $61.3 million compared to $66.5 million in the prior year quarter. This change was primarily driven by a $5.3 million decrease in initial and other fees associated with the sale of kitchen equipment in the prior year quarter. Franchise operating margin was $31.5 million, or 51.4% of franchise and license revenue compared to $31.6 million or 47.6% in the prior year quarter. Approximately 430 basis points of this favorable change in margin rate resulted from the completion of our kitchen modernization rollout during 2023. Company restaurant sales were $54 million compared to $54.4 million in the prior year quarter.

Robert Rustic: The $1 $8 million in legal costs had an unfavorable 340 basis point impact on the company restaurant operating margin rate for the current quarter.

Robert Rustic: Commodity inflation was in line with our internal expectations at approximately 2% in Q4 2023 compared to 1% deflation experienced in Q3 2023.

Robert Rustic: Additionally, labor inflation for Q4, 2023 was 3% flat with Q3 2023.

Robert Rustic: G&A expenses for Q4 totaled $19 3 million compared to $17 million in the prior year quarter.

Robert Rustic: These results collectively contributed to adjusted EBITDA of $18 $6 million.

Robert Rustic: The provision for income taxes was $1 7 million, reflecting an effective income tax rate of 36, 9% for the quarter compared to 27% in the prior year quarter.

Robert Verasco: Company restaurant operating margin was $5.4 million, or 10%, compared to $6.8 million, or 12.6%, in the prior year quarter. This margin change was primarily due to $1.8 million in legal costs in the current quarter, partially offset by improvements in product costs compared to the prior year quarter. The $1.8 million in legal costs had an unfavorable 340 basis point impact on the company restaurant operating margin rate for the current quarter.

Robert Rustic: Adjusted net income per share was <unk> 14 cents we.

Robert Rustic: We generated adjusted free cash flow of $7 $4 million.

Robert Rustic: Our quarter end total debt to adjusted EBITDA leverage ratio was 326 times.

Robert Rustic: We had approximately $266 million of total debt outstanding including $256 million borrowed under our credit facility.

Robert Rustic: During the quarter, we allocated $16 2 million to share repurchases, continuing our commitment of returning capital to our shareholders.

Robert Rustic: At the end of the quarter, we had approximately $100 million remaining under our existing repurchase authorization.

Robert Verasco: Commodity inflation was in line with our internal expectations at approximately 2% in Q4 2021, compared to 1% deflation experienced in Q3. Additionally, labor inflation for Q4 2023 was three, flat with Q3 2020. GNA expenses for Q4 totaled $19.3 million compared to $17 million in the prior year quarter.

Robert Rustic: Since beginning our share repurchase program in late 2010, we have allocated over $700 million to repurchase approximately 67 million shares at an average share price of $10.39.

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

Robert Verasco: These results collectively contributed to a justed EBITDA of $18.6 million. The provision for income taxes was $1.7 million, reflecting an effective income tax rate of 36.9% for the quarter, compared to 20.7% in the prior year quarter. Adjusted net income per share was $0.14. We generated an adjusted free cash flow of $7.4 million. Our quarter-end total debt-to-adjusted EBITDA leverage ratio was $3.26 billion. We have approximately $266 million in total debt outstanding, including $256 million borrowed under our credit facility.

Speaker Change: We anticipate denny's domestic systemwide same restaurant sales will be between zero percent and 3% compared to 2023.

We anticipate opening 40 to 50 restaurants and cafes on a consolidated basis inclusive of 12 to 16, kiki's openings and a consolidated net decline of 10% to 20 restaurants.

Speaker Change: We are projecting commodity inflation to be between zero percent and 2% for 2024.

Speaker Change: We expect labor inflation between 4% and 5% for the year. This labor inflation guidance takes into account the anticipated impact from a b 12, 28 in California.

Robert Verasco: During the quarter, we allocated $16.2 million to share repurchases, continuing our commitment to returning capital to our shareholders. At the end of the quarter, we had approximately $100 million remaining under our existing repurchase authorization. Since beginning our share repurchase program in late 2010, we have allocated over $700 million to repurchase approximately 67 million shares at an average share price of $10.39. 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 0% and 3% compared to 2023. We anticipate opening 40 to 50 restaurants and cafes on a consolidated basis, inclusive of 12 to 16 Tiki's only, and a consolidated net decline of 10 to 20 restaurants.

Speaker Change: Our expectations for consolidated total general and administrative expenses are between $83 million and $86 million.

<unk> $12 million related to share based compensation expense, which does not impact adjusted EBITDA.

Speaker Change: This consolidated range contemplates a full year of G&A for <unk>, New management team and a fully reloaded incentive plan, which is paid out at approximately 70% over the last four years.

Additionally, this range would suggest corporate administrative expenses have grown at a compounded annual rate of 2.5% to 3% from pre pandemic 2019 before considering the investment in <unk> management team, who will drive that brand's growth.

Robert Verasco: We are projecting commodity inflation to be between 0% and 2% for 2024. We expect labor inflation between 4% and 5% for the year. This labor inflation guidance takes into account the anticipated impact from AB 1228 in California. Our expectations for consolidated total general and administrative expenses are between $83 million and $86 million, including $12 million related to share-based compensation, which does not impact adjusted EBIT.

That compares to a compounded annual growth rate of four 3% nationally for private industry salaries and wages between 2019 and 2023.

Speaker Change: As a result, we anticipate consolidated adjusted EBITDA of between 85 and $89 million.

Speaker Change: Finally, I would like to thank our engaged franchisees and results driven brand teams, who have remained focused on serving our guests while supporting the transformation of the Denny's brand and the growth of keys.

Robert Verasco: This consolidated range contemplates a full year of GNA for Kiki's new management team and a fully reloaded incentive plan which has paid out at approximately 70% over the last four years. Additionally, this range would suggest corporate administrative expenses have grown at a compounded annual rate of 2.5% to 3% from pre-pandemic 2019 before considering the investment in Kiki's management team, who will drive that brand's growth. That compares to a compounded annual growth rate of 4.3% nationally for private industry salaries and wages between 2019 and 2020. As a result, we anticipate consolidated adjusted EBITDA of between $85 and $89 million.

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

Speaker Change: Thank you at this time, we'll be conducting a question and answer session.

Speaker Change: Like to ask a question. Please press star one on your telephone keypad.

Operator: <unk> told indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue. So participants using speaker equipment may be necessary to pick up your handset before pressing the star keys.

Operator: Our first question comes from the line of Michael but.

Michael: It's a math with Oppenheimer and company.

Michael: Please proceed with your question.

Hi, Thanks, good afternoon.

Michael: Provided same store sales guidance of zero to 3% for the year. So can you first touch on maybe what level of menu pricing youre anticipating within that for 2024, and then can you talk about the cadence shall we see sales build throughout the year or how do you how do you want us thinking about that trajectory.

Operator: Finally, I would like to thank our engaged franchisees and results-driven brand teams who have remained focused on serving our guests while supporting the transformation of the Denny's brand and the growth of Kika. 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. At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone.

Speaker Change: Yeah, Hey, Michael how are you hope you're well.

Speaker Change: With regard to pricing for the year, we are going to roll into some rollover pricing on the year.

Speaker Change: Of approximately 2% and there will be additional pricing, we have two pricing windows were getting back to our normal normal cadence.

Operator: A confirmation toll indicator line is in the question. You may press start to feel like you're moving a question. For participants using speaker equipment, it may be necessary to pick up their handset before pressing the start button.

Speaker Change: Of the year, which is in April menu printing in October menu print of which will have two additional.

Michael A. Tamas: Our first question comes from the line of Michael and Tomas with Oppenheimer and Company. Please proceed with your question. Hi, thanks, good afternoon, you provided, guys. Yeah, hey, Michael, how are you?

Speaker Change: Two additional menu opportunities for pricing within those menu prints.

Speaker Change: So we've grown over two you have two additional pricing the April pricing will he.

Robert Verasco: Hope you're well. With regard to pricing for the year, we are going to roll into some rollover pricing for the year of approximately 2%. And there will be additional pricing; we have two pricing windows; we're getting back to our normal, normal cadence of the year, which is an April menu print and an October menu print, which will have two additional additional menu opportunities for pricing within those menu prints. So rolling over to, you have two additional pricing options. The April pricing will allow us to contemplate AB 1228 in California.

Speaker Change: We will allow us to contemplate a 12 months 2018, California.

Speaker Change: So I would expect that window to probably have more pricing than the October window. So.

Speaker Change: So I would think that the pricing will be in the range of the 5% to 6%.

Speaker Change: With that build that I just described there with regard to the cadence I think you probably captured it correctly I think it does somewhat build over the course of the year. We are rolling over the prior year, some pretty strong numbers from the first quarter of the prior year.

Robert Verasco: So I would expect that window to probably have more pricing than the October window. So I would think that the pricing will be in the range of five to six percent with that bill that I just described there. With regard to the cadence, I think you probably captured it correctly.

And we have seen some some impacts from weather.

Speaker Change: As we started off January here, so I do believe it will build over the course of the year.

Speaker Change: Based on some of those items I, just mentioned along with our initiatives, becoming even further baked as we move throughout the year with regard to menu innovation value messaging off Prem.

Robert Verasco: I think it does somewhat build over the course of the year. We are rolling over the prior year, and some pretty strong numbers from the first quarter of the prior year. And we have seen some impacts from weather as we started off January here. So I do believe it'll build over the course of the year based on some of those items I just mentioned, along with our initiatives becoming even further baked as we move throughout the year with regard to menu innovation, value messaging, off prem, and off prem with regard to the virtual brand. So I think all of those will continue to mature during the year.

Speaker Change: Off Prem with regard to the virtual brand. So I think all of those will continue to mature across the year. So with regard to pricing I think that 5% to 6% range and I do think as you described it does build over the course of the year.

Speaker Change: Thank you and then I.

Speaker Change: I think the unit growth guidance suggest you're close about 50 to 70 units this year can.

Can you talk about maybe what led to that decision any help on timing and pacing of that throughout the year and then can you talk about maybe the financial impact and maybe EBITDA or how we should think about that.

Robert Verasco: So with regard to pricing, I think that five to six percent range. And I do think, as you described, it does build over time. Can you talk about maybe what, maybe some help on?

Speaker Change: Yes. So is another really good question so to your point that the midpoint. There would suggest about 60 closures right that 50 to 70 range.

Robert Verasco: Yeah, so it's another really good question. So to your point that the midpoint there would suggest about 60 closures, right, that 50 to 70 range that you described. The reality of that situation is having come through the inflation environment that we had, although it did temper quite a bit in 2023, the profitability of restaurants that were kind of the break-even point for a unit, a Denny's restaurant, to remain open has really kind of elevated from about a million dollars to about 1.2 million dollars. And so we're continuing, that used to be, that level used to be that million dollars that I just referenced So we are continuing to work through some additional closures as a result of those inflationary pressures.

You described the <unk>.

Speaker Change: Reality of that situation is having come through the inflation environment that we've had although it did temper quite a bit in 2023.

Speaker Change: The profitability.

Speaker Change: Of restaurants that were kind of at breakeven.

Speaker Change: A unit of Denny's restaurant to remain open has really kind of elevated from about $1 million to about $1 2 million.

So we're continuing that used to be that level used to be that million dollars I just referenced that used to be the breakpoint of a closure. So we are continuing to work through some additional closures.

As a result of those inflationary pressures.

Robert Verasco: Our goal, as I've said previously, is to get back to a more normalized rate, but we wanted to be, as we started off the year, somewhat conservative with regard to that. When you think of these restaurants, to your point with regard to what the EBITDA impact would be, these generally are about million-dollar units. So at 40 to $50,000 in EBITDA, that is rolling off. So as we build new, higher Denny's restaurant openings, we guided 40 to 50 openings, 12 to 16 of those being Kiki's, you would expect us to open somewhere around 30 Denny's restaurants.

Speaker Change: Our goal as I've said previously is to get back to a more normalized rate, but we want it to be as we started off the year to be somewhat conservative with regard to that when you think of these restaurants at to your point with regard to what the EBITDA impact would be.

These generally are about 1 million units million dollars restaurant, so at 40.

Speaker Change: $50000 in EBITDA that is growing up so as we build new.

Speaker Change: Higher Denny's restaurant openings.

Speaker Change: So we guided.

Speaker Change: We guided 40 to 50 openings 12 to 16 of those being Kiki's.

Speaker Change: You would expect us, but somewhere around 30 30, Dennis those are almost double the volume nowadays of the closures. So so the reality is is it somewhat net neutral on the EBITDA between those two the closing by about half the number of openings or closings, but the volume of the openings are about double.

Robert Verasco: Those are almost double the volume nowadays of the closures, so the reality is that it's somewhat net neutral on the EBITDA between those two. The closings, about half the number of openings as there are closures, but the volume of the openings is about double that of the closings.

Speaker Change: Double.

Double that of our closings and we are at that level of openings. The guidance actually suggests the highest number of denny's openings. Since 2017. So we got we have that machine back open and.

Robert Verasco: And we are, that level of openings, the guidance actually suggests the highest number of Denny's openings since 2017. We have that machine back open, and with the 12 to 16 Kiki's, that's three to four times the level of openings that we have seen out of that brand at any point in its history. So we're really excited about what that's starting to produce. Thanks.

Speaker Change: And with the 12 to 16 geeky, that's three to four times the level of openings that we have seen out of that brand at any point in its history really so we're really excited about what that's starting to produce for us.

Speaker Change: Thank you.

Speaker Change: Thanks, Thanks, Michael.

Jake Rowland Bartlett: Thanks, Michael. Thank you. Our next question comes from the line of Jake Bartlett with Shuler Securities. Great, thanks for taking the question. You know, first, I just want to dig into kind of what drove the, you know, the myths on EBITDA versus your expectations. It looked like, you know, sales were a little bit above. So what was the surprise that drove that myth? I think versus the midpoint of guidance is about 5% lower. So any help there would be great.

Speaker Change: Okay.

Speaker Change: Thank you. Our next question comes from the line of Jade.

Jade: Bartlet mature securities. Please proceed with your question.

Jade: Great. Thanks for taking the question first I just wanted to dig into kind of what drove the miss on EBITDA versus your expectations. It looks like sales is a little bit above so what was the surprise that that drove that Miss I think versus the midpoint of guidance is about 5% lower so any help there would be yes.

Robert Verasco: Yeah. That's a really good question, Jake, and hello. Good to hear your voice. Some of the, it really was, and they were in some of our prepared remarks, really kind of revolving around two and a half to three million dollars worth of reserve adjustments that we really didn't have a good line of sight into. More than half of that came from some legal reserves that we had to book into late in the year. Two and a half of those, two and a half of that really sat in the company margin. And if you right-sized for that on the quarter, it would have been between 14 and a half and 15 percent. And that two and a half million would have added basically another full point to the year.

Speaker Change: That's a really good question Jacob Hello, good to hear your voice.

Speaker Change: Some of it it really was.

Speaker Change: We're in some of our prepared remarks.

Speaker Change: Really kind of revolving around two and a half to $3 million worth of reserve adjustments that we really didn't have a good line of sight into more than half of that game.

Jacob: From some legal reserves that we had to book into late into the year, two and a half of those two and a half of that really sat in the company margin and if you right size for that on the quarter. It would have been between 14, five and 15%.

Jacob: And that $2 5 million would've added basically another full point to.

Jacob: For the year.

Robert Verasco: And there was about a half million dollars of reserve adjustments related to our captive within the GNA section of our P&L also. So again, we really do, it bothers us. We put out guidance with the full intention of achieving it, and the fact that we didn't because of these kind of one-time events was truly bothersome to us.

Jacob: And there was about a $5 million of reserve adjustments related to our captive within the G&A section of our P&L also so.

Jacob: Again, we really bothers us we put out guidance with the full intention of achieving it.

Jacob: In the fact that we didn't because of these kind of one time events, what was truly bothersome to us, but when you adjust for those right sized for those.

Robert Verasco: But when you adjust for those, and right size for those, the margin, particularly on the company side, is much better. Some of the other pieces of those one-time charges, two and a half, the largest part was legal. We also had some claims development into workers' comp and GLA, general liability, and some minor medical that impacted that. So just kind of pervasive across the board, nothing really going in our favor this fourth quarter. Got it, got it.

Jacob: The margin, particularly on the company side are.

Jacob: Much better together some of the other pieces of those one time charges of two and a half the largest part was legal we also had some claims development into workers' comp and GL.

Jacob: General liability and some minor medical that impacted that so could you just kind of pervasive across the board nothing really going in our favor this fourth quarter.

Speaker Change: Got it got it and then it will make sense.

Kelly Valade: That all makes sense. You know, my other question was about traffic and your expectations for 24. Given the guidance for sales and the pricing that you talked about, it's like pretty, pretty negative traffic. So, you know, I guess I'm wondering, what is driving that? Are you seeing trade out of the category?

Speaker Change: My other question was about traffic and your expectations in 24, given the given the guidance for same store sales in the pricing you talked about you expect pretty pretty negative traffic. So I guess I'm wondering what is driving that are you seeing trade up out of the category I know at some point you were talking about can trade down.

Robert Verasco: I know, at some point, you were talking about trade down and trade out and kind of, you know, being maybe a net neutral on that. But, you know, what are you seeing with the consumer? Why do you think you're seeing this pressure on traffic? And, you know, what can you do about it?

Speaker Change: And trade out and kind of being maybe a net neutral on that but what are you seeing with the consumer.

Speaker Change: Where do you why do you think you are seeing this pressure on traffic and.

Speaker Change: What can you do about it is there is there are I know youre working on some some innovation on the lower end of the of the menu.

Robert Verasco: You know, is there a, I know you're working on some innovation on the lower end of the menu, but what's your confidence that you can kind of try to really move the needle here with that? Yeah, so another really good question, Jake. So when we look at it and we pay attention to what's happening in the general economy, we're seeing that there's not a lot of confidence in what we're seeing in 2024. So our guidance to your point on the guest traffic side is really a reflection of that. As you're aware, our consumer set is half of our consumer base has an income base of less than $50,000. So again, we're just being conservative there.

Speaker Change: What's your confidence that you can that you can kind of credit really move the needle here with the traffic.

Speaker Change: So another really good question Jake so when we look at it.

Speaker Change: And we pay attention to what's happening in the general economy.

Speaker Change: We're seeing it.

Speaker Change: Somewhat is not theres not a lot of confidence into what we're seeing in the 2024. So we are our guidance.

Speaker Change: To your point on the guest traffic side is really a reflection of that as you are aware our consumer set is half of our our consumer has an income base of less than $50000.

Speaker Change: So again, we're just being conservative there we are really bullish about everything that we have into the hopper.

Kelly Valade: We are really bullish about everything that we have into the hopper. We have new, we've caught the original grand slam, that $599, $799 messaging that we launched into in mid-November really changed trends in a very material way. We have concepts, new value concepts, at various levels of testing. We have multiple virtual brands at various levels of testing. So, in large part, being conservative because the rhetoric in the environment is there, but bullish about the other things that we have going on.

Speaker Change: You have new.

Speaker Change: The original Grand Slam that $5 99, $7 99 messaging that we launched into.

Speaker Change: In mid off in mid November really trained change trends in a very material way, we have concept new value concepts at various levels of testing, we have multiple virtual brands in various levels of testing.

Speaker Change: So in large part being conservative because of the rhetoric and the environment is there, but bullish about the other things that we have the only yeah, yeah, Jake I think hi, its great to hear your voice as well and just.

Kelly Valade: Yeah, Jake, I think, hi, it's great to hear your voice as well. And just to echo what Robert said and just piggyback on it, it really is about just watching the predictions from economists, just watching those that we track and those that are putting out those reports that just tell us whether it's inflation and recent reports that just came out or just that a lot went into thinking about it and being optimistic yet just realistic. I would also call out that our value mix has been ticking up, and we've seen that just in January alone. So we feel like we're probably projecting it the right way and looking at it the right way.

Just to Echo, what Robert said and just to Piggy back. It really is about just watching the predictions from economists just watching those that we track and those that are putting out those reports so just tell us whether it's inflation and the recent reports that just came out or just the.

Speaker Change: A lot went into thinking about it and being optimistic yet just realistic I would also call out our value mix has been ticking up and we've seen that just in January alone. So we feel like we're probably projecting it the right way of looking at it the right way and yet we're still optimistic lastly, I would tell you in both in the fourth quarter of last year and in January.

Kelly Valade: And yet, we are still optimistic. Lastly, I would tell you that in both the fourth quarter of last year and in January, we can tell that we are stealing share both on sales and traffic against our competitive benchmarks, which are both benchmarks for family dining and casual dining. So is there a trade down from casual?

Speaker Change: We can tell that we are stealing share both on sales and traffic against our competitive benchmarks, which are both benchmark for family dining and casual dining. So is there a trade down from casual perhaps is there a tradeoff from us perhaps we also see evidence that people in fact are still anxious enough to maybe visit less often but again for us.

Kelly Valade: Perhaps. Is there trade out from us? Perhaps, but we also see evidence that people, in fact, are still anxious enough to maybe visit less often. But again, for us, we can see what we're doing against the competitive set. The last thing I'll say relative to this, Jake, is that our value mix, while ticking up and an indicator, perhaps, of where people are being cautious, our GCA is still up. And we continue to just be really excited about and encouraged by our borrow strategy in that those that Robert called out, less than $50,000, may be the ones definitely coming in, sensing that we do have great value at this unbeatable price and great food. There are also people coming in and then upgrading to our amazing new products like the strawberry French toast and stuffed French toast just continues to sell incredibly well. So I feel like we're balanced. We've thought a lot about it, and we're really still pretty optimistic about the things we have in the hopper, as you heard from Robert. I appreciate it all. Thank you so much.

Speaker Change: We can see what we're doing against the competitive set the last thing I'll say relative to this jacobs that our value mix, while picking up and an indicator, perhaps indeed, where people are being cautious or GTA is still up and we continue to just be really excited about and encouraged by our barbell strategy and that those that Robert.

Speaker Change: Called out less than 50000, maybe the ones definitely coming in sensing that we do have great value, if it's unbeatable price and great food.

Speaker Change: Also though there are also people coming in and then upgrading to our amazing new products like the Strawberry French toast stuffed French toast just continues to just.

Speaker Change: So incredibly well so I feel like we're balanced we thought a lot about it and we're really still pretty optimistic about the things we have in the hopper as you heard from Robert.

Speaker Change: Great I appreciate it all thank you so much.

Jake Rowland Bartlett: Thank you. Thanks, Jake. Thank you. Our next question comes from the line of Nick Setyan with Wedbush. Thank you. I just want to first clarify the pricing commentary. Did I understand correctly that Q1 pricing is 2%? Sorry, Nick.

Speaker Change: Thank you thanks Jay.

Speaker Change: Thank you. Our next question comes from the line of.

Speaker Change: Searching with Wedbush.

Speaker Change: Listening to your question.

Wedbush: Thank you I just wanted to first clarify the pricing commentary.

Wedbush: Did I understand correctly that the Q1 pricing is 2%.

Wedbush: Yes, sorry, Nick no I am sorry, if I misled you.

Nick Setyan: No, sorry if I misled you. We're rolling off 2% in pricing for the quarter. The pricing that we will see throughout the year is in that 5% to 6% range, and that will be fairly steady across the year, maybe a little bit higher in April as we take into account pricing related to AB 1228. I apologize if I misled you with my remarks, but no, no, the pricing in Q1 will be more in line with the 5% to 6% that I referenced today.

Wedbush: We have.

Wedbush: We're rolling off 2% in pricing in the quarter the pricing.

Wedbush: And that we will see throughout the year is in that 5% to 6% range.

Wedbush: And it will be that'll be fairly steady across the year, maybe a little bit tick higher in April as we take into account pricing related to AG 228, I apologize if I.

Wedbush: Misled with my remarks, but no no pricing in Q1 will be more in line with the 5% to 6% that I referenced to Jay.

Robert Verasco: Okay, and Q4 sounds like it was in that mid 5% range just to kind of get to that 7.5% for the year. Is that correct? So the math of it is that we actually layered in additional pricing with a November print. So while we're rolling off various pieces of that over the, as we move into Q1, the actual pricing effect in the quarter, in Q4 2023, was more in the 7.5% range. So that's the number you should think about.

Speaker Change: Okay and Q4, it sounds like it was in that mid 5% range just to kind of get to that seven 5% for the year is that correct.

Speaker Change: So we so we'll run the math.

Speaker Change: Most of it is.

Speaker Change: Is that we actually layered in additional pricing with a November print.

So while we're rolling off various pieces of that over the as we move into Q1.

Speaker Change: The actual pricing effect in the quarter in Q3, Q4 2023 was more in the seven 5% range.

Speaker Change: So.

Speaker Change: Thats it Thats. The number you should think about so the one three wood would suggest about a six point traffic decline.

Robert Verasco: So the 1.3 would suggest about a six point traffic decline, about a 6.3 traffic decline. Yeah, about that. Again, it's not perfectly perfect math in that when you're dealing with same-source sales. So but yes, in that 6% range. I appreciate you giving me the opportunity to clarify those remarks. That's very helpful.

Speaker Change: About six three traffic decline.

Speaker Change: Yes about that.

Speaker Change: Again, it's not perfectly perfect math and that when youre dealing with same store sales, so, but yes in that six 6% range yes.

Speaker Change: Hey, I appreciate you, giving me the opportunity to clarify those remarks.

Speaker Change: No. That's very helpful. Thank you and then just on the G&A guidance. It does sound like you are pretty much.

Robert Verasco: Thank you. And then just on the GNA guidance, it does sound like you're pretty much assuming sort of a full payout across the board, and so... You know, when it's all said and done, it seems like, you know, DNA may not be as high as you think. As for the full year guidance, I mean, hopefully, it is, and everything, you know, across the top line and margins is great. But if not, it sounds like GNA is actually going to be a little bit lower. Is that a fair understanding of how you're guiding GNA? Given the last four years, Nick, it would represent 70%, but I liked your more bullish claim that we're going to hit all of our guidance and actually pay out that level, and everybody will be excited to do that. But yes, the $83 to $86 million range does include 100% short-term incentive compensation assumptions.

Speaker Change: Assuming sort of a full pay out across the board and so.

Speaker Change: 101.

Speaker Change: It's all set and done it seems like G&A may not be as high as.

Speaker Change: As of the full year guidance implies I mean, hopefully it is and everything across the top line and margins are great, but if not it sounds like G&A is actually going to be a little bit lower is that a fair understanding of how you're guiding G&A.

Speaker Change: Given the last four years, Nick it would represent 70%, but I liked your more bullish claim that we're going to hit all of our guidance and actually pay out that level and everybody will be we'll be excited to do that but yes, the <unk> $83 million to $86 million range does include 100%.

Speaker Change: 100% short term incentive compensation.

Robert Verasco: Okay. And on the franchise margin, can we just talk about the trajectory of the franchise margin, you know, in 24, and then just how many company-owned Kikis you guys are thinking of within that guidance? Yeah, let me start with the second part. First, I'll give Curt a chance to help me out with the margin question on the franchise. But with regard to the Kikis openings, the 12 to 16, I would tell you that in the current year, in 2024, those will likely be 40 to 50% company openings as we build the pipeline with additional Kikis franchisee development and some great strength within the Denny's franchise development related to the development agreements that we announced on the last call, those 14 agreements for 100 additional CAFE commitments.

Speaker Change: Assumption.

Speaker Change: Okay.

Speaker Change: On the franchise margin can we just talk about sort of the trajectory on the franchise margin.

Speaker Change: Uh huh.

Speaker Change: And in 'twenty four and then just how many company owned Kiki's you guys are thinking of within that guidance in 2004.

Speaker Change: Yes, let me start with the second part first I'll give Kurt.

Kurt: Chance to to help me out with the with the margin question on the franchise, but with regard to the Kiki's openings. The 12 to 16 I would tell you that in the current year in 2024 that those will likely be 40% to 50% company openings as we build the pipeline.

Kurt: With additional Kiki's franchisee development and.

Kurt: Some some great strength within the Denny's franchise development related to the development agreements that we announced on the last call. Those 14 agreements for 100 additional cafe commitments. So in the current year as we build out our operational efficiency in places like Tennessee.

Robert Verasco: So in the current year, as we build out operational efficiency in places like Tennessee and Jacksonville, you will see us invest more in company company operated CAFEs. So the 12 to 16 would likely be 40 to 50% 40 to 50% of company CAFE openings. With regard to the margin, what I'm being shown is that it will be very, very similar to 2023, so approximately 51%.

Kurt: In Jacksonville, you will see us invest more into the intercompany company.

Kurt: Company operated cafes, so the 12 to 16 would likely be 40% to 50%.

Kurt: 40, 40% to 50% of company cafes companies.

Kurt: With regard to.

Kurt: The margin I E.

Kurt: Yeah.

Kurt: What im being shown is that it will be very very similar to 2023, so approximately 51% in the changes.

Robert Verasco: And the change, as you note in the remarks, is we have this odd revenue recognition standard that impacted the prior year, where we were having to recognize the kitchen equipment that we were installing for franchisees as revenue with a complete contra offset into the expense, which depressed margins by 4 to 5, and franchise margins by 4 to 5 percentage points. So we don't have that same type of impact within the 2023 results, so you shouldn't see, or you shouldn't expect or anticipate another 4 to 5 percentage point growth. It'll be very similar, that low 50% range, 50, and 51 range, though. I got it. Okay. Thank you very much.

Kurt: Note.

Kurt: In the remarks is we have this odd.

Kurt: Revenue recognition standard that impacted the prior year, where we were having to recognize the kitchen equipment that were installing for franchisees as revenue with a complete contra offset into the expense, which depressed margins by four to five franchise margins by 4% to five percentage points. So we don't have that same type of.

Kurt: The impact within the 2023 results. So you Shouldnt see you Shouldnt expect or anticipate another 4% to five percentage point growth it'll it'll be very similar at that low 50% range 50 51 range. So.

Speaker Change: Got it okay. Thank you very much.

Todd Brooks: Thanks, Nick. Thank you. Our next question comes from the line of Todd Brooks with Benchmark Company. Please proceed with your question. Hey, good evening, everyone.

Speaker Change: Thanks, Nick.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Todd Brooks with Benchmark Company. Please proceed with your question.

Todd Brooks: Hey, good evening, everyone. Thanks for taking my questions.

Kelly Valade: Thanks for taking my question. One follow-up. Hey, good to talk to you both.

Todd Brooks: Hey, Dan one follow up.

Todd Brooks: Hey.

Speaker Change: Good to talk to you both.

Kelly Valade: One follow-up to Jake's question, actually. Kelly, I think when you were answering, you said that ValueMix ticked up in January. I know it was stable.

Todd Brooks: One follow up to <unk> question actually.

Todd Brooks: Kelly I think when you were answering.

Todd Brooks: <unk> has ticked up in January I know it was stable.

Kelly Valade: Q4 versus Q3. Can you share with us how much it has ticked up just to maybe dimensionize it? Yeah, absolutely, Todd. A couple points. We've seen it go up a couple points. It's a recent trend change. But again, we're still seeing that check hold.

Todd Brooks: Q4 versus Q3 can you share with us how much it has ticked up just maybe dimensionalize.

Todd Brooks: Thanks.

Kelly Denny: Yeah, absolutely Todd a couple of points, we've seen it go up a couple of points. It's a recent trend change but again.

Kelly Denny: We're still seeing that check holds reiterate that and we're still seeing people coming in and ordering some of these great new products around innovation. So the value messaging. We know is working to get them in the door, we will refresh that messaging this quarter end.

Kelly Valade: And we're still seeing, you know, people coming in and ordering some of these great new products around innovation. So the value messaging we know is working to get them in the door. We'll refresh that messaging this quarter, and it's picked up a couple points as of late, and again, probably evidence of what most are saying about, you know, how people are feeling.

But it has picked up a couple points as of late and again, probably evidence to what most are saying about how people are feeling but for US again still confident in the strategy on barbell that is really working for us.

Kelly Valade: But for us, again, still confident in the strategy on Barbell and that that is really working for us. And if I think back historically, this has run in the low to mid 20s before, hasn't it? So we're not back to maybe historical peaks where values mixed out. I think that's correct. Robert is nodding his head as well.

Kelly Denny: And if I think back historically this is run in the low to mid Twenty's beforehand.

Kelly Denny: Not back to maybe historical peaks for where values maxed out.

I think Thats correct Robert is nodding his head as well.

Robert Verasco: Yeah, Todd, when we, during the heights of 2, 4, 6, 8 launch, it was in the 23, 24, 25 percent range. And as long as the barbell strategy is effective, as Kelly is alluding to, we're not afraid of driving that value instance rate. And this is all, this is not just the original Grand Slam and the one that we're talking about as of late, although that has been incredibly successful, as we've talked about. These are other things that are marketed in the restaurant that we would classify as our everyday value slam or super slam. We kind of capture those all in that kind of value incidence bucket for us. The original Grand Slam is the one that has increased in value as of late.

Speaker Change: We do.

Speaker Change: The Heights of 2468 launch it was in the $23, 24% to 25% range.

Speaker Change: As long as the <unk>.

Speaker Change: The barbell strategy.

Speaker Change: Strategy as effective as Kelly is alluding to we're not afraid of driving that that value incidence rate and this is all of these are this is not just the original Grand Slam and the one that we're talking about as of late although that has been incredibly successful as we've talked about this as other things that our message in the restaurant that we would classify our everyday value.

Speaker Change: Lamb, our Super Slam, we kind of capture those all in that kind of value incidents bucket for us.

Speaker Change: The original Grand plan is the one that is uptick as of late yeah. Yeah. That's helpful. Thanks, and then I wanted to give you a little bit on <unk>. So at the end of Q3, you updated us on the 2014 agreements 100 units.

Robert Verasco: Yeah, that's helpful. Thanks. And I want to get a little bit on Kiki's.

Todd Brooks: So at the end of Q3, you updated us on the 14 agreements, 100 units. And I think today's commentary was 14 agreements, 100 plus units. Are we actively selling agreements now? Are we digesting the explosion that we had in agreements?

Speaker Change: Today's commentary was 14 agreements 100, plus units are we actively selling agreements now or we are digesting the explorer to be explosion that we hadn't agreements in Q.

Kelly Valade: Q3, I'm just curious, I felt there was more momentum maybe to continue off the franchisee convention and the signings that you saw there, so I was wondering if we could talk about that. Yeah, I think that's fair, Todd, and you know what we're seeing is obviously there's a lot of excitement about it, and there's also been a lot of, and I think we've mentioned this and talked about it quite a bit, there's a tremendous amount of excitement still, and there's momentum, and there's a lot of conversations about Nashville, you know, it's that new prototype, it's the new design, it's all those things were in play, and then we still have levers to pull in terms of just continuing to drive that momentum, but a lot of folks really excited, a lot of things that are in play with the new menu, cocktails, you know, again, successful Tennessee opening, we're really encouraged by what we saw there, so there's quite a few that are lined up as of right now, as you know, the ones that we've talked about, and then we literally had people waiting to come to that opening and said, hey, let's get this thing open, let's do a great job opening it, we got that ceremony, we did the ceremony of grand opening, ribbon cutting with everyone in the community that we could get, so that we could get this name out there, and it's been really successful, but we also have franchisees waiting to go there, lining up to go there and be introduced via our development team, and those people are coming in as we speak, so we expect that momentum to continue, there's really no pause other than to say, hey, let's get this thing out of Florida, and see how it can perform for us, we do also have four cafes under construction, and then, you know, again, these openings next year are pretty accelerated, as Robert already talked about. And are the four or the 40% of growth this year that's anticipated to be company stores, are you seeding other states for proof of concept? Are you looking to get that kind of operational efficiency in the Tennessee market as a corporate market? And then go ahead, Robert.

Speaker Change: Q3, I'm just curious.

Speaker Change: There is more momentum maybe to continue off the <unk>.

Speaker Change: Franchisee convention and the signings that you saw there as soon as we've talked about yeah, Yeah, I think Thats fair Todd and you know what we're seeing is obviously, there's a lot of excitement about it and Theres also been a lot of and I think we mentioned this and talked about it quite a bit there is a tremendous amount of excitement still and there is momentum and there is a lot of.

Speaker Change: <unk> is about.

Speaker Change: Nashville.

Speaker Change: That new prototype, it's the new design into all of those things are in play and then we still have levers to pull in terms of just continuing to drive that momentum, but a lot of folks really excited a lot of things that are in play with the new menu cocktails.

Speaker Change: <unk> successful, Tennessee opening we're really encouraged by what we saw there. So theres quite a few that are lined up as of right now as you know the ones that we've talked about and then we literally had people waiting to come to that opening and said Hey, let's get this thing open let's do a great job opening at we got that ceremony, we did the ceremony of the Grand opening ribbon cutting with everyone in the <unk>.

Speaker Change: If we could get so that we can get this name out there and it's been really successful, but we also have franchisees waiting to go they're lining up to go there and be introduced via our development team.

Speaker Change: And those people are coming in as we speak so we expect that momentum to continue Theres really no pause other than to say hey, let's get this thing out of Florida and see see how it can how it can perform for us and we do also have four cafes under construction and then again these openings next year, a pretty accelerated rate as Robert already talked about.

Speaker Change: And on the floor.

Speaker Change: Or the 40%.

Speaker Change: Growth this year.

Speaker Change: As stated the company stores.

Speaker Change: Are you seeing other states for proof of concept or are you looking to get that kind of operational efficiency in the Tennessee market Theres a corporate.

Speaker Change: Market again.

Speaker Change: Regarding Robertson.

Robert Verasco: Yeah, so Todd, we're really excited by what we're seeing in Tennessee. We already have another corporate cafe under construction in Tennessee right now. We have another corporate cafe in Jacksonville under construction right now, and you will see us move into Texas, seating Texas as the next corporate area for development. So we'll be in places other than Florida and Tennessee this year. Okay, great. And then just a couple to wrap up on Kiki's, and I'll get back in queue.

Speaker Change: Yes so.

Speaker Change: We're really excited by what we're seeing in Tennessee, we already have another.

Speaker Change: Corporate cafe under construction in Tennessee, right now we have done.

Speaker Change: Another corporate cafe and Jacksonville under construction right now.

Speaker Change: You will see us move into Texas seeding, Texas as the next.

Speaker Change: Corporate area for development so.

Speaker Change: But we'll be in places other than Florida and Tennessee.

Speaker Change: This year.

Speaker Change: Okay, Great and then just a couple to wrap up on <unk>.

Kelly Valade: Can you speak to, since the program was successful, maybe alcohol incidents or lift and check that you saw on the test that we should think about for AUVs for the concept? And then the second one, just with the new prototype opening in Tennessee, which looks great from the pictures I've seen online? Thoughts on, is there a point, or do the franchisees existing in Florida want to go back and rework their units in the new prototype, or is this really a go-forward type of prototype for Kiki's? A lot in there, Todd, and really great questions. So first, to take the maybe the last thing that you mentioned in terms of going back into Florida, there are a lot of franchisees really excited about it. It's a beautiful building, it's a beautiful design, really leaned into what Kiki's is known for and what it's special about it with an updated, really bright, fresh look. So I'm glad you got to see that. Pictures don't totally do it justice.

Speaker Change: I'll get back in queue.

Speaker Change: Can you speak to since the program was successful can you speak to maybe alcohol incidents or lift in truck.

Speaker Change: What you saw in the test that.

Speaker Change: That we should think about for <unk> for the concept and then the second one.

Speaker Change: Just with the new.

Speaker Change: The new prototype opening in Tennessee, which looks great from the pictures I've seen online.

Speaker Change: Thoughts on is there is there a point in or does the franchisees existing in Florida wanted to go back and rework their units in the new prototype or is this really a go forward type of car types with <unk>. Thanks.

Speaker Change: A lot in there Todd and really great question. So first to take the take the maybe the last thing that you mentioned in terms of going back and in Florida. There are a lot of franchisees really excited about it's a beautiful buildings are beautiful design really leaned into what <unk> is known for and what's special about it with an updated really bright fresh look so I'm glad you got to see that pictures don't totally do it.

Kelly Valade: It really is a stunning building. The franchisees will go back. There's been conversations with a lot of them in Florida to go back and look at paint colors, look at some of the things that they could pull forward. There's really not been a comprehensive remodel program for the Kiki's brand until now.

Speaker Change: Justice It really is a stunning building that franchisees will go back there's conversations with a lot of them in Florida to go back and look at paint colors look at some of the things that they can pull forward, there's really not been a comprehensive remodel program for the Kiki's brand up until now so they are excited about the things that we can pull forward and having those conversations for sure.

Kelly Valade: So they're excited about the things that we can pull forward and have those conversations for sure. In terms of the alcohol programs, really encouraged by what we're seeing, it's a really simplified approach with mimosas, sangrias, and five to 7% of the mix is really what we're seeing there, higher on the weekends. This is obviously expected but really aligned with what we thought that that would do for us. So it's not been rolled out system-wide.

Speaker Change: In terms of the alcohol programs, so really encouraged by what we're saying, it's a really simplified approach with Melissa sangria and five 5% to 7% mix is really what we're seeing there higher on the weekend. This is obviously expected, but really in line with what we thought that that would do for us. So it's not been rolled out system wide in fact that Tennessee.

Kelly Valade: In fact, that Tennessee location did not yet open with it. It's one of those things where we're excited about the potential this has. This is a brand that doesn't have a honeymoon curve like other brands I'm used to; it doesn't have a honeymoon curve where it decreases. It actually grows over time.

Speaker Change: Location did not yet open with it it's one of those things where we're excited about the potential. This has this is a brand where it doesn't have a honeymoon curve that like other brands I mean assume it doesn't have a honeymoon curve, where it decreases actually grows over time and we're actually not talking about it just yet because we know it's got the potential and we've already seen it starting to <unk>.

Kelly Valade: And we're not actually talking about it just yet because we know it's got the potential and we've already seen it starting to grow. And again, we didn't open with cocktails or the alcohol program. We didn't open with some of the other things that we know we can pull off and that will help it to continue to grow for us. So we are excited about what that can do for the Kiki system in terms of rolling out that alcohol program, as well as even the remodels and what that could do for the Florida market. Okay, thanks. You're welcome.

Speaker Change: Grow and again, we didn't open with the cocktails or that the alcohol program. We didn't open with some of the other things that we know we can pull and that will help it to continue to grow for us. So we are excited about what that can do for the <unk> system in terms of rolling that alcohol program as well as even the remodels and what that could do for the Florida market.

Speaker Change: Okay. Thanks Kelly.

Kelly Denny: Youre welcome.

Kelly Denny: Okay.

Todd Brooks: Thank you. Our next question comes from the line of John Tower with Citi. Great, thanks for taking the questions.

Speaker Change: Thank you.

Speaker Change: Next question comes from the line of Jon Tower with Citi. Please proceed with your question.

John C. Miller: Great. Thanks for taking the questions.

John Tower: Maybe if we could start off on the unit closures, and specifically, I'm just trying to, maybe you can help us ring fence, how many of the stores are potentially at risk of closure? I think, Robert, you mentioned earlier that, you know, profitability break evens are close to 1.2 million now at Denny's. And I'm just curious, you know, if you could maybe give us some idea of what percentage of the system might be at or near those levels? Um, yeah, maybe that's all I'll stop for the moment. Yeah, John.

John C. Miller: Maybe if we could start off on the unit closures and specifically I'm just trying to.

John C. Miller: Maybe you can help us ring fence, how many of the stores are potentially at risk.

Of closure I think.

John C. Miller: Robert you mentioned earlier that the profitability breakeven or close to $1 2 million.

John C. Miller: I'm just curious if you could maybe give us some.

John C. Miller: An idea of like what percentage of the system might be at or near those levels.

Robert Rustic: Yes, maybe that's what stopped them alone.

Robert Rustic: Yes, John so happy to try to provide some additional color to that.

Robert Verasco: So I'm happy to try to provide some additional color on that. We assess Denny's system with regard to quintiles, and I can tell you that our lowest quintile in aggregate is actually above $1.2 million. So it's only a subset of that lowest quintile that we are really dealing with. The other piece that makes this a little bit harder to predict is that it's made up of – there are many franchisees that have restaurants within there, and they all have different motivations, right? So if it's covering the least cost but not necessarily profitable, it may be a restaurant that remains open in that scenario. So it's hard to say of that subset of units, of that subset of quintiles, how many are likely to close near the end.

Robert Rustic: We.

Speaker Change: With regard to we assess our kind of our the denny's system with regard to kind of Quintiles.

John: And our low I can tell you that our lowest quintile in aggregate is actually above the $1 two.

John: So it's only a subset of that lowest quintile.

John: We are really dealing with.

John: The other.

Other piece that makes this a little bit harder too.

John: Predict is that it's made up of Theres, many franchisees that have restaurants within there and they all have different motivations right.

John: If it is covering.

John: The lease cost, but not necessarily profitable it may be a restaurant that remains open.

John: In that scenario, so it's hard to say.

John: That subset of unit of that subset of quintile, how many are likely to close near in over time right.

Robert Verasco: Over time, right, in an elongated timeframe, you may be looking at half that quintile. But right now, what we're comfortable doing is to guide one year at a time with what we know and really, really watch closely, particularly as we move across this year and with the initiatives that we have in place, to hopefully grow out of it. I can tell you that of these quintiles, four of them actually grew in volume over the course of the pandemic. The only one that did not was that lowest quintile.

John: Long gated timeframe.

John: You may be looking at half that quintile, but right now what were comfortable doing is to guide one year at a time with what we know and really really watch closely particularly.

John: As we move across this year and with the initiatives that we have in place to hopefully to grow out of it I can tell you that of these quintiles.

John: Three of the four of them actually grew volume over the course of the pandemic. The only one that did not was that lowest quintile. So if we can if we can get that moving also it may put less of those at risk again. Another reason why we're just trying to give that one year to look right now is to as opposed to <unk>.

Robert Verasco: So if we can get that moving also, it may put less of those at risk. Again, another reason why we're just trying to give that one-year look right now as opposed to looking out much further than that. There are a lot of nuances that go into predicting how many of those will actually close in the near term. Thank you. And I guess on the flip side of that, it sounds encouraging with the new store openings on the Denny side, the first numbers reaching 2017 levels. So I'm just curious, maybe you can give us a little bit of color on where these stores are. Are they more infill?

John: Out much further than that a lot of a lot of nuances that go into to predicting how many of those will actually close in the near term.

Speaker Change: Thank you and I guess on the flip side of that it sounds encouraging with the new store openings on the dairy side.

Speaker Change: Members, reaching 2017 levels. So I'm just curious maybe you can give us a little bit of color on where these stores are doing more infill or are there new markets or the new franchisees existing franchisees or are they effectively relocations of Av.

Robert Verasco: Are they new markets? Are they new franchisees, existing franchisees? Are they effectively relocations of, you know, existing stores? provides some color.

Speaker Change: Listing stores just curious if you could provide some color.

Robert Verasco: Yeah, happy to do that also. Generally, not offsets, not close this Denny's, open this Denny's. So they're not generally offsets.

Speaker Change: Yes happy to do that also generally.

Speaker Change: Not.

Speaker Change: Offsets not closing denny's openness Denny so they're not they're not generally offsets 90% of the restaurants that close or what we were just talking about these very very low volume units. So it's.

Robert Verasco: 90% of the restaurants that close are what we were just talking about, these very, very low volume units. So it's not that we're not offsetting because of a property control issue. So no offsets.

Speaker Change: Not that we're not offsetting because of a property control issue so not offset.

Kelly Valade: Every year we have new franchisees, somewhere in the neighborhood of, let's say, four to six new franchisees. So there will always be some new franchisee development. But generally, the vast majority of these openings would be infill restaurants from existing franchisees, so I think that's probably the best way to look at it. With now 1,342 franchise domestic restaurants and another 65 company, we're fairly penetrated into most markets. You can find some, particularly if you look east of the Mississippi, that we could potentially build out. But in general, these are infills into existing markets where we know Denny's has a lot of success. Got it. And then I just kind of thought about California a little bit more.

Speaker Change: Every year, we have new franchisees somewhere in the neighborhood of lets say four to six new franchisees. So that they are though there will always be some new franchisee development, but generally the vast majority of these openings would.

Speaker Change: It would be infill restaurants.

Speaker Change: From existing franchisees, so that I think thats, probably the best way.

Speaker Change: To look at it with and now <unk> 142 franchised domestic restaurants. Another 65 company, we're fairly penetrated into most markets. You can go find some particularly if you look east of the Mississippi.

Speaker Change: That we could potentially build out but in general these are infill into existing markets, where we know the denny's.

Speaker Change: <unk> has a lot of strength.

Speaker Change: Got it and then just kind of thinking about California, a little bit more.

Kelly Valade: Detail, you know, do you have any specific plans to address value in that market given, obviously, the change in the pricing structure across the industry coming in April? I mean, are there any explicit plans that you might have to attack the value messaging, whether it's on, you know, building brand awareness with incremental marketing? You know, obviously, you've got a lot of innovation in the pipeline when it comes to product, but I'm just curious how you plan on handling that market in April and Fall. Great, great question and lots of conversations that we have. We're working very closely with the California franchisees. In fact, we call it our situation room, where we come to them and we partner with them, both in them sharing, you know, the kind of ideas that they might have. Many of them have other brands. In fact, many of them have QSR brands, actually.

Speaker Change: Detail do you have any specific plans to address value in that market given obviously the changes in pricing structure across the industry coming in April I mean are there any explicit plans that you might have to attack the value messaging, whether it's on.

Speaker Change: Building brand awareness with incremental marketing.

Speaker Change: Obviously, you've got a lot of innovation in the pipeline when it comes to product, but Im just curious how you plan on handling that.

Speaker Change: That market specifically in April forward.

Speaker Change: Great Great question and lots of conversations that we have we're working very closely with the California franchisees in fact, we call. It our situation room, where we come to them and we partner with them both in them sharing.

Speaker Change: The ideas that they might have many of them have other brands many of them have keyless our brands actually so while we're not in that same situation of course being a full service brand and we're being very mindful of that so what I can tell you is the value messaging. There. So we've got a price point at $5 99 in in many markets, but in California 799 is competitive for there.

Kelly Valade: So while we're not in that same situation, of course, being a full-service brand, we're being very mindful of that. So what I can tell you is, you know, the value messaging there. We've got a price point at $5.99 in many markets, but in California, $7.99, that's competitive for there. That's been working there fairly well. In fact, we've been working really well there also. So we'll continue with that messaging. The other thing that we have done is re-implementing or re-instituting the co-op program. And so we'll continue to spend at the local level. We'll spend more at the local level, working in partnership with them. So we'll do things unique to the market wherever possible. And we're doing our match, again, for that co-op program.

Speaker Change: That's been working there fairly well when it's actually been working really well. There also so we will continue with that messaging. The other thing that we have done we are re implementing a re instituting the co op program and so we'll continue to spend at the local level, we'll spend more at the local level and working in partnership with them. So we'll do things you need to the market wherever possible.

Speaker Change: We're doing our match again for that co op programs or bringing that back after several years of not doing that and we know that will help strengthen the market and then finally, it really really looking to strengthen the top line for them in as many ways as possible looking at I've mentioned this before but looking at the virtual brands. The things, we're testing and off premise, so not only helping them with analytics.

Kelly Valade: So we're bringing that back after several years of not doing it, and we know that it'll help strengthen the market. And then finally, really looking to strengthen the top line for them in as many ways as possible. Looking at, I've mentioned this before, but looking at the virtual brands, the things we're testing off-premise. So not only helping them with analytics and metrics to understand the effectiveness of their off-premise channels today, but also potentially bringing those virtual brands to them first, bringing those to enable as much revenue as we could possibly help them drive.

Speaker Change: And metrics to understand the effectiveness of their off premise channels today, but also potentially bringing those virtual brands to them first bringing those to enable as much revenue that we could possibly help them drive. So that's really the focus for US is it's almost a triage approach with them.

Kelly Valade: So that's really the focus for us, is it's almost a triage approach with them. And at the same time, you know, making sure just we're available to have the conversation. So we're staying really close to it.

Speaker Change: And at the same time.

Speaker Change: In making sure that we're available to have the conversation. So we're staying really close to it.

John Tower: Thank you for sending the question. Of course. Thank you, John. Thank you. Our next question comes from the line of Ashley Gruninger. Tyra Sandler, thank you for seeing Jericho.

Speaker Change: Got it thank you for taking the questions.

Speaker Change: Of course, yes, thanks, John Thank you Tom.

Speaker Change: Thank you next.

Speaker Change: Our next question comes from the line of Ashwin.

Ashwin: Piper Sandler. Please proceed with your question.

Ashley Gruninger: Hi, good afternoon. It's great to hear about all the momentum with Kiki's development, but on the franchise comp results for the quarter. Could you speak to what is behind the softness there?

Ashwin: Hi, good afternoon, it's great to hear about all the momentum with key each development, but just on the franchise comp result for the quarter could you speak to what is behind the softness there is it specific to like the Florida consumer or is there a primary driver of your point of thought.

Robert Verasco: Is it specific to the Florida consumer? Or is there a primary driver you can point to for that? Yeah, so that's a really good question. Florida remains, you must have been looking at some of my cheat sheets that we prepared. Florida is by far the weakest state that we've had.

Ashwin: Yes.

Speaker Change: That's a really good question I have Florida remains a waiting you must have been looking.

Speaker Change: Some of the <unk> <unk> that we prepared Florida is by far the weakest state.

Robert Verasco: There's actually some good strength throughout the Midwest when you look at New York, Pennsylvania, Ohio, Indiana, Illinois, strength there, but Florida still trails quite significantly with regard to that. And the reality is, if you look at the pace of our same-store sales across the quarter, October was weaker than November, and November was weaker than December. And December actually showed some significant strength as we got deep into our value messaging, the 599-7099 original Grand Slam messaging. So again, with regard to that, we were pretty pleased with the way we finished out the year. Great, thanks for that!

Speaker Change: That we have had.

Speaker Change: Actually some good strength throughout the Midwest when you look at New York, Pennsylvania, Ohio, Indiana, Illinois strength, there, but but.

Speaker Change: Florida is still trails.

Speaker Change: Quite significantly with regard to that.

Speaker Change: And the reality is if you look at the pace of our same store sales across the quarter.

Speaker Change: October was weaker than November and November was weaker than December and December actually showed some some some significant strength as we got deeper into our value messaging. The 590 970 99 original Grand Slam messaging.

Speaker Change: So.

Speaker Change: Again, we were.

Speaker Change: With regard to two that we were pretty pleased on the way we finished out the year.

Speaker Change: Great. Thanks for that my second question is on 24, seven now that were in 2024, I'm just hoping you could give us an update on what percent of the store base is back to 24, seven and then what your expectations are for the return to 24 seven this year.

Robert Verasco: My second question is on 24-7. Now that we're in 2024, I'm just hoping you could give us an update on what percent of the store base is back to 24-7 and what your expectations are for the return to 24-7 this year. Yeah, again, really good question. That's really stabilized. When we looked at it, it grew through about the July-August timeframe.

Speaker Change: Yes, again really good question Thats really stabilized when we've looked at it grew through about.

Speaker Change: The July August timeframe, we had a pretty conservative at a concerted effort to get back.

Robert Verasco: We had a pretty concerted effort to get back as many as we could to 24-7, and it's kind of leveled off at about the 75% level. And the other piece to note, though, is even if you're not on 24-7, the VASTs are already over 20 hours. So I think we've stabilized. I don't think you'll see material growth from here, nor do I think you'll see a material decline from here.

Speaker Change: As many as we could to $24 7 million.

Speaker Change: It's kind of leveled off at about 75% level.

Speaker Change: And the other piece to note, though is even if you are not at 24 seven the vast or are already over 20 hours. So I think we've stabilized I don't think I don't think youll see material growth from here, nor do I think youll see a material slide from here I think this is.

Kelly Valade: I think this is somewhat of the new norm. I think the other reality action... No, that's okay, Ashley. I was only going to add to what Robert mentioned in terms of just, you know, we just came off the last question on the FAFSA Act or AB 1228 and its impact there in California. So, you know, we're just always mindful of the profitability of our franchisees, the health of those franchisees that we talked about. So it's about driving the top line.

Somewhat of a new norm.

Speaker Change: I think the other reality.

Speaker Change: Oh I'm sorry.

Speaker Change: No no. That's okay I was only going to add to what Robert mentioned in terms of just we just came off the last question on the fast Act or <unk> 28, and the impact there in California. So we're just always mindful of the profitability of our franchisees the health of those franchisees that we talked about it's about driving top line. It's about just showing them every opportunity, but also just being the best part.

Kelly Valade: It's about just giving them every opportunity but also just being the best partner possible. We still know, given the percentage not only of, oh, you know, those that are 24-7 at 75% and holding, but also the amount of hours that we are open, that as a full-service brand that used to be, we are back strong and as strong as many other players that used to be 24-7 and haven't gotten even close to 75% back. So we feel good about it. And yet, you know, given the pressures in some of the states, like California, we're just mindful of that.

Speaker Change: Possible, we still know given the percentage not only.

Speaker Change: Those that are 27% to 75% and holding but also the amount of hours that we are open that as a full service brand that we have.

Speaker Change: We are back strong and as strong as many other players that used to be 24, seven and haven't gotten even close to 75% back. So we feel good about it and yet given the pressures in some of the states like California, where we're just mindful of that.

Operator: You're welcome. Thank you. And we have reached the end of the question and answer session. I'll turn the call back over to Curt Nichols for closure. I'd like to thank everyone for joining us on today's call. We look forward to our next earnings conference call in the spring, when we will discuss our first quarter 2024 results. Thank you all, and have a great evening. Thank you, and this concludes today's conference, and you may disconnect your line. Thank you for your participation and for their 2024 results. Thank you all and have a great evening.

Speaker Change: Thanks.

Speaker Change: Youre welcome. Thank you.

Speaker Change: We have reached the end of the question and answer session I'll turn the call back over to Curt Nichols for closing remarks.

Curt Nichols: Well I, thank everyone for joining us on today's call. We look forward to our next earnings conference call in the spring when we will discuss our first quarter 2024 results.

Thank you all and haven't really.

Curt Nichols: Thank you and this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.

Curt Nichols: Okay.

Curt Nichols: Okay.

Curt Nichols: For 2024 results.

Curt Nichols: You all haven't really.