Q1 2024 Denny's Corp Earnings Call
Our third virtual brand concept to an additional 200 plus locations over the next couple of months.
These will be in California, because as the unique potential of offsetting the impact of ABB 12, 28, when we offered this option our California franchisees were quick to sign up given the perfect timing and the fit of the band offerings. Once we expand fully into the California market will likely roll nationally most likely starting in early Q4.
Finally, and importantly, starting this quarter, we're adding significant media to the market by reestablishing our brand co ops and providing a match for all dollars from our AD Fund. This match was halted during the pandemic, but is critical to our go forward plans to get our message to more guests the matching funds provide greater incentive for co ops to step up their media investment, which we leveraged locally to add an impressive.
$1 million on an annualized basis to the AD budget.
Now, let's switch gears and provide updates to a few of our priority is captured in a cream strategic framework for reference crave stands for creating leading tech solutions robust new restaurant growth assembling best in class teams, validating and optimizing the business model and elevating profitable traffic.
I'll first focus on creating leading tech solutions we.
We've made significant progress during the beta testing phase of our new cloud based POS platform. We can now say, we'll be partnering with Xenial enterprise solutions for this launch we now have over 110 restaurants complete with the installation with plans to move in in general lease for the system in Q3, even more exciting are the recent results we have been seeing and what this platform <unk>.
Enable the key components of the platform for us our enhanced kitchen video display systems, where KBS, new beverage monitors server handhelds and QR pain.
Franchisees have been with us from the very beginning on this tests and they are now weighing in with their results reporting average check increases given the ease of adding beverages and add ons faster table turns reduced waste and reductions in labor given lesser hours needed in peak periods. We're.
We are encouraged by these results as they not only optimize the model, but they demonstrate a significant opportunity to show a strong return on the investment of this new system.
In the kitchen were also focusing on menu items that allow us to utilize existing equipment from our kitchen modernization rollout and extend the use of ingredients featured on the menu in fact, our culinary team created the new lease style waffle after exploring additional items that could be prepared in our ovens. This created efficiency for the restaurant, while providing new menu options for our guests.
They are in crane stance, where robust restaurant growth that growth will come from new units and strategic investments in our physical assets through an ongoing accretive remodel program. This quarter was a big one and that we finalized our research and now know with certainty that we have a home run or even a grand slam with our latest remodel package in this package, we leveraged the learnings.
From our last remodel program called Heritage 2.0, and combine that with research and new design elements that lean into our unique diner position. We now have a winning solution delivering mid single digit percentage Tropic list.
These impressive results along with our ability to incentivize and support our franchisees with financing through our loan pool will help them finance these remodels and improved sales and traffic for the entire brand.
This will also get us back to a remodel pace consistent with what we had prior to the pandemic expected talk more soon about the way, we will support our franchisees and work to improve our fleet with a strong focus to gear up in this area.
In short and to summarize what Youll see from the Denny's brand.
<unk>, new menu innovation, bringing craveable items to our guests continued strength in providing unparalleled value offerings heck advancements with our xenial rollout and a remodel program set to deliver fantastic traffic results and a great ROI for our franchisees. Finally, we will reinvest in our co ops, adding roughly $12 million to our overall marketing spend capturing the APA.
<unk> of even more guests and driving traffic.
Turning now to the momentum at Kiki's Breakfast Cafe, we noted on our last earnings call that we received a warm welcome in the Nashville market as we opened our first location outside of Florida. The local community continues to embrace <unk> as evidenced by sales volumes that are ahead of our expectations and on pace to deliver approximately $2 million in sales annualized.
We believe this pace, which is also ahead of the average sale volumes, we see in Florida cafes validates our optimism for this brand and for the <unk>. It also shows that our discipline and determination in making sure. We had the right recipe to begin expanding this concept into new markets was spot on the refresh interior prominent mornings from scratch tagline and refresh menu Dilip.
Our core Differentiators of an elevated culinary experience featuring delicious abundant entrees prepared from scratch daily and using the highest quality ingredients.
Ah Kiki's Youll see this delivered an energetic fun atmosphere, where the customer experience is best in class. We now measure kiki's guest satisfaction through guest XM and are blown away by the continued stellar results specifically, a Google rating of $4 seven and overall net sentiment and intent to return scores that far exceed other family dining or full service benchmarks.
Following the opening in the Nashville market two additional keys opened in Jacksonville, Florida with a new design and another catheter is expected to open in the Nashville market in the next couple of weeks.
The team is working feverishly to identify sites for future cafes helped secure property control navigate permitting and begin construction efforts against a strong development pipeline.
Simply can't wait to introduce new guests and new markets to this fantastic brands.
To close out our thoughtful strategies are driving our actions and our areas of focus are well timed given the environment and the expectations of our guests and our franchisees. These solutions and the promise of new innovation on the menu with technology and the right investments give us reason to be optimistic about what's ahead this quarter and beyond.
Robert: Now I'll turn the call over to our CFO Robert rustic.
Thank you Kelly and good afternoon, everyone.
Robert P. Verostek: Given the strong prior year numbers in the highly competitive value environment. During the quarter. We viewed denny's Q1 domestic system wide same restaurant sales of negative one 3% favorably.
<unk> in a two year comp of positive seven 1%.
Robert P. Verostek: Denny's domestic systemwide same restaurant sales were comprised of approximately five 5% and pricing, partially offset by approximately 5% of product mix related to higher value at.
Robert P. Verostek: All pricing for the quarter was a carryover from fiscal 2023. However in mid April we took approximately 3% in pricing with the Denny spring core menu launch.
Robert P. Verostek: April pricing included approximately 5% in California to offset the anticipated impact of $12 28.
Robert P. Verostek: This was more heavily weighted towards franchise restaurants with company restaurants, averaging approximately 4%.
Robert P. Verostek: Denny's domestic average weekly sales for the first quarter were approximately $37000, including off premises sales of approximately $8000 or approximately 21% of total sales.
Robert P. Verostek: <unk> delivered system wide same cafe sales of negative three 6% for the quarter.
Robert P. Verostek: Approximately 40% of our Kiki's cafes are located in Orlando, which is consistently trailed both Florida and the national average.
Robert P. Verostek: However, we have been very pleased with the progress made in the small but mighty brand.
Robert P. Verostek: 2023 was a year of building out the right team to lead <unk> and they are already making meaningful impacts.
Robert P. Verostek: In fact over the last year, they have closed the traffic gap to family dining significantly and we still have more traffic and check driving initiatives in the works.
Robert P. Verostek: <unk> plans to roll out a selection of alcoholic beverages system wide during Q2, which delivered instance of approximately 4% and test most of which was incremental.
Robert P. Verostek: Additionally, we are encouraged by the early test results of our new interior design in our latest Florida openings and are optimistic about what our future remodel program could deliver to the brand, including the addition of patios.
Speaker Change: Before I begin discussing the quarterly financial results I want to take a moment and describe the changes to our non-GAAP financial measures that we believe will provide more clarity to investors and analysts and greater comparability to peers.
Speaker Change: Beginning this quarter, we adjusted our non-GAAP financial measures for items, such as legal settlement expenses pre opening expenses and other items, we do not consider in the evaluation of our ongoing core operating performance in.
Speaker Change: In addition, cash payments for restructuring and exit costs and cash payments for share based compensation will no longer be a component of our adjusted EBITDA definition.
Speaker Change: We are also sunset, our adjusted free cash flow non-GAAP measure and we are now referencing the GAAP cash flow statements presented in our quarterly SEC filings.
Speaker Change: Please see the analysts center on our Investor Relations website, or our current investor presentation for a recasting of historical non-GAAP financials.
Speaker Change: Turning to our first quarter financial details.
Total operating revenue was $110 million compared to $117 5 million in the prior year quarter.
Speaker Change: Franchise and license revenue was $57 6 million compared to $64 million in the prior year quarter.
Speaker Change: This change was driven by a $2 $1 million decrease in initial and other fees associated with the sale of kitchen equipment in the prior year quarter, and a $1 $5 million decrease in advertising revenue primarily related to temporarily lower local advertising co op contribution in the current quarter.
Speaker Change: Prior to the pandemic. These co op contributions represented approximately 4% of system sales. However, they have averaged about half of that over the past several years.
Speaker Change: Beginning in Q2, the Denny's system has fully reestablish local advertising co op contributions and we look forward to these investments driving incremental guests into our restaurants.
Speaker Change: Adjusted franchise operating margin was $31 million or 52, 2% of franchise and license revenue compared to $31 6 million or <unk> 49, 4% in the prior year quarter.
Speaker Change: This margin change was primarily due to lower sales and lease terminations.
Speaker Change: Company restaurant sales were $52 3 million compared to $53 5 million in the prior year quarter. This was primarily driven by a decrease of 3% and Denny same restaurant sales, partially offset by one additional kiki's equivalent unit.
Adjusted Company restaurant operating margin was $6 million or 11, 5% of company restaurant sales compared to $7 1 million or 13, 2% in the prior year quarter. This margin change was primarily due to higher workers' compensation and general liability expenses in the current.
Speaker Change: Quarter of approximately $1 million.
Speaker Change: Or one nine percentage points of company restaurant sales.
Speaker Change: The inflation was approximately 2% for the quarter similar to what we experienced in Q4 2023.
Speaker Change: Additionally team labor inflation remained unchanged in Q1 at approximately 3%.
Speaker Change: To take a moment to provide insights on the impact of a b $12 28 on R 22, California company restaurants.
Speaker Change: Since a b 12, 28 was signed in September 2023.
Speaker Change: There were industry fears of full service employees rushing to secure fast food jobs, we have been very pleased to actually see improvements in both management and crew turnover in our company restaurants.
Speaker Change: We believe this is a true testament to investments made in our teams such as our game program, allowing team members to obtain their G. D College credits life skills and career pathways.
Speaker Change: Additionally, we have not experienced a material increase in team wages, thus far in April which is in part due to our servers, earning well above the 12 28 minimum wage when factoring in tip income.
Speaker Change: General and administrative expenses for Q1 totaled $21 2 million compared to $20 1 million in the prior year quarter.
Speaker Change: These results collectively contributed to adjusted EBITDA of $18 4 million.
Speaker Change: The effective income tax rate was 24, 6% compared to 61, 5% in the prior year quarter.
Speaker Change: This change was primarily due to discrete items relating to share based compensation in the prior year quarter.
Speaker Change: Adjusted net income per share was <unk> 11 in the current year quarter compared to 13 in the prior year. This change was primarily due to higher workers' compensation and general liability expenses, which weighed on adjusted EPS by approximately <unk> <unk>.
Speaker Change: Our quarter end total debt leverage ratio was three five times, we had approximately $271 million of total debt outstanding including $261 million borrowed under our credit facility.
Speaker Change: During the quarter, we allocated $4 $8 million to share repurchases continuing our commitment of returning capital to our shareholders. While also balancing investing in <unk> growth.
Speaker Change: At the end of the quarter, we had approximately $96 million remaining under our existing repurchase authorization.
Speaker Change: Next to recap our first quarter development highlights.
Our brands opened eight combined restaurants during the quarter.
Speaker Change: Denny's franchisees opened five new restaurants, including three international locations.
Speaker Change: These openings were offset by 24 franchise closures and one company restaurant closure.
Speaker Change: These franchise closures averaged less than $1 million in their average unit volumes and we're open on average for 32 years.
Speaker Change: Over that timeframe trade areas have shifted and as was the trend prior to the pandemic franchisees stayed opened through the holidays to enjoy one last season with their long time loyal guests.
Speaker Change: Despite these closures we remain encouraged by the overall health of the broader franchise portfolio.
In fact, despite domestic franchise same restaurant sales decreasing one 2% during the quarter. The average unit volumes have actually increased by approximately one 1% compared to the prior year.
Moving to Kiki's, we opened three company cafes during the quarter two in Jacksonville, Florida. In addition to the first cafe outside of Florida in Hendersonville, Tennessee.
Speaker Change: We are very encouraged that our first cafe outside of Florida is currently on track to deliver sales of approximately $2 million and as Kelly noted our second company location in Tennessee will open in the next couple of weeks and Gallatin just in time for mother's day.
Speaker Change: In addition, there are currently four cafes under construction with several others in permitting and site approval phases.
Speaker Change: Lastly, let me now take a few minutes to expand on the business outlook section of our earnings release.
Speaker Change: With many sales driving initiatives such as the expansion of Banda Burrito, which is consistently rival the meltdown performance as well as the testing with Franklin injunction and reigniting, our remodel program and local co op advertising funds, we remain optimistic on our domestic systemwide same restaurant sales guidance of between zero.
<unk> and 3% compared to 2023.
Speaker Change: We anticipate opening 40 to 50 restaurants on a consolidated basis inclusive of 12 to 16, Kiki's openings and a consolidated net decline of 10 to 20 restaurants.
Speaker Change: We are projecting 2020 for commodity inflation to be between zero, and 2% and for labor inflation to be between four and 5%.
Speaker Change: The labor inflation guidance takes into account the anticipated impact from a b 12, 28 in California.
Our expectations for consolidated total general and administrative expenses are between 83, and $86 million, including $12 million related to share based compensation expense, which does not impact adjusted EBITDA.
And lastly, as a result of evolving our non-GAAP financial measure definitions and factoring in Q1 results. We now anticipate consolidated adjusted EBITDA of between 87 and $91 million compared to the previous guidance of between 85 and $89 million.
Speaker Change: Finally, I would like to thank our supportive franchisees and result, driven brand teams, who have remained focused on serving our guests while continuing to drive our strategic priorities.
Speaker Change: That wraps up our prepared remarks, I will now turn the call over to the operator to begin the Q&A portion of our call.
Speaker Change: Thank you.
Speaker Change: At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset.
Speaker Change: Before pressing the star keys.
Speaker Change: Please while we poll for questions.
Speaker Change: Our first question comes from Michael Tamas with Oppenheimer. Please proceed with your question.
Michael A. Tamas: Alright, thank you.
Michael A. Tamas: Okay. Your guidance for flat to plus 3% same store sales for the year implies a pretty material acceleration.
Michael A. Tamas: I understand you face easier comparisons and you do have a bunch of catalysts rolling out, but the macro environment does also appear to be a little bit more challenging than it was even just a few months ago. So youre willing to talk about near term trends that all of the bills on your confidence to achieve that full year guidance and can you maybe talk about which of those sales initiatives you're most excited about.
Michael A. Tamas: That can drive real change in the near term.
Michael A. Tamas: Hey, Michael Good to hear your voice this is Robert.
Robert P. Verostek: With regard to the sales specifically Q Q1, particularly.
Robert P. Verostek: Mid March to about mid April saw some pretty significant volatility related to spring break.
Robert P. Verostek: But as we exited April the trend really started to improve particularly just within our own resolved and the comparisons again against casual and family dining so.
Robert P. Verostek: What we experienced on the quarter, we changed that trend now.
Robert P. Verostek: As we head out of April I do also.
Robert P. Verostek: We'd like to say that our value initiatives have really been performing quite well.
Robert P. Verostek: We just launched into our latest version of that again are all day diner deals. They have a $5 99 price point inclusive in that so despite the general macro economic environment and I agree with you there is an overhang there.
Robert P. Verostek: We are I think very well positioned with that value messaging.
Robert P. Verostek: To drive.
Robert P. Verostek: To drive same store sales and I'll pass it to Kelly for for the initiatives, Yes, absolutely and thank you Michael for the question Yeah. The only thing we have noticed and we've continued to watch not only throughout the quarter.
Kelly: Give us a bit accomplished competence in April and for the quarter is the fact that the trade that we really do see or what appears to be trade down given RB two casual dining and that has been pretty consistent right. So so while yes cautious consumers looking for value we feel like again those work for us and have been working for US We also launch.
Kelly: A new menu and it's.
Kelly: Really early but from what we can tell there was pricing in the menu, but also positive mix and the barbell strategy continues to work for us with people really are adding our new dessert is doing well things, adding to the check so that gives us some some governance.
Kelly: And then the things we're most excited about I think look the dollars and cents with say the increase in marketing spend in the with the simple matches.
Matt that's going to happen again.
Kelly: Gives us a lot of content and $12 million as mentioned in the script so that.
Kelly: That along with the things that we see and potentially a remodel program that will gear up as strong as it was pre pandemic. Those results are in and could have the potential to really show some impact the back half of the year I mentioned another virtual brand, it's not insignificant in terms of the sales that we see in that virtual random and the tests that we already have in close.
Two 100 restaurants Civil, California, and then nationally in the back half of the year.
Kelly: Those are probably the ones I would put at the top of the list starting with the co op knowledge, adding media into the mix.
Kelly: And then just as a.
Kelly: Follow up on value you know, we've heard a lot of restaurants talking about stepping up their value offerings going forward.
Particularly across the fast food category.
Kelly: Obviously, Danny is known for value and you pointed out the value mix was actually up to 19% this quarter.
Kelly: How does that shape the way youre thinking about your value strategies going forward and is there a value mix level that like you or your franchisees would like to stay below or sort of stabilize that thanks.
Kelly: Yeah, I think, especially what you see happening in fast food I would just say again, we are watching the price increases there where knowing what we know what our guest count on us for endo that that value leadership, it's something we can offer I think at 19, we're not surprised by that at all it's been 17 for quite some time and we've been at those levels before.
Kelly: So for us.
Kelly: I don't think we were in it gets above probably 25% mid 20 <unk>.
Kelly: To probably go higher than that.
Kelly: Our 2468 platform that launched years ago, but with one of our most successful platforms got as high as.
Kelly: 24%.
Kelly: And so that's that's probably an area we feel safe.
Kelly: Safe and in the way, we've orchestrated and architected that not.
Kelly: And then you in the past and what we would we'd be okay with going forward.
Speaker Change: Thank you.
Speaker Change: Thanks, Michael.
Speaker Change: Our next question comes from Jake Bartlett with Truth Securities. Please proceed with your question.
Jake Rowland Bartlett: Great. Thanks for taking the question.
Jake Rowland Bartlett: First one was a follow up on the on the value discussion.
All the diner meals.
Jake Rowland Bartlett: Launched Adam what about a year and a half ago.
Jake Rowland Bartlett: I'm wondering how that has performed versus just doing the grand Slam I'm trying to understand.
Jake Rowland Bartlett: Whether the relaunch here.
Jake Rowland Bartlett: How impactful it could be versus luxury move up to 599 Grand Slam.
Speaker Change: Yes. Thank you Jay great to hear from you I think we're actually pretty confident so we did a lot of testing to go back and look at reprising that versus staying on for quite a bit with the original Grand Slam and it performed well for us it really hung in there for us.
Speaker Change: So we do we do great when we talk about our plans at the signature platform. Obviously, so what you see in all day diner deals and what the research really pointed to for us.
Speaker Change: Revamped the commercial we went and really amped up the variety play. So it's six Andre we lead with the everyday value Slam a great value, but we lead with that but Youre also we can also see in just a really short amount of time since it launched and we can see Burger sales incidences are up so the things that are featured on the spot actually are.
Speaker Change: Our performing pretty well so we like the variety we like.
Speaker Change: But there are options for the guests and it's not just one single breakfast item, although we lead with breakfast because that's the best we have the best potential when we do not so we're encouraged and we've got great great plans in the mix for the rest of the quarter in the back half of the year.
Speaker Change: Great and just to confirm this is you mentioned in the last call you were testing some various levels of value. This is what you were testing or are there other platforms that youre currently still looking at.
Speaker Change: We absolutely are still there are other platforms. We are still looking at and again. This one given we revised the commercial given some new testing that we did at service to the top so a good one now to lead into this quarter with but where we are we are not done and have a few more tricks up our sleeve in terms of great everyday value offers.
Speaker Change: That can be really compelling for us given the environment.
Speaker Change: Okay and then this next question might be might be a one guy as you already know the answer I'm open. So I apologize ahead of time, but I wanted to make sure I understood. The implications of the local co op matching in the $12 million increased spend that you talked about where does that money come from is this.
Speaker Change: So help me understand exactly who is matching what and where.
Speaker Change: Is there any contribution from from Denny's itself.
Speaker Change: Out the door.
Speaker Change: Yes, Jake that's an excellent question. So the mechanics of that are this so all of our restaurants, although the denny's restaurants contribute.
Jake Rowland Bartlett: 3% to our brand building fund.
Jake Rowland Bartlett: This co op then suggest if the franchisees.
Jake Rowland Bartlett: And an incremental half a percentage point within their market, we will take a half a point out of that brand building fund to match into that local co op, giving that co op approximately 1%.
Jake Rowland Bartlett: Their sale to spend leaving the remaining two 5% in the brand building fund. So that's that's the mechanics of how that works. So overall.
Jake Rowland Bartlett: Again, the overall spend is lifted a half percent.
Jake Rowland Bartlett: This environment shifting the national spend from three to two and a half.
Jake Rowland Bartlett: Illustrative Lee and the local then goes from a half a point to a point.
Jake Rowland Bartlett: Great.
Jake Rowland Bartlett: And then the last question is just on California, you have theres been a months now the implementation of the fast recovery asking.
Jake Rowland Bartlett: You mentioned that it's not so far impacting your labor costs are it does sound like the labor cost increase is still built into the guidance.
Jake Rowland Bartlett: Anything Youre seeing I think there was an idea that this could drive traffic too.
Jake Rowland Bartlett: Dining and full service.
Speaker Change: Any any.
Speaker Change: Activity or any actions by consumers or changes in behaviors that you can share at this point.
Speaker Change: Yes, Jake this is Robert again with regard to that little early frankly to see changes in traffic patterns, resulting from that.
Speaker Change: The potential incremental funds going into the pockets of of our consumers. Those paychecks. It may just be getting into their pockets at this point, so kind of consumer behavior. As a result of increased income from increased wages is likely too early to see but we work with.
Speaker Change: Our.
Speaker Change: Prepared remarks, we're really at this point pretty.
Speaker Change: Pretty bullish at least in the near term debt management turnover.
Speaker Change: In crew turnover.
Speaker Change: It has not taken a significant change in California again watching it just as I described the wages maybe early the impact of how that all evolves with regard to turnover or labor inflation, we're still watching that very closely week, but early on those two points have have performed better.
Speaker Change: Then we are our guidance as you point out it does contemplate increased labor inflation that may be something that we could revisit later in the year, but right now just a little cautious to do so.
Speaker Change: Great I appreciate it thank you.
Speaker Change: Thanks Jake.
Speaker Change: Our next question comes from Todd Brooks with the Benchmark Company. Please proceed with your question.
Todd Morrison Brooks: Hey, Thanks for taking my question, one drilling on key keeps a little bit first.
Todd Morrison Brooks: Kelly just it sounds like the Henderson Bill opening is gone.
Todd Morrison Brooks: Better than you expected, but.
Todd Morrison Brooks: What kind of learnings out of the response, maybe potential in the non Florida markets. It's one data point, but any read through or excitement around this opening.
Todd Morrison Brooks: Other changes in the growth trajectory going forward or.
Todd Morrison Brooks: If you could possibly update us I know there were a lot of franchisees that were waiting to see that unit and the performance.
Todd Morrison Brooks: Florida is there any way to give us an update on where the.
Todd Morrison Brooks: Franchisee pipeline glass I think the last update was 100 pulse.
Speaker Change: Yes. So great question Todd we are absolutely excited at May opening has done well as you said and I have already mentioned, so above expectations and I think we mentioned on the last call didn't get into it in as much detail. This time, but we didn't open would patio or our liquor license yet we've got those things.
Speaker Change: They have been fully vetted and tested now and the rest of the system. So those other levers to pull that haven't yet even began to be in the mix in hendersonville, Tennessee market next one coming up in Tennessee. So we're really bullish about that market and the response, we've gotten so far beautiful design food. The net <unk> score as I mentioned in my comment, but they are they are absolutely.
Speaker Change: Phenomenal.
Speaker Change: And the team is working through a lot of different things in terms of ways to look at the existing fleet.
Speaker Change: In the way of a remodel package, where we can take the learnings and the things that we've seen that have been really positive from the guests.
Speaker Change: Really new positive aspects in the design and pull those into the Florida market. Those franchisees are incredibly excited to be the first time that would ever be a remodel program for the small, but mighty brand, making it. So there's a lot of excitement about that as well as excitement for the work that is being done around the alcohol that has been testing patios.
Speaker Change: Gallatin will open with a full patio and it's just a beautiful absolutely beautiful building. So the learnings are absolutely there we've got lots of people talking to us about it now that we've got these kind of learnings from <unk>. So the interest is still there the conversations are there and.
Speaker Change: And we expect to be continued talking about the pipeline strengthening.
Speaker Change: Okay, Great and then just a follow up.
Speaker Change: The potential to remodel the fleet in Florida do you have a rough idea on.
Speaker Change: What the remodel costs might run to get those units to have at least the elements that you could work into those older boxes from the newer design.
Speaker Change: Yes, Great question side, we're pretty early at this point and again pulling the most.
Speaker Change: Most appropriate elements to bring into a lot of inline locations as well. So we're kind of wrestling with what does it look like inside how do you really going to be paid and new colors and brightening it up.
Speaker Change: And then still having some of those same things that our signature for tiki. So we're still early in designing that in low test that at our Doctor Phillips location.
Speaker Change: Pretty soon but not quite there on just having that full package for you though.
Speaker Change: Okay, Great and then my second question and I'll hop back in queue.
Speaker Change: Menu innovation pipeline, you've talked about levering, the new kitchen equipment, more and more going forward.
Speaker Change: What does that look like does it go item by item or do you see new platforms that you're experimenting with.
Speaker Change: Lever the new kitchen equipment is there anything we should be watching for I guess from the menu standpoint, it could be another incremental driver to that list of same store sales drivers that you laid out earlier.
Speaker Change: Sure I mean, what I can tell you is what we are doing is looking at the menu holistically looking at the obviously always being mindful of the equipment.
Speaker Change: The simplicity and the consistency that that equipment offers.
Speaker Change: But there are a couple of things that you will see us do that kind of look at the menu and our strengths and things that are signature for us.
Speaker Change: While balancing that with things that we can use our menu our kitchen monetization equipment for.
Speaker Change: One thing that I, probably wouldn't want to add just yet in terms of what the pipeline looks but theres. Some theres some pretty exciting things that we've got for the back half of the year.
Speaker Change: Okay. Thanks Kelly.
Kelly: Thank you.
Kelly: Okay.
Speaker Change: As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.
Speaker Change: One moment, while we poll for questions.
Speaker Change: Our next question comes from Nick <unk> with Wedbush Securities. Please proceed with your question.
Nick: Thank you.
Nick: Just a follow up on the call.
Nick: Just to understand correctly is it an actual increase in marketing spend overall or do we just shifts.
Nick: 50 bps from national marketing to local marketing.
Nick: Yes for clarity Nick is an actual increase of 50 basis points.
Nick: Again, we are shifting a half point out of national to get to boost the total local spend to a point, but it is and it is an actual increase in total spend from three to three 5%.
Nick: Yeah.
Nick: Okay.
Speaker Change: Okay, I guess, we'll just take it offline to understand where that point comes from exactly.
Speaker Change: And then.
Speaker Change: Just around sort of.
Nick: Some of the.
Nick: Add back when the company online.
Nick: Or maybe just kind of step back and just think about EBITDA like if we were to keep it apples to apples we'd talk about it.
Nick: We used to talk about it what would the EBITDA guide equate to.
Nick: Yeah.
Speaker Change: Yes, so Nick we tried to take that into account.
Nick: Into the new range there so.
Speaker Change: It is now.
Nick: For 'twenty three this new definition would have led to approximately $89 million.
Nick: The current definition now is 87% to 91, so that new midpoint is about $89 million.
Nick: We adjusted our guidance range upwards to account for these changes that we that I described.
Nick: In our prepared remarks so.
Speaker Change: And just taking somewhat of a step back.
Nick: Reason for this is we have many conversation, particularly post our earnings releases, we were running into too many conversations.
Nick: Which analysts and the investors we're going.
Nick: Sure not is comparable as we would like to see to two others of your peers.
Nick: In the somewhat difficult for us to understand your definition in comparison to your peers. So we were really trying to take into account both of those making this.
Nick: <unk>.
Nick: More comparable to our peers within our investor presentation.
Speaker Change: Nick we do have a reconciliation.
Speaker Change: Dating before this.
Nick: New definition, all the way back to 2018.
Nick: Okay, and then just last question.
Nick: It does sound like Youre already seeing an acceleration in comp trends.
Nick: Is the Q1 comp.
Nick: Any way to maybe bracket, what youre seeing in April quarter to date.
Nick: Okay.
Nick: That's a tough one because the reality is again that choppiness that we've seen really kind of extended through mid April timeframe. So to give you a number I don't think that would be representative of the month would be representative of the new trends that we are now seeing in the back half of the month.
Nick: With the with the new menu with the incremental pricing with the new all day diner out there that new value commercial we have out there so that wouldn't necessarily be representative of the trend that we've seen kind of the back half of the hub.
Speaker Change: Got it fair enough. Thank you very much.
Speaker Change: Thanks, Nick.
Nick: Yeah.
Nick: Our next question is from Ashland Groninger with Piper Sandler. Please proceed with your question.
Ashley Bruminger: Hi, Good afternoon, guys I know you mentioned on the last call as well as in the prepared remarks that Florida was the weakest stadium geography I was just wondering if the Florida market is improving any synthesis and just how much how much has it been impacting traffic and sales at QB.
Speaker Change: Yes, so good to speak with you with regard to the.
Nick: With the traffic the sales within Florida, there has been some.
Nick: Improvement over the course of the quarter, but with regard to relative positioning to the balance of the U S.
Nick: It would still fall in the bottom bottom quintile of our sales performance I do believe that we will see that we begin to roll over the depth of this in about a month or so that happened in this really outsized relative underperformance in Florida really started in about May.
Nick: May of last year, so I do have.
Nick: Some hope that as we rollover this it'll begin to normalize.
Nick: But right now it would be still in the bottom quintile of our state's performance.
Nick: Though it did improve across Q1.
Speaker Change: Great. Thanks, I'll pass it back.
Speaker Change: Thanks.
Nick: We have reached the end of the question and answer session I'd now like to turn the call back over to Kayla money for closing comments.
Kayla Money: Thank you I'd like to thank everyone for joining us on the call today, we look forward to our next earnings conference call in late July when we will discuss our second quarter 2024 results. Thank you and have a great evening.
Speaker Change: This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.