Q4 2023 Dine Brands Global Inc Earnings Call

Operator: Good day, and thank you for standing by. Welcome to the Dine Brands Global fourth-quarter earnings. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised.

Good day and thank you for standing by welcome to the Dine brands Global fourth quarter earnings Conference call.

At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone.

Speaker Change: Then here an automated message advising your hand is raised to withdraw your question. Please press star one one once again please be advised that today's conference is being recorded I would now like to hand, the conference over to your host today, not Lee Senior Vice President Finance and Investor Relations.

Operator: To withdraw your question, please press star one one once again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Matt Lee, Senior Vice President, Finance and Investor Relations. Please go ahead.

Speaker Change: Please go ahead.

Speaker Change: Okay.

Matt Lee: Good morning, and welcome to Dine Brands' fourth quarter and fiscal 2023 conference call. This morning's call will include prepared remarks from John Payne, CEO, and Vance Cheng, CFO. Following those prepared remarks, Tony Maralejo, President of Applebee's, and Jay Johns, President of IHOP, will also be available to address questions from the investment community during the Q&A portion of the call. Please remember our safe harbor regarding forward-looking information. During the call, management will discuss information that is forward-looking and involves known and unknown risks, uncertainties, and other factors, which may cause actual results to be different than those expressed or implied.

Don Lee: Good morning, and welcome to Dine brands fourth quarter and fiscal 2023 conference call. This morning's call will include prepared remarks from John Payne CEO <unk> Chen CFO.

Speaker Change: Following those prepared remarks, Tony Marone, Leighow President of Applebee's, and Jay Johns President of IHOP will also be available to address questions from the investment community during the Q&A portion of the call.

Speaker Change: Please note of our safe Harbor regarding forward looking information during the call management will discuss information that is forward looking and involves known and unknown risks uncertainties and other factors, which may cause the actual results to be different than those expressed or implied.

Matt Lee: Please evaluate the forward-looking information in the context of these factors, which are detailed in today's press release and the 10-K following. The forward-looking statements are as of today, and we assume no obligation to update or supplement these statements. We will also refer to certain non-GAAP financial measures which are described in our press release and also available on Dine Brands' Investor Relations website.

Speaker Change: Please evaluate the forward looking information that context of these factors, which are detailed in today's press release and 10-K filing.

Speaker Change: The forward looking statements are as of today, and we assume no obligation to update or supplement. These statements. We will also refer to certain non-GAAP financial measures, which are described in our press release and also available on dine Brands' Investor Relations Web site.

Matt Lee: For calendar purposes, we are tentatively scheduled to release our Q1 2024 earnings before the market opens on May 8th, 2024, and to host a conference call that morning to discuss the results. With that said, it is my pleasure to turn the call over to Dine Brands CEO, John Payne. Good morning, everyone, and thank you for joining us.

Speaker Change: For calendar purposes, we are tentatively scheduled to release, our Q1 2024 earnings before the market opens on May eight 2024 and to host a conference call that morning to discuss the results with that it's my pleasure to turn the call over to <unk> CEO, John Payne and good morning, everyone and thank you for joining us on today's call I will share.

John C. Cywinski: On today's call, I will share Dine's fourth quarter and full year 2023 results. I'll discuss our strategy to increase the pace of restaurant openings, share the current outlook for our brands, and Vance will discuss in detail our financial results, capital allocation plans, and provide guidance for 2024. 2023 was a year of significant work in progress for Dine.

John C. Cywinski: <unk> fourth quarter and full year 2023 results I will discuss.

John C. Cywinski: Our strategy to increase the pace of restaurant openings share the current outlook for our brands and Vance will discuss in detail our financial results capital allocation plans and provide guidance for 2024.

John C. Cywinski: 2023 was a year of significant work in progress for <unk>.

John C. Cywinski: First, Applebee's and IHOP both delivered another year of positive comp sales growth. For Applebee's, 2023 was the third consecutive year of positive comp. Second, we generated year-over-year EBITDA growth. Third, we integrated Fuzzies into our system, realizing our long-term objective to add an emerging, high-growth potential brand to the Dime portfolio.

John C. Cywinski: First applebee's and IHOP, both delivered another year of positive comp sales growth for Applebee's 2023 was the third year of consecutive positive comps.

John C. Cywinski: We generated year over year EBITDA growth third we integrated <unk> into our system. Realizing our long term objective to add an emerging high growth potential brands the <unk> portfolio.

John C. Cywinski: We opened our eighth IHOP Applebee's dual-branded restaurant internationally, gaining experience and knowledge as we contemplate introducing this concept in the U.S. And finally, we refinanced our debt while returning $210 million to equity and bond investors. Of course, our success in 2023 would not have been possible without the hard work of our franchisees, their commitment to excellence, and their relentless focus on delivering a fantastic guest experience. As our franchisees focused on what they did best, so did we. We stayed focused on our recipe for growth, which is designed to drive long-term sustainable value creation for our brands, for our franchisees, and for our investors. Throughout 2023, we largely completed investments in technology to drive efficiencies and improve the guest experience.

John C. Cywinski: We opened our eighth IHOP applebee's dual branded restaurant internationally, gaining experience and knowledge as we contemplate introducing this concept in the U S and finally, we refinanced our debt, while returning $210 million back to equity and bond investors.

John C. Cywinski: Of course, our success in 2023 would not have been possible without the hard work of our franchisees their commitment to excellence and their relentless focus on delivering a fantastic guest experience.

John C. Cywinski: As our franchisees focused on what they do best So did we we stayed focused on our recipe for growth, which is designed to drive long term sustainable value creation for our brands for our franchisees and for our investors throughout 2023, we largely completed and investments in technology to drive efficiencies and improve the guest experience.

John C. Cywinski: We leveraged our resources and scale to drive revenue and EBITDA growth and we introduced menu innovation and marketing campaigns that drove traffic at IHOP and established a pipeline of new menu items and innovative offerings that will rollout this year to applebee's.

John C. Cywinski: As we advanced our innovation agenda, we did say with the needs of our guests top of mind during the year. We found that guests limited their discretionary spend in response to economic pressures and that this value conscious behavior continued in the fourth quarter.

John C. Cywinski: We leveraged our resources and scale to drive revenue and EBITDA growth, and we introduced menu innovation and marketing campaigns that drove traffic at IHOP and established a pipeline of new menu items and innovative offerings that will roll out this year at Applebee's. As we advance our innovation agenda, we did so with the needs of our guests top of mind. During the year, we found that guests limited their discretionary spend in response to economic pressures and that this value-conscious behavior continued in the fourth quarter.

John C. Cywinski: While this certainly creates challenging and dynamic market conditions. It also allows us to leverage our expertise in delivering exceptional value.

John C. Cywinski: Our brands are known for delivering abundant value and we are able to meet the guest at the right intersections even in a price sensitive environment. We successfully built our limited time offerings and other offers throughout the year to ensure our promotions were highly visible and appealing to our guest.

John C. Cywinski: Why it's no surprise that our 2023 top performing campaigns included Applebee's dollar Rita and all you can eat wings Ni hops kids eat free and all you can eat pancakes, we expect that the consumer will remain cautious in 2024, and we're planning for it with a compelling calendar of L. T OS and value different promotions across our brands. We know are.

John C. Cywinski: Guests and our strategy is grounded in consumer insights that differentiate us in the market and deliver an exceptional experience for our guests.

John C. Cywinski: In addition to our focus on driving traffic. We will also place a particular emphasis on strengthening our development capabilities as we recently announced Scott Gladstone has stepped into the newly created role of Chief Development Officer and will coordinate our development strategy.

John C. Cywinski: While this certainly creates challenging and dynamic market conditions, it also allows us to leverage our expertise in delivering exceptional value. Our brands are known for delivering abundant value, and we are able to meet the guests at the right intersections even in a price-sensitive environment. We successfully built our limited-time offerings and other offers throughout the year to ensure our promotions were highly visible and appealing to our guests.

John C. Cywinski: We are thrilled to have Scott in this role he has a dine veteran who knows our business inside and out from his time at Applebee's as well as his work and strategy business analytics and consumer insights Scott will continue to serve as the leader of our international business I will discuss our development strategy and Scotts work to build out our development capabilities and more deep.

John C. Cywinski: That's why it's no surprise that our 2023 top-performing campaigns included Applebee's Dollarita and All-You-Can-Eat Wings and IHOP's Kids Eat Free and All-You-Can-Eat Pancakes. We expect that the consumer will remain cautious in 2024, and we're planning for it with a compelling calendar of LTOs and value-driven promotions across our brands. We know our guests, and our strategy is grounded in consumer insights that differentiate us in the market and deliver an exceptional experience for our guests. In addition to our focus on driving traffic, we'll also place particular emphasis on strengthening our development capabilities. As we recently announced, Scott Gladstone has stepped into the newly created role of Chief Development Officer and will coordinate our development strategy. We are thrilled to have Scott in this role.

John C. Cywinski: Later on in the call.

Speaker Change: So with that I'll walk through our key financial highlights.

Speaker Change: In 2023, we generated $256 million of EBITDA, which was up from $252 million in 2022 and.

Speaker Change: In Q4, our EBITDA was $62 $2 million compared to $57 million in the same quarter last year, excluding the refranchising of the 69 company owned Applebee's units in October of 2022, our revenues were up 5% for the full year and up 4% in Q4.

Speaker Change: IHOP achieved full year comp sales growth of three 5% on top of 2020 two's comp sales growth of five 8%.

Speaker Change: And for the quarter IHOP posted its 11th consecutive quarter of positive comp sales with a Q4 increase of one 6%.

Speaker Change: Applebee's delivered positive <unk>, 6% comp sales for the full year, maintaining momentum from 2020 two's comp sale growth of five 1%.

Speaker Change: And in Q4, Applebees reported a slight decline of negative <unk>, 5% and comp sales.

Speaker Change: And adjusted free cash flow was $103 $3 million in 2023, which was an improvement from 2020 twos adjusted free cash flow of $64 $6 million.

John C. Cywinski: He's a Dine veteran who knows our business inside and out from his time at Applebee's, as well as his work in strategy, business analytics, and consumer insights. Scott will continue to serve as the leader of our international business. I'll discuss our development strategy and Scott's work to build out our development capabilities in more detail later in the call. So with that, I'll walk through our key financial highlights. In 2023, we generated $256 million of EBITDA, which was up from $252 million in 2022. In Q4, our EBITDA was $62.2 million, compared to $57 million in the same quarter last year.

Speaker Change: Turning now to Applebee's the highlight for Applebee's in Q4 was the success of our dollar reader promotion, which tapped into the promotional mindset of our guest and drove strong comp sales and positive traffic in October, helping applebee's outperformed black box and traffic in Q4.

Speaker Change: Dollar read it was supported by strong social media pickup and more importantly, it was welcomed by our franchisees because it drove profitable sales and traffic in fact, 93% of dollar reader purchases had an additional menu item attached dialer.

Speaker Change: <unk> also expanded our demographic reach attracting a younger age group many of whom visited applebee's for the first time.

Speaker Change: We will continue to execute on this successful formula via our Q1 partnership with Bryan Cranston, and Aaron pause dose <unk> brand and the launch of three new Mezcal Margaritas, along with our $5 Tipsy Cupid Mucho and fixed dollar Blue Moon. This builds on the success of Davita and recognizes the promotional mindset of our guest as.

John C. Cywinski: Excluding the refranchising of the 69 company-owned Applebee's units in October of 2022, our revenues were up 5% for the full year and up 4% in Q4. IHOP achieved full-year comp sales growth of 3.5%, on top of 2022's comp sale growth of 5.8%. And for the quarter, IHOP posted its 11th consecutive quarter of positive comp sales with a Q4 increase of 1.6%. Applebee's delivered positive 0.6% comp sales for the full year, maintaining momentum from 2022's comp sale growth of 5.1%. And in Q4, Applebee's reported a slight decline of negative 0.5% in comp sales. And adjusted free cash flow was $103.3 million in 2023, which was an improvement from 2022's adjusted free cash flow of $64.6 million. I'm turning now to Applebee's.

Speaker Change: By 19% of transactions in Q4 were attributed to an L T O or promotion.

Speaker Change: Applebee's also has a full pipeline of new menu products, an exciting marketing partnerships. The culinary team has now tested over 200, new menu concepts and we're excited to start rolling out the top performing items to applebee's nationwide in Q2.

Speaker Change: We want to continue to be at the forefront of guests mines and in an increasingly crowded space being culturally relevant as essential which is why we will be increasing the number of on air weeks in our marketing calendar, our approaches to weave together, a strategic mix of promotions and new menu items and to drive traffic frequency in check.

Speaker Change: In Q4, we also took a big step forward improving our guests' digital experience in December Applebee's launched its new website and mobile App, which features a fresh design and offers guests the personalized and elevated ordering experience applebee's site and App now allow guests to pick up their orders using car side to go in restaurant pickup.

Speaker Change: Or have it delivered straight to their door.

Speaker Change: Since the launch of the new website and mobile App, we've seen a higher percentage of guests choosing to place their order digitally higher conversion rates and increased check averages compared to our prior site and app.

Speaker Change: Now while the off premise side of the business remains above pre pandemic levels. It has softened somewhat and we believe that there are opportunities to improve on our off premise offering and execution, we have new initiatives to drive this segment of our business.

John C. Cywinski: The highlight for Applebee's in Q4 was the success of our Dollarita promotion, which tapped into the promotional mindset of our guests and drove strong comp sales and positive traffic in October, helping Applebee's outperform BlackBox in traffic in Q4. Dollar Eater was supported by strong social media pickup, and, more importantly, it was welcomed by our franchisees because it drove profitable sales and traffic. In fact, 93% of Dollar Eater purchases had an additional menu item attached. Dollarita also expanded our demographic reach, attracting a younger age group, many of whom visited Applebee's for the first time.

Speaker Change: Our job in 'twenty 'twenty four is to build on this progress by delivering innovative menu technology and marketing to propel this iconic brand in an increasingly value driven market. We're optimistic about applebee's continued performance and expect to deliver positive growth for applebee's throughout 2024.

Speaker Change: Now moving onto IHOP in the fourth quarter, we delivered our 11th consecutive quarter of positive comp sales.

Speaker Change: Average weekly sales over $50000 for the first time in the last week of December and we opened 46, new IHOP restaurants domestically last year.

Speaker Change: <unk> is truly a growth brand and its success reflects our steady and consistent investments in menu and marketing innovation technology enhancements and the buildout of the loyalty program.

John C. Cywinski: We'll continue to execute on this successful formula via our Q1 partnership with Brian Cranston and Aaron Paul's Dos Hombres brand and the launch of three new Mezcal Margaritas, along with our $5 Tipsy Cupid Mucho and $6 Blue Moon. This builds on the success of Dollarita and recognizes the promotional mindset of our guests, as evidenced by 19% of transactions in Q4 were attributed to an LTO or promotion. Applebee's also has a full pipeline of new menu products and exciting marketing partnerships. The culinary team has now tested over 200 new menu concepts, and we're excited to start rolling out the top-performing items to Applebee's restaurants nationwide in Q2.

Speaker Change: To expand a bit more on the loyalty program when we embarked on the international Bank of pancakes. It was based on the theory that loyalty drives frequency and the results have surpassed our own goals last year, we enrolled over three 5 million new members, bringing our total loyalty members to 8 million people.

Speaker Change: Our dine in loyalty members are on average visiting nearly twice as often as nonmembers and they spend on average 5% more than non loyalty members. The IHOP App has been downloaded 8000 times per day and Newsweek for the second year in a row recognized our loyalty program is one of the best in America.

Speaker Change: I believe that there is much more upside here notwithstanding the quick growth of the program loyalty only accounts for approximately six 5% of total sales for IHOP up from less than 3% in 2022.

John C. Cywinski: We want to continue to be at the forefront of guests' minds and, in an increasingly crowded space, being culturally relevant is essential, which is why we will be increasing the number of on-air weeks in our marketing calendar. Our approach is to weave together a strategic mix of promotions, new menu items, and drive traffic, frequency, and quality. In Q4, we also took a big step forward in improving our guests' digital experience. In December, Applebee's launched its new website and mobile app, which features a fresh design and offers guests a personalized and elevated ordering experience. Applebee's site and app now allow guests to pick up their orders using Car Site-to-Go, in-restaurant pickup, or have it delivered straight to their door.

Speaker Change: We're just beginning to scratch the surface in terms of the loyalty programs ability to drive incremental traffic and sales.

Speaker Change: And we're also starting to learn the purchasing habits of our loyalty members that will lead to more personalized marketing.

Speaker Change: 2023 was also an important year for IHOP, some menu with the knowledge that 70% of our sales are breakfast items, including at dinner, we added the new categories of biscuits, and Benedix and free fresh the French toast and crepes categories.

Speaker Change: These additions all sustain their performance during the fourth quarter and both the menu items and the visual design of the new menu where industry Award winners.

Speaker Change: On the marketing.

Speaker Change: Perhaps omnichannel approach to marketing connect with guests focusing on limited time promotions and the basics of great value. For example, our fourth quarter partnership with Warner Brothers Walker included a film inspired limited time menu that enhanced brand awareness and drove sales in fact, IHOP outperformed black box in family dining in comp sales.

John C. Cywinski: Since the launch of the new website and mobile app, we've seen a higher percentage of guests choosing to place their orders digitally, higher conversion rates, and increased check averages compared to our prior site and app. Now, while the off-premise side of the business remains above pre-pandemic levels, it has softened somewhat, and we believe that there are opportunities to improve on our off-premise offering and execution. We have new initiatives to drive this segment of our business. Our job in 2024 is to build on this progress by delivering innovative menus, technology, and marketing to propel this iconic brand in an increasingly value-driven market. We're optimistic about Applebee's continued performance and expect to deliver positive growth for Applebee's throughout 2024. Now, moving on to IHOP.

Speaker Change: Four out of five weeks during Q4 as Wonka campaign.

Speaker Change: On the technology front, 92% of our IHOP restaurants have implemented the new Pos system and server tablets. Our preliminary data shows that franchisees that are fully enabled their server tablets are experiencing a higher beverage attachment rate improvement in ticket time higher average check and higher tips for servers.

Speaker Change: Last year IHOP also made significant strides in advancing our consumer packaged good program. According to Kraft Heinz our IHOP coffee became one of the fastest growing new launches and dry coffee over indexing with Gen Z and millennials momentum continues to grow as marketing support and social media ramp up.

Speaker Change: Additional sizes are being added in Q1, and new flavor innovations and formats are on track for Q2.

Speaker Change: The new to market Isooctane offer cafe style beverages at home, making inroads with younger consumers.

John C. Cywinski: In the fourth quarter, we delivered our 11th consecutive quarter of positive comp sales, average weekly sales exceeded $50,000 for the first time in the last week of December, and we opened 46 new IHOP restaurants domestically last year. IHOP is truly a growth brand, and its success reflects our steady and consistent investments in menu and marketing innovation, technology enhancements, and the build-out of the loyalty program. To expand a bit more on the loyalty program, when we embarked on the International Bank of Pancakes, it was based on the theory that loyalty drives frequency, and the results have surpassed our own goals. Last year, we enrolled over 3.5 million new members, bringing our total loyalty members to 8 million people.

Speaker Change: <unk> gained exclusive distribution of the new IHOP ice law stays in Walmart in 2023, and we launched nationally in 2024.

Speaker Change: Overall I have solidified its market leadership last year and we expect this momentum to continue in 2024 supported by ongoing innovation and operational enhancements.

Speaker Change: Turning now to fuzzies. The highlight here of course is that the integration process was completed last year and fuzzy is now set up to benefit from dine shared resources.

Speaker Change: We're excited about the cross pollination underway as existing <unk> portfolio of franchisees or looking to opportunities across all three brands in the dine family portfolio.

Speaker Change: Alongside integration, we've also been applying IHOP and applebee's tried and tested insights and expertise, including menu optimization and innovation and analytics to improve pricing and to drive smarter data informed decisions.

Speaker Change: We're pleased that Fuzzies L. T OS last year, such as the Margarita shrimp Taco chicken, a latte and its newest barilla Taco Bowl and queso, we're the best in the brand's history already in Q1 Fuzzies has launched its new traditional Baja fish Taco and premium Baja menu category. This is the first step of bringing the Baja.

John C. Cywinski: Our Dine-In loyalty members are, on average, visiting nearly twice as often as non-members, and they spend, on average, 5% more than non-loyalty members. The IHOP app is downloaded 8,000 times per day, and Newsweek, for the second year in a row, recognized our loyalty program as one of the best in America. I believe that there is much more upside here. Notwithstanding the quick growth of the program, loyalty only accounts for approximately 6.5% of total sales for IHOP, up from less than 3% in 2022. We're just beginning to scratch the surface in terms of the loyalty program's ability to drive incremental traffic and sales. And we're also starting to learn the purchasing habits of our loyalty members, which will lead to more personalized marketing. 2023 was also an important year for IHOP's menu. With the knowledge that 70% of our sales are breakfast items, including at dinner, we added new categories of biscuits and benedicts and refreshed the French toast and crepe categories.

Speaker Change: Program to life in 2024, starting Q1 'twenty 'twenty four we will provide more details on <unk> performance.

Speaker Change: And finally, our international Division had a strong year of growth in 2023 with a total of 23 openings for the year, resulting in 11 net new restaurants.

Speaker Change: Our IHOP and Applebee's dual branded prototype continues to perform well in its markets and we opened our eighth dual branded restaurant in January and Leone, Mexico, which represents a compelling opportunity for further growth since Mexico is one of our largest international markets and with that I'll hand, the call over to Vince.

Vince: Thank you John.

Vince: Overall, we delivered a solid performance in 2023. In addition to the significant operational gains we generated $103 million of free cash flow three consecutive years of positive comp sales at Applebee's and continued sales momentum of IHOP, we exceeded our EBITDA guidance.

Vince: Reduced leverage to four two turns and we have successfully completed the refinancing of our class a two one notes while continuing to return capital to shareholders.

Vince: Our fourth quarter total revenues were $206 $3 million, which declined 1% on a year over year basis, primarily due to the Refranchising of the 69 company operated Applebee's units in October of 2022.

John C. Cywinski: These editions all sustained their performance during the fourth quarter, and both the menu items and the visual design of the new menu were industry award winners. Under marketing, IHOP's omni-channel approach to marketing connects with guests, focusing on limited-time promotions and the basics of great value. For example, our fourth-quarter partnership with Warner Brothers, Wonka, included a film-inspired limited-time menu that enhanced brand awareness and drove sales. In fact, IHOP outperformed Black Box in family dining and comp sales four out of five weeks during Q4's Wonka campaign. On the technology front, 92% of our IHOP restaurants have implemented the new POS system and server tablets.

Vince: Excluding the Refranchising fourth quarter total revenues would have been up 4%.

Vince: For the full year, we generated $831 1 million in total revenues, which was 9% lower than prior year again, primarily due to the refranchising.

Vince: Excluding the Refranchising revenues increased 5% due to the positive comp sales at IHOP and Applebee's and four years' revenue contribution from Fuzzies, which we acquired in December of 2022.

Vince: If we exclude advertising revenues franchise revenues in Q4 increased six 5% year over year and eight 7% for the full year.

Vince: Rental segment revenues for the fourth quarter of 2023 remained flat at $29 5 million compared to the same quarter of 2022.

John C. Cywinski: Our preliminary data shows that franchisees that have fully enabled their server tablets are experiencing a higher beverage attachment rate, improvement in ticket time, higher average check, and higher tips for servers. Last year, IHOP also made significant strides in advancing our consumer packaged goods program. According to Kraft Heinz, our IHOP coffee became one of the fastest growing new launches in dry coffee, over-indexing with Gen Z and millennials.

Vince: G&A for the fourth quarter of 2023, it was $55 million compared to $58 8 million for the same quarter of last year.

Vince: We ended the year with $198 $1 million of G&A expenses.

Vince: From $197 million last year due to cost, resulting from the inclusion of fuzzies operations stopping of the IHOP flip initiative.

Vince: Increases in compensation related and software maintenance costs offset by the Refranchising of the company operated restaurants and transaction costs related to Fuzzies acquisition in 2022.

John C. Cywinski: Momentum continues to grow as marketing support and social media ramp up. Additional sizes are being added in Q1, and new flavor innovations and formats are on track for Q2. The new-to-market iced lattes offer cafe-style beverages at home, making inroads with younger consumers.

Vince: We generated consolidated adjusted EBITDA of $62 $2 million this quarter compared with last year's $57 million quarterly results.

Vince: Our consolidated adjusted 2023 EBITDA of $256 $4 million was ahead of our guidance and up from last year's $251 $9 million.

Vince: Finally, adjusted earnings per diluted share for the fourth quarter and full year were $1 40 per share and $6 65 per share respectively.

John C. Cywinski: Kraft Heinz gained exclusive distribution of the new IHOP ice lattes in Walmart in 2023, and we launched them nationally in 2024. Overall, IHOP solidified its market leadership last year, and we expect this momentum to continue in 2024, supported by ongoing innovation and operational enhancement. Turning now to Fuzzies, the highlight here, of course, is that the integration process was completed last year, and Fuzzies is now set up to benefit from Dine's shared resources. We're excited about the cross-pollination underway as existing Dine portfolio franchisees are looking for opportunities across all three brands in the Dine family portfolio. Alongside integration, we've also been applying IHOP and Applebee's tried and tested insights and expertise, including menu optimization and innovation, and analytics to improve pricing and to drive smarter data-informed decisions. We're pleased that Fuzzy's LTOs last year, such as the Margarita Shrimp Taco, Chicken Elote, and its newest Burrito Taco Bowl and Queso, were the best in the Already in Q1, Fuzzy's has launched its new traditional Baja Fish Taco and Premium Baja Menu category.

Vince: Our pacing last fourth quarter's dollars 34 per share in 2020, twos $6 20 per share.

Vince: Despite higher interest expense from our refinancing where you increase EPS, primarily due to an increase in segment profit and the benefit of our share repurchases.

Vince: Turning to our cash flow statement balance sheet and strategic usage of capital.

Vince: We generated adjusted free cash flow of $103.3 million in 2023.

Vince: This compares favorably to $64.6 million for 2022.

Vince: Our full year 2023 cash flows from operations came in at $131 $1 million compared with $89 $3 million in the prior year.

Vince: The increase was primarily due to a favorable change in working capital and an increase in segment profit.

Vince: Capex for 2023 was $37 $2 million compared to a $35 $3 million for 2022.

Vince: Our 'twenty to 'twenty three capex number does not reflect the $11 million of Ti reimbursement that we received which would have lowered our effective capex.

Vince: We ended the fourth quarter with total unrestricted cash of $146 million.

Vince: This compares favorably to unrestricted cash of $98 million at the end of the third quarter.

Vince: Our leverage ratio also improved by <unk> four turns due to a combination of EBITDA growth and strong cash generation.

John C. Cywinski: This is the first step of bringing the Baja program to life in 2024. Starting in Q1 2024, we will provide more details on Fuzzy's performance. And finally, our international division had a strong year of growth in 2023, with a total of 23 openings for the year, resulting in 11 net new restaurants. Our IHOP and Applebee's dual-branded prototype continues to perform well in its markets, and we opened our eighth dual-branded restaurant in January in Leon, Mexico, which represents a compelling opportunity for further growth, since Mexico is one of our largest international markets. And with that, I'll hand the call over to Vance.

Vince: Which is a testament to the strength and stability of <unk> business model in challenging environments.

Vince: Regarding capital allocation, we continue to remain disciplined.

Vince: We returned $58 million of capital to shareholders in 2023 through dividends and stock buybacks.

Vince: In addition to that we return capital to bondholders of $151.7 million through debt buybacks and the refinancing.

Vince: We know what that capital return is important to our shareholders and we continue to evaluate the optimal mix of dividends and buybacks. While also ensuring we invest in our business for growth and maintain a healthy balance sheet.

Vince: In 2023, <unk> system sales reached over $7.9 billion, demonstrating the scale that our brands collectively have.

Vance: Thank you, John. Overall, we delivered a solid performance in 2023. In addition to the significant operational gains, we generated $103 million of free cash flow, three consecutive years of positive comp sales at Applebee's, and continued sales momentum at IHOP. We exceeded our EBITDA guidance, reduced leverage to 4.2 turns, and we have successfully completed the refinancing of our Class A21 notes while continuing to return capital to shareholders. Our fourth quarter total revenues were $206.3 million, which declined 1% on a year-over-year basis, primarily due to the refranchising of the 69 company operated Applebee's units in October of 2022. Excluding the re-franchising, fourth quarter total revenues would have been up 4%. For the four years, we generated $831.1 million in total revenues, which was 9% lower than the prior year, again, primarily due to the re-franchising.

Vince: <unk> 2023, same restaurant sales increased <unk>, 6% year over year.

Vince: Applebee system sales results have remained fairly steady in 2023 as average weekly sales were $54000, including close to $12000 from off premise or about 22% of total sales of which 11 percentage from to go and 11% from delivery.

Vince: I have system sales continued their positive momentum in 2023 with same restaurant sales growth of three 5%.

Vince: Average weekly sales in 2023 were a little over $38000, including approximately $8000 from a premise or 21% of total sales of which 9% is for them to go and 12% is from delivery.

Vince: On the commodities front applebee's Q4 commodity costs improved by two 9% versus a year ago, and I hops commodity costs improved by two 3% versus 2022.

Vince: Our supply chain co op C. S. C. S is expecting pricing in 2020 for applebee's to be flat to low single digit deflation, indicating further potential tailwind for our franchisees.

Vince: <unk>, we're expecting pricing to remain steady in the range of flat to low single digit inflation.

Vince: Yeah.

Vince: In partnership with C. S. Yes, we continue to leverage our scale and make progress on our cross functional restaurant profitability initiative.

Vance: Excluding the re-franchising, revenues increased 5% due to the positive comp sales at IHOP and Applebee's and four years of revenue contribution from Fuzzy's, which we acquired in December of 2022. If we exclude advertising revenues, franchise revenues in Q4 increased 6.5% year-over-year and 8.7% for the fall year. Rental segment revenues for the fourth quarter of 2023 will remain flat at $29.5 million compared to the same quarter of 2022.

Vince: In 2023, we implemented several projects with the Applebee's and IHOP franchisees that resulted in about $53 million in cash.

Vince: Annualized savings for our franchisees.

Vince: We're pleased with the results of this initiative and continuing to actively identify new savings ideas for the future.

Vince: Based on data we've collected from the franchisees, while labor wages have gone up over the last couple of years restaurants staffing has improved and we're seeing labor as a percent of sales at levels similar to pre COVID-19 levels at both brands.

Vince: On the food side food as a percent of sales has declined from its peak in 2022 and is improving.

Vance: G&A for the fourth quarter of 2023 was $50.5 million, compared to $58.8 million for the same quarter of last year. We ended the year with $198.1 million of G&A expenses, up from $190.7 million last year due to costs resulting from the inclusion of Fuzzy's operations, the stopping of the IHOP Flip initiative, and increases in compensation-related and software maintenance costs offset by the refranchising of the company-operated restaurants and transaction costs related to Fuzzy's acquisition in 2022. We generated consolidated EBITDA of $62.2 million in this quarter compared with last year's $57 million quarterly result. Our consolidated adjusted 2023 EBITDA of $256.4 million was ahead of our guidance and up from last year's $251.9 million. Finally, adjusted earnings per diluted share for the fourth quarter and full year were $1.40 per share and $6.65 per share, respectively.

Vince: But it is still elevated relative to pre COVID-19 levels at both brands by approximately 50 bps.

Vince: However, we continue to leverage the purchasing power of our brands co op C. S. C S, which continuously evaluates cost savings from market basket to equipment.

Vince: As mentioned, we expect food cost to stabilize in 2024 and will continue to support our franchisees to drive additional efficiencies.

Vince: Lastly to recap Q4, and full year development numbers Applebees had net domestic closings of 33 restaurants in 2023.

Vince: IHOP opened 46 restaurants domestically in 2023, 17 of which four in Q4.

Vince: For the year IHOP had net domestic openings of 19 restaurants in 2023.

Vince: And this brings me to a discussion of our full year guidance for 'twenty 'twenty four.

Vince: As John mentioned, we're at reintroducing comp sales into our guidance in.

Vince: In 2024, we're expecting applebee's domestic system wide comp sales to range between zero to 2%.

Vince: We're expecting IHOP domestic system wide comp sales to range between one and 3%.

Vince: We're forecasting a G&A range of $200 million to $210 million, including noncash stock based compensation and depreciation of approximately $35 million.

Vance: Outpacing last year's $1.34 per share and 2022's $6.20 per share, despite higher interest expense from our refinancing, we increased EPS primarily due to an increase in segment profit and the benefit of our share repurchases. Turning to our cash flow statement, balance sheet, and strategic usage of capital, we generated a just-free cash flow of $103.3 million in 2023. This compares favorably to $64.6 million for 2022. Our full year 2023 cash flows from operations came in at $131.1 million compared with $89.3 million in the prior year.

Vince: On EBITDA, we're guiding to a range of $255 million to $265 million.

Vince: We anticipate 2020 for capex spend to be in the range of approximately $50 million to $20 million.

Vince: On 2020 for development, we're expecting 25 to 35 net fewer domestic applebee's restaurants, and 15 to 25 net new domestic IHOP restaurants.

Vince: With our new development strategy in place, we feel confident in our ability to continue to open up new restaurants, and scaled the footprint of our brands over time.

Vince: Now I'll turn the call back to John to further discuss our development strategy and to close out today's earnings John Thanks.

John C. Cywinski: Thanks, So much Vance I'll wrap up by speaking a bit more about our development efforts. We are in the fortunate position that as a result of our healthy balance sheet strong cash flow generation and prudent use of capital we are able to enhance our strategy and execution on development.

Vance: The increase was primarily due to a favorable change in working capital and an increase in segment profit. CapEx for 2023 was $37.2 million compared to $35.3 million for 2022. Our 2023 CapEx number does not reflect the $11 million of TI reimbursement that we received, which would have lowered our effective CapEx. We ended the fourth quarter with total unrestricted cash of $146 million.

John C. Cywinski: As I said at the start of the call. We believe that there is plenty of opportunity to grow the global footprint of our three brands. However development is not a one size solution for our brands nor for our franchisees our brands each have different starting points and areas of focus specifically IHOP has a track record of growth upon which to build.

John C. Cywinski: Applebee's focuses on conversions and developing a prototype with an ROI that will return the brand to net unit openings.

John C. Cywinski: As the largest brands in their respective segments by unit count both brands are focused on infill opportunities. In fact this week, we reached an agreement with our largest franchisee the Flynn group, reflecting their plans and goals to develop 25 restaurants over the next seven years with Fuzzies. Our approach is to recruit new franchisees to develop new markets.

Vance: This compares favorably to unrestricted cash of $98 million at the end of the third quarter. Our leverage ratio also improved by 0.4 turns due to a combination of EBITDA growth and strong cash generation, which is a testament to the strength and stability of Dine's business model in challenging environments. Regarding capital allocation, we continue to remain disciplined. We will return $58 million of capital to shareholders in 2023 through dividends and stock buyback. In addition to that, we will return capital to bondholders of $151.7 million through debt buybacks and refinancing.

John C. Cywinski: I'll also tapping into our IHOP and Applebee's franchisee network.

John C. Cywinski: This approach is the same in our international markets attract new franchisees and also leverage the dual brand option.

John C. Cywinski: Similarly, our franchisees also have different needs. Some are looking for different forms of financial support others may need help finding real estate opportunities others need assistance with the permitting and construction process. While some may desire help with the Preopening marketing, we will address the specific needs in its target and analytical way to create profitable growth for dine.

John C. Cywinski: And our franchisees.

John C. Cywinski: Yes.

John C. Cywinski: Lastly, it's important to note that we're funding the investment in development by reallocating costs within <unk> existing cost structure and not by increasing overall spend.

Vance: We know that capital return is important to our shareholders, and we continue to evaluate the optimal mix of dividends and buybacks, while also ensuring we invest in our business for growth and maintain a healthy balance sheet. In 2023, Dine's system sales reached over $7.9 billion, demonstrating the scale that our brands collectively have. Applebee's 2023 same restaurant sales increased 0.6% year over year. Applebee's system sales results have remained fairly steady in 2023 as average weekly sales were $54,000, including close to $12,000 from off-premise, or about 22% of total sales, of which 11% is from to-go and 11% is from delivery. IHOP system sales continued their positive momentum in 2023 with same restaurant sales growth of 3.5%. Average weekly sales in 2023 were a little over $38,000, including approximately $8,000 from off-premise, or 21% of total sales, of which 9% is from to-go and 12% is from delivery.

John C. Cywinski: So to wrap up I want to thank our franchisees and team members for a strong performance in 2023 and reiterate my confidence in the outlook of our business Dine is uniquely positioned and the attributes that make us so our asset light model, our iconic brands our scale and our expertise are all the more impactful in the currency.

John C. Cywinski: Economic environment.

John C. Cywinski: In an environment in which our guests remain price sensitive our brands are known for delivering abundant value. We're further strengthening our recipe for growth in 2024, with our methodical development strategy that will generate sustainable value over the long term for our shareholders and franchisees and with that I will return the call to the operator to open up for question.

John C. Cywinski: <unk>.

Speaker Change: Thank you.

John C. Cywinski: As a reminder to ask a question.

John C. Cywinski: Please press star one one on your telephone and wait for your name.

John C. Cywinski: To withdraw your question. Please press star one again please.

John C. Cywinski: Please standby, while we compile the Q&A roster.

John C. Cywinski: Our first question.

Speaker Change: Comes from the line.

John C. Cywinski: Jeff Bernstein from Barclays. The floor is now yours.

Jeffrey A. Bernstein: Great. Thank you very much couple of questions first just thinking about the comp trends.

Jeffrey A. Bernstein: I'm wondering if you could talk about whether there was any change in trajectory through the quarter for Q I should say on the first quarter quarter to date, what are you seeing any change in consumer behavior. I know you had mentioned that it's definitely a more challenging environment.

Jeffrey A. Bernstein: And I think you mentioned you expect positive comps in applebee's throughout the year I wasn't sure whether that was a reference to reversing the negative trend and therefore getting back to positive even in the first quarter. Despite the weather.

Jeffrey A. Bernstein: Follow up.

Jeffrey A. Bernstein: Sure Good morning, Jeff It's Jon Thanks for the question.

Vance: On the commodities front, Applebee's Q4 commodity costs improved by 2.9% versus a year ago, and IHOP's commodity costs improved by 2.3% versus 2022. Our supply chain co-op, CSCS, is expecting pricing in 2024 at Applebee's to be flat to low single-digit deflation, indicating further potential tailwinds for our franchisees. And at IHOP, we're expecting pricing to remain steady in the range of flat to low single-digit inflation.

Jon: And I'll address the first question about the comp trends in General and then Tony will talk to you about the applebee's trends specifically.

Jon: So.

Speaker Change: You all know many of the people.

Tony Marone: Competitors are the same thing the trends in January where top right weather weather took a hit a ticket to took its toll on all of us in January but since then.

Tony Marone: The weather eased at the end of January through February we've seen traffic improving each week throughout February.

Tony Marone: You're in the right direction.

Tony Marone: And Tony do you want to address Applebees specifically.

Tony Marone: Yes.

Tony Marone: Jeff.

Tony Marone: Confidence in our plan for the year.

Vance: In partnership with the CSES, we continue to leverage our scale and make progress on our cross-functional restaurant profitability initiative. In 2023, we implemented several projects with the Applebee's and IHOP franchisees that resulted in about $53 million in annualized savings for our franchisees. We're pleased with the results of this initiative and continue to actively identify new savings ideas for the future.

Tony Marone: That confidence is.

Tony Marone: As is rooted in the performance of our brand over the last three years, you know as we said from the outset, we've delivered positive comp sales in 'twenty, one 'twenty, two and 23, so I think that bodes well for for 'twenty four as John mentioned there.

Tony Marone: There were some headwinds in January but we are looking to repeat the success of 23% and 24, our plan centers around what we believe are three really important drivers of our business.

Tony Marone: We've got a really strong promotional strategy with new disruptive campaigns and aggressive value. We're rolling out much needed menu innovation starting in Q2. This year and there is a renewed focus on our off premise business centered on improving our operational efficiency and marketing tactics.

Vance: Based on data we've collected from the franchisees, while labor wages have gone up over the last couple of years, restaurant staffing has improved, and we're seeing labor as a percent of sales at levels similar to pre-COVID levels at both brands. On the food side, food as a percent of sales has declined from its peak in 2022 and is improving, but it is still elevated relative to pre-COVID levels at both brands by approximately 50 bps. However, we continue to leverage the purchasing power of our brand's co-op, CSCS, which continuously evaluates cost savings from the market basket to equipment. As mentioned, we expect food costs to stabilize in 2024 and will continue to support our franchisees to drive additional efficiencies. Lastly, to recap Q4 and four-year development numbers, Applebee's had net domestic closings of 33 restaurants in 2023. IHOP opened 46 restaurants domestically in 2023, 17 of which were in Q4. For the year, IHOP had net domestic openings of 19 restaurants in 2023.

Tony Marone: We execute against those initiatives.

Tony Marone: Another really strong year of comp sales growth.

Speaker Change: Understood and then John as we've talked about development.

John C. Cywinski: Just curious your thoughts on a return to Applebee's net unit growth, we know theres definitely been some franchisee headwinds I'm assuming there is.

John C. Cywinski: Some pushback too.

John C. Cywinski: Net unit growth.

John C. Cywinski: The U S system is fairly mature.

John C. Cywinski: Expect more of it.

John C. Cywinski: Disciplined.

John C. Cywinski: Which to more international White space opportunities I know you talked about the dual brand.

Speaker Change: I'm just trying to size up when you internally expect applebee's to get back to net unit growth and whether or not that international could become a greater leverage going forward.

Speaker Change: Sure. Thanks, Dan.

Speaker Change: So for Applebee's, our goal is absolutely.

Speaker Change: It will return to net unit growth.

Speaker Change: The World has changed the world today is different than it was three years ago. When we first started talking about that.

Speaker Change: Particularly because of the cost to build an applebee's.

Speaker Change: And so we're very focused right now and Tony can offer more detail on.

Speaker Change: Assembling a prototype for applebee's that has an ROI that our franchisees are looking for we're doing that with them together and.

Vance: And this brings me to a discussion of our full-year guidance for 2024. As John mentioned, we're reintroducing comp sales into our guidance. In 2024, we're expecting Applebee's domestic system-wide comp sales to range between 0 to 2 percent. We're expecting IHOP's domestic system-wide comp sales to range between 1 and 3 percent.

Speaker Change: That work is underway applebee's is focusing on conversion and that's an important pivot for the brand and most importantly, we mentioned in the scripted remarks that.

Speaker Change: We've just.

Speaker Change: Agreed this week to a new development deal with wind group for 25 restaurants over the next seven years, which is a great indication of our largest franchisees commitment to the brand.

Speaker Change: <unk> commitment to and belief in the future. So we've got work to do to build the pipeline or applebee's over the next couple of years to return the brands that net unit growth when it comes to international.

Vance: We're forecasting a GNA range of $200 million to $210 million, including non-cash stock-based compensation and depreciation of approximately $35 million. On EBITDA, we're guiding to a range of $255 million to $265 million. We anticipate 2024 CAPEX spend to be in the range of approximately $50 million to $20 million on 2024 development.

Speaker Change: That's where the white spaces for both brands and what we're really pioneering internationally is this dual branded concept. We just opened the dual brand restaurant and we owned Mexico outside Mexico City. The concept there is a shared back of house.

Speaker Change: Combined and blended upfront in house with the two brands.

Speaker Change: And what we're seeing on average is that the revenues for the same sized box is one brand to the other is to excess or more what it was before what you would expect because we with the two brands can address all four day part that's a big innovation that we're nurturing overseas and that our intent is to eventually bring to the U S. When we find the right opportunity.

John C. Cywinski: We're expecting 25 to 35 net fewer domestic Applebee restaurants and 15 to 25 net new domestic IHOP restaurants. With our new development strategy in place, we feel confident in our ability to continue to open up new restaurants and scale the footprint of our brands over time. Now, I turn the call back to John to further discuss our development strategy and to close out today's earnings.

Speaker Change: And just lastly.

Speaker Change: I think you mentioned.

Speaker Change: Talking about the optical mix from a cash usage perspective.

Speaker Change: Sure pullback and then the dividend yield is now in the four 5% range, that's well above your casual dining peers I'm, just wondering whether youre getting credit for such a yield there where their money might be better spent buying back more shares at the valuation.

John C. Cywinski: Thanks so much, Vance. I'll wrap up by speaking a bit more about our development efforts. We are in the fortunate position that, as a result of our healthy balance sheet, strong cash flow generation, and prudent use of capital, we are able to enhance our strategy and execution on development. As I said at the start of the call, we believe that there is plenty of opportunity to grow the global footprint of our three brands. However, development is not a one-size-fits all solution for our brands, nor for our franchisees.

Speaker Change: Looks like you're contemplating.

Speaker Change: I think that as well, but just curious your thoughts on whether.

Speaker Change: Are you thinking about leverage in 'twenty, four and that Youre in the low four times range, we would expect that to go from here. Thank you.

Speaker Change: Thanks for your question, Jeff our capital allocation priorities remain the same so right now we're focused on protecting and strengthening our balance sheet, while returning capital to shareholders at the same time.

Speaker Change: And deals that you referenced.

Speaker Change: Kept our dividend payout ratio of roughly the same and the dividend yield is more of them.

John C. Cywinski: Our brands each have different starting points and areas of focus. Specifically, IHOP has a track record of growth upon which to build. Applebee's focus is on conversions and developing a prototype with an ROI that will return the brand to net unit openings. As the largest brands in their respective segments by unit count, both brands are focused on infill opportunities. In fact, this week, we reached an agreement with our largest franchisee, the Flynn Group, reflecting their plans and goals to develop 25 restaurants over the next seven years. With Fuzzies, our approach is to recruit new franchisees to develop new markets, while also tapping into our IHOP and Applebee's franchisee network. This approach is the same in our international markets.

Speaker Change: A reflection of where the stock is trading but but.

Speaker Change: We are focused on the optimal mix between two and we will do buybacks as we've done.

Speaker Change: Opportunistically and.

Speaker Change: Understand how important capital returns to our shareholders.

Speaker Change: <unk>.

Speaker Change: Our $200 million of capital return in the past two years, and we pay down our debt.

Speaker Change: $200 million, so we'll continue that trajectory.

Speaker Change: Meaningful change to how we think about it.

Speaker Change: I understand the importance of returning capital.

Speaker Change: Understood. Thank you so much.

Speaker Change: Thank you one moment at that preparing the next question.

Speaker Change: Our next question comes from the liner.

UBS: From UBS. Your line is now open.

UBS: Great. Thanks, guys.

UBS: One curious if you could speak a little more to the customer reception to the value that you had in the fourth quarter and maybe the value incidence at Applebee's I think you mentioned I think it was 19% of transactions were attributed to <unk> or promos can you just remind us where that has been historically and then just on the stickiness maybe of those value occasions.

John C. Cywinski: attract new franchisees and also leverage the dual brand option. Similarly, our franchisees also have different needs. Some are looking for different forms of financial support.

UBS: I think you talked to the dollar being new customers and somewhat sticky. So just anything more there on on that stickiness on kind of essentially keeping some of those customers coming in for all for the value occasions.

John C. Cywinski: Others may need help finding real estate opportunities, others need assistance with the permitting and construction process, while some may desire help with pre-opening marketing. We will address these specific needs in a targeted and analytical way to create profitable growth for Dine and our franchisees. Lastly, it's important to note that we're funding the investment and development by reallocating costs within Dine's existing cost structure and not by increasing overall spend. So to wrap up, I want to thank our franchisees and team members for a strong performance in 2023 and reiterate my confidence in the outlook of our business. Dine is uniquely positioned, and the attributes that make us so, our asset-light model, our iconic brands, our scale, and our expertise are all the more impactful in the current economic environment.

Speaker Change: Yes, Dennis Thanks, It's John I'll start as well and then Tony will ask you to give a little bit more detail.

John C. Cywinski: At the highest level 2020 for it from our perspective for both brands remains a promotion driven environment and our guests are attracted to that so we view 2024 is a fight for market share.

John C. Cywinski: We haven't we have seen that our guests have been remarkably resilient in 2023 as well in 2004 in terms of their intent to continue to dine out, but what we're also seeing from consumer behavior perspective is that there they are making choices about where and when to dine out they are dining out a little bit less often and when they R&R.

Speaker Change: Restaurants. They are finding are our value portion of our menus, whether it's the everyday value portion or the <unk> that you alluded to for for Applebee's that 19% is up it's up about two two points over earlier quarters, but not but not drastically.

Speaker Change: Tony can you add some more color about applebee's approach for the year.

John C. Cywinski: In an environment in which our guests remain price sensitive, our brands are known for delivering abundant value. We're further strengthening our recipe for growth in 2024 with our methodical development strategy that will generate sustainable value over the long term for our shareholders and franchisees. And with that, I will return the call to the operator to open up for questions. Thank you. As a reminder, to ask a question, please press star one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again.

Tony Marone: Yes, so a couple of points one of the questions. One of the points you asked about was the value menu with the Johnny answered that but.

Tony Marone: Our value menu continues to perform well that the share of tickets has remained fairly stable in.

Tony Marone: In 2023.

Tony Marone: Tends to go up a little bit when we promote.

Tony Marone: Really abundant value like some of our all you can eat campaigns you also asked about.

Tony Marone: Dollar Rita Delgado was a standout success right.

Speaker Change: There is a level of stickiness that's associated to it our guests absolutely love the promotion.

Speaker Change: Our franchisees more importantly is thrilled with it.

Speaker Change: We are we sold more than six 3 million dollar readers in the month of October that's about 135 per restaurant per day. The ticket order incidence was higher than we originally launched it.

Operator: Please stand by while we compile the Q&A. Our first question comes from the mind of Jeff Bernstein from Barclay. The floor is now: Great, thank you very much. A couple of questions. The first is just thinking about the cop trend.

Speaker Change: Back in 2017, so from a brand perspective dollar reader exceeded all of our internal targets, whether it was valued draw frequency.

Speaker Change: It exceeded our internal product scores.

Jeffrey A. Bernstein: I'm wondering if you could talk about whether there was any change in trajectory through the quarter, 4Q, I should say, or the first quarter, quarter to date. Are you seeing any change in consumer behavior? I know you mentioned that challenging environment.

Speaker Change: And then more importantly, it exceeded our financial targets it drove incremental sales incremental tickets.

Speaker Change: The all important franchisee margin dollars.

Speaker Change: Yeah, and Tony speaking of franchise the margin dollars, it's a great number to share right, which is that 94% of those salaries tickets included another menu item, which is exactly what our franchisees are looking for in a promotion like that.

Jeffrey A. Bernstein: And I think you mentioned you expect positive comps at Applebee's throughout the year. Wasn't sure whether that was a reference to reversing the negative trend and therefore getting back to positive, first quarter, despite the weather, and then had a follow-up, Sure, good morning, Jeff, it's John. Thanks for the question.

Speaker Change: Correct.

Speaker Change: Great very helpful guys and then just one other I think you've talked about increasing number of.

Speaker Change: Our weeks on air.

Speaker Change: Just curious if anything as it relates to 'twenty four I forgot the timeframe you you're free.

Speaker Change: Same that out, but what 24, it looks like maybe versus prior years from a marketing and number of weeks on air perspective, if anything there too to share to highlight the things Youre doing this year. Thank you. That's a good question for Tony.

John C. Cywinski: And I'll address the first question about the comp trends in general, and then Tony will talk to you about the Applebee's trend specifically. So, you know, you all have known many of the people that are competitors for the same thing. The trends in January were tough, right? Weather took a hit, took its toll on all of us in January.

Tony Marone: Yes, absolutely I'm not going to go into too much detail on our promotional strategy.

Tony Marone: But we revisit our marketing spend annually and it's relatively flat this year versus 2023.

Tony Marone: Certainly spending more we're just spreading the total spend spend across more windows. So our strategy our promotional strategy for the year is allowing us to add additional on air advertising, while we still maintain our reach and frequency goals youll see an uptick and more digital.

John C. Cywinski: But since then, as the weather eased at the end of January and through February, we've seen traffic improving, you know, each week throughout, hanging, heading in the right direction, and Tony, do you want to address Applebee's specifically? Yeah, so Jeff, we're confident in our plan for the year. That confidence is rooted in the performance of our brand over the last three years. As we said from the outset, we've delivered positive comp sales in 21, 22, and 23. And so I think that bodes well for 24. As John mentioned, there were some headwinds in January.

Speaker Change: Spend on certain promotions this year as well.

Speaker Change: Great. Thank you guys.

Speaker Change: Thank you for your question one moment of acquiring the next.

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

Jake Rowland Bartlett: On <unk> Dot com.

Jake Rowland Bartlett: Great. Thanks for taking great. Thank you thanks for taking the question.

Jake Rowland Bartlett: I was just a follow up really on the Applebee's same store sales trends and it sounds like October was very strong with the dollar arena.

Jake Rowland Bartlett: Would've gotten more negative after that but you sound pretty confident in the current trajectory might reduce that youre, implying a positive same store sales expectations in the first quarter. So what is what is driving that what do you think is driving that improvement from what you saw in November December to kind of what Youre seeing now.

Tony Maralejo: But we're looking to repeat the success of 23 and 24. Our plan centers around what we believe are three really important drivers of our business. We've got a really strong promotional strategy with new disruptive campaigns and aggressive value. We're rolling out much needed menu innovation starting in Q2 of this year. And there's a renewed focus on our off-premise business centered on improving our operational efficiency and marketing.

Jay D. Johns: Yes, Jacob J.

John C. Cywinski: It is John.

John C. Cywinski: The one thing I wanted to also mentioned about October is we beat black box through that entire period driven by the dollar had a promotion and then yes. It was a little bit softer in in November and in December.

Speaker Change: We can't give you specific guidance on Q1, but Tony I think it's helpful. You speak to Applebee's.

Tony Marone: Plans for the year around menu innovation et cetera that gives you the confidence for the year.

Tony Marone: Yes, So I did mentioned in an earlier, let me let me start by going back to Q4, and what we saw there during the quarter.

Tony Marone: We outperformed black box and traffic for the quarter. So we were obviously pleased with that but we did underperform in sales.

Tony Maralejo: If we execute against those initiatives, we should enjoy another really strong year of comp sales. John, as you talked about the development, Curious about your thoughts on a return to Applebee's net unit growth, and others. Headwinds, pushback.

Tony Marone: <unk> was successful as I mentioned earlier it drove business in October, but our holiday combo promotion during November and December It had limited appeal and so what that told US was that guests, we're expecting stronger value offerings. So we'll take that learning, which is part of our confidence into 2024 I'd also.

Jeffrey A. Bernstein: You know, the U.S. system is fairly mature. Should we expect more of a switch to more the international white space opportunity, and then you talked about the dual brand. Size Up, you internally expect Applebee's to get back to net unit growth and whether or not that's international? Sure. Thanks, Jeff.

Tony Marone: Say that.

John C. Cywinski: Remember in December were impacted by macroeconomic conditions.

John C. Cywinski: Our guests, we're making a little bit more selective decisions for their wallets and we did see we are seeing a continuation of that trend.

John C. Cywinski: In Q1, we're seeing that tightening of discretionary spending.

John C. Cywinski: Knowing the holidays it had an impact.

John C. Cywinski: In January and February has improved.

John C. Cywinski: So for Applebee's, our goal is absolutely this: It will return to net unit growth. The world has changed.

John C. Cywinski: And we will give you more color on Q1, obviously when we report results in May.

John C. Cywinski: Great.

John C. Cywinski: Just wanted to just wanted to make sure that the guidance that we gave for the full year not Q1, specifically.

John C. Cywinski: The world today is different than it was three years ago when we first started talking about it, particularly because of the cost to build an app. And so we're very focused right now, and Tony can offer more detail on, assembling a prototype for Applebee's that has an ROI that our franchisees are. We're doing that with them together, and, you know, that work is underway. You know, Applebee's is focusing on conversions, and that's an important pivot for the brand. And most importantly, you know, we mentioned in the scripted remarks that we've just agreed this week to a new development deal with the Flynn Group for 25 restaurants over the next seven years, which is a great indication of our largest franchisee's commitment to the brand and commitment to and belief in its future.

John C. Cywinski: Look at how.

John C. Cywinski: How we did last year, what we're comping over that will give you a sense of how.

John C. Cywinski: The trend should be but we're not guiding in Q1, specifically.

John C. Cywinski: No. That's a good clarification, because you said throughout 2004 and to me that was in <unk>.

John C. Cywinski: That was going to be positive throughout each quarter, but that is not the implications to make sure.

John C. Cywinski: Can reiterate that that is not what you are trying to imply that that is not all of them.

Speaker Change: Okay, Alright got it great and then the other question was on development.

Speaker Change: I understand the.

Speaker Change: The unit economics being impacted by the build costs, but it seems like what we're also seeing is an acceleration of closures or maybe just a continuation of closures at applebee's.

John C. Cywinski: Im not sure maybe you can kind of clarify the moving pieces for the lower development net development at IHOP and so we're seeing a fair amount of closures yet it feels like the <unk>.

John C. Cywinski: So we've got work to do to build the pipeline for Applebee's over the next couple of years to return the brand to its net unit. When it comes to international, that's where the white space is for both brands. And what we're really pioneering internationally is this dual-branded concept. We just opened the eighth dual-brand restaurant in Leon, Mexico, outside Mexico City.

John C. Cywinski: Margin pressures are easing.

John C. Cywinski: What kind of metrics on labor and commodities that you provided so what is what is driving that elevated level of closures and then.

John C. Cywinski: Building on that.

John C. Cywinski: IHOP.

John C. Cywinski: You know, the concept there is a shared back of house and a combined and blended front of house for the two brands. And what we're seeing on average is that the revenues for the same size box as one brand or the other are two X or more what they were before, which you'd expect because with the two brands we can address all four days. That's a big innovation that we're nurturing overseas and that our intent is to eventually bring to the U.S. when we find the right opportunity.

John C. Cywinski: Roughly two years ago at the Analyst Day, you mentioned I think we were talking about roughly a 100.

John C. Cywinski: Store openings at this point now we're talking about significantly less so so what is the what are the biggest things that have changed it feels like.

John C. Cywinski: Youre <unk>.

John C. Cywinski: We will clearly constantly about development yet the development is actually much less than we would've expected.

John C. Cywinski: A year or two ago.

John C. Cywinski: Yes, Jacob it's John I'll, just briefly say that.

John C. Cywinski: The environment has changed in several ways in terms of the availability of financing cost of financing the cost to build a restaurant.

Vance: Lastly, Vance, I think you mentioned the... Cash Usage Perspective. The share pullback, I mean, the dividend yield is now in the 4.5% range. That's well above your casual dining peers. I'm just wondering whether you're getting credit for such a yield or whether your money might be better spent buying back more shares of the company.

John C. Cywinski: And also just the cyclical pattern of large brands like ours and when contracts expire in the renewal process.

John C. Cywinski: Jay why don't you talk specifically about IHOP and then we'll go to Tony comments on Applebees closures.

Jay D. Johns: Yes, Thanks Jake.

Jay D. Johns: I think that at IHOP clearly.

Vance: Thank you. Thanks for your question, Jeff. Our capital allocation priorities remain the same.

Speaker Change: Jon just said the environment has changed significantly post COVID-19 with inflation.

Vance: So right now, we're focused on protecting and strengthening our balance sheet while returning capital to shareholders at the same time. The dividend yield that you referenced, we've kept our dividend payout ratio roughly the same, and the dividend yield is more of a reflection of where the stock is trading. But we are focused on the optimal mix between the two, and we will do buybacks, as we've done in the past, opportunistically. And we understand how important capital return is to our shareholders. And we've done over $200 million of capital return in the past two years, and we've paid down our debt by $2.5 million.

Jay D. Johns: And how people are viewing things interest rates et cetera.

Jay D. Johns: But overall, we've been a steady developer we might not have hit the 100 number we had talked about a few years ago, but we own 46 restaurants. This past year and have been pretty stable and steady and consistent grower and pretty consistent net growth while comp sales.

Jay D. Johns: <unk> have been going up as well. So we are growing we are we do have a good pipeline headed into this year and.

Jay D. Johns: You recall, we were having all kinds of issues I think the industry was too with kind of timelines and permitting delays and I think we're looking at this now when we look at our guidance. This year, that's the new normal.

Vance: So we'll continue that trajectory. No meaningful change to how we think about it. We understand the importance. Thank you so much.

Operator: Thank you. One moment as I prepare for the next. Our next question comes from the line of Dennis Geiger from UBS. Your line is now open. Great, thanks guys. First one, curious if you could speak a little more about the customer reception, the value that you had in the fourth quarter, maybe the value incidents at Applebee's. I think you mentioned that 19% of transactions were attributed to LTOs or promos. Can you just remind us where that has been historically?

Speaker Change: We probably shouldnt. Thanks, so much about how many roll into next year, there's always some that push into next year was accelerated and there are more of them in the last couple of years, but that's probably the new normal on what the timeline looks like and we're trying to be realistic in our guidance. This year with let's just build all of that into our thoughts and.

Speaker Change: We really think that's what we're going to be able to accomplish this year now with the guidance we've given.

Speaker Change: Yes, let me let me this is Tony let me add a little bit more color on the.

Dennis Geiger: And then just on the stickiness, maybe, of those value occasions, I think you talked to the Dalai Lama about new customers and somewhat sticky. So anything more there on that stickiness of kind of, you know, potentially keeping some of those customers coming in for the value. Yeah, Dennis, thanks. It's John.

Tony Marone: On the question on enclosures for Applebee's.

Tony Marone: Our closure rates are between 1% and 2% of the system.

Tony Marone: That's a normal attrition rate for a mature brands like applebee's, what we need to do now is leverage our new development structure leverage the initiatives that are underway like the new prototype to build a more robust pipeline of new openings. So that we can finally returned to positive net unit growth I'll add that these closures.

John C. Cywinski: I'll start as well. And then, Tony, we'll ask you to give a little bit more detail. You know, at the highest level, 2024, from our perspective, for both brands, remains, you know, a promotion-driven environment, and our guests are attracted to that.

Speaker Change: These closures on assignment struggling franchisees theyre offering a sign of a struggling trade areas and I can assure you that our leadership team. We're pulling every lever we have to offset the downside of closings closing the restaurant isn't incredibly difficult decision. It's really a decision of last resort for a franchise or in a franchisee.

John C. Cywinski: So, you know, we view 2024 as a fight for market share. We have seen that our guests have been remarkably resilient in 2023, as well as in 2024, in terms of their intent to continue to dine out. But what we're also seeing from a consumer behavior perspective is that they are making choices about where and when to dine out. You know, they're dining out a little bit less often.

Speaker Change: So we'll work closely with our franchisees to minimize closures and then build the pipeline of new openings to get us back to net unit growth.

Speaker Change: Great I appreciate it thank you.

Speaker Change: Thank you for the question one moment please.

Speaker Change: Our next question comes from the lineup, Eric Gonzalez with Keybanc capital markets. The floor is yours.

Eric Gonzalez: Alright, Thanks, and thanks for taking my question.

Eric Gonzalez: First is on the EBITDA outlook range appears to be a bit higher than what we expected and it implies about flattish maybe up 3% to 4% G&A, you're expecting flat, maybe up 4% to 5% so.

Eric Gonzalez: I think that means youre not going to see much leverage on a low single digit comps I'm. Just wondering if you can point to us.

John C. Cywinski: And when they are in our restaurants, they are finding our value portion of our menus, whether it's the everyday value portion or the LTO, like you alluded to for Applebee's. That 19 percent is up about two points over earlier quarters, but not drastically. Tony, can you add some more color about Applebee's approach for the year? Yeah, so a couple of points.

Eric Gonzalez: The upside might be coming from because that EBITDA range.

Speaker Change: Okay. Thank their advanced new address that course.

Speaker Change: Eric.

Speaker Change: It does.

Eric Gonzalez: The EBITDA upside that we're seeing is from.

Speaker Change: Margin expansion that we're seeing in Q4 and continue to believe.

Speaker Change: For the next year remember.

Speaker Change: With our asset light model.

Speaker Change: This is what we are exactly where we plan accomplishes two leverage the investments we've made and we're starting to see the growth outpacing <unk>.

Tony Maralejo: One of the questions, one of the points you asked about was the value menu. I think John answered that. But, you know, our value menu continues to perform well, but the share of tickets has remained fairly stable in 2023. It tends to go up a little bit when we promote really abundant value, like some of our all-you-can-eat campaigns. You also asked about Dollarita. It was a standout success, right? We think there is a level of stickiness that's associated with it.

Speaker Change: Facing the.

Speaker Change: That's fine.

Speaker Change: Our growth isn't just in comp unit development, we have other revenue channels collectively that we're working on and altogether right. Those are the things that we've invested in altogether, we're driving top line faster than that.

Speaker Change: On the G&A growth, that's where the marketing expense.

Speaker Change: Angela.

Speaker Change: Okay.

Angela: Hey, Eric.

Angela: Yes.

Angela: Youre seeing the improvement in cash flow Youre seeing no.

Angela: Guiding a lower capex going forward and Thats all the result.

Angela: More or less racking up with with the implementation of the technology initiatives, we've done and we're sort of just.

Angela: Realizing the fruits of that.

Angela: The investments of the work that we've done in the past few years at this point.

Speaker Change: Well you answered my follow up before I could ask it but it wasn't going to be about that capex outlook.

Tony Maralejo: Our guests absolutely love the promotion, and our franchisees, more importantly, are as thrilled with it as we are. We sold more than 6.3 million Dollaritas in the month of October. That's about, you know, 135 per restaurant per day.

Angela: <unk> versus I think you spent $37 million last year.

Angela: That the new run rate should we expect that to be in that range going forward, yes that is the new run rate.

Angela: Look I think we.

Angela: Capex.

Speaker Change: We use that as a growth vehicle, we have projects and new ideas new initiatives on one investment to drive return, we will update investors accordingly.

Speaker Change: But this year I think this is the right run rate and where we're sort of just realizing that the cash flow benefit.

Tony Maralejo: The ticket order incidence was higher than we originally launched it back in 2017. So, from a brand perspective, you know, Dollarita exceeded all of our internal targets, whether it was value, draw, or frequency. It exceeded our internal product scores.

Speaker Change: Thanks Art.

Speaker Change: We're really excited about the outlook.

Speaker Change: Okay. Thank you very much.

Speaker Change: Thank you for your question one moment please.

Speaker Change: Our next question comes from the lineup.

Tachyon: Tachyon from Wedbush. Please go ahead.

Tachyon: Okay.

Tachyon: Thank you.

Tachyon: You guys talked about.

John C. Cywinski: And then, more importantly, it exceeded our financial targets. It drove incremental sales, incremental tickets, and the all-important franchisee margin dollars. Yeah, and Tony, speaking of franchisee margin dollars, it's a great number to share, right, which is that 94% of those dollar-a-tickets included another menu item, which is exactly what our franchisees are looking for. Correct. Great, very helpful guys.

Tachyon: And an evolving strategy around.

Tachyon: Both advertising and LTE and.

Tachyon: <unk>. Thank.

Tachyon: Thank you mentioned the higher number.

Tachyon: Of <unk>, if I'm not mistaken with a greater emphasis on value.

Tachyon: And I know you guys you guys talked about sort of the.

Tachyon: The higher <unk>.

Tachyon: The higher number of weeks on television.

Speaker Change: Maybe just holistically talk about both of the strategies.

Tachyon: Is there any way to quantify the number of LTE OS.

Dennis Geiger: And then just just one more. I think you talked about increasing the number of weeks on air. Just curious, if anything, as it relates to 24, I forgot that the time frame you frame that up, but what 24 looks like maybe versus prior years, you know, from a marketing and number of weeks on air perspective, if there's anything there to share to highlight the things you're doing this, is a good question for Tony. Yeah, absolutely.

Tachyon: What do you mean by greater value.

Tachyon: And also would add spend not growing as much or at least that dollar is not growing as much where is the sort of incremental spend on television.

Speaker Change: <unk> from.

Tachyon: Good morning, Nick It's Jon just a blanket centers on behalf of Jay and Tony is.

Speaker Change: We're not going to get into.

Jon: Specifics around where we're spending certain dollars or or what our message will be or how many promotions because thats clearly strategically proprietary and we don't want our competitors to know that Jay.

Tony Maralejo: I'm not going to go into too much detail on our promotional strategy, but, you know, we revisit our marketing spend annually. And, it's relatively flat this year versus 2023.

Speaker Change: Jay and then Tony can certainly talk about their their promotional strategy.

Tony Maralejo: We're not necessarily spending more, we're just spreading the total spend across more windows. So our strategy, our promotional strategy for the year is allowing us to add additional on-air advertising while we still maintain our reach and frequency goals. You'll see an uptick in more digital spend on certain promotions this year as well. One moment, as I prepare the next.

Speaker Change: As you said at a higher holistic level without.

Speaker Change: Giving away the secret to Jay why don't you talk about your promotion strategy first and then we'll go to Tony.

Jay D. Johns: Sure John Thanks for the question Nick.

Speaker Change: What you just referenced most of your question pertained I think as follow ups to the Applebees comments earlier.

Jay D. Johns: We're pretty stable as far as what we're doing as far as.

Jay D. Johns: Amount of money, we're spending and the number of <unk> et cetera. So.

Operator: Our next question comes from the line of Jake Bartlett, from Truist.com. Great. Thank you.

Jay D. Johns: We're running the same strategy, we've been running we really believe we need to have a great menu, great marketing and great execution to drive repeat business.

Jake Rowland Bartlett: Thanks for taking the question. You know, mine was just a follow-up really on the Applebee's seems-for-sales trends. And, you know, it sounds like October was very strong for dollar retail, and then it would have gotten more negative after that. But you sound pretty confident in, you know, the current trajectory.

Jay D. Johns: That's a recipe to get traffic, improving and sales going up and EBITDA going up et cetera.

Jay D. Johns: Clearly, we've got our loyalty levers, we can pull as far as additional marketing and that keeps growing for us and gives us new opportunities all the time as we learn who our guests are and.

Jake Rowland Bartlett: I mean, my read is that you're implying a positive seems-for-sales expectation in the first quarter. So what is driving that, you know, what do you think is driving that improvement from what you saw in November and December to kind of what you're seeing now? Jake, it's Jake, it's John.

Jay D. Johns: Being able to activate direct channel one to one marketing with them.

Jay D. Johns: But we strongly believe that in the barbell strategy, where we have full price great new innovative items that we promote we have new menus, a couple times a year that we promote.

John C. Cywinski: The one thing we wanted to also mention about October is that we beat Black Box through that entire period, driven by the Dollar-Eta promotion. And then, yes, it was a little bit softer in November and December. We can't give you specific guidance on Q1. But Tony, I think it's helpful if you speak to Applebee's about their plans for the year around menu innovation, et cetera, that gives you the confidence for the. So I did mention it earlier.

Jay D. Johns: And clearly we have value things that we promote and we put those in throughout the year at the appropriate times when we feel it's right to either go heavily on value or more on innovation and we are doing the same strategy, we have been doing with new innovations and different values and maybe a different times that it was one <unk>.

Tony Maralejo: Let me start by going back to Q4 and what we saw there during the quarter. We outperformed BlackBox in traffic for the quarter, so we were obviously pleased with that, but we did underperform in sales. Dollarito was successful, as I mentioned earlier. It drove business in October, but our holiday combo promotion during November and December had limited appeal.

Jay D. Johns: <unk> role, but.

Jay D. Johns: We're continuing down that same path, we've been on this guidance to 11 straight quarters of being up in sales.

Jay D. Johns: Yeah, and look up along the same lines are our promotional.

Jay D. Johns: <unk> strategy the key.

Jay D. Johns: Key to it is to is to remain balanced right.

Jay D. Johns: We've always been known for affordability.

Speaker Change: But when you're when you've got a promotional strategy that's based in value it has to be more than just discounted pricing.

Tony Maralejo: And so, what that told us was that guests were expecting stronger value offerings. So, we'll take that learning, which is part of our confidence, into 2024. I'd also say that November and December were impacted by macroeconomic conditions, and our guests were making a little bit more selective decisions with their wallets. And we are seeing a continuation of that trend in Q1. We're seeing that tightening of discretionary spending following the holidays. It had an impact in January, and February has improved. And we'll give you more color on Q1, obviously, when we report results in May.

Speaker Change: In this competitive environment lots of brands are engaged and discounting the experience becomes the differentiator and.

Speaker Change: And so part of that experience is menu innovation, so youll see in our calendar for 2024. It includes multiple new products that will be introduced throughout the year starting in April you'll see the first of the many products.

Speaker Change: And then we will introduce some new promotional partners that will excite and engage our guests and then we will obviously sprinkle in some of our tried and true promotions that our guests have come to love at Applebee's, but the key to our plan is to be balanced it's not just dependent solely on discounting.

Speaker Change: Okay.

Speaker Change: I just wanted to kind of understand the building blocks of the comp because.

Speaker Change: As Vince said, you guys expect more or less flattish pricing.

Speaker Change: Applebee's, if I understood the commentary correctly so.

Speaker Change: Flattish.

Speaker Change: Pricing I guess.

Speaker Change: Do you actually are expected to drive positive transactions for the year to get to sort of a.

Jake Rowland Bartlett: Jake, just in advance, just wanted to make sure that the guidance that we gave is for the full year, not Q1 specifically. And if you look at how we did last year, what we're coming over, that will give you a sense of how the trend should be, but we're not guiding on that. No, that's a good clarification because you said throughout 24. And to me, that was implying that it was going to be positive throughout each quarter. But that is not the implication.

Speaker Change: Plus one comp.

Speaker Change: That's the midpoint of your guidance.

Speaker Change: Nick Let me just clarify this advanced what I had mentioned pricing that commodity cost pricing not menu pricing. So let me just find.

Speaker Change: And then John Mcdonald.

John C. Cywinski: Thank you.

Speaker Change: Yes.

John C. Cywinski: Going to ask you to clarify that exact thing it wasn't about menu pricing.

Speaker Change: Tony do you have anything you want to you want to add I think that probably clarifies next question yes.

Tony Marone: Yes, no I mean, we can't speak on behalf of our franchisees, but I.

Tony Marone: I can say that in terms of menu pricing they understand that.

Tony Marone: Affordability is the main driver for visitors.

Speaker Change: We expect them to act accordingly.

Speaker Change: Protect our category lead and affordability.

Speaker Change: Okay understood and just final question on Fuzzies do you actually is.

Jake Rowland Bartlett: Just to make sure, just to reiterate that that is not what you're trying to imply. That is not what you're right about. And then the other question was on development. And, you know, I understand the Indian economy being impacted by the build cost. But it seems like what we're also seeing, you know, is an acceleration of closures or maybe just a, you know, continuation of closures at Applebee's. I'm not sure, maybe if you could kind of clarify the moving pieces for, you know, the lower development, net development at IHOP. But so we're seeing a fair amount of closures, yet it seems like the, you know, margin pressures are easing, you know, given what you kind of the metrics on labor and commodities that you provided. So what is driving that elevated level of closures? And then, you know, building on that, on IHOP, roughly two years ago at Analyst Day, you mentioned that we were talking about, you know, roughly 100 store openings at this point. Now we're talking about significantly less.

Speaker Change: Spectrum openings in 'twenty, four and maybe just give us some numbers around the pipeline if you could.

Speaker Change: Sure the pipeline for <unk> is a 144 restaurants in the pipeline, which we've grown since the acquisition and we're not guiding on these pipeline yet we'll do that we'll do that next year full year.

Speaker Change: I'm sharing its actuals with you.

Speaker Change: Got it thank you.

Speaker Change: Thank you for your question one moment please.

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

Speaker Change: Brian Vaccaro from Raymond James the floor is yours.

Brian M. Vaccaro: Hi, Thanks, and good morning.

Brian M. Vaccaro: You go back to the fourth quarter comps can you level set or quantify what each brand reflects in terms of traffic versus check.

Brian M. Vaccaro: Or even pricing within the quarter.

Brian M. Vaccaro: Vince I'm going to turn it to you.

Brian M. Vaccaro: Yes.

Vince: Sure Hey, Brian how are you so fourth quarter, Apple B pricing menu pricing was two 7%.

Vince: IHOP menu pricing was seven 8%.

Vince: Those brands saw negative traffic for the fourth quarter, but as Tony mentioned earlier fourth quarter for Applebee's.

Vince: The black box.

Vince: And I think price as far as P mix.

Vince: Both IHOP as well.

Vince: Laddish to slightly up and then and then applebee's.

Vince: Slightly negative on P mix.

John C. Cywinski: So what are the biggest things that have changed? You know, you're talking fairly confidently about development, yet the development is actually much less than we would have expected, you know, even just a year or two. Yeah, Jake. It's John.

Vince: Make up.

Vince: Okay. That's that's very helpful. Thank you. Thank you for that and I have specifically I guess I wanted to ask Jay maybe get your perspective, it seems like the family dining sector is holding pricing higher for longer.

Jay D. Johns: And I am curious to.

John C. Cywinski: I'll just briefly say that, you know, the environment has changed in several ways in terms of the availability of financing, the cost of financing, the cost to build a restaurant, and also just the cyclical pattern of large brands like ours and when contracts expire and, you know, renewal. Jay, why don't you talk specifically about IHOP, and then we'll go to Tony for comments on Apple. Yeah, thanks, Jake.

Jay D. Johns: To ask how sustainable you think that might be and given given the pressures that youre seeing out there the value conscious consumer and maybe you can even elaborate a little bit on what youre seeing from a day part perspective that I would think that maybe the composition of your guests might be a little bit different at core bra.

Jay D. Johns: Axis versus lunch and dinner and how that might play into it but mainly focused on that first part around the pricing running higher in family dining and how that fits with the current environment.

Jay D. Johns: You know, I think that at IHOP, clearly, as John just said, the environment has changed significantly post-COVID with inflation and how people are viewing things, interest rates, etc. But you know, overall, we've been a steady developer; we might not have hit the hundred number we had talked about a few years ago. But you know, we own 46 restaurants this past year and have been pretty stable and steady and a consistent grower and, and pretty consistent net growth, while comp sales have been going up as well. So we are growing, we are, we do have a good pipeline headed into this year. And if you recall, we were having all kinds of issues, I think the industry was, too, with timelines and permits and delays. And I think we're looking at this now when we look at our guidance this year. That's the new normal. We probably shouldn't think so much about how many roll into next year; there's always some that push into next year were accelerated, and there are more of them the last couple of years.

Speaker Change: Yeah. Thanks for the question Brian.

Speaker Change: Clearly you just listen to the numbers of answers told you, yes, we're a little higher than even our sister brand as far as what.

Speaker Change: What are franchisees took in the way of pricing this past year I do think that.

Speaker Change: You implied that is not sustainable.

Speaker Change: I would tend to agree with you in those.

Speaker Change: Those kind of numbers.

Speaker Change: People aren't going to keep doing seven or 10% pricing in perpetuity right.

Speaker Change: You've already seen our own franchisees have dropped that considerably.

Jay D. Johns: Last menu prints, we did towards the end of last year, much lower increases than that but remember.

Jay D. Johns: These are annualized numbers when you look at what they've already taken at other menu prints earlier in the year that still kind of in the number I think that those will start to roll off as we get a little further down the path. So.

Jay D. Johns: Im less concerned about those kind of increases as we move forward at least at this this moment just looking at the trends of what I saw on the last menu increase that they did so.

Jay D. Johns: But that's probably the new normal on, you know, what the timeline looks like. And we're trying to be realistic in our guidance this year, with let's just build all that into our thoughts. And, you know, we really think that's what we're going to be able to accomplish this year now with that guidance we've given. Yeah, let me let me. This is Tony.

Jay D. Johns: That will start to stabilize itself.

Speaker Change: Okay I appreciate that.

Speaker Change: I know pricing decisions are up to your franchisees, but what's a reasonable expectation just ballpark for how much pricing might be in or average check might be in the applebee's and IHOP systems in 2024.

Tony Maralejo: Let me add a little bit more color on the question of closures for Applebee's. You know, our closure rates are between one and 2% of the system. That's a normal attrition rate for a mature brand like Applebee's. What we need to do now is leverage our new development structure, leverage the initiatives that are underway, like the new prototype, to build a more robust pipeline of new openings so that we can I'll add that these closures aren't a sign of struggling franchisees. They're often a sign of struggling trade areas. And I can assure you that our leadership team is pulling every lever we have to offset the downside of closing. Closing a restaurant is an incredibly difficult decision.

Speaker Change: Jay you want to continue and then we'll go to Tony Yes, that's fine.

Jay D. Johns: I think that as we look forward, we've got another menu coming up here in the spring and then there'll be one in the fall is the way it is scheduled at the moment.

Speaker Change: So.

Jay D. Johns: They havent made all their final determinations on what those prices are going to be in those menus are not out yet. So I can't give you any kind of forward looking as far as what theyre going to do I just see their behaviors of what they did this past fall and.

Tony Maralejo: It's really a decision of last resort for a franchisor and a franchise, so we'll work closely with our franchisees to minimize closures and then build the pipeline of new openings to get us back to net unique. Great. I appreciate it.

Jay D. Johns: One of the things we've done on the outside of the business, we we actually engage with with RMS revenue revenue management solutions company.

Jake Rowland Bartlett: Thank you. Thank you for the question. One moment.

Speaker Change: Probably the biggest in the industry that helps a lot of companies do this.

Eric Gonzales: Our next question comes from the line of Eric Gonzales, with KeyBank Capital Markets. Hi, thanks, and thanks for taking my question. The first is on the EBITDA outlook, you know, the range appears to be a bit higher than what you're expecting. Supplies got flattish. You know, G&A, you're expecting to be flat, maybe up 4% to 5%. You know, I think that means you're not going to see much leverage on the low single-digit comms. So I'm just wondering if you could point to where the upside might be coming from for that EBITDA. Thanks, Derek Vance.

Speaker Change: They are helping our franchisees, giving them some guidance as to where is the optimal.

Speaker Change: Prices and what's price sensitive what isn't where should you be careful and theyre getting some good guidance on this now.

Speaker Change: Clearly they get to make their own decisions.

Speaker Change: They are the final.

Speaker Change: Decisionmaker on price, but they are getting some very good scientific.

Speaker Change: How to protect traffic and how to also make sure that they are optimizing their EBITDA at the same time too they're getting some really good advice now I think so we look forward to that as we go into this year too.

Vance: Can you address that? Of course. Eric, the EBITDA upside that we're seeing is from the margin expansion that we're seeing in Q4 and continue to believe will work for the next year. You know, remember the asset-like model, right? Like it's, this is what we're talking about, exactly what we're trying to accomplish is to leverage the investments we've made, and we're starting to see growth outpacing, outpacing the, you know, the investments that have been spent. Our growth isn't just in comps. It's a unit development.

Speaker Change: Yes, I'll just add along the same lines. They are franchisees took.

Speaker Change: Two 7% in pricing.

Speaker Change: In Q4, which was down from I believe 4%.

Speaker Change: In Q3, and I can't give you a.

Speaker Change: A number to guide in your in your model, but as a reference point, we have been our franchisees are very strategic and measure when it comes to pricing decisions that they make.

Vance: We have other revenue channels collectively that we're working on. And all together, right, those are the things that we invested in. Altogether, we're driving the top line faster than the G&A growth, and that's where the margin extension. Okay, by the way, by the way, Eric, you're seeing the improvement in cash flow, you're seeing, you know, what guiding on lower capex going forward, that's all just the result of us, you know, more or less wrapping up with the implementation of the technology initiatives we've done, and we' Well, you answered my follow-up before I could ask it, but it was going to be about that CapEx out... versus, I think you spent $37 million last year. Is that the new run rate?

Speaker Change: They've consistently.

Speaker Change: Recently have price below their peers. So if you look at the crude away from home.

Speaker Change: Increased data that would probably serve as a potential guide again the decisions are up to the franchisees, but they've been pretty consistent and staying at or below what the peers have taken pricing in the category.

Speaker Change: Alright, that's very helpful. And then just last one for me if I could move it onto the franchisee margins Vance I. Appreciate the color you gave on the food and the labor margins kind of compared to 2019 could you just take that navy round that out to the bottom line the store level EBITDA, either dollars or margins give us a sense where each.

Speaker Change: Each brand is compared to <unk> 19 on that.

Vance: Yes so.

Speaker Change: I, probably won't get into the business, but we're not often ample but based on what I've seen what the franchisees have shared with us.

Speaker Change: Both systems are in <unk>.

Vance: Good shape.

Speaker Change: We talked about the headwinds and <unk>.

Eric Gonzales: Should we expect that to be in that range going forward? Yeah, that is the new run rate. CapEx is, you know, we use that as a growth vehicle, right? We have projects and new ideas, new initiatives that we want to invest in to drive return. We'll update investors accordingly. But for this year, I think this is the right run rate.

Speaker Change: When the headwinds being labor costs remain elevated but is stabilizing.

Speaker Change: And then.

Speaker Change: Labor cost as a percent of sales.

Speaker Change: Trending back towards pre Covid level.

Speaker Change: Cost.

Speaker Change: Modest easing so that's a good thing we talked about the restaurant initiatives.

Speaker Change: Stability initiatives with $50 million at annualized savings, so that's a tailwind as well so.

Speaker Change: So all of this in the context of the sort of uncertain macroeconomic environment, but.

Vance: And we're sort of just realizing the cash flow benefits of the investment we've made so far. I'm really excited about the outcome. Thank you very much. Thank you for your questions. One moment. Our next question comes from the line of Nick Setyan from WebMD.

Speaker Change: As a whole systems are performing and.

Speaker Change: And this is of course this is Q, we always have a quarter lag right. So I'm looking at Q3 financials right now for the franchisees.

Speaker Change: Yes.

Speaker Change: Alright, Thank you I'll pass it along.

Speaker Change: Thank you that now concludes our Q&A portion.

Speaker Change: I would now like to turn the conference back to John Peyton Dine Brands' CEO for closing remarks.

John C. Cywinski: Gerald our favorite operator, we love when you're with US It took good care of us.

Nick Setyan: Please go ahead. Thank you. You guys talked about an evolving strategy around both advertising and LTOs. I think you mentioned a higher number of LTOs, if I'm not mistaken, with a greater emphasis on value. And I know you guys, you guys talked about sort of the higher weeks, the higher number of weeks on TV. Maybe just holistically talk about both of the strategies. Is there any way to quantify the number of LTOs?

Gerald: Thanks, guys for joining us on the call. This morning, we are excited for 2024, we are confident in our plans we're excited to share our guidance around our EBITDA build year over year. We are excited about the new plan that we just let you know about with wind group for 25, new restaurants, and we're excited about it.

Speaker Change: No.

Speaker Change: And we're excited about our brands that have compelling and exciting promotions. So thanks, everyone and we'll talk to you next quarter.

John C. Cywinski: What do you mean by greater value? And also, you know, with ad spend not growing as much, or at least ad dollars not growing as much, where is the sort of incremental spend on TV coming from? Good morning, Nick. It's John.

Speaker Change: Thank you. This now concludes today's conference call. Thank you for participating you may now disconnect.

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John C. Cywinski: A blanket sentence on behalf of Jay and Tony: We're not going to get into specifics around where we're spending certain dollars, or what our method will be, or how many promotions we do, because that's clearly strategically proprietary, and, you know, we don't want our competitors to know that. But Jay and Tony can certainly talk about their promotional strategy at a, as you said, a higher holistic level without giving away the secrets. So, Jay, why don't you talk about your promotion strategy first, and then we'll Sure, John. Hey, thanks for the question, Nick.

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Jay D. Johns: You know, what you just referenced, most of your questions pertain, I think, as follow-ups to the Applebee's comments earlier. We're pretty stable as far as what we're doing as far as the amount of money we're spending and the number of LTOs, etc. So, you know, we're running the same strategy we've been running. We really believe we need to have a great menu. Great marketing and great execution are needed to drive repeat business.

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Jay D. Johns: That's the recipe to get traffic improving and sales going up and even it going up, et cetera. Clearly, we've got our loyalty levers we can pull as far as additional marketing, and that keeps growing for us and gives us new opportunities all the time as we learn who our guests are and, you know, being able to activate direct channel one-to-one marketing with them. But we strongly believe in the barbell strategy, where, you know, we have full-priced, great, new, innovative items that we promote.

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Jay D. Johns: We have new menus a couple of times a year that we promote. And, clearly, we have value things that we promote, and we put those in throughout the year at the appropriate times when we feel it's right to either go heavily on value or more on innovation. And we're doing the same strategy we have been doing with new innovations and different values, maybe a different time set is when they roll out, but we're continuing down that same path we've been on that's gotten us to 11 straight quarters of being up in sales.

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Tony Maralejo: Yeah, look, along the same lines, you know, our promotional strategy, the key to it is to remain balanced, right? We've always been known for affordability, but when you've got a promotional strategy that's based on value, it has to be more than just discounted pricing. In this competitive environment, right, where lots of brands are engaged in discounting, the experience becomes the differentiator.

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Tony Maralejo: And so part of that experience is menu innovation. So you'll see in our calendar for 2024, it includes multiple new products that will be introduced throughout the year, starting in April. You'll see the first of many.

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Tony Maralejo: And then we'll introduce some new promotional partners that will excite and engage our guests. And then we'll obviously sprinkle in some of our tried and true promotions that our guests have come to love at Applebee's. But the key to our plan is to be balanced. It's not just dependent solely on this. Okay, you know. I just want to kind of understand the building blocks.

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Nick Setyan: As Van said, you guys expect more or less slavish pricing at Applebee's. If I understood the commentary correctly, you know, what flattered me. Pricing, I guess, you know, do you actually expect to drive positive transactions for the year to get to sort of, you know, a plus one comm? That's the Mid-Period Guide. Nick, let me just clarify, this is Vance.

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Vance: When I mentioned pricing, that's commodity food cost pricing, not menu pricing. So let me just address that up front, and John can tell me. Yeah, thanks, man. I was gonna ask you to clarify that exact thing.

Nick Setyan: It wasn't about the menu, Tony, do you have anything you want to add, or I think that probably clarifies things. Yeah, no, I mean, we can't speak on behalf of our franchisees. But I can say that, in terms of menu pricing, they understand that, you know, affordability is the main driver for visit intent, and we, you know, we expect them to act accordingly to protect our category lead in affordability. Okay, understood. And just a final question, you know, on Fuzzy's, do you actually, you know, expect any openings in 24?

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John C. Cywinski: And maybe just give us some numbers on the pipeline, if you could. Sure, the pipeline for Fuzzy's is 144 restaurants in the pipeline, which we've grown since the acquisition. And we're not guiding on Fuzzy's pipeline yet.

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John C. Cywinski: We'll do that next year, if we have a full year of... Sharing Exactly. Got it. Thank you. Thank you for your question. One moment, please. Our next question comes from the floor, Brian Vaccaro from Ramey James. The floor is yours. Hi, thanks and good morning.

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Brian M. Vaccaro: I wanted to go back to the fourth quarter comps, and can you level set or quantify what each brand reflects in terms of traffic versus check or even pricing within the quarter? Vance, I'm going to turn that to you. Sure. Hey, Brian, how are you?

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Vance: So for the fourth quarter, Applebee's menu pricing was 2.7%, and IHOP menu pricing was 7.8%. Both grants saw negative traffic for the fourth quarter, but as Tony mentioned earlier, for the fourth quarter at Applebee's, we beat BlackBox, and I think Price, as far as P-Mix, both read that I have this ladish slightly up, and then and then Applebee's likely has a negative P to

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Brian M. Vaccaro: Thank you. Thank you for that. And on IHOP specifically, I guess I wanted to ask Jay, maybe get your perspective.

Brian M. Vaccaro: It seems like the family dining sector is holding prices higher for longer, and I'm curious to ask how sustainable you think that might be, and given the pressures that you're seeing out there from the value-conscious consumer. And maybe you could even elaborate a little bit on what you're seeing from a daypart perspective. I would think that maybe the composition of your guests might be a little bit different at core breakfast versus lunch and dinner, and how that might play into it.

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Jay D. Johns: But I mainly focused on that first part around the pricing running higher in family dining and how that fits with the current environment. Yeah, thanks for the question, Brian. You know, clearly, you should just listen to the numbers Vance just told you.

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Jay D. Johns: Yeah, we're a little higher than even our sister brand as far as what our franchisees took in the way of pricing this past year. But I do think that you imply that it's not sustainable. And, you know, I would tend to agree with you in that at those kind of numbers. People aren't going to keep doing 7% or 10% pricing in perpetuity, right? And we've already seen our own franchisees have dropped that considerably. The last menu prints we did toward the end of last year showed much lower increases than that. But remember, these are annualized numbers when you look at what they've already taken at other menu prints earlier in the year that's still kind of in the numbers. I think that those will start to roll off as we get a little further down the path.

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Jay D. Johns: So I'm less concerned about those kind of increases as we move forward, at least at this moment, just looking at the trends of what I saw in the last menu increase that they did. So I think that will start to stabilize itself. Okay, I appreciate that. And I know pricing decisions are up to your franchisees, but what's a reasonable expectation, just a ballpark, for how much pricing might be in or the average check might be in the Applebee's and IHOP systems in 2024? Jay, do you want to continue and then we'll go to Tony? Yeah, that's fine.

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Jay D. Johns: I think that as we look forward, we've got another menu coming up here in the spring, and then there'll be one in the fall. That is the way it is scheduled at the moment. So, you know, they haven't made all their final determinations on what those prices are going to be, and those menus are not out yet, so I can't give you any kind of forward-looking as far as what they're going to do. I just see their behaviors of what they did this past fall.

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Jay D. Johns: And, you know, one of the things we've done on the IOP side of the business, we actually engage with RMS, a revenue management solutions company that's probably the biggest in the industry that helps a lot of companies do this. And they're helping our franchisees, giving them some guidance as to where the optimal prices are and what's price-sensitive, what isn't, where you should be careful. And they're getting some good guidance on this now. And clearly, they get to make their own decisions, and they are the final decision-maker on price, but they are getting some very good scientific guidance on how to protect traffic and how to also make sure that they're optimizing their EBIT at the same time, too. They're getting some really good advice now, I think.

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Jay D. Johns: So we look forward to that as we go into this year, too. I'll just add along the same lines. Our franchisees took about 2.7% in pricing in Q4, which was down from, I believe, 4% in Q3. And I can't give you a number to guide your model, but as a reference point, our franchisees are very strategic in measure when it comes to pricing decisions that they make. And they've consistently, recently, priced below their peers. So if you look at the food away from home increased data, that would probably serve as a potential guide.

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Vance: Again, the decisions are up to the franchisees, but they've been pretty consistent in staying at or below what their peers have taken in pricing in this case. All right, that's very helpful. And then just last one for me, if I could, moving on to the franchisee margins, Vance, I appreciate the color you gave on the food and the labor margins kind of compared to 2019. Could you take that maybe round that out to the bottom line, the store level EBITDA, either dollars or margins? Give us a sense of where each brand is compared to 19 on that.

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Vance: Yeah, so, you know, I probably won't get into the specifics because those are not our financials, but based on what I've seen from what the franchisees have shared with us, both systems are in. We talked about the headwinds and the tailwinds, the headwinds being labor costs remain elevated, but they're stabilizing, but the labor costs as a percent of sales are trending back towards pre-COVID Food costs are commodity costs easing, so that's a good thing. We talked about the restaurant initiatives, the profitability initiatives with $50 million of annual life savings, so that's a tailwind as well. So all of this is in the context of this sort of uncertain macroeconomic environment. As a whole, systems are performing, and, you know, this is, of course, this is Q; we always have a quarter lag, right?

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Vance: So I'm looking at the Q3 financials right now. All right, thank you. I'll pass it along. Thank you. That now concludes our Q&A portion. I would now like to turn the conference back to John Payton, Dine Brands CEO, for closing remarks. Thanks, Gerald, our favorite operator. We love it when you're with us. You took good care of us. Thanks. Thanks, guys, for joining us on the call this morning. You know, we're we're excited for 2024. We are confident in our plans, and we're excited to share our guidance around our EBITDA growth year over year. We are excited about the new plan that we just let you know about with the Flynn Group for 25 new restaurants. And we're excited about our brand new piano, and we're excited about our brands that have compelling and exciting promotions.

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John C. Cywinski: So thanks everyone, and we'll talk to you next quarter. Thank you. This now concludes today's conference call. Thank you for participating.

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Operator: You may now.., www. DineBrandsGlobal.com www. DineBrandsGlobal.com, Thanks for watching! www.dinebrandsglobalinc.com www.dinebrandsglobalinc.com www.dinebrandsglobalinc.com www.dinebrandsglobalinc.com www.dinebrandsglobalinc.com www.dinebrandsglobalinc.com www.dinebrandsglobalinc.com www.dinebrandsglobalinc.com www.dinebrandsglobalinc.com www.dinebrandsglobalinc.com www.dinebrandsglobalinc.com www.dinebrandsglobalinc.com www.dinebrandsglobalinc.com www.dinebrandsglobalinc.com ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? www.dinebrandsglobal.com ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? www.dinebrandsglobalinc.com www.dinebrandsglobalinc.com www.dinebrandsglobalinc.com www.dinebrandsglobalinc.com

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