Brinker International (EAT) 30 Oct 182019 Q1 Earnings call transcript

Company Profile

Participants

Mika Ware	Brinker International, Inc.
Wyman T. Roberts	Brinker International, Inc.
Joe Taylor	Brinker International, Inc.
Sara Harkavy Senatore	Sanford C. Bernstein & Co. LLC
John Glass	Morgan Stanley & Co. LLC
Gregory R. Francfort	Bank of America Merrill Lynch
Robert Mashall Derrington	Telsey Advisory Group LLC
Stephen Anderson	Maxim Group LLC
Jeffrey A. Bernstein	Barclays Capital, Inc.
David Palmer	RBC Capital Markets LLC
Jeff D. Farmer	Gordon Haskett Research Advisors
Karen Holthouse	Goldman Sachs & Co. LLC
John William Ivankoe	JPMorgan Securities LLC
Will Slabaugh	Stephens Inc.
Howard W. Penney	Hedgeye Risk Management LLC (Research)
Chris O'Cull	Stifel, Nicolaus & Co., Inc.
Peter Saleh	BTIG LLC
Andrew Strelzik	BMO Capital Markets (United States)
Nicole M. Miller Regan	Piper Jaffray & Co.
Brian M. Vaccaro	Raymond James & Associates, Inc.
Jon Tower	Wells Fargo Securities LLC

Call transcript

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Operator

Good morning, ladies and gentlemen, and welcome to the Brinker International Q1 F 2019 Conference Call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Mika Ware, Vice President of Finance and Investor Relations. Ma'am, the floor is yours.

Mika Ware

Thank you and good morning, everyone. call Chili's; Roberts, Financial and today's and Executive Officer. on of President Joe me are Chief Wyman Officer With Taylor, Chief are Results this at were quarter available and brinker.com. for website on released our the morning earlier

is make comments first and initiatives. related Joe performance prepared operating our practice, our As and strategic will Wyman to

will the for call We your questions. then open

Before forward-looking statements. regarding our Safe beginning our Harbor comments, please let me remind everyone of

Such this should facts. Act its of be more that Securities and the course, which of press include During the non-GAAP financial said, management forward-looking our are items, commonly SEC. to uncertainties, insight Any cause And results provide call, the such risks are turn call Wyman. measures refer certain on entirely Litigation I company's All which certain release the items over management within actual and on the with and into uncertainties statements not to historical ongoing company's the considered Private with to statements to anticipated. meaning of may factors review in based operations. that morning's the from the risks differ in subject described could such business filings believes discuss And of will call, XXXX. will Reform may we and uses those

Wyman T. Roberts

Thanks, Mika. Hey. Good morning, everyone.

momentum our compelling to listen offerings aggressive We committed that leverage climb, meet more driving were our Chili's quarter. pleased and consistency to an in guests our at in investments meaningful since Every capturing traffic a for results. the operators simpler X% traffic quarter had still quarter As you plenty at continues And we've and then, guests comps. sequential to Last model. Chili's. core creating them the an execute We're performance traffic upside comp saw sales and the running share shareholders. make Brinker driving our convenience the quarter, X.X% fourth remain well. quarter know increasing with for that even dinner. delivered to positive has we the in was share, guests Chili's this improvements that both compelling business first and comp year, and and By our comprehensive for And continued With to and our the it traffic outperforming making near in significantly to propositions we're of Chili's life value differentiate taken and believe Chili's those release, positive we consumers' of strong guest products, most X% press yet, brand. of offering both up to committed experience we brings of the this sales industry value positive of strategy for proposition. long-term We traffic. committed our by on give are We them morning's recent outperforming improvements, needs affordable approach comp improve best in earnings our frequently. variety introduced our value a to sales X.X%, for our to attributes it a that enjoy $X.XX. And strategy to we in been there's our per and our with of that and a lunch on for at and quality and menu, unique We've more to

takeout fiscal their online kicked big the new us business the impact past every is our second to-go on to metric we platform. we've work of during track. having ensuring guests focus experience. half and a are see year our food introduction strategic that telling done that the with our XXXX, And of in accelerate progress on can We faster is in Our our hotter this

business to-go to inside and new and we're restaurant. double-digits, continues traffic growing outside now, grow the both Our

move basics we we've tweak and the as to dialed and in continue we'll refine forward. So

time focus during on times. with next more members restaurants our more executing consistently, spend clear to I in peak our As our team and especially is it's step guests, that

support I starts So on and we the restaurants. on are ensure The Chili's doubling is can with in team The created talent and a advantage down leadership how operators, a industry buy rightfully on competitive news concerned have talent, the versus the marketplace we shifts build week. from our to whole where guest, our believe every keep for because the execute system And to our to excellence our that about we've systems talent have focusing best-in-class it. delivering this we XX outside. best and is, good to talent to a it find afford in we talent with having

and the encouraged Bottom-line their excited ongoing we Globally, of hard we're brand our with teams on address headwinds, President, demand to Chili's ongoing I'm I to partners Our deliver retaining hourly Brand team focused and culture, by the of developing guests is into transitions up, spent my role macroeconomic better into turnover talking getting future. some as ChiliHeads. but heading and also about as their better they'll into Maggiano's hourly promise we're operators. growing his We're but internationally and what significantly every well, than foreseeable biggest execute our of people our into top-performing top-performing they're systems ground industry-leading manager are we're expansion far Kelly have industry and members their who brand plan as our maintain so year. about have season our is our for the our learned to Baltes from that true the day. to rate the Chili's, team our the the time continues working

restaurant guests enables with them that's support insights, team to provide have that a world-class innovation teams provide operating outstanding We systems, our and experiences. our with to marketing driven the

call what part to over are the through Joe? And about I'm turn walk We team. Joe be ahead to I'll lies all excited you the to and thrilled numbers. the of now,

Joe Taylor

the reported began gear. Combined of sales We quarter comp this everyone. morning, quarter markets the first of sales performance kicked our of with very good positive International Brinker important fiscal networks quarterly higher XXXX a strategy traffic net solid business. important year sequential Mexico first level, reflected forward franchise U.S. as the sales the aspect brand performance drive reported in a X% X.X%, sales and and our for and the Caribbean. strong were to comp into network comp as step in At Chili's of the improvement nice such Chili's another execution of in franchise our continued X.X%. comp Wyman, Thanks,

Middle comp sales were Maggiano's issues However, net these flat Eastern markets. were more year-over-year. than economic our offset by the in

the in mentioned, Chili's the points, the traffic basis was Wyman driver quarter. over the XXX traffic X%. was every increase by industry As improvement sales primary comp industry week the of at Chili's quarterly gapping positive to of company-owned of

current traffic carried growth momentum positive of first well the to-go lunch as dayparts restaurant Chili's dinner our quarter. momentum has the Our into across from operations. business both with in positive as part and forward gapping industry realized growth at and

new Our on quarter to-go strategy. Maggiano's for well significantly net up carryout business for quarter of at both the strength XX% brands XX% up Chili's price year-over-year. your its portion double the with was flat the performed and Chili's

pricing level which our year-over-year our of change is X.X%, However, level range gross reported pricing comp to a expense, The against we difference the X% price price. of was target and X.X%. in menu underlying in menu record this net figure in

As the negative brand's $XX on quarter, X of offer it comps. impact effect traffic resulting the did a relates the mix to mix, X% driving impact for for reported in

combination quarter new of press was food for our margin operating decrease along standard in detailed and sale XX.X%. this the value leaseback-related into restaurant the investment rent expense as is recognition our in with line Our is The of revenue and and adoption a propositions morning's release. X.X% the with expectations

comparative XX.X% operating the leaseback without sale For our for quarter. standard, have accounting impact margin in purposes, the been would the change and

sales performance, guests the of margin the increased a provide value to XX.X%, compelling with our basis quarter Within XX operating points a result primarily for initiative to of as proposition. our cost

environment that the status see conditions our in to continue chain near-term. market We supply a quo overall support cost in

are basis basket and year-over-year, by current insurance health claims. through quarterly anticipated across and contracted increase of an inflation year. rate the wage our quarter fiscal for commodity points We the end in driven Restaurant XX increased contracted XX% the XX% labor

rate quarter increased We the to expenses be expect increased to to X% inflation continue between in our wage rent change to for XX.X% the the year. recognition. Restaurant aforementioned to due and the X.X% for expense revenue

year. We for a somewhat this compared level also last spend to maintenance recorded quarter restaurant higher

special quarter Our share for per XX% $X.XX to adjusted before items increased the first quarter. earnings almost

our capital the adjusted anticipate of increase borrowings. ending of X.XX Our strategies decreased applied leaseback X.X% a We will with lease to we leverage quarters fiscal X% from currently sale for first support proceeds as somewhat remaining in of EBITDAR year. times this to leverage to reduce credit revolving the do target allocation quarter

our during program fully strategies We the restaurant capital expenditures with spend continue underway allocation reimage execute quarter the $XX.X Chili's. reflecting the at of million, now from higher to capital

it at X.X to In addition, our approximately fiscal of good during level. we In repurchased the the approximately the $XX million the million restaurant a shares by of and execution was quarter. paid year, dividends strategy summary start driven

you I focused With call move questions. complete, facilitate. to improving and open it are flow-through the growing our driving with implementation. back our now improved our on turn our comments will Our your we to at share strategy market traffic operators Kate, as forward let's brands, for

Operator

Our first today Senatore. question Please then your announce you pose Thank Sara from your coming is question. affiliation

Sara Harkavy Senatore

Two you. may. if quick I questions Thank Bernstein.

coming understand gain helping industry. you done narrowly investment there. wanted is The of some doing seems let's broader, I grills me and is a helping restaurants of know first varied to certainly the well. have just strikes struggled. might menu you're focused, and is call where quite I it it, other traffic this some of kind Certainly, any versus from? question more that get have Do bar value of you sort have the the be comp lot. like It that proposition And the that and you this sense then, of

curious it then, about the accounting, your relatively So changes are a related in flattish, to rare of about question in sounds ex like actually this which because I And environment. wanted that. margins some ask is I just was margins

opportunities bit So, forward. going what and to maybe offset talk doing might be a what little you're there the about

Wyman T. Roberts

representative The the compelling traffic kind than as the of the the dinner a And from to-go I Sara. spectrum of growth typical. issue. at Hey, first is question well deal and I of and lunch may that both growing. Joe seeing kind I'll with some margin offers of coming we're think broader be is, think, business that's Wyman. I'll in nature of This the as let answer

at pretty dinner a lunch, growing we're good and So, takeout rate.

of our consider of from I than might to just group broader some obvious you think targeted one competitors more one-off we're was share strategy a taking it normally competitors. maybe promotional if

the So, coming up as when is I the it that's – way giving is kind much look of doesn't we market, strategy. see at from like there's we of one look kind broader think a good don't it I it. which spectrum, it broader a player us

it. of kind that's how So, we see

Sara Harkavy Senatore

mean say Thank you when And well? just just but broader, as diners, clarify do full-service you. QSRs Okay. casual to you not other like

Wyman T. Roberts

Yes, I think so.

both think especially of experienced you our has dining some the of spaces. a quality and think We're some I of the I casual, takeout I the I several of value those about offering and in solidify those think we're dinner. of become the propositions more with lunch now fast casual with position starting mean, when kind and in competitive to across, availability to and even big think to-go that starting spaces takeout lot pressure

Sara Harkavy Senatore

Thank the margins? on you. And then Understand. just

Joe Taylor

to Sara, Yes, I relates as exactly you're margins, think it right.

to that that relatively out getting We're in flat downs puts that across two that, and do a It's marketing great within belief have It's those being more do can and that's restaurant. changes done done piece items. business. the there's ups a factor of strong is really we of being margin heavy those across a manage work from and But supply a line I areas, overall, a by chain but cited, effective particularly you number margins. efficient being hard manage If environment. different work takes, the it we done Obviously, there's number lifting perspective. different of effectively

of record that We and track really they're bear. effective bringing have, I good operators think, a pretty to being

Sara Harkavy Senatore

you. Thank

Wyman T. Roberts

Thanks, Sara.

Operator

Thank you.

affiliation John pose announce and Our next Please your from coming then is question. today question your Glass.

John Glass

the balance you Thank bit how of mix year? morning. Can quarter. It you about you. a Morgan Stanley. sort little through the It's tricky this think Good flows talk of was

$XX stronger that little you had more strong the traffic about think as last maybe you so You you're that willing How seek and talk the maybe progresses? traffic balance mix to value? what of was how of about reaction gotten that. the a if menu represented? year, just you negative And mix X to year for talk your bit it a like on create that percentage to mix? has sales Is Can in through mix big actually

Wyman T. Roberts

Hey. a insight. It's John. great

ourselves So, obviously, kind a were we were last lower up and promotional quarter, if for higher we this setting you remember, check, mix. of strategy running

we to at will, for we wrap we is just mix nice value. kind all good proposition, of in We balance. we're on competitive right that the was where for a we With get We value we've to $XX anticipate oriented. aggressive value our offering kind that are And piece want hey, And more enough as level we're a seeing regard as accentuated. right menu? more menu. of we through need say how sitting our So there specific. really value-oriented got of the don't It's look think I there. the value roll say, platforms, X to have with more the our kind of are you of Do really of if those rest I'll kind mix the segments year. now platforms of about in – doing, against don't our with several that that mix in guests totality feel the value combination marketplace

John Glass

to you of increased you're sales. do brought And Are your experiencing? more restaurants your – competitors indirect to the and staffed drive turnover the competitors restaurants or about Do have one talked to or are open still just staffing you've view positions continue traffic in like of sort you need still you needing, you or of staffing got the you and feel topic in staffing, appropriately? you levels given right adding

Wyman T. Roberts

quality about the good focused members our We're team building of have, and and feel on the both We hourly levels. we No. really staffing supporting management.

that job expect for. making focus looking sure they're supported guests the and Our to do are on is our that we

John Glass

Got it, okay. Thank you.

Wyman T. Roberts

Great. Thanks John.

Operator

Thank you.

affiliation Our Gregory your your and then today from coming next is question announce Please pose Francfort. question.

Gregory R. Francfort

I Hey. It's two Bank for America. questions Joe, of you. have

there? I off sort all? line or both question interest I your I XXX that points points been at today? accounting other about basis is, think than basis And thoughts as XX is on points. those basis do was, around said you then two that changes. greater or guess, debt the rent quantify would XX look debt the the the franchise of operating can at you sort And the first down had and of the you The portion of amount have out a the are ex rising rates, so rolling fixing Plenti between other you driver what What's drive

Joe Taylor

from that couple relates Well, the first than basis cost XXX – probably there back The on different deltas. that table, question. the off higher shifts the within Plenti in Again, you're loyalty margin is there's the it impact right side as equation. rolling the as benefit just the a points. ballpark of of comp to slightly margins a Yes, number that of basis out a the taking into points of benefit actually

So that's the labor. effectively obviously, one there, managing positives of through

labor on through environment folks in and One things time the attention focusing back – talked of folks of a getting work by and about that again, the the comments more training, we helps of and to going retention tenured keeping some prior place. lot

about the of to basis So, but basis takes, XXX delta puts ballpark. points again, you're points in different is number right the and talking XXX

We to fixing already we, our that have relates debt fixed. obviously, debt, markets I those watch of mean, closely. is As the component it a

rate years the the what you markets. down the will of the front of the the environment think road, we going we we for it currently that something And numbers kind road? business see closely. down be to next doing mind year. rate provided a do into conservative in over the evaluate the have markets several that's going just in watch may it's We context of the but what's save What where we incorporated and we I'll and

Wyman T. Roberts

Hello?

Operator

you. Thank

Wyman T. Roberts

Greg. Thanks, Thanks.

Operator

from your Robert and today coming then question Derrington. Please next your pose question. is announce Our affiliation

Robert Mashall Derrington

give Telsey an of could the know some a Thank you Rewards you that growing Advisory. and program, in membership growing? were Chili's Any energy that behind the pleased strategic changes how little how on I membership with Yeah. color to the this a how you're your you there the use us lot are that of you. and way mix Wyman, and put plan on promotional bit going of in in is year. your progress kind there? is fiscal update

Wyman T. Roberts

transition are from and fully-owned Chili's absolutely – with we loyalty over to back pleased a Yeah, Plenti My the Reward Bob. program. Hey, to

Our acquisition late grown of with significantly loyalty strategy last aggressive – we has kind database of an an kind year. started acquisition

million over that X would active to strategies. move using through say more kind loyalty we are kind we well probably, group couple continuing have significantly it. committed of are members we different potential Right different We phases and I a grow as think we of than to program. leverage of And of to we the are today now,

group So a up, as continuing to significant how excited and see at the of kind we the forward in market future. we've upside of about we able more to terms where grow grow today aggressively to of kind it it look program's against in been that

Robert Mashall Derrington

think quarter Was or for or Yeah. to-date you we I the versus appreciate had do understand quarter to-date How second traffic on that. first "still the about trends trend? Was that either quarter Joe outperforming us made Could peers"? that second that statement comps? you I the quantify nominal that?

Joe Taylor

quantify continuing quarter. first in that we we part in it didn't specific gaining momentum for The about are comment first of this to talked market share Bob. traffic this I the quarter the you, traffic. in Hey, was but

Robert Mashall Derrington

you. Thank Terrific. Okay.

Wyman T. Roberts

Bob. Thanks,

Operator

Thank you.

today Our coming and affiliation next pose Anderson. your then your Stephen Please question is question. announce from

Stephen Anderson

with Good morning, Group. Yes. Maxim

you the paying, increase try rent the I at pay increased you to not managerial pay say referenced the reflected line also know that should that maybe little more? you're line that with gotten in do you better that in a in supervisory Looking your – we having about non-supervisory comments, is bit (XX:XX:XX) has you're maybe should to to attract expenses, for the that and that account at be to your an maybe talk They managers prepared (XX:XX:XX) but and find number. look performance

Joe Taylor

I is – going line. about in talking Stephen. be management to again, labor Management restaurant think restaurant And level expense you're the line,

Stephen Anderson

right. All Okay.

Operator

Thank you.

Jeffrey Our from next and is question. announce affiliation question coming pose today Bernstein. then Please your your

Jeffrey A. Bernstein

you. up Two it's traffic Barclays. Thank quarter. from following questions. kind the XXX up this question One of basis points so earlier, on

Looking it back this to last basis quarter, so. or XXX year down points was

the fairly wondering talk if more obviously, the because traffic So, does easy year. of the compares rest compares. the about the can are sustainability of you look much it I'm like difficult

So guidance assumed going think or give compares I'm and of sense how traffic forward. to just traffic difficult number expectation fiscal wondering maybe you the kind in more the full take your for get what on year about of a is

Wyman T. Roberts

obviously, don't pricing of give Hey, strategy. and number Jeff, we numbers traffic Wyman. Yes, our our know you've kind guidance, sales you but got

but into see So, the continue yeah, strategy bit last already to had a lap, this out an mentioned to and I first to near traffic easier future. quarter, little us of as there grow was for playing we well continue year

and to us that incremental doing. combination to is for improved to value we what we will of near with some obviously think better to growth the tactics be continue future. to marketing are that stronger allow have forward been just also and bear got move in going we traffic bring going to quality, then the strategies We've So execution

some kind exciting against So, anticipate up new we to just into. initiatives don't without of next kind lean of year going

Jeffrey A. Bernstein

your it. sure support your references I'm you what is. to bar or to even is market first grill – simplistically grown comp share how and or Got traffic data share, measure the industry or just whether been what wondering not share, market actual have has market to maybe I'm maybe it's the And at historic category looking what within relative it now compare the it's versus you versus the that what broader within place. your or absolute in you how that's whether whether

Wyman T. Roberts

on specifically to has over are said, we the look again, and of best the at. that industry we're several that understand we broader share kind dining and of through how bar as to keep year traffic, our look grow but to how been be. to the we there's working. at is us viability kind we casual Yes, goal think marketplace playing at And always excited casual then eye an We that our grow is are looking and dining about and we've strategy the the of performing. place out at Chili's category is metrics the grill, last long-term for it's and And traffic plan broader

Jeffrey A. Bernstein

it. I I'm And what mentioned what lastly, we're your sharing or are you mix you basis think the growing, wondering brands what referencing. total? is takeout was the to-go Got in of one but each that

Joe Taylor

is pushing one we obviously Chili's. kind It Jeff. talked the the high XX%, about XX.X% range XX.X%, there, Yeah, into is up of most

Jeffrey A. Bernstein

you. Thank Great.

Wyman T. Roberts

Thanks, Jeff.

Operator

Thank you.

Our announce David question. today Palmer. affiliation your coming from next pose then is question and your Please

David Palmer

Great. Thanks. RBC.

components, adjustments not understand quarter, now, I that traffic but the adjusting there Just versus switch I of only check. that we $XX of you're you're price sales at the and looking menu. pretty can making in think X there's a all terms components see same-store the for dramatic

$X You've got margaritas. the

pulsing to that that month. X think And margarita of I the for presumably least on you're keep at going $XX. then,

into for even wondering check. some here is results? recent play you sense adjustments focus is it see I'm to are much and a more traffic as to and you're have of So how from balance that a you getting of a going if And coming how balanced out goal

Wyman T. Roberts

our absolutely. today, I referencing – think happening menu Yeah, right. is on what of kind David. or you're And Hey, what's

proposition gives really – better to an rely We day-in, an of you some a we not that others from to value lock can basis. so kind on we much innovation value made on menu more I one strategy. ability of continuity the platforms past. commitment maybe ago the LTO And and to in on think operational shifts the standpoint, having things and at differentiates operators just a your major your a little execute than the us more we've throw is in, day-out them more frequent had basis have years So from guess a

So importance as we innovation, news want the as in. of new locked understand we value and but really keep much we can propositions to

And our at so what menu to we've more have of and the with we some is value done propositions traditional started look modified them.

You mentioned X very with and more we X program. Hour $X for and Happy menu. lunch for the lean you've into $XX, changed is our also look Margarita lunch us, propositions $XX. to more That's also recent at able more kind mentioned at for then our been which we well this dinner, as of are And working both

weeks. don't recreate tend So have of we kind that to It pressure your to or you every longer also off into marketing lean of in, bring these the takes them we typical programs eight urgency periods for time than LTO. six

a You menu us Like working going franchisees said, about We're get be now. some it's And for with regional you our it very about where and stuff, against in. to feel but approach. with to happy to offer. for also guest are we're base I build that we getting dialing on the this how taking. right at playing smarter always where And we're value kind the that's pretty it's regard propositions good loyal us, strategy we're of out the ongoing

from kind moving forward so of And here. we're

David Palmer

you. Thank Okay.

Wyman T. Roberts

David. Thanks,

Operator

Thank you.

your from coming Farmer. then Please Jeff is today your question next question. Our pose announce affiliation,

Jeff D. Farmer

Thank and Haskett. it's Gordon you,

plan do the handle that I'm So in you remodel guys I remodeled terms the just and restaurant to downtime XXX believe sales? restaurants how calculating this curious downtime year. of fiscal guys you is same-store what for

Wyman T. Roberts

easy that's zero There's Gordon, one. an downtime. Hey,

Joe Taylor

Yeah.

Wyman T. Roberts

We We bathrooms. don't we're And redoing close. them night. at work

there's not they if have really occasionally, right with So it any something may bit. to having we're that But for now, business close deal little happens, to opportunities.

Jeff D. Farmer

you the traffic one and response were lot more scale. I helpful a for ran and year follow-up, this. surprised That's customer $XX? a promotion at X to by earlier the least of think to in same the smaller just didn't you But on about seem questions Okay. get number, the

of response? for over summer customer surprises running in the any So, the it you strong terms and

Wyman T. Roberts

pretty with it year were time. we last we're line Actually, brought out much we the No. on first when based our saw in what what expectations

Jeff D. Farmer

Okay, and final on expense, post the just bookkeeping refinance? guidance interest Any one. updated

Joe Taylor

in had No. Jeff, we comments. per would press release you our give any the updates, the we policy, and to if them

it as relates today to guidance. nothing So

Jeff D. Farmer

Thank Okay. you.

Operator

you. Thank

Our is Please announce next your then Holthouse. question from Karen affiliation, today coming your pose question.

Karen Holthouse

Hi. Karen Sachs. Goldman Holthouse,

Just at a than for to looks X% a labor were actually looking slower line, inflation. labor like wage the that, X.X% it bit costs store like little rising week

less timing of or able with than or items was around grow labor to-go, that comp of costs even So curious growth Or underlying kind I if there's where position one-time a – – the growth? around in traffic are costs inflation workers' are actually you even with can that or line? anything affected you you – labor grow really below

Joe Taylor

into correct. of per wage Karen, that lot but obviously a labor rate go Yes, level things talked we've mean up, there's restaurant about, I of the average that is apply them efficient in are that to-go, in how you how for within you calculation of very hours nature. being those things versus use – you dining that in on restaurant, effective that and

Something we with of lot spend operators closely very and achieve operation. a an time work the as to efficient

on. that to and utilization big hours I but attention is things insurance the We yes, there business comp as will of other back workers' into efficient but hours the be business, how are one and it you can and think relates as focus to as the takes in you and puts the of some apply on time grows, hours. nature, volumes go are There be very there that – those increase, we

Karen Holthouse

we're the be should or well, spending as well, aware then, we of I of – sort quarter mismatches of? And any looking weights cadence media anything the that of terms guess year, is the advertising of through this balance in as there

Joe Taylor

opportunity marketer efficient mean, to to I cost as Not really. point. from developed regard. forward those being again, a equation. would even And we I be the marketer that we'll a there's that think, initiatives. become has direct continue better cadence, better ball that the arise and continue I relates benefits a I to able side that we year, move it direct nothing established of a very to more plan some potential our to think talk again, in at the the marketing but And I mean, about marketing runs throughout

Karen Holthouse

Great. Thank you.

Operator

you. Thank

John from Our next announce question. your question is today and then your affiliation coming pose Please Ivankoe.

John William Ivankoe

Hi. Thank I of model JPMorgan. you. couple With questions if A may.

million rate mean, the there reduction rent get run about a project? First, the can $XXX.X to that that D&A in that you expense possible, the is if from terms that? also incremental talk how you And rate you're I from give? is you of in willing received, much

Joe Taylor

Yeah.

what was think we from benefit there's equation to the it and on million depreciation the an for year rent basis, I the is, have roughly $X of impact talked effects. side annual on a going million before roughly $XX about an

So quarterly, forward. during the can first flow going sense get be even John, we quarterly but how that kind it's of closed will an so not the of exactly the quarter, you of

John William Ivankoe

what got, thought And guess (XX:XX:XX). you what I is you maybe

Joe Taylor

much Very in with Yeah. we John. what line much, Very were expecting.

John William Ivankoe

if – correctly. press have your that's in wrote I think XX I locations you then release, left, that down And

properties tranche these keeping where another So, or you're are? that in might come they happy

Joe Taylor

not at a another some to one properties. there those but meaningful don't as see – transaction it relates could be I'm this small or delta one-off, Yeah, point, I – it significant

John William Ivankoe

guess, $XXX to that that I that reported or mean, earnings, be will at of Okay. the but good but is be know quarterly over XX the obviously or that because a going length And in out of finally, of adjusted going are you years. or well, in the transaction your your left very I gain recognized, calling adjustments, you is earnings there's length then I in guys earnings? of to earnings amortization, the reported be be will – that million your

Joe Taylor

That Yeah. out, adjusted be would John.

John William Ivankoe

Okay. Perfect. for Thanks that.

Joe Taylor

have here And our down quick lease then see the it. that'll change accounting I impact coming you'll think an standard pretty on road

part not So be it in cases, the of all will earnings. adjusted

John William Ivankoe

you. Okay. Thank

Wyman T. Roberts

John. Thanks,

Operator

you. Thank

next is question. your Our pose your from affiliation then coming announce today Please Will Slabaugh. and question

Will Slabaugh

believe I made (XX:XX:XX) you. a It's rather, wanted the comments Stephens. follow-up point the Wyman, on earlier. I Thank or – a to you question on

feedback and led some hours? You around your headwind those executing And the away mentioned presenting guests especially opportunities that But consistently could you a to at around what's is potentially conclusion go peak. more down that from what's peak maybe that and measurable road? then the

Wyman T. Roberts

our think to we're guests delivering our I promises. on very track, we sure Will, make closely obviously, Yes,

especially so As the we need Sundays, and that in volume weekend we've can nights, supporting expectation during the to has. them make increased traffic, level deliver put that to they we're the on of more sure those restaurants pressure busy the guests we

there I don't just before. now, what right been, than yeah, say been So, we significantly we it's there. think there's probably it's opportunity going after have that there's harder outsized always but go opportunity even I'd are to now

Will Slabaugh

as or labor additional - well require that Does

Wyman T. Roberts

systems why That's necessarily. our not talked and I focus our there. about kind No, I – really use this of

Sometimes of those we haven't helped our terms in busiest not in times experience a by support. operators providing consistent

little support distractions, with we've them that to easy are very for when will. smooth, make them, sure make if you So got they it we busy,

of And shift are a being successful will it. And part is we the make sure them in great that then part running weekend implemented. that making know systems other that's the so

so And that's of our focus. kind

Will Slabaugh

any differences quick And you Did markets could. the a country? versus it. if I your Got surrounding geographic rest either different Texas between markets the or just in see of performance follow-up on

Wyman T. Roberts

couple that lot filter a we markets. really strength kind But think, then is news, across you the and with of I it's years hurricanes that halo out to of hurricane – of from in broad reaching out Well, now the or been where post on breadth be wrap some good kind seems and sit and you weather get an broad that. the you there interesting when of

strength couple as weakness we like have with as so, probably years regional or seen a the situation oil And of much not ago.

So seems be to consistent there country. strength more a across much the

Will Slabaugh

Got it. you. Thank

Operator

Thank you.

is announce Our next Howard pose Please coming your from affiliation then and your question. question Penney. today

Howard W. Penney

in don't your Thanks in don't I delivery Management. think Joe Wyman, yet Risk scripts. question. uttered for the you Hedgeye and have certainly I or you this did. the think call word

I If missed you did, it.

was new just pick is the I curious to-go So delivery? up or

Wyman T. Roberts

is prior XX said Like calls, delivery think, to somewhere focus I really on our companies in takeout. different about nationwide. No, definitely we've business delivery with up now Howard. we Hey, right probably, the on are

you right about. system. on talked restaurant see every weekend first big for fragmented, be multiple iPads especially there's focused system, very are a as some you don't Those a off sure night, walk obviously when coming still to a a We're And we've it's there that now, integrate on restaurant, our works very players in. that one So bigger a the are into that delivery options, well although partner. going delivery if well into it making within busy restaurant the

us to these now going our you're And I the you important. to on that have give we if them. – then, relationship around us, we with value integrate hey, how got is you right you've it customers listen, operational issue also have about thinking the focus that's around start with incrementality of and whole profitability So works to big is data partner obviously, with table and say, us. to then some partners And model with and an obviously the and our think the

some are of very and that to as eyes Don't kind have those going committed that kind aversion into at kind with closely to issues of our to it our we're So wide but more it, looked open with have you get of to partners be delivery. business. understand walk an secondary

addressing convenience that's kind now So much takeout. delivery, our with drive about how more excited we're right ability to of

Howard W. Penney

it's at possible? incrementality, if get just ask I Can you level of the how

Wyman T. Roberts

understand very have us can analytical we incrementality. that I of mean a models lot effective help

incrementality are So some that I players out big are to there think struggle delivery. the – with know don't now, seeming actual I there

but like qualitative is, okay, they're their and analyze frequency business would quantitative guest. our both these are do guests research where we and something current we're if how how understand, and and kind people So determine not try currently their that like the saying only are often changing they obviously to delivery of obviously incremental from I'm coming

Howard W. Penney

Thank Awesome. you.

Wyman T. Roberts

Thanks, Howard.

Operator

you. Thank

today question O'Cull. question. Our then is affiliation Chris and from your Please pose next your announce coming

Chris O'Cull

of questions. a I follow-up Stifel. have It's couple Thanks.

the I has traffic company one, the like for mean, off First deals, the is performance and been X more on when $XX? consistent

Wyman T. Roberts

that quarter, a Well, the quite pretty message this much lot, quarter. ran we

that compelling you're sure going had you value So, our strategy proposition and earlier, don't we on X basically driven. mentioned And is the traffic whipsaw go like totally to for and restaurants $XX, base menu traffic value have kind preferable respond. see obviously, compelling with when to changes out in of our have the I promotionally so is to that just a as make proposition are

communicated come mean, our just very a differentiated respond way. but offerings of appreciate and proposition, the absolutely, value Chili's the strong when focus. that message. And in with position I work the team good it's consumers we marketing doing especially that's the the been to price So, quality kind not to has the

Chris O'Cull

inference to So, consistent would that going be deal it – promote forward. be to of basis on my you're continue would a going type that

Wyman T. Roberts

for years. of Again, last menu, nine Again, for Yes, having of the of that of see – we on been us. just This we refreshed a the moving strategy away. a think eight following for base value is strategy that's it keeping We've kind it's or kind it critical. necessarily mind consumers, version been that it. yes, top is don't not new

Chris O'Cull

and really what what help retention But I'm assuming of employee then, you guess drives conduct specific employment understand maybe Chili's other or can Okay. studies. aspects And benchmarking chains? more I make guys you Chili's you at than surveys it Fair. and explain us some can at – compelling

Wyman T. Roberts

in we but in brand's we a to about the the maybe only every where job, every team ask member their in member they're feeling and once survey point, company just organization your the typically while how year, every about once, Chris, twice a so Sure. or team at. leadership, about –

them very of engaged that's team part with and how working seriously, you. I engagement it member take a we and big our And So, feedback. think you keep

money how critical. it's is job We make also a much understand they and

work we find efficiency if higher between the house for to a balance us, into of for member, team wage. which higher you're turns also so tips usually that front and And you

so as money. at And our the down. high they us And make them so members our and is bonus, higher as getting also want to connected the turnover good and Chili's kind that possible much I are possible the that – averaged and as server board. making much things for to hour. team average we hourly We managers of that your money can goes to money as across Those they're sure as wages a make the be want – staying getting priority are think keep making $XX over efficient an things, have

Chris O'Cull

compare chains house of back benchmark house some – hiring and pay back in their terms restaurant the roles of the in those positions. in versus you against? difficulty How back Chili's talk for whoever other about turnover does those just in in We've certain heard benchmark,

Wyman T. Roberts

we're kind of think Yeah, competitive. I situation. market-by-market It's a

benchmarking You're always competition. out the there against

so of We right. have some is – the very interesting, back house very

back member won't a won't four the you two restaurant or you or typically where team We have XX-year-plus – house walk into find a of at three Chili's. or

tenure. there is a of lot So

little some dishwasher if sometimes more a fill. is will, You position tend churn, the to positions, hard bit a to you one

high that execute. turnover. But tenured little to And are those to have again, in house important members a the very ability and of back more are bit so the amazing long we some really our team

Chris O'Cull

Okay, great. Thanks, guys.

Wyman T. Roberts

Thanks.

Operator

you. Thank

question today affiliation your coming is and your then question. pose Our announce Please Saleh. next from Peter

Peter Saleh

takeout. wanted is in of how on to I think much and takeout how do conversation come Chili's said Great, just mix double-digit the the percentage to versus to And thanks. back But overall about it's incremental sales? you usage business the is low growing low that you know repeat trial? BTIG. the I double-digits.

Wyman T. Roberts

for are to take, Peter, to it's – we feel takeout incremental about whether to The incremental think and takeout guests really the is good going going the we significantly takeout. opt it's of regardless growth business.

they're somebody getting not option. those going takeout you're dollars, to to else takeout if who the offers move So

across undeniable. desire home for the to convenience find the So little to demographics is more time a at consumer today's and spend

because we're offering. works good we've the the takeout our of and – of execute, I a are can to of kind tell menu our we the so of sales that that and operators And got well. of We've got or very nature by of takeout fortunate. And percentage that our guests – menu think you a into flow quality

Peter Saleh

and dining? do takeout for both they the kind compare? of Are correlated? satisfaction they guys scores measuring you are And How customer

Wyman T. Roberts

experience regard to them. strong on talked weekends. things We measure that is focused that on high-volume and making right we're call bit doing sure the we a do little I'd now this takeout with about say our

for so today, sure is and are We've that changed as correctly. it allocated our place We've up volume that success. and we're packaging. setting that systems We also on that in are that grow staffing we business, our from that as can making operators and got we we increase we we we staffing up the significantly appropriately that think are where grow business ourselves takeout

Peter Saleh

message the there just Great. to $XX, question for and and weeks to a proposition this pulsing coming or keep few you traffic stores? into you still then after back X have And which consistently see where is pulse can the a for honeymoon in the the in value my you do is last coming period stop it

Wyman T. Roberts

we're Again, menu. the of No. kind putting committed proposition to on value

the that propositions building for strong an awareness so consumers value available. And it, understanding building from are

away, while. take a hey, this, for worked So you model there's model. haven't then not no need that awareness, you that build for And we working then build We're it awareness.

Peter Saleh

All very much. you Thank right.

Wyman T. Roberts

All right, Peter.

Operator

Thank you.

is announce today pose Please affiliation, Andrew question your coming question. then your from Strelzik. Our next

Andrew Strelzik

morning. Good Two me. questions from BMO.

have more had the reasonably couple my until enough way were the the you of Chili's views talking wondering some strategy effectively of heard that forms question, the leverage seems you're there. about consumer we've and pretty does program, to it's a as loyalty more long but you growing with health of loyalty take been conflicting rapidly, like low-end, on You've customer earlier. I'm other how well data the overlaps budget-conscious And employing that it that it

the perspective for on curious your just Thanks. So cohort.

Wyman T. Roberts

first loyalty the whole Yeah. So situation. on

the five on years four, some over We learning loyalty. have had definitely last

really And is right not focused bit journeys. more base. push – in aggressive again, those the year, think conversations building frequency more are a for relationship to and start to, very into a we're with. got loyal hey, right further database to we And get have we're that base now, database. we'll regard and of we're And with on a them the smarter we've base, what solid acquisition that users a little into loyalty more harder the large I probably now going down as we little a with get having the little drive a

are Andrew, we talent Overall, leveraging committed Joe marketing I as we're strategic kind mentioned, is have terms to of of in the none that just to second of to those as through think make we kind then technology, the in-house, I though, a was process. and these how move approach, how decisions to leveraging we Andrew, to – was So, direct What - which and have question kind them guests part most these sorry, second how databases, of to are relationships to how build with these the build to motivating – effectively it. them. With things to these communicate regard them that it? It the lost to

Andrew Strelzik

consumer. lower-end health of the consumer, was it budget-conscious the So,

Wyman T. Roberts

Yeah.

always nature is of puts price compelled works kind the budget-oriented them the to point by what that find of that them. for at in category and typically just a consumer, kind So obviously, value, of

kind industry, our some when of we of budget-oriented, We of consumer the that options. the opportunities And we in committed they will, the giving we're strongest they're to points that's kind some just have under those I have commit more, commitment. to to within think pressure, obviously, kind want is if So you do fans eat budget. – more. good casual that in dining of and fit price that out to value they think them resonate what know putting And with folks then are we their

Andrew Strelzik

Great. Thank much. you very

Wyman T. Roberts

Yeah.

Operator

you. Thank

pose your Our next question. Nicole then Miller. affiliation, question announce today from your Please is coming

Nicole M. Miller Regan

do And Thank you're in with spread weekday the across about driving Jaffray. how beverage with more the that about anything talk wondering then the to hear anything traffic and lunch or or I'm how it you Could restaurant. to if want I morning. Good sales dinner, do you. remodels. has that if weekend? wondering to has incident. has Piper finally,

in regards over Thanks. you've do in you coming to traffic remodeled? the the So where restaurant index

Joe Taylor

that just improvement really those seeing you of mentioned. areas all Nicole, we're across

the process. gains traffic move reimage, reimages, of the that particularly also in on of will fourth still from of But the of ones relates I as it we're that think into have early start The last England more seeing New mean, in the equation. our impact area, year. really, As the quarter very an to the we to are yes, side I year on and we did impact perspective, third

That as lunch of frankly, designed again, that in dinner, half opportunity week plan help been both had the on of when a dinner we But But a One at against the day we and last a bit move some the that with think impact year. we across consumption. the has the a see of pleased mix lunch. this to the years. of in the greater have second really think things up I and alcohol up improvement small at that pick lapse was the us we're deal does the you both on couple have throughout best lunch little about forward restaurant side of board, the with you bigger pickup come Interestingly, with impact and based of seeing and the we're and the the programs parts. the

Nicole M. Miller Regan

in inflation, also that's in see et shortages about sometime COGS, fairly under of an So product there, pressure drivers, industry there do terms then, terms can intense that's what how create piece? of the but you labor because delivery Is And anything see distribution in you distribution? of changing actual benign cetera? terms of and

Joe Taylor

say – about it when It's the definitely I it's would of part includes the – that Yeah. supply the Again, across I that. our is environment part chain, talked chain. of cost supply

we a developing lot in long-term, manage cost does forward. to the us distribution for relationships. challenge And both again, standpoint, but a an for and great stand in opportunity players working job differentiate it I team at from of think, and a be it's We're a those Our short and going comfortable where industry structures. the will

Wyman T. Roberts

have the And And scale. in today you more distributors is then another the pressure. kind one as they're the this you And just a under with to a and a lot is of dealing mentioned, because about to your of share. lists And of where is There've you scale if put more. to this market getting it where situations right, been going questions couple they're are again, large of where independents Nicole, category struggle think, I going I you're top XX% list. you're independent. way, again, they're And of those making think now,

more So the bigger feel is some this a of independents maybe where I pressure going of to think than example just the another are chains. lot

Nicole M. Miller Regan

could scale. you want Yeah, absolutely point versus really forward? in and a guess, agree days returns. an I And split kind important on those digital it's these will fairly, do you carve your Last cadence just the question, measuring curious say year-over-year between percentage And about to going it the and of even how out marketing of TV be quarter? then, you're

Wyman T. Roberts

pretty Nicole, much we we out. usually evenly unless it don't a accrue make split We change.

it's kind that So the of was set. – accrual

to they say we're trying part of intensely. X% market our continue potential world on in plan. the will, guests lot budget, very looks to inflation the get around of using like all The as of world of think I TV that to us channels, we're for and In diverse have traditional you keep pricing television we mean, strategies advertising. you that kind guests. of X% pressure X% budget. if range marketing The aspect just identified, media never-ending scrutinizing marketing will, a a of that put you X%, a to I the the inflation if that I'd our to has chain at

getting it we're and from that, play So we looking to perspective. bang to we are do return. the relative we're deliver marketing how play social at very out for how I'll expenditure but do most buck how dollars we digital aggressively a get – where does other at leave at marketing biggest the looking aggressively just and our the

Nicole M. Miller Regan

Thank you. time. Appreciate your

Wyman T. Roberts

Thank you.

Operator

you. Thank

affiliation then question Please today and Our question. is pose Brian next coming your Vaccaro. from your announce

Brian M. Vaccaro

Raymond you. Thank James.

in out. few a point question. think impact basis last comp quarter And underlying that you of year. sort wrong, comp up I I expense versus ticked I pricing that the bps was said clarifications fourth of Just quarter the I margin there expected dissipate negative of might pricing you forward. a it little offset called XXX on but bit On think the expenses you that specifically, thought last going XX about be

pricing few So what give next about how that quarters? color on headwind the over you think some intensifying could should net drove and we

Joe Taylor

incremental wasn't Brian, on you additional that delta let of comp really fourth Yes, quarter that time an negative clarification necessarily me the last about XXX to that that we using applied expense was we reinvigorate comp in talked underlying because points a XXX% in was we What some give it expense loyalty specifically regard. been program. it wouldn't on basis. an have reactivate that, and that ongoing but There was basis

an apples to XXX comparison at it's the versus So accurate to basis looking number with. that point that you're oranges

that I not into talked the about of utilizing of the have activation specifically an level fourth expense forward, expense and of move we are comp to loyalty as think, the we part fiscal of back same move that year-over-year use one, again, we will lapse work we through year. But comp this happen our that as we quarter. opportunity in

Brian M. Vaccaro

in Did expected be you lines more And occur this quantify could G&A? quarter, versus I'll specifically, you of follow both both Okay. thought I last saw were the All Joe, on year levels and And half labor on pressure the then bonuses to offline. depressed level insurance corporate the on and in up store the fiscal that first up that the XXXX. right. sort of labor the quarter? at level

Joe Taylor

profits first, we that when Sales, bonus regard. typically annual, into talked those second, for into in was and guides again, that And don't obviously Yes. feed metrics an fourth third, lapse get all compensation calculations. incentive the guest so about and year, quarter

piece can you're Obviously, your the to So quarter. point seeing you year that basis claims of roughly insurance actual equation of insurance be based this regard. through a health move the equation. standpoint, in as experience from of kind health there the a drag the some The from was what as on in it's XX side variability

was an anomaly that on might you So point what quarter, one in it any in given basis this – is based about a experience have actual drag. XX was and that quarter,

Brian M. Vaccaro

would just the on then, I disclosure, well. in other differential, rec I it one, based is about And said And of think change rents line, XX bps which that bps quarter, imply thinking was the that about correct? the OpEx XX quarter. that about then, confirm your last you on R&M leaseback Can as margin you higher think sale match in rev was the Understood.

would was Thank you. that that or down item year-on-year there So expense something was other else the be maybe is down ads that line?

Joe Taylor

the expense that that's of Again, You're right you it as one can them. in fluctuations those ballpark to was those R&M a line. – number up two year-over-year. was right other of have relates first one quarterly things. within There's those That of

in moving other I the still that, year-over-year, got line items. loyalty ones and lapping But those we're out on the of but are there's benefit think the and I several the referenced them. biggest you've ups downs deltas right

Operator

you. Thank

today question. pose is Please your from Jon question coming then and Our affiliation your Tower. announce final

Jon Tower

and Fargo, Wells sorry, thanks – question. the Jon for taking Nice.

Joe Taylor

Jon. Hey,

Jon Tower

you going an frequency different Q&A. spectrum the And dayparts, back and drawing I Chili's and these are up, coming traffic stores? customers, what the picking but frequency, back when the are comments seeing going they them menu, to maybe back we're trading increase in of concepts, home if that implies made from seeing from to hammering to around moving you customers. new are in drove the up traffic originally broader customers a Just increase are using existing they that stores, you an me into or back open the is in that the to piece up to believe really you're also mentioned

Wyman T. Roberts

that how the we on more level don't which that we're ease proposition well some our detail guests. offers improvements all with have you loyal and obviously moving as so know in new growth guests across can frequency they but within with with seeing And the takeout increases and I can the take out, categories, all Jon. some I that there the lighter that as compelling menu, of got we've give Hey, they're

share – broader a that's who's going a probably And thing. going where consumers. Exactly from of we now. where swath traffic So level think from, detail right that's to coming good growth the just it's of a of trading we're not broad kind is they're a and that

Joe Taylor

thing, be to-go operations, and dayparts into week. one the business, the all Jon, I back Yes. propositions be value would And add it are food, is, investments we the it the both across working made – throughout the

created and at we've loyal more think I So too. different guests for times, compelling to opportunities new in to come both reasons find

that's So helping that's think move I forward we too. as

Jon Tower

Thank you for the answering question.

Wyman T. Roberts

Jon. right, All

Mika Ware

right. Thank you. All

look and us So next thank your and forward participation to you, you everyone, for we talking joining time. to today

Wyman T. Roberts

Thanks, Great. everybody.

Mika Ware

bye. Good

Operator

call. conference ladies This you, does today's gentlemen. conclude and Thank

lines wonderful and your disconnect at day. for time this a your phone participation. may have you You Thank

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