Q4 2024 Brinker International Inc Earnings Call

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Speaker Change: Harold Fairweather Johnson.

Operator: Good day and welcome to the Brinker International's Q4F24 earning, At this time, all participants have been placed on a list. The floor will be open for questions and comments following the, It is now my pleasure to turn the floor over to your host, Kim Sanders, Vice President of Investor Relations. Ma'am, the floor is yours.

Speaker Change: Good day and welcome to the Brinker International's Q4F24 earnings call.

Kim Sanders: At this time, all participants have been placed on a listen-only mode. The floor will be open for questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, Kim Sanders, Vice President of Investor Relations. Ma'am, the floor is yours.

Kim Sanders: Thank you, Holly, and good morning, everyone, and thank you for joining us on today's call. Here with me today are Kevin Hochman, President and Chief Executive Officer, and Mika Ware, our new Chief Financial Officer. Results for our fourth quarter were released earlier this morning and are available on our website at Brinker.com. As usual, Kevin and Mika will first make prepared comments related to our strategic initiatives and operating performance. Then we will open the call for your questions.

Kim Sanders: Thank you, Holly, and good morning, everyone, and thank you for joining us on today's call.

Speaker Change: Here with me today are Kevin Hochman, President and Chief Executive Officer, and Mika Ware, our new Chief Financial Officer.

Speaker Change: Results for our fourth quarter were released earlier this morning and are available on our website at Brinker.com. As usual, Kevin and Mika will first make prepared comments related to our strategic initiatives and operating performance. Then we will open the call for your questions.

Kim Sanders: Before beginning our comments, I would like to remind everyone of our safe harbor regarding forward-looking statements. During our call, management may discuss certain items which are not based entirely on historical facts. Any such items should be considered forward-looking statements within the meaning of the Private Security's Reunification Reform Act of 1995. All such statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated.

Speaker Change: Before beginning our comments, I would like to remind everyone of our safe harbor regarding forward-looking statements. During our call, management may discuss certain items which are not based entirely on historical facts.

Speaker Change: Any such items should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Speaker Change: All such statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated.

Kim Sanders: Such risks and uncertainties include factors more completely described in this morning's press release and the company's filings with the SEC. And of course, on the call, we may refer to certain non-GAAP financial measures that management uses in its review of the business and believes we'll provide insight into the company's ongoing operations. And with that said, I will return the call over to Kevin.

Speaker Change: Such risks and uncertainties include factors more completely described in this morning's press release and the company's filings with the SEC.

Speaker Change: And of course, on the call, we may refer to certain non-GAAP financial measures that management uses in its review of the business and believes will provide insight into the company's ongoing operations.

Kevin Hochman: Thank you, Kim, and thank you for your 26 years of leadership on the Brinker Finance team. We are very excited to have you in this role. Good morning, everyone, and thank you for joining us as we wrap up our fiscal year and share our plans for Fiscal 25. Fiscal 24 marked the second full year of our turnaround, and we're very pleased with our progress and momentum. It was a year we delivered both big growth and major operational improvements, which sets us up for continued profitable and sustainable long-term growth.

Speaker Change: And with that said, I will return the call over to Kevin.

Kevin Hochman: Thank you, Kim, and thank you for your 26 years of leadership on the Brinker Finance team. We are very excited to have you in this role. Good morning, everyone, and thank you for joining us as we wrap up our fiscal year and share our plans for Fiscal 25.

Speaker Change: Fiscal 24 marked the second full year of our turnaround, and we're very pleased with our progress and momentum. It was a year we delivered both big growth and major operational improvements, which sets us up for continued profitable and sustainable long-term growth.

Kevin Hochman: The vision we introduced two years ago was to improve our restaurant's four-wall economics by focusing on the fundamentals of casual dining, a differentiated brand with credible menu items, served with great hospitality, and a fun and friendly atmosphere. And while we still have lots more work to do, we're well on our way to achieving that vision.

Speaker Change: The vision we introduced two years ago was to improve our restaurant's four-wall economics through focusing on the fundamentals of casual dining, a differentiated brand with credible menu items, served with great hospitality, and a fun and friendly atmosphere.

Kevin Hochman: Over the past two fiscal years, we've grown Chili's restaurant AUVs by $440,000 to $3.6 million, and we've grown Brinker's adjusted EBITDA by 25%. This is excellent progress on our four-wall economics. The biggest driver of these results are the significant improvements we've made to the guest experience. On the operations front, we conducted listening sessions with our field restaurant leaders all over the country to better understand what we could do to reduce or eliminate, to make our restaurant jobs easier and more rewarding.

Speaker Change: And while we still have lots more work to do, we're well on our way to achieving that vision.

Speaker Change: Over the past two fiscal years, we've grown Chili's restaurant AUVs by $440,000 to $3.6 million, and we've grown drinkers adjusted EBITDA by 25%. This is excellent progress on our four-wheel economics.

Speaker Change: The biggest driver of these results are the significant improvements we've made to the guest experience.

Speaker Change: On the operations front, we conducted listening sessions with our field restaurant leaders all over the country to better understand what we could do to reduce or eliminate

Kevin Hochman: Today, the Chili's menu has 22% less items than it did two years ago. We've eliminated many prep steps and pantry ingredients, reduced administrative tasks like how often we count inventory, and other complexity that reduces team member morale and gets in the way of great execution. I'm proud to say we still do these listening sessions, and they are still led by myself and other members of our executive team.

Speaker Change: to make our restaurant jobs easier and more rewarding. Today, the Chili's menu has 22% less items than it did two years ago.

Speaker Change: We've eliminated many prep steps and pantry ingredients, reduced administrative tasks like how often we count inventory, and other complexity that reduces team member morale and gets in the way of great execution.

Speaker Change: I'm proud to say we still do these listening sessions, and they are still led by myself and other members of our executive team.

Kevin Hochman: We now have a cross-functional simplification team, firstly led by our Chief Operating Officer, Doug Cummings, which is where we get most of the simplification ideas. Co-designing our operational programs by intently listening to our restaurant team's ideas is the new way of doing business at Brinker International. In addition to simplification, we're making our technology more reliable, which also reduces friction for team member and guests. We've made investments to bring the off-the-table technology to replace the prior system, which has increased reliability and usage.

Speaker Change: We now have a cross-functional certification team personally led by our chief operating officer, Doug Cummings, which is where we get most of the civil vacation ideas.

Speaker Change: In addition to simplification, we're making our technology more reliable, which also reduces friction for team member and guests.

Speaker Change: We've made investments to bring Seahawks pay-at-the-table technology to replace the prior system, which has increased reliability and usage. We've also reduced server handheld ordering tablet errors from 5% two years ago to less than 1% today. And we are on track to finish the replacement of an end-of-life kitchen display system by October.

Kevin Hochman: We've also reduced server handheld ordering tablet errors from 5% two years ago to less than 1% today, and we are on track to finish the replacement of an end-of-life kitchen display system by October. We recently rolled out AI labor forecasting, which is reducing the amount of time our general managers need to write labor schedules, as well as making their forecast more accurate.

Speaker Change: We recently rolled out AI labor forecasting, which is reducing the amount of time our general managers need to write labor schedules, as well as making their forecasts more accurate.

Kevin Hochman: With a renewed focus on our fundamentals, technology is now working harder than ever for our Achilles managers, with lots more room for upside. In addition to improved technology over the last two years, we've also made investments in labor and facilities, which is improving the overall experience. Labor investments include more hours for QA, cooks, and most recently, bussers, which are all helping deliver record food grade scores.

Speaker Change: With a renewed focus on our fundamentals, technology is now working harder than ever for our Achilles managers, with lots more room for upside.

Speaker Change: In addition to improved technology over the last two years, we've also made investments in labor and facilities, which is improving the overall experience. Labor investments include more hours for QA, cooks, and most recently, bussers, which are all helping deliver record food grade scores.

Kevin Hochman: Our facilities investments have helped us catch up on deferred maintenance during the COVID years and is creating a better environment for both team members and guests. Simplification, stabilization of restaurant technology, and labor and facility investments have delivered dramatic improvements in the guest experience, with our daily track dine-in metric just with a problem dropping from 5% two years ago to just 2.7% today. And that's the lowest sustained score we've seen tracking that measure.

Speaker Change: Our facilities investments have helped us catch up on deferred maintenance during the COVID years and is creating a better environment for both team members and guests.

Speaker Change: Simplification, Stabilization of Restaurant Technology, and Labor and Facility Investments

Speaker Change: have delivered dramatic improvements in the guest experience with our daily track dine-in metric guests with a problem dropping from 5% two years ago to just 2.7% today. And that's the lowest sustained score we've seen tracking that measure.

Kevin Hochman: Even with the surge in traffic over the past few months, our Google ratings for the past 90 days have also improved to a all-time high of 4.1. We've also made good progress over the last two years in improving our core menu, margaritas, chicken crispers, burgers, and fajitas. We now have a clear good-better-best lineup of margaritas with entry price points of $3.99 and $6 for those gifts, looking for lower price points but still wanting great taste. And those low-priced margaritas include premium tequilas like Espolon Reposado and Patron.

Speaker Change: And even with the surge in traffic over the past few months, our Google ratings for the past 90 days have also improved to a all-time high of 4.1.

Speaker Change: We've also made good progress over the last two years in improving our core four menu, margaritas, chicken crispers, burgers, and fajitas. We now have a clear good, better, best lineup of margaritas with entry price points of $3.99 and $6 for those gifts. Looking for lower price points, but still wanting great taste.

Speaker Change: Those low-priced margaritas include premium tequilas like Espolon, Reposado, and Patron. But in addition to making our entry-point margaritas stronger, we also now have super-premium offerings like Casamigos and Termata Blanco, which have allowed us to double the number of margaritas sold over $10 price points.

Kevin Hochman: But in addition to making our entry-point margaritas stronger, we also now have super premium offerings like Casamigos and Tierra Madre Blanco, which have allowed us to double the number of margaritas sold at the $10 price point. We've learned that some guests love a great price point with great tequila, and others are willing to spend a little more for that super premium brand. Our job is to make sure we offer items for all of our guests in the core segments that we want to win in.

Speaker Change: We've learned that some guests love a great white wine with great tequila and others are willing to spend a little more for that super premium brand. Our job is to make sure we offer items for all of our guests in the course segments that we want to win in.

Kevin Hochman: Having a balance of price points allows us to deliver great everyday value while continuing to keep food costs low and to grow operating margins. We have made similar moves with innovation in burgers and both of us fried chicken to create improved offerings and deliver barbell pricing in those core four seconds. Fajitas will be the last of the Core 4 to be upgraded, with improvements starting in Q2 and a full relaunch coming in Q4.

Speaker Change: Having a balance of price points allows us to deliver great everyday value, while continuing to keep food costs low and to grow operating margin.

Speaker Change: We have made similar moves with innovation in burgers and boneless fried chicken to create improved offerings and deliver barbell pricing in those core four segments.

Speaker Change: Fajitas will be the last of the Core 4 to be upgraded, with improvements starting in Q2 and a full relaunch coming in Q4.

Kevin Hochman: We also have successfully restarted our marketing after several years off air with hard-hitting advertising placed in shows where people are watching live sports, premium cable, primetime, streaming, and digital channels. Thanks to our CMO George Felix and his leaders Jesse Johnson and Steve Kelly and their marketing team, Chili's has never been more relevant with TV, streaming, and social media working very hard to put us back in the cultural conversation. And being back in the cultural conversation gets us back in the consumer's consideration set, which ultimately leads to more traffic.

Speaker Change: We also have successfully restarted our marketing after several years off air with hard-hitting advertising placed in shows where people are watching live sports, premium cable, primetime, streaming, and digital channels.

Speaker Change: Thanks to our CMO George Felix and his leaders, Jesse Johnson, Steve Kelly and their marketing team.

Speaker Change: Chili's has never been more relevant with TV, streaming, and social media working very hard to put us back in the cultural conversation. And being back in the cultural conversation gets us back in the consumer's consideration set, which ultimately leads to more traffic.

Kevin Hochman: Even with all these significant investments we've put into the business, we've made good progress on our ultimate goal of improving unit economics, delivering 3.3% brinker restaurant operating margins in fiscal 24, a 210 basis points improvement from the prior year. Before I talk about what's coming in Fiscal 25, let me give a little more context about what we saw in Q4. With the launch of our Big Smasher and our Triple Dipper going viral on TikTok, we experienced a step change in our business, delivering 14.8% sales growth and 5.9% traffic growth versus a year ago.

Speaker Change: And even with all these significant investments we've put into the business, we've made good progress on our ultimate goal of improving unit economics, delivering 3.3% brinker restaurant operating margins in fiscal 24, a 210 basis points improvement from the prior year.

Kevin Hochman: To put in context, this was 15.6 points better than the industry on sales and 9.4 points better than the industry on traffic. A majority of the incremental kits were new to Chili's, so we responded quickly by adding labor to ensure we could handle the increased volume.

Speaker Change: Before I talk about what's coming in Fiscal 25, let me give a little more context of what we saw in Q4. With the launch of our Big Smasher and our Triple Dipper going viral on TikTok,

Speaker Change: We experienced a step change in our business, delivering 14.8% sales growth and 5.9% traffic growth versus a year ago.

Speaker Change: To put in context, this was 15.6 points better than the industry on sales and 9.4 points better than the industry on traffic. A majority of the incremental kits were new to Chili's, so we responded quickly by adding labor to ensure we could handle the increased volume.

Kevin Hochman: Our restaurant experience would normally be very challenged with such a sudden influx of traffic but with the operational simplification over the past two years and labor investments that we made in Q4, we were able to maintain our record guest metrics throughout May and now into June and July. Now, let me spend a few minutes on what's to come in Fiscal 25. For the front half, we'll continue to drive the day smasher as it's been successful in driving traffic and tapping into the cultural conversation about fast food prices. An almost half-pound burger, bottomless chips and salsa, and bottomless drink at $10.99 continues to be an industry-leading value that we believe it to be, and it continues to work.

Speaker Change: Our restaurant experience would normally be very challenged with such a sudden influx of traffic, but with the operational simplification over the past two years and labor investments that we made in Q4, we were able to maintain our record guest metrics throughout May and now into June and July .

Speaker Change: Now let me spend a few minutes on what's to come in Fiscal 25. For the front half, we'll continue to drive the base masher, as it's been successful in driving traffic and tapping into the cultural conversation about fast food prices.

Speaker Change: An almost half-pound burger, bottomless chips and salsa, and bottomless drink at $10.99 continues to be an industry-leading value that we believe it to be, and it continues to work.

Kevin Hochman: During the back half of the year, our plan is to refresh the 1099 message with new product news and superior value in a large fast food segment. We will commercialize this new news using the successful Better Values in Fast Food campaign we created during the successful Big Smasher launch last May. In Q4, our plan is to relaunch the Fajitas platform, which is currently a $200 million business. The new Fajita line-up will feature improved chicken, guacamole, and pico de gallo recipes, and upgraded soft tortillas.

Speaker Change: During the back half of the year, our plan is to refresh the 1099 message with new product news and superior value in a large fast food segment. We will commercialize this new news using the successful Better Values in Fast Food campaign we created during the successful Big Smasher launch last May.

Speaker Change: And Q4, our claim is to re-launch the Behuze platform, which is currently a $200 million business.

Speaker Change: The new fajita line-up will feature improved chicken, guacamole and pico de gallo recipes, and upgraded soft tortillas. We're also incorporating new dippable add-ons and a completely new menu merchandising designed to drive bigger fajita bundles.

Speaker Change: We believe strengthening the Corps and expanding offerings like we've done in other Corps segments will also work on fajitas and drive a significant lift in the business.

Kevin Hochman: We're also incorporating new dippable add-ons and a completely new menu merchandising designed to drive bigger fajita bundles. We believe strengthening the core and expanding offerings like we've done in other Core 4 segments will also work on fajitas and drive a significant lift in demand. And throughout the year, we'll have beverage innovation at both the opening price point and premium tiers to create excitement for our guests to return. It's going to be an exciting year of food and drink innovation.

Speaker Change: and throughout the year we'll have beverage innovation at both the opening price point and premium tiers to create a setting for our guests to return. It's going to be an exciting year of food and drink innovation.

Kevin Hochman: In addition to strong food innovation throughout the year, we'll continue to make strides to reduce pantry skews and simplify operational processes. At our annual general manager conference last week here in Dallas, we rolled out the first wave of fiscal 25 simplification, which included simplified avocado prep that will also mean a pressure product for gas, reduction in time spent forching brisket, a new both-bredding chicken crisper procedure, and the introduction of a new process that reduces the time required to grow states.

Speaker Change: In addition to strong food innovation throughout the year, we'll continue to make strides to reduce pantry skews and simplify operational processes.

Kevin Hochman: These changes were met with a lot of excitement from our managers because the ideas all came from them. We also have a plan to improve our off-premise business execution by streamlining operational process to improve order accuracy, eliminating curbside to remove friction for team members, and improving packaging to ensure our food arrives hot and fresh. The first of these changes, curbside removal, will roll out by the end of Q1.

Speaker Change: at our annual general manager conference last week here in Dallas.

Speaker Change: We rolled out the first wave of fiscal 25 simplification.

Speaker Change: which included simplified avocado prep that will also mean a fresher product for guests, reduction in time spent forging brisket, a new bolt breading chicken crisper procedure, and the introduction of a new process that reduces the time required to grill steaks.

Speaker Change: These changes were met with a lot of excitement from our managers because the ideas all came from them.

Speaker Change: We also have a plan to improve our off-premise business execution by streamlining operational process to improve order accuracy, eliminating curbside to remove friction for team members, and improving packaging to ensure our food arrives hot and fresh. The first of these changes, curbside removal, will roll out by the end of Q1.

Kevin Hochman: Now I'd like to spend a little time sharing our Operations Obsession Metric for Fiscal 25. If you recall, our Obsession Metric for Fiscal 23 was manager turnover, for Fiscal 24 was hourly turnover, both of which we made significant progress on. For Fiscal 25, the Obsession Metric our Vice Presidents of Operations chose is growing traffic. We now have a joint business plan with our operations leadership to continue to accelerate traffic ahead of the industry, which includes an additional simplification, as well as an incremental $15 to $20 million investment in labor. We rolled up the new traffic obsession metric at last week's Annual General Manager Conference with the theme, Making Every Guest Count, with content and labor investments focused on driving sustainable traffic growth.

Speaker Change: Now I'd like to spend a little time sharing our operations obsession metric for Fiscal 25. If you recall, our obsession metric for Fiscal 23 was manager turnover, for Fiscal 24 was hourly turnover, both of which we made significant progress on.

Speaker Change: For Fiscal 25, the obsession metric our Vice Presidents of Operations chose is growing traffic.

Speaker Change: We now have a joint business plan with our operations leadership to continue to accelerate traffic ahead of the industry Which includes an additional simplification as well as an incremental 15 to 20 million dollar investment in labor

Speaker Change: We rolled up the new traffic obsession metric at last week's annual general manager conference with the theme Making every guest count with content and labor investments focused on driving sustainable traffic growth

Kevin Hochman: To close, the past two years of our Chili's turnaround was all about improving the guest experience and creating a traffic-driving model to build sustainable momentum in our business. The next two years will be continuing more of the same, driving our differentiated brand with advertising, superior value, and food innovation with barbell pricing strategy, simplifying the operation and removing friction to improve the guest experience, and creating a fun and inviting environment for our guests and teams.

Speaker Change: To close, the past two years of our Chili's turnaround was all about improving the guest experience and creating a traffic driving model to build sustainable momentum in our business.

Speaker Change: The next two years will be continuing more of the same, driving our differentiated brand with advertising, superior value, and food innovation with barbell pricing strategy.

Speaker Change: Simplifying the operation and removing friction to improve the guest experience.

Kevin Hochman: We will continue to bring new and fresh ideas to the business and leverage technology to help, but they will still be focused on those key casual dining fundamentals that are proven to deliver long-term profitable and sustainable results. And with that, I want to turn it over to our new Chief Financial Officer, Mika Ware. Mika brings 36 years of experience at Brinker to the role. She's basically done every financial role of the company.

Speaker Change: and creating a fun and inviting environment for our guests and teams. We will continue to bring new and fresh ideas to the business and leverage technology to help, but they will still be focused on those key casual dining fundamentals that are proven to deliver long-term profitable and sustainable results.

Kevin Hochman: And before that, she started her career at Chili's End Brinker, working in the restaurants. I can't think of a leader in our company who knows more about our chili's business and are passionate for people in the wing will help take Brinker through its next wave a profitable growth. And with that, please take away, Mika.

Michael Ware: And with that, I want to turn it over to our new Chief Financial Officer, Mika Ware. Mika brings 36 years of experience at Brinker to the role. She's basically done every finance role of the company. And before that, she started her career at Chili's and Brinker working in the restaurants.

Mike: I can't think of a leader in our company who knows more about our Chili's business and our passion for people and winning will help take Brinker through its next wave of profitable growth. And with that, please take it away, Mika.

Mika Ware: Thank you. Thank you, Kevin. And good morning, everyone.

Mika Ware: I am so honored to represent our amazing team at Sprinkler's Chief Financial Officer. I'm excited to continue executing our strategy and helping our operators grow our very strong, Today's results mark the completion of a very successful fiscal 2024 for Brinker. This was year two of our new strategy, and it was great to see it come to life, especially through the results we were able to deliver. F-24 reported annual revenue growth of 6.8%, restaurant operating margin improvement of 210 basis points, and adjusted EPS growth of approximately 45%.

Mika Ware: Thank you, Kevin, and good morning, everyone. I am so honored to represent our amazing team as Sprinkler's Chief Financial Officer. I'm excited to continue executing our strategy and helping our operators grow our very strong brand.

Speaker Change: Today's results mark the completion of a very successful fiscal 2024 for Brinker.

Speaker Change: This was year two of our new strategy, and it was great to see it come to life, especially through the results we were able to deliver. F24 reported annual revenue growth of 6.8 percent.

Speaker Change: Restaurant Operating Margin Improvement of 210 basis points and Adjusted ETS Growth of approximately 45%.

Mika Ware: Turning to the fourth quarter, we saw strong year-over-year top-line growth, comp sales and traffic well above our historical and industry averages, and significant restaurant margin expansion. Brinker reported total revenues of $1,208,000,000 for the quarter, with consolidated comp sales of positive 13.5%.

Speaker Change: Turning to the fourth quarter, we saw strong year-over-year top-line growth, comp sales and traffic well above our historical and industry averages, and significant restaurant margin expansion.

Speaker Change: Brinker reported total revenues of $1,208,000,000 for the quarter with consolidated comp sales of positive 13.5%.

Mika Ware: Our adjusted diluted EPS for the quarter was $1.61, up from $1.39 last year. Both brands reported top line sales growth, with Chili's comps coming in at positive 14.8%. Driven by price of 8.1% A positive mix of 0.8% and positive traffic of 5.9%. These results were driven by a strong partnership between our marketing and operations teams with our successful launch of the Big Smasher on the 3 For Me value platform. In addition to positive traffic, mix was also positive for the quarter, driven by more triple-different cells, which more than offset a very modest mix shift into the 1099 value.

Speaker Change: Our adjusted diluted EPS for the quarter was $1.61 up from $1.39 last year.

Speaker Change: Both brands reported top-line sales growth, with Chili's comps coming in at a positive 14.8%, driven by price of 8.1%, positive mix of 0.8%, and positive traffic of 5.9%.

Speaker Change: These results are driven by a strong partnership between our marketing and operations teams with the Art Successful Launch of the Dixmeasure on the three-for-may value platform.

Speaker Change: In addition to positive traffic, mix was also positive for the quarter driven by more triple dipper cells which more than offset a very modest mix shift into the 1099 value tier.

Mika Ware: Turning to Maggiano's, the brand reported 2.5% positive comp sales for the quarter, driven by 9.2% of price and positive 2.2% of mix, offset by negative 8.9% traffic. Dominique and the team are making progress, applying learning from our Chili's turnaround to drive long-term sustainable growth at the brand. He is strengthening his leadership team, most recently with the addition of Anthony Amaroso as Vice President of Innovation and Growth. Anthony is a highly successful Michelin starship with a deep Italian American heritage whose the perfect culture fit for the Magianas.

Speaker Change: Turning to Maggiano's, the brand reported 2.5% positive comp sales for the quarter, driven by 9.2% of price and positive 2.2% of mix, offset by negative 8.9% traffic.

Dominique: Dominique and the team are making progress applying learnings from our Chili's turnaround to drive long-term sustainable growth at the brand. He is strengthening his leadership team, most recently with the addition of Anthony Amoroso as vice president of innovation and growth.

Speaker Change: Anthony is a highly successful Michelin starship with a deep Italian-American heritage, who's the perfect cultural fit for the Maggiano's team.

Mika Ware: They are working to simplify operations and redirect their efforts to elevate the guest experience and drive food and beverage innovation. I'm excited to share more from Magianas in the coming quarter. Now that we've covered the top line from both brands, let's talk about how our sales flow through to the bottom line. With the traffic spike at Chili's during the fourth quarter, we chose to accelerate investments in key areas, such as repair and maintenance, to ensure our buildings were welcoming and well-maintained, and labor, so our teams were staffed up to take care of the guests and deliver great hospitality.

Speaker Change: They are working to simplify operations and redirect their efforts to elevate the guest experience and drive food and beverage innovation. I'm excited to share more from Majano's in the coming quarters.

Speaker Change: Now that we've covered the top line from both grants, let's talk about how our sales flow through to the bottom line.

Speaker Change: With the traffic spike at Chilies during the fourth quarter, we chose to accelerate investments and key areas, such as repair and maintenance, to ensure our buildings were welcoming and well maintained and labor, so our teams are staffed up to take care of the guests and deliver great hospitality.

Mika Ware: Restaurant operating margins for the quarter was 15.2%, an impressive 180 basis points agreement year over year, primarily driven by sales leverage from top line growth. This resulted in favorable food and beverage and labor costs, partially offset by a 90 basis points increase in restaurant expenses. Food and beverage cost for the quarter was favorable 140 basis points year-over-year benefiting from higher price, partially offset by commodity inflation. Labor expense for the quarter was favorable 130 basis points year-over-year, despite incremental labor and debt.

Speaker Change: Restaurant operating margin for the quarter was 15.2%, an impressive 180 basis points improvement year-over-year, primarily driven by sales leverage from top-line growth. This resulted in favorable food and beverage and labor costs, partially offset by a 90 basis points increase in restaurant expense.

Speaker Change: Food and beverage costs for the quarter was favorable 140 basis points year-over-year, benefiting from higher price, partially offset by commodity inflation.

Speaker Change: Labor expense for the quarter was favorable 130 basis points year-over-year, despite incremental labor investments.

Mika Ware: Top Line Growth offset the additional labor hours, as well as wage rate inflation of approximately 3.5% [inaudible] Advertising for the quarter increased approximately $14 million versus last year, which has been a highly successful strategy for us. G&A for the quarter came in at 4.3% of revenues, with the year-over-year increase largely driven by an increase in incentive-based compensation expense due to improved financial performance. Capital expenditures for the quarter were approximately $58 million, driven by equipment replacement and maintenance, new restaurant development, IT upgrades, and restaurant reimagining. For the full year, capital expenditures came in at $199 million.

Speaker Change: Top-line growth offset the additional labor hours as well as wage rate inflation of approximately 3.5%.

Speaker Change: Advertising for the quarter increased approximately $14 million versus last year, which has been a highly successful strategy for us.

Speaker Change: GNA for the quarter came in at 4.3% of revenues with the year-over-year increase largely driven by an increase in incentive-based compensation expense due to improved financial performance.

Speaker Change: Capital expenditures for the quarter were approximately $58 million, driven by equipment replacement and maintenance, new restaurant development, IT upgrades, and restaurant re-images. For the full year, capital expenditures came in at $199 million.

Mika Ware: Fourth quarter, adjusted EBITDA with $142 million, a 24% increase from prior year, and full year of $244 million, an increase of 28% versus prior year. We continue to strengthen our balance sheet by repaying the remaining outstanding balance of $51 million on our Evolving Credit Agreement during the quarter. Our funded debt to EBITDA ratio improved to 1.64 times at quarter end. As Kevin mentioned, while the industry softened in July due to rocky macros, our quarter-to-date sales trends have remained strong, but at a more sustainable level. July sales for Chili's were in the high single digits, including positive traffic.

Joseph Ebedet: Fourth quarter adjusted EBITDA was $142 million, a 24% increase from prior year. And full year adjusted EBITDA totaled $444 million, an increase of 28% versus prior year.

Joseph Ebedet: We continue to strengthen our balance sheet by repaying the remaining outstanding balance of $51 million on our evolving credit agreement during the quarter. Our funded debt to EBITDA ratio improved to 1.64 times at quarter end.

Joseph Ebedet: As Kevin mentioned, while the industry softened in July due to rocky macros, our quarter-to-date sales trends have remained strong, but at a more sustainable level.

Kevin Hochman: July sales for Chili's were in the high single digits, including positive traffic. We've also maintained our gap to the casual dining industry through the first week in August by approximately 13% in sales and 8% in traffic.

Mika Ware: We've also maintained our gap to the casual dining industry through the first week in August by approximately 13% in sales and 8% in track. Before I get into guidance, let me build on Kevin's comments by sharing some of the strategic financial choices we will continue to make to maintain our strong performance in fiscal 2025. We will continue with our barbell pricing strategy to protect our industry-leading value for those that need it, while providing more premium options for those who want a more elevated experience.

Speaker Change: Before I get into guidance, let me build on Kevin's comments by sharing some of the strategic financial choices

Speaker Change: We will continue to make to maintain our strong performance in fiscal 2025.

Speaker Change: We will continue with our barbell pricing strategy to protect our industry-leading value for those that need it, while providing more premium options for those who want a more elevated experience. We will continue to focus on menu management, with the goal of keeping mixed flat to slightly negative in the current economic environment.

Mika Ware: We will continue to focus on menu management with a goal of keeping mixed flat to slightly negative in the current economic environment. And we'll continue to focus on improving the guest experience with expectations of delivering traffic well above the individual. Now turning to fiscal 2025 guidance. In this morning's press release, we shared that we expect F-25 annual revenues in the range of $4.55 billion to $4.62 billion. Adjusted Diluted EPS in the range of $4.35 to $4.75.

Speaker Change: And we'll continue to focus on improving the guest experience with expectations of delivering traffic well above the industry.

Speaker Change: Now turning to fiscal 2025 guidance.

Speaker Change: In this morning's press release, we shared that we expect F-25 annual revenue in the range of $4.55 billion to $4.62 billion.

Speaker Change: Adjusted Diluted EPS in the range of $4.35 to $4.75.

Mika Ware: Weighted average shares in the range of $45 to $47 million And capital expenditures in the range of $195 million to $215 million, Assumptions underlying this guide include plain commodity inflation in the low single digits, Wage rate inflation is in the mid-single digits and a tax rate in the low-double digits.

Speaker Change: Weighted average shares in the range of 45 to 47 million and capital expenditures in the range of 195 million to 215 million.

Speaker Change: Assumptions underlying this guidance include plain commodity inflation in the low single digits, wage rate inflation in the mid-single digits, and a tax rate in the low double digits.

Mika Ware: To provide some additional context as to how we landed on these guidance numbers, while we are pleased with where the business is and confident our plans will enable us to continue to significantly outperform the industry on sales and traffic, we are also mindful of what we are seeing in the industry and in the macros. Even though we are not experiencing the same softness as others today, we did contemplate the macros in our guidance.

Speaker Change: To provide some additional context as to how we landed on these guidance numbers, while we are pleased with where the business is and confident in our plans,

Speaker Change: Confident our plans will enable us to continue to significantly outperform the industry on sales and traffic, we are also mindful of what we are seeing in the industry and in the macros. Even though we are not experiencing the same softness as others today, we did contemplate the macros in our guidance.

Mika Ware: All wrapped up with this, we are encouraged with the momentum and our strategy has created in the business and we are focused on executing at an even higher level in ensuring continued financial momentum throughout F-25, We're watching the macros closely, and we believe we're well-positioned to navigate the anticipated choppiness and lay plenty of runway to continue to execute on our key priorities. We look forward to sharing our progress during upcoming quarters. With our comments now complete, I will turn the call back to Holly to moderate questions. Holly?

Speaker Change: I'll wrap up with this. We are encouraged with the momentum our strategy has created in the business and we are focused on executing at an even higher level and ensuring continued financial momentum throughout F-25.

Speaker Change: We're watching the macros closely, and we believe we're well positioned to navigate the anticipated chalkiness and leave plenty of runway to continue to execute on our key priorities. We look forward to sharing our progress during upcoming quarters.

Speaker Change: With our comments now complete, I will turn the call back to Holly to moderate questions.

Operator: Thank you. At this time, we will be conducting a question and answer session. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while asking your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality.

Speaker Change: Holly?

Holly: Thank you. At this time, we will be conducting a question and answer session. If you have any questions or comments, please press star 1 on your phone at this time.

Holly: We ask that while posing your question you please pick up your handset if listening on speakerphone to provide optimum sound quality Please hold while we poll for questions

Operator: Please hold while we poll for questions. Your first question for today is from Chris O'Cole with. Thanks. Good morning, guys.

Speaker Change: Your first question for today is from Chris O'Cole with Stiefel.

Chris O'Cole: Thanks. Good morning, guys.

Chris O'Cole: Mika, the midpoint of the earnings guidance suggests a rate below the three to year targeted range, I think was 13 to 17%. Given the revenue guidance was roughly in line with the three to 5% growth target, can you can you help us understand what's driving the relative margin pressure for next year? Yeah, so there's two main things.

Speaker Change: Thank you. Bye-bye.

Speaker Change: Mika, the midpoint of the earnings guidance suggests...

Speaker Change: a rate below the three-to-year targeted range I think was 13 to 17 percent given the revenue guidance was roughly in line with the three to five percent growth target can you can you help us understand what's driving the relative margin pressure for next year?

Mika Ware: First, in the prepared comments, I talked about the wage rate inflation and the commodity inflation. The second thing is we do have some incremental planned investments into the F-25 plan. Kevin talked about the incremental investment into labor, which is $15 to $20 million. And we've also beefed up our media plan by about approximately $15 to $18 million more. So we do have some incremental investments that we have contemplated in that guidance. Okay, that's helpful.

Speaker Change: Yeah, so there's two main things. First, in the prepared comments, I talked about the wage rate inflation and the commodity inflation. The second thing is, we do have some incremental planned investments into the F-25 plan.

Speaker Change: Kevin talked about the incremental investment into labor, which is $15 to $20 million, and we've also beefed up our media plan by about approximately $15 to $18 million more. So we do have some incremental investments that we have contemplated in that guidance.

Kevin Hochman: And then, Kevin, I was hoping you could provide and I apologize if I miss this, but I was hoping you could provide an update on the Gale partnership and any progress standing up around standing up the required infrastructure to keep customers refreshed with current data. Yeah, so the update there is that we're continuing our efforts to enhance our direct marketing and optimize segmentation with target e-mails, so we are leveraging the real-time data now that we're getting with the Zeop scroll up, so if you recall, we used to get that rolled out in order to get the tokens, build up the tokens, and so that's been done. We are now receiving token data from every Zeop transaction, and it's now being incorporated in our CM planning and measurement.

Speaker Change: Okay, that's helpful. And then, Kevin, I was hoping you could provide, and I apologize if I miss this, but I was hoping you could provide an update on the Gale Partnership and any progress standing up, around standing up the required infrastructure to keep customers refreshed with current data.

Speaker Change: Yeah, so the update there is that we're continuing our efforts to enhance our direct marketing and optimize segmentation with targeted emails. So we are leveraging the real-time data now that we're getting with the Xeox rollout. So if you recall, we needed to get that rolled out in order to get the tokens, build out the tokens, and so that's been done.

Speaker Change: We are now receiving token data from every Geos transaction, and it's now being incorporated in our CM planning and measurement. We are working now on our loyalty program, so we've got better targeting going on with CRM.

Kevin Hochman: We are working now on our loyalty program, so we've got better targeting going on with CRM. We're now reopening our loyalty program, and I will tell you, from what I've seen in the industry where other major players are pulling back on our loyalty programs, it's having me rethink whether we want to double down on loyalty or really focus on using the CRM data in order to better optimize our marketing plans and our innovation.

Speaker Change: We're now reopening our loyalty program, and...

Speaker Change: I will tell you, from what I've seen in the industry where other major players are pulling back on our loyalty programs, it's having to rethink whether we want to double down on loyalty or really focus on using the CRM data in order to better optimize our marketing plans and our innovation. And so what we're focusing right now on the loyalty program is how do we simplify it to make it easier for the guests.

Kevin Hochman: And so what we're focusing right now on the loyalty program is how to simplify it to make it easier for the guests to understand and easier for them to use and make it more frictionless at the point of purchase. So we think it can continue to be a delighter. I just don't think we're going to put as much investment as I originally thought into the loyalty program.

Speaker Change: to understand and easier for them to use.

Speaker Change: and make it more frictionless at the point of purchase. So, we think it can continue to be a delighter. I just don't think we're going to put as much investment as I originally thought into it.

Dennis Geiger: I think we're going to use it primarily to both reward the guests but also mine that data in order to better service or better optimize our marketing plans and our innovation. And then, the last thing I'd tell you is I'm still very excited about the token data and what it can mean for our total business, and we're continuing to build out that capability, and when I have more to share beyond just the segmentation and the targeted emails, we will. Great, thanks guys. Your next question is from Dennis Geiger with UBC. Great, thank you.

Speaker Change: And to the loyalty program, I think we're going to use it primarily to both reward the guests, but also mine that data in order to better service or better optimize our marketing plans and our innovation.

Speaker Change: And then the last thing I tell you is I'm still very excited about the token data and but what it can mean for our total business and we're continuing to build out that capability and when I have more to share beyond just the segmentation and the targeted emails we will.

Speaker Change: Great, thanks guys.

Speaker Change: Your next question is from Dennis Geiger with UBS.

Mika Ware: I wanted to ask first a bit more on the the top line outlook for 25. Strong momentum, obviously, very much continuing into into the start of the new year. Just wanted to touch, Mika, on your comments around the macro. Obviously, it doesn't seem like you're seeing much as far as negative behavior from macro pressures. But just a little more on on what's embedded in the guide.

Dennis Geiger: Great, thank you. I wanted to ask first a bit more on the top line outlook for 2025. Strong momentum, obviously, very much continuing into the start of the new year. Just wanted to touch, Mika, on your comments around the macro. Obviously, it doesn't seem like you're seeing much as far as negative.

Mika Ware: And are you sort of embedding some kind of of macro softness that maybe eventually impacts trends through the year? If there's anything more you can you can touch on with respect to the top line guide? Sure, so what that guide entails is really same-store sales in that mid-single-digit range, so that's the first building block. Like I said, we always consider what the macro and what the casual dining is running right now in traffic.

Speaker Change: behavior from macro pressures, but just a little more on on what's embedded in the guide. And are you sort of embedding some kind of, of macro softness that maybe eventually impacts trends through the year? If there's anything more you can, you can touch on with respect to the top line guide, please.

Speaker Change: Sure, so what that guide entails is...

Speaker Change: Really, same-store sales in that mid-single-digit range.

Speaker Change: So that's the first building block.

Speaker Change: Like I said, we always consider what the macro and what the casual dining is running right now in traffic.

Mika Ware: So underlying that, we're anticipating that our pricing is going to be in the 4% to 5% range for the year, and that traffic could be flat to slightly positive, and mix will be flat to slightly negative. So just to add on that, when we do our building blocks for our traffic, we built in a 4% to 5% decline in the industry, which is what we hear from our third-party insight group. So the way to think about it is, if it's better than that, you know, that certainly could be upside in that number. But right now, that's what we've baked into our traffic at some. But obviously, we're going to do everything within our power to beat them. That's great. Very helpful, guys.

Speaker Change: So, underlying that, we're anticipating...

Speaker Change: that our pricing is going to be in the 4% to 5% range for the year, and that traffic could be flat to slightly positive and makes it flat to slightly negative. So in the, just to add on that, so we built in, and it's like, when we do our building blocks for our traffic, we built in a 4% to 5%.

Speaker Change: A Decline in the Industry, which is what we hear from, you know, our third-party insight groups.

Speaker Change: So, the way to think about it is, if it's better than that, that certainly could be upside in that number, but right now that's what we've baked into our traffic assumptions.

Mika Ware: And then just on marketing, helpful, the dollar amounts there. Not sure if I missed it, but just as far as number of weeks on air, 25, are you able to frame that up at all? Well, I can give you some, I can give you some, I can't give you the exact weeks, but I can give you kind of what's in my quarter. So towards the end of the first quarter, and then into the second, we'll have a nine week flight. And then in the 3rd quarter, we're going to have 4 weeks at the beginning of the year.

Speaker Change: But obviously we're going to do everything in our power to beat that.

Speaker Change: That's great, very helpful guys. And then just on marketing, helpful, the dollar amounts there, not sure if I missed it, but just as far as number of weeks on air, 25, are you able to frame that up at all?

Speaker Change: Well, I can give you some...

Speaker Change: I can give you some, I can't give you the exact weeks, but I can give you kind of what's in my quarter. So, towards the end of the first quarter and the end of the second, we'll have a nine-week flight.

Speaker Change: And then in the third quarter, we're going to have four weeks at the beginning of the year, and then another six weeks towards the end of the third quarter, and then we've got six weeks planned in the Q4. And so that's the detail I can give you right now on...

Jeffrey Bernstein: And then another 6 weeks towards the end of the 3rd quarter, and then we've got 6 weeks planned in the Q4. And so that's the, that's the detail I can give you right now on, on 1MoreFlighting. Very helpful and congrats on the top-line strength. Your next question is from Jeffrey Bernstein with Barker. Great. Thank you very much.

Speaker Change: So Dennis, what we did is we added a few more weeks, but we've also beefed up some of the TRP. So just really enhancing it overall by investing some more dollars into that plan.

Speaker Change: Very helpful and congrats on the top-line strength.

Dennis Geiger: Thanks, Dennis.

Speaker Change: Your next question is from Jeffrey Bernstein with Barclays.

Kevin Hochman: The first one is just on, you know, the broader competitive environment in terms of value and increasing deal focus. As you think about your 1099, I know you're kind of doubling down on that in the first half of the year, which shows in terms of consumers that maybe just come in for the deal. Obviously, it's a good thing if you can get them to remain with you, and I think you said you had a lot of younger guests.

Jeffrey Bernstein: Great, thank you very much. The first one just done that.

Speaker Change: You know, the broader competitive environment.

Speaker Change: in terms of value and increasing deal focus.

Speaker Change: As you think about your 1099, I know you're kind of doubling down on that the first half of the year.

Speaker Change: which learns in terms of consumers that maybe just come in for the deal.

Speaker Change: Obviously, it's a good thing if you can get them to remain with you, and I think you said you had a lot of newer guests. So, just wondering how you measure.

Kevin Hochman: So just wondering how you measure stickiness just to prove that the consumer is going to stay with you, you know, in good times and bad, whether or not you're advertising a 1099 or not. Any kind of thoughts on that broadly would be great. And then I have one follow-up. Yeah, so we look at that two ways.

Speaker Change: Stickiness, just to prove out that the consumer is going to...

Speaker Change: They will be in good times and bad, whether or not you're advertising at $10.99 or not. Any kind of thoughts on that broadly would be great, and then I have one follow-up.

Kevin Hochman: We have anecdotal data just when we talk to our restaurant teams, and they're telling us they're seeing new guests and they're seeing those new guests return. We will have, as I was talking about earlier with Chris's question on the CRM program in Gale, we are building out the capability to be able to use tokens to have much more finite numerical data that we could share with you. So we'll be able to tell you what percentage of guests were new, and we'll be able to tell you what percentage of guests have come back within a certain period of time.

Speaker Change: Yeah, so we look at that in two ways. We have anecdotal data just when we talk to our restaurant teams, and they're telling us that they're seeing new guests, and they're seeing those new guests return. We will have, as I was talking about earlier,

Speaker Change: With Chris's question on the CRM program in jail, we are building out the capability to be able to use tokens to have a much more finite numerical data that we can share with you. So we'll be able to tell you what percentage it gets for new and we'll be able to tell you what percentage it gets to come back with in a certain period of time. So I'll be able to answer that question more than just.

Kevin Hochman: So I'll be able to answer that question more than just what our restaurant managers are telling us they're seeing inside their restaurants. The other thing I would add on that, Jeff, is it's not like we just put this value in the market in the last quarter. We've been running this thing for almost 18 months, and so the guests is associating us with this great value and this superior value. We're seeing it in our scores, and we think that's having a compounding effect of why you've seen the traffic trends not just get better but really start to accelerate.

Speaker Change: what our restaurant managers are telling us they're seeing inside their restaurants.

Speaker Change: The other thing I would add on that, Jeff, is it's not like we just put this value in the market in the last quarter. We've been running this thing for almost 18 months.

Jeff: The guest is associating us with this great value and this superior value, we're seeing it in our scores.

Jeff: And we think that's having a compounding effect of why you've seen the traffic trends not just get better, but really start to accelerate. So we're very excited about the position that we're in. I think we've put in...

Kevin Hochman: So we're very excited about the position that we're in. I think we've put in more investment over a longer period of time into this value message, and so it might seem like someone can just flick something on, especially if you're a really big competitor, right? But most competitors don't have that kind of muscle, and it's going to take some time for them to be able to establish whatever their value is in the market versus we've been doing the same thing for almost 18 months.

Jeff: More investment over a longer period of time into this value message.

Speaker Change: It might seem like someone can just flick something on, especially if you're a really big competitor, right?

Speaker Change: But most competitors don't have that kind of muscle, and it's going to take some time for them to be able to...

Speaker Change: establish whatever their value is in the market, versus we've been doing the same thing for 18, almost 18 months. So I remain very bullish about that offer in the market, it continues to resonate with our guests.

Kevin Hochman: So I remain very bullish about that offer in the market. It continues to resonate with our guests. And the other thing I would tell you is this is really simple for them. They don't have to download an app.

Mika Ware: They don't have to come at a certain time of day. It's always available for them. They know that, and I think that's why we're seeing this. Jeff, I'd also like to add to that deal.

Speaker Change: and the other thing I would tell you is it's really simple for them. They don't have to download an app, they don't have to come a certain time of day. If it's always available for them, they know that. I think that's why we're seeing the business continue to excel.

Mika Ware: We're very pleased that on the $10.99, we still have a minimum amount of guests, or only 18% of guests eating on that $10.99 tier. So we still have the majority of our guests coming in for the value, but then seeing the great menu and all the other options and abilities to trade up. So we still have over 80% of the people eating on the full price menu. And in addition to that, with the Big Smasher, we still have 25% of the Big Smasher sales being sold for full price.

Gembo: Um, Jeff, I'd also like to add on.

Speaker Change: On that deal,

Speaker Change: We're very pleased that on the $10.99...

Gembo: We still have a minimum amount of guests, or only 18% of guests, eating on that 1099 tier.

Speaker Change: So we still have the majority of our guests.

Gembo: Coming in for the value but then seeing the great menu and all the other options and abilities to trade up

Gembo: So we still have, you know, over 80% of the people eating on the full.

Gembo: And in addition to that, with the Big Smasher, we still have 25% of the Big Smasher sales being sold for full price. So a lot of people are coming in, but they're utilizing the menus, they're trading up for more premium options, and it's really helping us to drive traffic all while maintaining our mix. And then, of course,

Mika Ware: So a lot of people are coming in, but they're utilizing the menus, they're trading up for more premium options, and it's really helping us to drive traffic all while maintaining our mix. And then, of course, the great guest scores that we keep getting, and the momentum that continues, even when we're off air, all those things point to why we're happy with this offer and how it's done. Yeah, let me just build on that.

Gembo: The great guest scores that we keep getting and the momentum that continues even when we're off air, all those things point to why we're happy with this offer and how it's performed.

Mika Ware: So yeah, like the person that's coming in for 1099, it's not like they're coming in alone. And we're not really seeing that much more of an incidence of 1099 or three for me, as a percentage of 100. I mean, it's a slight pickup. So we're at 17.7 in Q4 per 100 versus 16.1. So there is a pickup, but it's not huge.

Gembo: Yeah, let me just build on that. So, Jeff, like, the person that's coming in for 1099, it's not like they're coming in alone.

Jeff: We're not really seeing that much more of an incidence of 1099 or 3 for me as a percentage of 100. I mean, there's a slight tick-up. So we're at 17.7 in Q4 per 100 versus 16.1, so there is a tick-up.

Jeff: But it's not, it's not huge. And then if we look at the mix within that incidence,

Mika Ware: And then if we look at the mix within that incidence, 51% is at 1099 here, that's slightly up. But then 49% is at the 1499 and 1699 tier, right? So a lot of times, I think folks see the traffic and go, oh, it's all 1099. It's only 1099.

Jeff: 51% is at the $10.99 tier, that's slightly up, but then 49% is at the $14.99 and the $16.99 tier, right? So, a lot of times I think folks see the traffic and go, oh, it's all $10.99 and it's only $10.99, and the reality is that's not really the case.

Mika Ware: And the reality is, that's not really the case. A slight increase in mix, but it's really kind of negligible, and you can see that in our COGS number and our margin number, which remains quite good. So, you know, we'll continue to monitor that. We say this every call because, obviously, that could get sideways at some point, but we're nowhere close to that, and we feel very good about the way we're doing venue merchandising, the way we're using this to drive traffic and bring guests in. Understood. Thank you for the color.

Jeff: It's a slight increase in the mix, but it's really kind of negligible. And you can see that in our cogs.

Jeff: We'll continue to monitor that, we say this every call, because obviously that could get sideways at some point, but we're nowhere close to that, and we feel very good about the way we're doing venue merchandising and the way we're using this to drive traffic and bring guests in.

Jeffrey Bernstein: And then just my follow-up is on the menu pricing. I think it was roughly 8% in the fiscal fourth quarter. I'm just wondering what you're thinking about the fiscal first quarter and full year. I'm wondering whether you think you're seeing any pushback, because obviously you would look to avoid increases on the 1099, but I guess that means there's a wider barbell, and therefore maybe the full price offerings are forced to kind of carry the 1099 effectively.

Speaker Change: Understood. Thank you for the color. And I think it was roughly 8% in the fiscal

Speaker Change: I'm just wondering what you're thinking about the fiscal first quarter and full year. I'm wondering whether you think you're seeing any pushback, because obviously you would look to avoid increases on the 1099.

Speaker Change: But I guess that means there's a wider barbell, and therefore maybe the full price offerings are forced to kind of carry the $10.99 effectively. Just wondering how you think about that barbell approach and, you know, the profitability on different customers who fall into the different end of those ranges. Thank you.

Mika Ware: I'm just wondering how you think about that barbell approach and the profitability on different customers who fall into the different end of those ranges. Thank you. Yeah, Jeff, so we feel really good about the opportunity in our pricing strategy because it's working really well. So we don't have a lot of evidence that it's not working with the great traffic that we're having, the great guest metrics that we have. And then Kevin just talked about, I feel if we were overpricing on the regular menu, we'd be pushing a ton of people into the three for me in the 1099, which isn't happening. So, I think all those indicators are helping us to really feel confident to keep moving forward with a barbell strategy. So, you know, it's working.

Speaker Change: Yeah, Jennifer, we feel really good.

Speaker Change: about the opportunity and our pricing strategy, because it's working really well.

Kevin Hochman: So we don't have a lot of evidence that it's not working with the great traffic that we're having, the great guest metrics that we have, and then Kevin just talked about, I feel if we were overpricing on the regular menu, we'd be pushing a ton of people into the three for me and the $10.99, which isn't happening.

Kevin Hochman: I think all those indicators are helping us to really feel confident to keep moving forward with the barbell strategy. So, you know, it's working. We're going to continue to be strategic. We think that on an absolute and relative basis, we're still very competitive, even versus competition. So we still think we got some runway there.

Mika Ware: We're going to continue to be strategic. We think that on an absolute and relative basis, we're still very competitive, even versus competition. So we still think we got some runway there.

Mika Ware: And the pricing through the four quarters, if you didn't take incremental, or how are you thinking about that versus the 8% in the fourth quarter? Yep, so it will start to step down throughout the fiscal year. So our pricing for F-25 should be in the mid-single-digit range. That's what we're shooting for now. We're not planning on taking any price in the first half of the fiscal year.

Speaker Change: And the pricing through the four quarters, if you didn't take incremental, or how you're thinking about that versus the 8% in the fourth quarter?

Speaker Change: It will start to step down throughout the fiscal year. So our pricing for F-25 should be in the mid-single-digit range. That's what we're shooting for now. We're not planning on taking any price in the first half of the fiscal year. We have optionality to take a little price in the back half if we want to. What I would expect is you'll probably see about a 2%

Mika Ware: We have the optionality to take a little price in the back half if we want to. What I would expect is you'll probably see about a 2% step down in price each quarter in the first half and a little bit less in the back. Thank you and congratulations, Mika. Thank you, Jeff.

Speaker Change: step down in price each quarter in the first half and a little bit less in the back half.

Speaker Change: Thank you and congrats, Mika.

Mika Ware: Thank you, Jeff.

David Palmer: Your next question is from David Palmer with Evercore ISD. Thanks. First, just a modeling-type question. Restaurant expenses were up 17% per unit in the quarter in fiscal 4Q.

Speaker Change: Your next question is from David Palmer with Evercore ISI.

Mika Ware: Could you break out how much of that was due to advertising, repair and maintenance bonuses? And then how are you thinking about those line items for fiscal 25? Yeah, so hi, David.

David Palmer: Thanks. First, just a modeling type question. Restaurant expenses were up 17% per unit.

David Palmer: in the quarter and fiscal 4Q. Could you break out how much of that was due to advertising, repair and maintenance, bonuses?

Speaker Change: And then how are you thinking about those line items for fiscal 25?

Mika Ware: So restaurant repairs were up $16 million a year every year in the fourth quarter. And that's what Kevin and I both mentioned in our prepared remarks about accelerating some of those repairs. Advertising was up $14 million year over year.

Speaker Change: Yes, so hi David

Speaker Change: So restaurant repairs were up $16 million a year in the fourth quarter, and that's what Kevin and I both mentioned in our prepared remarks about accelerating some of those repairs.

Mika Ware: So that's just part of the strategy where this was the big year we had the big incremental investments that hit every quarter. And I think you asked, were you asking about G&A or on the bonuses, but the incident-based compensation continues to drive G&A, and obviously year-over-year, that was up $13 million. I will call out, because of the really, the big spike in the fourth quarter performance that we had, it triggered some older legacy, longer-term compensation programs.

Speaker Change: Advertising was up $14 million year-over-year, so that's just part of the strategy where this was the big year where we had the big incremental investments that hit every quarter.

Speaker Change: I think you asked, were you asking about DNA or on the bonuses?

Speaker Change: But the incident-based compensation continues to drive G&A, and obviously year-over-year that was up $13 million.

Speaker Change: I will call out, because of the really, the big spike in the fourth quarter performance that we had,

Speaker Change: It triggered some older legacy, longer term compensation programs.

Mika Ware: So, for example, we had one program that we had written off, and that, within the fourth quarter, that came back into the money, so that was approximately about $4 million. And in the past, that would have been spread out over three years. Instead, we had to take that full pump into the fourth quarter.

Speaker Change: So, for example, we had one program that we had written off and that within the fourth quarter that came back into the money, so that was approximately about $4 million.

Speaker Change: And in the past, that would have been spread out over three years. Instead, we had to take that full pump into the fourth quarter. So, and then the rest of that incremental expense is just, again, incentive-based compensation with a better performance.

Mika Ware: So, and then the rest of that incremental expense is just, again, incentive-based compensation with the better performance, and some more of that. And finally, I think the last piece of Q4 that we invested is we had about $5 million of incremental labor that we put in, again, to take care of the guests and just make sure that, as we had those new guests coming in, that we were prepared and that we were going to deliver a great experience so that we get back in that consideration set and have them come again and again. Great. Thanks, Mika.

Speaker Change: And finally I think the last piece of Q4 that we invested is we had about $5 million of incremental labor that we put in again to take care of the guests and just make sure that as we had those new guests coming in that we were prepared and that we were going to deliver a great experience so that we get back in that consideration set and have them come again and again.

David Palmer: One other question. I think you mentioned something about during the back half the year, your expectation was to replace the 1099 message with something else compelling, and you continue to do that in juxtaposition against traditional fast food and the value there. I'm just wondering what's driving that or what your thinking is there, because it looks like you're killing it with the Big Smasher on the 1099 with an appetizer. The Big Smasher, I see it on the regular menus.

Mika Ware: Great, thanks Mika. One other question, I think...

Speaker Change: You mentioned something about during the back half of the year your expectation was to replace the 1099 message with something else compelling, and you continue to do that in a juxtaposition against...

Speaker Change: traditional fast food and the value there.

Speaker Change: I'm just wondering what's driving that or what you're thinking is there because it looks like you're killing it with that big smasher on the 1099 with an appetizer.

Kevin Hochman: $3 more than that. So, you know, taking that off the 1099 or doing something to remove the 1099 would certainly be a big step up in actual price. I'm just wondering how, you know, what you're really thinking there. Why not stick with something that's working?

Speaker Change: You know, the Big Smasher, I see it on the regular menus.

Speaker Change: $3 more than that. So taking that off the 1099 or doing something to remove the 1099 would certainly be a big step up in actual price. So I'm just wondering what you're really thinking there. Why not stick with something that's working? Thanks,

Kevin Hochman: Yeah, so if you recall, our last race call, we talked about the plan was to switch the message in the fall and but now that the big smashers done so well, we decided to run it. The balance of this calendar year and then the thought was when we get the Q3 to rotate this new 1099 messaging on a new item, I will say that we contemplated those plans in July when we saw some softness versus what we had expected, and Mika shared with you we were in the high single digits on sales and positive traffic, and so the thought was, hey, is this starting to run its course?

Speaker Change: Yeah, so if you recall our last series call, we talked about the plan was to switch the message in the fall, but now that the Big Smashers have done so well, we decided to run it for the fall.

Speaker Change: The balance of this calendar year and then the thought was when we get the Q3 to rotate this new 1099 message on a new item. I will say that we contemplated those plans in July when we saw some softness.

Speaker Change: versus what you had expected, and Mika shared with you we were in the high single digits on...

Speaker Change: on sales.

Kevin Hochman: Now, we've seen an acceleration happen in August, which would lead us to believe that the burger is still very relevant, so at the end of the day, we're going to, in Q3, we're going to be ready to go with the new message, but if the burger is continuing to work throughout Q4, I'm sorry, throughout Q2, we'll continue the same burger message, so we're going to keep optionality on that, but we're going to go ahead and produce the new spot against the new food innovation just so that we're ready in case it starts to slow down, but we have seen it pick up back up in August, so we feel very confident. And David, to be clear, we're not moving away from the 1099 value proposition. That's staying in.

Speaker Change: and positive traffic, and so the thought was, hey, is this starting to run its course? Now, we've seen an acceleration happen in August.

Speaker Change: which would lead us to believe that the burger is still very relevant. So, at the end of the day we're going to rip in Q3 and we're going to be ready to go with the new message, but if the burger is continuing to work throughout Q2, we'll continue the same burger message. So, we're going to keep optionality on that, but we're going to go ahead and produce the new spot.

Speaker Change: David, to be clear, we're not moving away from the $10.99.

Kevin Hochman: It would just be new news in the entree, so kind of like how we had the old time with cheese, we switched that to the Big Smasher. That's what we're saying. We have new innovation in the 1099 platform if we need it, but we're going to stick with the Big Smasher as long as we can. That makes sense. Your food costs are pretty good with this $10.99. It's pretty impressive.

David Palmer: value proposition. That's staying in. It would just be new news in the entree. So kind of like how we had the old time with cheese, we switched that to the big smasher. That's what we're saying. We have new innovation in the 1099 platform if we need it, but we're going to stick with a big smasher as long as it's still working.

Speaker Change: That makes sense. Your food costs are pretty good with this $10.99. It's pretty impressive. Thank you.

David Palmer: Thank you. Your next question for today is from Andrew Strelzik with BMS. Hey, good morning.

David Palmer: Thank you.

David Palmer: Your next question for today is from Andrew Strelzick with BMO.

Andrew Strelzik: Thanks for taking the questions. You mentioned continuing to do the listening sessions. And so I'm curious about how those are evolving and what you're hearing now. Obviously, you've done a lot over the last two years or so.

Andrew Strelzick: Hey good morning, thanks for taking the questions . . . . . . . .

Andrew Strelzick: You mentioned continuing to do the listening sessions, and so I'm curious about how those are evolving and what you're hearing now, obviously you've done a lot over the last, you know, two years or so. So what are you hearing now, and how is that informing the strategic actions you're taking in 25?

Kevin Hochman: So what are you hearing now? And how is that informing the strategic actions you're taking in twenty five? Yeah, you know, we're in a little bit of an inflection point. We shared this with our general managers last week in Dallas of, you know, we've been winning pretty big, and it's really been accelerating all throughout the year. And we're at an inflection point with our restaurant teams in that, like, we need to get everybody to be thinking we're going to just permanently win, right?

Speaker Change: Yeah, you know, we're a little bit inflected, but we shared this with our general managers last week in Dallas.

Speaker Change: You know, we've been winning pretty big, and it's really been accelerating all throughout the year.

Andrew Strelzick: And we're at a complexion point with our restaurant teams in that we need to get everybody to be thinking, we're going to just permanently win, right? And what that's all about is raising the expectation and raising the bar on what's okay and what's not okay.

Kevin Hochman: And that's what that's all about is raising the expectation and raising the bar on what's okay and what's not okay. And so the big thing that we're hearing from the team now in the listening sessions is, if you guys want to raise the bar, here are the things that I need you to help me with in order for us to continue to raise the bar on experience, both in terms of the restaurant environment as well as the experience of the guests and the team member have, right? So, you know, what I would tell you right now is, like, it's a lot about ownership. So we hear about, you know, let me go ahead and own this.

Speaker Change: The big thing that we're hearing from the team now in the listening sessions is if you guys want to raise the bar, here are the things that I need you to help me with in order for us to continue to raise the bar on experience both in terms of the restaurant environment as well as

Kevin Hochman: If you want me to continue to raise the bar on performance, these are the levers I need in order to be able to own on my own versus have everything kind of laid out in a model. And so I think the theme that we're going to be seeing throughout the next 12 months in terms of supplication is going to be, what are the things that we can remove off of their plates to allow them to focus on the most important things so that they're not being measured and tracked against every little detail? So, for example, ABT, which is average versus theoretical, that's a measure of waste.

Speaker Change: as well as the experience of the guest and the team member have, right? So, you know, what I would tell you right now is, like, it's a lot about ownership. So we hear about, you know, let me go ahead and own this. If you want me to continue to raise the bar on performance.

Speaker Change: These are the levers I need in order to be able to own on my own versus have everything kind of laid out in a model. And so I think the theme that we're going to be seeing throughout the next 12 months in terms of supplication is going to be, what are the things that we can remove off of their place?

Speaker Change: To allow them to focus on the most important things, so that they're not being measured and tracked against every little detail. So, for example...

Kevin Hochman: You know, we measure – we used to measure ABT on every item, and now, number one, they're not going to get a bonus on ABT, and number two, they're just going to get a bonus on COGS. And so, if they want to just focus on the most expensive items like proteins and alcohol and not worry about everything else so they can free up time to spend more time with their teams and more time with their guests, that's something that we're going to allow them to do.

Speaker Change: A.B.T. which is Average Versus Theoretical. That's a measure of waste. We used to measure A.B.T. on every item and now, number one, they're not going to get bonus on A.B.T. and number two, they're just going to get bonus on COGS and so if they want to just focus on

Speaker Change: The most expensive items like proteins and alcohol, and not worry about everything else, so they can free up time to spend more time with their teams.

Kevin Hochman: So I think the biggest thing that we're hearing is to empower us, like give us more freedom within the framework to run our restaurants and reward us as such. And so that's really kind of the next wave of support is going to be about empowering those restaurant teams to raise the bar and continue to win. Okay, great.

Speaker Change: and more time with their guests. That's something that we're going to allow them to do. So I think the biggest thing that we're hearing is empower us, like give us more freedom.

Speaker Change: And so that's really kind of the next wave of simplification is going to be about empowering those restaurant teams to raise the bar and continue to win.

Kevin Hochman: And then my second question. Yeah, I'm just curious if you have a sense for where the traffic growth is coming from within the industry, obviously vastly outperforming, kind of the benchmarks that we look at and some of the data that you referenced. Do you have a sense, you know, is this coming from within Bar and Grill, Independence, trade up, trade down? Just curious if you have any insight into where that's coming from. Thanks.

Speaker Change: Okay, great. That's super helpful. And then my second question, I'm just curious if you have a sense for where the traffic growth is coming from within the industry, obviously vastly outperforming.

Speaker Change: kind of the benchmarks that we look at and some of the data that you referenced. Do you have a sense, you know, is this coming from within Bar and Grill, Independence, trade up, trade down? Just curious if you have any insight to where that's coming from. Thanks.

Kevin Hochman: Yeah, you know, number one, I'd tell you from a demographic standpoint, all demographics are growing. So it's not like it's, you know, lower income or higher income, it's pretty much every age and every income level are growing. So it's pretty, pretty broad based. I mean, when you're outpacing the industry by, you know, 15 point whatever points we say that you're going to be basically growing in every segment, you know, clearly, we're winning market share.

Speaker Change: Yeah, you know, number one, I'd tell you from a demographic standpoint, all demographics are growing, so it's not like it's, you know,

Speaker Change: Lower income or higher income, it's pretty much...

Speaker Change: Every age and every income level are growing, so it's pretty broad-based. I mean, when you're outpacing the industry by...

Speaker Change: you know 15 point whatever points we say.

Kevin Hochman: I mean, you just do the math, we're winning market share, you know, I will tell you, I think that the biggest thing that I've said is in the past is like the fact that we're more relevant and we're more top of mind and we're more on air, and we have a very attractive value out there. I think that's really just kind of growing some trips. So I don't think someone was saying, hey, I was going to go to this fast food place, and now I'm going to decide to go to Chili's tonight. I think it's the fact that we're front and center and relevant, not just on TV, but in social media. I think you see this in pop culture more often.

Speaker Change: You're going to be basically growing in every segment. You know, clearly we're winning market share. I mean, you just do the math, we're winning market share. You know, I will tell you, I think that the biggest thing that I've said this in the past is like the fact that we're more relevant and we're more top of mind and we're more on air.

Kevin Hochman: And that is just kind of triggering them to be in that consideration set that we talked about in Investor Day a couple of years ago and causing them to want to come to Chili's. So I don't think it's a specific thing where it's like we're sourcing from these two concepts. It's so broad based, and I think it's really a more function of we're more top of mind, we're more relevant, and so we're more in the consideration set for people to choose to come to us. Great, thank you very much. Your next question for today is from Jeff Farmer with Gordon. Thank you very much.

Speaker Change: And we have a very attractive value out there. I think that's really just kind of growing some trips. So I don't think someone was saying, hey, I was going to go to this fast food place, and now I'm going to decide to go to Chili's tonight. I think it's the fact that we're front and center and relevant, not just on TV, but in social media. I think you see this in pop culture more often. And then it's just kind of triggering them to be in that consideration set that we talked about in Investor Day a couple years ago and causing them to want to come to Chili's. So I don't think it's a specific thing where it's like we're sourcing from these two concepts. It's so broad-based. And I think it's really a more function of we're more top of mind, we're more relevant, and so we're more in the consideration set for people to choose to come to us.

Speaker Change: Great, thank you very much.

Speaker Change: Your next question for today is from Jeff Farmer with Gordon Haskett.

Jeff Farmer: You provided some guidance components for the restaurant level margin for FY25, but Mike, is there anything you can do in terms of providing sort of a range of where you think that margin might end up in 25 versus 24? Yeah, so I still think we're going to stick to the probably 30 to 50 basis points ROM improvement year over year. So again, that contemplates the inflation that we're still experiencing, plus those incremental investments that we want to do.

Jeff Farmer: Thank you very much. You provided some guidance components for the restaurant level margin for FY25, but Mike, is there anything you can do in terms of providing sort of a range of where you think that margin might end up in FY25 versus FY24?

Jeff Farmer: But we're just pleased that we can still invest in the business and still expand our ROM. So we do think we'll have another year of expansion. Okay, and then I apologize if I missed this, but G&A in 25, obviously a lot of things going on in 2024, but G&A dollars in 25 versus 24, any insight there? Yes, so GNA is going to be up probably five to seven million dollars next year. And here's why.

Mike: Yeah, so I still think we're going to stick to the probably 30 to 50 basis points.

Speaker Change: ROM improvement year over year. So again, that contemplates the inflation that we're still experiencing, plus those incremental investments that we want to do, but we're just pleased that we can still invest in the business and still expand our ROM. So we do think we'll have another year of expansion.

Speaker Change: Okay, and then I apologize if I missed this, but G&A in 25, obviously a lot of things going on in 2024, but G&A dollars in 25 versus 24, any insight there?

Mika Ware: We have a couple things that are coming into play. So the first thing is that we are actually transitioning from a legacy ERP system that is going live this fiscal year. So the cost of that, with the software, and the cost of the project is now going to be in our GNA numbers. And then, on top of that, we are growing the teams; we've been investing back into the teams. And so we have a little bit of an increase in payroll expenses as well. Thank you all. Pass it along. Your next question is from Brian Vaccaro, with Raymond. Hi, thanks, and good morning.

Speaker Change: Yes, so GNA is going to be up probably five to seven million dollars next year, and here's why. We have a couple things that are coming into play. So the first thing is...

Speaker Change: We actually are transitioning from a legacy ERP system that is going live this fiscal year.

Speaker Change: So the cost of that with the software and the cost of the project is now going to be in our GNA numbers, and then on top of that, we are growing the teams. We've been investing back into the teams.

Speaker Change: And so we have a little bit of increase in payroll expenses as well.

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

Speaker Change: Your next question is from Brian Vaccaro with Raymond James.

Brian Vaccaro: Just if I could start with two quick clarifications and sorry if I missed it, but what was the total sales mix on three for me in the quarter? We said, I rounded up to 18, Kevin said 17.7, so that was the mix. Okay, thank you. And the fiscal 4Q R&M spend, Mika, I think you said it was at $14 million. Can you level set where that is versus a normal level of spend?

Brian Vicarro: Hi, thanks and good morning. Just if I could start with two quick clarifications, and sorry if I missed it, but what was the total sales mix on 3 for May in the quarter?

Brian Vicarro: We said, I rounded up to 18, Kevin said 17.7, so that was the mix.

Mika Ware: OK, thank you. And the fiscal 4Q R&M spend, Mika, I think you said it was at $14 million.

Brian Vaccaro: And is this a new higher level of spend that will carry into fiscal 25? What have you layered in terms of expectation there versus 24? That's a great question, Brian.

Speaker Change #101: Can you level set where that is versus a normal level of spend, and is this a new higher level of spend that will carry into fiscal 25? What have you layered in terms of the expectation there versus 24?

Mika Ware: So our R&M has been going up the last couple of years. Obviously, if we came out of COVID, we had a lot of deferred maintenance to catch up on. And truthfully, as the business has done better and exceeded our expectations on how fast it's recovered, we've accelerated some of that deferred maintenance. I'm happy to say I do think that we have hit the peak for R&M expense this year. So next year, we are planning to have lower R&M expense, probably lower $8 to $10 million. So we're not all the way there, but we're definitely moving now in the right direction.

Speaker Change #102: That's a great question, Brian. So, our RNN has been going up the last couple of years. Obviously, if we came out of COVID, we had a lot of deferred maintenance to catch up on.

Speaker Change #101: And truthfully, as the business has done better and exceeded our expectations on how fast it's recovered, we've accelerated some of that deferred maintenance.

Speaker Change #101: I'm happy to say I do think that we have hit the peak.

Speaker Change #101: For R&M expense this year, so next year we are planning to have lower R&M expense, probably lower 8 to 10 million dollars.

Brian Vaccaro: We've been on a catch up where we've been very reactive in doing all this deferred maintenance. I think we're finally getting to the point that we can start being proactive and getting some more preventative maintenance programs back into our restaurants so that we can take care of our equipment, we can minimize equipment going down, and then we're also going to extend the life of that equipment over time. So I do think this new strategy that we've caught up and now we're moving from reactive to proactive will allow us to start lowering that expense, and that should start next fiscal year. Okay, great.

Speaker Change #101: We're not all the way there, but we're definitely moving now in the right direction.

Speaker Change #101: We've been on it.

Speaker Change #103: I want to catch up where we've been very reactive in doing all this deferred maintenance.

Speaker Change #101: I think we're finally getting to the point that we can start being proactive and getting some more preventative maintenance programs back into our restaurants so that we can take care of our equipment.

Speaker Change #103: We can minimize equipment going down, and then we're also going to extend the life of that equipment over time. So I do think this new strategy that we've caught up, and now we're moving from reactive to proactive, will allow us to start lowering that expense. And that should start next fiscal year.

Brian Vaccaro: And then my question, you know, obviously, impressive comps driven by a few different levers that you're pulling. But one area specifically, you know, Chili seemed to catch lightning in a bottle on TikTok in May, and maybe more recently, too, with the Nashville Hot mozzarella sticks. And it sounds like you think you're attracting new guests, which makes sense. But I guess the question is, how do you think about the stickiness of this TikTok consumer?

Speaker Change #104: Okay, great. And then my question, you know, obviously impressive comps driven by a few different levers that you're pulling, but one area specifically, you know, chili seemed to catch lightning in a bottle on TikTok in May and maybe more recently too with the Nashville hot mozzarella sticks.

Speaker Change #104: And it sounds like you think you're attracting new guests, which makes sense, but I guess the question is, how do you think about the stickiness of this TikTok consumer? And how did that impact how you set your fiscal 25 guide?

Kevin Hochman: And how did that impact how you set your fiscal 25 guide? Yeah, so what we thought about that May that you saw, you know, had such an incredible performance. We think about 60% of it was due to the advertising and the Big Smasher, and about 40% was due to TikTok going viral on the Mozzarella Sticks. That's the analysis that we did kind of post-May to better understand what moved and why it moved. Obviously, that's our chance when they come in, to wow them with a great experience.

Speaker Change #105: Yeah, so when we thought about that May that you saw, you know, had such a

Speaker Change #106: We think about 60% of it was due to the advertising and the Big Smasher, and about 40% was due to the TikTok going viral on the mozzarella sticks. That's the analysis that we've done kind of post-May.

Speaker Change #108: Obviously, that's our chance when they come in is to wow them with a great experience. That's one of the reasons why we put more money in the facilities and more money in the labor. As soon as we saw that spike,

Kevin Hochman: That's one of the reasons why we put more money in the facilities and more money in the labor. As soon as we saw that spike, you know, we got on a call with our managers, and we said, look, guys, this is our opportunity, given how much traffic is coming in, to try to keep them, right? So we're going to put these investments into the business over the next six weeks to try to maintain as many of those new guests as we possibly can, right?

Speaker Change #108: We got on a call with our managers and we said, look guys, this is our opportunity given how much traffic is coming in to try to keep them. We're going to put these investments into the business.

Speaker Change #108: over the next six weeks to try to maintain as many of those new guests as we possibly can, right? I think now that we've seen kind of July and the first part of August play out,

Kevin Hochman: I think now that we've seen kind of July and the first part of August play out, it would lead us to believe we were glad that we put those investments in because the business continues to be incredibly strong, and we continue to outpace the industry by double digits. So that was the thought process behind it, right? Now, you know, is a TikTok – is a person converted by TikTok any different than a person converted by TV?

Speaker Change #108: It would lead us to believe we were glad that we put those investments in because the business continues to be incredibly strong.

Speaker Change #109: and we continue to outpace the industry by double digits. So that was the thought process on it, right? Now, you know, is a TikTok, is a person converted with TikTok any different than a person converted with TV?

Brian Vaccaro: I don't really think so. I think the opportunity is when they come to try Chili's for the first time, are they having that experience that would make them want to come back? I think if you look at some of the comments that we got during that time, I mean, I was very excited to hear things like – it was like, Chili's is low-key awesome, like, where do they come out of? Where they came out of the blue to be so good?

Speaker Change #110: I don't really think so, I think the opportunity is when they come to try Chili's for the first time, are they having that experience that would make them want to come back?

Speaker Change #111: I think if you look at some of the comments that we got during that time, I mean...

Speaker Change #112: I was very excited to hear things like, it was like Chili's is low key awesome, like where do they come out of, where they came out of the blue to be so good. So I think we've been introducing guests to new, or new guests to the brand, and when they actually come they're having a great experience, and I think that's why you're seeing a strengthening and strengthening of our business. Now, if that continues there could be upsides, you know, versus what we shared with you guys, but right now we feel really good about where we are.

Kevin Hochman: So I think we've been introducing guests to new – or new guests to the brand, and when they actually come, they have a great experience, and I think that's why you're seeing a strengthening and strengthening of our business. Now, if that continues, there could be upsides, you know, versus what we shared with you guys, but right now, we feel really good about where we are. All right, that's really helpful

Brian Vaccaro: And maybe on a follow-up to that, I think I read recently that influencer marketing spend might be up 50% versus two years ago. And I know your team's been focused on, you know, re-injecting the Chili's brand into the social media conversation for a couple years now. But have you started to spend specifically on influencer marketing yet? And if not, is that something you think we could see soon?

Speaker Change #112: All right, that's really helpful, Kevin, and maybe on a follow-up to that.

Speaker Change #113: I think I read recently that influencer marketing spend might be up 50% versus two years ago. And I know your team's been focused on re-injecting the Chili's brand into the social media conversation for a couple years now. But have you started to spend specifically on influencer marketing yet? And if not, is that something you think we could see soon?

Kevin Hochman: So I think there's two things that have kind of step-changed our social media game. I think number one, Luz Beckert and Jack Bailey, who run that group internally, they're Brinker employees. They've been empowered to just go run with it, and they've done a phenomenal job of changing our voice online. Similar to what you've seen some other brands do and have had some success, they've just done a phenomenal job. I think the second thing is that we have been putting some investments into TikTok, and some of that, obviously, is to run the media on TikTok; some of that is for influencer marketing.

Speaker Change #114: Yes, so I think there's two things that are kind of step step changed our, our, our social media game. I think number one.

Speaker Change #115: Luz Becker and Jack Haley who run that group internally, they're Brinker employees.

Speaker Change #115: They've been empowered to just go run with it, and they've done a phenomenal job.

Speaker Change #115: , . . . .

Kevin Hochman: And typically what we're seeing is the organic stuff is what's traveling more, but I do think some of that investment is starting – it starts that flame, right, that gets things going. So I'm obviously not an expert on TikTok and social media marketing, but I would say those are the two things.

Speaker Change #115: And some of that, obviously, is to run the media on TikTok. Some of that is for influencer marketing. And typically, what we're seeing is the organic stuff is what's traveling more. But I do think some of that investment starts that flame that gets things going. So I'm obviously not an expert on TikTok and social media marketing. But I would say those are the two things I think we've got.

Kevin Hochman: I think we've got people in place that are now empowered within the framework to win. And then, number two, we have put more investment into TikTok and influencer marketing. And we do think that social media plan is helping us to drive the younger consumer into Chili. So we're really happy with that. Yeah, it's a great point.

Speaker Change #116: People in place that are now empowered within the framework to win. And then number two, we have put more investment into TikTok and influencer marketing.

Speaker Change #117: And we do think that social media plan is helping us to drive the younger consumer into Chili so we're really happy with that. Yeah, it's a great point. Like our buzz metrics from YouGov were up across most demographics but among 18 to 34 they were, it was by far the most which is a good sign because you obviously want to introduce.

Kevin Hochman: Like our buzz metrics from YouGov were up across most demographics, but among 18 to 34, they were by far the most, which is a good sign because you obviously want to introduce that generation to your brand and obviously have a great, great experience when they come in. That's very helpful. I'll pass it along.

Speaker Change #117: That generation into your brand and obviously have a great experience when they come in.

Brian Vaccaro: Thank you. Thanks, Brian. Your next question is from Jon Ivankoe with J.P. Hi, thank you. A couple, if I may.

Speaker Change #118: That's very helpful. I'll pass it along. Thank you.

Brian Vicarro: Thanks, Brian .

Speaker Change #119: Your next question is from John Ivanko with JP Morgan.

Jon Ivankoe: First, in answering an earlier question, you know, it was asked, you know, about why you were at the lower end of your earnings growth guide for the year in fiscal 25, and increased advertising, you know, was, you know, cited, at least from what I heard, as one of those reasons. Now, you know, normally, at this point in the cycle, a company would be taking up advertising because they would view it as a creative to sales and actually a creative to profit.

John Ivanko: Hi, thank you. A couple, if I may. First, in answering an earlier question, you know, it was asked, you know, about why you were at the lower end of you were.

John Ivanko: Bernie's Growth Guide for the Year in Fiscal 25, and increased advertising, you know, was, you know, cited, at least from what I heard, as one of those reasons. Now...

John Ivanko: You know, normally at this point in the cycle, a company would be taking up advertising because they would view it...

Jon Ivankoe: So, is this advertising that we should really view as an investment that won't bring an increase in profitability? Or was it, you know, just kind of a modeling exercise that we're trying to go through now, just to explain, I guess, why the increased advertising actually doesn't come with even greater profitability, since it does sound like that's discretionary on your part? Well, I think the way to think about it, Jon is, we obviously add volume and traffic to the plans when we put advertising in. That's kind of the deal we have with marketing. So they get more money, and we get more traffic.

John Ivanko: as a creative to sales and actually a creative to profit, so.

Speaker Change #121: Is this advertising that we should really view as an investment that won't get an increase in profitability? Was it just kind of a modeling exercise that we're trying to go through now?

Speaker Change #122: Just explain, I guess, why the increased advertising actually doesn't come with even greater profitability, since it does sound like that's discretionary on your part.

Speaker Change #123: Well, I think the way to think about it John is you know the we add we obviously add volume and traffic into the plans when We put advertising in like that's kind of the deal we have with marketing so they get more money And we get more traffic and what we take into the plan

Kevin Hochman: What's happening here is the macro assumption, so we talked about that 4-5% that we pulled out for industry traffic, so that's a headwind. So you've got a tailwind with putting the advertising in, you've got a headwind with the macro assumption. Now, obviously, as I said earlier, if we're able to beat that macro assumption, there could be upsides on the guidance that we gave. But at this point, we're six weeks into our fiscal year, it's very hard for us to give you guys an update on whether 4-5% was the right number or not. Certainly, we've seen pretty good strength in the first six weeks of the year, so we feel very good about where we are, but we're not ready to change that assumption. Okay, I'm with you.

Speaker Change #124: What's happening here is the macro assumption, so we talked about that 4 to 5 percent.

John Ivanko: that we've pulled out for industry traffic. So that's a headwind. So you've got a tailwind.

John Ivanko: with putting the advertising in, you've got a headwind with the macro assumption. Now, obviously, as I said earlier...

John Ivanko: If we're able to beat that macro assumption, there could be upsides on the guidance that we gave. But at this point, we're six weeks into our fiscal year. It's very hard for us to give you guys an update on whether four to five was the right number or not. Certainly, we've seen pretty good strength in the first six weeks of the year, and so we feel very good about where we are, but we're not ready to change that assumption.

Jon Ivankoe: Thank you for that. You know, CapEx fiscal 25, the range right on top of what you spent on, you know, in 24. Can you talk about, you know, kind of shifting priorities between new unit CapEx remodels, which I'm going to call discretionary at this point, and then just R&M that may be capitalized. And let's talk about how the mixes may or may not be different.

Speaker Change #125: Okay, I'm with you. Thank you for that. You know, CapEx fiscal 25, you know, the range right on top of what you spent on, you know, in 24. Can you talk about...

Speaker Change #126: You know, kind of shifting priorities between new unit CapEx remodels, you know, which I'm going to say discretionary at this point.

Speaker Change #127: And then just R&M that may be capitalized, and let's talk about how the mixes may or may not be different, 25 versus 24. And this reminds us, since we all have models kind of going beyond 25, how you're at this point thinking about capital intensity in the out year as well.

Mika Ware: And this reminds us, since we all have models kind of going beyond 25, how you're at this point thinking about capital intensity in the out year as well. Okay, Jon, so this next year, like you said, will be pretty similar in the spend level as the F-24 was. We did shift some money around in the bucket.

John Ivanko: Okay, Jon, so...

John Ivanko: This next year, like you said, will be...

John Ivanko: pretty similar in the spend level as the F-24 was. We did shift some money around in the bucket. So like I said, the R&M should start to come down in equipment replacement with that's been our main focus this year and our highest bucket of spend. We'll probably shift some of that spend out of the R&M equipment replacement into the reimage bucket. So that is a bucket we would like to start.

Mika Ware: So, like I said, the R&M should start to come down in equipment replacement with that's been our main focus this year and our highest bucket of spend. We'll probably shift some of that spend out of the R&M equipment replacement into the reimage bucket. So, that is a bucket we would like to start or a program we'd like to start bringing back to the equation. So, a little bit more dollars there. And then the new restaurants, we're probably going to have about the same level of Chili's that we built last year into F-25 in that, you know, 10-ish range. We are going to start to accelerate some Maggianos.

John Ivanko: or a program we'd like to start bringing back to the equation.

John Ivanko: So a little bit more dollars there. And then the new restaurants, we're probably going to have about the same level of chilies.

John Ivanko: that we built last year into F-25 in that, you know, 10-ish range. We are going to start to accelerate some Magianas. We have some Magianas on the horizon, which is exciting.

Mika Ware: We have some Maggianos on the horizon, which is exciting. So, we have new restaurants, the bucket going up slightly in F-25. Now, moving forward, the CapEx dollars could slightly increase from there. You could hopefully continue to moderate your R&M. Depending on how the new, especially the Maggianos, go, you could accelerate your new unit growth bucket a little bit.

John Ivanko: So we have new restaurants, the bucket going up slightly in F25.

John Ivanko: Now moving forward, the CapEx dollars could slightly increase from there. You hopefully can continue to moderate your R&M.

John Ivanko: Depending on how the new, especially Majanos go, you could accelerate your new unit growth bucket a little bit. And then also, if we want to get back on a more...

Mika Ware: And also, if we want to get back on a more, just a more common cadence on reimages, we could really start to elevate that spend as we get a new prototype design, a new reimage design. If that starts driving some sales, we'd like to put some CapEx dollars against that, just to get all of our restaurants on the, you know, eight to 10-year cycle to keep them relevant and up-to-date.

Speaker Change #128: And just a more...

Speaker Change #128: And with that common cadence on reimages, we could really start to elevate that spin as we get a new prototype design, a new reimage design. If that starts driving some sales, we'd like to put some CapEx dollars against that just to get all of our restaurants on an eight to ten year cycle to keep them relevant and up to date.

Speaker Change #129: Okay, and that re-image comment, obviously an important one, and that was kind of leading you there a little bit, but can you tell us the percentage of Chiles, the percentage of Magianos today that you view as being current or modern, or said another way, what percentage of your system do you think would actually benefit?

Jon Ivankoe: But can you tell us the percentage of Chiles, the percentage of Magianos today that you view as being current or modern? Or said another way, what percentage of your system do you think would actually benefit from re-imaging? If you could do it all today, which of course you can't, but you know, what percentage do you think, say Kate, would really make sense for you guys to go out and put some capital against them?

Speaker Change #129: from re-imaging, if you could do it all today, which of course you can't, but what percentage do you think, say Kate, would really make sense for you guys to go out and put some capital against them?

Jon Ivankoe: Yeah, I mean, I don't have the exact numbers at my fingertips right now on how many we consider a day versus how many we consider a week. We've been catching up on deferred maintenance, we don't have a plan right now to catch up on re-imaging, we're just going to re-imaging on that 8-10 year timing, and so when they get updated, they get updated. I don't think that the issue is as big as we had originally thought, just because a lot of what we've been able to fix in terms of the deferred maintenance is making the restaurants a really good environment, but the important thing for you and the investor community to understand is there's no plans to try to catch up on deferred re-imaging; we're just going to put in a plan once we get to a Sounds good!

Speaker Change #130: Yeah, I mean, I don't have the exact numbers at my fingertips right now on, like, how many we would consider as out of date versus...

Speaker Change #130: would be feel good about. What I will tell you is...

Speaker Change #131: We've been catching up on deferred maintenance. We don't have a plan right now to catch up on re-imaging. We're just going to re-image on that eight to 10-year timing, and so when they get updated, they get updated. I don't think that the issue is as big as we had originally thought just because a lot of what we've been able to fix.

Speaker Change #131: In terms of the deferred maintenance is making the rest of us a really good environment. So, so, but the important thing for you and the investor community to understand is like, there's no plans to.

Speaker Change #131: To try to catch up on deferred re-imaging, we're just going to put in the plan once we get to a re-image that we feel confident in a normal 8-10 year cadence.

Speaker Change #132: Sounds good. Thank you for that.

Mika Ware: Thank you for that. Thanks, Jon. Your next question is from Eric Gonzalez with. Thanks for the question. Just with regard to the recent trend, I'm wondering if there's anything really behind the strong quarter-to-date momentum, and perhaps, you know, maybe if you delayed some of the marking windows, given the strong momentum, and whether you have the ability or flexibility to do that, should the momentum dictate it? And then I think you saw some relative softness in July, obviously, Given the strong trend, it's not unexpected that it would flow, but did you do anything proactively to drive the improvement that you saw here in August thus far? Honestly, we didn't.

John Ivanko: Thanks John [inaudible]

Speaker Change #133: Your next question is from Eric Gonzalez with KeyBank.

Speaker Change #134: Hi, thanks for the question. Just with regard to the recent trend, I'm wondering if there's anything...

Speaker Change #135: really behind the strong quarter-to-date momentum.

Eric Gonzales: And perhaps, you know, maybe if you delayed some of the marking windows, given the strong momentum, and whether you have the ability or flexibility to do that, should the momentum dictate it. And then I think you saw some relative softness in July , obviously, you know.

Speaker Change #137: Given the strong trend, it's not unexpected that it would slow, but did you do anything proactively to drive the improvement that you saw here in August thus far?

Eric Gonzalez: In fact, we had advertising on in July, and we maintained our gap versus the industry, so it was quite good. It just, everything kind of, the industry went down a few points, and so did we, versus the prior run rates. But now we're in August, we don't have advertising on, and the businesses kind of snapped back to where we thought it would be.

Speaker Change #138: So, honestly, we didn't. In fact, we had advertising on in July , and...

Speaker Change #139: We maintained our gap versus the industry, so it was quite good. It just, everything kind of the industry went down a few points and so did we versus the prior run race, but

Speaker Change #138: Now we're in August , we don't have advertising on, and the businesses kind of snapped back to where we thought it would be. And we always, we've experienced a tail, so when we've been on media all through F-24, we've noticed that we have a nice tail into the next four to five weeks. Also, our social media program is really strong, and so those...

Kevin Hochman: Yeah, and we always, we've experienced a tail, so when we've been on media all through F-24, we've noticed that we have a nice tail into the next four to five weeks. Also, our social media program is really strong, and so those sales continue. The triple dipper, we watch that closely.

Mika Ware: You know, obviously, it spiked in the fourth quarter. Sales were up in triple dipper over 75%. Those maintained. They're selling way more year over year as we move into the first quarter, so I think there's a lot of different pieces that are working, and then again, like Kevin mentioned, you know, just the baseline macro, it really dropped in July, and it snapped back a little bit in August, so everyone's benefiting from that as well.

Speaker Change #137: Those cells continue the triple dipper, we watched that closely.

Kevin Hochman: and Kevin Hochman. Obviously, it spiked in the fourth quarter. Sales were up in triple dipper over 75%. Those maintain. They're selling way more year over year as we move into the first quarter. I think there's a lot of different pieces that are working. Then again, like Kevin mentioned, just the baseline macro, it really dropped in July and it snapped back a little bit in August, so everyone's benefiting from that as well. The other thing I would say is I just think we can't underestimate the dramatic improvements that we've had in our service levels.

Mika Ware: I mean, the other thing I would say is I just think we can't underestimate the dramatic improvements that we've had in our service levels and our guest scores. Like, we were talking about, we've been talking about it for six months of, like, that and the advertising kind of multiplying effect, and that we were seeing more and more momentum throughout the calendar year, and I think we're just continuing to see that. Like, the service levels continue to get better.

Speaker Change #140: and our guest scorers.

Kevin Hochman: Like we were talking about, we've been talking about it for six months of like, that and the advertising have a multiplying effect and that we were seeing more and more momentum throughout the calendar year. And I think we're just continuing to see that.

Mika Ware: The food scores continue to get better, and we see just better traffic trends, so I think these are the things that are always hard to point to because it's not a point-in-time piece of food innovation or pricing or whatever that you can say, okay, I saw an inflection change in the business, but it's clear that our business is a lot stronger because the experience is a lot better. That's helpful.

Kevin Hochman: The service levels continue to get better, the food scores continue to get better, and we see just better traffic trends. So I think these are the things that are always hard to point to because it's not a point in time piece of food innovation or pricing or whatever that you can say, okay, I saw an inflection change in the business, but it's clear that our business is a lot stronger because the experience is a lot better.

Kevin Hochman: And congratulations on that. And maybe just switching gears real quick on the balance sheet, is there anything you can talk about with regard to capital allocation and your leverage ratios coming down quite a bit? Is there any change in thinking with regard to, you know, repurchases or dividends or anything of that nature? Yeah, so our capital allocation strategy for F-25 is going to be more of the same. So we're going to continue to invest back in the business.

Speaker Change #141: That's helpful and congratulations on that and maybe just switching gears real quick on the balance sheet. Is there anything you can talk about with regards to capital allocation and your leverage ratios come down quite a bit?

Speaker Change #141: Is there any change in thinking with regards to repurchases or dividends or anything of that nature?

Speaker Change #143: Yeah, so our capital allocation strategy for F-25 is going to be more of the same. So we're going to continue to prioritize investing back in the business.

Kevin Hochman: And so, you know, we demonstrated that with our CapEx guidance. We're going to continue to pay down debt. So we have a bond due in October, we're going to move that $350 million bond to our to our revolver.

Speaker Change #143: And so, you know, we demonstrated that with our CapEx.

Speaker Change #143: We're going to continue to pay down debt. So we have a bond due in October. We're going to move that $350 million bond to our revolver, and we're going to continue to pay down the debt, probably at similar levels that we paid down this year.

Mika Ware: And we're going to continue to pay down the debt probably at similar levels that we paid down this year. And then we do have some plans to buy back some shares to offset dilution. So we've also factored that into our strategy for next year. So I think it's going to be one more year of the same, invest back in the business, continue to delever, and then buy back some shares to offset dilution. After that, again, we'll all talk and then we'll decide what we can do in N26 and beyond that we can have some more levers to pull. Great, thank you so much.

Speaker Change #143: And then we do have some plans to buy back some shares to offset dilution, so we've also factored that into our strategy for next year. So I think it's going to be one more year of the same, invest back in the business, continue to delever, and then buy back some shares to offset dilution.

Speaker Change #143: After that, again, we'll all talk and then we'll decide what we can do in F26 and beyond that we can have some more levers to pull.

Speaker Change #144: Great. Thank you so much.

Eric Gonzalez: Thanks, Eric. Your next question is from Brian Mullan with Piper. Thank you. Just a question.

Eric Gonzales: Thanks, Eric.

Eric Gonzales: Your next question is from Brian Mullan with Piper Sandler.

Brian Mullan: Hey, hi, Mika, and congrats. Just a question on development. You know, in a prior answer, you told us what the Chili's new unit growth would be for this year. My question is just beyond this year, given all the progress that has taken place on both the top and bottom line. You know, can you just talk about your appetite to build more Chili's restaurants over time? Or, you know, just ask another way, what would you need to see before you might want to accelerate that at all, if you would?

Eric Gonzales: Thank you. Just a question. Hey, I'm Mika and congrats. Just a question on development. You know in a prior answer you told us what the Chili's

Brian Malon: The unit growth would be for this year. My question is just beyond this year, given all the progress that has taken place on both the top and bottom line, you know, can you just talk about your appetite to build more Chili's restaurants over time? Or, you know, just ask another way, you know, what would you need to see before you might want to accelerate that at all, if you would?

Mika Ware: You know, right now, our plans are to keep the Chili's in the 10 to 12 new restaurant openings. We could accelerate that into 15, you know, especially as construction costs start to come down and we continue to accelerate our restaurant operating margin. One thing that we're focused on right now is just watching Maggiano's closely because, again, we only have 50 Maggiano's, so we may want to lean in the Maggiano's side a little bit more than we've leaned into the Chili's.

Speaker Change #146: You know, right now our plans are to keep the chilies in the 10 to 12.

Speaker Change #147: We could accelerate that into 15, especially as construction costs start to come down and we continue to accelerate.

Speaker Change #148: are restaurants.

Speaker Change #149: Operating Margin.

Speaker Change #150: One thing that we're focused on right now is just watching Majanas closely because, again, we only have 50 Majanas, so we may want to lean in the Majana side a little bit more than we've leaned into the Chili's.

Mika Ware: We're going to build, you know, one or two of those are in the pipeline now, so we're going to balance both of those brands, but Chili's for now, I'd say 10 to 12, could accelerate to 15, and then we're going to keep watching the Maggiano's with those improvements that we expect. We're hoping to accelerate that in the out years of that branch. Okay, thanks.

Speaker Change #150: One or two of those are in the pipeline now, so we're going to balance both of those brands. But Chili's for now, I'd say 10 to 12, could accelerate to 15, and then we're going to keep watching the Maggianos. With those improvements that we expect, we're hoping to accelerate that in the out-years of that brand's growth.

Brian Mullan: And then follow up on Maggiano's then, exciting to hear you might want to start building again, just, Kevin, can you explain what are the most important priorities the leadership will be focused on, say, just this year in fiscal 25, you know, understanding there will be improvements? Yeah, we just got back two weeks ago from the Magiano's annual conference in Savannah, and kind of the theme was, you know, Dom, who's our new president, he's not that new anymore, but he was sharing his vision for elevating the brand.

Speaker Change #151: Okay, thanks. And then follow-up on Maggiano's, then I'm excited to hear you might want to start building again.

Speaker Change #152: Kevin, can you explain what are the most important priorities the leadership will be focused on, say, just this year in Fiscal 25, you know, understanding there will be improvements? Yeah, we just got back two weeks ago from the Magianos annual conference in Savannah, and

Speaker Change #153: The kind of the theme was, you know, Dom, who's our new president, he's not that new anymore, but he was...

Brian Mullan: And there are really two components to it, and it actually sounds a lot like Chili's was two years ago, which is, number one, what are the things that get in the way of making the guests have a great experience?

Dom: He was sharing his vision for elevating the brand.

Speaker Change #155: and there's really two components to it. Next, we found a lot like Chili's was two years ago, which is number one.

Kevin Hochman: Like, and so speed of service is an obvious one at Magiano's that we could, you know, if we could just reduce that by a small amount, it could actually lead to a lot more traffic on the weekends, as well as an overall better guest experience. There are a lot of prep steps that we kind of did at Magiano's that probably don't need to be done, so he's challenging some of those things, and he's freeing up those labor hours and then reinvest into having a better guest experience with both better experience in terms of service levels, as well as adding innovation with table-side garnishes, really cool innovation that's going to be coming down the pipe to make Maggiano's relevant and exciting. And so that's really the key thing is elevate the brand, simplify in order to reinvest in the things that are going to separate Maggiano's from the other Italian restaurants that are in the market.

Speaker Change #155: What are the things that get in the way of making the guests have a great experience? And so speed of service is an obvious one at Machiano's that we could just reduce that.

Speaker Change #155: By a small amount, it could actually lead to a lot more traffic on the weekends.

Speaker Change #155: as well as an overall better guest experience.

Speaker Change #155: There are a lot of prep steps that we kind of did.

Speaker Change #156: at Magiana that probably don't need to be done, so he's challenging some of those things. And he's freeing up those labor hours to then reinvest into having a better guest experience with both better experience in terms of service levels as well as adding innovation with table-side garnishes.

Speaker Change #156: really cool innovation that's going to be coming down the pike so big.

Speaker Change #156: Madhya is relevant and exciting.

Speaker Change #156: and so that's really the key thing is elevate the brand, simplify in order to reinvest in the things that are going to separate Maggiano's.

Kevin Hochman: And, you know, I think we're seeing it right now in our cocktail program. So that was the first thing that he went and changed, bringing a master sommelier in to help curate specific wines at a Maggiano price that the guests can enjoy. He's also brought in several experiential cocktails at higher price points. And the number one cocktail now is the new one that he brought in, a Smoking Old Fashioned that comes out in like a, basically like a cage with smoke, and it's premium priced.

Speaker Change #156: from the other Italian restaurants that are in the market. And I think we're seeing it right now in our cocktail program, so that was the first thing that you went and changed, bringing a match for Sunday in.

Speaker Change #157: to help curate specific wines at a Maggiano price that the guests can enjoy. He's also brought in several experiential cocktails at higher price points.

Speaker Change #157: and the number one cocktail now is the new one that he brought in a smoking old batch and it comes out like a

Brian Mullan: And I will tell you, it's the first thing, we've now experienced the first change in our improvement in alcohol mix that we've seen in over a decade of Maggiano. So and that's just, he's just getting started on innovation. There's a whole slug of food innovation that's really exciting and going to help drive check and traffic coming in September. So we're just getting started on the Maggiano's initiatives, but I feel like that team is hunting in the right areas.

Speaker Change #157: Basically like a cage with smoke and it's premium priced and I'll tell you it's the first thing

Speaker Change #157: We've now experienced the first change in our improvement in alcohol mix.

Speaker Change #157: and we've seen it over a decade at Baggiano. So, and that's just, he's just getting started on innovation.

Speaker Change #157: There's a whole slug of food innovation that's really exciting and going to help drive check in traffic.

Speaker Change #157: coming in September. So we're just getting started.

Speaker Change #157: on the Maggiano's initiatives, but I feel like that team is hunting in the right areas.

Brian Mullan: There's a bigger ambition to grow on that brand and grow profitably. And when we have more news to report on more specifics and details of what these things are going to get, we're very eager to share that with you. Thank you very much.

Speaker Change #158: There's a bigger ambition to grow on that brand and grow profitably. When we have more news to report on more specifics and details of what these things are going to get, we're very eager to share that with you.

Speaker Change #159: Thank you very much.

Operator: We have reached the end of the question and answer session, and I would now like to turn the floor back to Ken Sanders for closing. Thank you. And that concludes our call for today. We appreciate everyone joining us and look forward to updating you on our first quarter results in October. Have a wonderful day.

Speaker Change #159: We have reached the end of the question and answer session, and I would now like to turn the floor back to Ken Sanders for closing remarks.

Ken Sanders: Thank you, and that concludes our call for today. We appreciate everyone joining us and look forward to updating you on our first quarter results in October . Have a wonderful day.

Operator: Thank you. This concludes today's conference call. You may disconnect your phone lines at this time and have a wonderful day.

Speaker Change #161: Thank you. This concludes today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.

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Operator: Thank you for your participation. [music] Good day and welcome to Brinker International's Q4F24 earnings call. At this time, all participants have been placed on a list. The floor will be open for questions and comments following the, It is now my pleasure to turn the floor over to your host, Kim Sanders, Vice President of Investor Relations. Ma'am, the floor is yours.

Speaker Change #161: [inaudible]

Speaker Change #162: Good day and welcome to the Brinker International's Q4F24 earnings call.

Speaker Change #163: At this time, all participants have been placed on a listen-only mode. The floor will be open for questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, Kim Sanders, Vice President of Investor Relations. Ma'am, the floor is yours.

Kim Sanders: Thank you, Holly, and good morning, everyone, and thank you for joining us on today's call. Here with me today are Kevin Hochman, President and Chief Executive Officer, and Mika Ware, our new Chief Financial Officer. Results for our fourth quarter were released earlier this morning and are available on our website at Brinker.com. As usual, Kevin and Mika will first make prepared comments related to our strategic initiatives and operating performance, then we will open the call for your questions.

Kim Sanders: Thank you, Holly, and good morning, everyone, and thank you for joining us on today's call.

Speaker Change #164: Here with me today are Kevin Hochman, President and Chief Executive Officer, and Mika Ware, our new Chief Financial Officer.

Holly: Results for our fourth quarter were released earlier this morning and are available on our website at Brinker.com As usual, Kevin and Mika will first make prepared comments related to our strategic initiatives and operating performance. Then we will open the call for your questions.

Kim Sanders: Before beginning our comments, I would like to remind everyone of our safe harbor regarding forward-looking statements. During our call, management may discuss certain items which are not based entirely on historical facts. Any such items should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All such statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated.

Speaker Change #165: Before beginning our comments, I would like to remind everyone of our safe harbor regarding forward-looking statements.

Speaker Change #165: During our call, management may discuss certain items which are not based entirely on historical facts. Any such items should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Speaker Change #165: All such statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated.

Kevin Hochman: Such risks and uncertainties include factors more completely described in this morning's press release and the company's filings with the SEC. And of course, on the call, we may refer to certain non-GAAP financial measures that management uses in its review of the business and believes will provide insight into the company's ongoing operations. And with that said, I will return the call over to Kevin.

Speaker Change #165: Such risks and uncertainties include factors more completely described in this morning's press release and the company's filings with the SEC.

Speaker Change #165: And, of course, on the call, we may refer to certain non-GAAP financial measures that management uses in its review of the business and believes will provide insight into the company's ongoing operations.

Kevin Hochman: Thank you, Kim, and thank you for your 26 years of leadership on the Brinker Finance Team. We are very excited to have you in this role. Good morning, everyone, and thank you for joining us as we wrap up our fiscal year and share our plans for Fiscal 25. Fiscal 24 marked the second full year of our turnaround, and we're very pleased with our progress and momentum. It was a year we delivered both big growth and major operational improvements, which sets us up for continued profitable and sustainable long-term growth.

Speaker Change #165: And with that said, I will return the call over to Kevin.

Speaker Change #165: Thank you, Kim, and thank you for your 26 years of leadership on the Brinker Finance Team. We are very excited to have you in this role. Good morning, everyone, and thank you for joining us as we wrap up our fiscal year and share our plans for Fiscal 25.

Kevin Hochman: Fiscal 24 marked the second full year of our turnaround, and we're very pleased with our progress and momentum. It was a year we delivered both big growth and major operational improvements, which sets us up for continued profitable and sustainable long-term growth.

Kevin Hochman: The vision we introduced two years ago was to improve our restaurant's four-wall economics by focusing on the fundamentals of casual dining, a differentiated brand with credible menu items, served with great hospitality, and a fun and friendly atmosphere. And while we still have lots more work to do, we're well on our way to achieving that vision.

Kevin Hochman: The vision we introduced two years ago was to improve our restaurant's four-wall economics through focusing on the fundamentals of casual dining, a differentiated brand with credible menu items, served with great hospitality, and a fun and friendly atmosphere.

Kevin Hochman: Over the past two fiscal years, we've grown Chili's restaurant AUVs by $440,000 to $3.6 million, and we've grown Brinker's adjusted EBITDA by 25 percent. This is excellent progress on our four-wall economics. The biggest driver of these results are the significant improvements we've made to the guest experience. On the operations front, we conducted listening sessions with our field restaurant leaders all over the country to better understand what we could do to reduce or eliminate, to make our restaurant jobs easier and more rewarding.

Kevin Hochman: And while we still have lots more work to do, we're well on our way to achieving that vision. Over the past two fiscal years, we've grown Chili's restaurant AUVs by $440,000 to $3.6 million, and we've grown Brinker's adjusted EBITDA by 25%. This is excellent progress on our four-wheel economics.

Kevin Hochman: The biggest driver of these results are the significant improvements we've made to the guest experience.

Kevin Hochman: On the operations front, we conducted listening sessions with our field restaurant leaders all over the country to better understand what we could do to reduce or eliminate the public.

Kevin Hochman: Today, the Chili's menu has 22% less items than it did two years ago. We've eliminated many prep steps and changing ingredients, reduced administrative tasks like how often we count inventory, and other complexities that reduces team member morale and gets in the way of great execution. I'm proud to say we still do these listening sessions, and they are still led by myself and other members of our executive team.

Kevin Hochman: to make our restaurant jobs easier and more rewarding. Today, the chilly venue has 22% less levels than it did two years ago.

Kevin Hochman: We've eliminated many prep steps and pantry ingredients, reduced administrative tasks like how often we count inventory, and other complexity that reduces team member morale and gets in the way of great execution.

Kevin Hochman: I'm proud to say we still do these listening sessions, and they are still led by myself and other members of our executive team.

Kevin Hochman: We now have a cross-functional simplification team, first led by our Chief Operating Officer, Doug Cummings, which is where we get most of the simplification ideas. Co-designing our operational programs by intently listening to our restaurant team's ideas is a new way of doing business at Brinker International. In addition to simplification, we're making our technology more reliable, which also reduces friction for team members and guests. We've made investments to bring ZeeOps pay-at-the-table technology to replace the prior system, which has increased reliability and usage.

Kevin Hochman: We've also reduced server handheld ordering tablet errors from 5% two years ago to less than 1% today, and we are on track to finish the replacement of an end-of-life kitchen display system by October. We recently rolled out AI labor forecasting, which is reducing the amount of time our general managers need to write labor schedules, as well as making their forecast more accurate.

Doug Cummings: We now have a cross-functional simplification team personally led by our Chief Operating Officer Doug Cummings, which is where we get most of the simplification ideas. Co-designing our operational programs by intently listening to our restaurant team's ideas is the new way of doing business at Brinker International.

Doug Cummings: In addition to simplification, we're making our technology more reliable, which also reduces friction for team member and guests.

Doug Cummings: We've made investments to bring the off-the-table technology to replace the prior system, which has increased reliability and usage. We've also reduced server handheld ordering tablet errors.

Doug Cummings: from 5% two years ago to less than 1% today, and we are on track to finish the replacement of an end-of-life kitchen display system by October . We recently rolled out AI labor forecasting, which is reducing the amount of time our general managers need to write labor schedules, as well as making their forecast more accurate.

Kevin Hochman: With a renewed focus on our fundamentals, technology is now working harder than ever for our Achilles managers, with lots more room for upside. In addition to improved technology over the last two years, we've also made investments in labor and facilities, which is improving the overall experience. Labor investments include more hours for QA, cooks, and most recently, bussers, which are all helping deliver record food grade scores.

Doug Cummings: With a renewed focus on our fundamentals, technology is now working harder than ever for our Chile's managers, with lots more room for upside.

Doug Cummings: In addition to improved technology over the last two years, we've also made investments in labor and facilities, which is improving the overall experience. Labor investments include more hours for QA, cooks, and most recently, bussers, which are all helping deliver record food grade scores.

Kevin Hochman: Our facilities investments have helped us catch up on deferred maintenance during the COVID years and created a better environment for both team members and guests. Simplification, stabilization of restaurant technology, and labor and facility investments have delivered dramatic improvements in the guest experience, with our daily tracked dine-in metric guests with a problem dropping from 5% two years ago to just 2.7% today. And that's the lowest sustained score we've seen tracking that measure.

Doug Cummings: Our facilities investments have helped us catch up on deferred maintenance during the COVID years and is creating a better environment for both team members and guests [inaudible] Thank you for your time and for your time and for your time and for your time

Speaker Change #167: Simplification, stabilization of restaurant technology, and labor and facility investments have delivered dramatic improvements in the guest experience, with our daily track dine-in metric just with a problem dropping from 5% two years ago to just 2.7% today. And that's the lowest sustained score we've seen tracking that measure.

Kevin Hochman: Even with the surge in traffic over the past few months, our Google ratings for the past 90 days have also improved to a all-time high of 4.1. We've also made good progress over the last two years in improving our core menu, margaritas, chicken crispers, burgers, and fajitas. We now have a clear good-better-best lineup of margaritas with entry price points of $3.99 and $6 for those gifts, looking for lower price points but still wanting great taste. And those low-priced margaritas include premium tequilas like Espolon Reposado and Patron.

Speaker Change #167: And even with the surge in traffic over the past few months, our Google ratings for the past 90 days have also improved to a all-time high of 4.1.

Speaker Change #168: We've also made good progress over the last two years in improving our core menu, margaritas, chicken crispers, burgers, and fajitas.

Speaker Change #168: We now have a clear good-better-best lineup of margaritas with entry price points of $3.99 and $6.00 for those gifts.

Speaker Change #169: Looking for lower price points, but still wanting great taste.

Speaker Change #169: Those low-priced margaritas include premium tequilas like Espolon, Reposado, and Patron. But in addition to making our entry-point margaritas stronger, we also now have super-premium offerings like Casamigos and Termata Blanco, which have allowed us to double the number of margaritas sold over $10 price points.

Kevin Hochman: But in addition to making our entry-point margaritas stronger, we also now have super premium offerings like Casamigos and Termata Blanco, which have allowed us to double the number of margaritas sold over $10 price points. We've learned that some guests love a great price point with great tequila, and others are willing to spend a little more for that super premium brand. Our job is to make sure we offer items for all of our guests in the core segments that we want to win in.

Speaker Change #169: We've learned that some guests love a great price point with great tequila, and others are willing to spend a little more for that super premium brand. Our job is to make sure we offer items for all of our guests in the course segments that we want to win in.

Kevin Hochman: Having a balance of price points allows us to deliver great everyday value while continuing to keep food costs low and to grow operating margins. We have made similar moves with innovation in burgers and boneless fried chicken to create improved offerings and deliver barbell pricing in those core pork sectors. Fajitas will be the last of the Core 4 to be upgraded, with improvements starting in Q2 and a full relaunch coming in Q4.

Speaker Change #169: Having a balance of price points allows us to deliver great everyday value, while continuing to keep food costs low and to grow operating margin.

Speaker Change #169: We have made similar moves with innovation in burgers and boneless fried chicken to create improved offerings and deliver barbell pricing in those core four segments.

Speaker Change #169: Fajitas will be the last of the Core 4 to be upgraded, with improvements starting in Q2 and a full relaunch coming in Q4.

Kevin Hochman: We also successfully restarted our marketing after several years off air with hard-hitting advertising placed in shows where people are watching, live sports, premium cable, primetime, streaming and digital channels. Thanks to our CMO, George Felix, and his leaders, Jesse Johnson and Steve Kelly, and their marketing team, Chili's has never been more relevant with TV, streaming and social media working very hard to put us back in the cultural conversation. And being back in the cultural conversation gets us back in the consumer's consideration set, which ultimately leads to more traffic.

Speaker Change #170: We also successfully restarted our marketing after several years off air with hard-hitting advertising placed in shows where people are watching live sports, premium cable, primetime, streaming and digital channels. Thanks to our CMO George Felix and his leaders Jesse Johnson and Steve Kelly and their marketing team

Speaker Change #171: Chili's has never been more relevant with TV, streaming, and social media working very hard to put us back in the cultural conversation. And being back in the cultural conversation gets us back in the consumer's consideration set, which ultimately leads to more traffic.

Kevin Hochman: Even with all these significant investments we've put into the business, we've made good progress on our ultimate goal of improving unit economics, delivering 3.3% brinker restaurant operating margins in fiscal 24, a 210 basis points improvement from the prior year. Before I talk about what's coming in fiscal 25, let me give a little more context of what we saw in Q4. With the launch of our Big Smasher and our Triple Dipper going viral on TikTok, we experienced a step change in our business, delivering 14.8% sales growth and 5.9% traffic growth versus a year ago.

Speaker Change #171: And even with all these significant investments we've put into the business, we've made good progress on our ultimate goal of improving unit economics, delivering 3.3% breaker restaurant operating margins in fiscal 24, a 210 basis points improvement from the prior year.

Kevin Hochman: To put in context, this was 15.6 points better than the industry on sales and 9.4 points better than the industry on traffic. A majority of the incremental kits were new to Chili's, so we responded quickly by adding labor to ensure we could handle the increased volume.

Speaker Change #171: Before I talk about what's coming in Fiscal 25, let me give a little more context of what we saw in Q4. With the launch of our Big Smasher and our Triple Dipper going viral on TikTok,

Speaker Change #171: We experienced a step change in our business, delivering 14.8% sales growth and 5.9% traffic growth versus a year ago.

Speaker Change #171: To put in context, this was 15.6 points better than the industry on sales and 9.4 points better than the industry on traffic.

Speaker Change #171: A majority of the incremental kits were new to Chili's, so we responded quickly by adding labor to ensure we could handle the increased volume.

Kevin Hochman: Our restaurant experience would normally be very challenged with such a sudden influx of traffic, but with the operational simplification over the past two years and labor investments that we made in Q4, we were able to maintain our record guest metrics throughout May and now into June and July. Now, let me spend a few minutes on what's to come in Fiscal 25. For the front half, we'll continue to drive the day smasher, and it's been successful in driving traffic and tapping into the cultural conversation about fast food prices.

Speaker Change #171: Our restaurant experience would normally be very challenged with such a sudden influx of traffic, but with the operational simplification over the past two years and labor investments that we made in Q4, we were able to maintain our record guest metrics throughout May and now into June and July.

Speaker Change #171: Now let me spend a few minutes on what's to come in Fiscal 25. For the front half, we'll continue to drive the day smasher as it's been successful in driving traffic and tapping into the cultural conversation about fast food prices.

Speaker Change #171: An almost half-pound burger, bottomless chips and salsa, and bottomless drink at $10.99 continues to be an industry-leading value that we believe it to be, and it continues to work.

Kevin Hochman: During the back half of the year, our plan is to refresh the 1099 message with new product news and superior value in a large fast food segment. We will commercialize this new news using the successful Better Values in Fast Food campaign we created during the successful Big Smasher launch last May. In Q4, our plan is to relaunch the Fajitas platform, which is currently a $200 million business. The new Fajita line-up will feature improved chicken, guacamole, and pico de gallo recipes, and upgraded soft tortillas.

Speaker Change #171: During the back half of the year, our plan is to refresh the 1099 message with new product news and superior value in a large fast food segment. We will commercialize this new news using the successful Better Values in Fast Food campaign we created during the successful Big Smasher launch last May.

Kevin Hochman: We're also incorporating new dippable add-ons and a completely new menu merchandising designed to drive bigger fajita bundles. We believe strengthening the core and expanding offerings like we've done in other Core 4 segments will also work on fajitas and drive a significant lift into sales. And throughout the year, we have beverage innovation at both the opening price point and premium tiers to create excitement for our guests to return. It's going to be an exciting year of food and drink innovation.

Speaker Change #171: In Q4, our plan is to relaunch the Behemoth platform, which is currently a $200 million business.

Speaker Change #172: The new Fajita line-up will feature improved chicken, guacamole and pico de gallo recipes, and upgraded soft tortillas. We're also incorporating new dippable add-ons and a completely new menu merchandising designed to drive bigger fajita bundles.

Speaker Change #172: We believe strengthening the Corps and expanding offerings like we've done in other Corps force segments will also work on fajitas and drive a significant lift in the business.

Speaker Change #173: And throughout the year we'll have beverage innovation at both the opening price point and premium tiers to create a setting for our guests to return. It's going to be an exciting year of food and drink innovation.

Kevin Hochman: In addition to strong food innovation throughout the year, we'll continue to make strides to reduce pantry skews and simplify operational processes. At our annual general manager conference last week here in Dallas, we rolled out the first wave of fiscal 25 simplification, which included simplified avocado prep that will also mean a fresher product for guests, a reduction in time spent forging brisket, a new bulk breading chicken crisper procedure, and the introduction of a new process that reduces the time required to grill steaks.

Speaker Change #173: In addition to strong food innovation throughout the year, we'll continue to make strides to reduce pantry skews and simplify operational processes.

Kevin Hochman: These changes were met with a lot of excitement from our managers, because the ideas all came from them. We also have a plan to improve our off-premise business execution by streamlining operational process to improve order accuracy, eliminating curbside to remove friction for team members, and improving packaging to ensure our food arrives hot and fresh. The first of these changes, curbside removal, will roll out by the end of Q1.

Speaker Change #173: At our annual General Manager Conference last week here in Dallas,

Speaker Change #173: We rolled out the first wave of fiscal 25 simplification, which included simplified avocado prep that will also mean a fresher product for guests.

Speaker Change #173: Reduction in time spent portioning brisket, a new bulk breading chicken crisper procedure, and the introduction of a new process that reduces the time required to grill steaks. These changes were met with a lot of excitement from our managers because the ideas all came from them.

Speaker Change #173: We also have a plan to improve our off-premise business execution by streamlining operational process to improve order accuracy, eliminating curbside to remove friction for team members, and improving packaging to ensure our food arrives hot and fresh.

Kevin Hochman: If you recall, our obsession metric for Fiscal 23 was manager turnover, and for Fiscal 24, it was hourly turnover, both of which we made significant progress on. For Fiscal 25, the obsession metric our vice presidents of operations chose is growing traffic. We now have a joint business plan with our operations leadership to continue to accelerate traffic ahead of the industry, which includes additional simplification, as well as an incremental $15 to $20 million investment in labor. We rolled out the new traffic obsession metric at last week's Annual General Manager Conference with the theme, Making Every Guest Count, with content and labor investments focused on driving sustainable traffic growth.

Speaker Change #173: The first of these changes, curbside removal, will roll out by the end of Q1.

Speaker Change #173: Now I'd like to spend a little time sharing our operations obsession metric for Fiscal 25. If you recall, our obsession metric for Fiscal 23 was manager turnover, for Fiscal 24 was hourly turnover, both of which we made significant progress on.

Speaker Change #173: For Fiscal 25, the obsession metric our Vice Presidents of Operations chose is growing traffic.

Speaker Change #173: We now have a joint business plan with our operations leadership to continue to accelerate traffic ahead of the industry, which includes an additional simplification, as well as an incremental $15 to $20 million investment in labor.

Speaker Change #173: We rolled up a new traffic obsession metric at last week's Annual General Manager Conference with the theme Making Every Guest Count with content and labor investments focused on driving sustainable traffic growth.

Kevin Hochman: To close, the past two years of our Chili's turnaround was all about improving the guest experience and creating a traffic-driving model to build sustainable momentum in our business. The next two years will be continuing more of the same, driving our differentiated brand with advertising, superior value, and food innovation with Fargo pricing strategy, simplifying the operation and removing friction to improve the guest experience, and creating a fun and inviting environment for our guests and teams.

Speaker Change #173: To close, the past two years of our Chili's turnaround was all about improving the guest experience and creating a traffic driving model to build sustainable momentum in our business.

Speaker Change #173: The next two years will be continuing more of the same, driving our differentiated brain with advertising, superior value, and food innovation with barbell pricing strategy.

Speaker Change #173: Simplifying the operation and removing friction to improve the guest experience.

Kevin Hochman: We will continue to bring new and fresh ideas to the business and leverage technology to help, but they will still be focused on those key casual dining fundamentals that are proven to deliver long-term profitable and sustainable results. And with that, I want to turn it over to our new Chief Financial Officer, Mika Ware. Mika brings 36 years of experience at Brinker to the role. She's basically done every finance role of the company.

Speaker Change #173: and creating a fun and inviting environment for our guests and teams. We will continue to bring new and fresh ideas to the business and leverage technology to help, but they will still be focused on those key casual dining fundamentals that are proven to deliver long-term profitable and sustainable results.

Mika Ware: And with that, I want to turn it over to our new Chief Financial Officer, Mika Ware. Mika brings 36 years of experience at Brinker to the role. She's basically done every finance role at the company. And before that, she started her career at Chili's and Brinker working in the restaurants.

Kevin Hochman: And before that, she started her career at Chili's and Brinker, working in the restaurants. I can't think of a leader in our company who knows more about our Chili's business, and her passion for people and winning will help take Brinker through its next wave of profitable growth. And with that, please take it away, Mika.

Speaker Change #174: I can't think of a leader in our company who knows more about our Chili's business and her passion for people and winning will help take Rickert through its next wave of profitable growth. And with that, please take it away, Mika.

Mika Ware: Thank you, Kevin, and good morning, everyone. I am so honored to represent our amazing team as Brinker's Chief Financial Officer. I'm excited to continue executing our strategy and helping our operators grow our very strong, Today's results mark the completion of a very successful fiscal 2024 for Brinker. This was year two of our new strategy, and it was great to see it come to life, especially through the results we were able to deliver.

Mika Ware: Thank you, Kevin, and good morning, everyone. I am so honored to represent our amazing team as Sprinkler's Chief Financial Officer. I'm excited to continue executing our strategy and helping our operators grow our very strong brands.

Speaker Change #175: Today's results mark the completion of a very successful fiscal 2024 for Brinker.

Speaker Change #175: This was year two of our new strategy, and it was great to see it come to life, especially through the results we were able to deliver. F-24 reported annual revenue growth of 6.8 percent.

Mika Ware: F24 reported annual revenue growth of 6.8%, restaurant operating margin improvement of 210 basis points, and adjusted ETS growth of approximately 45%. Turning to the fourth quarter, we saw strong year-over-year top-line growth, comp sales and traffic well above our historical and industry averages, and significant restaurant margin expansion. Brinker reported total revenues of $1,208,000,000 for the quarter, with consolidated comp sales of positive 13.5%.

Speaker Change #175: Restaurant Operating Margin Improvement of 210 Basis Points and Adjusted ETS Growth of approximately 45%.

Speaker Change #175: Turning to the fourth quarter, we saw strong year-over-year top-line growth, comp sales and traffic well above our historical and industry averages, and significant restaurant margin expansion.

Speaker Change #175: Brinker reported total revenues of $1,208,000,000 for the quarter with consolidated comp sales of positive 13.5%.

Mika Ware: Our adjusted diluted ETS for the quarter was $1.61, up from $1.39 last year. Both brands reported top line sales growth, with Chili's comps coming in at positive 14.8%, driven by price of 8.1 percent. A positive mix of 0.8% and positive traffic of 5.9%. These results were driven by a strong partnership between our marketing and operations teams with our successful launch of the Big Smasher on the 3 For Me value platform. In addition to positive traffic, mix was also positive for the quarter, driven by more triple differ cells, which more than offset a very modest mix shift into the 1099 value.

Speaker Change #175: Our adjusted diluted EPS for the quarter was $1.61 up from $1.39 last year.

Speaker Change #175: Both brands reported top-line sales growth with Chili's comps coming in at positive 14.8 percent, driven by price of 8.1 percent, positive mix of 0.8 percent, and positive traffic of 5.9 percent.

Speaker Change #175: These results were driven by a strong partnership between our marketing and operations teams with our successful launch of the Big Smasher on the 3ForMe value platform.

Speaker Change #175: In addition to positive traffic, mix was also positive for the quarter driven by more triple dipper cells which more than offset a very modest mix shift into the 1099 value tier.

Mika Ware: Turning to Maggiano's, the brand reported 2.5% positive comp sales for the quarter, driven by 9.2% of price and positive 2.2% of mix, offset by negative 8.9% traffic. Dominique and the team are making progress, applying learnings from our Chili's turnaround to drive long-term sustainable growth at the brand. He is strengthening his leadership team, most recently with the addition of Anthony Amoroso as Vice President of Innovation and Growth. Anthony is a highly successful Michelin star chef with a deep Italian-American heritage, who's the perfect cultural fit for Maggiano's.

Speaker Change #176: Turning to Maggiano's, the brand reported 2.5% positive comp sales for the quarter, driven by 9.2% of price and positive 2.2% of mix, offset by negative 8.9% traffic.

Dominique: Dominique and the team are making progress applying learnings from our Chili's turnaround to drive long-term sustainable growth at the brand.

Speaker Change #177: He is strengthening his leadership team, most recently with the addition of Anthony Amoroso as Vice President of Innovation and Growth. Anthony is a highly successful Michelin star chef with a deep Italian-American heritage who is the perfect cultural fit for the Maggiano's team.

Mika Ware: They are working to simplify operations and redirect their efforts to elevate the guest experience and drive food and beverage innovation. I'm excited to share more from Majano's in the coming quarter. Now that we've covered the top line from both brands, let's talk about how our sales flow through to the bottom line. With the traffic spike at Chili's during the fourth quarter, we chose to accelerate investments in key areas, such as repair and maintenance, to ensure our buildings were welcoming and well-maintained, and labor, so our teams were staffed up to take care of the guests and deliver great hospitality.

Speaker Change #178: They are working to simplify operations and redirect their efforts to elevate the guest experience and drive food and beverage innovation. I'm excited to share more from Maggiano's in the coming quarters.

Speaker Change #179: Now that we've covered the top line from both brands, let's talk about how our sales flow through to the bottom line.

Speaker Change #179: With the traffic spike at Chili's during the fourth quarter, we chose to accelerate investments in key areas, such as repair and maintenance, to ensure our buildings were welcoming and well-maintained, and labor so our teams were staffed up to take care of the guests and deliver great hospitality.

Mika Ware: Restaurant operating margin for the quarter was 15.2%, an impressive 180 basis points improvement year over year, primarily driven by sales leverage from top line growth. This resulted in favorable food and beverage and labor costs, partially offset by a 90 basis points increase in restaurant expenses. Food and beverage cost for the quarter was favorable 140 basis points year-over-year, benefiting from higher prices, partially offset by commodity inflation.

Speaker Change #179: Restaurant operating margin for the quarter was 15.2%, an impressive 180 basis points improvement year-over-year, primarily driven by sales leverage from top-line growth.

Speaker Change #179: This resulted in favorable food and beverage and labor costs partially offset by a 90 basis points increase in restaurant expense.

Speaker Change #179: Food and beverage costs for the quarter was favorable 140 basis points year-over-year, benefiting from higher price, partially offset by commodity inflation.

Speaker Change #179: Labor expense for the quarter was favorable 130 basis points year over year, despite incremental labor investment.

Mika Ware: Top-line growth offsets the additional labor hours as well as wage rate inflation of approximately 3.5%. Advertising for the quarter increased approximately $14 million versus last year, which has been a highly successful strategy for us. G&A for the quarter came in at 4.3% of revenues, with the year-over-year increase largely driven by an increase in incentive-based compensation expense due to improved financial performance. Capital expenditures for the quarter were approximately $58 million, driven by equipment replacement and maintenance, new restaurant development, IT upgrades, and restaurant reimagining. For the full year, capital expenditures came in at $199 million.

Speaker Change #179: Top-line growth offsets the additional labor hours as well as wage rate inflation of approximately 3.5%.

Speaker Change #179: Advertising for the quarter increased approximately $14 million versus last year, which has been a highly successful strategy for us.

Speaker Change #179: G&A for the Quarter came in at 4.3% of revenues, with the year-over-year increase largely driven by an increase in incentive-based compensation expense due to improved financial performance.

Speaker Change #179: Capital expenditures for the quarter were approximately $58 million, driven by equipment replacement and maintenance, new restaurant development, IT upgrades, and restaurant re-images. For the full year, capital expenditures came in at $199 million.

Mika Ware: Fourth quarter adjusted EBITDA was $142 million, a 24% increase from the prior year, and full year adjusted EBITDA totaled $444 million, an increase of 28% versus the prior year. We continue to strengthen our balance sheet by repaying the remaining outstanding balance of $51 million on our Evolving Credit Agreement during the quarter. Our funded debt to EBITDA ratio improved to 1.64 times at quarter end. As Kevin mentioned, while the industry softened in July due to rocky macros, our quarter-to-date sales trends have remained strong, but at a more sustainable level. July sales for Chili's were in the high single digits, including positive traffic.

Speaker Change #179: Fourth quarter adjusted EBITDA was $142 million, a 24% increase from prior year, and full year adjusted EBITDA totaled $444 million, an increase of 28% versus prior year.

Speaker Change #179: We continue to strengthen our balance sheet by repaying the remaining outstanding balance of $51 million on our evolving credit agreement during the quarter. Our fund-to-debt to EBITDA ratio improved to 1.64 times at quarter end.

Speaker Change #179: As Kevin mentioned, while the industry softened in July due to rocky macros, our quarter-to-date sales trends have remained strong, but at a more sustainable level.

Kevin Hochman: July's sales for Chili's were in the high single digits, including positive traffic. We've also maintained our gap to the casual dining industry through the first week in August by approximately 13% in sales and 8% in traffic.

Mika Ware: We've also maintained our gap to the casual dining industry through the first week in August by approximately 13% in sales and 8% in traffic. Before I get into guidance, let me build on Kevin's comments by sharing some of the strategic financial choices we will continue to make to maintain our strong performance in fiscal 2025. We will continue with our barbell pricing strategy to protect our industry-leading value for those that need it, while providing more premium options for those who want a more elevated experience. We will continue to focus on menu management with the goal of keeping mixed flat to slightly negative in the current economic environment.

Kevin Hochman: Before I get into guidance, let me build on Kevin's comments by sharing some of the strategic financial choices

Kevin Hochman: We will continue to make to maintain our strong performance in fiscal 2025.

Kevin Hochman: We will continue with our Barb Bell pricing strategy to protect our industry-leading value for those that need it, while providing more premium options for those who want a more elevated experience.

Kevin Hochman: We will continue to focus on menu management, with a goal of keeping mixed flat to slightly negative in the current economic environment. And we'll continue to focus on improving the guest experience, with expectations of delivering traffic well above the industry.

Mika Ware: And we'll continue to focus on improving the guest experience with expectations of delivering traffic well above the individual. Now turning to fiscal 2025 guidance. In this morning's press release, we shared that we expect S-25 annual revenues in the range of $4.55 billion to $4.62 billion. Adjusted Diluted EPS in the range of $4.35 to $4.75.

Kevin Hochman: Now turning to fiscal 2025 guidance.

Kevin Hochman: In this morning's press release, we shared that we expect F-25 annual revenues in the range of $4.55 billion to $4.62 billion.

Kevin Hochman: Adjusted Diluted EPS in the range of $4.35 to $4.75.

Mika Ware: Weighted average shares in the range of $45 to $47 million And capital expenditures in the range of $195 million to $215 million, Assumptions underlying this guidance include plain commodity inflation in the low single digits, Wage rate inflation is in the mid-single digits and a tax rate in the low-double digits. To provide some additional context as to how we landed on these guidance numbers, while we are pleased with where the business is and confident our plans will enable us to continue to significantly outperform the industry on sales and traffic, we are also mindful of what we are seeing in the industry and in the macros. Even though we are not experiencing the same softness as others today, we did contemplate the macros in our guidance. I'll wrap up with this.

Kevin Hochman: Weighted average shares in the range of $45 to $47 million, and capital expenditures in the range of $195 million to $215 million.

Kevin Hochman: Assumptions underlying this guidance include plain commodity inflation in the low single digits, wage rate inflation in the mid-single digits, and a tax rate in the low double digits.

Kevin Hochman: To provide some additional context as to how we landed on these guidance numbers, while we are pleased with where the business is and confident in our plans,

Kevin Hochman: Confident our plans will enable us to continue to significantly outperform the industry on sales and traffic, we are also mindful of what we are seeing in the industry and in the macros. Even though we are not experiencing the same softness as others today, we did contemplate the macros in our guidance.

Mika Ware: We are encouraged by the momentum our strategy has created in the business, and we are focused on executing at an even higher level and ensuring continued financial momentum throughout F25. We're watching the macros closely, and we believe we're well-positioned to navigate the anticipated volatility and lay plenty of runway to continue to execute on our key priorities. We look forward to sharing our progress during the upcoming quarters. With our comments now complete, I will turn the call back to Holly to moderate questions.

Kevin Hochman: I'll wrap up with this, we are encouraged with the momentum our strategy has created in the business and we are focused on executing at an even higher level and ensuring continued financial momentum throughout F25.

Kevin Hochman: We're watching the macros closely, and we believe we're well positioned to navigate the anticipated chalkiness and leave plenty of runway to continue to execute on our key priorities. We look forward to sharing our progress during upcoming quarters.

Kevin Hochman: With our comments now complete, I will turn the call back to Holly to moderate questions.

Operator: Thank you. At this time, we will be conducting a question and answer. If you have any questions or comments, please press star 1 on your phone at this, We ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality.

Kevin Hochman: Holly?

Holly: Thank you. At this time we will be conducting a question and answer session. If you have any questions or comments please press star 1 on your phone at this time.

Holly: We ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions.

Operator: Please hold while we poll for questions. Your first question for today is from Chris O'Cole with. Thanks. Good morning, guys.

Speaker Change #180: Your first question for today is from Chris O'Cole with Stiefel.

Chris O'Cole: Micah, the midpoint of the earnings guidance suggests a rate below the three to year targeted range, I think was 13 to 17%. Given the revenue guidance was roughly in line with the three to 5% growth target, can you can you help us understand what's driving the relative margin pressure for next year? Yeah, so there's two main things.

Chris O'Cole: Thanks. Good morning, guys.

Speaker Change #181: Thank you. Thank you. Thank you.

Mika Ware: Mika, the midpoint of the earnings guidance suggests a rate below the three-to-year targeted range I think was 13 to 17 percent. Given the revenue guidance was roughly in line with the three to five percent growth target, can you can you help us understand what's driving the relative margin pressure for next year?

Mika Ware: First, in the prepared comments, I talked about the wage rate inflation and the commodity inflation. The second thing is we do have some incremental planned investments into the F-25 plan. Kevin talked about the incremental investment into labor, which is $15 to $20 million. And we've also beefed up our media plan by about approximately $15 to $18 million more. So we do have some incremental investments that we have contemplated in that guidance. Okay, that's helpful.

Speaker Change #182: Yes, so there's two main things.

Speaker Change #183: First, in the prepared comments, I talked about the wage rate inflation and the commodity inflation. The second thing is, we do have some incremental planned investments into the F-25 plan.

Speaker Change #183: Kevin talked about the incremental investment into labor, which is $15 to $20 million, and we've also beefed up our media plan by about approximately $15 to $18 million more. So we do have some incremental investments that we have contemplated in that guidance.

Speaker Change #183: Okay that's helpful and then Kevin I was hoping you could provide and I apologize if I miss this but I was hoping you provide an update on the Gale partnership and any progress standing up around standing up the required infrastructure to keep customers refreshed with current data.

Kevin Hochman: And then, Kevin, I was hoping you could provide and I apologize if I miss this, but I was hoping you provide an update on the Gale partnership and any progress standing up around standing up the required infrastructure to keep customers refreshed with current data. Yeah, so the update there is that we're continuing our efforts to enhance our direct marketing and optimize segmentation with targeted emails. So we are leveraging the real-time data now that we're getting with the Xeos rollout.

Speaker Change #184: Yeah, so the update there is that we're continuing our efforts.

Speaker Change #185: To enhance our direct marketing and optimize segmentation with targeted emails, so we are leveraging the real-time data now that we're getting with the XeoScrollout, so if you recall, we needed to get that rolled out in order to get the tokens, build out the tokens, and so that's been done.

Kevin Hochman: So, if you recall, we needed to get that rolled out in order to get the tokens, build out the tokens, and so that's been done. We are now receiving token data from every Xeos transaction, and it's now being incorporated into our CM planning and measurement.

Speaker Change #185: We are now receiving token data from every DeOps transaction, and it's now being incorporated in our CM planning and measurement. We are working now on our loyalty program, so we've got better targeting going on with CRM.

Kevin Hochman: We are working now on our loyalty program, so we've got better targeting going on with CRM. We're now reopening our loyalty program, and I will tell you, from what I've seen in the industry where other major players are pulling back on our loyalty programs, it's having me rethink whether we want to double down on loyalty or really focus on using the CRM data in order to better optimize our marketing plans and our innovation.

Speaker Change #185: We're now reopening our loyalty program and

Speaker Change #186: I will tell you, from what I've seen in the industry, where other major players are pulling back on our loyalty programs, it's having to rethink whether we want to double down on loyalty or really focus on using the CRM data in order to better optimize our marketing.

Kevin Hochman: And so what we're focusing right now on the loyalty program is how do we simplify it to make it easier for the guests to understand and easier for them to use and make it more frictionless at the point of purchase.

Speaker Change #186: plans on our innovation.

Speaker Change #186: and so what we're focusing right now on the loyalty program is how do we simplify it to make it easier for the guests.

Kevin Hochman: So we think it can continue to be a delighter. I just don't think we're going to put as much investment as I originally thought into the loyalty program. I think we're going to use it primarily to both reward the guests but also mine that data in order to better service or better optimize our marketing plans and our innovation. And then the last thing I'd tell you is I'm still very excited about the token data and what it can mean for our total business, and we're continuing to build out that capability, and when I have more to share beyond just the segmentation and the targeted emails, we will. Great. Thanks, guys. Your next question is from Dennis Geiger with UBC. Great, thank you.

Speaker Change #186: to understand and easier for them to use.

Speaker Change #186: and make it more frictionless at the point of purchase. So, we think it can continue to be a delighter. I just don't think we're going to put as much investment as I originally thought into it.

Speaker Change #186: I think we're going to use it primarily to both reward the guests but also mine that data in order to better service or better optimize our marketing plans and our innovation.

Speaker Change #186: And then the last thing I tell you is I'm still very excited about the token data and what it can mean for our total business, and we're continuing to build out that capability, and when I have more to share beyond just the segmentation and the targeted emails, we will.

Speaker Change #187: Great. Thanks, guys.

Speaker Change #188: Your next question is from Dennis Geiger with UBS.

Dennis Geiger: I wanted to ask first a bit more on the the top line outlook for 25 strong momentum, obviously very much continuing into into the start of the new year. Just wanted to touch Mike on your comments around the macro obviously doesn't seem like you're seeing much as far as negative behavior from macro pressures, but just a little more on on what's embedded in the guide and are you sort of embedding some kind of of macro softness that maybe eventually impacts trends through the year. If there's anything more you can you can touch on with respect to the top line guide.

Dennis Geiger: Great, thank you. I wanted to ask first a bit more on the the top line outlook for 25. Strong momentum obviously very much continuing into into the start of the new year. Just wanted to touch Mike on your comments around the macro. Obviously doesn't seem like you're seeing much as far as negative

Speaker Change #189: behavior from macro pressures, but just a little more on on what's embedded in the guide. And are you sort of embedding some kind of, of macro softness that maybe eventually impacts trends through the year? If there's anything more you can, you can touch on with respect to the top line guide, please.

Mika Ware: Sure, so what that guide entails is really same-store sales in that mid-single-digit range, so that's the first building block. Like I said, we always consider what the macro and what the casual dining is running right now in traffic. So underlying that, we're anticipating that our pricing is going to be in the 4% to 5% range for the year, and that traffic could be flat to slightly positive, and mix will be flat to slightly negative.

Speaker Change #190: Sure. So, what that guide entails is really same-store sales in that mid-single-digit range.

Speaker Change #191: So that's the first building block. Like I said, we always consider what the macro and what the casual dining is running right now in traffic. So underlying that, we're anticipating...

Speaker Change #191: We know that our pricing is going to be in the 4-5% range for the year, and that traffic could be flat to slightly positive, and mix will be flat to slightly negative. So, just to add on that, so we built in, like when we do our building blocks for our traffic, we built in a 4-5% range.

Mika Ware: So just to add on that, when we do our building blocks for our traffic, we built in a 4% to 5% decline in the industry, which is what we hear from our third-party insight group. So the way to think about it is, if it's better than that, you know, that certainly could be upside in that number. But right now, that's what we've baked into our traffic at some. But obviously, we're going to do everything within our power to beat them. That's great. Very helpful, guys.

Speaker Change #191: A Decline in the Industry, which is what we hear from, you know, our third-party insight groups.

Speaker Change #191: So the way to think about it is, if it's better than that, that certainly could be upside in that number, but right now that's what we've baked into our traffic assumptions, but obviously we're going to do everything within our power to beat that.

Mika Ware: And then just on marketing, helpful, the dollar amounts there. Not sure if I missed it, but just as far as number of weeks on air, 25, are you able to frame that up at all? Well, I can give you some, I can't give you the exact weeks, but I can give you kind of what's in my quarter. So towards the end of the first quarter and then into the second, we'll have a nine week flight. And then in the 3rd quarter, we're going to have 4 weeks at the beginning of the year.

Speaker Change #192: That's great. Very helpful, guys. And then just on marketing, helpful, the dollar amounts there, not sure if I missed it, but just as far as number of weeks on air, 25, are you able to frame that up at all?

Speaker Change #193: Well, I can give you some...

Speaker Change #194: I can't give you the exact weeks, but I can give you kind of what's in my quarter. So, towards the end of the first quarter and the end of the second, we'll have a nine-week flight.

Speaker Change #195: In the third quarter, we're going to have four weeks at the beginning of the year, and then another six weeks towards the end of the third quarter, and then we've got six weeks planned into Q4. So that's the detail I can give you right now on Q4.

Jeffrey Bernstein: And then another 6 weeks towards the end of the 3rd quarter, and then we've got 6 weeks planned in the Q4. And so that's the detail I can give you right now on One More Planning. Very helpful, and congratulations on the top-line strength. Your next question is from Jeffrey Bernstein with Barker. Great. Thank you very much.

Speaker Change #196: on one more flooding. So then what we did is we added a few more weeks, but we've also beat that some of the TRT, so just really engaging it overall by investing some more dollars into that plan.

Speaker Change #197: Very helpful and congrats on the top-line strength.

Dennis Geiger: Thanks Dennis.

Speaker Change #198: Your next question is from Jeffrey Bernstein with Barclays.

Kevin Hochman: Questions. The first one just on, You know, the broader competitive environment in terms of value and increasing deal focus. As you think about your 1099, I know you're kind of doubling down on that the first half of the year, which glimmers in terms of consumers that maybe just come in for the deal. Obviously, it's a good thing if you can get them to remain with you, and I think you said you had a lot of newer guests.

Jeffrey Bernstein: Great, thank you very much, questions. The first one just on...

Speaker Change #199: you know, the broader competitive environment.

Speaker Change #199: in terms of value and increasing deal focus.

Speaker Change #201: As you think about your 1099, I know you're kind of doubling down on that the first half of the year.

Speaker Change #202: which learnings in terms of consumers that maybe just come in for the deal

Speaker Change #203: Obviously, it's a good thing if you can get them to remain with you, and I think you said you had a lot of newer guests, so just wondering how you measure stickiness, just to prove out that the consumer is going to stay with you, you know, in good times and bad, whether or not you're advertising at $10.99 or not, any kind of thoughts on that broadly would be great, and then I have one follow-up.

Kevin Hochman: So just wondering how you measure stickiness just to prove out that the consumer is going to stay with you in good times and bad, whether or not you're advertising a 1099 or not, any kind of thoughts on that would be great. And then I have one follow-up. Yeah, so we look at that two ways.

Kevin Hochman: We have anecdotal data just when we talk to our restaurant teams, and they're telling us they're seeing new guests and they're seeing those new guests return. We will have, as I was talking about earlier with Chris's question on the CRM program in Yale, we are building out the capability to be able to use tokens to have much more finite numerical data that we could share with you. So we'll be able to tell you what percentage of guests were new, and we'll be able to tell you what percentage of guests have come back within a certain period of time.

Speaker Change #204: Yeah, so we so we look at that two ways. We have anecdotal data just when we talk to our restaurant teams and they're telling us they're seeing new guests and they're seeing those new guests return. We will have, as I was talking about earlier,

Speaker Change #204: with Chris's question on the CRM program at Yale.

Speaker Change #204: We are building out the capability to be able to use tokens to have much more finite numerical data that we could share with you, so we'll be able to tell you what percentage it gets for new, and we'll be able to tell you what percentage it gets have come back within a certain period of time. So I'll be able to answer that question more than just when our restaurant managers are telling us they're seeing inside their restaurants.

Kevin Hochman: So I'll be able to answer that question more than just what our restaurant managers are telling us they're seeing inside their restaurants. The other thing I would add on that, Jeff, is it's not like we just put this value in the market in the last quarter. We've been running this thing for almost 18 months, and so the guest is associating us with this great value and this superior value. We're seeing it in our scores, and we think that's having a compounding effect of why you've seen the traffic trends not just get better but really start to accelerate.

Speaker Change #204: The other thing I would add on that, Joseph.

Joseph: It's not like we just put this value in the market in the last quarter. We've been running this thing for almost 18 months.

Speaker Change #206: The guess is associating us with this great value and this superior value, we're seeing it in our scores.

Speaker Change #206: And we think that's having a compounding effect of why you've seen the traffic trends not just get better, but really start to accelerate. So, we're very excited about the position that we're in. I think we've put in...

Kevin Hochman: So we're very excited about the position that we're in. I think we've put in more investment over a longer period of time into this value message, and so it might seem like someone can just flick something on, especially if you're a really big competitor, right? But most competitors don't have that kind of muscle, and it's going to take some time for them to be able to establish whatever their value is in the market versus we've been doing the same thing for almost 18 months.

Speaker Change #206: more investment over a longer period of time into this value message.

Speaker Change #207: It might seem like someone can just flick something on, especially if you're a really big competitor, right?

Speaker Change #207: But most competitors don't have that kind of muscle, and it's going to take some time for them to be able to...

Speaker Change #207: establish whatever their value is in the market versus we've been doing the same thing for 18, almost 18 months. So I remain very bullish about that offer in the market. It continues to resonate with our guests.

Kevin Hochman: So I remain very bullish about that offer in the market. It continues to resonate with our guests. And the other thing I would tell you is it's really simple for them. They don't have to download an app.

Mika Ware: They don't have to come at a certain time of day. It's always available for them. They know that, and I think that's why we're seeing this. Jeff, I'd also like to add to that deal.

Speaker Change #207: And the other thing I would tell you is it's really simple for them. They don't have to download an app. They don't have to come a certain time of day. It's always available for them. They know that, and I think that's why we're seeing the business continue.

Mika Ware: We're very pleased that on the $10.99 tier, we still have a minimum amount of guests, or only 18% of guests eating on that $10.99 tier. So we still have the majority of our guests coming in for the value, but then seeing the great menu and all the other options and abilities to trade up. So we still have over 80% of the people eating at the full price menu. In addition to that, with the Big Smasher, we still have 25% of Big Smasher sales being sold for full price.

Speaker Change #208: To accelerate.

Speaker Change #208: Um, Jeff, I'd also like to add on.

Jeff Farmer: On that deal,

Jeff Farmer: We're very pleased that on the $10.99

Jeff Farmer: We still have a minimum amount of guests, or only 18% of guests, eating on that 1099 tier.

Speaker Change #209: So we still have the majority of our guests.

Speaker Change #210: Coming in for the value but then seeing the great menu and all the other options and abilities to trade up

Speaker Change #210: So we still have, you know, over 80% of the people eating on the full.

Speaker Change #210: And in addition to that, with the Big Smasher, we still have 25% of the Big Smasher sales being sold for full price. So a lot of people are coming in, but they're utilizing the menus, they're trading up for more premium options, and it's really helping us to drive traffic all while maintaining our mix. And then, of course,

Mika Ware: So a lot of people are coming in, but they're utilizing the menus, they're trading up for more premium options, and it's really helping us to drive traffic all while maintaining our mix. And then, of course, the great guest scores that we keep getting and the momentum that continues, even when we're off air, all those things point to why we're happy with this offer and how it's done. Yeah, let me just build on that. So yeah, like the person that's coming in for 1099, it's not like they're coming in alone.

Speaker Change #210: The great guest scores that we keep getting and the momentum that continues even when we're off air, all those things point to why we're happy with this offer and how it's performing.

Mika Ware: And that we're not really seeing that much more of an incidence of 1099 or three for me, as a percentage 100. I mean, there's a slight pickup. So we're at 17.7 in Q4 per 100 versus 16.1. So there is a pickup. But it's not, it's not huge.

Speaker Change #211: Yeah, let me just build on that. So yeah, like the person that's coming in for 1099, it's not like they're coming in alone.

Speaker Change #212: We're not really seeing that much more of an incidence of 1099 or 3 for me as a percentage of 100. I mean, there's a slight tick-up. So we're at 17.7 in Q4 per 100 versus 16.1, so there is a tick-up.

Speaker Change #212: But it's not, it's not huge and then if we look at the mix within that incidence...

Mika Ware: And then if we look at the mix within that incidence, 51% is at 1099 here; that's slightly higher. But then 49% is at the 1499 and the 1699 tier, right? So a lot of times, I think folks see the traffic and go, oh, it's all 1099. It's only 1099.

Speaker Change #212: 51% is at the 1099 tier, that's slightly up, but then 49% is at the 1499 and the 1699 tier, right? So, a lot of times I think folks see the traffic and go, oh, it's all 1099 and it's only 1099, and the reality is that's not really the case.

Mika Ware: And the reality is, that's not really the case. , you can see that in our COGS number and our margin number that remains quite good. So we'll continue to monitor that, we save it every call, because obviously that could get sideways at some point, but we're nowhere close to that and we feel very good about the way we're doing venue merchandising and the way we're using the strive traffic and bring guests in. Understood. Thank you for the color.

Speaker Change #212: It's a slight increase in mix, but it's really kind of negligible. And you can see that in our cogs.

Speaker Change #212: We'll continue to monitor that, we say this every call, because obviously that could get sideways at some point, but we're nowhere close to that, and we feel very good about the way we're doing venue merchandising and the way we're using this to drive traffic and bring guests in.

Jeffrey Bernstein: And then just my follow-up is on the menu pricing. I think it was roughly 8% in the fiscal fourth quarter. I'm just wondering what you're thinking about the fiscal first quarter and full year. I'm wondering whether you think you're seeing any pushback, because obviously you would look to avoid increases on the 1099, but I guess that means there's a wider barbell, and therefore maybe the full price offerings are forced to kind of carry the 1099 effectively.

Speaker Change #213: Understood. Thank you for the color. And then just my follow-up is on the menu pricing. I think it was roughly 8% in the fiscal fourth quarter.

Speaker Change #214: I'm just wondering what you're thinking about the fiscal first quarter and full year. I'm wondering whether you think you're seeing any pushback, because obviously you would look to avoid increases on the 1099.

Speaker Change #214: But I guess that means there's a wider barbell, and therefore maybe the full-price offerings are forced to kind of carry the $10.99 effectively. Just wondering how you think about that barbell approach and, you know, the profitability on different customers who fall into the different end of those ranges. Thank you.

Mika Ware: I'm just wondering how you think about that barbell approach and the profitability on different customers who fall into the different end of those ranges. Thank you. Yeah, Jeff, so we feel really good about the opportunity in our pricing strategy, because it's working really well. So we don't have a lot of evidence that it's not working with the great traffic that we're having, the great guest metrics that we have. And then Kevin just talked about, I feel if we were overpricing on the regular menu, we'd be pushing a ton of people into the three for me in the 1099, which isn't happening. So I think all those indicators are helping us to really feel confident to keep moving forward with a barbell strategy. So it's working.

Speaker Change #214: Yeah, Jeff, so we feel really good about the opportunity and our pricing strategy because it's working really well. So we don't have a lot of evidence that it's not working with the great traffic that we're having, the great...

Kevin Hochman: I feel like if we were overpricing on the regular menu, we'd be pushing a ton of people into the three-for-me and the $10.99, which isn't happening. So I think all those indicators...

Speaker Change #215: All of these are helping us to really feel confident to keep moving forward with the barbell strategy. It's working. We're going to continue to be strategic. We think that on an absolute and relative basis, we're still very competitive, even versus competition. So we still think we've got some runway there.

Mika Ware: We're going to continue to be strategic. We think that on an absolute and relative basis, we're still very competitive, even versus competition. So we still think we got some runway there.

Mika Ware: And the pricing for the four quarters, if you didn't take incremental, or how are you thinking about that versus the 8% in the fourth quarter? Yep, so it will start to step down throughout the fiscal year. So our pricing for S-25 should be in the mid single digit range. That's what we're shooting for now. We're not planning on taking any price in the first half of the fiscal year.

Speaker Change #216: And the pricing through the four quarters, if you didn't take incremental, or how are you thinking about that versus the 8% in the fourth quarter?

Mika Ware: We have the option to take a little price in the back half if we want to. What I would expect is you'll probably see about a 2% step down in price each quarter in the first half and a little bit less in the back. Thank you and congratulations, Mika. Thank you, Jeff.

Speaker Change #217: Yes, so it will start to step down throughout the fiscal year so our pricing for F-25 should be in the mid single-digit range That's what we're shooting for now. We're not planning on taking any price in the first half of the fiscal year We have optionality to take a little price in the back half if we want to What I would expect is you'll probably see about a 2%

Speaker Change #217: step down in price each quarter in the first half and a little bit less in the back half.

Speaker Change #217: Thank you and congrats, Mika.

David Palmer: Your next question is from David Palmer with Evercore ISD. Thanks. First, just a modeling type question.

Mika Ware: Thank you, Jeff.

Speaker Change #218: Your next question is from David Palmer with Evercore ISI.

David Palmer: Restaurant expenses were up 17% per unit in the quarter in fiscal 4Q. Could you break out how much of that was due to advertising, repair, and maintenance bonuses? And then how are you thinking about those line items for fiscal 25? Yes. So, hi, David.

David Palmer: Thanks. First, just a modeling-type question. Restaurant expenses were up 17% per unit.

Speaker Change #219: in the quarter and fiscal 4Q. Could you break out how much of that was due to advertising, repair and maintenance, bonuses, and then how are you thinking about those line items for fiscal 25?

Mika Ware: So restaurant repairs were up $16 million a year every year in the fourth quarter. And that's what Kevin and I both mentioned in our prepared remarks about accelerating some of those repairs. Advertising was up $14 million year over year.

Speaker Change #220: Yes, so, hi David.

Speaker Change #221: So restaurant repairs were up $16 million a year per year in the fourth quarter, and that's what Kevin and I both mentioned in our prepared remarks about accelerating some of those repairs.

Mika Ware: So that's just part of the strategy where this was the big year where we had the big incremental investments that hit every quarter. And I think you asked, were you asking about G&A or on the bonuses, but the incident-based compensation continues to drive G&A, and obviously year-over-year, that was up $13 million. I will call out, because of the really, the big spike in the fourth quarter performance that we had, it triggered some older legacy, longer-term compensation programs.

Speaker Change #221: Advertising was up $14 million year-over-year, so that's just part of the strategy where this was the big year where we had the big incremental investments that hit every quarter.

Speaker Change #222: I think you asked, were you asking about G&A or on the bonuses?

Speaker Change #222: But the inter-based compensation continues to drive GNA and obviously year-rear. That was a $13 million.

Speaker Change #222: I will call out because of the really the big fight and the fourth quarter performance that we had.

Speaker Change #222: It triggered some older legacy, longer term compensation programs.

Mika Ware: So, for example, we had one program that we had written off, and that, within the fourth quarter, that came back into the money. So that was approximately about $4 million, and in the past, that would have been spread out over three years. Instead, we had to take that full pump into the fourth quarter.

Speaker Change #222: So, for example, we had one program that we had written off and that, within the fourth quarter, that came back into the money. So that was approximately about $4 million.

Speaker Change #222: And in the past, that would have been spread out over three years. Instead, we had to take that full pump into the fourth quarter. So, and then the rest of that incremental expense is just, again, incentive-based compensation with a better performance.

Mika Ware: So, and then the rest of that incremental expense is just, again, incentive-based compensation with the better performance, and some more of that. And finally, I think the last piece of Q4 that we invested in is we had about $5 million of incremental labor that we put in, again, to take care of the guests and just make sure that, as we had those new guests coming in, that we were prepared and that we were going to deliver a great experience so that we get back in that consideration set and have them come again and again. Great. Thanks, Mika.

Speaker Change #222: And finally, I think the last piece of Q4 that we invested in is we had about $5 million of incremental labor that we put in, again, to take care of the guests and just make sure that as we had those new guests coming in, that we were prepared and that we were going to deliver a great experience so that we get back in that consideration set and have them come again and again. Thank you.

David Palmer: One other question. I think you mentioned something about during the back half the year, your expectation was to replace the 1099 message with something else compelling, and you continue to do that in juxtaposition against traditional fast food and the value there. I'm just wondering what's driving that or what your thinking is there, because it looks like you're killing it with that. The Big Smasher on the 1099 with an appetizer. The Big Smasher, I see it on the regular menus.

Speaker Change #223: Great, thanks Mika. One other question, I think...

Speaker Change #224: You mentioned something about during the back half of the year, your expectation was to replace the 1099 message with something else compelling, and you continue to do that in a juxtaposition against...

Speaker Change #225: I'm just wondering what's driving that or what you're thinking is there because it looks like you're killing it with the Big Smasher on the $10.99 with an appetizer. You know, the Big Smasher, I see it on the regular menus.

Kevin Hochman: $3 more than that. So, you know, taking that off the 1099 or doing something to remove the 1099 would certainly be a big step up in actual price. I'm just wondering how, you know, what you're really thinking there. Why not stick with something that's working?

Speaker Change #225: [inaudible]

Speaker Change #226: $3 more than that. So, taking that off the 1099 or doing something to remove the 1099 would certainly be a big step up in actual price. I'm just wondering how, what you're really thinking there... Why not stick with something that's working? Thanks.

Kevin Hochman: Yeah, so if you recall, on our last series call, we talked about the plan was to switch the message in the fall, but now that the big smashers were doing so well, we decided to run it. The balance of this calendar year, and then the thought was, when we get to Q3, to rotate this new 1099 message on a new item. I will say that we contemplated those plans in July when we saw some softness versus what we had expected, and Mika shared with you that we were in the high single digits on sales and positive traffic, and so the thought was, hey, is this starting to run its course?

Speaker Change #227: Yeah, so, if you recall, on our last series call, we talked about the plan was to switch the message in the fall, but now that the Big Smashers have done so well, we decided to run it for the fall.

Speaker Change #228: The balance of this calendar year and then the thought was when we get to Q3 to rotate this new 1099 message on a new item. I will say that we contemplated those plans in July when we saw some softness.

Speaker Change #228: And Mike has shared with you, we were in the high single digits on sales and positive traffic. And so the thought was, hey, is this starting to run its course? Now, we've seen an acceleration happen in August .

Kevin Hochman: Now, we've seen an acceleration happen in August, which would lead us to believe that the burger is still very relevant, so at the end of the day, we're going to, in Q3, we're going to be ready to go with the new message, but if the burger is continuing to work throughout Q4, I'm sorry, throughout Q2, we'll continue the same burger message. So, we're going to keep optionality on that, but we're going to go ahead and produce the new spot against the new food innovation, just so that we're ready in case it starts to slow down, but we have seen it pick up back up in August, so we feel very confident right now where we are.

Speaker Change #228: which would lead us to believe that the burger is still very relevant. So, at the end of the day, we're going to, in Q3, we're going to be ready to go with the new message, but if the burger is continuing to work throughout Q4, I'm sorry, throughout Q2, we'll continue the same burger message. So, we're going to keep optionality on that, but we're going to go ahead and produce the new spot.

David Palmer: David, to be clear, we're not moving away from the 1099.

Kevin Hochman: And David, to be clear, we're not moving away from the 1099 value proposition. That's staying in. It would just be new news in the entree, so kind of like how we had the old time with cheese, we switched that to the Big Smasher.

David Palmer: and the other is the value proposition. That's staying in. It would just be new news in the entree. So kind of like how we had the old timer with cheese, we switched that to the Big Smasher. That's what we're saying. We have new innovation in the 1099 platform if we need it, but we're going to stick with the Big Smasher as long as it's still working.

Kevin Hochman: That's what we're saying. We have new innovation in the 1099 platform if we need it, but we're going to stick with the Big Smasher as long as we can. That makes sense. Your food costs are pretty good with this $10.99. It's pretty impressive.

Speaker Change #229: That makes sense. Your food costs are pretty good with this $10.99. It's pretty impressive. Thank you.

David Palmer: Thank you. Your next question for today is from Andrew Strelzik with BMS. Hey, good morning.

Speaker Change #229: Thank you.

Speaker Change #229: Your next question for today is from Andrew Strelzick with BMO.

Andrew Strelzik: Thanks for taking the questions. You mentioned continuing to do the listening sessions. And so I'm curious about how those are evolving and what you're hearing now. Obviously, you've done a lot over the last two years or so. So what are you hearing now?

Andrew Strelzick: Hey, good morning. Thanks for taking the questions. You mentioned continuing to do the listening sessions, and so I'm curious about how those are evolving and what you're hearing now. Obviously, you've done a lot over the last two years or so. So what are you hearing now, and how is that informing the strategic actions you're taking in 2025?

Kevin Hochman: And how is that informing the strategic actions you're taking in 25? Yeah, you know, we're at a little bit of an inflection point. We shared this with our general managers last week in Dallas that we've been winning pretty big, and it's really been accelerating all throughout the year.

Speaker Change #230: Yeah, you know, we're a little bit inflected, but we shared this with our general managers last week in Dallas.

Speaker Change #231: You know, we've been winning pretty big, and it's really been accelerating all throughout the year.

Speaker Change #231: And we're at a complexion point with our restaurant teams in that, like, we need to get everybody to be thinking, we're going to just permanently win, right? And what that's all about is raising the expectation and raising the bar on what's okay and what's not okay. And so.

Speaker Change #231: The big thing that we're hearing from the team now in the listening sessions is if you guys want to raise the bar, here are the things that I need you to help me with in order for us to continue to raise the bar on experience both in terms of the restaurant environment as well as

Speaker Change #231: as well as the experience of the guest and the team member have, right? So, you know, what I would tell you right now is like, it's a lot about ownership. So we hear about, you know, let me, let me go ahead and own this. If you want me to continue to raise the bar on performance.

Speaker Change #231: These are the levers I need in order to be able to own on my own versus have everything kind of laid out in a model. And so I think the theme that we're going to be seeing throughout the next 12 months in terms of supplication is going to be, what are the things that we can remove off of their place?

Speaker Change #231: to allow the focus on the most important things so that they're not being measured and practiced against every little detail. So, for example,

Speaker Change #231: AVT, which is average versus theoretical. That's a measure of waste. We measure, we used to measure AVT on every item, and now, number one, they're not going to get bonus on AVT, and number two, they're just going to get bonus on COGS, and so if they want to just focus on

Speaker Change #231: The most expensive items like proteins and alcohol and not worry about everything else so they can free up time to spend more time with their teams.

Speaker Change #231: and more time with their guests, that's something that we're going to allow them to do. So, I think the biggest thing that we're hearing is empower us, like give us more freedom within the framework to run our restaurants and reward us as such. And so that's really kind of the next wave of simplification is going to be about empowering those restaurant teams to raise the bar and continue to win.

Kevin Hochman: And we're at an inflection point with our restaurant teams in that, like, we need to get everybody to be thinking, we're going to just primarily win, right? And that what that's all about is raising the expectation and raising the bar on what's okay and what's not okay. And so the big thing that we're hearing from the team now in the listening sessions is, if you guys want to raise the bar, here are the things that I need you to help me with in order for us to continue to raise the bar on experience, both in terms of the restaurant environment, as well as, as well as the experience of the guests and the team members, right?

Kevin Hochman: So, you know, what I would tell you right now is like, it's a lot about ownership. So we hear about, you know, let me, let me go ahead and own this. If you want me to continue to raise the bar on performance, these are the levers I need in order to be able to own on my own versus have everything kind of laid out in a model. And so I think the theme that we're going to be seeing throughout the next 12 months in terms of supplication is going to be, what are the things that we can remove off of their plates to allow them to focus on the most important things so that they're not being measured and tracked against every little detail.

Speaker Change #232: Okay, great. That's super helpful. And then my second question.

Speaker Change #233: I'm just curious if you have a sense for where the traffic growth is coming from within the industry, obviously vastly outperforming. [inaudible]

Speaker Change #234: kind of the benchmarks that we look at and some of the data that you referenced. Do you have a sense, you know, is this coming from within Bar and Grill, Independence, trade up, trade down? Just curious if you have any insight into where that's coming from. Thanks.

Kevin Hochman: So for example, ABT, which is average versus theoretical, that's a measure of waste. And we measure; we used to measure ABT on every item. And now, now, number one, they're not going to get a bonus on ABT.

Kevin Hochman: And number two, they're just going to get bonus on COGS. And so if they want to just focus on the most expensive items, like proteins and alcohol, and not worry about everything else so they can free up time to spend more time with their teams and more time with their guests, that's something that we're going to allow them to do. So I think the biggest thing that we're hearing is empower us, like give us more freedom within the framework to run our restaurants and reward us as such. And so that's, that's really kind of the next wave of supplication is going to be about empowering those restaurant teams to raise the bar and continue to win. Okay, great. That's super helpful.

Kevin Hochman: And then my second question. Yeah, I'm just curious if you have a sense for where the traffic growth is coming from within the industry, obviously vastly outperforming, kind of the benchmarks that we look at and some of the data that you referenced. Do you have a sense, you know, is this coming from within Bar and Grill, independence, trade up, trade down? Just curious if you have any insight to where that's coming from. Thanks.

Speaker Change #235: Yeah, you know, well, number one, I'd tell you from a demographic standpoint, all demographics are growing, so it's not like it's, you know,

Kevin Hochman: Yeah, you know, number one, I tell you from a demographic standpoint, all demographics are growing. So it's not like it's, you know, lower income or higher income, it's pretty much every age and every income level are growing. So it's pretty, pretty broad based. I mean, when you're outpacing the industry by, you know, 15 point whatever points we say that you're going to be basically growing in every segment, you know, clearly, we're winning market share.

Speaker Change #235: Lower income or higher income, it's pretty much...

Speaker Change #235: Every age and every income level are growing, so it's pretty broad-based. I mean, when you're outpacing the industry by, you know, 15-point-whatever points we sit,

Kevin Hochman: I mean, you just do the math, we're winning market share, you know, I will tell you, I think that the biggest thing that I've said is in the past is like the fact that we're more relevant and we're more top of mind and we're more on air, and we have a very attractive value out there. I think that's really just kind of growing some trips. So I don't think someone was saying, hey, I was going to go to this fast food place, and now I'm going to start to go to Chili's tonight. I think it's the fact that we're front and center and relevant, not just on TV, but in social media. I think you see this in pop culture more often.

Speaker Change #235: You're going to be basically growing in every segment. You know, clearly we're winning market share. I mean, you just do the math, we're winning market share. You know, I will tell you, I think that the biggest thing that I've said this in the past is like the fact that we're more relevant and we're more top of mind and we're more on air.

Speaker Change #235: And we have a very attractive value out there. I think that's really just kind of growing some trips. So I don't think someone was saying, hey, I was going to go to this fascinating place.

Speaker Change #235: And now I'm going to decide to go to Chili's tonight. I think it's the fact that we're front and center and relevant, not just on TV, but in social media. I think you see this in pop culture more often. And that is just kind of triggering them to be in that consideration set that we talked about it yesterday a couple years ago. And causing them to want to come to Chili's. So I don't think it's a specific thing where it's like these, we're sourcing from these two concepts.

Kevin Hochman: And then it's just kind of triggering them to be in that consideration set that we talked about it yesterday, a couple of years ago, and causing them to want to come to Chili's. So I don't think it's a specific thing where it's like we're sourcing from these two concepts. It's so broad based.

Kevin Hochman: And I think it's really a more function of we're more top of mind, we're more relevant. And so we're more in the consideration set for people to choose to come to us. Great, thank you very much. Your next question for today is from Jeff Farmer with Gordon. Thank you very much.

Speaker Change #235: It's so broad-based, and I think it's really a more function of, we're more top-of-mind, we're more relevant, and so we're more in the consideration set for people to choose to come to us.

Speaker Change #236: Great, thank you very much.

Speaker Change #236: Here next question for today is from Jeff Farmer with Gordon Haskett

Jeff Farmer: You provided some guidance components for the restaurant level margin for FY25, but Mike, is there anything you can do in terms of providing sort of a range of where you think that margin might end up in 25 versus 24? Yeah, so I still think we're going to stick to the probably 30 to 50 basis points ROM improvement year over year. So again, that contemplates the inflation that we're still experiencing, plus those incremental investments that we want to do.

Jeff Farmer: Thank you very much. You provided some guidance components for the for the restaurant level margin for FY25 but Mike is there anything you can do in terms of providing sort of a range of where you think that that margin might end up in 25 versus 24?

Jeff Farmer: But we're just pleased that we can still invest in the business and still expand our ROM. So we do think we'll have another year of expansion. OK, and then I apologize if I missed this, but G&A in 25, obviously a lot of things going on in 2024, but G&A dollars in 25 versus 24, any insight there? Yes, so GNA is going to be up probably $5 to $7 million next year. And here's why.

Mike: Yeah, so I still think we're going to stick to the probably 30 to 50 basis points ROM improvement year-over-year. So again, that contemplates the inflation that we're still experiencing, plus those incremental investments that we want to do. But we're just pleased that we can still invest in the business and still expand our ROM. So we do think we'll have another year of expansion.

Speaker Change #237: Okay, and then I apologize if I missed this, but GNA in 25, obviously a lot of things going on in 2024, but GNA dollars in 25 versus 24, any insight there.

Mika Ware: We have a couple things that are coming in into play. So the first thing is, we actually are transitioning from a legacy ERP system that is going live this fiscal year. So the cost of that with the software and the cost of the project is now going to be in our GNA numbers.

Speaker Change #238: Yes, so GNA is going to be up probably 5 to 7 million dollars next year, and here's why. We have a couple things that are coming into play. So, the first thing is...

Speaker Change #238: We actually are transitioning from a legacy ERP system that is going live this fiscal year. So the cost of that with the software and the cost of the project is now going to be in our GNA.

Mika Ware: And then on top of that, we are growing the teams, we've been investing back into the teams. And so we have a little bit of increase in payroll expenses as well. Thank you all. Your next question is from Brian Vaccaro with Raymond. Hi, thanks and good morning.

Speaker Change #238: Numbers, and then on top of that we are growing the teams. We've been investing back into the teams and so we have a little bit of increase in payroll expenses as well. Well, thank you all for the long.

Speaker Change #238: Thank you very much for watching this video.

Speaker Change #238: Your next question is from Brian Vaccaro with Raymond James.

Brian Vaccaro: Just if I could start with two quick clarifications and sorry if I missed it, but what was the total sales mix on three for me in the quarter? We said, I rounded up to 18, Kevin said 17.7, so that was the mix. Okay, thank you. And the fiscal 4Q R&M spend, Mika, I think you said it was at $14 million. Can you level set where that is versus a normal level of spend?

Brian Vicarro: Hi, thanks and good morning. Just if I could start with two quick clarifications, and sorry if I missed it, but what was the total sales mix on 3 for May in the quarter?

Brian Vicarro: We said, I rounded up to 18, Kevin said 17.7, so that was the mix.

Speaker Change #239: Okay, thank you. And the fiscal 4Q RNM spend, Mika, I think you said it was at 14 million bucks.

Brian Vaccaro: And is this a new higher level of spend that will carry into fiscal 25? What have you layered in terms of expectation there versus 24? That's a great question, Brian.

Speaker Change #240: Can you level set where that is versus a normal level of spend, and is this a new higher level of spend that will carry into fiscal 25? What have you layered in terms of expectation there versus 24?

Mika Ware: So our R&M has been going up the last couple of years. Obviously, as we came out of COVID, we had a lot of deferred maintenance to catch up on. And truthfully, as the business has done better and exceeded our expectations on how fast it's recovered, we've accelerated some of that deferred maintenance. I'm happy to say I do think that we have hit the peak for R&M expense this year. So next year, we are planning to have lower R&M expense, probably lower $8 to $10 million. So we're not all the way there, but we're definitely moving now in the right direction.

Speaker Change #241: That's a great question, Brian. So, our RNN has been going up the last couple of years. Obviously, as we came out of COVID, we had a lot of deferred maintenance to catch up on. And truthfully, as the business has done better and exceeded our expectations on how fast it's recovered, we've accelerated some of that deferred maintenance.

Speaker Change #241: I'm happy to say I do think that we have hit the peak.

Speaker Change #241: for R&M expense this year. So next year we are planning to have lower R&M expense, probably lower $8-10 million. So we're not all the way there, but we're definitely moving now in the right direction.

Brian Vaccaro: We've been on a catch up where we've been very reactive in doing all this deferred maintenance. I think we're finally getting to the point that we can start being proactive and getting some more preventative maintenance programs back into our restaurants so that we can take care of our equipment, we can minimize equipment going down, and then we're also going to extend the life of that equipment over time. So I do think this new strategy that we've caught up and now we're moving from reactive to proactive will allow us to start lowering that expense, and that should start next fiscal year. Okay, great. And then my question, you know, obviously, impressive comps driven by a few different levers that you're pulling.

Speaker Change #241: We've been on a ketchup where we've been very reactive in doing all this deferred maintenance.

Speaker Change #241: I think we're finally getting to the point that we can start being proactive and getting some more preventative maintenance programs back into our restaurants so that we can take care of our equipment.

Speaker Change #241: We can minimize equipment going down and then we're also going to extend the life of that equipment over time So I do think this new strategy that we've caught up and now we're moving from reactive to proactive Will allow us to start lowering that expense and that should start next fiscal year

Brian Vaccaro: But one area specifically, you know, Chili seemed to catch lightning in a bottle on TikTok in May, and maybe more recently, too, with the Nashville Hot mozzarella sticks. And it sounds like you think you're attracting new guests, which makes sense. But I guess the question is, how do you think about the stickiness of this TikTok consumer?

Speaker Change #242: Okay, great. And then my question, you know, obviously impressive comps driven by a few different levers that you're pulling, but one area specifically, you know, Chili seemed to catch lightning in a bottle on TikTok in May and maybe more recently too with the Nashville Hot mozzarella sticks.

Speaker Change #243: And it sounds like you think you're attracting new guests, which makes sense, but I guess the question is, how do you think about the stickiness of this TikTok consumer? And how did that impact how you set your fiscal 25 guide?

Kevin Hochman: And how did that impact how you set your fiscal 25 guide? Yeah, so the way we thought about that May that you saw, you know, had such an incredible performance was we think about 60% of it was due to the advertising and the Big Smasher, and about 40% was due to the TikTok going viral on the mozzarella sticks. That's the analysis that we've done kind of post-May to better understand what moved and why it moved. Obviously, that's our chance when they come in is to wow them with a great experience.

Speaker Change #244: Yeah, so when we thought about that May, that May that you saw, you know, had such a

Speaker Change #245: incredible performance. We think about 60% of it was due to the advertising and the Big Smasher, and about 40% was due to the TikTok going viral on the mozzarella sticks. That's the analysis that we've done kind of post-May.

Speaker Change #246: Obviously, that's our chance when they come in is to wow them with a great experience. That's one of the reasons why we put more money into facilities and more money into labor.

Kevin Hochman: That's one of the reasons why we put more money in the facilities and more money in the labor. As soon as we saw that spike, you know, we got on a call with our managers, and we said, look, guys, this is our opportunity, given how much traffic is coming in, to try to keep them, right? So we're going to put these investments into the business over the next six weeks to try to maintain as many of those new guests as we possibly can, right?

Speaker Change #246: We got on a call with our managers and we said, look guys, this is our opportunity given how much traffic is coming in to try to keep them. So we're going to put these investments into the business.

Speaker Change #246: , and the rest of the team. I think now that we've seen kind of July and the first part of August play out, it would lead us to believe we were glad that we put those investments in because the business continues to be incredibly strong.

Kevin Hochman: I think now that we've seen kind of July and the first part of August play out, it would lead us to believe we were glad that we put those investments in because the business continues to be incredibly strong, and we continue to outpace the industry by double digits. So that was the thought process on it, right? Now, you know, is a TikTok, is a person converted with TikTok any different than a person converted with TV?

Speaker Change #246: and we continue to outpace the industry by double digits. So that was the thought process on it, right? Now, is a TikTok, is a person converted with TikTok any different than a person converted with TV?

Kevin Hochman: I don't really think so. I think the opportunity is when they come to try Chili's for the first time, are they having that experience that would make them want to come back? I think if you look at some of the comments that we got during that time, I mean, I was very excited to hear things like, it was like Chili's is low-key awesome, like where do they come out of, where they came out of the blue to be so good.

Speaker Change #247: I don't really think so. I think the opportunity is when they come to try Chili's for the first time, are they having that experience that would make them want to come back?

Speaker Change #248: I think if you look at some of the comments that we got during that time, I mean, I was very excited to hear things like, it was like, Chili's is low-key awesome, like, where did they come out of? It came out of the blue to be so good. So I think we've been introducing guests to new...

Kevin Hochman: So I think we've been introducing guests to new, or new guests to the brand, and when they actually come, they have a great experience, and I think that's why you're seeing a strengthening and strengthening of our business. Now, if that continues, there could be upside, you know, versus what we shared with you guys, but right now, we feel really good about where we are. All right, that's really helpful, Kevin

Speaker Change #248: are new guests to the brand and when they actually come, they're having a great experience and I think that's why you're seeing a strengthening and strengthening of our business. Now, if that continues, there could be upsides versus what we shared with you guys, but right now we feel really good about where we are.

Brian Vaccaro: And maybe on a follow-up to that, I think I read recently that influencer marketing spend might be up 50% versus two years ago. And I know your team's been focused on, you know, re-injecting the Chili's brand into the social media conversation for a couple years now. But have you started to spend specifically on influencer marketing yet? And if not, is that something you think we could see soon?

Speaker Change #249: All right, that's really helpful Kevin and maybe on a follow-up to that

Speaker Change #250: I think I read recently that influencer marketing spend might be up 50% versus two years ago. And I know your team's been focused on re-injecting the Chili's brand into the social media conversation for a couple years now. But have you started to spend specifically on influencer marketing yet? And if not, is that something you think we could see soon?

Kevin Hochman: Yeah, so I think there's two things that have kind of step changed our social media game. I think number one, Luz Beckert and Jack Bailey who run that group internally, they're Brinker employees, they've been empowered to just go run with it, and they've done a phenomenal job of changing our voice online. Similar to what you've seen some other brands do and had some success, they've just done a phenomenal job. I think the second thing is we have been putting some investments into TikTok, and some of that obviously is to run the media on TikTok, some of that is for influencer marketing, and typically what we're seeing is the organic stuff is what's traveling more, but I do think some of that investment is starting – it starts that flame, right, that gets things going. So I'm obviously not an expert on TikTok and social media marketing, but I would say those are the two things.

Speaker Change #251: Yes, so I think there's two things that have kind of step changed our social media game. I think number one,

Speaker Change #252: Luz Becker and Jack Haley who run that group internally, they're Brinker employees.

Speaker Change #252: They've been empowered to just go run with it, and they've done a phenomenal job.

Speaker Change #252: of changing our voice online, similar to what you've seen some other brands do and had some success. They've just done a phenomenal job. I think the second thing is we have been putting some investments into TikTok.

Speaker Change #252: And some of that, obviously, is to run the media on TikTok. Some of that is for influencer marketing. And, you know, typically what we're seeing is the organic stuff is what's traveling more, but I do think some of that investment is starting.

Kevin Hochman: I think we've got people in place that are now empowered within the framework to win, and then number two, we have put more investment into TikTok and influencer marketing. And we do think that social media plan is helping us to drive the younger consumer into Chili. So we're really happy with that. Yeah, it's a great point.

Speaker Change #252: it starts that flame, right, that gets things going. So I'm obviously not an expert on TikTok and social media marketing, but I would say those are the two things. I think we've got people in place that are now empowered within the framework to win. And then number two, we have put more investment into TikTok and influencer marketing.

Speaker Change #253: And we do think that social media plan is helping us to drive the younger consumer into Chile so we're really happy with that. Yeah, that's a great point. Like our buzz metrics from YouGov were up across most demographics but among 18 to 34 they were, it was by far the most which is a good sign because you obviously want to introduce.

Kevin Hochman: Like our buzz metrics from YouGov were up across most demographics, but among 18 to 34, they were, it was by far the most, which is a good sign, because you obviously want to introduce that generation into your brand and then obviously have a great, a great experience when they come in. That's very helpful. I'll pass it along.

Speaker Change #253: that generation into your brand and obviously have a great experience when they come in.

Brian Vaccaro: Your next question is from Jon Ivankoe with J.P. Hi, thank you. A couple, if I may.

Speaker Change #254: That's very helpful. I'll pass it along. Thank you.

Brian: Thanks, Brian .

Brian: Your next question is from John Ivanko

Jon Ivankoe: First, in answering an earlier question, you know, it was asked, you know, about why you were at the lower end of your earnings growth guide for the year in fiscal 25, and increased advertising, you know, was, you know, cited, at least from what I heard, as one of those reasons. Now, you know, normally, at this point in the cycle, a company would be taking up advertising because they would view it as a creative to sales and actually a creative to profits.

John Ivanko: Hi, thank you. A couple, if I may. First, in answering an earlier question, you know, it was asked, you know, about why you were at the lower end of you were.

John Ivanko: Bernie's Growth Guide for the Year in Fiscal 25, and increased advertising, you know, was, you know, cited, at least from what I heard, as one of those reasons. Now...

Speaker Change #256: You know, normally at this point in the cycle, a company would be taking up advertising because they would view it...

Jon Ivankoe: So, is this advertising that we should really view as an investment that won't get an increase in profitability? Was it, you know, just kind of a modeling exercise that we're, you know, trying to go through now, just to explain, I guess, why the increased advertising actually doesn't come with even greater profitability, since it does sound like that's discretionary on your part. Well, I think the way to think about it, Jon is, you know, the we add, we obviously add volume and traffic into the plans when we put advertising in, like that's kind of the deal we have with marketing. So they get more money and we get more traffic.

Speaker Change #257: as a creative to sales and actually a creative to profit. It's so...

Speaker Change #258: Is this advertising that we should really view as an investment that won't get an increase in profitability? Was it, you know, just kind of a modeling exercise that we're, you know, trying to go through now just to explain, I guess, why the increased advertising actually doesn't come with even greater...

Speaker Change #259: Profitability, since it does sound like that's discretionary on your part. Well, I think the way to think about it, Jon, is, you know, we obviously add volume and traffic into the plans when we put advertising it, like that's kind of the deal we have with marketing. So they get more money and we get more traffic and we bake it to the plan.

Kevin Hochman: What's happening here is the macro assumption, so we talked about that 4-5% that we pulled out for industry traffic, so that's a headwind, so you've got a tailwind with putting the advertising in, but you've got a headwind with the macro assumption. Now, obviously, as I said earlier, if we're able to beat that macro assumption, there could be upsides to the guidance that we gave, but at this point, we're six weeks into our fiscal year, it's very hard for us to give you guys an update on whether 4-5% was the right number or not, right? Certainly, we've seen pretty good strength in the first six weeks of the year, so we feel very good about where we are, but we're not ready to change that assumption. Okay, I'm with you.

John Ivanko: What's happening here is the macro-assumption, so we talked about that four to five percent.

John Ivanko: that we pulled out for industry traffic, so that's a headwind. So you've got a tailwind with putting the advertising in, you've got a headwind with the macro assumption. Now, obviously, as I said earlier, if we're able to beat that macro assumption, there could be upside on the guidance that we gave.

Speaker Change #260: But at this point, we're, you know, six weeks into our fiscal year, it's very hard for us to give you guys an update on whether four to five was the right number or not, right? Certainly, we've seen pretty good strength in the first six weeks of the year, and so we feel very good about where we are, but we're not ready to change that assumption.

Jon Ivankoe: Thank you for that. Your CapEx for fiscal 25, you know, the range right on top of what you spent on, you know, in 24. Can you talk about, you know, kind of shifting priorities between new unit CapEx remodels, which I'm going to call discretionary at this point, and then just R&M that may be capitalized. And let's talk about how the mixes may or may not be different. 25 versus 24.

Speaker Change #261: Okay, I'm with you. Thank you for that. You know, CapEx fiscal 25, you know, the range right on top of what you spent on, you know, in 24. You know, can you talk about...

Speaker Change #262: You know, kind of shifting priorities between new unit CapEx remodels, you know, which I'm going to say discretionary at this point.

Speaker Change #263: And then just R&M that may be capitalized, and let's talk about how the mixes may or may not be different, 25 versus 24. And this reminds us, since we all have models kind of going beyond 25, how you're at this point thinking about capital intensity in the out year as well.

Mika Ware: And this reminds us, since we all have models kind of going beyond 25. How you're at this point, think about capital intensity in the out year as well. Okay, Jon, so this next year, like you said, will be pretty similar in the spend level as the F-24 was. We did shift some money around in the bucket.

John Ivanko: Okay, John Stokes, [inaudible]

John Ivanko: This next year, like you said, will be pretty similar in the spend level as the F-24 was. We did shift some money around in the bucket, so...

Mika Ware: So, like I said, the R&M should start to come down and equipment replacement with that's been our main focus this year and our highest bucket of spend. We'll probably shift some of that spend out of the R&M equipment replacement into the reimage bucket. So, that is a bucket we would like to start or a program we'd like to start bringing back to the equation. So, a little bit more dollars there.

Speaker Change #264: Like I said, the R&M should start to come down in equipment replacement. That's been our main focus this year and our highest bucket of spend. We'll probably shift some of that spend out of the R&M equipment replacement into the reimage bucket.

Speaker Change #264: So that is a bucket we would like to start, or a program we'd like to start bringing back to the equation.

Mika Ware: And then the new restaurants, we're probably going to have about the same level of Chili's that we built last year into F-25 and that, you know, 10-ish range. We are going to start to accelerate some Maggianos. We have some Maggianos on the horizon, which is exciting.

Speaker Change #264: So, a little bit more dollars there. And then the new restaurants, we're probably going to have about the same level of chillies

Speaker Change #264: that we built last year into F-25 in that, you know, tennis range. We are going to start to accelerate some majanas. We have some majanas on the Almen Horizon, which is exciting.

Mika Ware: So, we have new restaurants, the bucket going up slightly in F-25. Now, moving forward, the CapEx dollars could slightly increase from there. You can hopefully continue to moderate your R&M. Depending on how the new restaurants, especially Maggianos, go, you could accelerate your new unit growth bucket a little bit.

Speaker Change #264: So we have new restaurants, the bucket going up slightly in F25.

Speaker Change #264: Now moving forward, the CAPTAX dollars could slightly increase from there. You hopefully can continue to moderate your RNN.

Speaker Change #264: Depending on how the new, especially Magianos go, you could accelerate your new unit growth.

Mika Ware: And then also, if we want to get back on a more, just a more common cadence on reimages, you know, we could really start to elevate that spend as we get a new prototype design, a new reimage design. We'd like to get that start driving some sales. We'd like to put some CapEx dollars against that, just to get all of our restaurants on the, you know, eight to 10-year cycle to keep them relevant and up-to-date.

Speaker Change #264: Bucket a little bit, and then also, if we want to get back on a-

Speaker Change #264: and more. [inaudible]

Dita Moore: I did the more...

Dita Moore: So, that's a really common cadence on re-images, you know, we could really start to elevate that spin as we get a new prototype design, a new re-image design, if that starts driving some sales, we'd like to put some CAPEX dollars against that just to get all of our restaurants on a eight- to ten-year cycle to keep them relevant and up to date.

Mika Ware: Okay, and that that reimage your comment, obviously an important one, and that was, you know, kind of leading you there a little bit. But can you tell us, you know, the percentage of Chili's, the percentage of Magianos today that, you know, you view as being current or modern? Or, you know, said another way, what percentage of your system do you think would actually benefit from reimaging? If you, of course, if you could do it all today, which, of course, you can't, but you know, what percentage do you think, say, Kate would really make sense for you?

Speaker Change #266: Okay, and that that reimage your comment obviously an important one and that was you know kind of leading you there a little bit, but Can you tell us you know the percentage of Chili's the percentage of Maggiano's today that you know? You view is being current or modern or you know said another way what percentage of your system Do you think would actually benefit?

Speaker Change #266: from Reimaging, if you could do it all today, which of course you can't, but what percentage do you think to Kate would really make sense for you guys to go out and put some capital against them?

Jon Ivankoe: Yeah, I mean, I don't have the exact numbers at my fingertips right now on how many we would consider a day per. We've been catching up on deferred maintenance, we don't have a plan right now to catch up on re-imaging, we're just going to re-imaging on that 8-10 year timing, and so when they get updated, they get updated.

Speaker Change #267: Yeah, I mean, I don't have the exact numbers at my fingertips right now on, like, how many we would consider as out-of-date versus...

Speaker Change #268: would be feel good about. What I will tell you is...

Speaker Change #269: We have no plans, like we've been catching up on deferred maintenance, we don't have a plan right now to catch up on re-imaging, we're just going to re-image.

Jon Ivankoe: I don't think that the issue is as big as we had originally thought, just because a lot of what we've been able to fix in terms of the deferred maintenance is making the restaurants a really good environment, but the important thing for you and the investor community to understand is there's no plans to try to catch up on deferred re-imaging, we're just going to put in a plan once we get to a re-image that we feel confident in a normal 8-10 year cadence. Sounds good.

Speaker Change #269: on that 8-10-year timing. And so, when they get updated, they get updated. I don't think that the issue is as big as we had originally thought just because a lot of what we've been able to fix.

Speaker Change #269: In terms of the deferred maintenance, it's making the rest of us a really good environment. But the important thing for you and the investor community to understand is there's no plans to...

Speaker Change #269: To try to catch up on deferred re-imaging, we're just going to put in the plan once we get to a re-image that we feel confident in a normal 8-10 year cadence.

Mika Ware: Your next question is from Eric Gonzalez with Key. Hi, thanks for the question. Just with regard to the recent trend, I'm wondering if there's anything really behind the strong quarter-to-date momentum and, perhaps, you know, maybe if you delayed some of the marking windows, given the strong momentum, and whether you have the ability or flexibility to do that, should the momentum dictate it? And then I think you saw some relative softness in July. Obviously, given the strong trend, it's not unexpected that it would slow, but did you do anything proactively to drive the improvement that you saw here in August thus far?

Speaker Change #270: Sounds good, thank you for that [inaudible]

John Ivanko: Thanks, Jon.

Speaker Change #271: Your next question is from Eric Gonzalez with KeyBank.

Speaker Change #272: Hi, thanks for the question. Just with regard to the recent trend, I'm wondering if there's anything...

Speaker Change #273: really behind the strong quarter-to-date momentum.

Eric Gonzales: And perhaps, you know, maybe if you delayed some of the marking windows, given the strong momentum and whether you have the ability or flexibility to do that, should the momentum dictate it. And then I think you saw some relative softness in July, obviously, you know.

Speaker Change #274: and given the strong trend, it's not unexpected that it would slow but did you do anything proactively to drive the improvement that you saw here in August so far?

Eric Gonzalez: In fact, we had advertising on in July, and we maintained our gap versus the industry, so it was quite good. It just, everything kind of, the industry went down a few points, and so did we, versus the prior run rates. But now we're in August, we don't have advertising on, and the businesses kind of snapped back to where we thought it would be.

Speaker Change #275: So, honestly, we didn't. In fact, we had advertising on in July , and...

Speaker Change #276: We maintained our gap versus the industry, so it was quite good, it just, everything kind of, the industry went down a few points, and so did we, versus the prior run rates.

Speaker Change #276: Now we're in August, we don't have advertising on, and the businesses...

Kevin Hochman: And we always, we've experienced a tail, so when we've been on media all through F-24, we've noticed that we have a nice tail into the next four to five weeks. Also, our social media program is really strong, and so those sales continue. The triple dipper, we watch that closely. You know, obviously, it spiked in the fourth quarter.

Speaker Change #276: We've experienced a tail, so when we've been on media all through F-24, we've noticed that we have a nice tail into the next four to five weeks.

Speaker Change #276: Also, our social media program is really strong, and so those...

Mika Ware: Sales were up triple digits over 75%. Those maintain, they're selling way more year over year as we move into the first quarter. So, I think there are a lot of different pieces that are working, and then again, like Kevin mentioned, just the baseline macro, it really dropped in July, and it snapped back a little bit in August, so everyone's benefiting from that as well. The other thing I would say is we can't underestimate the dramatic improvements that we've had in our service levels and our guest scores.

Speaker Change #276: Those cells continue the triple dipper, we watch that closely.

Speaker Change #276: Obviously, it spiked in the fourth quarter. Sales were up and tripled over 75%.

Kevin Hochman: Those maintain, they're feeling way more year-over-year as we move into the first quarter. So I think there's a lot of different pieces that are working. And then again, like Kevin mentioned, just the baseline macro, it really dropped in July and it snapped back a little bit in August . So everyone's benefiting from that as well. And the other thing I would say, I just think we can't underestimate the dramatic improvements that we've had in our service levels.

Mika Ware: Like, we were talking about, we've been talking about it for six months of like, that and the advertising have a multiplying effect, and that we were seeing more and more momentum throughout the calendar year, and I think we're just, we're just continuing to see that. Like, the service levels continue to get better, the food scores continue to get better, and we see just better traffic trends. So, I think these are the things that are always hard to point to because it's not a point in time piece of food innovation or pricing or whatever that you can say, okay, I saw an inflection change in the business, but it's clear that our business is a lot stronger because the experience is a lot stronger. That's helpful.

Kevin Hochman: and our guest scorers.

Speaker Change #277: Like we were talking about, we've been talking about it for six months of like, that and the advertising have a multiplying effect and that we were seeing more and more momentum throughout the calendar year. And I think we're just continuing to see that.

Kevin Hochman: The service levels continue to get better, the food scores continue to get better, and we see just better traffic trends. So I think these are the things that are always hard to point to because it's not a point-in-time piece of food innovation or pricing or whatever that you can say, okay, I saw an inflection change in the business, but it's clear that our business is a lot stronger because the experience is a lot better.

Kevin Hochman: And congratulations on that. And maybe just switching gears real quick on the balance sheet, is there anything you can talk about with regard to capital allocation and your leverage ratios coming down quite a bit? Is there any change in thinking with regard to, you know, repurchases or dividends or anything of that nature? Yeah, so our capital allocation strategy for F-25 is going to be more of the same.

Speaker Change #278: That's helpful and congratulations on that and maybe just switching gears real quick on on the balance sheet. Is there anything you can talk about with regards to capital allocation and your leverage ratios come down quite a bit. Thank you very much.

Speaker Change #278: Is there any change in thinking with regards to, you know,

Mika Ware: So we're going to continue to prioritize investing back in the business. And so, you know, we demonstrated that with our CapEx guidance. We're going to continue to pay down debt. So we have a bond due in October, we're going to move that $350 million bond to our revolver.

Speaker Change #280: We purchase it as our dividends or anything of that nature.

Speaker Change #281: Yeah, so our capital allocation strategy for F-25 is going to be more of the same. So we're going to continue to prioritize investing back in the business.

Speaker Change #282: And so, you know, we demonstrated that with our CAPEX guidance.

Speaker Change #282: We're going to continue to pay down debt, so we have a bond due in October, we're going to move that $350 million bond to our revolver, and we're going to continue to pay down the debt, probably at similar levels that we paid down this year.

Speaker Change #282: And then we do have some plans to buy back some shares to offset dilution, so we've also factored that into our strategy for next year. So I think it's going to be one more year of the same, invest back in the business, continue to de-lever, and then buy back some shares to offset dilution.

Speaker Change #282: After that, again, we'll all talk and then we'll decide what we can do in F26 and beyond that we can have some more levers to pull.

Mika Ware: And we're going to continue to pay down the debt probably at similar levels that we paid down this year. And then we do have some plans to buy back some shares to offset dilution. So we've also factored that into our strategy for next year. So I think it's going to be one more year of the same, invest back in the business, continue to de-lever, and then buy back some shares to offset dilution. After that, again, we'll all talk and then we'll decide what we can do in F26 and beyond that we can have some more levers to pull. Great, thank you so much.

Eric Gonzalez: Thanks, Eric. Your next question is from Brian Mullan with Piper. Thank you. Just a question.

Speaker Change #295: Great. Thank you so much.

Speaker Change #296: Thanks, Eric.

Speaker Change #296: Your next question is from Brian Mullan with Piper Sandler.

Brian Mullan: Hey, hi, Mika, and congrats. Just a question on development. You know, in a prior answer, you told us what the Chili's new unit growth would be for this year. My question is just beyond this year, given all the progress that has taken place on both the top and bottom line. You know, can you just talk about your appetite to build more Chili's restaurants over time? Or, you know, just ask another way, what would you need to see before you might want to accelerate that at all, if you would?

Brian Malon: Thank you. Just a question. Hey, hi, Mika, and congrats. Just a question on development. You know, in a prior answer, you told us what the chilies...

Brian Malon: The unit growth would be for this year. My question is just beyond this year, given all the progress that has taken place on both the top and bottom line, you know, can you just talk about your appetite to build more Chili's restaurants over time? Or, you know, just ask another way, you know, what would you need to see before you might want to

Mika Ware: We could accelerate that into 15, you know, especially as construction costs start to come down and we continue to accelerate our restaurant operating margin. One thing that we're focused on right now is just watching Maggiano's closely because, again, we only have 50 restaurants, so we may want to lean on the Maggiano's side a little bit more than we've leaned into the Chili's.

Speaker Change #283: accelerate that at all if you would.

Speaker Change #284: You know, right now our plans are to keep the chilies in the 10 to 12.

Speaker Change #285: New Restaurant Openings. We could accelerate that into 15, especially as a construction spot cost starts come down, and we continue to accelerate our restaurant operating margins. One thing that we're focused on right now is just watching Marjanos closely, because again, we really have 50 Marjanos, so we may want to lean in the Marjanos side a little bit more than we've leaned into the chillies. We're going to build...

Mika Ware: We're going to build, you know, one or two of those are in the pipeline now, so we're going to balance both of those brands, but Chili's for now, I'd say 10 to 12 could accelerate to 15, and then we're going to keep watching the Maggiano's with those improvements that we expect. We're hoping to accelerate that in the out years of that branch. Okay, thanks.

Speaker Change #285: One or two of those are in the pipeline now, so we're going to balance both of those brands. But Chili's for now, I'd say 10 to 12, could accelerate to 15, and then we're going to keep watching the Maggianos. With those improvements that we expect, we're hoping to accelerate that in the out years as that branch grows.

Brian Mullan: And then follow up on Maggiano's then, exciting to hear you might want to start building again, just, Kevin, can you explain what are the most important priorities the leadership will be focused on, say, just this year in Fiscal 25, you know, understanding there will be improvements? Yeah, we just got back two weeks ago from the Magiano's annual conference in Savannah, and kind of the theme was, you know, Dom, who's our new president, he's not that new anymore, but he was sharing his vision for elevating the brand.

Speaker Change #286: Okay, thanks. And then follow-up on Maggiano's, then exciting to hear you might want to start building again.

Speaker Change #286: Kevin, what are the most important priorities the leadership will be focused on, say, just this year in Fiscal 25, you know, understanding there will be improvements? Yeah, we just got back two weeks ago from the Magiano's annual conference in Savannah, and

Speaker Change #286: The kind of the theme was, you know, Dom, who's our new president, he's not that new anymore, but he was

Brian Mullan: And there's really two components to it, and it actually sounds a lot like Chili's was two years ago, which is, number one, what are the things that get in the way of making the guests have a great experience? Like, and so speed of service is an obvious one at Magiano's that we could, you know, if we could just reduce that by a small amount, it could actually lead to a lot more traffic on the weekends, as well as an overall better guest experience.

Dom: He was sharing his vision for elevating the brand.

Speaker Change #287: And there's really two components to it, and it actually sounds a lot like Chili's was two years ago, which is, number one,

Speaker Change #288: What are the things that get in the way of making the guess? [inaudible]

Speaker Change #288: have a great experience like and so speed of service is an obvious one at Machiano's that we could you know we can just reduce that.

Speaker Change #288: by a small amount, it could actually lead to a lot more traffic on the weekends, as well as an overall better guest experience.

Brian Mullan: There are a lot of prep steps that we kind of did at Magiano's that probably don't need to be done, so he's challenging some of those things, and he's freeing up those labor hours to then reinvest into having a better guest experience with both better experience in terms of service levels, as well as adding innovation with table-side garnishes, really cool innovation that's going to be coming down the pipe to make Maggiano's relevant and exciting. And so that's really the key thing is elevate the brand, simplify in order to reinvest in the things that are going to separate Maggiano's from the other Italian restaurants that are in the market.

Speaker Change #289: There are a lot of prep steps that we kind of did at Magiana that probably don't need to be done. So he's challenging some of those things. And he's freeing up those labor hours and then reinvest into having a better guest experience with both better experience in terms of service levels as well as adding innovation with table side garnishes and some.

Speaker Change #289: and really cool innovation that's going to be coming down the pipe to make...

Speaker Change #289: Maggiano's relevant and exciting and so that's really the key thing is elevate the brand, simplify in order to reinvest in the things that are going to separate Maggiano's.

Kevin Hochman: And, you know, I think we're seeing it right now in our cocktail program. So that was the first thing that he went and changed, bringing a master sommelier in to help curate specific wines at a Maggiano price that the guests can enjoy. He's also brought in several experiential cocktails at higher price points. And the number one cocktail now is the new one that he brought in, a Smoking Old Fashioned that comes out in like a, basically like a cage with smoke and it's bringing a price.

Speaker Change #290: from the other Italian restaurants that are in the market. And, you know, I think we're seeing it right now in our cocktail program. So that was the first thing that he went and changed, bringing a master sommelier in.

Speaker Change #291: to help curate specific wines at a Maggiano price that the guests can enjoy. He's also brought in several experiential cocktails at higher price points.

Speaker Change #291: and the number one cocktail now is the new one that he brought in a smoking old batch and it comes out like a

Kevin Hochman: And I will tell you, it's the first thing, we've now experienced the first change in or improvement in alcohol mix that we've seen in over a decade at Maggiano. So, and that's just, he's just getting started on innovation. There's a whole slug of food innovation that's really exciting and going to help drive check and traffic coming in September. So we're just getting started on the Maggiano's initiatives, but I feel like that team is hunting in the right areas. There's a bigger ambition to grow on that brand and grow profitably.

Speaker Change #291: Basically like a cage with smoke and it's premium price and I'll tell you it's the first thing

Speaker Change #291: We've now experienced the first change in our improvement in alcohol mix.

Speaker Change #291: and we've seen it over a decade ago by Gianna. And that's just not an act. And that's just he's just getting start on innovation.

Speaker Change #291: There's a whole slug of food innovation that's really exciting and going to help drive check in traffic.

Speaker Change #291: coming in September, so we're just getting started.

Speaker Change #292: on the Maggiano's initiatives, but I feel like that team is hunting in the right areas. There's a bigger ambition to grow on that brand and grow profitably. And I, you know, when we have more news to report on more specifics and details of what these things are going to hit, we'll, we're very eager to share that with you.

Kevin Hochman: And when we have more news to report on more specifics and details of what these things are going to hit, we're very eager to share that with you. Thank you very much. We have reached the end of the question and answer session, and I would now like to turn the floor back to Ken Sanders for closing. Thank you, and that concludes our call for today. We appreciate everyone joining us and look forward to updating you on our first quarter results in October. Have a wonderful day. Thank you. This concludes today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.

Speaker Change #293: Thank you very much.

Speaker Change #293: We have reached the end of the question and answer session, and I would now like to turn the floor back to Kim Sanders for closing remarks.

Ken Sanders: Thank you, and that concludes our call for today. We appreciate everyone joining us and look forward to updating you on our first quarter results in October. Have a wonderful day.

Speaker Change #294: Thank you. This concludes today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.

Speaker Change #294: [inaudible]