DENN - Earnings call transcript Q1 2020

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Operator

Good day, everyone, and welcome to the Denny’s Corporation First Quarter 2020 Earnings Call. Today's call is being recorded.

At this time, I would like to turn the conference over to Curt Nichols, Vice President, Investor Relations and Financial Planning and Analysis. Please go ahead, sir.

Curt Nichols

Thank you, Kristy. everyone. afternoon, Good joining conference for Denny's quarter first Thank us earnings call. XXXX you for

today John President With Executive management from me are Robert Officer. Denny's Financial Officer; Miller, Verostek, Senior Chief Vice and and Chief Denny's

available Please webcast refer investor.dennys.com our financial our any quarter webcast on first call measures with an site will mentioned press of along call of and to is later today. release This find site earnings reconciliation today. our to Web be at non-GAAP the on archive Web the being

John Robert recent will current of quarter business up After begin trends today's call questions. will facility and credit will our a update. we results our recap provide it that, a on amendment. before commenting open first for

from implied on of and uncertainties subject the performance December performance that materially reports other Denny's in factors by or the this that urges you different outlook XXXX, to in its Private constitute of knows quarterly may and remind and most members set Form may me forward-looking accordance call by actual provided subsequent XX-Q. indicated of recent such statements. earnings be ended on risks trends Management the that be statements. Harbor X-K cause XXXX, Such let begin, factors Litigation certain to risks, company's the current this we on Securities management the Safe the the and statements discussed Act Such provisions year XX, are XX-K call. Reform are in of forth company annual considering to with matters in report and during for on Form any caution any Before Form

Officer. call will Chief now John turn With to Denny's over that, I the Miller, Executive

John Miller

having our and Curt. times. are were these Thanks, safe restrictive stay-at-home afternoon, in unprecedented healthy room industry weeks and February things COVID-XX solid mandates and everyone. we are as impact year dining with period, during the while staying our along government our the The pandemic started fiscal brand. challenging mandates changed directives January hope quickly an related implemented on you and and with results quarter families We And latter your the closures. Good requiring in and of

to swift well were team network business of and in a and days. of We worked together these equally in proud adjustments make I’m to changes our our franchisees required so of well matter how implement our

already our abruptly As business to on have established we off-premise was business our Demand off-premise channels to were sales limited only, Denny’s through fortunately an platform.

orders nearly approximately XX% of Prior to these XX% sales and transactions the business of were orders off-premise the representing represented our pandemic, balance. pickup with delivery

option. business to delivery As feature some were our contactless we delivery while Web message site also accelerate ordering app introducing media able broadcast a our national when to through mobile free a was or shifting,

media digital We have continued while delivery to transitioning social and feature channels. to free

We also XXX quickly adopted transactions curbside restaurants implemented build Dine-Thru the over and company service. a program curbside pickup to franchise

As representing February a volumes more April with average for pickup between sales efforts, than doubled of transactions. unit of and off-premise XX% result these April

restaurants greater popular staffing reduce efficiency streamline platform we curbside third to feature products reminding kitchen Demand were with existing our of partners delivery site guests as menu party more mobile of balance through and Of the on delivery some and a adjusted our service, coming our also April implementing beyond Web speed significantly And attributed of and to remaining was to developed that or transactions, app. Denny’s for optimized XX% the transactions allows levels. in our

Grand Slam, of to menu introduced were Meal products added developed quickly Packs featuring meals a also brought for slightly which but print and of ordering family feeding Family online week, more encourage our four. single for menus restaurants download cheeseburger guests. streamlined Chicken Earlier this and We and use back. our also larger popular can by Shareable Tender market initially a we

an permitted, enabling our introduced out one-stop of our grocery purchase guests to shopping to signature some same XXX for as guests our always items program grocery a order. market pantry order have certain creating opportunity few Denny's menu items for at Denny's of they this the have their restaurants Where time items add adopted we and and over to

our pandemic. managers collaboration critical have and and in and impact all restaurant preparation been shared the training developed for Communication in franchisees elements program. with materials the We of

with in We challenging information our calls key best and email have time communications. this systems sharing addition daily system conducted nearly practices in XX to

developing our wellbeing dining of team of restrictions, large. public job to focused teams, measures to safety our advance suppliers and jurisdictions these on implemented health designed the terrific did restaurant materials the guests, and at and a In employees, additional protect starting ease were newly our

that sanitation Our specialist and To best-in-class measures. who end, This every has an distancing and person new area vest tasked initiative for that a practices or and their includes disinfected. table dedicated visit. that every services a new customer disinfecting guest is wears service, been notifying have are with operations, social cleaning following new encouraging all to sanitation, guests restaurants the on identifies armband leaves role a card we

cleaned highest a clean and ensure sanitize. the then and To surfaces high-touch sanitation, will cleanliness two-step of be deep disinfect, our using level regularly process;

table utilize caddies use also tables continue and and single condiments to removed high-touch like have We menus. items from

checks face masks instructions expected forehead thermometers. with wear are suppliers temperature and mandatory and employees gloves Our supplied and using we’ve restaurants no-touch for to all

XX alcohol-based service necessary are will and hands sanitizer Temperature as required their personnel vendors be the employees well entering every apply to wash Employees restaurant. as minutes. for checks and an

and will at sanitizer shields register. cash guests are sanitary also each of to installation hand encouraging access the addition, we have In easy

is mission-critical. Social within distancing restaurants

measures mark not have our rooms accommodate social stores signage and use. to are rearranging diner are proper distancing We that to currently in supplied with tables

few. guest a merchandizing name signs, highlights clings, decals, posters that with guards, just developed banners, measures roadside distancing have door other social We table signs, floor and safety to yard and

confident and to a place, for known in Denny’s can so high-quality experience we’re in measures that same that and the safe manner. these is deliver great do we With food

We great rooms one health Denny’s a and safety confidence will where our in permitted. to dining these be sharing enjoy to with consumers meal provide with enhanced measures them of

In have the addition been we and health our financial of the guests focused on our of general health to franchisees. public,

Direct has week of weeks remodels deferral of deferral notice, advertising until forgiveness immediate fiscal and further fiscal consisted XX. of and the an of financial for XX for a abatement XX relief royalty or and such fees fees full

franchisees XX company. also operating lease a deferral provided the owned for the properties We by in XX-week

a relief for the company of approximately has rent Our such development relief in deferrals leases team lessee. securing the of XX% which aggressively the is or pursued abatements form in

franchisees to extending to the company. lend same Furthermore, behalf. and additional that on who their with sublease party our relief franchisees vendors closely third from have we to relief secure who are primary banks worked We key

ability to their want challenging a the businesses, actually equally businesses found burden are to relief times franchisees. locally enduring economic provide felt I Now that’s franchisees to personally caused. moment thank crisis the of small, take while our have our Most in that loyal much-needed who, our partners to owned been brand of this

fact, operating have and XX% fewer restaurants five single franchisees a or In franchisees operate of restaurant. XX we still over our

their ability restaurants franchisees have representing Paycheck federal programs time. with the domestic and awaiting are for franchisees’ secure apply aid to XX% funding franchise why individual and economic Protection support X% critical funding. stimulus over of decisions We and fully Today, received is protect survival to our during local approved under jobs. Program That to this another

both details In savings will on addition facility credit cost a in share a amendment Robert more implementing into to of an also entered number just moment. items of yesterday. we measures, our to these

domestic Denny's some channels only As with of limited most of May off-premise still restaurants XX% with at point. were approximately dining XX, rooms, capacity this XXXX, operating sales

meals a principle, is that We why challenging by Love for runs can medical founded teams. live That while was the to teams in first doing and passion to guests have responders these on we times, for donated close system our deep franchise our adapt communities our to simple even That safely serving many Feeding Let brand XX,XXX me over current in quickly restaurant collective these reminding come. everything continue feeding you People. and to drives to we challenges which and resolve years people free our into our

Robert Robert? the Denny's call turn to Officer. Verostek, now I’ll Chief Financial over

Robert Verostek

Good John. everyone. you, afternoon, Thank

mentioned, times. our results, John trends the a liquidity and up wrap start an brief credit quarter entered review our share around position will are these first of with I with on on we facility recent into indeed update As perspective unprecedented then yesterday. details amendment including some

delivering X.X% were yielding of for As to our and down the last we particularly domestic domestic system-wide a over quarter, the our started impact John of sales periods. footing, of quarter. decline same-store of Due sales same-store X% January two fiscal in of COVID-XX, system-wide fiscal March the the solid February a ultimately early XX.X%, period same-store sales through noted, quarter the for weeks

We with substantially opened end our X,XXX development XX at franchise refranchising due restaurant restaurants. $XX.X primarily that revenue These to closing. ended one restaurant X.X% Franchise million, the complete company and quarter were eight and franchisees restaurants, license Denny's of and total openings increased offset as to strategy closings was by XXXX. the

million and This was abatement $X.X partially year two driven decrease in offset by royalty quarter. due fees operating million the in of XX.X% rate quarter. COVID-XX margin and a Franchise on prior million $X occupancy on COVID-XX, last was the royalties impact weeks primarily approximately at improved bad franchise debt offset the margin. in by allowance advertising of related sales compared the partially abatement to receivables $X.X of franchise-related for and by restaurants to XX.X% the early This was margin

prior own higher XXX-equivalent strategy down the general real the restaurants because early a as COVID-XX refranchising margin portfolio offset in from XX.X% well year Company of XX.X% was where of well an our were in impact flat Company due was a increase an costs the as result of of decrease other quarter. primarily unit costs. million our development and compared property as to to we insurance due occupancy-related refranchising restaurant of operating by to sales end quarter. estate decline of liability $XX.X at increase in expenses operating as were restaurant as This in costs the

Total and liabilities short-term to planned year our of costs accrual expenses with the incentive business EBITDA $X.X achievement compensation refranchising and These million associated million $XX.X administrative in both results were plan the in connection decrease long-term deferred the prior revised company’s market XX.X to general compensation reversals share-based The valuation in on million. and certain driven of based strategy. was compared and plan by rationalization development with expectations, adjusted our changes contributed quarter.

a million a was million $X.X Depreciation approximately and provision compared refranchising lower $X.X at reduction to year number $X.X financing amortization due primarily the taxes and in to was lower leases. equivalent Interest an XX.X%. $X.X due X.X to income company average of tax lower credit The million, in expense lower our expense borrowings restaurants reflecting was of resulting strategy. quarter, and million, effective prior rates, primarily from income development interest rate million facility for

income million expenditures the was interest. quarter, decreases Cash million year and Adjusted per million to was net cash capital $X.XX which capital compared expenditures, $X.X Adjusted free in cash in remodels, to interest, the cash and to cash due and primarily in prior capital year quarter. share compared quarter. prior taxes after capital expenditures cash the flow cash year prior was $X.XX maintenance million $X.X in included to $X.X $X.X compared

March X.Xx allocated $XXX terminated $XX.X down credit outstanding, was we but of share approximately We quarter and end to as suspended the adjusted $XXX under the XXbX-X the end that as XXXX facility credit during After repurchases communicated our quarter, our leverage quarter, same and of on total in $XX.X drawing we XX, debt repurchases including million towards trading had our of XX, EBITDA a the February release press facility. plan million million debt near million ratio XXXX share day. under

March announced, the year our XXXX, December for XX, guidance XX, withdrew ending As XXXX. we on previously fiscal

COVID-XX reasonably Given our at evolving the provide of an performance, substantial cannot and outlook on updated time. and business future operations impact we dynamic pandemic this about uncertainty

XX% our low Turning have domestic to following the of in negative sales trends, which week first sequential final point of we occurred same-store in the improvement recent seen performance quarter.

sales sales in same-store week approximately is included the to domestic Our year year for the worth equivalent the sales fiscal in negative same-store XX%. restaurants current with are fiscal week calculation. noting week results prior improved both XX It that and

that a in our temporarily the quarter from domestic by restaurants We are reduced same-store calculation. for late weekly second sales sales night those that many particularly the closed results of with locations the weekly are week same-store in The portions for pandemic. closed operating the hours, Any restaurants report sales to impacted are throughout calculations at response week. only exclude included

number on late-night likely ease lunch, As during of XX% start jurisdictions and would a to we room our hours total sales a with capacity restaurants dining restrictions XX% John of earlier, for through limit approximately restaurants few in dine weekends. week occurring service, Sunday Friday noted impact only Denny's seen of between have a a

Currently, opened room up XX%, XX there full are dining trending dining with capacity room are a with XXX limitations dining with Denny's that week sales compared down restaurants for to prior sales year. states. down XX% approximately operating Same-store operating have off-premise for approximately been locations the rooms sales channels XXX% and approximately across

variable cost, I need in other restaurants. exceeded and scenario, only off-premise Denny's some In sales The April. an for provide Denny's day volume level cover off-premise labor approximately sales per food Now manager levels to perspective of $X,XXX costs. and late would of like breakeven would restaurant sales restaurants average this on team only a to

requires would XX% Denny's room management domestic XXXX. $X,XXX would day. $X,XXX our the cost to generated units average service represent of volumes equivalent so of variable This unit franchise level per Dining staff, inclusive more breakeven to in a approximately by be sales labor

over to and restaurant compensation numerous implemented of significantly multiple office. holds corporate In level for field savings the Directors and measures cost reduced positions, we across and our management in-person the cash, all reduce staffing cancelled of including the corporate suspended an of of reduced field effort portfolio, on use meetings, Board meaningfully levels furloughed opened XX% travel, placed

has company ways roughly normally with part employees. to magnitude we costs on of and pandemic had of make furloughed Unfortunately uncertain half these disruption the week. our by benefits the this of While borne length the impacted covered the the with difficult employees to furloughed, decision earlier the business,

our be the severance other operating second the related for and benefit quarter, component charges period. fiscal and over be losses Severance those of in impacted captured costs will payments as will while gains net made

XXXX, XX, and of amended the testing ratio leverage XXXX we The an Yesterday, charge amendment testing resume. ratio modified the the credit agreement. May successfully fixed March ending until at first charge ratio quarter covenant our leverage XX, credit will which fiscal into time agreement coverage suspends to and fixed entered the coverage ratio

investments. The a the facility. fiscal delivery amendment has of statements under Through we unable XXXX, be repurchase ending ending the liquidity unrestricted or expenditures restricted date June to the our Capital million of the credit XX, certain will covenant our defined to March cash also shares XX, sum will quarter of make through be minimum as monthly financial for $XX and availability XXXX. first fiscal quarter

extremely appreciative support to participating they with facility our our had credit way our which the are in longstanding we the and in of have relationships business. continued We have banks

we strength doing supporting committed to In reduce are managing in these the our of dining challenging leverage which to management times, generate leverage on business is term. near our using flows strong while as focused costs reopen. asset-light business Denny’s rooms In team the cash we recovery model will so, to

the our up turn operator our wraps Q&A to the remarks. will I over call. of call prepared portion That the to begin now

Operator

from we’ll Thank Nick you. to go first, [Operator Wedbush Securities. Instructions]. And Setyan

Your open. line is

Nick Setyan

Hi. potential Thanks relative other the the cetera, near changing any the do term? we’re the the longer bigger guess offering are of over of dayparts obviously not for but breakfast you that I picture only and in questions, seeing specific some sort daypart habits, sort within you about question. addressing And category? the thinking the taking et compare before to breakfast term how

John Miller

question. great a it’s Nick,

it’s to pandemic pace throughout There’s continue. judge in what the that all, as no hard today or get late were we’ll use soon. be to post-pandemic, what’s to expect a they and of things carefully which return watching the quarter, things to normal new expect back we happening question at quarter, that hit the we for First a because not any the normal and do time where to

on, heightened delivery of picture the big meals, through are pickup, things desire that bundled is technology, meal and for family of of sort the going convenience One course, packs.

a did to brand that one-stop not us provide stores service for shop It’s of test. inventory little but quite to it bit manage but gave an a the participated noted consumers. in a of opportunity any grocery You we by also means, standard a number

expected not listen is to like consumers it’s us and say. what to ops So the time, or say all over early marketing quickly. I quickly from adapt our But franchise persist that things in to team, whether would collaboration to and really with too leadership what development and partners moved learn Denny’s team,

and stands some and hostess customers on doors, gloves to lot don’t complete delivery not to and and station, gas Some return parking set time, dining stores participated and that, stations number dine-thru that did cones falls their more for back to an the masks, feel People and allowed for unemployment some operations of got operating everywhere. flow over would the parking learning some I that open economy don’t start But the just closed, on touch in touchless, feel of want and registers, up to and comfortable pickup some who as stayed rooms want lot, the anything. normal [ph] zip – lot compelled sneeze bathroom we a momentum at code and expect they there’s at stores builds the like. guards Nick, sterile through and enter stores to will plates and up tick expectation through

of expectations would will this expect be persist brand and So the as I that at you’d unfolds. think warfront consumer accommodating things are some of our these what

the low the Prior for strong hours daypart, in very breakfast to call daypart. roughly far closed XX, for pandemic, all mix XXX% in course XXs it as sales. continues lunch made. low daypart continues night But late as just on but of was early breakfast a be a XXs, very The and adaptations to we as was As breakfast daypart a a daily we be our and worst strong XX late as franchisee strongest save of is our early mixing up breakfast XX product it daypart system to Denny’s. making to night dinner – day the XX, because

Nick Setyan

do is the family growth seen top just variation in question and much but XX% concepts that’s down dining exactly dining near bridge comps are we’ve the casual of And the in off-premise, now big Denny’s a gap how over can and you What different mind that XX%. their gap current among as of you. sales necessarily not big right a think Thank other now put term? XX%, as off-premise the

John Miller

I lunch think and Yes, raise it’s late we by because Free bridged equities deliveries and awareness awareness. helps over dinner breakfast have certainly night.

us early towards expect fair players daypart in their the not casual to dinner. as already going mix more You’d all have as skewed of well that

the Denny’s different think peers have make in lost sales that after on time overall My or cabin the me. theme that either I competitors the don’t X, to not need wait, I I is or dinner out. and in don’t fever. week the casual trend me of wouldn’t I weekends. breathe pressured. want the any it’s are to is consistent but air. we rush to got need during certainly our be Whereas I very on I think get family

multitasking. We are

the doing at extending homework our honey-do workday. or items kids with We’re home or

looking say pain will whatever food, and true points might the in for to healthcare, that’s and that style role consumer will a service eliminate and that. casual, will And persist a restaurants, retail, the technology I’d adapting play play all in role it so across fast convenience is need be,

even delivery, all the we Denny’s sure pieces for are equal. to to in third that party to customers and our not how There use. they’re make expect adapt components So – is have right

see time a Some alone. to is you convenience how by apps little the over four of or a just players easier were use their a preference couple on over major over being five developed just and consumers

of the and works some the very level perfection of So and that’s technology they’re expectation Nick, demanding serves telling, them. consumer

you want provide able than Denny’s to don’t So point sanitary of outlined now – I environment the emphasize more as up that to necessary here, critically some don’t those and of signal to on to take time things just taking we understate our steps to have is to but make extra right your there. call. important I anything the We is want so do sure can we’re that point well.

and also in touchless more with expectation more an these be mask, across and the things together there’s all and consumer but So table industry distancing expectation with will a stakes view. others my

Nick Setyan

much. very Thank you

Curt Nichols

Nick. Thanks,

Operator

next, we’ll & from Brooks C.L. Associates. And to Todd King go

line Your you may be mute. open. on is Todd,

handset You phone. unmute may up the of the want to pick

Todd Brooks

all I mute. you’re on was Apologies. well. Hope

John Miller

Todd. Hi,

Todd Brooks

blended units XX% to were where the sales, and same-store you when look where the talking what a split can dine-in are XX% middle they fall if take we’ve opened kind you about stores at the right XX% stab down Robert, or across states the restrictions or and you they of --? in the capacity closer

Robert Verostek

can those question, excellent Of those in of an XX Todd. you you the that’s Yes, sense. states. states, in XX% give XXX a five units I kind of are

So Utah. Nevada that’s and Texas, Arizona, Florida,

sense, a so distancing. XX terminology XX give is XX%. Texas for the then you capacity, around using is it units Florida. Arizona at Nevada in at and about units us to social XX% That’s So

a work and the point there where with play. make I it’s So you you constraints a blended are when XX% idea timeframe sense the it’s in that that within on of to capacity now this think would the handful the – that only I would to XX% was say back place, all over sense, Todd, look the I those But hours into I to board, give regard is come weekend right I trying over a to between and my script may average. probably really across

Todd Brooks

restriction it do was guideline? capacities that maybe the because if separations, and the where level Arizona a just look just you If you restrictions up state-based from the and restaurant you like capacity what the mandated do socially Arizona say, you socially with or distanced. as get out at have follow six-foot I And think your think we does did is was it look to great. if Okay, guideline capacity just a to distance would

Robert Verostek

there. more at Yes, the Todd, and you that that regard actually a socially is the you feet, with tables distance showing. capture than many that the units business less. to not XX% these gives great capacity about even these appropriately follow-on of requirements us within rearrange are We look line the states more different those to When at by look – can top

that us more would So give capacity.

Todd Brooks

of And of are then question. at XX% as in a your going great. temporary continuing over you’re markets? see what’s base number to that reopen work what’s open that, here? the din-in, Okay, Is just What that final XX%? Thanks. second to closures, those of quarter? it their that The stores kind looking Is of closed, dine-in, open trigger at thoughts down that you the start are to that

John Miller

the a knowing bag. they in. the would it emotion. PPP Part could of or into was Yes, franchisee is come not mixed that certain rely trigger on that going A not that

balance good nervous The out fast. So have some role of but recently running sleepy those or cash. areas little really played out restaurants really of sort just franchisees, that a in but that extent franchisees sleepy really in their investments little went maybe or some capped made of then are and and – but there’s are broad resort more otherwise a some credit, really and good to of some array about areas sheets of levered liquidity some maybe the

circumstances. each set So of varied own has their

think of and a restaffing, of I for gear-up costs. inventory franchisees to concerned, will be some the just is waiting then degree reopening reopening reloading, XX% the as or to looking far better sort because As

when their good a reliably think I it’s the So of those jurisdiction. will more come mark passed portion in online XX%

Todd Brooks

that, Okay. for John. Thanks

John Miller

Todd. Thanks,

Operator

we’ll Oppenheimer. Michael from next, to Tamas And go

open. Your line is

Michael Tamas

everyone’s Hope well. Thanks. doing Great.

with open units mentioned XX%. down same-store You that are sales are that the dine-in

Just the wondering, you versus how timeframe talk the about the you that consumers used during dine-in? saw off-premise on can what with brand mix

John Miller

weary what to and let’s he’s for station of it nervous Robert Yes, safe, to going because answer Texas apart the or retail keeping or sense six say a would the it into use just the some might in do I But social still Depot have capacity. interpretation and a their when Home Abbott up XX% anything capacity. from keep an and The to schizophrenic for restaurant with consumer turn someone’s go public that’s stores over as gas and message but XX% makes Texas to store the to feet missed. then grocery example little not a they opened Governor I’ll distancing and start disparage it’s or the trying

So that thing unfold. most some rational argued that wasn’t the to

And so of and that perfectly lot it’s of there’s safe eat really debate was some pick up not to out a fine it hammer. with go to but screws or whether

daily. so I a of think and So up, than created business business think to dine-in that was to-go faster the picked in message pickup to frankly really little evolve accelerated. dine bit a picked the slower up Then I that continues

going the up do early way add it’s to-go picking of I want reliable dine-in over is persists that? to higher slowly. anything place. And kind measure, then predictive is Robert, the all think would you So a say but to not and I

Robert Verostek

nearly was go doubled John, I going over maintaining timeframe. that has That was the exact add point off-prem we to still this are to on,

we’ve have off-premise robust to the business with able as coming in on-prem that even seating really been come season. play, of maintain additional a advent into restaurant So back the still restaurants online

Michael Tamas

or Perfect. somewhere around then And Thanks either got from still of be are of XX% these to your think waiting federal some I you franchisees for funded that. programs. mentioned

those response of some closed some Just prior questions from reopening units. potentially jitters about mentioned in franchisees to

think help at there you do base, federal the then be that question think franchisees is you out do guess and to reopen franchised And programs just reopening? get the I broadly that are the that across enough So are successful to of or off some there’s your get jittery them improve just creative going wear enough or does enough think funds? have out don’t as to between programs and these bridge now potentially environment then a do there until to that have little you can they’re the

John Miller

with Thanks, of into evolved, Michael. With eight-week to the constraints regard is timeframe bolstered is been of programs forgiveness. is, as through you the reality place now have with evolution regard has again time, kind the one programs, as this play, come these tranche. seen have the PPP second to taken at the for this that’s And the been looked

would With think maybe able long to extended. it become a already hope And that would have were regard extended, creative that think many with I think creative, many I worked sit many of and we the in regard they with many becoming franchisees banks who worked, we that I with with commentaries, that banks abatements. will them. to have be in if lessors way. that franchisees, worked reopen to ensuring the go to of the as these and with of deferrals lessors. We their lending master work many We get know of position and and to noted franchisee [ph] on those we lease be

the again, to continue available. work as place really have widely to more and get lot down put that has in off-premise of on we time at becomes relieved the will ensure a that early that liquidity liquidity path tensions bolster can appropriate the to anxiousness we the So and reopened we

Michael Tamas

Best Thank of luck. very much. you

Curt Nichols

you. Thank

Operator

And to from next, James go we’ll Rutherford Stephens.

Your line is open.

James Rutherford

kind include figures housekeeping. taking for and and fee? into the What royalty here. it level breakeven assumptions thanks unit Is normal of breakeven just us? go and Robert, questions you sustainable long-term gave a you Does that like that Thank ad first those rent figure? one

Robert Verostek

question, Yes, so James. great

own fixed to hard would components, for franchisees the we around lease would not the – that. It’s it that all it regard on include clarity, to for have With a rest unit. they it just with the that mentioned, they franchisees to or may include supposition you the of of that unit terms ad that cases, royalty. variability fact deals, will in more know we the For make don’t include that the all variability that or regard the debt the the whether

really larger the for two includes So it costs variable all of except those pieces.

The start other that get XX of majority piece those into level, the consideration into there between to X,XXX is to to may costs. the fixed somewhere cover you take you

work more report beyond go get we numerous got where is not dream Curt XX% it’s from to capacity more from sequential would with will you X-Ks, suspect to but as But that that to same-store a cover given you it’s each So negative so XX% get right there, XX% the to continue seen now, XX% step you’ve – and sales, of – that. that. you same-store as to far sales

James Rutherford

day circling very reopens or going the I decision follow improvement in day or on the if the like that is open room, that’s my from the math. have negative looks about the it most just helpful. seems the cost cost. also $X,XXX back $XXX adds for dining restaurant those week lift about and a picking math the negative kind up and to per comp when That’s recently that’s the if and correct, it to up reopened, got so to And a XX in to like extra as dining And right $XXX which about of you’re XX% the XX reopen an room initially

point the So breakeven to it’s to like dining I’m initially the reopen is making close room. it seems

to open incentive for is initially So these kind that what franchisees if so, back up? correct? of the And math

Robert Verostek

ensure support generally you that seen that. you math can we’ve We would upon the open up and you themselves. – build reality open with You’re in ballpark is that are you as up is The you certainly back can is, correct. sales

kind you upon So insights. of we limited the with week that various benefits learning feeds notion an real on-prem thoughts still the and open perspective John, getting or very quickly those itself a are other any getting open all --? of only so on to with just business and are

John Miller

a Employees have week Well, worth come to it a momentum hours number staff. of unemployment. to certain need to get obviously you off it make with

in cook hours and of a role. play will managing and another The inventory and so get again. stages larger back things server, diner as then another then building stages all And menu menus, and the cook and dynamic hours those then the building goes then up

So sort added some we’ve as stage continue a sales to increase. and do we very small of menu back then that items we’ll to from

on But play the then a all line. it also So what builds hopefulness. things and can these sort in staff a a what do small role of larger do can and staff momentum

You a restaurants toured few can see – I yesterday. quite

XX-unit We it a franchisee and quite franchisees, larger casual the parking has in fast lot. and then and to see just our able restaurants, then momentum it operations food toured see cars just of Texas number could to be down nice you of guests a fast competitors, good starting One on of who was Florida Denny’s. And to build. to and to see the the the some was excitement And of on. waited slowly sit be

James Rutherford

lot of makes a That sense. Thanks much. very

Curt Nichols

Thank you.

Operator

And next, Bartlett Jake to from we’ll go SunTrust.

Your line is open.

Jake Bartlett

cash basis, or kind rate. Hi. question the guys sales, about some level rate cash the your Thanks right appreciate was estimate My what all have same-store weekly of In be? burn peers for now some on the a of in basis you overall hard time. assuming monthly are companies, taking this doing the provided would your you of question. of but I tough – kind to work a a burn

Robert Verostek

Yes, burn you, million in month to you What $X excellent so month. rate the up question. that Jake, was that million is somewhere of our we the in frame cash can to tell for the $X for April,

million is So X.X somewhere basis. if and weekly between you break that cash burn X that a down, on million

things that the So have down, had is take deficit closing to the well there account the some working that capital as were into of as burn restaurants off. a idea we we

So in burn cash that somewhat rate. into taken that account was

So that is one note. to thing

more regard more are that’s to of move The on be level; perspective – is move burn into breakeven to because that, and trying that XXX off-premise, to the and units units we cash for now. status, on that We $X,XXX the reality piece $X,XXX goes is down. we these rate not other are on-prem wanting more everybody that why so that for focus restaurant with on-prem of

$X can April. to the the of range really represented million flow that I be burn that think would I cash worst kind $X offer what is of million rate which in So

Jake Bartlett

at down a see right? it. really has kind that of What would but just breakeven – G&A sales given of including looks was or been calculating running a have store the sales, you, to what to to be on franchisee, clarify, the maybe just is to the Got then XX% guess weekly store I but level kind you’ve franchisee exact the it not at some breakeven the of much I’m have be would somewhat level? about And breakeven, that the to or the more calculating than north of be same-store like that. I’m think Is I

Robert Verostek

there. the Yes, Jake, in I think ballpark you’re

per that think what so I trying with relay. with think is $X,XXX that’s level. trying relay that unit, we’re what I breakeven to spot to XX% That’s we’re you’re to that in range, that XX% on

Jake Bartlett

that you. more capacity the just and maybe bit for can a you explain about constraints what then And Okay. if means little

what brunches think like on that the hours that made it weekend Can capacity Sunday I that. of just you, and us kind help I but only you you a understand impact was more kind what actually maybe what capacity comment typical constraint, at know XX% a of it a of means? few or little something the is important bit your really would maybe – how that

John Miller

Yes.

any some – get of [ph]. as financial week nights, particular weekend on has peaks Sunday of until Saturday and sort picture precision as and big we just a where spread XX ours on So rhythm own not hours, but Saturday where less go Sunday Friday segment has daypart, so a the weights represents give basically industry out. you more to Robert result days pressure its of places can of a here, every There’s seven the lot a and

so being the XX-hour the fully bell through don’t casual afternoon have curves Saturday. without the night the Sunday there’s daypart. breakfast business would does Friday and to afternoon, we But – late a listed on And lot mean the as our same – brand

other affects us different more week less it’s during it So as very the on weekends and between us and brands. the

servers in at do. on whereas only bringing to another role XX% them Saturday require XX% work really their Sunday, waiting segment you get cooks sense us maybe for to can’t interested makes because they we therefore, than or peaks, the and differently because building to So higher of start for and people XX% them really

So helps not. or I don’t know if that

Jake Bartlett

kind I be your business that maybe spread like wondering an I a kind of sounds there was weekends, Yes, was helps. but to advantage out. so guess it disadvantage it how how was actually – --? whether on focus to the was of And

John Miller

back get start wouldn’t an to few se. a I advantage capacity that advantage It’s It’s XX% just start to a to again, less material. restart advantage out than it’s not an at call weeks, for per

Jake Bartlett

tell, about that’s a how And that’s I Right. opened or have seems dining capacity like we’ve – like dine-in. you Georgia, from for what stores look been in available have open dine-in at can state many a half then it tracking And XX%. we

change this to or also, address you dine-in for this dine-in question then think the in, did you open little addressed – question what I bit in but what a say, earlier, to those needs longest, And trends can trends kind -- of for the the you’ve the weeks over as share opened been see of if sort any state – you have one. could opened of you’ve couple you kind of Texas of there, last if [ph] Georgia? the

Robert Verostek

which back you determination to and location I I’ll you sitting whether other John’s John out, reopened yet a and life may the come could it have here the in you not would that if opens reopened, that. the different that Florida, general a reality looked the of I on to of and will say numbers tourist that states that top couldn’t pointed are Arizona, at back the again, complications again I whether think is to moment, regard not that with is, point I in in half to or we be do have Texas. Nevada regard pointing Utah five start dynamics, or comments you Texas, nearly kind exactly XXX has with with tell the are – Georgia. but is in to question Georgia, opened unit as

quickly. came Texas So back fairly on of the majority line

think dining I opened the franchisee have that it there propensity is for to on-premise back So states get a for quickly. pretty at

to on-prem not may unique be – where that I that that but had opportunity taken it’s of be have case more the opportunity point. think So the they at

Jake Bartlett

marketing there on? quicker back some digital, or then pulling changes be have any continuing were with question, your might casual made whole is television that either competitors of your or the last results a quarter, dining it And you weights maybe impacted as your versus in or whether versus Great.

John Miller

Yes.

full some to few sales digital take casual to there, on the players successful hundred for service basis though sure switched off-premise to-go us, has delivery total free special our points still even peers is, that in on efforts program advantage. our of channels overall behind all we’re Denny’s known, make family been was focused lowest dining that sales. we a Demand out Remember in the So

and that, pretty with home, at focus So in lunch to especially take at for or breakfast – you shelter wanting you’re building easily. momentum place, and dinner care you can really of can on home if people staying

So the focus on the been five. have off-premise or delivery would dollars after

to we our Denny’s sure platform. make Demand that optimize can going really we’re on So

to a have people drive-thru and won’t curbside, to have did if a a about well they otherwise and lot a seems forgotten yard value I’ll to also out. for our quick played messaging diner where cones family for really to we hostess might on brand. mention signs that ourselves get stands, just attention of delivery, your if the go weekend work free lot focus signage for banners, tempts general So sometimes an audience streamers, call

they prominence were food. sales attention case in we create even low could, anything So strictly grocery the benefit we groceries around of and try We those to our to of of just communities to margin the customers and for for and ability visibility call some sell to ourselves. to-go some or did our if some

say think lengthy one. I’d side without degree in council, of moved of improved focus our is that I results we efforts, meeting Number working I next a more our collaboration. high sometimes those our committee, week that twice and to and talk inside all to too number about to brand where were have the often chairs have the with for fared our steering of side brands great Remember, One, than calls advisory with we been culture the which our on the was couple engagement step. two, community and fronts. our us adapt by would have think well a that So franchisee quickly of

think I So what that’s see. you’ll

for have families. Denny’s meal more eliminate more delivery convenient of of of balance and options, we provide replacement kinds initiatives on of that full to-go year things a And the options those is all on homely and that focus each pain well. packs, see throughout those service and bundled the as points You’ll peers proud family the of course meals, of among of say I’d

Jake Bartlett

appreciate Great. you. Thank I it.

Curt Nichols

you. Thank

Operator

next, from to MKM. we’ll Brett go Levy And

Your open. line is

Brett Levy

everyone color. I Great. call. all Thank appreciate you hope doing well. the for taking of is I the

XXX%, $X,XXX I you And that And reopened? a what sales said think dining have two percentage had the what I might also we Did per $X,XXX have it. week? franchisee but were you say off-premise are said have up you week for this, I been or of then stores currently rooms those missed the generating open, either are trending units before questions.

John Miller

for talk I Yes, we QX. was used your second the the that my question number. and into Robert have don’t for part reported we let should early think above of --? I’m breakeven pencil sales I’ll a about at have or quarter are number look the sorry, stores I specific of that

Brett Levy

rooms. You growth the gave up What was rooms before were open? open dining dining trending XXX% with at units that were that off-premise for

John Miller

up so year. I going to we wrapping XX% going did were the it we back into script, Yes, call – this the think

Robert Verostek

so regard – and business. on-prem, we’ll would you the in balance point tell the XXX That’s correct, not to XXX that got And off-prem, the off-prem. states only we still and really units about on-prem tell we as be to into with so U.S. on-prem loosen component the And still on-prem, I’ll up still then can But close, is as that they that the there. doubled move John. remain or the is the that balance those is the that of the about to only And XX% on-prem moved restrictions. XX% nearly I’ll that business you off-prem more more get reality is, again, there

Brett Levy

they sense kind was you where trying was to dining where Right. two do for, units reopened, is where the XXX before what were now the just I those weeks they rooms, What at that’s asking for the are up sales opened any say, I of --? you have off-premise the versus

Robert Verostek

are remained XX% The about has same still though worth They’re time. of real time, that able moved the is has moving and news at through for remained sure. in have April. here that – weeks with but doubled that off-prem business the on-prem even as to nearly the we than represents good short two units moved It Yes, even did – it’s in still the so script. been comments back we robust on-prem, maintain my a period again, with strength data, the goes so to that of we’ve robust. business have – Everything off-prem that for Absolutely. that is, XXX%, is

Brett Levy

there been hearing you And maybe respect about maybe that closures, Great. need to you with up road, step the a wherewithal franchisee little the of bit don’t if aggressive any or offer something franchisees they additional they know, have, the believe that’s but you And might are your of talking challenges franchisees, to out to do more down relief? also need persists, have have take I desire stance? to sales or

Robert Verostek

regard So closures, let’s it’s to an that. franchisees excellent question. step kind With through the of

be I that. early may it think cycle to little bit the understand a in

liquidity first long may and to think assess last we level in when may trying going to with this how regard were back ramp was the I of capturing up. understanding focus to liquidity what be and available

It conjecture we’re But we – of It right would wouldn’t be. at went where and be would day week, if out number just So that. insight my get that me passing on really can’t not to requests to point part with surprise up? surprise Would each better now. a the it closure put me.

what to-date franchise look with week might I goal the scenario have be royalty hazard and regard strong fund what now weeks to look to – the perspective additional we for that our franchisees reopen system this brand abatements this is I interest. wouldn’t With we’ve robust is But corporate what right worked for we franchisees like building of As availability would would our through understand even we guess help financials what have a nor that a call look as a best every from XX different said to might keep time. the But and committed to our the that XX like. our had the deferral to was big and and we we what funding, with contribution. you which that advertising version to of XX able the script regard like expect, at point plan in have in be in might say may

Brett Levy

there’s But you Thank restrictions? you Great. nothing than possibly much. to other covenant preclude very type

Robert Verostek

to a as within the Yes, the that amendment covenants. franchisees. we point, The does cap all don’t within outside covenant other really our restriction so stay that just restriction long but type as the to loan is put quickly direct we have a of that, of

Brett Levy

Great. good and very Thank luck. you much

Curt Nichols

you. Thank

Operator

a question Setyan Nick And have Securities. next, from follow-up from Wedbush we

Nick Setyan

Hi. back Is on it’s rate week the on. what’s per Thanks – or per now? run me a letting it come basis? Robert, month a G&A for whether

Robert Verostek

translate how at we so it I the we’ve figure if see and said let’s Nick, look G&A, Yes, is what can out to this.

people we mentioned as furloughed more has – of that noticed travel to been staff office and follow shut have one, up a that the but know earlier We virtually ended had in individual that I I all XX% did run don’t I’ll those We with furloughed you home permanent. You regard had we have unfortunately week. up to becoming with I parted off. if have ways the on rate the available, Curt that on moment Nick. in

Nick Setyan

clarification. owned? Of then many now has dine-in the units And opened, problem. how just one XXX no are Yes, company

Robert Verostek

my that excellent again have to a apologize will that question we get follow-up certainly Yes, you. too. an current states, may in I to XX but be That’s It’s too. data opened that, right sheet. on now number XXX not for

Nick Setyan

much okay. so luck. Thank That’s you good and

Robert Verostek

Thanks, Nick.

Curt Nichols

Thank you.

Operator

James Stephens [Operator Instructions]. go from to And we’ll next. Rutherford

open. is line Your

James Rutherford

Thanks had a supply two-parter chain front. well. that me Hi. on and on as the for you’re I what hearing in quick just squeezing back

any supply the franchisees part The second price term? is might you. on The your your around near beef, if first that and around is part food how Thank profitability on you in the picture increases availability had just disruption specifically in protein chain? affect

Robert Verostek

hand With time of that of processing he weeks that. for those plenty that me you the as on enough work and the articles related procurement already we Thank would and That the see available James. to might be on are would don’t tell of not chain, the questions. I the processing long ground I call disruption had through supply us. those one of every to our up expect, head have would we to there animals Hi, to that plant, issues. number Good regard you

reopened. with So and you weeks with regard regard certainly hand through to have to mentioned, getting a will the get plants that inflation, With that the I to regard believe think place. we’re specifically beef that again, us we on in commodity that pretty processing good

We products. our are with regard many contracted of to

so And a this of we exact don’t we – quoted the haven’t just disruptions. lot year. inflation commodity There’s

We have partner back really what’s as so get well open. And really of they’ve a they’ve you and we able quite have supply our that so a valuable many this to to line up units in a of other heads in are really to in XXX and we’ll with worked and units on that fashion, products have been we regards break up mentioned, McLane. give beef we really They distributor, able up. get on. and obviously abundance there there our worked been that but are the our the then we highlighted pork and them been be may beef – a stepped ones products have ramped timely through be of as the Overall, chain, coming

seen supply haven’t any regard So a disruption, with that to really in regard. chain

slight think multiple we’re with products hand inflation. beef commodities weeks with with well covered and our our on regard I to

that of the I regard the so that’s With that of specific that of that everyone those on-premise on number think right we give company a only XXX now, of is And still this kind just out of XX piece to to XX information. not Nick are one for it’s XXX. so the units really like. gets owned, sales what have the too might look soon call,

a So have. everyone the that that’s line on piece information of can

Operator

I’ll turn the to in And closing for remarks. with questions back no further it queue, Curt Nichols

Curt Nichols

today’s like great everyone to for late you conference our results. evening. in our next we I’d forward discuss call Kristy. which joining for a thank July you, in quarter earnings will Thank on call. second have We us Thank look XXXX to and joining

Operator

And today. that participation. our you for call Thank conclude your does for

may You now disconnect.

Denny's (DENN) 15 May 202020 Q1 Earnings call transcript