Q3 2024 Cracker Barrel Old Country Store Inc Earnings Call

Yes.

Operator: Good day, and welcome to the Cracker Barrel Fiscal 2024 Third Quarter Conference Call. All participants will be in a listen-only mode.

Speaker Change: Good day and welcome to the Cracker barrel fiscal 2024 third quarter conference call. All participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.

Operator: Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your touch-tone phone.

Speaker Change: After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on you touched on phone.

Speaker Change: To withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Mr. Adam Hannon Senior manager of Investor Relations. Please go ahead Sir.

Operator: And to withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Mr. Adam Hanan, Senior Manager of Investor Relations. Please go ahead, sir.

Adam Hanan: Thank you.

Adam Hanan: Thank you. Good morning, and welcome to Cracker Barrel's third quarter fiscal 2024 conference call and webcast. This morning, we issued a press release announcing our third quarter results. In this press release and on this call, we will refer to non-GAAP financial measures such as adjusted EBITDA for the third quarter ended April 26, 2024. Please refer to the footnotes in our press release for further details about these measures. The company believes that these measures provide investors with an enhanced understanding of the company's financial performance.

Speaker Change: Good morning, and welcome to Cracker barrels third quarter fiscal 2024 conference call and webcast.

Adam Hanan: This information is not intended to be considered in isolation or as a substitute for net income or earnings per share information prepared in accordance with GAAP. The last pages of the press release include reconciliations from the non-GAAP information to the GAAP financing.

Speaker Change: This morning, we issued a press release announcing our third quarter results and this press release and on this call. We will refer to non-GAAP financial measures such as adjusted EBITDA for the third quarter ended April 26, 2024, please refer to the footnotes in our press release for further details about these metrics.

Speaker Change: The company believes that these measures provide investors with an enhanced understanding of the company's financial performance. This information is not intended to be considered in isolation or as a substitute for net income or earnings per share information prepared in accordance with GAAP. The last pages of the press release include reconciliation from the non-GAAP information.

The GAAP financials.

Adam Hanan: On the call with me this morning are Cracker Barrel's President and CEO, Julie Masino, and Senior Vice President and CFO, Craig Pommells. Julian Craig will provide a review of the business, financials, and outlook. We will then open up the call for questions. On this call, statements may be made by management of their beliefs and expectations regarding the company's future operating results or expected future revenues. These are known as forward-looking statements, which involve risks and uncertainties that are, in many cases, beyond management's control and may cause actual results to differ materially from expectations.

Speaker Change: On the call with me. This morning are cracker barrels president and CEO, Julian Makena, and senior Vice President and CFO, Craig Penthouse Julien.

Speaker Change: Julian Craig will provide a review of the business financials and outlook.

Speaker Change: And up the call for questions.

Speaker Change: This call statements may be made by management of their beliefs and expectations regarding the company's future operating results or expected future events.

Speaker Change: These are known as forward looking statements, which involve risks and uncertainties that in many cases are beyond management's control and may cause actual results to differ materially from expectations.

Speaker Change: Caution our listeners and readers in considering forward looking statements and information.

Speaker Change: Do you have the factors that could affect results are summarized in the cautionary description of risks and uncertainties found at the end of the press release and are described in detail in our reports that we filed with or furnished to the SPC. Finally, the information shared on this call is valid as of today's date and the company undertakes no obligation to update it except as may be required under.

Speaker Change: The applicable law.

Julie Felss Masino: We caution our listeners and readers in considering forward-looking statements and information. Any of the factors that could affect results are summarized in the cautionary description of risks and uncertainties found at the end of the press release and are described in detail in our reports that we file with or furnish to this. Finally, the information shared on this call is valid as of today's date, and the company undertakes no obligation to update it, except as may be required under applicable law. I'll now turn the call over to Cracker Barrel's President and CEO, Julie Masino. Good morning.

Speaker Change: I'll now turn the call over to Cracker barrels President and CEO, Julie Massena Julie.

Julie Felss Masino: Given the substantive update we provided two weeks ago, today's prepared remarks will be shorter than usual. I encourage everyone to review our comments from the May 16th call for additional details on our transformation plan if they haven't already. This morning, we reported total revenue of $817.1 million and adjusted EBITDA of $47.9 million, or 5.9% of revenue. As we previously noted in our May 16 press release, our results fell below our expectations due to weaker than anticipated traffic.

Julie Felss Masino: Good morning, given the substantive update we provided two weeks ago today's prepared remarks will be shorter than usual I encourage everyone to review our comments from the May 16th call for additional details on our transformation plan if you haven't already.

Julie Felss Masino: This morning, we reported total revenue of $817 1 million and adjusted EBITDA of $47 9 million or five 9% of revenue.

As we previously noted in our May 16th press release, our results fell below our expectations due to weaker than anticipated traffic.

Julie Felss Masino: Our third-quarter traffic challenges underscore the need for our strategic transformation, as we discussed on May 6th. Of course, as we undertake our longer-term strategic initiatives, we continue to aggressively manage our day-to-day business, and I was encouraged by our performance despite the financial impact of lower traffic. Although our financial performance in the quarter was challenged, our teams managed the business well. We saw solid improvements across the metrics that are most highly correlated with same-store sales growth. Guest satisfaction, speed, hourly turnover, and average skill level for key job roles.

Julie Felss Masino: Our third quarter traffic challenges underscore the need for our strategic transformation as we discussed on may 16th.

Julie Felss Masino: Of course, as we undertake our longer term strategic initiatives, we continue to aggressively manage our day to day business and I was encouraged by our performance despite the financial impact of lower traffic.

Julie Felss Masino: Although our financial performance in the quarter was challenged our teams managed the business well, we saw solid improvements across the metrics that are most highly correlated with same store sales growth.

Julie Felss Masino: Satisfaction speed hourly turnover and average skill level for key job holes. We believe these are key leading indicators and we're pleased with the progress we are making.

Julie Felss Masino: We believe these are key leading indicators, and we're pleased with the progress we are making. For example, compared to the prior year quarter, our hourly turnover has improved by 10 percentage points. Our seat-to-eat times, that's a key speed metric, have improved by approximately 8%. And our off-premise missing item scores have improved by 18%.

Julie Felss Masino: For example, compared to the prior year quarter, our hourly turnover has improved by 10 percentage points or seek to eat times. If it keeps feed metric has improved by approximately 8% our off premise missing item scores improved by 18% the average skill level for the key positions of Cook and server inquiry.

Julie Felss Masino: The average skill level for the key positions of cook and server increased by 3%, and our Google star rating increased from 4.1 to 4.2. We are confident that our sustained focus on these operational metrics will deliver further improvements, which will translate to increased visits in due course. Additionally, our operators did a good job of managing food waste.

Julie Felss Masino: By 3% and our Google Star rating has increased from four one to four point too.

Julie Felss Masino: We are confident that our sustained focus on these operational metrics will deliver further improvements, which will translate to increased visits in time.

Julie Felss Masino: Additionally, our operators did a good job of managing food waste I believe this along with a positive trend in the above metrics is the result of our organization wide emphasis on operational discipline and it's also indicative of our dual focus of running the day to day business, while also executing our transformation.

Julie Felss Masino: I believe this, along with a positive trend in the above metrics, is the result of our organization-wide emphasis on operational discipline and is also indicative of our dual focus of running the day-to-day business while also executing our transformation. And our operators' ability to effectively manage expenses helped mitigate the margin compression from lower trust. Next, while retail sales were also challenged as a result of our traffic results and broader retail headwinds, we were encouraged that we saw sequential monthly improvements in retail same-store sales and the performance of our seasonal theme assortment. In closing, our financial performance remains pressured by the challenges we've previously described.

Julie Felss Masino: Our operator's ability to effectively manage expenses helped to mitigate the margin compression from the lower traffic.

Julie Felss Masino: Next well retail sales were also challenged as a result of our traffic results in broader retail headwinds. We were encouraged that we saw sequential monthly improvement in retail same store sales and the performance of our seasonal theme assortments.

Julie Felss Masino: In closing our financial performance remains pressured by the challenges we previously described.

Julie Felss Masino: But we are confident that our focus on our five strategic pillars, one, refining the brand, two, enhancing the menu, three, evolving the store and guest experience, four, winning in digital and off-premise, and five, elevating the employee experience, will deliver our imperatives of driving relevancy, delivering food and an exceptional guest experience, and growing profitability and position the company for significant value creation over time. I'll now turn the call over to Craig for a more detailed look at the quarter from a financial perspective and to discuss our financial outlook for the rest of the year. Thank you, Julie, and good morning, everyone.

Julie Felss Masino: But we are confident that our focus on our five strategic pillars, one refining the branch shoot enhancing the menu three evolving our store and guest experience for winning in digital and off premise and five elevating the employee experience well deliver our imperatives of driving relevancy delivering food at an.

Julie Felss Masino: Guests love and growing profitability and position the company for significant value creation over time.

Speaker Change: I'll now turn the call over to Craig for a more detailed look at the quarter from a financial perspective and to discuss our financial outlook for the rest of the year.

Julie Felss Masino: Hey.

Craig A. Pommells: Thank you Julie and good morning, everyone.

Craig A. Pommells: Before getting into our results and guidance, I want to remind everyone of a few changes we've made as it relates to our financials. We are now focused on Adjusted EBITDA as a key metric to track our financial performance and are now providing guidance on Adjusted EBITDA as we believe it is more meaningful to investors to evaluate our performance before the impact of depreciation, which we expect to be higher due to the increased investments related to our strategic transformation plan.

Craig A. Pommells: Before getting into our results and guidance I want to remind everyone. A few changes we've made as it relates to our financials.

Craig A. Pommells: Yes.

Craig A. Pommells: We're now focused on adjusted EBITDA as a key metric to track our financial performance.

Craig A. Pommells: And are now providing guidance on adjusted EBITDA as we believe it is more meaningful to investors to evaluate over four months before the impact of depreciation.

Craig A. Pommells: Which we expect it to be higher due to the increased investments related to all of our strategic transformation plan.

Craig A. Pommells: Second, we modified our definition of adjusted EBITDA and are no longer adjusted for the non-cash amortization of the asset recognized from the gains on sale and leaseback transactions, which is an approximately $3.2 million expense each quarter and is expected to remain at a similar level over the remaining life of these leases.

Craig A. Pommells: Second we modified our definition of adjusted EBITDA and are no longer adjusting for the noncash amortization of the asset recognized from the gains on sale and leaseback transactions.

Craig A. Pommells: Which is an approximately $3 2 million dollar expense each quarter and is expected to remain at a similar level over the remaining life of these leases.

Craig A. Pommells: Additionally, we are now including an advertising back for share-based compensation expense. We understand there are a few moving pieces here, so we refer you to the reconciliation tables in the press release for additional information. For the third quarter, we reported total revenue of $817.1 million. Restaurant revenue decreased 1.5% to $671.3 million, and retail revenue decreased 3.7% to $145.8 million compared to the prior quarter. Comparable store restaurant sales decreased by 1.5% over the prior year.

Craig A. Pommells: Additionally, we are now including an add back for share based compensation expense.

Craig A. Pommells: We understand there are a few moving pieces here. So we refer you to the reconciliation tables in the press release for additional information.

Craig A. Pommells: For the third quarter, we reported total revenue of $817 $1 million.

Restaurant revenue decreased one 5% to $671 $3 million and our retail revenue decreased three 7% to $145 $8 million versus the prior year quarter.

Craig A. Pommells: Comparable store restaurant sales decreased by one 5% over the prior year.

Craig A. Pommells: Pricing was approximately 4%. Our quarterly pricing consisted of approximately 1.5% carried forward pricing from fiscal 2023 and 2.5% new pricing from fiscal 2024. Off-premise sales were approximately 18.9% of restaurant sales. Comparable store retail sales decreased 3.8% compared to the third quarter of the prior year.

Craig A. Pommells: Pricing was approximately 4%.

Craig A. Pommells: Our quarterly pricing consisted of approximately 1.5% cardboard pricing.

Craig A. Pommells: So 2023.

Craig A. Pommells: And two 5% new pricing for fiscal 'twenty 'twenty four.

Craig A. Pommells: Off premise sales were approximately 18, 9% of restaurant sales.

Craig A. Pommells: Comparable store retail sales decreased three 8% compared to the third quarter of the prior year.

Craig A. Pommells: Although retail sales remain soft, we were pleased with how the team has effectively managed inventory levels which remain below prior year. Moving on to our third quarter expenses. Total cost of goods sold in the quarter was 30% of total revenue versus 31.5% in the prior year quarter. Restaurant cost of goods sold in the third quarter was 25.9% of restaurant sales versus 27.3% in the prior year quarter. This 140 basis point decrease was primarily driven by menu pricing. However, commodities deflated for the quarter by approximately 0.6%.

Craig A. Pommells: Although retail sales remained soft we were pleased with how the team has effectively managed inventory levels, which remain below prior year.

Craig A. Pommells: Moving onto our third quarter expenses.

Craig A. Pommells: Total cost of goods sold in the quarter was 30% of total revenue versus 31, 5% in the prior year quarter.

Craig A. Pommells: Restaurant cost of goods sold in the third quarter was 25, 9% of restaurant sales versus 27, 3% in the prior year quarter.

This 140 basis point decrease was primarily driven by menu pricing.

Craig A. Pommells: Commodity deflation for the quarter by approximately 0.6% driven.

Craig A. Pommells: This was driven principally by lower oils, poultry, and egg prices. Third quarter, retail cost of goods sold was 49% of retail sales, versus 50.2% in the prior year quarter. This 120 basis point decrease was primarily driven by higher initial margin. Our inventories at quarter end were $175.3 million compared to $184.8 million in the prior year.

Craig A. Pommells: Driven principally by lower oils, poultry and egg prices.

Craig A. Pommells: Third quarter retail cost of goods sold was 49% of retail sales versus 52% in the prior your quarter.

Craig A. Pommells: This 120 basis points decrease was primarily driven by higher initial margin.

Our inventories at quarter end were $175 $3 million compared to $184.8 million in the prior year.

Craig A. Pommells: With regard to labor costs, our third-quarter labor and related expenses were 37.8% of revenue, versus 35.8% in the prior year quarter. This 200 basis point increase was primarily driven by our investment in additional labor hours to support the guest experience and hourly wage inflation of approximately 5.2%, partially offset by pricing. Other operating expenses were 24.5% of revenue versus 23.6% in the prior year quarter. This 90 basis point increase was primarily driven by our investments in advertising and higher depreciation. Adjusted General and Administrative Expenses for the 3rd Quarter were 5.4% of revenue, which was flat compared to the prior year quarter.

Craig A. Pommells: With regard to labor costs, our third quarter labor and related expenses were 37, 8% of revenue versus 35, 8% in the prior your for.

Craig A. Pommells: This 200 basis point increase was primarily driven by your own investments and additional labor hours to support the guest experience and hourly wage inflation of approximately five 2% partially offset by pricing.

Craig A. Pommells: Other operating expenses were 24, 5% of revenue versus 23, 6% in the prior year quarter. This 90 basis point increase was primarily driven by our investments in advertising and higher depreciation.

Adjusted General and administrative expenses for the third quarter were five 4% of revenue, which was flat to the prior year quarter.

Craig A. Pommells: The current quarter results exclude approximately $3.5 million in expenses related to the CEO transition and approximately $6.6 million in professional fees related to our strategic transformation initiative. Our GAAP financial results also include store impairment charges and closure expenses of $22.9 million. Our top capital allocation priority is investing in the core Cracker Barrel business and in the initiatives we discussed on May 16th. Therefore, we have decided to slow down Mantle Street's unit growth in the short term.

Craig A. Pommells: The current quarter results excludes approximately $3 $5 million in expenses related to the CEO transition.

Craig A. Pommells: And approximately $6 $6 million in professional fees related to our strategic transformation initiative.

Craig A. Pommells: Our GAAP financial results, including store impairment charges, and a closure expenses of $22 $9 million.

Craig A. Pommells: Our top capital allocation priority is investing in the core cracker barrel business and the initiatives we discussed on may 16th.

Craig A. Pommells: Therefore, we have decided to slow down Maple Street's unit growth in the short term, while they work on improving that business model.

Craig A. Pommells: While they work on improving that business model and as part of our focus on investing in the core Cracker Barrel business. As a result of our decision to slow down Maple Street's growth, we recorded a goodwill impairment of $4.7 million. Net interest expense for the quarter was $5.2 million, compared to net interest expense of $4.5 million in the prior quarter. This increase was primarily the result of higher average interest rates and higher debt levels. Our gap income taxes were a $15.3 million credit.

Craig A. Pommells: And as part of our focus on investing in the core cracker barrel business.

Craig A. Pommells: As a result of our decision to slow down Maple Street's growth, we recorded a goodwill impairment of $4 $7 million.

Craig A. Pommells: Net interest expense for the quarter was $5 $2 million compared to a net interest expense of $4 $5 million in the prior year quarter.

Craig A. Pommells: This increase was primarily the result of higher average interest rates and higher debt levels.

Craig A. Pommells: Our GAAP income taxes were a 15.3 million dollar credits.

Craig A. Pommells: Adjusted income taxes were a $6.4 million credit. Both results include the year-to-date impact of lower income tax expectations. Due primarily to lower expected annual earnings before taxes, third quarter gap earnings losses per diluted share were negative 41 cents, and Adjusted Earnings per Diluted Share were a positive 88%.

Craig A. Pommells: Adjusted income taxes were a 6.4 million dollar credits.

Craig A. Pommells: <unk> results include the year to date impact of lower income tax expectations due primarily to lower expected annual earnings before taxes.

Craig A. Pommells: Third quarter GAAP earnings loss per diluted share were negative <unk> 41, and adjusted earnings per diluted share were a positive eight cents.

Craig A. Pommells: In the third quarter, adjusted EBITDA was $47.9 million, or 5.9% of total revenue, compared to $59.6 million, or 7.2% of total revenue in the prior year quarter. Now, turn to capital allocation and or the balance sheet. The company's board of directors is committed to a balanced capital allocation approach. Investing in the business to drive profitable growth continues to be the top priority, followed by returning cash to shareholders through a regular quarterly dividend and share repurchases. In the third quarter, we invested $29 million in capital expenditures, and we returned $28.9 million to shareholders in dividends. We ended the quarter with $472.2 million in total debt, with respect to our fiscal 2024 outlook.

Craig A. Pommells: In the third quarter, adjusted EBITDA was $47 $9 million or five 9% of total revenue compared to $59 $6 million or seven 2% of total revenue in the prior year quarter.

Now turning to capital allocation and our balance sheet.

Craig A. Pommells: The company's board of directors is committed to a balanced capital allocation approach.

Craig A. Pommells: First thing in the business to drive profitable growth continues to be the top priority followed by returning cash to shareholders through a regular quarterly dividend and share repurchases.

Craig A. Pommells: In the third quarter, we invested $29 million in capital expenditures.

Craig A. Pommells: We returned $28 $9 million to shareholders in dividends.

Craig A. Pommells: We ended the quarter with 472.

Craig A. Pommells: $2 million in total debt.

Craig A. Pommells: With respect to our fiscal 2024 outlook.

Craig A. Pommells: We now expect total fiscal 2024 revenue of $3.47 billion to $3.51 billion. We continue to anticipate pricing of approximately 5% for the full year. We have completed our two planned Cracker Barrel openings.

Craig A. Pommells: We now expect total fiscal 'twenty 'twenty four revenue.

Craig A. Pommells: 3.47 billion to $3 five $1 billion.

Craig A. Pommells: We continue to anticipate pricing up approximately 5% for the full year.

Craig A. Pommells: We have completed our two planned to talk about bolt ons and we now anticipate eight to 10, new maintenance people names during the year, including the six we've already opened.

Craig A. Pommells: And we now anticipate eight to ten new Maple Street openings during the year, including the six we've already opened. We now expect commodity inflation to be approximately flat, and we continue to expect hourly wage inflation of approximately 5%. Taking all of the above into account, we anticipate full-year adjusted EBITDA of approximately $200 million to $220 million, which includes the benefit of a 53rd week. This reflects our lower than expected results in Q3, as well as our downwardly revised expectations for Q4, which are primarily driven by our lower expectations for traffic, although we did not previously provide adjusted Ibragara.

Craig A. Pommells: We now expect commodity inflation to be approximately flat and we continue to expect overly wage inflation of approximately 5%.

Craig A. Pommells: They can all the above into account.

Craig A. Pommells: Dissipate full year adjusted EBITDA of approximately 200 million to $220 million, which includes the benefit of a 50 <unk> week.

Craig A. Pommells: This reflects our lower than expected results in Q3.

Craig A. Pommells: As well as our downwardly revised expectations for Q4.

Craig A. Pommells: Which are primarily driven by our lower expectations for traffic.

Craig A. Pommells: Although we did not previously provided adjusted EBITDA guidance.

Craig A. Pommells: Our current guidance reflects an approximately $20 million reduction relative to our previous expectations. Our adjusted EBITDA guidance contemplates certain excluded expenses. First, approximately $9 million of one-time CEO transition expenses.

Craig A. Pommells: Our current guidance reflects an approximately $20 million reduction relative to our previous expectations.

Craig A. Pommells: Second, approximately $16 million in consulting fees related to our strategic transformation, which includes additional pricing and menu strategy work. Third, approximately $2 million in corporate restructuring charges, and fourth, approximately $5 million in favorable effects from the change to our benefits policy that occurred during the second quarter. We now expect a full year GAAP effective tax rate of negative 55% to negative 60% and an adjusted effective tax rate of negative 3% to negative 8%. For the fourth quarter, we expect a gap in the effective tax rate of approximately negative 2% to negative 7% and an adjusted effective tax rate of approximately negative 1% to positive 4%.

Craig A. Pommells: Our adjusted EBITDA guidance contemplate certain excluded expenses first approximately $9 million of one time CEO transition expenses.

Craig A. Pommells: Second approximately $16 million in consulting fees related to our strategic transformation.

Craig A. Pommells: Which includes additional pricing at menu strategy work.

Craig A. Pommells: Third approximately $2 million and corporate restructuring charges and fourth approximately $5 million of favorability from the changed over benefits policy that occurred during the second quarter.

Craig A. Pommells: We now expect a full year GAAP effective tax rate of negative 55% to negative 60%.

Craig A. Pommells: And an adjusted effective tax rate of negative, 3%, so negative 8%.

Craig A. Pommells: For the fourth quarter, we expect a GAAP effective tax rate of approximately negative 2% to negative 7%.

Craig A. Pommells: And an adjusted effective tax rate of approximately negative 1% to positive 4%.

Operator: Lastly, we anticipate capital expenditures of $120 to $125 million. I'll now turn the call over to the operator for questions. Thank you. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.

Craig A. Pommells: Lastly, we anticipate capital expenditures of $120 million to $125 million.

Speaker Change: I'll now turn the call over to the operator for questions.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your touch some phone if.

Speaker Change: You're using a speakerphone please pick up your handset before pressing the keys. If anytime your question has been addressed and you would like to withdraw. Your question. Please press Star then two and at this time, we'll pause momentarily to assemble our roster.

Jeffrey Daniel Farmer: If at any time your question has been addressed, and you would like to withdraw your question, please press star, then 2, and at this time we will pause momentarily to assemble our roster. The first question will come from Jeff Farmer with Gordon Haskett. Please go ahead. Good morning and thank you.

Julie Felss Masino: I'm just hoping you can provide a little bit more color on some of your near-term, top-line strategies, especially in the context that we've heard from your peers, which is pointing to sort of both increased advertising weight and a lot more value promotion. So I appreciate your long-term strategy that you outlined a couple weeks ago, but at least over the next couple of quarters, how are you guys looking to compete in an environment that's increasingly promotional and has a lot more advertising? Good morning, Jeff.

Speaker Change: And your first question will come from Jeff Farmer with Gordon Haskett. Please go ahead.

Jeffrey Daniel Farmer: Good morning, and thank you I'm, just hoping you can provide a little bit more color on some of your your near term top line strategies.

Jeffrey Daniel Farmer: Especially in the background that we've heard from your peers, which is pointing to a sort of both increased advertising waits a lot more value promotions. So I. Appreciate your long term strategy that you outlined a couple of weeks ago, but.

Speaker Change: We used to over the next couple of quarters. How are you guys looking to compete in an environment, that's been increasingly promotional and in a lot more advertising.

Julie Felss Masino: Thanks for the question. We actually feel very well positioned in this environment because Cracker Barrel is a brand that values value and really understands that value is important to our guests. And remember, value is a multifaceted equation for the guests. It's not only the price that somebody pays, but it's the quality of the food, the amount of the food, and the experience that they receive in our restaurant. We got out of the gate early on thinking about value and how we were going to... We were welcoming our guests at that very, very sharp price point. We rushed to get that to market, so much so that we actually didn't have any planned advertising around it in Q2.

Jeffrey Daniel Farmer: Good morning, Jeff. Thanks for the question, we actually feel very well positioned in this environment because cracker barrel is a brand that values value and really understands the value is important to our guests and remember values a multifaceted equation for the gas it's not only the prices.

Jeffrey Daniel Farmer: Somebody pays but it's the quality of the.

Jeffrey Daniel Farmer: Our knowledge of the various experience.

The experience that they receive in our restaurants.

Jeffrey Daniel Farmer: We got out of the gate early on thinking about value and how we were going to you.

Jeffrey Daniel Farmer: They value in new ways to our guests based on the research that we've done that really underpins the transformation agenda value front that cracker barrel is just one key piece that holiday, we got out of the gate last Q2, you'll remember that I shared on the earnings call that we were launching in early Dine program a it was something we believed.

Jeffrey Daniel Farmer: Very very strongly and it's got great dinner items at 899 from four to six P. M. Monday through Friday, we love welcoming our guests and at that very very sharp price point, we rushed to get that to market. So much. So that we actually didn't have any planned advertising around it in Q2, what you're seeing right now or even.

Julie Felss Masino: What you're seeing right now, or even Q3, what you're seeing right now is that at the beginning of May, we actually started to put some advertising behind that so that guests are aware that Cracker Barrel has their back in these times, that we are there for them with this great, sharp value price point at dinner. That is a big piece of our overall pricing strategy that I talked about on the call a few weeks ago.

Jeffrey Daniel Farmer: Q3, what Youre seeing right now is that at the beginning of May we actually started to put some advertising behind that so that's making guess aware of that cracker barrel has their back in these times that we are there for them with this great sharp value price point.

Jeffrey Daniel Farmer: At dinner that is a big piece of our overall pricing strategy that I talked about on the call. She weeks ago, we're really executing a barbell pricing strategy. So that we can be very sharp with key price points not only with this early dine program, but we also have key price point that breakfast, we've introduced a new Sunrise special for.

Julie Felss Masino: We are really executing a barbell pricing strategy so that we can be very sharp with key price points, not only with this early-dining program, but we also have key price points at breakfast. We've introduced a new sunrise special for breakfast at a 799 price point. That's an incredible value. I challenge you to eat it all. I personally can't eat it all. It's such a great breakfast.

Jeffrey Daniel Farmer: Breakfast was 799 price point, that's an incredible value I challenge any at all I personally can't eat at all it's such a great. It's such a great breakfast. It features our signature pancakes and eggs or are your choice of me and that's a great price point as well. So that's kind of one end of it while we're really evaluating our ability to.

Julie Felss Masino: It features our signature pancakes and eggs or your choice of meat, and that's a great price point as well. That's one end of it, while we're really evaluating our ability to take prices strategically, as I've talked about on the last couple of calls. We believe that we're very well positioned. We're starting to actually communicate this through our media channels, but Cracker Barrel has and always will be a great value proposition for our guests, and we're just there to protect it and to ensure that they know about it.

Jeffrey Daniel Farmer: Kind of take pressed strategically as I've talked about on the last couple of calls. So we believe that we're very well positioned we're starting to actually communicate this through our media channels Cracker barrel has and always will be a great value proposition for our guests and we're just are protected and to ensure that they know about it.

Craig A. Pommells: Okay, and then just two more quick follow-ups on the modeling side. So, I think your guidance implies something like 200 basis points of adjusted EBITDA margin compression for the fourth quarter. So, the first question is, am I in the ballpark with that? And then the second one would be, I might have missed it, but can you share the traffic and mix? I think you shared that the pricing was in the press release, but traffic and mix in the quarter?

Speaker Change: Okay, and then just two more quick follow ups on the modeling side. So I think your guidance implies for the fourth quarter or something like 200 basis points of adjusted.

Speaker Change: Adjusted EBITDA margin compression. So first question is I in the ballpark with that and then the second one would be I might have missed it but can you share the the traffic and mix I think you shared the pricing it was in the press release, but traffic and mix are in the in the quarter.

Craig A. Pommells: Hi Jeff, it's Craig. Yes, you're in the ballpark as it relates to the margin reduction in Q4, you know, in very, very rough terms, approximately 200 basis points. And in terms of traffic for the quarter, traffic for Q3 was a negative 4.9 for Get Forward With Water. All right, thank you. The next question will come from Todd Brooks with The Benchmark Company. Please go ahead.

Craig A. Pommells: Hi, Jeff It's Craig Yes, you're in the ballpark as it relates to the margin production in Q4, and very very rough terms.

Speaker Change: <unk> 200 basis, approximately 200 basis points and in terms of traffic for the quarter traffic for Q3 was a negative four nine.

Speaker Change: For the fourth quarter.

Speaker Change: Alright, thank you.

Speaker Change: The next question will come from Todd Brooks with the Benchmark company. Please go ahead.

Todd Morrison Brooks: Hey, thanks for taking my question. Just following up on Jeff's question, consumer behavior and what you're seeing currently, are you seeing really frequency as the loss from the same store sales pressure standpoint, or how about check management? I mean, what are you seeing?

Todd Morrison Brooks: Hey, Thanks for taking my question just following up on Jeff's question consumer behavior, and what you're seeing currently are you seeing.

Todd Morrison Brooks: Really frequency being being the loss from.

Speaker Change: From a same store sales pressure standpoint, or how 'bout check management I mean, what are you seeing as.

Craig A. Pommells: as far as trade down value responding maybe people coming out of other day parts into that early evening day part, just like the essence of kind of your consumer and how that developed across the course of the quarter. In terms of the consumer, what we're seeing is that the lower income consumer is more pressured, and we're seeing that particularly with the under 60K consumer in terms of their visits. I'm not sure if it's frequency necessarily, but that would make sense. Traditionally, Cracker Barrel has been a great value.

As far as trade down value resonated, maybe people coming out of other day parts into that early evening day part just wanted to get a sense on kind of your consumer and how that developed across the course of the quarter.

Speaker Change: The in terms of the consumer what we're what we're seeing is the lower income consumer is more pressure and we're seeing that particularly with the Andhra 60, K a consumer in terms of their visits I'm not sure if it's frequently necessarily but.

Speaker Change: That that would make sense.

Speaker Change: Traditionally cracker barrel been of great value was actually held up well over the longer term with the under 60, K consumer but more recently you've seen some pressure there.

Craig A. Pommells: We've actually held up well over the longer term with the under 60K consumer. But more recently, you've seen some pressure there. In terms of the menu mix, there are a couple of moving pieces, so there is a little bit of negative menu mix there, Todd. It's not a large amount, and I would say there are some reductions in add-ons and things like that relative to prior trends. We've really seen it more so on the retail side, where that's a highly discretionary part of the dining occasion, and we've seen a little bit of softness on conversion. That's really helpful. Thanks, Craig.

Speaker Change: In terms of the menu mix there are a couple of moving pieces and so there is a little bit of a negative menu mix there Todd it's not not a large amount and I would say there were some there was some reductions in add ons and things like that relative to prior trends, we've really seen it more so on the retail side.

Speaker Change: We're a highly discretionary part of the dining occasion, and we've seen a little bit of softness on on conversion, so maybe more on retail than necessarily in restaurants.

Speaker Change: That's really helpful. Thanks, Craig a second follow up if I may.

Craig A. Pommells: Second follow-up, if I may. If we look back to the call from a couple of weeks ago, you talked about 2025 being an investment year and talking about it being in the range of flat to slightly down EBITDA. Should we be thinking about the guidance range for full year 24 and maybe that lower half of the $200 to $220 million range being attainable? In 25, and that would be that flattish outcome.

Speaker Change: If we look back to the the call from a couple of weeks ago, you talked about.

Speaker Change: 2025, being an investment year and talking to it being in the range of flat to slightly down EBITDA.

Speaker Change: Should we be thinking about the guidance range for full year, 'twenty, four and maybe that.

Speaker Change: Hmm.

Speaker Change: The $200 million to $220 million range being achievable.

Craig A. Pommells: But if you're in the upper half of 24, that leads to kind of a down year over year, you've got any sense of how we flow this incremental guidance point you've given us versus the qualitative guidance point around fiscal 25. We'll add some more texture to that in September. I think we really believe in the three-year plan. We believe in the roughly 400 basis point improvement in EBITDA. And we're looking at all of the work we've got ahead of us.

Speaker Change: In 'twenty, five and that would be that.

Speaker Change: Flattish outcome, but if you're in the upper half in 'twenty for that that leads to kind of a down year.

Speaker Change: EBITDA any sense of how we flow these incremental guidance point, you've given us.

Speaker Change: Versus the qualitative guidance point around fiscal 'twenty.

Yeah, well add some more texture to that end in September I think we we really believe in the three year plan. We believe in the roughly 400 basis point improvement in EBITDA and we were looking at all of the work. We've got ahead of US we're kind of looking at the industrial headwinds and that kind of leaves us.

Craig A. Pommells: We're kind of looking at the industry headwinds, and that kind of leads us to the point of view that 25 will be a bit challenged. And we still continue to believe in an EBITDA level of flat to slightly down relative to 24. Now, where we end at 24 is still a bit of an open chapter.

Speaker Change: To the point of view that 25 will be a bit challenged and we still continue to believe in the EBIT level flat to slightly down relative to the 24 now where are you and where we ended 24 is it still a bit of a open and Oprah and open chapter. So that's kind of play out in there.

Craig A. Pommells: So we'll let this kind of play out, and then we'll update you on the next call. Okay, thanks. And just a final one on the modeling side. Can you remind us the expectation for what the 53rd week is worth from a revenue and EBITDA standpoint? Thank you. We haven't provided an exact number for the 53rd week, and generally, what I would encourage you to do is go back to 2018 and use that as a reference point and generally update that for lower margins.

Speaker Change: Two of the next call.

Speaker Change: Okay. Thanks, and just a final one on the modeling side can you remind us the expectation for what the 50 <unk> week is worth from a revenue and EBITDA standpoint. Thank you.

Speaker Change: Yeah, we haven't provided an exact number on the 53rd week and generally what I would encourage you to do is go back to the 2018 and use that as a as a reference point and generally update that for lower margins I would say that the 50 <unk> week impact is embedded you know what.

Craig A. Pommells: I would say that the 53rd week impact is embedded in our total year key bit of guidance for this year. And as we talk about fiscal 2025, we're comparing the expectation for 2025 to that total fiscal 2024 guidance that we provided. Okay, great.

Speaker Change: Total to your EBITDA guidance for this year and as we talk about fiscal 'twenty to 'twenty five.

Jake Rowland Bartlett: Thanks, Craig. The next question will come from Jake Bartlett with Truist Securities. Please go ahead.

Speaker Change: Comparing the expectation for 25 to that total fiscal 'twenty 'twenty four guidance that we provided.

Speaker Change: Okay, great. Thanks, Greg.

Speaker Change: The next question will come from Jake Bartlett with <unk> Securities. Please go ahead.

Julie Felss Masino: Great, thanks for taking the question. You know, I wanted to build on the update, Paul, and some of the big changes that you announced. And, you know, one question that I had following it was, And just really what gives you the confidence that reinvesting in the stores is the right way to go here, such a big change to the model. Anything you can share in terms of just more detail of what you heard from consumers and why you think that the remodels as well as the kind of increased maintenance are so important for the turnaround. Yeah, good morning, Jake.

Jake Rowland Bartlett: Great. Thanks for taking the question I wanted to build on.

Speaker Change: The the the update Paul and some of them.

Speaker Change: Big changes that you announced in your one question that I had following it was just really what gives you the confidence that reinvesting in the stores is the right you know.

The right way to go here, such a big change to the model anything you can share in terms of just more detailed what you heard from from consumers and why are you why do you think that that you know the remodels as well as the the 10th.

Speaker Change: The increased maintenance it is so important for the turnaround here.

Julie Felss Masino: We heard we did extensive research and really put together the transformation plan. We talked to guests all over the country, all different kinds of segments, all kinds of backgrounds, and also listened to our team members and really took a great stock of where we find ourselves. And with traffic down almost 20% to 2019, you know, they're telling us they're not choosing us. And so digging into the why there was really, really important.

Speaker Change: Yeah, Good morning Jake.

Speaker Change: Her we did extensive research and really putting together that transformation he talked to gas all over the country all different kind of segments all kinds of backgrounds and also listen to our team members that really took great stock and kind of where we find ourselves and with traffic down almost 20% in 2019, you know, they're telling us they're not choosing us.

Speaker Change: Digging into the wise there was really really important we heard from them that the experience in cracker barrel just isn't as relevant specifically at dinner.

Julie Felss Masino: We heard from them that the experience at Cracker Barrel just isn't as relevant, specifically at dinner. So, when our dinner sales are down, when you look at that year-over-year, it's 35% of our mix, and it's an important day part for us. We've held up quite well at breakfast, but what guests have told us is that the Cracker Barrel experience, there are more relevant choices for them in the dinner part based on the experiential factors.

Speaker Change: So when in our dinner sales are down when you look at that year over year, it's 35% of our backs and it's an important day part for US we've held up quite well at breakfast, but what guests have told US is that the cracker barrel experience there are more relevant choices for them in the dinner day part be funny experiential factors.

Julie Felss Masino: So a lot of that was looking at the comfort of the table, the lighting, the paint, all of those things. And it really came out in our research that we needed to look at the store experience as well as the other parts of the transformation agenda. The menu also needed some work on relevance, so lots of data is behind that. And then what I would tell you Jake, as well as having only two stores, they're very much lab stores at the moment.

Speaker Change: So a lot of that is looking at the comfort of the table.

Speaker Change: And at that pace.

Speaker Change: All of those things and that really came out in our research that we needed to look at the store experience as well as the other parts of the transformation agenda right. And then you also you did some work on relevance so lots of data in behind that and then what I would tell you take as well as the only two stores, they're very much lab stores at the moment.

Speaker Change: We're seeing great guest feedback on the Remodels that we did there in just a feeling of lighter brighter fresher cleaner a place where I do want to have dinner I remember, we put some bank has some boost entities stores and people are really loving knows I'm feeling like a place that you know it feels like their cracker barrel and just a.

Julie Felss Masino: We're seeing great guest feedback on the quick remodels that we did there and just the feeling of a lighter, brighter, fresher, cleaner, a place where I do want to have dinner. Remember we put some banquettes and booths into these stores, and people are really loving those. And it's feeling like a place that feels like they're Cracker Barrel and just a better version of Cracker Barrel.

Speaker Change: Better version of Cracker barrel. So we believe we're on the right track and that's what 25 is all about really taking a very disciplined approach to the capital deployment around this piece of the strategy right. We we know that we want to be careful and good stewards of the capital that we're looking at testing 25 to 30 stores in this next year and a variety.

Julie Felss Masino: So we believe we're on the right track and that's what 25 is all about, really taking a very disciplined approach to the capital deployment around this piece of the strategy. We know that we want to be careful and good stewards of the capital. So we're looking at testing 25 to 30 stores this next year at a variety of investment levels and, frankly, at a variety of baselines. So we're looking at stores that are performing well, stores that aren't performing well, looking at whether we put a higher amount of money into them or a lower amount of money into them to really see and find that sweet spot for the right level of investment versus return versus growth rate.

Speaker Change: The other investment levels and frankly at a variety of baseline. So we're looking at stores that are performing well stores that aren't performing well looking at whether we put a higher amount of money into it or a lower amount of money and you really see and find that sweet spot for the right level of investment versus return versus growth rate isn't.

Speaker Change: So that we can be very disciplined about the deployment of capital to really drive that part of the plan for growth for the future.

Julie Felss Masino: So that we can be very disciplined about the deployment of capital to really drive that part of the plan for growth. And I'll follow up with the second part of your question or link to the main part.

And I'll follow with the second part of your of your question as it relates to the maintenance that you know.

Julie Felss Masino: The you know, some of that can come through general feedback, but I guess I won't give you that specific. It was clear to us that we fell a bit behind on some significant guest- and employee-based maintenance items, things such as parking lots, paint, floors, and baths. And so that really came through our own standards, anecdotally from guests, but primarily through our own standards.

Some of that kind of come through general feedback what guests don't give you that specific.

Speaker Change: Specific feedback however, we havent brand standards and so what will you do with a normal course of business and maybe felt a little bit behind or in corporate as we go through when we bought it at every store and we audited the entire portfolio and as we completed that process. It was clear to us that we fell a bit behind on.

Speaker Change: Some.

Speaker Change: Yes, they've been an employee based in our maintenance items things such as parking lots of paints and floors and bathrooms and so that really came through our own standards anecdotally from gas will primarily through our own standards and if we have to get caught up on that that is one of those investments that it pays dividends over.

Julie Felss Masino: And we have to get caught up on that. That is one of those investments that pays dividends over time as you think about how you view a business. Does it look fresh? Does it look clean?

Speaker Change: Our time as you'd think about how you view of business does it look fresh clean does it look up to date.

Julie Felss Masino: Does it look up to date? Great, that's helpful. My next question is on the cost savings targets that you provided, you know, the $50 to $60 million. I know you're in the early stages, but I guess my question is, if you could help us understand maybe some big buckets.

Speaker Change: Got it great. That's helpful. And then my next is it a similar question on the cost savings targets that you provided.

Speaker Change: No the $50 million to $60 million I know you're early stages.

Speaker Change: But I guess my question, if you could help us understand maybe some big buckets.

Craig A. Pommells: You know, we've talked about the opportunity to maybe have a little bit less scratch cooking, maybe some little more food coming in the door, a little more, you know, processed, for lack of a better word. But, you know, what are the big, is that the majority? I mean, just give us some big kind of buckets of where you think these cost savings are going to be coming from. You've kind of started the answer there for us, so thank you.

Speaker Change: We've you've talked about the opportunity to maybe have a little bit less scratch cooking, maybe some little more.

Speaker Change: Who's coming in the door, a little more process for them for lack of a better word but.

Speaker Change: What are the big is that the majority I mean, just just give us some big buckets of where you think these cost savings are going to be coming from.

Speaker Change: Yeah, you you've got to start with the answer there for us so thank you.

Craig A. Pommells: A lot of the work centers around industrial engineering efforts that focus on the back of the house. We're in the early stages of that, but we think there's a win-win opportunity, given the breadth and the complexity of our menu, to simplify our operations, make them more efficient, and make them more consistent. And that will show up in kind of the back of the house, in labor in some ways. It will show up in other areas in the back of the house.

They have a lot of the work centers around the industrial engineering effort that focuses on the back of the house. We're in the early stages or early stages of that but we think there was a win win opportunity given the breadth and the complexity of our menu to simplify our operations make it more efficient make it more.

Speaker Change: And that will show up again kind of back of the house and in labor in some ways. It will show up in other areas in the back of the house, we think that will be a meaningful part of this $50 million to $60 million. In addition to that we have an ongoing program. That's that's been quite successful over.

Craig A. Pommells: We think that will be a meaningful part of this $50 to $60 million. And then, in addition to that, we have an ongoing program that's been quite successful over the years that will generate savings across the full P&L. So I think some of that's going to skew towards the back of the house, which will have a labor component to it over time. And then the other program is an overlay to that.

Speaker Change: The year is that will generate savings across the full P&L. So I think that's going to skew towards the back of the house, which will have a labor component to it over time and then the other program is an overlay.

Speaker Change: Two.

Craig A. Pommells: The challenge has been, we've had these programs for a while, Jake, as you know. Candidly, the challenge has been this issue that Julie brought up. It's this relevant issue, which we think manifests itself in declining traffic. So if we're saving $50 million, as an example, and then the traffic's down significantly, then that erodes that $50 million. Okay, and just to that point, there was some, you know, cost cuts in the past year, 30 to 40 million, but that was being reinvested. So it wasn't kind of flowing through to the margins.

Jake Rowland Bartlett: Two that the challenge has been we've had these programs for awhile Jake as you know candidly. The challenge has been this issue that Julia brought up is this is a relevant issue, which we think manifests itself in the client and traffic's up saving $50 million as an example, and then the traffic's down significantly then that erodes.

That $50 million. So we have both of these things coming together with stabilizing the traffic and ultimately started to grow then that allows these cost savings efforts to flow through to a greater degree.

Craig A. Pommells: You know, I just want to make sure we're clear that the 50 to 60 million that you expect to save, that's going to flow through the margins. You expect that to be kind of a real, kind of essentially a net margin saver in itself. And so, you know, reinvesting that in something else would not kind of allow this to flow through. Yeah, the 50 to 60 million is embedded in the 400 basis points improvement. So it's a part of that improvement over the three-year window. Thank you very much. The next question will come from Brian Mullan with Piper Sandler. Please go ahead.

Speaker Change: Okay, and just to just I guess to that point there was some.

Speaker Change: You had cost cuts in the in the past year.

Speaker Change: I don't know 30 to 40 million, but that was being reinvested. So it wasn't kind of.

Speaker Change: Wasn't flowing through to the margins I just want to make sure. We were clear that this $50 million to $60 million that you expect to to say that's going to flow through the margin do you expect that to be kind of a wheel.

Speaker Change: Kind of a essentially a net margin saver in itself and so you're not reinvesting that into something else that would not kind of allowed us to flow through.

Speaker Change: Yeah. The 50 to 60 million is embedded in the 400 basis points improvement. So it's a part of that.

Speaker Change: Improvement over the three year window.

Speaker Change: Okay. Thank you very much appreciate it.

Speaker Change: The next question will come from Brian Mullan with Piper Sandler. Please go ahead.

Brian Hugh Mullan: Thank you, Julie. You mentioned something called seat to eat times in the prepared remarks. You know, that seems like an important API. Maybe could you just give a little history? Was that being tracked before you joined?

Julia: Okay. Thank you Julia you mentioned something called C to eat times in the prepared remarks, you know it seems like an important.

Speaker Change: Yeah, I mean, maybe could you just give a little history, what was that being tracked before you joined and then you know assuming it was it's nice to hear that there's been some recent progress could you just give a sense of where that stands versus a couple of years ago. When the business was in a bit of a better place just trying to get a sense of how far you might have to go.

Julie Felss Masino: And then, you know, assuming it was, it's nice to hear that there's been some recent progress. Could you just give a sense of where that stands versus a couple of years ago, when the business was in a bit of a better place, just trying to get a sense of how far you might have to go? Sure, Brian, thanks for the question. You know, one of the early things we did in really dissecting the business and looking at what we could do to improve where we find ourselves was focus on what I call metrics that matter.

Brian Hugh Mullan: Sure Brian Thanks for the question.

Brian: You know one of the early things we did.

Speaker Change: And really dissecting the business I'm looking at what we could do to improve where we find ourselves with a focus on what I call metrics that matter.

Julie Felss Masino: And so we did a lot of correlation and found out what the operational metrics specifically in the stores that we can control today that have the highest impact on same store sales growth? And when we got, when we dug into that, we looked at, I don't even know, we looked at like 40 or 50 different metrics and really landed on these five that I talked about in the prepared remarks. The first one is really guest satisfaction.

Speaker Change: And so we did a lot of correlation and what are the what are the ops metrics specifically in the stores that we can control today.

Speaker Change: Highest impact on same store sales growth.

Speaker Change: And when we came when we dug into that we looked at it I don't even know we looked at like 40 or 50 different metrics and really landed on these five that I talked about in the prepared remarks. The first one is really guest satisfaction. Our guest satisfaction is a little bit of a loaded one because it's like value. There's a lot of things in that calculation for our guests. It's it's everything.

Julie Felss Masino: Now, guest satisfaction is a little bit of a loaded one because it's like value. There are a lot of things in that calculation for our guests. It's, everything from the service level to all of those things roll up into guest satisfaction. But we're measuring that with a Google star rating, and so that's number one. Number two, I talked about seed to eat, and we also have another metric called seed to pre-check. So that's basically how quickly are you greeted and then how long does it take for your food to come out?

Speaker Change: And from the surface level to all of those things roll up into guest satisfaction that we're measuring that with Google surveying them and so that's number one number two I talked about C. D E and we also have another metric called pizza pre tax. So that's basically how quickly are you agreed it and then how long does it take for your food to come out that's D to each which is really the big one.

Julie Felss Masino: The seed to eat, which is really the big one, because people are hungry, that's why they came to Cracker Barrel, they want to eat, you know, so we want to make sure that we get their food to them in a reasonable amount of time, but that it's made properly. Hot food is hot, cold food is cold, made according to our wonderful recipe. We've improved that time by 8%, which is actually really, really meaningful when you think about the average time somebody spends with us is a little less than an hour.

Speaker Change: Oh, great. That's why they came to cracker barrel they want to eat out. So we wanted to make sure that we get their food to them in a reasonable amount of time, but that is made properly hot food Hot cold food is called nature of our wonderful recipe, we've improved that time by 8%, which is actually really really meaningful when you think about the average time somebody spends with us.

Speaker Change: Less than an hour. So that's that's a key that's a key metric in getting your food faster and getting you on your way and we want to be part of your life.

Julie Felss Masino: So that's, that's a key metric in getting your food faster and getting you on your way. We want to be part of your life, but we also know you have other things going on too.

Speaker Change: Things going on too so that was a key one the other ones I talked about our turnover tenure in a wrong.

Julie Felss Masino: So that was a key one. The other ones I talked about are turnover, tenure in a role, and then we're also looking at off-premise missing item scores, all of which we're showing improvement on. I'll just use this opportunity to really shout out the operations team and all of our field partners every single day and the leaders there because they are so focused on taking care of our guests, delivering an experience that guests are going to love and food that guests love.

Speaker Change: And then we're also looking at off premise missing items cars, all of which were showing improvement on the team here I'll just use this opportunity to really shut off the ops team and all of our field partners every single day and leaders there because they're so focused on taking care of our guests delivering an experience that guests are going to love and food. The guests a lot remember those are part of my three M. P.

Julie Felss Masino: Remember, those are part of my three imperatives, the relevancy, food, and experience that guests love, and growing profitability, and that really starts day in, day out, every execution with every guest, making it wonderful. We believe that these dividends that we're, not the dividend, dividend, but these efforts that we're really focused on in our restaurants today will pay dividends to the business in the long term because these are really what matter to our guests and what drive theme store sales. So, thanks. Okay, thank you.

Speaker Change: There is a relevance eat food and experience the guest love and growing profitability and it really starts day in day out every execution with every guests, making it wonderful we believe that these dividends that were in but not a dividend dividend.

Speaker Change: These efforts that we're really focused on in our restaurants today will pay them will pay dividends to the business in the long term because these are really what matters from our guests and drive same store sales. So thanks for the question.

Brian Hugh Mullan: And then just a follow-up question on the off-premise business. You talked about this a bit in the strategic call a few weeks ago, but can you just remind us how you view this business now? You know, which channels are you happy with?

Speaker Change: Okay. Thank you and then just a follow up question on the off premise business you talked about this a bit in the strategic call. A few weeks ago, but can you just remind us how you're viewing this business now you know which channels are you happy with where do you expect to make some changes and just related to that I think I think the heat and serve business might be a lower margin percentage.

Julie Felss Masino: Where do you expect to make some changes? And just related to that, I think the heat and serve business might be a lower margin percentage business, which I think is understood, but I'm curious if that is right. And does that have any impact on operations as well, if you were to make changes to that part of it?

Speaker Change: <unk> business, which I think is understood, but I'm curious if that is right and if does that have any impact on operations as well. If you were to make changes to that part of it.

Julie Felss Masino: Yeah, Brian, it's a really interesting channel because it's got a lot of stuff going on in it for us. So in off-premise today, we put individual-to-go in that, we put third-party delivery in that, and we put catering and our occasion business in that. And they are three really different businesses, actually, when you break them down and kind of think about it. The way the guest interacts with our staff across all of those is really different. The third-party experience, you know; they're not even coming in; it's somebody else grabbing it and taking it to that individual.

Speaker Change: Yeah Ryan.

Ryan: It's a really interesting channel because it's got a lot of stuff going on in it for us. So in off premise today, we play individual to go in that third party delivery in that and we put catering and hurricanes in business and that they are really different business is actually when you when you break them down and kind of think about it the way the way to guests to interact with our staff across all of those.

Ryan: Really different third party experience you have theyre not even coming in it's somebody else grabbing it and taken it to that individual to go airplanes in that order through our channel, but they're coming in to get it in a catering that could happen in a myriad of ways all of which to the last part of your question is really important does have an impact on our in store operations. So we've got to make this too just.

Julie Felss Masino: They're placing that order through our channel, but they're coming in to get it. And then catering, that can happen in a myriad of ways, all of which, to the last part of your question, is really important, does have an impact on our in-store operations. So we've got to make this food just alongside everything that's happening in our restaurant. So we're running a couple of different businesses all at the same time.

Ryan: Alongside of everything that's happening in our restaurants, and we're running a couple of different businesses. All at the same time, what we realized namely in kind of Q2 of last year was that some of these businesses, we're putting them disproportionate amount of pressure on the dine in business and we had been focusing on growing catering a little bit up.

Julie Felss Masino: What we realized mainly in kind of Q2 of last year was that some of these businesses were putting disproportionate amounts of pressure on the dining sector. We have been focusing on growing catering a little bit at all costs, like grow, grow, grow, grow, grow, grow. And what we realized is that it's not as profitable as other channels, and it was really hurting guest satisfaction in our restaurants. Because the amount of energy to put against, you know, think about it. We have orders for, you know, warehouses that we're celebrating, you know, a party or something like that, and it could literally be feeding 100 people.

Ryan: At all costs like grow grow grow grow grow.

Ryan: And what we realized is that it's not as profitable another challenge as other channels and it was really hurting guest satisfaction in our dine in business.

Ryan: Because the amount of energy to put against you know think about it we have orders for you know warehouses that were celebrating.

Parity or something like that and it can literally be feeding 100 people. So the kitchen kitchen, that's feeding the guests in the restaurant are putting us order together and it can be a little bit of a distraction and it was impacting our CPE times in these things that I've just had a really important to guest satisfaction. So because of this that's why that's part of our pillar.

Julie Felss Masino: So the kitchen, the same kitchen that's feeding the guests in the restaurant, is putting this order together. And it can be a little bit of a distraction, and it was impacting our seat-to-eat times and these things that I've just said are really important to get satisfaction.

Jon Michael Tower: So because of this, that's why part of our pillar four has been about really focusing on how to make these three businesses within off-premise more profitable, to right-size them against our dine-in business, which is our priority business, and to really make sure that we execute them with excellence. I talked about missing items in my prepared remarks because that was one of the key things that we weren't doing well. Our missing item rate was high for the industry in those third-party delivery orders.

Ryan: <unk> has been about really focusing on how to make these three businesses within all kind of more profitable.

Ryan: Rightsize them against our dine in business, which as you know our priority business.

Ryan: And to really make sure that we execute them with excellence I talked about missing item in my in my prepared remarks, because that is one of the key things that we werent doing well are missing item rate was high for the industry and those third party delivery orders and so getting that right executing with excellence across all three of these businesses within that.

Jon Michael Tower: And so getting that right, executing with excellence across all three of these businesses within that off-premise channel is really, really important as we grow. Thank you very much. The next question will come from Jon Tower with Citigroup. Please go ahead.

Ryan: Premise.

Ryan: Channel are really really important as we grow for the future.

Speaker Change: Thank you very much.

Julie Felss Masino: Great, thanks for taking the question. I'm just curious, you know, pricing is running 4% this year in the context of Transcripts provided by Transcription Outsourcing, LLC. Given, you know, the way that you're looking at it on a store by store basis, rather than kind of bigger regional markets, that's open. Maybe how you think about that informs your view for 2025 pricing, given the backdrop for the consumer, but at the same time, the opportunities that you're seeing across the different stores in the system. Thanks, Jon.

Speaker Change: The next question will come from Jon Tower with Citigroup. Please go ahead.

Jon Michael Tower: Great. Thanks for taking the question I'm. Just curious you know pricing is running 4%. This year are in the context of <unk>.

Speaker Change: Some deflation on the commodity side, obviously labor inflation still out there.

Speaker Change: And I think a month, but strategic update call. A couple of weeks ago, you talked about the opportunity to perhaps get a little bit sharper on pricing across the system.

Speaker Change: Given you know the way that you're looking at it on a store by store basis, rather than kind of bigger regional markets. I was hoping maybe how how are you thinking about that informs your view for 2025 pricing given the backdrop with the consumer but at the same time the opportunities that you're seeing across the different stores in the.

Speaker Change: System.

Speaker Change: Thanks, John.

Julie Felss Masino: Look, one of the things we identified early on is that there is an opportunity for us to be more strategic in the way that we actually apply price. Price is a powerful lever, but it's also something that's really recognizable for consumers and comparable to other experiences that they're having out there. So, as we talked, we've been really maniacal about thinking about how we protect value while making sure that we take price in a way that better sets us up for success and better flows through.

Speaker Change: Look one of the things we identified early on is that there's an opportunity for us to be more strategic in the way that we actually apply price.

John: Price is a powerful lever, but it's also something that's really recognizable for consumers and comparable to other experiences that theyre having out there. So as we talked we've been really maniacal about thinking about how we protect value, while making sure that we take price in a way that better sets us up for success and better better flows through.

Julie Felss Masino: I used the example in the call two weeks ago of, you know, today we have a tier that has 60% of our stores in it. And in that tier, there's literally a store where the average household income is $55,000 a year and a store where the average household income is $90,000.

John: I used the example in our call two weeks ago was you know today, we have a tier that has 60% of our stores in it.

And that's here there are there's literally a store where the average household income is $55000 a year and a store where the average household income of $90000 a year, we use that as an example, because I think it's pretty powerful that there's different willingness to pay and different competitive sets around each of those stores and that provides an opportunity for us to refine our pricing here.

Julie Felss Masino: We use that as an example because I think it's pretty powerful that there is different willingness to pay and different competitive sets around each of those stores, and that provides an opportunity for us to refine our pricing tier. So, we're doing that work. Now, we've got a test running right now.

John: So we're doing that work now we've got a test running right now and we've got several tests running where we've been taking price across these tiers it more strategically across different items in the menu, we're testing and learning quite a few different things in that as we talked in the prepared remarks are two weeks ago.

Julie Felss Masino: We've got several tests running where we've been taking price across these tiers more strategically across different items in the menu. We're testing and learning quite a few different things in that, as we talked about in the prepared remarks two weeks ago or on the call two weeks ago, we've taken about 3% of price, and most of that's flowing through. One of the goals in putting together this strategic approach to pricing was that we could lay out a multi-year roadmap to pricing and really understand where moves might be, where we have opportunities, and then choosefully apply that to our plan.

John: On the call two weeks ago, we've taken about 3% of price and most of that flowing through.

One of the goals and putting them together in a strategic approach to pricing with it. So we could lay out a multi year roadmap to pricing and really understand where move might be where we have opportunity and then choice fully apply that to our plan.

Julie Felss Masino: And that's what we're doing. So while we know that we've got opportunity out there, we're not actually applying all of it when we get into Q1 of 25, and we're laying out a roadmap for what actually is the right thing, given the consumer pressures of today, given how we feel about value, given all the other moves we know we're making on the menu. I think the only thing I would add to that, Jon, is just to reemphasize what Julie said earlier on. It's kind of really early in the process.

John: And that's what we're doing so while we know that we've got opportunity out there, we're not actually applying all of it and when we get into Q1 of 25, and we're laying out our road map.

John: For what actually is the right thing given the consumer pressures of today, given how we feel about value given all the other moves that we're making on the menu. So we believe now we have it.

John: Really a nice roadmap that we can move around as we need to kind of quarter by quarter over the next three years a plan.

Greg: With some ability to take price I'll, let Greg add some thoughts I think the only thing I would add to that John is just reemphasize, what Julie said earlier on as you know kind of really early in the process.

Julie Felss Masino: Julie identified this as a value issue, a big issue in the industry, and we put in place these anchor points around the early dine and breakfast at sunrise starting at $7.99. So we have those anchors; those are advertiseable price points across multiple dayparts. So this pricing work will layer on top of that, but it keeps that foundation out there with a very sharp, communicatable price. Got it.

Speaker Change: Julia identify this.

Speaker Change: The issue is the big issue in the industry and we've put in place these anchor points around the early dine and breakfast are the sunrise starting at 799. So we have those anchors those or Advertiser Bowl.

Speaker Change: Price points across multiple day parts and so there's the price didn't work will layer on top of that but it keeps that foundation up there with a very sharp communicates a bull price points.

Jon Michael Tower: Okay. And kind of in a related similar vein, you know, you've seen nice commodity inflation in this most recent quarter. I think for the balance of the year or the full year, you're implying roughly flat. But, you know, we're looking at some of the indices across the restaurant space, suggesting that a lot of the key inputs are starting to rise for the category. I think some of the ones that you have exposure to are ticking higher.

Speaker Change: Got it okay and kind of related similar vein.

Speaker Change: You've seen nice commodity deflation this most recent quarter.

Speaker Change: For the balance of the year or the full you're you're implying roughly flat, but you know we're looking at some of the indices across the restaurant space, suggesting that a lot of the key inputs are starting to rise.

Speaker Change: For the category I think some of the ones that you have exposure to are ticking higher. So how are you thinking about food costs over the next 12 months or so are there any contracts, we should be aware of that might be coming up for renewal that might have to reset at different rates.

Speaker Change: Yeah.

Jon Michael Tower: So how are you thinking about food costs over the next 12 months or so? Are there any contracts we should be aware of that might be coming up for renewal that might have to be reset at different rates? Hey John, it's Craig again.

Speaker Change: Hi, John it's quite again the.

Craig A. Pommells: Then... We'll talk more about it in September. I mean, I do think you have a meaningful insight there that the underlying dynamic is shifting a bit. So we'll provide more color on the September call. Okay, and then maybe this last one.

Speaker Change: We'll talk more about it in September I mean, I don't think you have the meaningful insight there is that the underlying dynamic is shifting a bit. So we'll provide more more color on the September call.

Jon Michael Tower: You do have a convertible that's due in, I think it's June of 2026. Can you provide any insights on what you're thinking with respect to how you might handle that when it comes due? Yes, that one is a big one, and we're actually starting to work on that well in advance and to ensure that we understand all of our options, and we understand what the best decision is. The good news there is we have a lot of room in our revolver, a large capacity in our revolver.

Speaker Change: Okay, and then maybe just last one.

Speaker Change: You do have a convertible that's due in.

Speaker Change: I think it's June of 2026 can you provide any insights on what you're thinking with respect to how you might handle that when it comes due.

Speaker Change: Yes, we are.

Speaker Change: That one is a big one and we're actually starting to work on that.

Speaker Change: You're well ahead and to ensure that we understand all of our options. We understand what's the best the best decision is the good news. There is we have a lot of room on our revolver.

Speaker Change: Large capacity in our revolver, we've continued to keep our leverage at a reasonable level. So that gives us a lot of options as we look to as we look to refinance that so we'll share more about that in the future restrictions will look at it well ahead of the of the debate that will make a decision based on kind of the facts on the ground at the time.

Craig A. Pommells: We've continued to keep our leverage at a reasonable level, so that gives us a lot of options as we look to refinance that, so we'll share more about that in the future. We're starting to look at it well ahead of the due date, and we'll make a decision based on kind of the facts on the ground.

Speaker Change: Got it thanks for taking the questions.

Katherine Anne Griffin: Thanks for taking the question. Your next question will come from Katherine Griffin with Bank of America. Please go ahead.

Speaker Change: Your next question will come from Katherine Griffin with Bank of America. Please go ahead.

Craig A. Pommells: Hi, thanks for the question. I had two modeling questions and then a follow-up. So first, just if I could ask again, kind of about the commodities cost expectations, can you remind me what some of the largest components of your cost basket are, maybe, specifically as it relates to protein? And then the second question is just how we should think about GNA in 4Q. Is 3Q kind of the right runway from here? Hi Katherine, it's Craig. I'll take that one.

Katherine Anne Griffin: Hi, Thanks for the question I had two modeling questions and then a follow up so I'm first just if I could ask again kind of about the commodities cost expectations can you remind me what what like some of the largest components of your cost basket are maybe like specifically as it relates to protein.

Katherine Anne Griffin: And then the second is just how we should think about our G&A and for Q is it still kind of the right run rate from here.

Craig A. Pommells: Hi, Catharine, it's Craig I'll take that one you know the good news with one of the many reasons with Microcontrollers, we've got a pretty diversified.

Craig A. Pommells: You know, one of the many good things about Cracker Barrel is that we've got a pretty diversified basket. So we're pretty well split across the major categories. Fruits and vegetables are one of the larger ones. Poultry is actually the largest.

Craig A. Pommells: So we are pretty well spread across the major categories.

Craig A. Pommells: Fruits and vegetables is as one of the larger ones poultry is actually the largest and then we've got beef and pork so pretty well diversified.

Craig A. Pommells: And then we've got beef and pork. So, pretty well diversified group as it relates to commodities. Then, in terms of G&A, we do expect that G&A will be a bit higher in Q4 versus where it was in Q3. And then, as we move into fiscal 25, G&A may pick up a little bit as well because we're continuing to invest in all of this work and re-energize the business and get growth going again. I got it.

Craig A. Pommells: Group as it relates to as it relates to commodities and then in terms of G&A. We do expect that G&A will be higher in Q4 versus where it was in in Q3, and then as we move into fiscal 'twenty. Five you know G&A may pick up a little bit as well because.

Craig A. Pommells: We're continuing to invest in all of this and all of this work that we were going to drive the business and get growth going again.

Katherine Anne Griffin: Makes sense. And then, Julie, I have a question for you on some of the additional technology investments that you spoke about a couple weeks ago. I wanted to kind of understand, like, where the tech stack is today since, you know, I think for the last couple of years, there have been investments in better food and labor systems. And, you know, some of that may be bearing fruit. But I think I'm curious about, I guess, how you are prioritizing those technological investments. Are you looking to replace some elements of the tech stack that would align with some of the remodel plans or industrial engineering plans?

Speaker Change: Got it makes sense and then Julie a question for you on some of the additional technology investments that you spoke about a couple of weeks ago I I wanted to kind of understand like how where where are the tech stack is today since that you know I think for the last couple of years there've been invest.

Speaker Change: <unk> into better food and labor systems, and you know some of that may have maybe bearing fruit, but I think I'm I'm curious about I guess, how you are prioritizing those technology investments are you looking to replace some elements of the tech stack that are you know that would align with some of the remodel plans or industrial engineering plan.

Julie Felss Masino: Just trying to get a sense, I guess, of how incremental some of the changes could be with these additional, you know, technological investments. You know, is there improvement to be made in terms of whether it's like reservation software or, you know, things that could even increase some of the metrics that you talked about, whether it's, you know, CTE or turnover? Yeah, Katherine, thanks for the question.

Speaker Change: I'm, just trying to get a sense I guess of how incremental some of the changes could be with these additional technology investments.

Speaker Change: Is there improvement to be made and in terms of whether it's like reservation software or you know things that could even increase some of the metrics that you talked about whether it's you know see to eat or our turnover.

Julie Felss Masino: Look, we have a three-year tech roadmap that the team has worked to build and that we're continuing to refine as we go into the AOP process for 25 and beyond. We built that as part of the strategic plan and the transformation agenda, knowing that we would need to make some investments. What I would tell you is the near-term ones that we're really evaluating and looking at are still around the loyalty tech stack and making sure that we are ramping our ability to monetize that program and make it the industry-leading program that we know it can be. So things around personalization, around PDP, CRM, those things we didn't have today, and those are the nearer-term closer ones that we're looking at.

Speaker Change: Yeah Katherine Thanks for the question look we have a three year tech roadmap and the team has worked to build and that we're continuing to refine as we go into the a L. P process for 25 and beyond we built that as part of that strategic plan and the transformation agenda, knowing that we would need to make some investments, but I would tell you is the near term ones that work.

Speaker Change: Really evaluating and looking at are still around the loyalty tech stack and making sure that we are ramping our ability to monetize that program and make it the industry leading program that we know it can be so things around personalization around P. P. C. Around those things we didn't have today and those are those are in euro term closer in things that we're looking.

Julie Felss Masino: We are always looking at POS and technology. Remember, we've got a retail business and a restaurant business, and our retail business is also a little bit behind in some of the tech investments there, so some of those are on our tech roadmap over the next three years. So we'll give you more guidance on that in the September call as we look at 25, and we can be more specific about what those might look like in 25 and 26 and 27, but know that we have a three-year roadmap, teams working against that, making sure that we can pace and sequence in a way that we can actually get the work done, the field can absorb that work with everything else that we have going on, so we're being really, really mindful about The next question will come from Dennis Geiger with UBS; please go ahead. Great, thanks, guys.

Speaker Change: We are always looking at kind of P. O S and technology and you know remember, we've got a retail business and our restaurant business and our retail business is also a little bit behind it and some of the tech investments. There. So some of those are on our tech roadmap over the next three years. So we'll give you more guidance on that in the September call is when you look at 25.

Speaker Change: And we can be more specific about what those might look like in 'twenty five 'twenty six 'twenty seven but know that we have a three year roadmap teams working against that making sure that we can pace and sequence in a way that we can actually get the work done that feels kind of absorbed that work you know with everything else that we have going on so we're being really really mindful about.

Speaker Change: How we pace and sequence some of these investments not only from the investment perspective, but also from the absorption perspective.

Speaker Change: Okay. Thank you both.

Speaker Change #100: The next question will come from Dennis Geiger with UBS. Please go ahead.

Dennis Geiger: Great. Thanks, guys I'm wondering if there's anything more that you can share on I think the comments around the sequential monthly improvement that you spoke to it which I think related just to the to the retail business. So if anything more on kind of what was driving that.

Dennis Geiger: Wondering if there's anything more that you could share on I think the comments around the sequential monthly improvement that you spoke about, which I think related just to the retail business. So if anything more on kind of what was driving that, if it's an underlying improvement, and then I don't know if you were commenting on the restaurant trend specifically, but if there is anything to share there on that sequential trajectory to the quarter.

Dennis Geiger: If it's an underlying improvement and then I don't know if you you were commenting on the restaurant trends specifically, but if there is anything to share there on that sequential trajectory through the quarter.

Dennis Geiger: Yeah, our retail performance, as you know, Craig talks about it this way quite a bit, it's discretionary, right? I mean, you don't have to buy everything we have in a Cracker Barrel Country Store and lots of things that I think will catch your eye, but you probably don't need most of them, so it tends to be a little bit discretionary.

Speaker Change #102: Yeah, our retail performance as you know Craig talks about it this way quite a bit is discretionary right I mean, you know.

Speaker Change #102: We have lots of things, we'd love for you to pick up and the cracker barrel country store and lots of things that I think well catch Rob I E.

Speaker Change #102: So it tends to be a little bit discretionary underperformance has been challenged for the last year or so but what we have been encouraged by is the sequential monthly improvement in comp store sales there and a lot of that's been driven by some of the theme assortments that have been performing really well and we are still unique and the team does.

Julie Felss Masino: The performance has been challenged for the last year or so, but what we have been encouraged by is the sequential monthly improvement in comp store sales there. A lot of that's been driven by some of the theme assortments that have been performing really well. We are so unique, and the team does such a great job on that product, and some of those theme assortments have really been responding with people.

Speaker Change #102: Such a great job on that product and some of those theme assortments have really been resonating with people. The other thing is you know if you need a gift swing by because we have some great value items in that store and that is also really resonating with guests. So both things that we have put on markdown, but things that are out there that come into the team does really at sharp.

Julie Felss Masino: The other thing is, you know, if you need a gift, swing by, because we have some great value items in that store, and that is also really popular with guests. So, both things that we have put on markdown, but things that are out there that the team does really at sharp price points again, and given everything that's going on in the macros with, you know, value being important and, you know, lots of the press around low-income consumers, there's a lot of good value in our mix there, and that's really what's working well.

Speaker Change #102: Price points I'm again, given everything that's going on in the macros with with you now value being important and you know lots of press around low income consumers. There's a lot of good value in our mix there and that's really what's that's working well finally I want to give a shot out to that team because they've done a wonderful job managing.

Julie Felss Masino: Finally, I want to give a shout-out to that team because they have done a wonderful job managing inventory levels and growing margins. So, while we have had some headwinds with traffic and the retail conversion, our inventory levels are down, so same store sales are up on a lower inventory level, and margins are up. So, it continues to be nice. Appreciate that, Julie. Just on loyalty, maybe there's anything more to talk about in the quarter observations from that program, what it's done for you, and maybe how that helps you think about your expectations for the program going forward, perhaps? I'll start with that one, and maybe Julie can give us some more.

Speaker Change #102: We're levels and growing margin so while we've had some headwinds to traffic in the retail conversion our inventory levels are down and.

Speaker Change #102: So that same store sales is up on a lower inventory levels and margins are up so and continues to be a nice business for us.

Julie Felss Masino: I appreciate that Julie just on loyalty maybe than anything more to talk about in the quarter. Our observations from that program. What it's done for you and maybe how that helps you think about the your expectations for the program going forward perhaps.

Speaker Change #103: Well I'll start with that one and maybe Julie can give some more we are really exactly what the loyalty program. We're in the 5 million member kind of neighborhood at this point, which is you know wishes. He was really excited about that it's still early and there's more work to do but actually I'll turn it over to Julie who will give a little bit more.

Craig A. Pommells: We are really excited about the loyalty program. We're in the 5 million member neighborhood at this point, which is huge, so we're excited about that. It's still early, and there's more work to do, but actually, I'll turn it over to Julie to give a little bit more about what's coming next in terms of what information we're going to share and so on about the program.

Julie Felss Masino: <unk> about what's coming next in terms of what information, we're gonna assure us the one about the program yeah. Thanks for that question. We we are excited about this program that you've heard me talk about it from my very first call to where we are today and where we were two weeks ago. It's an anchor for what we're doing it's a key program in our pillars, because we believe that the how guess.

Julie Felss Masino: Thanks for the question. We are excited about this program. You've heard me talk about it from my very first call to where we are today and where we were two weeks ago. It's an anchor for what we're doing. It's a key program in our pillars because we believe this is how guests want to interact with us. It's also a very great way for us to deliver value, so don't forget that. This is a great program that helps us deliver value to guests who are really seeking value from us, but, reminder, it's still the early days of this program. We just launched it in September of last year, so we're not even at our one-year anniversary.

Julie Felss Masino: Want to interact with US. It's also a very great way for us to deliver value. So don't don't forget that right is this is a great program that helps us deliver value to guests who are really seeking value from us.

Julie Felss Masino: But reminder, it's still the early days of this program. We just launched it in September of last year. So we're not even at our one year anniversary. What we're planning to do is actually spend some more time on our September call digging in a little bit deeper helping you understand how we're thinking about the program in 'twenty, five and beyond and how long do using it to drive key levers in the plan so more to come.

Julie Felss Masino: What we're planning to do is actually spend some more time on our September call, digging in a little bit deeper, helping you understand how we're thinking about the program in 25 and beyond and how we're using it to drive key levers in the plan. So, more to come on the September call. You know that we continue to be super optimistic about it, and I think it's also important to remember it's a key way for us to deliver value to guests. Makes sense. Thanks, guys.

Julie Felss Masino: In the September call know that we continue to be Super optimistic about it and I think it's also important to remember, it's a key way for us to deliver value to our guests.

Dennis Geiger: Last one for me, if I could, Craig, on the longer-term DNA front, still too early there to say other than I think the up significantly or whatever the comment is, exactly. Anything more concrete there as far as how to think about that? Or is it still too early?

Speaker Change #104: Makes sense. Thanks, guys last one for me if I could Greg on the on the longer term DNA front, it's still too early there to to.

Speaker Change #105: And then I think the up significantly or whatever the the comment is exactly anything more.

Speaker Change #106: Creep, there and as far as how to think about that or is it still too early at this juncture.

Craig A. Pommells: And it's just to confirm, you said depreciation at amortization or GNA? General and Administrative. Depreciation is clearly going to be increasing. We're spending a fair bit of capital to reinvigorate the business, and we're seeing our capital spend go up. That will be an increased expense as you think about net income or EPS going forward. It will start to ramp up. Even this year, you can see a bit of a ramp up; you'll see a bit of a ramp up next year as well.

Speaker Change #107: Just to confirm you said depreciation and amortization or G&A.

Speaker Change #106: DNA.

Speaker Change #108: General and administrative.

Speaker Change #109: No no sorry, depreciation sorry, Okay, yes got it yes, well depreciation is clearly going to be an increase in you know, we're spending a fair bit of capital to reinvigorate the business.

Speaker Change #109: And we're seeing it with capital spend to go up and so that will be an increased expense as you think about net income or EPS going forward, so that will start to ramp up.

Speaker Change #109: Even if you know this year you can be a bit of a ramp up we will see a bit of a ramp up next year as well now as we've as we shared earlier on the strategy call. We're going through this three year window, specifically under the deferred maintenance side of this.

Craig A. Pommells: Now, as we shared earlier on the strategy call, we're going through this three-year window specifically on the deferred maintenance side of the spend that will kind of get us caught up. So, I don't think it's a forever topic.

Speaker Change #109: Spend that will kind of get us caught up so I don't think it's a forever topic. It is a it's a it's an issue that we have to go back and address and that's a three year investments that will drive some capital spending the capital spend that will drive.

Craig A. Pommells: It is an issue that we have to go back and address, and that's a three-year investment that will drive some capital spending. The capital spending will drive depreciation, which will be around for a bit longer than that, but it is not a long-term part of the business model. It's something that we have to get caught up on. Now, as we make other capital investments, and to the degree that those things have compelling returns, we may increase our capital spending, and that will drive depreciation in the future. For example, as we develop a new prototype and we're able to start growing again over the longer term, that will be value-creating, but it will have higher depreciation and amortization.

Speaker Change #109: Depreciation, which will be around for a bit longer than that but it is not a long term partner a long term part of the business model is something that we have to get caught up on it now as we make other capital investments and to the degree that those things have compelling returns.

Speaker Change #109: Our capital spend.

Speaker Change #109: Spend in it and that will drive depreciation in the future for example, as we develop a new prototype and we're able to start growing again over the longer term that will be value, creating but it will have higher depreciation and amortization. So the short answer is depreciation and amortization will most certainly be up in the near term but longer.

Craig A. Pommells: So, the short answer is depreciation and amortization will most certainly be up in the near term. But longer term, we think the overall business model, the way we would think about it is we're going to improve the EBITDA level by about 400 basis points. Very helpful.

Speaker Change #109: Term, we think the overall business model the way we would think about it is we've got to improve the EBITDA level by about 400 basis points.

Speaker Change #109: Okay.

Speaker Change #110: Very helpful. Thanks, guys.

Craig A. Pommells: Thanks, guys. The next question will come from Andrew Wool with CL King. Please go ahead.

Speaker Change #111: The next question will come from Andrew Wong with C. L. King. Please go ahead.

Andrew Paul Wolf: Thanks, Julie. The five key metrics you're sharing with us and focusing on as lead indicators for, you know, same source sales and really guest traffic. Could you give us a sense, based either on your experience or your internal plan, what the lead times are here? I'm sure it's cumulative and so forth, but when does it start to move the needle meaningfully?

Speaker Change #112: Thanks Julie.

Speaker Change #113: The five key matrix.

Andrew Paul Wolf: Carrying with us and focusing on as lead indicators for you know.

Speaker Change #115: Same store sales and really guest traffic.

Andrew Paul Wolf: Could you give us a sense best either your experience or are your internal plan.

Speaker Change #116: What are the lead time here.

Speaker Change #117: I'm you know I'm sure, it's accumulative and so forth, but when does it start to move the needle.

Speaker Change #116: Thankfully.

Julie Felss Masino: And, you know, obviously related to that is kind of what inning it is in. Maybe you can blend them all together as a group, you know, what inning it is in, so that we can start to think about how guest traffic is, or at least think guest traffic might just start to improve. Yeah, Andrew, thanks for the question. Um, you know, performance in traffic is like a multivariate equation. So there's a lot of things that go into it.

Speaker Change #116: And you know.

Obviously related to that is kind of what inning. You know maybe you can blend them all together as a group you know what inning is it in so that we can start to think about house guest traffic is are you at least think guest traffic might just start to improve.

Speaker Change #116: Yeah.

Yeah, Andrew Thanks for the question you know.

Speaker Change #116: Performance in traffic like value isn't it.

Speaker Change #118: A multi variant equation, so theres a lot of things that go into it we know that our ops metrics and our performance and our ability to execute and the key driver of that another key driver of that is our ability to drive guest in right. When you think about that upper funnel and awareness and making sure that we have food that is really relevant.

Julie Felss Masino: We know that our offline metrics and our performance and our ability to execute is a key driver of that. Another key driver of that is our ability to drive guests in right when you think about the upper funnel and awareness and making sure that we have food that is really relevant. It's really why the three imperatives are the three imperatives of the plan, right? We've got to drive and reignite relevance, and then we have to have food and an experience that guests crave and guests love. So they kind of work together to fuel the momentum of the flywheel of traffic, if you will.

Speaker Change #118: Really why the three imperatives are the three imperatives up the plan right, we've got to drive and Reignite Relevancy and then we have to have food and an experience that gets crazy guess lives. So they kind of worked together to fuel the momentum of a flywheel of traffic. If you will I I would say we are further along in the ops.

Julie Felss Masino: I would say we are further along in the optometrics than we are in some of the marketing pieces. We continue to test and learn our way through all of that. I've talked about some of that in the past, some of the tests we've done locally. We're learning through that.

Speaker Change #118: [noise] tricks than where we are in some of the marketing pieces, we continue to test and learn our way through all of that I've talked about some of that in the past. Some of this has to be done in local we're learning through that we're testing different things like NASCAR like college football. It just find these key things that resonate with driving traffic all of these things.

Julie Felss Masino: We're testing different things, like NASCAR, like college football, to find these key things that resonate with driving traffic. All of these things together, we'll get there. That's why you see our performance continue to kind of... Get better in the back half of 26, because we're going to continue investing in these things in 25, so that we can actually get there in 26. So more to come on that, but know that the team is focused on the improvements there.

Speaker Change #118: Hopefully, we will get there and that's why you see our performance continue to kind of get better in the back half of 'twenty six.

Speaker Change #118: Because we're going to continue investing in <unk> and 'twenty five instead of we can actually get there in 2006, so more to come on that but know that the team is focused on the improvement there we're seeing it in our in the metrics and guests are commenting on it which is which is also a key thing for us to know.

Julie Felss Masino: We're seeing it in our metrics, and guests are commenting on it, which is great. Can you bring up, obviously, the foundational aspect of, you know, brand identity and food quality and things to really drive traffic that are more foundational than even the operation stats? Could you give us sort of a qualitative sense of where you believe the business is? Is that going to be able to improve in concert, time-wise, with the operational metrics? Yeah, absolutely, is the short answer.

Speaker Change #119: Okay and you brought up are obviously, the foundational aspect of you know brand identity and food.

Speaker Change #119: Food quality, and you know things to really drive traffic.

Speaker Change #120: That a more foundational than even the operation stats, where do you could you give us sort of a qualitative sense of where where you believe the businesses and.

Speaker Change #121: Is that going to be able to improve our in concert time wise with the operation metrics operational.

Speaker Change #122: Yeah, absolutely is the short answer we did a lot of research I guess, it really underpins the strategic plan and the transformation agenda and in a lot of that we talked to get asked about why they weren't coming why they were coming in a lot of the feedback was around just the relevancy of the menu of the brand.

Julie Felss Masino: We did a lot of research again to really underpin the strategic plan and the transformation agenda. And in a lot of that, we talked to guests about why they weren't coming, why they were coming, and a lot of the feedback was around just the relevance of the menu, of the brand, where we are, and all of those things. So we are actively... We're tearing that all down, getting into it, working on the menu, working on innovation, as I mentioned on the call two weeks ago. We've got a lot of items in our Texas test, and we've expanded that test. You'll see those things starting to hit the menu as early as this fall.

Speaker Change #122: And where we are in all of those things. So we are actively.

Speaker Change #122: Hearing that all down and getting into it working on the menu working on innovation as I mentioned on the call a few weeks ago. We've got a lot of items in test in our Texas tests, and we've expanded that test you'll see those things starting to hit the menu as early as this fall.

Julie Felss Masino: I talked about that. We had some innovation that we even hit this summer that we're talking about right now that's responding with guests. So we believe we can do all of these things at the same time and that they're the right things to do, which is the most important thing.

I talked about that we have some innovation that we even had this summer that we're that we're talking about right now that is resonating with guests. So we believe we can do all of these things at the same time and that they're the right things to do which is the most important thing the guests and the research said that you know being more relevant with us it would be more relevant with the experience or the things that will drive them back in and that's what we're working.

Julie Felss Masino: The guests in the research said that being more relevant with the food and being more relevant with the experience are the things that will drive them back, and that's what we're working on. The Bulletproof Executive 2013, Thank you. This concludes our question and answer session. I would like to turn the conference back over to Ms. Julie Mathena for any closing remarks. Please go ahead.

Speaker Change #122: Two two outright.

Speaker Change #122: Yeah.

Speaker Change #122: Yeah.

Speaker Change #123: Thank you.

Speaker Change #122: Yeah.

Speaker Change #124: This concludes our question and answer session I would like to turn the conference back over to MS. Julie Masino for any closing remarks. Please go ahead.

Julie Felss Masino: Thank you all for joining us today. We remain intently focused on driving relevancy, delivering food and an experience that guests love, and growing profitability through the execution of our five pillars. As we execute our transformation, we are simultaneously focused on managing our day-to-day business and on operational excellence every shift, every day. I want to thank our team members and leaders for their hard work taking care of our guests and executing with excellence day in and day out.

Julie Felss Masino: Thank you all for joining US today, we remain intently focused on driving relevancy, delivering food and an experience I guess love and growing profitability through the execution of our five pillars.

Julie Felss Masino: Their dedication and commitment to bringing our brand to life gives me further confidence that we will be successful as we transform our business and position it for long-term growth. Thank you for your interest and we look forward to updating you on our progress at our next earnings call. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. ??? ??? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? © BF-WATCH TV 2021, ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? © BF-WATCH TV 2021

Julie Felss Masino: We execute our transformation we are simultaneously focused on managing our day to day business and on operational excellence every shift every day.

Julie Felss Masino: I think our team members and leaders for their hard work, taking care of our guests and executing with excellence day in and day out their dedication and commitment to bringing our brand to life gives me further confidence that we will be successful as we transform our business and position it for long term growth.

Julie Felss Masino: Thank you for your interest and we look forward to updating you on our progress at our next earnings call.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

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