TAST - Earnings call transcript Q3 2020 | Carrols Restaurant Group Inc.

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Operator

Good morning. Welcome to the Carrols Restaurant Group, Inc.

Third Quarter 2020 Earnings Conference Call. [Operator Instructions]. I would like to remind everyone that this conference is - call is being recorded today, Thursday, November 5, 2020, at 8:30 a.m. be replay. will and Time available for Eastern I to Tony like to conference over turn the Hull, would now Chief Financial Officer. sir. ahead, go Please

Anthony Hull

Thank our earnings morning, have good review Relations presentation morning you, section. now, both earnings www.carrols.com Jerry, should available under are you Investor on and everyone. an access at released announcement By our that earlier website this to and the

consist everyone of our of remarks, undue regarding are statements, I that remind our placed be begin to forward-looking statements discussion should them. we reliance intentions Before which future strategies, like may comments our These therefore, or include will would not upon performance plans. and guarantees not

could you We results, SEC filings and more COVID-XX. impact including to the the impact that with our our also of business details, refer for risks especially the

to During additional discuss today's that presentation isolation substitute can be non-GAAP performance. should in isolations as Dan prepared with will comparable our Chairman generally we to a or principles. information reconciliation of in not available A believe is measures call measures The CEO, GAAP call, evaluating release. considered - our accordance results the over turn With and will useful that, earnings this or certain in now Accordino. accepted I we Dan? in be accounting for our with

Daniel Accordino

of are hard foot even succeed. our put my our by safety Thanks, entire enabling whether strict operations I helping in overseeing protocols, or persevering Tony, in in this everyone. our and working to forward. are us appreciation and They and our best to serving field restaurants, to the expressing customers and the morning, pandemic sanitation our to very remotely, the begin want team, they while midst center restaurants and support our good Carrols' adhering

last operations, our job but have have I an those today, As we and impacted financial repeating it pivoting performance. done bears quarter, adjustments said exceptional positively

and business. our restaurant-level our state at EBITDA to Popeyes the and were adjusted ago synopsis profitability to income and Number a restaurant year during compared pleased of provide adjusted the King of me by the have brief let quarter increased Burger our EBITDA, one, third Now sales current period. measured comparable we net as both improved

of generated we during flow free flow million to $XX year-to-date XXXX. quarter, free $XX the cash Secondly, cash third million generation in bringing

quarter revising was position $XXX next cash $XX generating years. believe the be flow million system-wide we liquidity million, Burger at high negotiating of over well other spend, relating are with continue this level, Our for foreseeable a provisions with process ample annual upgrades of level improved million. $XX we to able and thirdly, million the available end restaurant spending and King requirements the significantly at under to should remodeling franchisor, $XXX our restaurant since restaurant we initiatives, has Development second considering to modified. Area the remain quarter liquidity of will of be expect to we Corporation. as what development the as committed At and terms said the remodeling positive agreement in CapEx of last At the we of future. our already current nearly Agreement and development, we free After then And over new X previous in

discuss in let's points Now of each detail. greater some these

such positioned XX% third dining from number open was second of attributes XX% channels, We business, quarter. approximately generated have convenience in in aggregate, COVID however, implemented and rooms based XX% navigate since to well quarter, to did, the in the believe channels up upon model have where, service platforms. the of given to our proven limited these sales recently as be takeout drive-through, all We is delivery us sales at-the-counter resilient our these our increase last Our and no-contact of quarter. we which

We From few a only restaurants more This to a in of somewhat region shifting have at XX we issues have because more Northeast, portfolio been any region. the better performing X,XXX limited one than staffing short-term impact a the thankfully restaurants relatively faring are perspective, in diverse will cushion but states. discuss as regional a how supply across terms. benefited specific time. are worse us South also has Central is the of provided from or in geographically by of Tony restaurant having we the pandemic And

For quarter, King impressive comp X.X%. last Restaurants second This our an from for tough when turnaround increased comparison marked from against full the fell comparable Burger the year. X.X% quarter restaurant X.X% sales a sales

in it clear weakening the attribute We their third of the third customers quarter their into as we trends October. Number factors. October. quarter and checks our believe move that softened this and a Main into that the exhausting we part on in first, However, to impact sales spending is several a stimulus latter economy one, negative constrained had due to through Street

activity increased Second, segment the including third pressures market during quarter competitive heightened we think discounting. share, the and promotional our fast affected within food

the Burger upon size launch Delivery restaurant sales during quarter that. of day per third This an approximately of with lapped order Impossible total the Impossible third last and weeks, year, dining average introduction onerous more which dampened of the comprised many restrictions XX are averaging demand. of $XX. the with least in quarter average is than in at orders made twice past Whopper the increase X now renewed King August. less states, over of was in consumer approximately the restaurant likely were to size temporarily comparisons XXXX. related order Third, X% along the COVID lastly, per beginning And have during half cases, we overall

providers: Restaurants, now XXX have the partnered integrated Burger of DoorDash, leading end quarter. of the Uber who approximately X service at Postmates delivery and with from We are our fully XXX King Eats, up services second at Grubhub, providing

sales X.X% a a that versus chicken the as view option their X.X% begin at provide We in outcome we sandwich delivery ahead, we Burger of last see King servicing had restaurant of launched increased this from Looking providers a not markets believe our Popeyes last lapped Comparable way. to positively as more we could expected year. Restaurants August. resiliency this level meaningful increase given

to from breakfast food This been of sales day now reflected and level based and management. so more labor, as hours trends. shift we certainly away we have progress. in the waste because have lower corporate rates in expense part our is to requirements labor but incurred higher late great We on restaurant to made night wage modify even Turning have able where adjusted production

up second integration. expansion quarter. This the in restaurant was geography the the of for Our of Briefly from XX local current due third King employees In Cambridge Burger team quarter, elements size during hours. the on the labor last conditions increase normalization we to of employees. quarter averaged on to year, averaged related and depending XX third XX certain

process. improvement it of continue improved the as meaningful the to sequential in costs. by a this sales net of Burger Popeyes about improvement quarter the the implementation points. see of labor scheduling XXX some environment, restaurant basis labor to our current basis successful labor King points and relates Certainly, reflects third a the also We but of XXX expense XXXX restaurants the at of to Restaurants quarter by of percentage Comparing XXXX, third

Popeyes work managing As costs. these it to more progress of at we integration our particularly We to cost systems still complete, restaurants. relates sales, made in have have

second what during had line second expected that call our compared period. increased adjusted expense and additional we to restaurant year process. corporate opened trends our training addition benefited overhead management said as not this In prior locations positive our our level, X to restaurant-level outcomes restaurants margin we more the XXX XXX reduced we are by have from the the EBITDA points we open margin had improving streamlined favorable and quarter to with by total, structure In to regional both we Year-to-date, during in EBITDA new basis also at These realized by by the while repeat. earlier X substantial we've year-end. basis third quarter having quarter points gains in and the regional margin year adjusted with

closed restaurants. also have underperforming We XX permanently

we While to a to approximately XX to we XX. now total in expect close had of XXXX, planned earlier close restaurants XX

XX restaurants close EBITDA and next closures in losing year. additional were our money benefit a environment, an to locations the These to expected are year-end. XX will by post-COVID So

to end available position financially for Turning strong ended and built the and sheet revolving the our and we borrowing. third as million very $XX.X balance million from under and We were the the equivalents, cash the of at related quarter second a $XXX.X in up already quarter. exited our quarter further that facility second during We with metrics. credit quarter million $XX cash in upon

outstanding no of level no have credit we very with we have revolving borrowings and a debt believe near-term also under We $XXX facility. maturities, million our manageable

expect in to total check, know, keeping sale-leaseback been capital repeatedly XXXX we have this continue you which said expenditures we million to expenditures proceeds. about operational throughout of year, $XX net As to committed our and

that As targeted first million the of in in and X million year. quarters generated the I free through pandemic, in $XX.X quarter flow referenced the XXXX. free had cash flow million $XX cash we we before $XX.X earlier, during the up third Recall to

considerably. amount surpassed So obviously we've that

over development Lastly, our new the next anticipate in down requirements requirements. Corporation Development current King a reduce years the Area annual of of restaurants our commitments our it and restaurant remodeling revised units we X with agreement. remodel revision relates and that part agreement that will to minimum to are removes Agreement process to the XX new Burger the a of were as negotiating We proposed total

we Carrols It this have such new believe business into up has to at is parties a believe at a that on we that to the there allow be value refusal We while no that such expect that all. when sheet, organic assurance agreed to into enter entered arrangement should will arrangement of current basis. entered noted our up first the We this also this diminished be into we new ramp or would will environment. its and new expect stage, term give right in that on terms QSR growth in balanced agreement,

accelerating we to quarter, year thereafter. X $XX restaurants for to $XX X we intend to before next over that last total amount, next XXXX, year intend XX being per new to beginning the build spend expenditures fewer to committed years. in we year million with per capital million completed As Within

permits third-party our time real restaurants. but secure per to boards, newly plan of XXXX CapEx all as related our maintenance and along costs capital remodeling, spend on portion We year investment Given will constructed to estate, remain be other towards XX built of new to committed our per that to time the XX restaurants needed upgrades restaurants outdoor construction, through digital with upgrading a the over our and equipment menu initiatives in amount new commence XXXX. large development, commencing remodeling share those identify finance year of combination a system-wide using CapEx X-year such frame. the believe and should our within restaurant We

As occur remain we expect At leverage below to next will we relates our off ratio still it ratio, that basis. restaurant pro Xx, credit opportunistic target Xx these below agreement, which point, consider acquisitions, adjusted transactions until forma drops in as on defined our are as bolt-on we long on we holding year. a pursuing leverage to early as

through complete of size, third complete our us believe needing capital able To is we record, this be we ROFR. pandemic our all a strength eventually we to operational be of without structure expect quarter behind demonstrative when track - able to well business performance our and transactions believe positions us. Given is and conclude, to the to transactions

from in consumer our reliance that on rooms, spending only delivery We with although dining aware softened reliance the on channels and carryout benefiting our near term. are minimal has drive-through, we're

our We our and and adjusted margins EBITDA. have EBITDA adjusted improved increased restaurant-level

have enhanced We liquidity. our

check. reaffirming generating and $XX on execute a free portfolio and anticipated quality we our grow and our under this than the intention outlook. our of to stated million respect will are nonorganic maintain believe current goals expected even be we balanced conditions, longer sufficient our are with in levers flow step will organic pre-COVID our are to cash to We up positioned way CapEx million annual soon of footprint We our to keeping level poised spend be expenditure while our originally year, growth more we to restaurants of and This term. leverage in $XX

to execute and game free flow, are in objective. to Our significant cash turn With the and a growing generating financials. is confident level Tony call to ability that over plan to me let we review of our our continue on that,

Anthony Hull

Dan. Thanks,

prior to restaurant the of $XXX.X For to year third period million million. the compared quarter, increased revenue X.X% $XXX

sales basis X.X% system restaurant comparable during XXXX, increased Our the U.S. the points. of XXX Burger outpacing King King third quarter by Burger

we these especially results, that a are considering many performance, ago pleased robust X.X%. with comparison this lapping factors there year that we are of While impacted were

Burger King representing restaurants X%. be And were In Given it Burger In useful King X,XXX-plus finally, portfolio Southeast across Restaurants, the XX% of the South sales thought the comparable to of King of comparable might we were Restaurants, XX% comparable Restaurants region, region, flat. mainly lower sales our Restaurants, sales our Burger Tennessee, Northeast, dispersion In and comparable consisting color X.X%. King by Burger of Midwest, by were region. just of of were XX% the our in representing of our over additional our states, representing Central sales sales up King provide our size and XX% XX X.X%. on its representing up Burger comparable

to availability. X% due many in now the X.X% system the of most comparison. the Turning year sales overall XXXX, X.X% quarter against month of comparable lacked of revenues, in our the rest chicken our the availability restaurant represents of latest restaurants than whereas We Popeyes, of ago September of the sandwich system of for the total less the to increased average underperformed which

year. X.X% This addition, margins South was a prior to quarter Popeyes $XX.X the from increased of labor during rate Adjusted operating back to points to reduced was made as reflection ground mainly along most of are based beef the of with adjusted our sales to are across costs year. part requirements points last the third due as day from less that margin revenue. ago pound - year in continued in located that million not quarter, of cost brand's To per $X.XX the to QX the the clear, the some the normal $X.X during and the labor averaged $XX.X upon restaurant same the prices, which in as having adjustments trends was of increased the million QX. approximately sales. primarily region, sales period. a third has increased to breakfast an increase Restaurant operating our basis into Notably, at year prior points $XX the million restaurants EBITDA was second sales operating rate quarter lower revenue operating from of hours margin higher offset $XX.X a million basis XXX wage to percentage year in we compared EBITDA trends, our rooms. quarter Adjusted decreased percentage million restaurants. part. a last were the Cost compared in due $X.X of reduced we our of and restaurants reduced EBITDA despite percentage period. restaurant-level increase increased improvement Restaurant-level already million is costs dining be day XX% XXX have expense of labor EBITDA Adjusted essentially of saw in sales quarter hours The in food restaurant In XXX legacy flat waste, at third hourly expenses basis quarter weakest to The as the and the period. sales X.X% to X.X% in to along compared improvement a net year and Central. ago period with by restaurant improvement

soon. COVID. to that operating Even still at were anytime closing operating our pre-COVID do expect to were hours less hours we are - XX that they this midnight, the However, than are prior and not night hours are robust late restaurants change XX

overall face to restaurant quarter thermometers, third in year General do of that of were dining changes past due adjustments outside due trajectories. of to COVID-related of sanitizers. including in third performance a closures. at and X administrative in it the improved in labor, benefit of should last of $XX.X utility, While basis XXXX, percentage guards to sneeze XX the XX percentage due masks, proven we includes to contribute prior QX what and expenses improvement as margin rent repair, the labor accrual supplies, the $X prior compared has in expenses Restaurant sales to months. other operating maintenance operating points managing year. due to quarter previous basis making have period, year included within $XXX,XXX of million over room and revenue from the increased as believe there to are points control, activity compared the Other primarily bonus period expenses restaurant impact X sales million costs as to the a which compared Therefore, factors adept control higher quarters. to our can in we the percentage leasing operation a decreased sales as in many lower we Operating

this expense in expect quarter. remain We fourth the to approximately the same amount at

includes quarter of third and regional this process XXXX such our cost were efficiency as impact reengineering corporate The earlier initiatives, of the many that the streamlining year. completed management training structure

expect XXXX. will carry these over into We savings

net was income of share. On period, quarter Our In nonoperating diluted per share. had the XXXX in the net third per of diluted basis, quarter items, loss million adjusted per year $X.X an we $X.XX $X.XX certain $X.X was or diluted $X.X third share. income million excluding or or million ago net a adjusted $X.XX

free over Dan been generation said, past quarters. the has very cash As flow strong X

already lose quarter, adjusted repurchase the our our compared XX suspended the ratio at paid second this agreement a and down quarter in stood down at pay capacity, of our and we not building X.XXx our leverage to the in this of first June X.XXx Term to is Having share term intend cash end if As in capital do This loan, plan in because uncertain a near reduce to we the we result, to continue environment. revolver September term. access on credit B, lose cash at year. would want our we Loan to use - to would were we

withdrawn although XXXX the beyond. XXXX guidance, year and let's provided one this of in fiscal the remarks, course of week some balance lines with with the guidelines ahead compared operating XXXX. formal and we open reminder, the As that, also questions. that for And have a to go earnings operator, respect to Note had our previously has additional our year

Operator

Instructions]. [Operator

question first from Bartlett, Truist Securities. The is Jake

Jake Bartlett

what do on and is, sales My of levers first But get deceleration. have last sales drivers you easier as forward? that? rooms, other November question compares new menu reaccelerate what so in maybe the you maybe of level the same-store confidence of year. reopening the October in dining outdoor kind do December versus of October of to kind such have I is promotional the going trends, believe maybe boards, impact My calendar your

Daniel Accordino

This Jake. Yes, is Dan.

be We current more given favorable marketing the sure. the of months and quarter, Burger of calendar for the that's trend, next that October from sales with couple than comparable fourth the year, King will last the expect

Jake Bartlett

it. Got

your of we've been two? describe would versus the any seeing your what without or accelerating of the promotional in - kind calendar So month last you details, kind in confidence but

Daniel Accordino

will over you're than year activity to numbers next we're some will couple see conjunction us November I going yes. December last the that think - And that in enhanced with against that trend of confidence better the a months. give October, and rolling have that in

Jake Bartlett

acquisitions? developing, do How unit prospect Got unit be look driver relied forward? starting commitment just growth acquisitions then of coming growth in growth years? but balanced acquisitions. can should But is and historically, going think next be I much more also it. do your my you confidence to the you about that question think next to you've on What's your significant And unit the versus a acquisitions. just it more at

Daniel Accordino

There that increase position opportunities. be the take remarks, will And in been how below I'm our flow the be. would our haven't in COVID a significant those we'll transactions sure advantage acquisition will of of in XXXX. whole deal Well, will that leverage to prepared XXXX a of Xx, as because that indicated we would be thing, expect I so We assume. in we it lot not expect

that in Popeyes. growth that organic by the and - as way, considers and the both also King - far Burger As is

of our shut because XXXX, again. that we've up growth terms organic in In really we in to XXXX, down development got ramp

- brand be in building will restaurants will XXXX. that latter be either So the of in will part we be

Operator

Rutherford, Inc. James Next question is from Stephens

James Rutherford

economy I much follow slice way the to I some things called competitive macro And think that cases wanted is it the COVID that asking dynamics out, follow-up out? you this then that on Street you of in to be deceleration how another question, compared I to is and a to question have the Main do called on Jake's please. decel up just of also the October. you guess

Daniel Accordino

affected as of checks you much on, determine out. the good And time James, economy from as a got bit know, difficult reporting, went the both how It's pretty us. Certainly, Main uptick well McDonald's to we But stimulus when had your they and Street ran obviously, an Wendy's happened. Octobers.

James Rutherford

year, Yes, for already. certainly. And of BK look on mentioned particular, in couple a like here at the promotion it back aggressive $X in some October. been has the the in like activity seems pretty here the guys the looked of And - promotional does you calendar - - reintroduced for two you discounting, BK like months last it in

or it's benefit the full they if if $X, you're to mid-October? just promotional for activity just which came incremental of getting I'm in more referring So curious X that

Daniel Accordino

Both.

see ilk. that will in XXXX. for in - the there we that of to continuation the I marketing some the the think will X value fourth And $X quarter, think positioning then I and of that modification be a for tactics

James Rutherford

the right question refusal seem Okay. was growth was is your refusal. Or comment is desire the system given BK right driven that. the in That's about has on that environment, final does view immediate diminishing broadly? in helpful. development of that own to the on term? it little in position and organic more around more your likely focus there's first that But And use your prospects that comment of And for first my value, near

Daniel Accordino

James. second, The

while, opportunity Deals right first look some refusal seller have to us that XX been asked and the either that have us existed. came us months. the came of we into acquisition done a that We Burger in deals to or XX, King done haven't to

haven't really months. XX on first for I'm going a XX right we say, to So probably refusal, relied of to

Operator

question Hamblin, Jeremy The from next is Craig-Hallum.

Jeremy Hamblin

ask to the XX that look of be What the for some come just I capital that outlays with here you half in and XXXX, you where sale-leaseback those to back are slated wanted given kind mentioned the time expect of would X development units in the parent type about just the the store second opportunities? to future? and in where the kind company here year. at you'd situations concept of King the redesigns of for this in more Burger is point King Burger the of playing Would

Daniel Accordino

what sale-leaseback of a The and the and is But that's some they therefore, of most the be already a build-to-suit which Jeremy, organic couple of outlay equipment. come identified combination opportunities. part, only pocket. will opportunities, the growth, be will we There may from for do we've cash several that out

Jeremy Hamblin

like where you're yield that? that with free would something mean, you perspective, flow the mid-teens current you a Okay. are just $XX at looking about forward, sheet, I balance the of at to and at the kind flow thinking And plan, run $XX cash then of suspended rate your capital of improved repurchase million million free consider - but level moving you from share stock kind Board the is uses a restarting a prices. cash

Daniel Accordino

Yes.

you table. - be from things the be Right and continuing go kinds the of high a are thing, we now, level those evaluate. we is As are a repurchase through a business uncertainty not cash will. to the given we allocation to a be of And XXXX. of from share are powder, we're we we're sure from maintaining through the consider that one COVID some of as that where things certainly, standpoint things if sort and really reopening capital on would Jeremy, dry that all to standpoint, But the XXXX, table is go going what on

Jeremy Hamblin

and the those what for your sense company digital a be? then in digital an you percentage initiative of Great. your menu And drive-through us the today new to have time productivity. parent frame board, has place units next that of give menu the in experience parent know Can would time improve cost boards you existing of and over what the percent get frame to so I currently that outlook that have your individual on expectation on company is, to time board, the place years, the line X each what looking done project? in is your complete but the outdoor the

Daniel Accordino

We complete by place of And be part thing. XXX the do in year, That's layout end and have of they're about this and and XXX sort between next will first year. by upon each And we'll XXX about $XX,XXX the to embedded... depending the that XXXX. of $XX,XXX

Anthony Hull

in the... that's Jeremy,

Daniel Accordino

million. $XX the in embedded That's

Jeremy Hamblin

it. Got from are of type What lift seeing you those?

Daniel Accordino

from. of the Difficult the I to tell because business most business, almost coming where is all of COVID, Jeremy. mean, drive-throughs obviously, are,

So to putting you, point menu boards, digital difficult look this in compared at look determine. nicer to a I it's lot boards to a they're at. heck of tell menu if at I nondigital will

sales do know lift in They You I would at terms the point. a can see them this at better night. what marketing, don't but be of much job

Jeremy Hamblin

then gave you you some think, thing, missed around And guidance Tony, closings - mentioned Okay. last I it, What I for but store figure? just was this that unit year.

Anthony Hull

is So XX closings - we - up at were earlier the XX. end and XX, at about total XX probably which will year, this to about

at point. amount those increased that impact money will help losing because year And that this next of looking COVID. are we've So at restaurants EBITDA of obviously the sort

Operator

Instructions]. [Operator

a Raymond have Brian from Vaccaro, question James. We

Brian Vaccaro

I any worth or is other outsized the just wanted Burger region to if King on back beyond decel the dynamics in did? specific circle October you're day the already comp you seeing part ones trends. the I'm curious or highlighting

Anthony Hull

regionally... Well,

Daniel Accordino

Tony. ahead, Go

Anthony Hull

South in quarter, to Yes. Dan. weakest the The was in third same the was - flat sort the regions Central we of that region. the had was same - it weakness Tennessee, positive Thanks, the the Northeast in Regionally, slightly October.

March it's saw what So and them. April, bit to a once thrown back dip. whatever And recovery same we of then and sort a the see COVID - have in then spikes, there's the a we in over where a carrying guests see adjusted of of bit being you environment, at dip definitely miniature is

of we're of as we version So But think this we're both there's and significant structure. point our have given more on of that comps. some sort it's seeing we a miniature saw where I focused next Dan capital think a pursue at April. number March - a bit we back and said, easier inorganic, opportunities, of in clearly, we can year growth what again, And organic

for next about So year. prospects we're excited our

Brian Vaccaro

you Is South And something Or competitive in it QSR segment? something is Central the that mainly industry terms are mentioned there softer there a region. helpful. is operations Or COVID? impacting markets? going on the those That's broader for maybe region of your or Okay. dynamic as that

Daniel Accordino

No. geography that It's restaurants. most responding and maybe the at the I that's QSR at share certainly QSR But we've moment. of what it's elsewhere. right all area, concepts, comps - And - is in the part difficult level the than a seeing know yes, broader market other with lower and a of we're country and checked

Brian Vaccaro

sales? that can frame you earlier. sales the last you comp outlook, outlook year, King, either thinking that weekly help terms kind Okay. brands. for you average the Just both the Great. remind And about or just to were us comps talking year-on-year in of then monthly At cadence on Burger about of fourth the saw of quarter

Anthony Hull

have But have recollections, my check both were digits. than other recollection we're last December Dan, down don't digits any we in November I year. low single and single specifically. low you if know, to that? down think sort of I I'd

Daniel Accordino

have me. that the No, with they were that's yes, right, yes, - Tony. that - But don't about - I months individual

Brian Vaccaro

Okay.

we circle that. up can on Maybe Okay.

you talk about And you rooms, dining many in sales how dining fourth rooms might reopening reopening plan that and the EBITDA of terms can those how impacts units? quarter? In on in

Daniel Accordino

Yes, dining a room misnomer. reopenings is

of All our are dining rooms takeout. for open

in out rooms you utilization the the In the time. have the at to tables And some any dining indicated But can intercity a terms college construction some some or all, of in environments drink It's not in meaningful great workers, are don't terribly that used this It's those air a as that some traffic actually across benefit campuses. this heat is guests of - Brian. to remarks, we self-service sale. use where of And and open point in bars rooms open conditioning. point prepared in rooms have component have we of where XX%. them dining the about where the fact primarily come is get we at it's the we cases, not walk-up open they're sit, by of at have cost and being

Brian Vaccaro

Yes.

contract for that you that? trend. also but from that's place line. to I like just ground It It to QX, QX. prices, more some were seen a you're high but Okay. then Is That's spot down seems food about ask the improvement a months? margins. in beef spike, seen big in came very more helpful. the system insulated store maybe cost just obviously, we've not help stable the And Can shifting recent or square the where wanted favorability you've in of in that

Anthony Hull

just towards not It's we've quarters. It's a heading in the last of It's $X contractual. flat. the spot costs decline beef just continual over And couple seen market.

and - to the see $X recently, up crystal of don't and anyone pretty from see for just We But better ball level. quarter the sort be our that we quarter. get than of in second no is beginning think thing. our else's. any feedback or we movement sort we down come that's more spiked steady that much the obviously of It's the food going have from co-op fourth and down then the don't anything to they So level

Brian Vaccaro

Tony. Okay. just And clarify helpful. That's to that,

the in Xs? or... Are they So you're quarter-to-date low

Anthony Hull

$X something. flat, or now, $X.XX at right We're like

Brian Vaccaro

Okay.

quarter guidance were a ratio it's QX. what you that COGS giving on or... Was a nice your COGS? improvement fourth So comment And was versus

Anthony Hull

Yes.

consistent As it sales, of with to we a QX. be percentage expect

Brian Vaccaro

help that And the... me beef be to of understand kind why would is down be if ground going

Anthony Hull

factors - which cost. there's promotional promotional been at lot There's much Well, beef, There's a actually They in have quarter. up in than third could commodities, there. more of fluctuate. other least

even a factors there's last that into We're the waste are benefit - a there's using rebates. bunch lot from on less beverage go of so though that. [indiscernible] rebates the of lower, side. we So There's

there's in it quarter says was fourth ratio to but same sort the a be quarter factors, of bunch look it's So versus as the fourth the quarter. third at our going of

Brian Vaccaro

me. Okay. Great. one then for last And

the party how And those return growth us kind cash-on-cash of about be How much unit margin think investment? just and about level, what the would thinking the build-to-suits? the thinking equipment. Can on you'd equipment on the economics is high third about high just it? sort you unit of the classic Just walk the store through be AUV level, talked about you financing. and on utilizing build-to-suits would You

Anthony Hull

equipment obviously, to good have build, overall Well, the capital are to what third-party capital. on cost only for that's provider. we - return versus in to the to and XX% highest where we to there's think going The build margins the a - we're we're invest going the store of probably XX% are look costs

going in So forward being the going it's build, opportunistic - a obviously, looking we very the returns low we're what to for we're on teens restaurants - those basis. on cash-on-cash selective to go based being and we're and higher overall on or

Daniel Accordino

November last was Brian, December question, and your X.X% was answer was To flat. - year negative

was So as the said, on Tony's comment money. we right

Operator

follow-on a Stephens have Inc. from We James Rutherford,

James Rutherford

wanted just level together margins comments fourth of some into I going quarter. these restaurant around to put the

back adding to slowly the You're box. headcount

sounds it activity more progressively, dining rooms remain opening like You're heightened. promotional will fairly and

you improve, think, where things comp. maybe where you your relative in quarter? So or land did land of margins in of to clearly, assume might the third here part do XX% on those depends steady-ish we if just maybe level compared this But slightly of restaurant to kind October you Tony, terms the stay

Anthony Hull

XX will little store to say. think just up - big to adding folks from there'll be per We we're system. XX, our and From think the I we attempting that - count. XX, goal. end - XX we're will It's That's sustainable on worse stress day. a at went add bit I'd probably per have to labor a per restaurant not day employees per I because - that head be it's

the in bit of think costs said, much. little that's the all as that the of shouldn't sort that we but a and that COGS terms So - will They've costs year, we're I of are where sequential third quarter. be sequentially of operating to going same - change we headwind, should expect the I be mean from rest see flat, QX to QX, they And other to we in as about they improving the were been think.

labor. So be that way. either the only headwind, I some will slight But go could TBD, think,

so see. And we'll

Operator

We from have Securities. a follow-on Jake Bartlett, Truist further

Jake Bartlett

with the repair than on was right COVID coming crisis? hours, expected like your out maintenance, Great. that. the you're found. the have than potential crisis going longer of and we you COVID less do stronger saving on things know margins that might efficiencies My are I be Dan, labor think now that question you just But term to before

Daniel Accordino

Yes.

Jake. so, I think

I think better as mean, Tony I the you than are know know, - cyclical. anybody, commodity you as costs

is and - price money whatever and we'll limited to market depends forth. your the ability and on by is how so of their So which in much people have somewhat pockets, virtue so on stimulus

helpful. scheduling Some brands is I we're both that in labor - we've more things with - of making the done think some

XXXX. same not we favorable that we I generate So we're than the increase XXXX. had in be they a I yes, that that will that will to going think margins continual QX margins healthy. I our think can be that we assuming of the forecast, I'm suggesting in But margins more think were maintain sales

Operator

Craig-Hallum. another have We follow-on from Jeremy Hamblin,

Jeremy Hamblin

QX. for about the sequential I point wanted increase sure all what the as of that what that to cost think line just correct second. the had And QX understand understand just that? sales from and to QX XXX it. QX. QX. of basis change was is going Tony, sales in at think, in point cost a pretty be And make to basis want versus I today. then better we got I drove a - What I suggested I components XXX sales higher of revisit Sorry, you similar that There sequentially follow-ups in percent of kind I to sequential was want to of

Anthony Hull

sequentially, our remarks, again, Yes, all, of I first I flat - we they'll we think be would prepared to would said QX. - in

higher sequential get co-op. because from our less the least to But down. say And rebates than We lower that we no biggest delivery QX, and because get the on QX rebates we latter, factor So rebates get using supplier. from - using slightly there at costs we're should rebates QX. be less, change. the saw in QX We come in from our food was beverage we're I'd

third in fourth - of see change nothing it's it's sales we'll pressure kind I the think But I that I no think that don't the had negative quarter. on cost the of in think there's - quarter. - there's

be third But these least flat. other the commodities, those other some that happened guess whether lesser pretty the it fourth at quarter versus see commodities, were worse the - getting think I of these shortening in thing will year, I or And up. it's quarter. potatoes was don't other again, last or in the

Jeremy Hamblin

clarify as Okay. I labor to on well. just And wanted then

is slightly a than year-over-year because a on what in going you're your Can with QX QX. add in you to as person less maybe sales QX QX similar are labor be So was versus you store? last or likely X that labor your percent suggesting improvement help you Are of higher suggesting? us maybe just basis year, have to - a per

Anthony Hull

it. Yes, sure. Got

labor. be it it little than or think a an year-over-year, but will probably be... think I But will So be little it will QX I a higher, Yes. of improvement lower cost

Daniel Accordino

little Tony. A higher than QX,

Anthony Hull

Yes, sorry. that's I And meant, what then... Yes.

Jeremy Hamblin

than percent a higher, will as QX. in improvement be the Labor of less sales you is saw but

Anthony Hull

Yes.

Operator

remarks. Ladies and call back over reached I'd Dan this end the the session, the like closing for to to time, gentlemen, we have Accordino question-and-answer of and turn

Daniel Accordino

questions. a be know And or moments. for of of Well, we'll who on asked you you, be thank questions, that today being all - with few and I you all the in I guess your speaking all you speaking with line for we'll

February I guess, you. all, you next call. is and in touch in, the thank So again Thank we'll be

Anthony Hull

Yes. Thanks.

Operator

This concludes today's conference.

You your and for thank you may disconnect lines this time, participation. at your

Carrols Restaurant (TAST) 7 Nov 202020 Q3 Earnings call transcript