Q1 2024 First Watch Restaurant Group Inc Earnings Call

Operator: Thank you for standing by, and welcome to the First Watch Restaurant Group First Quarter Earnings Conference Call occurring today, May 7, 2024, at 8 a.m. Eastern. Please note that all participants are currently in a listen-only mode. Following the presentation, the conference call will be open to analyst questions, and instructions on how to ask a question will be given at that time. This call will be archived and available for replay at investors.firstwatch.com under the news and events section. I would now like to turn the conference over to Steven Marotta, Vice President of Investor Relations at First Watch, to begin. Hello, everyone.

Thank you for standing by and welcome to the first Watch restaurant Group, Inc. First quarter earnings conference call occurring today May seven 2024 at eight am eastern time.

Note that all participants are currently in a listen only mode. Following the presentation. The conference call will be open for analyst questions and instructions on how to ask a question will be given at that time. This call will be archived and available for replay at investors thought first watch dot com under the news and events section.

I would now like to turn the conference over to Steven Marotta, Vice President of Investor Relations at first watch to begin go ahead, Sir Hello, everyone. I'm joined by first watches Chief Executive Officer, and President, Chris Tommaso and Chief Financial Officer, Mel Hope.

Steven Marotta: Hello, everyone. I am joined by First Watch's Chief Executive Officer and President, Chris Tomasso, and Chief Financial Officer, Mel Hope. This morning, First Watch issued its earnings release for the first quarter of fiscal year 2024 on Globe Newswire and filed its quarterly report on Form 10-Q with the SEC. These documents can be found at investors.firstwatch.com. Let me first cover a few housekeeping matters before introducing Chris.

Speaker Change: This morning first watch issued its earnings release for the first quarter fiscal year 2024 on Globe Newswire and filed its quarterly report on Form 10-Q with the SEC.

Speaker Change: And this can be found at investors Doc first watch dot com.

Steven Marotta: Let me first cover a few housekeeping matters before introducing Chris <unk>.

Steven Marotta: This conference call will include forward-looking statements that are subject to various risks and uncertainties that could cause the company's actual results to differ materially from these statements. Such statements include, without limitation, statements concerning the condition of the company's industry and its operations, performance and financial condition, outlook, growth plans and strategies, and future expenses. Any such statements should be considered in conjunction with cautionary statements in the company's earnings release and the risk factor disclosure in the company's filings with the SEC, including our annual report on Form 10-K. First Watch assumes no obligation to update these forward-looking statements, whether as a result of new information, future developments, or otherwise, except as may be required by law.

This conference call will include forward looking statements that are subject to various risks and uncertainties that could cause the company's actual results to differ materially from these statements such statements include without limitation statements concerning the condition of the company's industry and its operations performance and financial condition.

Steven Marotta: The growth plans and strategies and future expenses any such statements should be considered in conjunction with cautionary statements in the company's earnings release and the risk factor disclosure in the company's filings with the SEC, including our annual report on Form 10-K for Swatch assumes no obligation to update these forward looking statements whether.

As a result of new information future developments or otherwise, except as may be required by law.

Steven Marotta: Lastly, management's remarks today will include references to various non-gap measures, including restaurant-level operating profit, restaurant-level operating profit margin, adjusted EBITDA, and adjusted EBITDA margin. Investors should review the reconciliation of these non-gap measures to the comparable gap results contained in the company's earnings release filed this morning. During today's call, references to same restaurant sales and traffic growth compare the 13-week periods ended March 31, 2024, and April 2, 2023, in order to compare leg-for-leg periods. Otherwise, any reference to percentage growth when discussing first quarter performance is a comparison to the first quarter of 2023, unless otherwise indicated. And with that, I will turn the call over to Chris.

Steven Marotta: Lastly, management's remarks today will include references to various non-GAAP measures, including restaurant level operating profit frustrated restaurant level operating profit margin adjusted EBITDA and adjusted EBITDA margin investors should review the reconciliation of these non-GAAP measures to the comparable GAAP results contained in the Companys.

Steven Marotta: Earnings release filed this morning.

Steven Marotta: During today's call references to same restaurant sales and traffic growth compares to a 13 week periods ended March 31, 2024, and April 2023 in order to compare like for like periods.

Steven Marotta: Otherwise any reference to percentage growth when discussing first quarter performance as a comparison to the first quarter of 2023, unless otherwise indicated and with that I will turn the call over to Chris.

Good morning.

Christopher A. Tomasso: Thanks to the hard work of our entire team, I'm pleased to report that First Watch delivered another solid quarter. We generated $289.6 million in system-wide sales, $242.4 million in total revenues, and $28.6 million in adjusted EBITDA, driven by our comp restaurant performance, strong results by our non-comp restaurants, new unit growth, solid operations execution that drove improved profitability, and contributions from our strategic franchisee acquisitions completed over the past year. We opened nine new restaurants in eight states during the quarter, and on April 15th, we completed the acquisition of 21 franchise-owned restaurants and associated development rights in the Raleigh, North Carolina market.

Christopher A. Tomasso: Thanks to the hard work of our entire team I am pleased to report that first what's delivered another solid quarter.

Christopher A. Tomasso: We generated $289 $6 million in system wide sales $242 4 million in total revenues and $28 6 million in adjusted EBITDA, driven by our comp restaurant performance strong results by our non comp restaurants, new unit growth solid operations execution that drove improved profitability.

Christopher A. Tomasso: Stability and contributions from our strategic franchisee acquisitions completed over the past year.

Christopher A. Tomasso: We opened nine new restaurants in eight states during the quarter and on April 15th completed the acquisition of 21 franchise owned restaurants and associated development rights in the Raleigh, North Carolina market.

Christopher A. Tomasso: I'm especially proud that we delivered positive same-restaurant sales, continued to grow share, and drove strong operating results despite well-documented headwinds and a particularly difficult start to the year, namely harsh weather in January. Encouragingly, our trends improved sequentially throughout the quarter, although they were a bit choppy as we were up against the strongest quarterly sales and traffic comparison of the year, as well as spring break and Easter weekend timing Despite the volatility in the quarter, our team produced strong operating results across multiple key performance indicators. Labor management efficiencies were once again driven by process improvements and the continual refinement of recently deployed labor and analytics tools that allow our operators a more real-time view into their business.

I'm, especially proud that we delivered positive same restaurant sales continued to grow share and drove strong operating results, despite well documented headwinds and particularly.

Christopher A. Tomasso: Particularly difficult start to the year, namely harsh weather in January.

Christopher A. Tomasso: Encouragingly, our trends improved sequentially throughout the quarter, although they were a bit choppy as we were up against the strongest quarterly sales and traffic comparison of the year as well as spring break and Easter weekend timing shifts.

Christopher A. Tomasso: Despite the volatility in the quarter our team produced strong operating results across multiple key performance indicators labor management efficiencies. Once again, we're driven by process improvements and the continual refinement of recently deployed labor and analytics tools that allow our operators are more real time view into their business.

Christopher A. Tomasso: With more robust information and enhanced visibility, our leaders are better equipped to manage their business. This improved efficiency contributed to both our top and bottom lines, with KPIs once again improving and remaining very strong. In the quarter, we saw the highest customer experience scores we've recorded to date.

Christopher A. Tomasso: With more robust information and enhanced visibility our leaders are better equipped to manage their business.

Christopher A. Tomasso: This improved efficiency contributed to both our top and bottom line with Kpis once again, improving and remaining very strong in the quarter. We saw the highest customer experience scores we've recorded to date.

Christopher A. Tomasso: Another sequential improvement in employee turnover, the fastest food ticket times we've recorded to date, and continued market share gains with our same restaurant traffic exceeding the black box casual dining segment by more than 100 basis points. These accomplishments were achieved during a quarter that typically includes some of the busiest months of the year for us. Our first quarter results give us confidence that we are focused on the right things and delivering the best possible experience for both our employees and our customers.

Christopher A. Tomasso: Another sequential improvement in employee turnover.

Christopher A. Tomasso: Fastest food ticket times, we've recorded to date and continued market share gains with our same restaurant traffic exceeding the black box casual dining segment by more than 100 basis points.

Christopher A. Tomasso: These accomplishments were achieved during a quarter that typically includes some of the busiest months of the year for us our.

Christopher A. Tomasso: Our first quarter results give us confidence that we are focused on the right things and delivering the best possible experience for both our employees and our customers.

Christopher A. Tomasso: Turning to the consumer, it's evident that after several quarters of macro pressure, there appears to be clear signs of a slowdown. The reality is that consumers are being more cautious and more discerning, resulting in fewer dining out occasions across the industry. This trend began last summer as several large factors converged. Inflation pressures peaked.

Christopher A. Tomasso: Turning to the consumer it's evident that after several quarters of macro pressure there appears to be clear signs of a slowdown.

Christopher A. Tomasso: The reality is that consumers are being more cautious and more discerning, resulting in fewer dining out occasions across the industry.

Christopher A. Tomasso: This trend began last summer as several large factors converge inflation pressures Pete the gap between food at home and food away from home widened and student loan payments resumed.

Christopher A. Tomasso: The gap between food at home and food away from home widened, and student loan payments resumed. Macroeconomic environments are transitory, but proven business models endure. Our operating model allows us to remain nimble so that we can flex labor as business dictates, introduce elevated appeal and higher value items on our LTOs, and lean into and out of GNA projects as the environment evolves. However, we draw a hard line at reacting hastily to short-term dynamics, with potentially brand-damaging tactics such as discounting or matching the promotional activity which has begun to spike across the industry. In our view, broad discounting is a short-term fix with potentially negative long-term implications.

Christopher A. Tomasso: Macroeconomic environments are transitory, but proven business model vendor.

Christopher A. Tomasso: Our operating model allows us to remain nimble so that we can flex labor as business dictates introduce elevated appeal in higher value items on our L. T O and lean into and out of G&A projects as the environment evolves. However.

Christopher A. Tomasso: However, we draw a hard line of reacting hastily to short term dynamics with potentially brand damaging tactics, such as discounting or matching the promotional activity, which has begun to spike across the industry.

Christopher A. Tomasso: In our view broad discounting as a short term fix with potentially negative long term implications. Instead, we will continue to focus on profitable growth over the long term.

Christopher A. Tomasso: Instead, we will continue to focus on profitable growth over the long term. We've noted discussions about the challenging consumer environment facing restaurants in the state of Florida, validated by Placer AI reporting that restaurant visits actually contracted over the last several quarters throughout the state. We believe that the traffic benefit the state enjoyed in the several years following the initial outbreak of COVID is now normalized.

Christopher A. Tomasso: We've noted discussion about the challenging consumer environment facing restaurants in the state of Florida validated by Placer AI reporting that restaurant visits actually contracted over the last several quarters throughout the state.

Christopher A. Tomasso: We believe that the traffic benefits of state enjoys in the several years. Following the initial outbreak of Covid is now normalizing.

Christopher A. Tomasso: At First Watch, I'm proud of our clear leadership in our home state, where our aggressive expansion strategy is critical to our long-term growth. With 30% of our system in Florida, we are perhaps more attuned to the current environment here than most, and our bullish outlook hasn't changed. Our development in Florida has seen us grow to 123 restaurants in the state, a 48% increase over the past five years.

Christopher A. Tomasso: At first watch I'm proud of our clear leadership in our home state, where our aggressive expansion strategy is critical critical to our long term growth.

Christopher A. Tomasso: With 30% of our system in Florida, we are perhaps more attuned to the current environment here than most in our bullish outlook Hasnt changed our development in Florida has seen us grow to a 123 restaurants in the state of 48% increase over the past five years and over that period, we've gained significant market share while keeping competitive intrusion at bay by adhering.

Christopher A. Tomasso: And over that period, we've gained significant market share while keeping competitive intrusion at bay by adhering to our strict site selection criteria as we have grown. The bottom line is we're serving a lot more customers in Florida than we ever have, and it will continue to be a material component of our growth strategy. No matter the market dynamics we're operating in, we continue to be focused on our long-term opportunities. It's something we've done throughout our 40-year history.

Christopher A. Tomasso: Two our disciplined site selection criteria as we have grown.

Christopher A. Tomasso: The bottom line is we're serving a lot more customers in Florida than we ever have and it will continue to be a material component of our growth strategy.

Christopher A. Tomasso: No matter the market dynamics, we are operating in we continue to be focused on our long term opportunity. It's something we've done throughout our 40 year history.

Christopher A. Tomasso: As it relates to long-term strategic initiatives, we continue to focus on in-restaurant tech enablement with the ultimate goal of elevating both our customer and our employee experience. In most instances, these enhancements are tucked behind the scenes, which is by design, and our primary focus remains on delivering memorable hospitality and removing bottlenecks. The launch of systems such as KDS, Pay at the Table, and waitlist management all serve a particular role in enhancing the First Watch experience.

Christopher A. Tomasso: As it relates to long term strategic initiatives, we continue to focus on in restaurant Tech enablement with the ultimate goal of elevating both our customer and employee experiences.

Christopher A. Tomasso: In most instances these enhancements are tucked behind the scenes, which is by design.

Christopher A. Tomasso: Our primary focus remains on delivering memorable hospitality and removing bottlenecks.

Christopher A. Tomasso: The launch of systems, such as <unk> pay at the table and Waitlist management all serve a particular role in enhancing the first launch experience.

Christopher A. Tomasso: Now there's a greater opportunity for those systems to begin communicating with one another with the purpose of digitizing the end-to-end customer experience. Doing so creates a broader platform to measure our performance more accurately in a variety of ways, paving the road for further improvement. For instance, prior to the launch of KDS, we had little insight into our food ticket time.

Christopher A. Tomasso: Now, there's a greater opportunity for those systems to begin communicating with one another with a purpose of digitizing the end to end customer experience.

Christopher A. Tomasso: Doing so creates a broader platform to measure our performance more accurately in a variety of ways paving the road for further improvements for instance, prior to the launch of Tds, We had little insight into our food ticket times.

Christopher A. Tomasso: We completed the installation over a year ago, and with comparative information now available in real time, we are seeing tangible improvements. We'll continue to analyze that data to refine and evolve the system in an effort to optimize its benefits. Along with improved customer interaction, there is also a benefit in the acquisition of customer data and insights into their behavior. As we stated in the past, upwards of 50% of our weekend traffic originates on our waitlist.

Christopher A. Tomasso: We completed the installation over a year ago and with comparative information now available in real time, we are seeing tangible improvement.

Christopher A. Tomasso: We will continue to analyze that data to refine and evolve the system in an effort to optimize its benefits.

Christopher A. Tomasso: Along with improved customer interaction. There is also a benefit in the acquisition of customer data and insights into their behavior as.

Christopher A. Tomasso: As we stated in the past upwards of 50% of our weekend traffic originates on Airwave waitlist.

Christopher A. Tomasso: We're excited to see that our latest installation, Pay at the Table, is experiencing 35% adoption during peak periods as well. The data generated from these two tech enhancements alone are offering rich insight into visit and ordering behavior. We're beginning to pilot processes where these systems are joined in real time, and customer identification can be connected to the POS, where check information resides. The result is a more enriched view of our customers and the growing opportunity to target them with relevant communication through an enhanced marketing tech stack.

Christopher A. Tomasso: Excited to see that our latest installation pay at the table is experiencing 35% adoption during peak periods as well.

Christopher A. Tomasso: The data generated from these two tech enhancements alone are offering rich insight into visit in ordering behavior.

Christopher A. Tomasso: We're beginning to pilot processes, where these systems are joined in real time and customer identification can be connected to the Pos. We're check information resides. The result is a more enriched view of our customer and the growing opportunity of target them with relevant communications through an enhanced marketing tech stack.

Christopher A. Tomasso: We believe this creates a more focused approach to creating and serving more demand versus resorting to broader, inefficient, and brand-eluting action. We're in the very early stages of these initiatives, and we'll have more to share in the coming quarters. I'm as excited about the future of First Watch as I have ever been. We are the market leader in daytime dining with unmatched scale, proven portability, and a high ceiling with a total addressable market more than three times our current size.

Christopher A. Tomasso: We believe this creates a more focused approach to creating and serving more demand versus resorting to broader inefficient and brand diluting actions. We are in the very early stages of these initiatives and we'll have more to share in the coming quarters.

Christopher A. Tomasso: I'm as excited about the future first watch as I have ever been we are the market leader in daytime dining with unmatched scale proven portability and a high ceiling with a total addressable market more than three times, our current size and in the aggregate. Our recent <unk> vintages are all performing at or above their underwriting targets.

Christopher A. Tomasso: And in the aggregate, our recent NRO vintages are all performing at or above their underwriting targets. In closing, while we feel the headwinds affecting us and many others, we're confident that we're simply far better equipped to withstand them than our competitive set. And with that, I'll turn it over to Mel.

Christopher A. Tomasso: In closing, while we feel the headwinds affecting us and many others. We are confident that we are simply far better equipped to withstand them than our competitive set and with that I'll turn it over to Mel.

Henry Melville Hope: Thanks and good morning. Overall, as Chris mentioned, we're proud to have delivered strong first quarter operating results. Total revenues were $242.4 million, an increase of 14.7%. Our total revenue growth in the first quarter was driven primarily by our new restaurant openings and the 24 franchise restaurants we acquired over the past year. First Quarter same restaurant sales grew 0.5% on negative traffic of 4.5% compared to last year's strong positive traffic of 5.1%.

Henry Melville Hope: Thanks, and good morning overall.

Henry Melville Hope: Overall as Chris mentioned, we're proud to have delivered strong first quarter operating results.

Henry Melville Hope: Our food and beverage costs were 21.8% of sales in the first quarter compared to 22.4% in the same period last year. Costs as a percent of sales benefited from carried pricing of 4.4% positive mix, and were partially offset by commodity inflation of 2.9%. Labor and other related expenses were 33.3% of sales in the first quarter, an increase from 33% in the first quarter of 2023.

Henry Melville Hope: Total revenues were $242 4 million, an increase of 14, 7%.

Henry Melville Hope: Our total revenue growth in the first quarter was driven primarily by our new restaurant openings and the 24 franchise restaurants, we acquired over the past year.

Henry Melville Hope: First quarter same restaurant sales grew <unk>, 5% on negative traffic of four 5% compared to last year's strong positive traffic of five 1%.

Henry Melville Hope: Our food and beverage costs were 21, 8% of sales in the first quarter compared to 22, 4% in the same period last year.

Henry Melville Hope: Cost as a percent of sales benefited from carried pricing of four 4%.

Henry Melville Hope: Positive mix and were partially offset by commodity inflation of two 9%.

Henry Melville Hope: Labor and other related expenses were 33, 3% of sales in the first quarter, an increase from 333% in the first quarter of 2023.

Henry Melville Hope: We're fully staffed to support longer-term growth with an average of three managers per restaurant compared with 2.9 managers in the same period one year ago. Hourly labor efficiency improved in the first quarter, and we're pleased to call out that our employee turnover again declined. Restaurant level operating profit was $49.9 million for the first quarter, reflecting a margin of 20.8%. The 40 basis point decline versus last year was due to an increase in the average number of managers per restaurant, and deleveraging of fixed expenses, partially offset by favorable food and beverage costs as a percent of sales. General and administrative expenses were $27.7 million, approximately $5 million higher than in the prior year, primarily due to additional headcount.

Henry Melville Hope: We're fully staffed to support longer term growth with an average of three managers per restaurant compared with 2.9 managers in the same period one year ago.

Henry Melville Hope: Hourly labor efficiency improved in the first quarter and we're pleased to call out that our employee turnover again declined.

Henry Melville Hope: Restaurant level operating profit was $49 9 million for the first quarter, reflecting a margin of 28%.

Henry Melville Hope: The 40 basis point decline versus last year was due to an increase in the average number of managers per restaurant <unk>.

Henry Melville Hope: Deleveraging of fixed expenses, partially offset by favorable food and beverage costs as a percent of sales.

Henry Melville Hope: General and administrative expenses were $27 7 million approximately $5 million higher than in the prior year, primarily due to additional head count.

Henry Melville Hope: Adjusted EBITDA was $28.6 million, an increase versus the $27.4 million reported last year. Given the headwinds to same restaurant sales and traffic during the period, we're pleased to report this year over year increase in adjusted EBITDA. Adjusted EBITDA margin was 11.8% versus the 13% margin we realized in the first quarter of 2023. The difference was primarily attributable to a decline in restaurant level operating profit margin and higher general administrative expenses.

Adjusted EBITDA was $28 6 million, an increase versus the 27 4 million reported last year.

Henry Melville Hope: Given the headwinds to the same restaurant sales and traffic during the period were pleased to report this year over year increase in adjusted EBITDA.

Henry Melville Hope: Adjusted EBITDA margin was 11, 8% versus the 13% margin we realized in the first quarter of 2023. The difference was primarily attributable to the decline in restaurant level operating profit margin and higher general administrative expenses.

Henry Melville Hope: We opened nine system-wide restaurants during the quarter, of which seven are company owned and two are franchised. And we closed two, including one company-owned and one franchise restaurant, resulting in 531 system-wide restaurants at the end of the quarter. In an effort to help you model our performance, acquisitions favorably impacted first quarter revenue by $12 million and adjusted EBITDA by about $2 million. For further details on the first quarter, please review our supplemental materials deck on our Investor Relations website beneath the webcast link.

Henry Melville Hope: We opened nine system wide restaurants during the quarter of which seven are company owned and two our franchise owned and we closed two including one company owned and one franchise restaurant, resulting in 531 system wide restaurants at the end of the quarter.

Henry Melville Hope: In an effort to help you model our performance acquisitions.

Henry Melville Hope: Favorably impacted first quarter revenue by $12 million and adjusted EBITDA by about $2 million.

Henry Melville Hope: For further details on the first quarter. Please review our supplemental materials deck on our Investor relations website beneath the webcast link.

Henry Melville Hope: To provide some color on how we're planning the balance of the year, while our same restaurant traffic trend improved each month during the first quarter, it remains negative mid single-digits quarter to date, a trend we expect to continue for the remainder of the second quarter. At the same time, based primarily on easing comparisons, we're expecting same restaurant traffic in the second half of 2024 to be relatively flat. Now, I'd like to update our full year outlook for 2024.

Henry Melville Hope: To provide some color on how we're planning the balance of the year, while our same restaurant traffic trend improved each month during the first quarter. It remains negative mid single digit quarter to date.

Henry Melville Hope: And we expect to continue for the remainder of the second quarter.

Henry Melville Hope: At the same time based primarily on easing comparisons were expecting same restaurant traffic in the second half of 2024 to be relatively flat.

Speaker Change: Now I'd like to update our full year outlook for 2024.

Henry Melville Hope: We're adjusting our total revenue growth to a range of 17 to 19% from 18 to 20% previously, excluding the impact of the 53rd week last year. Of the 17 to 19% range, approximately 7% of the growth is expected to be contributed from the 23 restaurants we acquired in 2023 and the 22 restaurants we acquired in 2024. We're adjusting same restaurant sales growth to a range of flat to 2% with a low single-digit Our same restaurant sales growth guidance includes a 2% price action implemented in the last week of January, which implies carried pricing of around three and a half percent in the second quarter and just under 3% for the year.

Speaker Change: We're adjusting our total revenue growth to a range of 17% to 19% from 18% to 20% previously excluding the impact of the 50 <unk> week last year.

Speaker Change: Of the 17% to 19% range approximately 7% of the growth is expected to be contributed from the 23 restaurants, we acquired in 2023 and the 22 restaurants, we've acquired in 2024.

Speaker Change: We're adjusting same restaurant sales growth to a range of flat to up 2% with a low single digit decline in same restaurant traffic from a range of 1% to 3% with flat to negative same restaurant traffic previously.

Speaker Change: Our same restaurant sales growth guidance includes a 2% price action implemented in the last week of January which implies carried pricing of around three 5% in the second quarter and just under 3% for the year.

Henry Melville Hope: We continue to expect a total of 51 to 57 net new system-wide restaurants, updated to reflect 44 to 48 company-owned restaurants, nine to 11 franchise-owned restaurants, and the two aforementioned system-wide closures. Our 2024 development pipeline remains heavily weighted in the second half of the year before, in particular, similar to our cadence in 2023.

Speaker Change: We continue to expect a total of 51 to 57 net new system wide restaurants updated to reflect 44 to 48 company owned restaurants nine to 11 franchise owned restaurants, and the two aforementioned system wide closures.

Speaker Change: Our 2024 development pipeline remains heavily weighted in the second half of the year Q4 in particular similar.

Speaker Change: Similar to our cadence in 2023.

Henry Melville Hope: Our expectation of commodity inflation for the year remains unchanged at 2 to 4%, as does our expected restaurant level labor cost inflation in the range of 5 to 7%. Also unchanged is our adjusted EBITDA guidance range of $106 million to $112 million, with the impact of acquisitions expected to contribute about $12 million. The overall adjusted EBITDA range implies growth of 12 to 18% over 2023 after adjusting for the 53rd week. We expect a blended tax rate in the range of 27 to 29%.

Speaker Change: Our expectation of commodity inflation for the year remains unchanged at 2% to 4% as does our expected restaurant level labor cost inflation in the range of 5% to 7%.

Speaker Change: Also unchanged is our adjusted EBITDA guidance range of $106 million to $112 million with the impact of acquisitions expected to contribute about $12 million.

Speaker Change: The overall adjusted EBITDA range implies growth of 12% to 18% over 2023 after adjusting for the 50 <unk> week.

Speaker Change: We expect a blended tax rate in the range of 27% to 29%.

Henry Melville Hope: Finally, we continue to plan capital expenditures of $125 to $135 million, not including the capital invested in franchise acquisition. Even though traffic has been challenging this year, our restaurant teams are operating at a high level. Our new restaurant development is on pace for double-digit percentage unit growth, and all departments are engaged in the successful execution of our franchise acquisition strategy. I commend all our teams for their commitment and excellence. Operator, if we could please open the line for questions?

Finally, we continue to plan capital expenditures of $125 million to $135 million, not including the capital invested and franchise acquisitions.

Speaker Change: Even though traffic has been challenging this year our restaurant teams are operating at a high level.

Speaker Change: Our new restaurant development is on pace for a double digit percentage unit growth and all departments are engaged and the successful execution of our franchise acquisition strategy.

Speaker Change: I commend all our teams for their commitment and excellence.

Speaker Change: And operator, if we could please open the line for the questions.

Speaker Change: Thank you at this time, we will be conducting a question and answer session. If you would 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 he would like to remove your question from Nokia We ask that you limit your questions to one and a <unk>.

Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in a question and answer session. You may press star 2 if you would like to remove your question from the queue. We ask that you limit your questions to one and a follow-up so that others may have an opportunity to ask questions. You may re-enter the queue by pressing star 1. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Speaker Change: Follow up so that others may have an opportunity to ask questions. You may reenter the queue by pressing star one for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star.

Operator: One moment, please, while we poll for questions. Our first question comes from Sara Senatore with Bank of America. Please proceed with your question.

Speaker Change: One moment, please while we poll for questions.

Katherine Anne Griffin: Hi, thanks for the question. This is Katherine Griffin on behalf of Sara.

Speaker Change: Our first question comes from Sara Senatore with Bank of America. Please proceed with your question.

Katherine Anne Griffin: First question, I wanted to ask about the same restaurant sales growth guidance. Could you just clarify why you lowered the guidance, you know, by a point at the midpoint? What exactly are you seeing that's different from what you had expected previously?

Speaker Change: Hi, Thanks for the question. This is Katherine Griffin on for Sarah.

Katherine Anne Griffin: First question wanted to ask about the.

Sara Harkavy Senatore: Restaurant sales growth guidance.

Katherine Anne Griffin: Could you just clarify why are why lower the guidance by.

Katherine Anne Griffin: <unk> appointed at the midpoint, what exactly are you seeing that's different from what you had expected previously.

Henry Melville Hope: It's really just the performance in the first quarter. We started out of the box a little slower than we had seen when we were guiding for the full year.

Katherine Anne Griffin: It's really just the performance in the second and the first quarter.

Katherine Anne Griffin: We started out of the box a little slower than we had had seen when we ever gotten.

Katherine Anne Griffin: For the full year originally.

Christopher A. Tomasso: Okay, thank you. So is it, I guess, just to clarify, so is it more about traffic then? came in lower than expected. Traffic has been lower, and we're bouncing back from it slower. Okay, thank you. And then just on, you know, EBITDA came in certainly better than we had expected, possibly, you know, better than internal expectations. So we're wondering if there's any consideration of reinvesting some of that margin into value and how that might look at First Watch, given the brand's everyday value approach.

Katherine Anne Griffin: Okay.

Katherine Anne Griffin: So.

Speaker Change: I guess just to clarify so is it more on traffic then.

Speaker Change: Okay.

Speaker Change: Traffic has been lower and were bouncing back from it.

Speaker Change: Lower.

Speaker Change: Okay.

Speaker Change: And then just on <unk>.

Speaker Change: The dog.

Speaker Change: Certainly better than we had expected, possibly better than our internal expectations. So.

Speaker Change: We're wondering if there's any consideration of reinvesting some of that.

Speaker Change: Jen into value and how that might look at first watch.

Speaker Change: Given the brand's everyday value approach.

Christopher A. Tomasso: Yeah, I think the second part of your question is the answer to your question, which is that we're focused on the everyday value piece. And as I said in my prepared remarks, we're not a discounting brand. We haven't been for 40 years, and we've been through all kinds of economic environments and have stayed true to who we are and what we are, and that's our plan for right now. We really want to focus on profitable growth and the guest experience. Great, thank you. Our next question comes from Jeffrey Bernstein with Barclays. Please proceed with your question.

Jen: Yes, I think the second part of your question is the answer to your question, which is where we're focused on the everyday value piece and as I said in my prepared remarks, where we are.

Jen: We're not a discounting brand we haven't been for our 40 year history and we've been through.

Jen: All kinds of economic environments, and if stay true to who we are and what we are and that's our plan for right now we really want to focus on profitable growth.

Jen: And focusing on the guest experience.

Speaker Change: Great. Thank you.

Speaker Change: Mhm.

Speaker Change: Our next question comes from Jeffrey Bernstein with Barclays. Please proceed with your question.

Jeffrey Andrew Bernstein: Hi, this is Aneesha Datt on behalf of Jeff.

Speaker Change: Hi, This is <unk> on for Jeff Greg.

Greg: I wanted to ask about restaurant margins are you comfortable overtime, and Laura 19% to 20% range.

Speaker Change: And is there any potential upside in 2024 with a strong start to the year.

Greg: Sure.

Speaker Change: On labor versus the prior year.

Greg: Yes.

Christopher A. Tomasso: Yeah, I think over the years, we've been pretty consistent about communicating that we're comfortable in that 19% to 20% range. And generally, that margin fluctuates in short-term periods, but it also helps us guide how we price. So if we stay within that range, we feel pretty comfortable with that.

Speaker Change: Yes, I think over the years, we've been pretty consistent about though.

Speaker Change: Communicating that we're comfortable in that 90% to 20% range in that.

Speaker Change: Generally that margin fluctuates and in short term periods, but it also helps US guide how we price. So so if we stay within that range, we feel pretty comfortable with that.

Speaker Change: Got it thank you.

Speaker Change: Yep.

Speaker Change: Yeah.

Andrew Marc Barish: Our next question comes from Andy Barish with Jeffreys. Please proceed with your question.

Speaker Change: Our next question comes from Andy Barish with Jefferies. Please proceed with your question.

Andrew Marc Barish: Hey, guys, just a couple of clarifications. Can you give us dine-in traffic for the quarter and then maybe just some color on how the Easter shift impacted 1Q and the start to 2Q.

Andrew Marc Barish: Hey, guys just a couple of clarifications can.

Andrew Marc Barish: Can you give us guidance traffic in the quarter and then maybe just some color on how the.

Andrew Marc Barish: The Easter shift impacted <unk> and the start to <unk>.

Christopher A. Tomasso: So, I heard Don in the traffic, and what was the other? Andy, if you could just say again what the second half was.

Speaker Change: So I.

Speaker Change: I heard Don and traffic and what was the other Andy idea. If you could just say again, what the second half was.

Andrew Marc Barish: The impact of the Easter shift in 1Q and to the start of the 2Q.

Speaker Change: The impact of the Easter shift and <unk> and <unk>.

Speaker Change: At the start of the <unk>.

Christopher A. Tomasso: Yeah, I'm not sure I know the answer offhand to the second part of the question. On the first part, dine-in traffic overall was down roughly, similarly to the rest of the overall numbers. I think it was down like 4% or something like that.

Speaker Change: Yeah, I'm not I'm not sure I know the answer off hand to the second part of the question.

Speaker Change: On the first part dine in traffic overall was down roughly this.

Speaker Change: Similar to the rest of the.

Speaker Change: The the overall number I think it was down like 4% something like that.

Christopher A. Tomasso: Okay, and yeah, Chris, on your opening comments, I mean, there was, I think, some subtle commentary around the seasonals and the LTOs. I mean, are you thinking about, you know, any kind of shifting? I know those are planned pretty far out, but, you know, it's been an area where you guys have gotten check growth from, you know, premium items. Is there a way to balance that maybe with, you know, some more items that are intended to drive traffic?

Speaker Change: Okay.

Speaker Change: <unk>.

Speaker Change: Yeah, Chris on the on your opening comments I mean, there was.

Speaker Change: Not at all.

Christopher A. Tomasso: Commentary around the <unk>.

Christopher A. Tomasso: And also in the <unk>.

Christopher A. Tomasso: Are you thinking about.

Christopher A. Tomasso: Any kind of shifting I know those are planned pretty far out but John.

John: It's been an area, where you guys have gotten check growth from premium items is there a way to balance that maybe with.

John: Some more items that are intended to drive traffic potentially.

Christopher A. Tomasso: Yeah, as you know, our seasonal menus have been a strength of ours, and they continue to be. And one of the greatest benefits of it, frankly, is the information that we have and the database of items that we've done. So my subtle comment really had to do with our flexibility.

John: Yes, as you know our seasonal menus and had been a strength of ours and they continue to be and one of the one of the greatest benefits of it frankly is the the information that we have and that the database of items that we've done so.

John: My what my subtle comment really had to do with was more around our flexibility. So for example.

Christopher A. Tomasso: So, for example, and maybe de-risking it a little bit, Andy, and bringing back some of our guest favorites, which is exactly what you're talking about with driving traffic. So, for example, we pivot and brought back shrimp and grits, which is a big customer favorite, and it also happens to be a high-margin item for us. And, you know, ironically, the items that we brought back may not have a top line impact from a PPA standpoint, but the higher appeal, de-risking, trying something new during these times, and then also the higher margin elements of them, you know, are really what led us to do that.

John: And maybe maybe derisking, it a little bit Andy and putting in.

John: Bringing back I should say some of our guest favorites, which is exactly what youre talking about with driving.

John: Driving traffic. So for example, we pivoted and brought back shrimp and grids, which is a big customer favorites and it also happens to be a high margin item for us in Iraq.

John: Ironically, the the items that we brought back may not have.

John: Our topline impact from a PPA standpoint, but the higher appeal Derisking trying something new during these times and then also the higher margin elements of them.

John: Is really what led us to do that so we look at it as kind of a win win win in a situation like this it's something that the.

Christopher A. Tomasso: So we look at it as kind of a win-win-win in a situation like this. It's something that the customers love. You know, they're high-margin items for us, and it reduces the risk of, you know, anything not performing as it did in the test once we go national.

John: Customers Love they are high margin items for us and it reduces the risk of of anything.

John: Anything not performing as it did in test once we go nationally.

Andrew Marc Barish: Awesome. Thank you for the call.

Speaker Change: Awesome. Thank you for the color.

Speaker Change: Youre welcome.

Speaker Change: Yeah.

Jon Michael Tower: Our next question comes from Jon Tower with Citi. Please proceed with your question.

Speaker Change: Our next question comes from John Power with Citi. Please proceed with your question.

Jon Michael Tower: Great, thanks for taking the question. I'm just curious, maybe you could start off, obviously you touched on the fact that Florida has been a soft spot for the overall industry. Just curious if maybe you could call out the discrepancy between that part of your business and the rest of the country. Was there a really wide gap between, you know, the state and the rest of the country?

John Daniel Jones: Great. Thanks for taking the question just curious maybe you could start off.

John Daniel Jones: Obviously, you touched on the fact that Florida has been a soft spot for the overall industry. Just curious if maybe you can call out the discrepancy between that part of your business and the rest of the country was there a real wide gap between you.

Speaker Change: You know that.

Speaker Change: The state and the rest of the country.

Christopher A. Tomasso: Yeah, there was a difference between Florida and the rest of the state. I think, you know, we're not the only one you're hearing that from. You know, what we like to do is when we're given questions about things like that, we, you know, that's why we bring it up here. And so, we're not quantifying the specific impact of Florida on our overall traffic and sales, but, you know, wanted to provide a little bit of color. You know, Florida was up huge in the first quarter last year, so that was an exceptional comp for us, and, you know, that's the impact that we're seeing in the top line now.

Speaker Change: Yes, there was a difference between Florida and the rest of the state I think you know.

Speaker Change: We're not the only one you're hearing that from.

Speaker Change: Well, we like to do is when we're when weird given questions about things like that we you know that's why we bring it forth here and so.

Speaker Change: We're not quantifying the specific impact of Florida on our overall <unk>.

Speaker Change: <unk> sales, but.

Speaker Change: I wanted to provide a little bit of color you know, Florida was up huge first quarter last year, so that was exceptional comp for us.

Speaker Change: And that's the impact that we're seeing in the in the top line now.

Jon Michael Tower: Okay. And just going back to the guidance for the year, I think, Mel, you mentioned the idea that you were anticipating what kind of trends would hold, that you'd see flattish traffic by the back half of the year. One, is that a correct assumption? And then two, you know, what gives you confidence that this is going to kind of hold as is? What are you seeing in your own, you know, dining behaviors and consumers to suggest that this trend is going to remain rather than weaken going forward?

Speaker Change: Okay, and just going back to the guidance for the year I think Bill you had mentioned the idea of that.

Bill: You were anticipating kind of trends hold that youll see flattish traffic by the back half of the year. One is that a correct assumption and then too.

Bill: What gives you confidence that this is going to kind of hold as it is what are you seeing in your own dining behaviors of consumers to suggest that this trend is going to remain rather than weekend going forward.

Henry Melville Hope: Yeah, I think so.

Henry Melville Hope: Yeah, I think our focus is on the first of all, we're rolling over some softer comps in the back half of the year, so I still remain confident that our original expectation that things would begin to flatten out with that softer comp is pretty reliable. Plus, you know, we have a good program plan for the year in terms of our offerings and performance. So it's, you know, part of this is depending on 40 years of experience of recovering short-term with the company's typical history of long-term growth.

Bill: Yes, I think our focus is on the first of all we're rolling over some softer comps in the back half of the year. So I still remain confident that our original.

Bill: Expectation that things would begin to flatten out with that softer comp.

Bill: As a pretty reliable plus.

Bill: We have a we have a good program plan for the year in terms of our offerings and performance. So it's.

Bill: Part of this is depending on 40 years of experience of recovering [laughter] short term with.

Bill: The company's typical history of long term growth.

Bill: Yeah.

Jon Michael Tower: Got it. And then, just lastly, I believe you mentioned earlier in the call, Chris, something about flexing, not just LTOs and labor with demand but also some GNA projects. And later on in the conversation, you talked about doing some stuff on the marketing side, very early stages. Can you elaborate a little bit on perhaps what projects you're going after right now?

Speaker Change: Got it and then just lastly, I believe you had mentioned earlier in the call Chris something about flat.

Speaker Change: <unk>, not just <unk> and labor with demand, but also some G&A projects and later on in the conversation you talked about some.

Speaker Change: Doing some stuff on the marketing side very early stages can you elaborate a little bit on perhaps what projects you're going after right now.

Christopher A. Tomasso: Yeah, so when I talked about the flexibility, you know, what we're doing, I believe, is a thoughtful balance of, you know, near-term solutions and long-term brand impact initiatives. And from a long-term perspective, it really is starting to leverage the data that we've been collecting now for a while with some of the new platforms and tools that we've done. So it's not any different from what I've talked about before, Jon.

Speaker Change: Yeah.

Speaker Change: So when I talked about the flexibility where what we're doing I believe is a is a thoughtful balance of.

Speaker Change: Near term solutions and long term brand implications type initiatives and from a long term perspective. It really is starting to leverage the data that we've been collecting now for a while with some of the new platforms and tools that we've done so.

Speaker Change: It's not any different than what I've talked about before John It's just that we're really starting to get.

Christopher A. Tomasso: It's just that we're really starting to get, you know, voluminous data that we're tying together to get more insights into consumer behavior in our restaurants. Everything from operational KPIs to seat-to-eat times to actual visit times. Pay at the table is a big part of that for us, and we've been really pleased with how that's gone. So we're really just starting to dig in and leverage all that data

Speaker Change: You know voluminous data that where we're tying together to get more insights into consumer behavior in our restaurants.

Speaker Change: Everything from operational Kpis to Cte times to actual visit times there.

Speaker Change: The pay at the table is a big part of that for us and we've been really pleased with how that's gone. So it's really just starting to dig in and leverage all of that data.

Jon Michael Tower: Got it. Thanks for taking the questions.

Speaker Change: Got it thanks for taking the questions.

Speaker Change: Youre welcome.

Brian Michael Vaccaro: Our next question comes from Brian Vaccaro with Raymond James. Please proceed with your question.

Speaker Change: Our next question comes from Brian Vaccaro with Raymond James. Please proceed with your question.

Brian Michael Vaccaro: Hi, thanks, and good morning. Just given the current environment, you know, you noted we're the consumer, obviously seeking value. I thought maybe you could elaborate on how First Watch's value proposition stacks up to peers and sort of positions you for the current environment. I think you've taken around 20% in cumulative pricing during the pandemic. Is that about right? Maybe you could type that up for us and maybe just speak to or provide any metrics sort of on how your average menu prices compare to your direct peers in most markets. Any color there would be great.

Brian Michael Vaccaro: Hi, Thanks, and good morning, just given the current environment you noted the consumer obviously sneaking value I thought maybe you could elaborate on how first watches value proposition stacks up to tears and sort of position you for the current environment.

Brian Michael Vaccaro: I think you've taken around 20% pricing cumulative during the pandemic is that about right. Maybe you could take that up for us and let me just sneak two or provide any metrics.

Brian Michael Vaccaro: On how your average menu prices compare to your direct peers in most markets any color there would be great.

Christopher A. Tomasso: Yeah, we have quite a bit of pricing power. You're right about how much we've taken since the pandemic. It's been about three and a half percent a year. But when we look at our per person average versus our competitive set, we are, believe it or not, actually at the low end of that. And while we realize that we have pricing power, we're sticking to our philosophy of pricing to cover inflation.

Speaker Change: Yeah, we we have.

Speaker Change: Quite a bit of pricing power you are right on how much we've taken since the pandemic has been about three 5% a year.

Speaker Change: But when we look at our.

Speaker Change: Per person average versus our competitive set we are believe it or not actually at the low end of that and while we.

Speaker Change: Realizing that we have pricing power, we're sticking to our philosophy of pricing to cover inflation. So.

Christopher A. Tomasso: So I think if you look at that three and a half percent a year and look at it comparatively, you'll see that we've been quite conservative and we'll continue to be that way. Our focus, as always, even in times like this, when relative values are incredible, really wants to focus on traffic. I think our numbers here and how we're beating the industry versus black box kind of attest to that. And we think that's the right approach for us. It's what we've done for years, and we're going to continue to do so.

Speaker Change: If you if you look at that three 5% a year and look at it comparatively youll see that where we've been quite conservative and we will continue to be be that way our focus as always.

Speaker Change: Even even in times like this.

Speaker Change: Credible relative value really wanted to focus on traffic I think are our numbers here and how we're beating the industry versus black box.

Speaker Change: You know kind of a test of that and we think that's the right approach for us. It's what we've done for years and we're going to continue to do that.

Brian Michael Vaccaro: All right, thank you for that. And one follow-up question, just on the operational improvements that you're seeing. You mentioned ticket times. Could you provide any more color or quantification on the year and the improvement you're seeing there? And on labor, it looks like, you know, the cost per week, as we look at it, was about flat year on year, despite wage inflation. Obviously, traffic was lower, but is there any way to sort of the level of efficiency being generated by some of the new tools you've deployed in recent quarters?

Speaker Change: Alright, Thank you for that and one follow up just on the operational improvements that you're seeing you mentioned ticket times could you provide any more color or quantification on a year on year improvement youre seeing there and on labor it looks like the cost per week as we look at it it was about flat year on year despite wage.

Speaker Change: <unk>, obviously traffic was lower but is there any way to parse out sort of the level of efficiencies being generated by some of the new tools you've deployed in recent quarters. Thank you.

Christopher A. Tomasso: Thank you.

Speaker Change: Sure I'll speak to the ticket times I'm not sure I Hormel have the answer for your labor piece, but on ticket times, we're seeing what we consider to be significant improvements keep in mind. We're just we're just at the point now where we're comping over the the installation and the full rollout and as I always caution.

Henry Melville Hope: Sure. I'll speak to you about the ticket times. I'm not sure me or Mel have the answer for your labor piece, but on ticket times, we're seeing what we consider to be significant improvements. Keep in mind, we're just at the point now where we're comparing installation and the full rollout. And as I always caution, just because it was rolled out doesn't mean it was optimized at that point. So even with that, as we continue to optimize the KDS system based on the information that we get, we're seeing early on 10% to 20% improvements in ticket times, which is most impactful during the peak sales hours, obviously.

Speaker Change: Just because it was rolled out doesn't mean it was optimized at that point, so even with that as we continue to optimize the kgs system too.

Speaker Change: Based on the information that we get I mean, where we're seeing early on.

Speaker Change: 10% to 20% improvements in ticket times, which excuse me which is.

Speaker Change: You know.

Speaker Change: Most impactful during the.

Speaker Change: Peak sales hours obviously.

Henry Melville Hope: And Brian, in terms of labor, really a couple of things are going on. One is that our operators are doing a very, very good job of managing that and managing the crews. But I think one of the things that they've really been successful with that maybe gets underappreciated is that our turnover has gone way down, and that's been deliberate. It's been part of their process, but that helps us lower overall costs.

Speaker Change: And then Brian in terms of labor.

Speaker Change: Really a couple of things are going on one is that our operators are.

Speaker Change: Doing a very very good job.

Speaker Change: Managing that and managing the crews, but I think one of the things that's really they've really been successful with that I, maybe it gets under underappreciated is that our turnover has gone way down and so when.

Speaker Change: And that's been deliberate it's been part of part of their process, but.

Speaker Change: That helps us lower overall costs they become more efficient when you have when you have tenured employees.

Henry Melville Hope: They become more efficient when you have tenured employees, and that low turnover is also part of lowering just overtime charges. So we've been delighted to see the improvements that the operators and our people services folks have made in terms of the crews and their interest in creating careers at the company because it's really paid off a great deal and with much, much lower turnover over the course of the last several years. It's been taken down to a great degree, but it's been fun to watch.

Speaker Change: And that that low turnover is also part of lowering just just overtime charges.

Speaker Change: So we've been delighted to see the improvements that the operators on our and our people services folks have made in terms of.

Speaker Change: The crews.

Speaker Change: And their their interest.

Speaker Change: <unk>.

Speaker Change: Creating careers at the company because it's really paid off a great deal in a much much lower turnover over the course of the last several years, it's been taken down a two to a great degree it's been it's been fun to watch.

Brian Michael Vaccaro: All right, that's helpful, Carla, I'll pass it along. Thank you.

Speaker Change: Alright, that's helpful color I'll pass it along thank you.

Gregory Ryan Francfort: As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question comes from Gregory Francfort with Guggenheim Securities. Please proceed with your question.

Speaker Change: As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.

Speaker Change: Our next question comes from Gregory Frank with Guggenheim Securities. Please proceed with your question.

Gregory Ryan Francfort: Hey, thanks guys. I had a couple questions. The first is, it looks like you may have a stronger mix from the fourth quarter to the first quarter. I'm curious, first, is that right? And what's maybe driving that?

Gregory Ryan Francfort: Hey, Hey, Thanks, guys I had a couple of questions. The first is.

Gregory Ryan Francfort: It looks like you may have had stronger mix from the fourth quarter. The first quarter I'm curious one is that right.

Gregory Ryan Francfort: What's maybe driving that.

Christopher A. Tomasso: So, I think that goes back to our LTOs, and, you know, we don't, as you know, we don't consider mix in our plan, but we have experienced it in the past, and I think our decision to select, you know, high-appeal items that are proven and that the consumer looks for from us, I think helped with that mix in Q1.

Gregory Ryan Francfort: So I think that goes back to our <unk> and we don't as you know we don't.

Gregory Ryan Francfort: Consider mix in our plan, but.

Gregory Ryan Francfort: But we have experienced it in the past and I think our decision to select.

Gregory Ryan Francfort: Hi appeal items that are proven in that.

Gregory Ryan Francfort: The consumer has.

Gregory Ryan Francfort: Look for from US I think help with that mix.

Gregory Ryan Francfort: In Q1.

Gregory Ryan Francfort: Got it. And then maybe just to level expectations, the commentary and the traffic throughout the year is helpful, but do you expect comps in 2Q to be better or worse than comps in the first quarter? Better.

Speaker Change: Got it and then maybe just to level set expectations on the commentary on the traffic throughout the year is helpful. But do you expect comps in <unk> to be better or worse than comps in the first quarter.

Gregory Ryan Francfort: Better.

Gregory Ryan Francfort: Okay, and then maybe on some of the commentary around the tech platforms and how long that's been in the system now. You're getting better insights on the customer across a few different platforms. Can you maybe give some examples of what this is giving you changes you can make from an operational perspective? Is that helping you change out the menu? I'm just curious kind of what the learnings are and what that's kind of tangibly giving you feedback on.

Gregory Ryan Francfort: Okay.

Gregory Ryan Francfort: And then just maybe on I think some of the.

Gregory Ryan Francfort: Commentary around the tech platforms, and how long that's been in the.

Gregory Ryan Francfort: System now you're getting better insights on the customer across a few different platforms.

Gregory Ryan Francfort: Maybe give some examples of what is it is that giving you changes you can make from an operational perspective.

Gregory Ryan Francfort: Is that helping you.

Gregory Ryan Francfort: Change out the menu I'm, just curious kind of what the learnings are and what kind of.

Gregory Ryan Francfort: Tangibly, giving you feedback on thanks.

Matt Eisenachter: Hey, Greg, it's Matt Eisenachter. I'll chime in on that one. Similar to what you've seen from us in KDS and, you know, back of house and ticket times, it's a similar long-term perspective there. You know, the data informs us to make better decisions overall. It enables better insight into efficiency in the front of house. So just as Chris and Mel talked about ticket times, we have that same opportunity over the long term to get more efficient in the front of house.

Gregory Ryan Francfort: Hey, Greg It's Matt is an accurate I'll chime in on that one.

Matt: Similar to what you've seen from us.

Gregory Ryan Francfort: Kgs.

Matt: Back of house in ticket times, its a similar long term perspective there.

Matt: The data informs us to make better decisions overall, it enables better insight to efficiency in the front of house. So just as Chris Mel talked about ticket times, we have that same opportunity over the long term to get more efficient in front of house and then of course, if you look even further out it's already talent, it's more about our customers and visit frequency and then that will allow us to segment.

Matt Eisenachter: And then, of course, if you look even further out, it's already telling us more about our customers and visit frequency. And then that will allow us to segment and talk to our customers in a more targeted and more efficient way. So, you know, again, it's a long-term perspective. One that is really at the forefront of how we look to drive demand. Well, thank you.

Matt: And talk to our customers in a more targeted and more efficient way. So you know again, it's a long term perspective, one it's really at the forefront of how we looked at to drop them in.

Gregory Ryan Francfort: Well, thank you guys. I appreciate it.

Speaker Change: Well. Thank you guys I appreciate it.

Speaker Change: Thanks, Greg.

Chris O'Callaghan: Our next question comes from Chris O'Callaghan. Please proceed with your question. Yeah, thanks.

Chris: Our next question comes from Chris I'll call at Stifel. Please proceed with your question.

Chris O'Callaghan: Yeah, thanks guys. I had a follow-up question on that last one, Mel. Can you expand on your comments about comps expected to be better in the second quarter than in the first quarter? Because I believe you said you expected traffic to be down mid-single digits and pricing to be up three and a half percent in the second quarter. I want to confirm that because I think that's less pricing in the second than in the first with similar traffic performance. So I'm just curious, is mixed expected to be the sequential improvement in the second that you're looking for?

Chris: Yes, thanks, guys.

Chris: Had a follow up question to that last one Mel can you expand on your comments about comps expected to be better in the second quarter than in the first quarter. Because I believe you said you expect traffic to be down mid single digits and pricing to be up three 5% in the second quarter I wanted to confirm that because I think that's less pricing in the second and in the first with similar traffic.

Chris: Performance. So I'm just curious is mix expected to be the sequential improvement in the second that you're looking for.

Henry Melville Hope: Again, when we project, we don't project in terms of our projections very much, so really, while we're still choppy on the traffic side, we feel optimistic about it gradually improving.

Chris: Again, when we project, we don't we don't project.

Chris: <unk>.

Chris: In terms of our projections.

Henry Melville Hope: Very much so so really it's.

Henry Melville Hope: While we're still choppy on on the traffic side.

Henry Melville Hope: Yeah.

Chris: Feel optimistic about our gradually improving.

Chris O'Callaghan: Okay, that's fair. And then, Chris, I know the company hasn't used paid advertising in a big way in the past, but have you considered making more meaningful investments in that medium, just to address the recent traffic weakness, especially in Florida?

Chris: Okay.

Speaker Change: That's fair and then Chris I know the company Hasnt used paid advertising in a big way in the past, but have you considered making more meaningful investments in that medium and in it just to address the recent traffic weakness, especially in Florida.

Christopher A. Tomasso: Well, paid media specifically, our focus has been on digital and social, so we do spend on channels, just not what I would call traditional media such as television, or radio, perhaps, and we have spent and invested in those channels more for us because we think they're a better fit for our brand. Again, we're not going to have a discounting platform, but it is a way for us to increase awareness. And, as Matt talked about, understanding customer visitation helps us be more targeted, especially with digital when you think about the timing of messages, the messaging itself. So Matt and his team have done a good job of segmenting better, and I think that's been helpful for us, and we'll continue to do that.

Speaker Change: Well.

Chris: Paid media specifically, our focus has been on digital and social so we do spend in channels just not what I would call you know.

Chris: Traditional media television radio perhaps but.

Speaker Change: And we have.

Speaker Change: Spent and invested into those channels more for US we think they are a better fit for our brand.

Speaker Change: We don't we're not going to have a discounting platform, but it isn't.

Speaker Change: A way for us to increase awareness and as Matt talked about you know understanding customer visitation helps us be more targeted especially with with digital when you think about timing of messages. The messaging itself. So Matt and his team have done a good job of of <unk>.

Speaker Change: Segmenting better and.

Speaker Change: That's been that's been helpful for us and we will continue to do that.

Chris O'Callaghan: Yeah, I was thinking more traditional, like billboards and radio. Is that not something that you guys are considering?

Matt: Yeah, I was thinking more traditional like Billboards and radio and that's not something you guys are considering.

Chris O'Callaghan: You know what, Chris? We don't really have the scale to be media efficient, even despite some of these markets where we're pretty well penetrated. But when you start getting into traditional media, it's very difficult to be media efficient, as you know. Fair enough. Thanks, guys.

Matt: Chris We don't really have the scale and to be media efficient even despite some of these markets, where we're where we're pretty well penetrated the when you start getting into traditional media, it's very difficult to get media efficient as you know.

Chris O'Callaghan: Okay, fair enough. Thanks, guys.

Speaker Change: Okay fair enough thanks, guys.

Christopher A. Tomasso: There are no further questions at this time. I would now like to turn the floor back over to Chris Tomasso for closing comments.

Speaker Change: There are no further questions at this time I would now like to turn the floor back over to Chris Marshall for closing comments.

Christopher A. Tomasso: Thank you. I want to once again thank our teams for their dedication and commitment to making days brighter for our customers and each other. Our success and growth opportunities are due in large part to their efforts, which in turn creates growth opportunities for them as we march toward 2200 restaurants. Thank you all for your time today.

Chris Marshall: Thank you I wanted to I want to once again, thank our teams for their dedication and commitment to making days brighter for our customers and each other our success and growth opportunities are due in large part to their efforts, which in turn creates growth opportunities for them as we March towards 2200 restaurants. Thank you all for your time today.

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

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

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Speaker Change: [music].

Speaker Change: Hum.

Speaker Change: Yeah.

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Speaker Change: Hum.

Speaker Change: Uh huh.

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Speaker Change: Oh.

Speaker Change: Mhm.

Speaker Change: Hum.

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Speaker Change: [music].

Speaker Change: Okay.

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Speaker Change: [noise].

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Speaker Change: [noise] [music].

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Speaker Change: Yes.

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Speaker Change: Yeah.

Speaker Change: Yeah.

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Speaker Change: Hum.

Speaker Change: Mhm.

Speaker Change: [music].

Speaker Change: Uh-huh.

Speaker Change: Yes.

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Speaker Change: [music].

Speaker Change: Hum.

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Speaker Change: [music].

Speaker Change: Mhm.

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Speaker Change: Mhm.

Speaker Change: Hum.

Speaker Change: Uh-huh.

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Speaker Change: Hum.

Speaker Change: Hello.

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Speaker Change: Mhm.

Speaker Change: [noise] [music].

Speaker Change: Oh.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: Yeah.