Q2 2025 Brinker International Inc Earnings Call and Business Update
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Good day and welcome to Brinker International's Q2 F. 'twenty five earnings call. At this time, all participants have been placed on a listen only mode. The floor will be opened for questions and comments. Following the presentation. It is now my pleasure to turn the floor over to your host Kim.
Sanders: 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.
Speaker Change: Here with me today are Kevin Hoffman, President and Chief Executive Officer, and President of Chili's, and micro Ware, Chief Financial Officer.
Speaker Change: For our second quarter were released earlier this morning and are available on our website at Brinker Dot com.
Speaker Change: As usual, Kevin as Micah will first make prepared comments related to our strategic initiatives and operating performance. Then we will open the call for your questions.
Speaker Change: Before beginning our comments I would like to remind everyone of our safe Harbor regarding forward looking statements during.
Speaker Change: During our call management may discuss certain items, which are not entirely based on historical facts any.
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.
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 Hoffman: And with that said I will turn the call over to Kevin.
Speaker Change: Thank you Kevin and good morning, everyone. Thank you for joining us as we discuss our financial and operating performance for the second quarter as well as our outlook on the remainder of fiscal 'twenty five but before I start I wanted to share that our thoughts are those.
Speaker Change: That are impacted by the Los Angeles area of wildfires and I want to thank the first responders on the ground. There I also want to recognize our Chile VP of operations Bill Balata and as restaurant teams in California, who are working hard to support the first responders with meals as well as taking care of our team members who have been impacted by the wildfires.
Speaker Change: A lot of how we're actually going to show up for each other and our communities during times like these.
Speaker Change: Now, let's give an update on the business Chili's delivered another positive quarter in our turnaround and significantly outperformed the industry with same restaurant sales up 31% versus a year ago. We're pleased with our sustained momentum the strength of the operational muscle, we've built and our significantly improved chili's guest experience.
Speaker Change: Q2 increased competitive promotional activity pressured testing trying pressure trying to undercut our value tested our guest experience improvements and the results are clear chili's turnaround is taking hold and it is sustainable our growth continues to be well balanced driven by the introduction of a new generation to the chili's.
Speaker Change: And by existing guests coming more often.
The investments we've been making over the last three years, our working marketing is doing a great job of bringing guests in and putting chili's back in culture again operation simplification investments in labor and facility improvements are working to get guests to return.
Speaker Change: In short Chili's is broadly relevant again in delivering our guest experience that is restored its leadership position in casual dining the most recent circon across traffic share data shows Chili's is now the number one casual dining chain in the industry for 2024, and we don't plan to give that title up.
Speaker Change: Congratulations to Doug Cummings, as vice President of operations, and our restaurant teams and selected traffic as their obsession metric for this fiscal and to George Felix's marketing team, who have supported them with literally world class marketing.
Speaker Change: These sustained results have been driven by continued operational improvements, which have guests coming back so I'd like to start with an update on operations.
Speaker Change: We are encouraged with our ability to accelerate sales results. While we also continue to trim the menu fiscal year to date, we've been able to remove 13 menu items, while pantry skus and several prep steps and we've reinvested timing of doing fewer things a whole lot better.
Speaker Change: From a food standpoint, we successfully moved to a higher quality chicken breast on every entre as well as guacamole made fresh in house every day, we also upgraded our recipes for bone in chicken wings and begun to make them. Chris beer. These recipe improvements continue to make a positive impact on guest satisfaction scores fewer things to prepare more care executing our core men.
Speaker Change: And continually upgrading ingredients is resulting in better tasting food, which is a key piece in accelerating our results next on the upgrade list as fajitas in Q4 and <unk> in Q1.
Speaker Change: We also continue to challenge our processes to simplify and make the job easier for our team members. The installation of our new kitchen display systems is now complete which is not only a limited hundreds of pages of referenced binders in the kitchen and made it easier to find recipes. It also has enabled slightly faster ticket times, even with the dramatic increase.
Speaker Change: And traffic and we have just completed the caveats disbursed upgrade at an all day counters across all three zones, which will be a game changer for close to get better visibility on what they need to prepared during the busiest of shifts.
Speaker Change: Other impactful operational changes. We've made recently include the use of state waits to Tim Cook time up to 40% elimination of chicken portion and the removal of that its just wink station tower in the prior areas zone, one, which frees up space and time cleaning for this one loan cooks, while we still offer that its just wings virtual brand we have removed enough complexity there.
Speaker Change: US to dismantle the specific station that was simply too much space allocated for what is now just 1% of the business. We're moving the Wink station seems small, but it has a big impact that is important to our operation.
Speaker Change: Let's items to prep less equipment to clean and mortgage REIT space.
Speaker Change: Zone, one where much of the incremental volume driving our business is hitting the kitchen with growth items with high growth items like triple differs and christophers to wrap up our operations I did want to share news of investment we have decided to accelerate to convert the balance of our restaurants that turbo shifts, which are ovens that use a combination of modern cooking methods.
Speaker Change: To rapidly accelerate cooking versus conventional oven.
Speaker Change: The majority of our system uses conveyor belt ovens, the cook a variety of menu items like ribs chicken in case. It is we've been testing turbocharging, the restaurants and slowly expanding them for the past three years with very positive feedback from the operators.
Speaker Change: Fluid much faster and much more evenly they've put out less heat, making the kitchen more comfortable for our team members that create superior tasting products that could be a case of deals originally the delicious cros, they save a lot of kitchen space, which help with kitchen capacity in the future. They are much easier to clean and they are much more reliable than the current conveyor belt ovens.
Speaker Change: We've been slowly replacing ended blood conveyor oven when they need repairs and now this is with the sustained traffic increases the time is right to upgrade the balance of our system to a piece of equipment that could properly handle our new increased volumes.
Speaker Change: Now, let's switch gears and talk about marketing and menu innovation we.
Speaker Change: We saw traffic and guest counts accelerate behind a continuation of our better than fast food TV campaign, and the triple dip our social media campaign.
Speaker Change: As the operation gets stronger and stronger it amplifies the return on our marketing investments through more frequent guest visitation. So while competitors can certainly price below our three for me offer it is very difficult for them to replicate the total value proposition given the amount of time and investment we have put into improving the experience we have a multiyear head.
Speaker Change: Started in the industry are accelerated Q2 results in the face of hotter competitive offers are a solid proof point that replicating our Chile success will be difficult for competitors to do in the near term.
Speaker Change: We also have deep with innovation news coming in Q4 to bring excitement to the new three two to three for me platform within or better than fast food campaign.
Speaker Change: I'd like to tremendously successful big Smasher. The Q4 launch will feature a famous very familiar taste profile, but with the high quality, great taste and high price point, you can only get from Chili's.
Speaker Change: Wait to be able to talk about it at our next earnings call as we expected new menu item to help us grow traffic versus year ago, as we lap the big Smasher launch from Q4 last year. In addition to our industry leading value three for me platform. The marketing team has done an excellent job driving that triple dip our social media campaign that started in April 2010.
Speaker Change: Four in Q2, they brought news to the campaign by partnering with social media personalities do perfect who challenge fans to create the perfect tripled that perfect shot and later in Q2, the marketing team launched a triple different themed holiday Bedspread collection and sold out in less than a week through yoga data. We can now see how these efforts.
Speaker Change: Positively impact buzz with younger guests and are introducing the next generations to chili's.
Speaker Change: We also brought innovation to triple differ in Q2 to keep the momentum going as a follow up to the wildly successful basketball Hot version of our of our famous mozzarella sticks. The food team launched Honey Chipotle months' six may have also driven so it will be the excitement around the triple differ.
Speaker Change: It's also behind the campaign are exceptional with Triple dip are now representing 14% of total sales in Q2, a three point acceleration versus Q1, and an important driver of the total business results.
Speaker Change: Payments, bringing a younger guests, it's driving a higher check average and guests who purchased a triple differ are coming back more frequently than those who don't new gas higher ticket and more frequency I would call that a triple different way for the business.
Speaker Change: Now I'd like to give an update on Marciano is we've got an established playbook with the successful chili's turnaround and we started deploying elements commodity analyst with the bringing the magic player being the magic back plan and it focuses on simplifying operations, while accelerating improvements to the guest and team member experience.
Speaker Change: Largely analyst President Dominic Bertolotti has built a strong leadership team to lead the transformation, we previously announced Anthony Amoruso as Vice President of innovation growth and Michelin starred chef and Iron chef winter and those food and he knows how to elevate experience now I am pleased to announce two additional strong leaders to round up the margin.
Speaker Change: His leadership team are in.
Speaker Change: As president of our new Vice President of <unk> operations.
Speaker Change: This was a chili's operations leader for 13 years before transitioning of our channels in 2020, and I couldnt be more pleased to announce his promotion is a true servant leader, who is working closely with the team to simplify operations and drive business growth.
Speaker Change: Also pleased to announce Mike Westley.
Speaker Change: And the team as Vice President of my channels market might have spent the last 14 years as a marketing executive at Yum brands and I had the pleasure of working with him and the entire time I've spent yung before that Mike learned leadership in brand management at Procter <unk> Gamble company. He has a strong track record delivering on the fundamentals of restaurant marketing and innovation as well as bringing big teams along.
Speaker Change: The journey he loves the Montana brand and he's excited to partner with to bring Don's vision to life.
Speaker Change: The Montana team has started the journey of simplification, we eliminated $6 take home positive seven other menu items, which was 13% of the menu.
Speaker Change: We've also eliminated 17 prep steps that don't improve the guest experience such as pounding chicken in proportion process. This has enabled us to reallocate around 80 hours of labor every week the heart of house, So our executive chefs and their teams can focus on executing the core menu with excellence and chef MRO. So is beginning to put his stamp on elevating the menu starting with core items that represent over at <unk>.
Speaker Change: Third of the business to make the biggest impact.
Speaker Change: Two recent upgrades are our marciano Caesar salad that now features scratch of HFC fresh breakthrough times, and freshly cut romaine as well as our meat sauce, which has been upgraded to a far more delicious beef and sausage bolognese serve with a superior cost of noodle next on our upgrade list is what we think is the most delicious fettuccine Alfredo our guests love it.
Speaker Change: It tasted and elevated crispy chicken parmesan topless fresh mozzarella, a 30 layer meeting sources lasagna and our new meatball recipe that has made with American <unk> will be to elevate spaghetti and meat balls as well as other dishes.
Speaker Change: In addition to operations and food innovation in largely added leadership team is working on big initiatives to improve speed of service and re imaging their estate both of which I look forward to updating you on in the future I do want to remind everyone that while we started growing sales immediately during the chili's turnaround. It did take five quarters to start trading traffic trend and it is.
Speaker Change: Seven quarters that turned positive on traffic so that should give you some type of guide on what we're expecting from our Geos.
Speaker Change: In closing I continue to be encouraged by our business momentum. Our Q2 results demonstrate we're working on the right things the right way to drive long term growth was even more encouraging about our turnaround is there's still so much more runway ahead of us where improvements in growth My executive leadership team. Just finished our annual strategy planning meetings, and we have a clear line of sight.
Speaker Change: Into our future growth plans, while we've made great strides in areas such as food grade scores in service, we still have a lot more opportunity. Our ultimate goal is best in class casual dining guest experience, we see a lot more upside by staying focused on improving the business fundamentals, which includes continued upgrades to menu service atmosphere. While also continuing to make our team members' jobs easier more fun.
Speaker Change: And more rewarding.
Speaker Change: Look forward to sharing even bigger initiatives anchored on improving the fundamentals in quarters to come.
Speaker Change: Now I'll hand, the call over to Mike to walk you through our second quarter numbers and our updated guidance go ahead Micah.
Mike Westley: Thank you, Kevin and good morning, everyone.
Mike Westley: We're pleased with <unk> second quarter results as we delivered record same store sales and 600 basis points of margin expansion.
Mike Westley: Our strong performance is a direct result of staying focused on the fundamentals at food service and atmosphere, our investor growth strategy combined with our industry, leading value proposition continues to drive sustained growth in our business.
Mike Westley: It's exciting to see our cross functional efforts deliver results and such a big way and I'm encouraged that we have more opportunity for growth ahead of us stand behind us.
Mike Westley: In the second quarter Brinker reported total revenues of $1 billion $358 million with consolidated comp sales are positive 27, 4%.
Mike Westley: Our adjusted diluted EPS for the quarter was $2.80 up from 99 cents last year.
Mike Westley: Both brands reported top line sales growth with Chili's comps coming in at positive 31, 4% driven by positive traffic of 19, 9% positive mix at six 6% and price at four 9%.
Mike Westley: Chile cells are a direct result of the investments we've made into marketing to drive the guests in and operations to bring guests back we're back at the top of the consideration set and we are committed to continuing to improve both the guest and team member experience.
Mike Westley: Turning to <unk>, the brand reported comp sales for the quarter at positive one 8% driven by six 4% price.
Mike Westley: Positive <unk>, 3% mix, partially offset by negative four 9% traffic.
Kevin Hoffman: As Kevin mentioned <unk> has started to implement its turnaround strategy dominant team are closely following the chili's playbook by eliminating discounting and improving the coordination and the service model I'm excited about the brand plans and the progress the team is already making.
Kevin Hoffman: At the breaker level, we made considerable progress on flow through this quarter with restaurant operating margin coming in at 19, 1%, a 600 basis points improvement year over year, primarily driven by sales leverage from top line growth.
Kevin Hoffman: This resulted in favorable <unk> in all categories of data and beverage costs labor and restaurant expense.
Kevin Hoffman: Food and beverage costs for the quarter was favorable 20 basis points year over year with price offsetting one 5% commodity inflation les.
Kevin Hoffman: Labor for the quarter, it was favorable 220 basis points year over year.
Kevin Hoffman: Top line sales growth and favorable productivity offset wage rate inflation of approximately three 5%.
Kevin Hoffman: Advertising spend for the second quarter was flat year over year as we moved some of our incremental spend into the back half of the year. Our marketing team continues to do an excellent job, bringing chili's back into the cultural conversation and making the brand relevant again Jim.
Kevin Hoffman: G&A for the quarter came in at three 9% of total revenues with the year over year decrease due to sales leverage partially offset by increases in performance based compensation and ERP system costs.
Kevin Hoffman: Q2 is our first quarter to report from our new ERP platform.
Kevin Hoffman: So far while we have experienced the normal bumps expected from an implant implementation of this scale operations are running smoothly and we havent had any material disruptions to the business.
Kevin Hoffman: Second quarter, adjusted EBITDA was approximately $216 million.
Kevin Hoffman: 102% increase from prior year.
Kevin Hoffman: Capital expenditures for the quarter or approximately $49 million driven by capital maintenance spend.
Kevin Hoffman: During the quarter, we repaid approximately $164 million in debt.
Almost half the amount we put on the revolver when our $350 million notes matured in October, bringing our overall lease adjusted leverage ratio to two three times, we will continue to execute our capital allocation strategy, which is to invest in the business pay down our debt and return excess.
Kevin Hoffman: Cash to the shareholders.
Kevin Hoffman: While it's still early in the quarter were excited to see our strong sales momentum continue.
Kevin Hoffman: As we finished our first month of Q3.
Kevin Hoffman: In terms of our expectations for the balance of the air.
Speaker Change: As noted in this morning's press release, we are raising our fiscal 2025 full year guidance to include the following.
Speaker Change: Annual revenues in the range of 515 billion to $5 two $5 billion.
Speaker Change: Adjusted diluted EPS in the range of $7 50 to $8.
Speaker Change: Capital expenditures in the range of $240 million to $260 million.
Speaker Change: Our existing guidance for weighted average shares was also reiterated.
Speaker Change: Assumptions underlying this guidance includes planned commodity inflation in the low single digits way.
Speaker Change: Wage rate inflation in the mid single digits and a tax rate in the mid double digits.
Speaker Change: Sustaining this level of performance tapes continued focus and discipline and we remain committed to the fundamentals continuing to improve our food service and atmosphere.
Speaker Change: We're proud of how far we've come we know there's more work to do and that's what excites us by sticking to our strategy and making smart investments, we're confident in our ability to drive long term success and with our comments now complete I will turn the call back over to Holli to moderate questions.
Holli: Certainly at this time, we will be conducting a question and answer session. If you have any questions or comments. Please press star one on your phone at this time, we ask that while posing your question you. Please pickup your handset if listening on speaker phone to provide optimum sound quality. Please hold.
Speaker Change: While we poll for questions.
Speaker Change: Your first question for today is from David Palmer with Evercore ISI.
David Palmer: First of all just a wow and congratulations to you guys on this on the spring turnaround, which probably used to be.
David Palmer: The best one of all time in this space.
David Palmer: And that would be true if the comps were 15%, but they were over 30.
David Palmer: I know theres a lot of <unk>.
David Palmer: Wonder about this level of same store sales and the reasons for it as you sort of separate the different levers.
David Palmer: One of those levers I think people wonder about is just the magical social media buzz lift that you've had particularly with triple Dipper.
David Palmer: And people.
David Palmer: Wonder and worry about not being lightning in a bottle that's difficult to replicate or or repeat as you have to lap. These so could you talk about that and how you sort of.
David Palmer: Try to sustain the lift that you're getting with some of this effective social media marketing and other things.
Kevin Hoffman: Hey, David Thanks for the kind comments, it's Kevin.
David Palmer: We ask ourselves the same question that we obviously go deepen our analytics to understand the drivers of the business.
David Palmer: I know last quarter, we talked about we got to a pretty precise measurement of what was triple dip or social media versus what was three for me.
David Palmer: In Q2, we saw really everything.
David Palmer: Continue to accelerate so it's kind of hard to tease apart what was.
David Palmer: Social media versus what was three for me what I will say to maybe help dimensionalize. It is if you look at the comp which is over 30, and then you look at like well what was the sales of triple dip or versus year ago, Bill, we basically doubled that business. So it's about seven points. So you can start dimensionalize, what's the percentage of the total is it probably.
David Palmer: You did the same numbers that we gave you last quarter.
David Palmer: Quite frankly, it's not it's harder for us to make a more finite comment about that so that's kind of 0.1, and then 0.2 is.
David Palmer: What we believe is going on in the businesses that without the operational improvements that Doug and his team are blurred and simplification efforts that we've made we don't think that the.
David Palmer: Orality and the impact on the business went up last as long so quite frankly this stuff really started in April of 2024, typically when you see something go viral especially in food.
David Palmer: No more than two to four weeks before you kind of see it step back like I remember seeing.
Speaker Change: Two it's our competitor.
David Palmer: Had done a promotion.
David Palmer: Is a cartoon company and they saw a big double digit comp that first week and then by week four it was kind of back to where they were and I think that's what you would normally expect if you get the morality of something without some of the improvements that we've made whats happening at young people are coming in.
David Palmer: You did see this tick tock and they're like Wow. This experience is really good and it becomes a part of the rotation and I think that's why you've seen the longevity of the results.
Acceleration of the results not just kind of a boom splat that I think you typically would see without the operational investments that we've made in the business. So.
David Palmer: I wish I could give you more find any answer on that because I think that's what everybody's yearning for including us, but we do believe that our strategy is working and.
David Palmer: The frequency and the repeat rates are in a place where this is a sustainable long term business for us.
Speaker Change: Thanks, I'll pass it on.
Dennis Geiger: Your next question is from Dennis Geiger with UBS.
Speaker Change: Great Thanks, guys and congratulations to the team.
Dennis Geiger: Wanted to ask on value and kind of the latest maybe I'm not sure if I missed it but as far as that three for me mix goes if maybe the 10 99 within that and if there's anything to share and specifically sort of those value scores. It sounds like everything is trending in the right direction and Kevin just kind of curious if those those value scores or or sort.
Speaker Change: Trading is strong.
Speaker Change: <unk> results and maybe if there's anything additional on your your thoughts on value and opportunities from here from a from a value perspective.
Speaker Change: So I'll start with just the trends on three for me. So the 10 99 bucket.
Speaker Change: Up a little bit our overall three for me. It's really it was about 19% last quarter is just a little bit about 19. This quarter. So it's pretty similar so we still feel really great about.
Speaker Change: Just the many management.
Speaker Change: And the ability for it that platform to drive traffic into our restaurants.
Speaker Change: Kevin if you want to talk a little bit more about just the whole value proposition and I think our values are definitely hanging in there yes.
Speaker Change: Our value scores standpoint, we are very very strong and.
Speaker Change: It's very clear that it's not about the lowest price point, because we actually had a lower price 0.3 years ago. We used to have three for $10 three per ton 99, with the trade up and what's the difference in the business today than three years ago was youre getting a much more consistent experience youre getting much more delicious food and.
Speaker Change: And you are getting it in a much better atmosphere with friendlier service and I think that is a huge part of the value equation that I think people underestimate and we were getting a lot of questions I don't know.
Speaker Change: 13 weeks ago, when the when our competitor came out with.
Speaker Change: Maybe eight weeks ago competitors coming out with a lower price point and I'll tell you. The story I'm talking with my Vice President of operations, we had a meeting with them a few weeks ago and I said are you guys worried about that number the 999 and they will just start laughing and I said why do you guys lap it and it is because we know how strong we've been in the gym, we've been working out and we are not afraid of competitors.
Under cutting us I think thats, what youre seeing in these results I think everybody on this call were asking questions about how is this sustainable why canceled lingo beneath you on price points and answer as they can but they can they deliver the overall value equation that we're delivering right now I think that's going to be difficult to do in the short term.
Speaker Change: Got it great guys appreciate it and one quick follow up if I could just just on the <unk>.
Speaker Change: The traffic success and it sounds like Theres, new customers as well as increased frequency from the existing is there any more color you can give on that and maybe how that's changed over the last several quarters. You've had this level of success, where where it's more of the increased frequency versus the newer customers any any sense on a on a breakdown or anything.
Speaker Change: Other positive behavior shifts from your customer that you've observed over the last several quarters. Thanks for all.
Speaker Change: The only thing we can share with you in the last couple of quarters. Then is that the frequency is getting better.
Speaker Change: And there is more new guests coming to the business.
Speaker Change: Can't give you any other granularity on it it should it's a new discipline for us and we're using token Ais data and we just wanted to be careful about giving anything thats exact without really fully understanding all of the data work. So we're very hesitant to give versus like when we give you the traffic numbers in sales numbers. These are tools that we've had for a very long partnered very competent and so we can say directionally.
Speaker Change: <unk> frequency is up new guests are up but to give you that kind of detail, it's just going to be difficult to do right now.
Speaker Change: Makes sense, thanks, guys Congrats again.
Speaker Change: Your next question for today is from Chris <unk> with Stifel.
Speaker Change: Thanks, Congratulations guys.
Speaker Change: Kevin You mentioned, a couple of product innovations coming in the fourth quarter, one being a big three for me innovation just given the results Youre seeing why is the fourth quarter. The right time to bring a new product to the platform and then what gives you. The confidence you can maximize the impact of really two new items right. The three for me innovation and then the fajita upgrades and the <unk>.
Speaker Change: Same quarter.
Chris Beer: Yeah, Hey, Chris Thanks for the question.
Speaker Change: No.
Speaker Change: From a three for me standpoint will have been running basically.
Speaker Change: That advertising for our full year and we feel like the time is right to bring some new fresh news two.
Speaker Change: Three for me, obviously, if we see a change in business trend when we turned on advertising on we will go back to the to the other advertising, but it's going to be in a similar vein of better than fast food campaign.
Speaker Change: Familiar taste profile that people know and love, but with the great taste in the hot price point of Chile. So we're pretty confident that it's going to be sufficient to rollover. The results. So, but obviously, we're not going to be myopic about that we're going to watch the results closely and we can always slip back up if we need to so that's kind of 0.1 and then how can we support both so that the heat is law.
<unk> is really going to be focused on the operational improvements the food improvements and through menu merchandising only so think about that as a thing that could really help our mix in the short term.
Speaker Change: If the business takes off on fajitas, we could then potentially advertise it in the long term. So we're.
Speaker Change: We're not we don't think our advertising budgets right now are big enough to have two mouths to feed and so they have two things on television and we know that value is to continue to work. So we are not willing to move off of that right now even if we are refreshing the message so think about <unk> as kind of a ground war.
Speaker Change: Menu merchandising operational improvements in food improvements and then our new three for me innovation will be the Air War, where we use advertising to drive traffic inside the building.
Speaker Change: That's great. That's very helpful. And then just one other one.
Speaker Change: I wanted to ask about chili's longer term margin potential and I'm curious if you know what a sustainable store level margin could be once the chain gets to let's say above $4 million in <unk>.
Speaker Change: Hi, Chris It's Mike So really good question about margin so.
Speaker Change: I want to take the opportunity to talk a little bit about Q2 expectations for this year and then a longer term expectation. So I will say the 19, one for Brinker margin was excellent in Q2, I think it is a little bit of an outsized, earning just for this corner quarter. There are a couple of things I wanted to point out.
Speaker Change: We had a really big changes in our sales from Q1 to Q2 and then the trick.
Speaker Change: January and we did it did take us a little bit of time to really ramp up our labor spend in that quarter. So we were a little light in the beginning we exited where we wanted to we felt really good about the labor then coming out of the quarter. So that in turn caused us to have some really favorable labor.
Speaker Change: That I still think we will definitely leverage labor as we move forward, but not at that magnitude.
Speaker Change: The second thing is the advertising we were flat year over year, we did reallocate some of those dollars to the back half of the year. So I do think again that the 19.
Speaker Change: It will be the peak and then I think we will moderate a little bit on run in the last few quarters, probably coming in for the year at that mid teens to even upper teens from for our full year expectations. So really pleased with all the progress we've made over the last few years you mentioned AAV.
Speaker Change: Just a few years ago <unk> were at $2 9 million last year. They were at three six and now we are over 4 million and $4 two at the <unk>.
Speaker Change: <unk> News is we think we can continue to grow. These AAV. So we actually have chile's out there that are $8 million to $9 million volume restaurants. So these are all basically in the same box. We also watch our guest counts are dining guest counts really closely and we know we still have a lot of upside there to continue to grow. These babies. So the point of that is if we can continue to grow.
Speaker Change: The Avs, we know we still have upside in the margin. So really pleased with this year the progress, we're making back to historical high ROM, probably even better if you adjust for some of the historical changes and still think theres upside from here to continue to grow the elites.
Speaker Change: Great. Thanks, guys.
Speaker Change: Your next question is from Jeff Farmer with Gordon Haskett.
Speaker Change: Thank you an incredible quarter to at least one of the focus a little bit on the free cash flow. Obviously, you guys pay down some debt capex is going up a little bit but.
Speaker Change: I'm, assuming that your operating cash flow run rates are at a higher level moving forward. How are you thinking about using cash moving forward.
Speaker Change: Jeff That's a great question, so really we're going to do more of the same.
Speaker Change: For us the most important thing is we continue to invest in the business and have the base business grow.
Speaker Change: So we're not going to take our eye off the ball there we're going to continue to pay down our debt, especially into the third quarter I think well continue to do that and then any excess cash or there will be used to.
Speaker Change: Return the cash to shareholders. We did some share repurchases to offset dilution will continue to evaluate that and do that as we move forward. So that prior priorities havent changed its going to be invest in the business continue to pay down that debt and then we will return cash to shareholders after that.
Speaker Change: Okay. That's helpful and then on the follow up you touched on it earlier, but as it relates to the increase in new guests that youre seeing.
Speaker Change: In Chili's.
Speaker Change: How you monitor that and sort of what are some of the data points that you've seen over the last nine months with.
Speaker Change: With our from new guests I should say.
Speaker Change: Yes, so the way we monitor it so we put those we were talking about it for a year and a half about getting the tokens into our business. So we took a nice today announced that we know.
Speaker Change: For a given period, how many guests are new and how many guests come back within the last 12 months or even further back 24 months.
Speaker Change: We just it's just a math equation right. So we could we could tell you what the number of guests that are that show up new at least the ones that we have taken out which is a good representation of the total population.
Speaker Change: That gives us the confidence that we know that we are bringing in more new guests as well as existing guests are coming back more frequently. So that's probably the amount of detail I can give you on that but that's how we're confident knowing that it's both drivers not one or the other.
Speaker Change: Okay. Thank you.
Speaker Change: Your next question is from Jeffrey Bernstein with Barclays.
Speaker Change: Okay.
Speaker Change: Great. Thank you very much.
Speaker Change: Two questions. The first one just following up on the very strong comps it seems like your revenue guidance for the full year.
Speaker Change: <unk> assumes sustained elevated level of comp.
Speaker Change: With the recent trend.
Speaker Change: And the last quarter when you gave guidance it seemed like it took perhaps a more conservative view on the forward comps.
Speaker Change: So I'm just wondering your confidence.
Speaker Change: I wouldn't think you could imagine sustaining a 30% plus comp, but just trying to get a sense for what your assumption is for comp through the back half of the year.
Speaker Change: And just so we can gauge maybe the momentum can you share the monthly comp trends for October November December and now January, especially with the weather impact and then I had one follow up.
Speaker Change: Alright, so so.
Speaker Change: I can share. This so we had a big step change in the business.
Speaker Change: We've had it starting in October in the second quarter honestly.
Speaker Change: We had a big increase what I will tell you is that happened and it is sustained and so.
Speaker Change: Really there was a little noise in the quarter, just because of holidays lifts, but our sales have increased and they're staying at those levels and that momentum has continued into the third quarter.
Speaker Change: Oh really.
Speaker Change: None of the assumptions have changed we know we've talked to you guys, what our price assumptions our mix has been elevated now triple differ.
Speaker Change: In the mozzarella sticks, we've added those to the appetizer menu those are highly incremental and selling more of those so our mix now will be in the mid single digits as well throughout the balance of the year and then we feel like the business has moved and sustaining so.
Speaker Change: We're seeing that consistently.
Speaker Change: Every day in everything that isn't it.
Speaker Change: Yeah.
Speaker Change: Great.
Speaker Change: Then Kevin just following up you mentioned the turbo chef.
Speaker Change: It sounds like you've already had it in some units I'm just wondering how many more units.
Speaker Change: Our need of the conversion.
Speaker Change: Any color you can provide in terms of how you would quantify the potential benefits I know you gave a lot of sort of metrics around.
Speaker Change: Better quality and consistency and whatnot, but.
Speaker Change: Anything else you can share maybe the cost to convert or any other.
Speaker Change: Quantifiable benefits you anticipate from that full rollout. Thank you.
Speaker Change: We're at about a quarter to a third we can certainly follow up after the call with an exact number but so the majority of the systems still has yet to be converted.
Speaker Change: I'm not going to share any specific details on the speed and overall satisfaction.
Speaker Change: With great scores et cetera, because theres just a lot of items that go through it it would be very complex, but generally speaking we've been very very pleased with all of the metrics and when you talk to the outlook. We have a lease at least directors of operations and they have anywhere from like eight to 12 restaurants and some of them have tourists, yes. Some of those restaurants and when do you ever you talked to these directors operations, let's say.
Speaker Change: What's the next big investment that we need to make into the restaurant that continue to improve.
Speaker Change: <unk> and the team member and guest experience. The first thing I'd say is can you just convert the rest of my restaurants. The turbo shifts. So we are so confident now that we've been testing. This thing for three years and the reality is we were pretty confident before and we're rolling it out as the conveyor belt of its work, where crapping out and out of warranty and now we are at this point with the increased traffic and the <unk>.
Speaker Change: Billy to invest to say, let's just go make that move now so that we can really support the teams with the things they need to deal with this increased traffic. There's other things that we've been doing the auditor was yet, but we know the time is right now so we couldnt be more confident that that is.
Speaker Change: The large investment we certainly can share with you all the numbers, but we're very very very confident this is the right thing to do for the business.
Speaker Change: And Jeff we've factored that into all of the current got it so honestly in our depreciation and.
Speaker Change: Our EPS and our Capex forecast as well.
Speaker Change: Thank you.
Speaker Change: Your next question is from Brian Harbor with Morgan Stanley.
Brian Harbor: Yes. Thank you morning, congratulations guys.
Speaker Change: Okay.
Kevin Hoffman: Kevin I guess, just the mix piece was that mostly driven by by Triple dip or maybe just comments on.
Kevin Hoffman: Somebody other things that you see driving that whether it's alcohol mix or do you think anything of that sort of adds to that as we go through the balance for the year.
Mike Westley: Yeah, Brian it's Mike so.
Speaker Change: Like Kevin mentioned, our triple dip our sales year over year have doubled and when we sell more triple diverse it definitely drives our mix. So I would say that is the bulk of what's driving the mix on a year over year. We do have like I mentioned, the mozzarella six those are incremental and the appetizer category. So we are seeing some mix from <unk>.
Speaker Change: Pfizer, So thats positive and then there's a small amount that could be a little bit of desserts or kind of other everything rolled out but those are the two big drivers of year over year, our alcohol sales they're hanging in there.
Speaker Change: Pretty flat or that pier one hundreds are up slightly so everything is pretty solid on the mix, but those are the two main drivers that triple Dipper is a big big mix driver year over year.
Speaker Change: Okay got it thanks.
Speaker Change: Maybe just to push a bit on that sort of use.
Michael: Uses of capital question too right Michael would you.
Speaker Change: Yeah.
Speaker Change: Do you think that you'll just pay off the revolver and then I mean longer term do.
Speaker Change: Do you want to sort of go back to growing units are there are there places where you think you could build new stores. You know do you think you could sort of accelerate some relocations are there stores that you'd you'd want to expand and I guess you know are there stores that is there a cohort of stores that you think need full remodels, how how would you think about that sort of thing.
Speaker Change: Yes, so Brian good question, so absolutely focusing again on the base business, we want to invest back in the business, where we think it's smart.
Speaker Change: Right now we've been growing new units at Chile, obviously, when the brand continues to improve that opens up more opportunities for that so we will still evaluate those opportunities you mentioned re imagined that something we're really excited about again with our pillars food service and atmosphere. We think atmosphere is very important. So we are ramping up with the new prototype.
Speaker Change: Nine which will then latest two our new re image design, so more to come on that but that is something we think we can put our cash against as we move forward with our capex plans in the future to keep Chile and marciano are relevant.
Speaker Change: So that'll be a big play there. So again, it's going to be focus on the business because if we don't have the business growing.
Speaker Change: The rest of the strategy isn't.
Speaker Change: It's not as meaningful so.
That's still the number one priority and that's what we'll do with the cash and made important.
Speaker Change: Thanks.
Speaker Change: Your next question for today is from John Ivan call with J P. Morgan.
Speaker Change: Hi, Thank you I wanted to firstly, congratulations on everything Kevin Youre going to write a great book on this Sunday. So we all look forward to reading it you congratulations thank you.
Speaker Change: Congratulations to the entire team.
Speaker Change: So the question is on.
Speaker Change: Capex of $2 40 to $2 60, I think is the number this year certainly if we go back in the history of the industry and the casual dining landscape I mean, there's so many brands that were once good that didn't do their remodels that didn't do relocations that didn't do rebuild just because maybe the financial returns didn't pencil out at the point in that.
Speaker Change: In other words, it wasn't necessarily the best use of capital from a return perspective, but in hindsight it was necessary for the brand.
Speaker Change: Ask the question in the context of the Chili's brand you have units that are 20 years old 30 years old 40 years or maybe even a couple over than that maybe 50 years old approaching.
Speaker Change: It's not quite 50, but in other words getting up there.
Speaker Change: Talk about that.
Speaker Change: Since your system is so strong and people are so excited to work at your brand how much of an opportunity we may have.
Speaker Change: Chili's to really be.
Speaker Change: A brand of the future from a physical asset perspective.
Speaker Change: 240 to $2 60 of Capex, where does that number go how much of an opportunity do you want to take forward.
Speaker Change: With the money that you now have to perhaps spend considerably more on the existing asset base.
Speaker Change: For the question, Joe So I'll start off with kind of our approach to.
Speaker Change: Sure.
Speaker Change: Two.
Speaker Change: Improving the estate or accelerating re images and then I'll, let Mike or provide any color on the numbers and how we're thinking about that so right now we really haven't done anything on re imaging yet so we talk about.
Speaker Change: Food service and atmosphere. So most of the atmosphere work that we've done so far has been in terms of repairs and maintenance so that would be things likely he roofs and bathrooms that they don't need of assistance.
Speaker Change: We placed 1000 sticky tables that were during COVID-19 damage through the cleaning process of making sure things were really clean and so really just sprucing up the existing estate, but not necessarily re imaging and taking it to the to that to the future of what chili's, New Chili's that were building right.
Speaker Change: That is going to be a focus for us starting next fiscal so Jesse Johnson and Jim Fae kind of our leaders just to use our head of advertising and brand image and Jim.
Speaker Change: Construction and in charges re imaging they are working very closely together to figure out whats that new next generation re image prototype and our hope will be and our expectation is it will be done sometime early in.
Speaker Change: And next fiscal and then will be will start being able to rollout roughly 100.
Speaker Change: Buildings, a year of re imaging and Theres 200, right now that we think are like what we'd call prior prioritization.
Speaker Change: <unk> that we want to get quickly because they are the ones that are much older generation that could be not re imaged in 2030 years right and at our boasted need of our re image program. So that's what we're going to focus on first and then once we get that done of that I think youll, probably see more of a normal cadence because.
Speaker Change: The rest of the state may not be in the image of what these guys are building, but it looks pretty darn good like I don't go into that restaurant and so I think this is brand damaging any way or is this is holding us back from growing comps. It just over time, you're going to make sure you continue to update these things. So that you don't get behind that we did before so that's how we're thinking about I know Micah do you want to add any color on the on the dollars and how we think.
Micah: Yes, John it'll be more information to come because we are still just really working on the whole scope and the cost, but we're not going to be scared about adding that to the capital allocation plan the capex budget. So.
Micah: We have spent millions of dollars we've invested millions of dollars on the operation side, we were investing in Capex and again.
Micah: Foundation of our strategy is to invest in the business to Gorilla you can't.
Micah: Try to.
Micah: Micromanage every single investment because then you can get nowhere so all great points and we think that's a key for us and as we move forward and will ramp up as fast as we can as fast as the CIS.
Micah: <unk> can digest it.
Micah: And I you know I ask this you know obviously in the context of some quick service Remodels that we've seen.
Micah: Theres, a scrape and rebuild package. That's currently being talked about that's something like a million eight for legacy quick service and obviously eating inside of a quick service restaurant isn't nearly as important as a casual diners. So do you have could you imagine over time like a quarter of your units might be three or $4 million in the quarter, just like some number materially low.
Micah: Sure than that like how are you kind of I mean, if youre willing to talk about it on this call are not.
Micah: Just kind of a range of projects that we might be considering for chili's over the next 10 years, John we'll consider at all we actually have one of our first scrape and rebuilds that's happening right now so we'll watch to see how that goes and we have a lot of different markets a lot of different prototypes out there. So.
Micah: We are open to all of it and that's what we're looking at now.
John Ivan: You're in a great position to consider all of that so congratulations on everything. Thank you. Thanks John.
Speaker Change: Your next question is from Brian Vaccaro with Raymond James.
Hi, Thanks. Good morning, Kevin You noted the continued strength in the guest experience you are seeing could you update us on some metrics that you'd given in the past <unk> percentage or anything else you had handy.
Speaker Change: On that topic.
Speaker Change: Sort of related to that on the laser side. Martha you mentioned, some labor hours through the second quarter to sort of catch up to the trends <unk> seen is that the way to frame or quantify sort of that catch up investments there to think about the relationship between hours and traffic going forward.
Speaker Change: Yes, let me start with the first question, Brian and then ill.
Speaker Change: I'll leave it to Mike to talk about is the catch up on labor question. So essentially what happened in the quarter is in October.
We got behind on on staffing for a variety of reasons. The main one is the volume.
Speaker Change: Volume really increased very quickly.
Speaker Change: And by the end of the quarter, we had caught up so.
Speaker Change: What we saw was a little bit of a dip in scores in that first period of the quarter and then progressively things got better as we caught up on the labor equation. So we actually ended the quarter.
Speaker Change: Last year on <unk>, while we were at three 5% lower is better by the way of this this year and Q2, we were at two 9%. So that's a pretty significant drop I mean that number when I started the <unk> was over 5% and now we're talking about getting sub three.
Speaker Change: Especially with the traffic increases that we've seen so.
Speaker Change: These are record numbers.
Speaker Change: Traffic increases so we feel very very good about the direction. We're headed you know the thing I talked about with the team as we can't get bored of continuing to improve those metrics because that's probably why we are winning right now.
Speaker Change: Marketing has done a great job of bringing guests in but the reason why we're keeping guesses because the experience is really good and it's becoming a part of the rotation in consideration set so we're going to continue to Bruce Lu simplify the operation we're going to continue to.
Speaker Change: Make sure our technology is working very hard for our teams to reduce cash that technology can do.
Speaker Change: And that's going to be our hallmark as Z, while continuing to go down or daas to hold ourselves accountable.
Speaker Change: Yes, so Brian it and as far as specifics on the investment. This one is a little bit hard because the labor has ramped up significantly so and it's not necessarily that we're adding to the base model is we have to ramp up as traffic.
Speaker Change: And so what I would tell you is.
Speaker Change: We continue to add people, where we think it makes sense in that we watch these guest scores and we watch how we're turning traffic through.
Speaker Change: So we're a little bit in flux.
Speaker Change: A high level like I said I gave some guidance on what I thought the full year round might be I would say, where we leveraged over 200 basis points of labor in the second quarter, I think you'd see about half that in the last three quarters of the year over year improvement, but still leveraging it investing in this labor, making sure the guests.
Speaker Change: Are taken care of as we ramped up and that Theyre going to come back.
Speaker Change: Alright, that's super helpful. Thank you and if I could squeeze one more in.
Speaker Change: Advertising spend Mike I think you said the dollars were flat I wanted to make sure youre referencing dollars there.
Speaker Change: As a percent of sales am I interpreting that right.
Speaker Change: So the dollar spend was flat year over year and other reason or.
Speaker Change: Does that help with our restaurant expense in Q2, and so the incremental spend that we have planned is now shifted to the back half of the year with probably 60% to 70% of the incremental spend happening in the fourth quarter.
Speaker Change: So that those dollars are.
Speaker Change: And the dollar increase I think originally you thought that would be up $15 million to $18 million coming into the years that still in that ballpark.
Speaker Change: That ballpark.
Speaker Change: Excellent alright, thank you so much.
Speaker Change: Your next question for today is from Christine Cho with Goldman Sachs.
Christine Cho: Hi, Thank you for taking my question and really a big congrats to Greg.
Speaker Change: Quarter.
Speaker Change: Big progress and gaining took a nice data.
Speaker Change: But what are some of the next steps there are some major areas of additional investments required.
Speaker Change: As you further progressing digital journey and deepen your consumer insight. Thank you.
Christine Cho: Yes. Thanks for the question Christine So there are two things we're working on there one.
Christine Cho: We've been using a third party to help US mine the data is expensive and very slow. So we are trying we have a new.
Speaker Change: Had a ahead of data leader, Alex Tonight that we hired last quarter.
Speaker Change: He is trying to build out in house capability to go to mine the token Ais data so.
Speaker Change: That's going pretty well.
Speaker Change: Dissipate every quarter, we're going to get stronger and stronger and building in house capability to mine the data.
Speaker Change: And make it more systematized versus.
Speaker Change: Versus something that's either expensive or it takes a long time for our people to call. So thats kind of 0.1, and then 0.2.
Speaker Change: What ive charges team with is.
Speaker Change: We are not going to try to expand our loyalty program until we take the friction out of it for the guests and the team members. So when we deploy free offers even with the free chips and salsa that you get every time you come in as long as you are a loyalty reward member and put your partner Brian.
Speaker Change: Theres, just a lot of friction with it and so.
Speaker Change: What ends up happening is the guess.
Speaker Change: Doesn't easily get their discount they have to call a manager over the manager takes their time away from being in the dining room are leading their teams.
Speaker Change: We get it sorted out and they get the discount, but the guest doesn't really feel great about that experience.
The server and the vantage doesn't feel really good about experience right and it ultimately if we're doing this to drive loyalty, that's not driving loyalty or anything right. So the direction I've given the team is let's get that friction out of redo redemption of MCR I'm sorry, My Chili's rewards offers so that it actually is a.
Speaker Change: Loyalty building experience and then once that's fixed now we can start driving it again, so I don't really have a timetable of when it's going to get cleaned out, but the mantra for the team as it lessens supermarket easy, meaning you could just put your phone number and all that and whenever discount you have in your cart It comes out.
Speaker Change: That interested in continuing to drive it and I'd, rather just drive loyalty through improving the guest experience.
Speaker Change: The food and the atmosphere, so more to come on that because I do think it has more upside for our business, but we've got to get that thing operationally ironed out before we start really growing it.
Speaker Change: Your next question for today is from Katherine Griffin with Bank of America.
Katherine Griffin: Hi, Thanks for the question.
Speaker Change: First I wanted to ask if the some.
Speaker Change: Some of the commentary that you gave on month to month comp trends quarter to date trends does that apply to marjiana's as Lal D. D C.
Speaker Change: Our cadence and then where.
Speaker Change: Where does that John is that in terms of the full year expectations, you talked about in terms of sustaining.
Speaker Change: A level of Congress.
Speaker Change: My job is in a different spot than chili's, but their same store sales were pretty similar month to month as well. So again, there was some holiday blips in there, but their trajectory as theyre working on improving and like Kevin said Thats going to Theyre kind of earlier in that turnaround. So we have more specifics on them, but there was no wild.
Speaker Change: <unk> and their their results.
Speaker Change: Okay. Thank you.
Speaker Change: And then just with the kick talked and social media virality.
Speaker Change: Giving continued for a couple of quarters.
Speaker Change: Without giving away any trade secrets I'm, just curious if theres a way you can contextualize the conversion rate of Kipp talk impressions into traffic is it something that happens immediately is there like a lag effect I'm just trying to understand to what extent you can forecast.
Speaker Change: The impact of social media marketing.
Speaker Change: And by reality, maybe a little bit in your control more than I might have seen them.
Speaker Change: Yes, we don't we don't really we don't have any kind of like X amount of social media impressions equals wide amount of sales like.
Speaker Change: We just.
Speaker Change: I don't think anybody has that may industry, we don't have it.
Speaker Change: And if someone has that we're going to go find a capability and yet because that would certainly make forecasting a whole lot easier.
Speaker Change: We do have we do that we have positive buzz and we think <unk>.
Speaker Change: Traffic go up at positive Buzz, so things like that and we know what our triple dip ourselves are but it's really I think the part of the story is it's all very consistent it's not ups and down does not peaks and valleys of very consistent change in the business across all day parts across lunch dinner weekday weekend.
Speaker Change: So again, it's a very consistent change that we're growing sales and in all phases of the business.
Speaker Change: Thank you.
Speaker Change: Welcome.
Speaker Change: Your next question is from Andrew <unk> with BMO.
Andrew: Hey, Thanks for taking my question I wanted to go back to the conversation around operations.
Andrew: Now you have the turboshaft, that's in the numbers, you're making some incremental investments in food quality.
Andrew: It sounds like labor exited the quarter, where you wanted so.
Andrew: I guess on the margin it sounds going forward like this is more marginal or kind of incremental investment than anything chunky is there anything kind of larger scale, though we should.
Andrew: Thinking about or considering given the strength of the traffic trends, even if it's beyond 2025% to 26 that.
Andrew: Whether from a proactive perspective, but just to improve the operations as you continue to talk about investments.
Speaker Change: Andrew we talk about investments all the time as a leadership team and we balance on what's going to have the biggest bang for the Buck and what can operations handle with all the changes. So again, we have gone through all our opportunities and we think that turboshaft with a great way to accelerate and to improve food quality to make the team members job easier.
Kevin Hoffman: It goes in the line of simplification. So right now I mean things can always change is something great conduct Kevin and I will evaluate it and the team and we'll decide if we want to.
Kevin Hoffman: Move or adjust on the business, but we feel we've done a good job of evaluating kind of the opportunities and we pulled up as many things as we can and to continue the momentum in the business, Yes, I mean, the challenges like we're learning about the business along with you guys right. So when we see this influx of traffic then we're out in the restaurants trying to understand.
Kevin Hoffman: And from our leaders what more do you guys need to keep up with the traffic and then we're deploying those things like the Turbo. <unk> example, where I think if you'd asked me six months ago are you willing to accelerate turboshaft right now I think the answer would have been well, let's just keep updating it as conveyor belt oven.
Kevin Hoffman: Hi.
Kevin Hoffman: And not worry about accelerating and then we get to two quarters of really accelerated growth and accelerated traffic trends and the restaurant leaders are like hey, we need to we need the turbo shifts because we know what it does to the restaurant. The other restaurants that have them and then that changes our point of view about that investment and accelerating it. So theres nothing Theres no line of sight right now to like to be able.
Kevin Hoffman: To answer your question. So yes, we know this is coming but I do expect that if we continue to see accelerated traffic trends and as the business continues to evolve and we've learned more about how to deal with these higher these higher guest counts there might be some more investments going forward, but there is nothing line of sight right now other than the normal stuff, we talked about the good news is we're not having to hold back.
Kevin Hoffman: So I think we have a great idea and we feel like we can't pay for it or implemented like anything that we think the business can handle and help the business. We're doing it so we're in a great position to.
Kevin Hoffman: Accelerate any expense that we think are any costs that we think is going to help improve ship food service atmosphere, and we're doing and the other thing I would share on that as like we're just trying to be really like.
Kevin Hoffman: Like judicious with where we deploy dollars because like everybody has got ideas right like we're in a large system.
Kevin Hoffman: And in the restaurant, saying, where they are in the country by operate a little bit differently right, even though we have a playbook and so everybody has got perspectives and ideas on what we can invest in it. So we got those all ideas and then we talk about them as a leadership team and figure out how do we vote plus these out the ones that have promise right. So.
Kevin Hoffman: It's just.
Kevin Hoffman: We're constantly getting more ideas that we can invest in not only ideas embrace some of the ideas are and then and that's how we're learning about the business and then we're going into deploying the capital. So I think we'll continue I mean, I think thats been working like using operator intelligence to drive our investment decisions has been working and I think we'll continue to do that.
Kevin Hoffman: Great. Thank you very much everyone.
Speaker Change: Your next question for today is from Jon Tower with Citi.
Kevin Hoffman: Great. Thanks for taking the question good morning.
Kevin Hoffman: I guess I'd never heard of achieved full until my daughter showed me some of your customers doing in social media, but it kind of it goes back to the question earlier related to your social media presence just marketing in general obviously, you guys have had something pretty dramatic on social media platforms and I'm just trying to think about longer term how are you.
Kevin Hoffman: Do you think about advertising dollars spend between the channels of traditional media have you guys kind of reached a saturation point on linear TV, perhaps connected TV.
Kevin Hoffman: Or frankly, a level of efficiency and other mediums that just makes sense for you guys to kind of hold the line from this point forward on your core chilis brand versus continuing to add dollars to it.
Kevin Hoffman: Yes, how that marketing team thinks about it as like they're setting the menu mix based on the brand priorities I'm sorry, the marketing mix based on the brand priorities and right now we feel like the mix is where it needs to be like there's no real reason to go change the percentage of dollar spent on television versus social because the results are so good right.
Kevin Hoffman: The only thing we're really thinking about now is should we be deploying more dollars to work in given the return on investment that we're getting from it right.
Kevin Hoffman: And we're really looking at it in terms of as long as they continue to grow sales and we feel like the paybacks are there we're going to continue to invest the advertising dollars earned through the through the growth of the business right.
Kevin Hoffman: Mainly the bargaining teams slightly tweaking and maybe putting a little bit more against social but like I don't think theres any major.
John Ivan: Media mix changes that we're going to be doing in 2006, because whenever they are doing right. Now is obviously working really good and so there is no reason to make a radical shift yeah, we're staying pretty consistent as a percent of sales John honestly that as the business improves that gives a few more dollars to invest that and it will keep right now we're going to keep with the with the program.
Speaker Change: Okay. It makes sense and maybe just pivoting a little bit in terms of the customer usage I appreciate everything you've provided so far in terms of.
Speaker Change: Triple dip are looking better, but maybe perhaps across day parts or weekends versus weekdays. How the business has been performing has there been any relative standouts, obviously, the whole business looks like it's doing well, but curious to get any more insights there.
Speaker Change: John That's what I Love is what I look at all the pieces at all the pieces are growing so every income levels growing every demographic sterling.
Speaker Change: All the day parts are growing.
Speaker Change: Off premise on premise all of it. So there is no real standout at Oh, It's one region or one day part so that really gets back to we know that the fundamentals are improving food service and atmosphere is just improving the overall business and so all these things are working together so that all pieces of the business are getting better and that's again why we're so confident that this is sustainable.
Speaker Change: Got it thanks for taking the questions.
Speaker Change: Thank you.
Speaker Change: Your next question is from Jim Sanderson with Northcoast research.
Jim Sanderson: Hey, Thanks for the question and congratulations on a great quarter I wanted to go back to some of the comments you made on operational improvements, notably, having the turboshaft youre going to be removing the wind towers.
Jim Sanderson: How did these changes solve problems at the operator level, meaning is this a way to improve throughput as a way to reduce wait times.
Jim Sanderson: On peak periods. It does it accelerate throttling for digital orders just any feedback on how this translates into improved operations given the visibility you have from a store level feedback.
Jim Sanderson: Hey, Jim it's Kevin so.
Jim: So it really depends on the item. So I'll, maybe I'll just use two examples so you get a flavor for what how do we think about these things so let's take the it's just wings.
Jim: Station when station and for Enzo and one so that's a pretty big tower, we got a bunch of sources that are housed there. There are bowls for every source. So if someone orders Domingo habanero way through which just wings.
Jim: Arthur Chili's, they'll take a one of the bold out they'll put the wings in they'll toss. It my mango Habanero, and then and then clean up the ball I'll put it back into the station by station is like five or six feet tall. It takes up a lot of space in zone, one where we're doing all the frame and so that's an example, where hey, if we get rid of a couple of the sources that are.
Jim: <unk> on <unk>.
Jim: Wigs and Chili's, we can dismantle that station and just put bottles on the line and just have one just have a couple of balls that stack on the line to be able to do this right. When you take that station Amazon one literally gives you more space to then put another body in so you can buy a weekend right. So Friday night Saturday night Saturday lunch.
Jim: Where they actually need more people in the <unk> zone, we now have physical space to be able to do that right. So think about that example is about theres less cleaning time, there's a lesson to claim to get rid of the station.
Jim: As faster throughput because the cloud right now and throughput at <unk> because of all the triple Dippers that we're selling and all the French fries that we're selling so being able to put in additional bodies certainly dramatically speeds things up right. So that's an example, where less equipment to clean more space to put a body there and then faster throughput. So that's one example.
Jim: Another example, we talked about on the call, which is using state waits right. So let's take weight will be able to depending on the cut a stake a whole lot faster it doesn't it doesn't impact the pace or the juicing as the steak whatsoever. It literally is just a way to cook a little bit faster because youre cooking both sides of the stake at the same time with a hot piece of metal right. So.
Jim: These are examples that will increase throughput right and I'll make it easier for the zone the zone to Cook to get all of the things out faster right. So it really depends on the on the well.
Speaker Change: What we're doing is we're sitting down with the teams and we're understanding what are the common things that they need help with we're taking those ideas back to our leadership team and we're prioritizing we're getting after it and I think that is having huge impact I mean, if you talk to a general manager in.
Jim: Random Chili's theyre going to tell you.
Jim: Even with all the increased volume, it's a lot easier to run a Chilean right now.
Speaker Change: Understood. Thank you very much for that just a quick follow up question looking at the promotional plan, adding fajitas should we expect you to really leverage social media influencers on Instagram et cetera to support that launch in tandem with the television advertising for the three for me is that the way to look at the marketing plan.
Speaker Change: Well I don't have the marketing as they prepare heaters, yet there'll be some there'll be some type of work that they do it's certainly not going to be on television.
Speaker Change: When we have that those plans, we'll certainly share them out, but we don't I don't have line of site other than the merchandising plan and the operational fixes that we're doing.
Speaker Change: Understood. Thank you very much.
Speaker Change: Thank you.
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 Holly.
Ken Sanders: That concludes our call for today, we appreciate everyone joining us and look forward to updating you on our third quarter results in April have a wonderful day.
Ken Sanders: Hi, everyone. Thank you. Thank you.
Ken Sanders: 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.
Ken Sanders: Okay.