Earnings Call: Q4 2020

Sep 15, 2020

Good morning, and welcome to the Cracker Barrels Fiscal 20 24th Quarter Earnings Call. All participants will be in listen only mode. After today's presentation There will be an opportunity to ask questions. I would now like to turn the conference over to Adam Han, Manager of Investor Relations, Please go ahead. Good morning, and welcome to Cracker Barrel's fourth quarter fiscal 2020 conference call and web cast. This morning, we issued a press release announcing our 4th quarter and full year results. In this press release and on this call, we will refer to non GAAP financial measures for the fourth quarter 12 months ended July 31, 2020. The 4th quarter non GAAP financial measures are adjusted to exclude the fees related to 2 sale leaseback transactions, the non cash gain on sale of assets related to the sale leaseback transactions that occurred during the 4th quarter, non cash impairment charges related to store assets and their related tax impacts. The full fiscal year non GAAP financial measures are adjusted for the items listed above as well as expenses related to COVID-nineteen, an impairment charge related to our equity investment in Huntsville's social and the related tax impacts of these items. The company believes that excluding these items from its financial results provides investors an enhanced understanding of the company's financial performance. This information is not intended to be considered in isolation or as a substitute for net income or earnings per share information prepared in accordance with GAAP. The last page of the press release includes a reconciliation from the non GAAP information to the GAAP financials. On the call with me this morning are Cracker Barrel's President and CEO, Sandy Cochran Senior Vice President and CFO, Jill Gulder and Vice President of Finance, Jeff Wilson. Sandy will begin with a review of the business and Jill will review the financials and outlook. Will then open up the call for questions future operating results or expected future events. These are known as forward looking statements, which involve risks and uncertainties that in many cases are beyond management's control, and may cause actual results to differ materially from expectations. We caution our listeners and readers in considering forward looking statements and information. Many of the factors that could affect results are summarized in the cautionary description of risks and uncertainties found at the end of the press release and are described in detail in our reports that we file with or furnished to the SEC. Finally, the information shared on this call is valid as of today's date, the company undertakes no obligation to update it, except as may be required under applicable law. I'll now turn the call over to Cracker Barrel's President and CEO, Sandy Cochran. Sandy? Thanks, Adam. Good morning, everyone. Thank you for joining us, and I hope everyone's continuing to stay safe and healthy. Since we last spoke in early June, our business and the casual dining industry have unsurprisingly remained pressured due to the pandemic. But despite this, I'm very pleased with progress we've made on our recovery and on key initiatives in recent months. While we anticipate dealing with pandemic related challenges for some time, I believe the decisive actions we've taken to strengthen our business model, bolster liquidity, and adapt our operations have us well positioned to successfully navigate this environment. And I'm confident our fiscal 2021 business priorities and the corresponding plans will further strengthen our leadership position in casual dining and drive long term value creation. I'll discuss some fourth quarter highlights and speak to you about our priorities and plans for fiscal 2021. Then, Jill will review our fourth quarter actual results and our liquidity, common on our expectations for fiscal 2021, as well as our sales performance quarter to date. Before I go on I want to comment on our re staffing and our commitment to ensuring a safe and healthy environment in our stores. I remain pleased with our effectiveness in re staffing our stores, which I believe has been facilitated by our strong culture the actions we've taken to support Carforce had returned to work. I'm also impressed with our operators' commitment to ensuring a safe environment for both our guests and our employees. I believe these factors especially proud of how our store managers and hourly team members continue to deliver our mission of pleasing people during these difficult times and want to again express my gratitude to all of our employees for the excellent job they've done over the past several months. We were pleased with our sales Comparable store restaurant sales decreased 39.2 percent in the quarter, improving from down 59% in May to down 28.2% in July. And this improvement has continued into fiscal 2021. We believe this trend has been driven by our reopened dining rooms, sales improvements at stores with open dining rooms, increased demand our strong everyday value and the trust our loyal guests have in us to deliver a great safe experience with genuine hospitality, even when the hospitality is delivered with a face mask on. We also believe we've benefited from summer travel. In the fourth quarter, we leveraged successful initiatives such as 3rd party delivery and curbside pickup and our family meal baskets offering maintained its popularity with our guests. Supported by our work to further enhance our off premise operations, these sales of 4th quarter restaurant sales compared to approximately 8.6% in the prior year quarter. During the fourth quarter, we rolled out the new lunch and dinner menu that is part of our menu evolution initiative The menu includes new craveable offerings such as chicken potpie and maple bacon grilled chicken, which are available every day, as well as new daily specials such as Saturday country fried pork chops and Sunday pot roast supper. Additionally, we believe the new simplified menu results in increased consistency and execution better highlights our signature offerings, value and variety. This is a significant initiative, which we've been taking a phased approach and I continue to be pleased with the results. It began with the introduction of our Signature Fried Chicken platform in fiscal 2019, And I'm looking forward to the future menu innovation we have planned as part of this initiative in fiscal 2021. Continue to make progress on the addition of a beer and wine program. As a reminder, at the time of our last earnings call, this test was in approximately 20 stores. Currently, these offerings are available in approximately 100 stores. Based on the favorable results, we'll be introduced the beer and wine program to the majority of our system in fiscal 2021, and we expect it to be in approximately 600 stores by the end of the fiscal year. I remain excited about this initiative and in addition to the financial benefits We believe of this initiative has been in line with our expectation and while it is mostly targeted enhancing the dinner day part, AR Mimosas have proven to be quite popular in the breakfast and lunch day parts. I was also pleased with our retail performance this order, especially considering the headwinds our retail business is facing as a result of our dining room closures and capacity restrictions. Teams were focused on managing inventories and strong sales in categories such as furniture to corn accessories contributed to top line retail performance that exceeded our internal expectations. We believe consumers are looking for affordable ways to improve and update their homes during the pandemic and that our offerings in these categories strongly appeal to and provided a compelling price Fiscal 2020 was unlike any year we've ever experienced and the challenges presented by the pandemic have and will persist into our growing off premise and enhancing the guest experience had us well positioned going into the crisis and they remain highly relevant. We'll build on these priorities to drive Our fiscal 'twenty one priorities include the following: 1st and most importantly, ensuring the health and safety of our guests and employees 2nd, driving restaurant sales by leveraging our new menu, introducing additional craveable offers and further growing and evolving our digital strategy Street biscuit company. And now I want to speak to some highlights of our fiscal 2021 business plans and priorities. Our first and top priority is ensuring the health and safety of our guests and employees. Our elevated health and safety measures remain in place and our teams continue to do an excellent job, diligently executing the procedures and protocols and adapting to a dynamic situation. We're committed to prioritizing and we'll be investing in health and safety over the long term and we believe this emphasis has and will continue to strengthen the trust that both guests and employees have in our brand. Colinary plans are focused on driving frequency by leveraging our new menu and introducing new craveable offerings during the fiscal year. For example, our Q1 menu promotion features and is being supported by an integrated marketing campaign that includes national TV. Looking ahead, I'm excited about future menu innovations such as the hand breaded chicken tenders we'll be introducing to the core menu later in the year, as we build on the success of our Signature Fried Chicken platform, and I'm also looking forward to the continued rollout of our beer and wine program to our stores. Turning to off premise, we've been pleased with the growth of this business in recent years, which further accelerated by the pandemic fiscal 2021, we're focused on growing our various off premise channels by building brand awareness and affinity, optimizing off premise operations and leveraging initiatives such as curbside pickup and third party delivery. Additionally, we'll be testing 2 new off premise formats, grab and go and a dedicated catering kitchen. We believe Grab and Grow will drive incremental to go purchases from our dining guests and can build off premise behaviors and guests that may not use to go channel as often. Our dedicated catering kitchen is designed to improve our ability to meet demand in high volume markets and drive productive growth in catering. These tests are launching this month, and I'll share additional details and future updates. I continue to be fully introduce initiatives such as front porch dining. This is currently available in approximately 350 stores and has helped mitigate the impacts of the capacity restrictions. Tents in our parking lots. Teams are focused on ensuring we deliver hospitality to our guests, whether they're dining in our stores, on our front porch, picking up in order to go, and we continue to adjust our operations to support the guest experience for all of these occasions. In retail, we're currently focused on our core holiday business, which accounts for a significant portion of our annual retail sales and our retail stores are presently set with fall and holiday assortments. We're encouraged by the early performance of these assortments and believe our affordable and unique holiday decor and merchandise will resonate with guests in the current environment. Our teams continue to work on optimizing the floor space in response to the capacity restrictions Additionally, we're focused on driving higher retail attachment for off premise occasions and this will be a key priority for the team throughout the fiscal year as we evolve In fiscal 2021, we'll be enhancing our digital infrastructure and involving our digital strategy to drive sales and improve the guest experience across form that provides an integrated and improved user experience for guests ordering food in retail. It is foundational for future planned initiatives that we believe will further enhance the guest experience and power guests by giving them more control over their journey. In addition to increasing convenience, we believe the digital store and these initiatives allow us to extend our hospitality in new ways. The digital store is already live in approximately 150 stores and the initial response has been positive as we've seen strong user engagement. The digital store will also support sales driving opportunities such as bundled restaurant and retail offerings, a loyalty program, and increased personalization and customization as well as it will result in sites. Another technology initiative that will provide additional guest experience enhancements as well as going forward to resuming the implementation. Approximately 175 stores currently have the new POS and we plan for approximately 500 stores to have it by the end of the fiscal year. I continue to be impressed with how the Maple Street team is navigating the difficult environment and I'm excited about the brand's future. The resilience they demonstrated during the pandemic has reinforced the attractiveness of the concept and their business model. We have a high degree of confidence in this In addition to opening these new locations, the Maple Street team is focused on developing replicable processes and on leadership developments staffing and training to support the Lastly, before turning it over to Jill, I'll update you on our capital allocation strategy. Ensure we have the appropriate capital allocation strategy. And remain committed to our highly disciplined and balanced approach to capital allocation. Top priority is investing in Cracker Barrel and Maple Street. Regarding the regular dividend, our board continues to evaluate the environment and intends to reinstate the dividend as soon as it prudent to do so. And lastly, we're evaluating our debt levels and we'll be normalizing our leverage both by reducing debt and Good morning, and thank you, Sandy. In light of the ongoing impacts of COVID-nineteen, my prepared remarks will focus on our fourth quarter financial performance and our liquidity position. Then I will provide some comments on our outlook for fiscal 2021 and our recent sales trends. I would like to begin by $495,100,000, a decrease of 37.1% compared to the prior year quarter. Our restaurant revenue decreased 38.2 percent to $401,500,000 and our retail revenue decreased 31.7 percent to $93,500,000. Despite the headwinds from the pandemic, We were pleased with the improvement decreased 39.2% with sequential monthly improvements from down 59% in May to down 28.2% in July. The improvement during the quarter was broad, both geographically and across dayparts. With our dinner daypart remaining the strongest and the breakfast daypart seeing the biggest improvement. We believe our top line results have been supported by summer travel, improvements in dining room capacity initiatives such as our new lunch and dinner menu, and in a portion of our stores, the addition of front porch dining and the introduction of beer and wine. We were also pleased with our strong retail top line performance, which similarly saw sequential monthly improvements during the quarter. Comparable store retail sales decreased 32.3% in the 4th quarter, and for the month of July, comparable store retail sales declined 16.9%. Now moving on to expenses. Overall, we were pleased with our manageable expenses during the quarter as well as the cost savings we achieved as part of our business model improvement initiatives. Total cost of goods sold in the quarter was 30.5 percent of total revenue versus 28.8% in the prior year quarter. We delivered restaurant cost of goods sold of 24.7 percent of restaurant sales, which was relatively flat versus the prior year quarter. Compared to the prior year quarter Our retail cost of goods sold was 55 percent of retail sales versus 48.7% in the prior year quarter. This 630 basis point increase was primarily due to employee discounts and increased use of markdowns, as our merchandising team aggressively worked to manage our inventories. I'm really proud of our retail teams who have been diligently working to ensure appropriate inventory levels and deliver improved retail sales you to do a nice job managing labor this quarter as labor and related expenses were $187,800,000 or 37.9 percent of revenue compared to $276,200,000 or 35.1 percent of revenue in the prior year quarter. Although we had deleveraging from our fixed expenses in the current sales environment, We were able to partially offset this with approximately $7,000,000 in cost savings we realized during the quarter as a result of our field management restructuring initiatives. We have been pleased with the results of this initiative which we believe has been Car4 hourly team members as leaders and mentors within our stores. Other operating expenses $4,500,000 or 20.9 percent of revenue in the prior year quarter. This 7 60 basis point increase was primarily the result of sales deleverage. Additionally, the growth in our off premise business resulted in the fourth quarter were relatively flat to the prior year quarter at $41,000,000, which includes approximately $5,700,000 in fees related $3,000,000 in cost savings realized during the quarter from our corporate restructuring initiatives. GAAP operating income was $40,100,000 or 8.1 percent of revenue. On an adjusted basis, operating loss was $20,000,000. Net interest compared to $3,900,000 in the prior year quarter. As a result of drawing on Our effective tax rate for in the prior year quarter. This increase was primarily driven by deferred taxes recorded as part of the sale leaseback transaction that occurred in the fourth quarter. We reported 4th quarter GAAP earnings per diluted share of and adjusted earnings per diluted share was a loss of $0.85. I now want to speak to our liquidity position. Since the pandemic began, we have made it a priority to ensure the company is well positioned for the long term from a cash standpoint To achieve this objective, we have been actively managing our balance sheet and have taken actions such as implementing cost savings initiatives, drawing down on our revolver, exercising our accordion feature and completing a sale leaseback transaction. We believe these actions combined with the strong performance of our operations teams have put us in a strong financial position. I would now like to spend time discussing our 2 sale leaseback transactions. The first transaction closed in the fourth quarter and involved a group of 64 properties that were part of a previous sale leaseback that was set to expire in 2021. We entered into a new lease agreement with better terms that will result in cash over the life of the 20 year agreement. Additionally, we entered into a second transaction to further bolster our liquidity This transaction closed in the first quarter $150,000,000. We believe the company's historically strong financial performance helped facilitate the transaction and secure an attractive long term rate. Regarding the financial and accounting impacts of the sale leaseback transactions, the first Dow leaseback resulted in us recording a non cash gain on sale of assets of approximately $70,000,000. Our 4th quarter results also included $5,700,000 in fees related to the 2 sale leaseback transactions. The adjusted 4th quarter operating income and adjusted EPS results I referenced earlier exclude this gain and gcludes the related tax impacts from these items. We anticipate the second sale leasebacks will result in a non quarter of fiscal 2021. In fiscal 2021, we expect that these two transactions combined will increase our which includes the amateurization of the right of use asset related to the gains on the sale leaseback transactions. Our cash rent will from the better terms of the I now want to walk you through our We ended our 3rd quarter with $363,000,000 accordion feature and increased our borrowings by approximately $64,000,000 in operating cash Some of the cash from our expansion of the new POS system and our beer and wine initiatives. $37,000,000 of cash. The sale leaseback transaction we closed on in August further increased our cash and we ended the month of August with approximately $565,000,000 of cash We believe our and as we consider capital allocation going forward. The board continues to evaluate the environment and our debt levels, and they will maintain a balanced approach to capital allocation and will take our strong cash position into account when determining the optimal mix of investing in our business returning cash to shareholders and paying down debt. Before moving to our outlook, I would like to comment on Maple Street. We are pleased with their We continue to believe they have strong unit economics, which in a normal environment includes targeted AUVs over $1,000,000 store level EBITDA over 17% and the build out cost of less than $750,000. We are excited about accelerating Maple Streets growth and anticipate opening up to 15 stores in fiscal 2021. And we believe Maple Street will meaningfully add to our results in the coming years. I would now like to speak to our outlook. Everyone should be mindful of the risks and uncertainties associated with this outlook as described in today's earnings release and in our reports filed with the SEC. Because of the uncertainties resulting from the pandemic, we are not providing annual guidance For fiscal 2021, we currently anticipate opening 3 Cracker Barrel stores, These stores had been in the fiscal 2020 pipeline, but were delayed due to the pandemic. We anticipate capital expenditures of approximately Approximately half will support strategic initiatives and new unit growth with the remaining amount supporting existing store maintenance. We expect to achieve Given the savings already realized, this means that the 1st 3 quarters of fiscal 2021 are each expected to deliver approximately 12 50% coming from labor and related with most of the remainder coming in G And A. However, We do expect that these and or margin improvements over the long term. We continue to closely monitor our restaurant supply chain. And are having regular discussions with our vendors. To date, we have not experienced any meaningful supply chain disruptions and we do not anticipate any significant disruptions in fiscal 2021. Assuming that there are no severe COVID-nineteen outbreaks, that affect our suppliers. We anticipate commodity inflation of approximately 1.5% to 2% in fiscal 2021. We were pleased with our sales improvements in the fourth quarter and this trend has continued into the new fiscal year. Through 1st 6 weeks of fiscal 2021, our sales trend has continued to improve with comparable store restaurant sales decreasing approximately 20% and our comparable retail sales decreasing approximately 5th 18% when compared to the same period in the prior year. We have continued to see strong off premise sales growth in stores that have reopened dining rooms in some capacity and currently, stores with open dining rooms are maintaining approximately 75% of their elevated year over year off premise growth compared to off premise only locations. Although we are encouraged by our trends our overall outlook remains cautious for several reasons. 1st, the possibility of additional COVID outbreaks and resurgences 2nd, despite the improvement in our sales trend, There continues to be much as well as economic impacts at the pandemic remains high. Despite these potential headwinds, we are confident in our plans and initiatives in fiscal 2021 will drive performance and long term value creation. Additionally, we continue to believe we will potentially benefit from several factors. First, we are a trusted differentiated brand with loyal guests. 2nd, we have a strong value proposition. 3rd, our interstate locations positioned us well when families choose to travel by car for holidays or vacations. And lastly, we believe key initiatives such as our new lunch and dinner menu, the introduction of a Bureau and wine program, and our investments in digital guest experience enhancements will help sustain our momentum and drive improved performance. Open it up for questions. I'd like to turn it back over to Sandy. One final point before we head into Q And A, we recognize the importance of maintaining a strong independent board that serves the best interests of our shareholders, employees and guests, with the expertise and experience critical to our business. Our board regularly reviews its capabilities and is committed to an ongoing refreshment process. Part of that process, we've recently added 2 outstanding directors to our board following a rigorous search process. Gilbert Davila and Gisele Ruiz. Gilbert joined our board in July, and we announced Gisele's edition yesterday. Both of these candidates are tremendous additions who enhance the diversity and skill sets of an already outstanding board, with Gilbert, bringing substantial marketing, market segmentation and digital expertise and Giselle, bringing a wealth of talent, having led complex operational and human resources functions for the country's largest company, Walmart. We're excited about what they will bring to our board room as we continue executing a clearly defined strategy to accelerate the growth of the company and enhance value for all shareholders. And with that, Jason, now we'll open it up to Q you. The first question comes from Todd Brooks from CL King. Please go ahead. Good morning, everyone. Thanks for taking my question. I appreciate it. You spoke to just things that kind of cautious on or watching going forward. Just wondering if you could kind of reconcile the down 20% restaurant same store sales that we've seen quarter to date. How much of that is supported by the port front and the tent based outdoor dining that we may lose in some locations as we do approach the winter season. And if we could tie it to when you look at optimal performance given the capacity restraints that you're having to operate under, is down 20% at the restaurant level pretty much as well as the concept can do in the current capacity environment? Good morning, Todd. This is Jill, and thank you for your question. It's a great question, a tough one to answer. So let me kind of walk you through things as we're looking at our the impact of capacity constraints on our sales versus demand. From a demand standpoint, just as we're focused on the health and safety of our guests and team members, guests are focused on their health and safety. So there may be some reduced demand because consumers are reluctant to eat in a dining room. Others might be cutting back on their, on their kind of away from home dining occasions, just given the uncertain environment from an unemployment standpoint or an economic standpoint. As we said, as the dining rooms have reopened, kind of even under the capacity restrictions, we have seen our demand, increase. And as we've looked at the demand progression, it's increased across all three day parts. We've seen the most improvement in our breakfast daypart, but of all three dayparts dinner remains the strongest. So which says to us that there is demand out there from the consumer On the capacity constraints, we do believe that in general, we benefit from the fact that we have a large open dining room. And the operators have done a really nice job maintaining capacity restrictions, the the six foot separation and managing through that, that approximately 50% to 60% restriction. Where we tend to run into capacity limitations tends to be on the weekend, kind of weekend dinners. As well as Sunday, that Sunday occasion. As we said, we did introduce front porch dining in approximately 3 50 stores to help increase our overall capacity The front porch dining adds anywhere from five to six tables. Those are four top tables. So that piece of it will most likely be Kurt tailed as we get into the cooler, the cooler months here. But so to your point, can we do better than down 20%. I mean, we have seen that we've been able to support the increased demand. The team has done a nice job. We can't directly talk to what our overall number can be at the 50% to 60%. Capacity levels, but hopefully that gives you a little bit more color. Yes, that's helpful. Thank you, Jill. And then just a follow-up on that and one more question. If you look at the store base and the 350 stores where you do have the front porch dining set up, Does it skew more across the Southern tier so you think you should be able to keep, a decent amount of that in place through, I mean, not necessarily the heart of winter, but let's say the fall shoulder period and if necessary the early spring shoulder period. Yes, it does. First of all, that's where our store base skews. And those were a lot of the states that allowed us to go to on premise dining, some of the soonest. And we're also hoping that geography will help us extend our ability to allow guests to eat outside the long as long as we can. The next question comes from Jeff Farmer from Gordon Haskett. Please go ahead. Thanks. A couple of questions. I was looking to drill down on the summer travel season. So I was curious What was the highway location same store sales performance like versus the non highway performance units And what was the mix of local versus travel customers that you saw this summer? So, Jeff, that's a great question. We've been slightly underserved data kind of 10 ways to Sunday. And, we really did not see a huge differentiation between the stores that are kind of off highway versus, more local what we have seen is in the Northeast. We've seen more improvement as their capacity restrictions have been lifted. That's probably the biggest trend change that we have seen. Okay. And then second topic. So for the 20% same store sales decline that you'd seen through the 1st 6 weeks of the quarter, Just looking for some cadence there, meaning what did it look like at the beginning of that 6 week period in the middle of the 6 week period? And then did you sort of exit that 6 week period, meaning in the last 2 weeks? Just sort of how the same for sales progressed or what they looked like over that 6 week period to get you to minus 20%. Okay. So as you can appreciate, 6 weeks is into too too long of a time period. So, I mean, clearly versus where we were in the fourth quarter, we saw some improvement, but we don't really want to slice and dice the the weeks themselves. I guess what I would say is that we've been pleased with sales kind of at all levels. Pleased with the breakfast lunch and dinner sales, pleased with our ability to retain a significant portion of the off premise sales as the dine in, grows. And then with our premise, all, virtually all channels have done well in individual to go, the 3rd party as well as our catering. So overall, we've been pleased. And I apologize if I can just sneak one more in, which was on the $50,000,000, I know I'm pushing my luck here, but the $50,000,000 in cost control that you talked about last quarter into this quarter, you mentioned on the call that that could be offset by some investments in technology and some other things. So $50,000,000 cost control versus what amount of dollars of investment are we talking about here? So we're going to continue to manage the P and L based on the business performance and our cash generation. So as we look out, let's talk about some of our kind of puts and takes, in terms of our overall expectations. So we expect, as we think about some of the puts, we expect to continue to generate cash from the sales performance. We will benefit from the cost savings initiative. And we're expecting to take approximately 2% pricing, maybe a little bit less than that, on some of the takes where it expecting wage inflation in the range of commodity inflation in the range of 1.5%. And so some of that then will be reinvested in our initiatives. Probably the biggest investments there are going to be around the beer and wine initiative as we, we do training and we obtain licenses Then we'll have some of our investment in POS, which will both be capital investment, as well as you'll see some training some, some training and incremental depreciation expense associated with that. And then, of course, our digital, that Sandy mentioned, we'll see some impact in that in G And A expense and potentially other OpEx. The next question comes from Rhett Levy from MKM Partners. Great. Thank you and good morning. Following on with Jeff's question there, I guess if you could give a little bit more incremental detail on the technology front. From how you're thinking about spreading the costs to what level of internal disruption you might see as well as any potential operating or sales lift? And then just on the menu front, can you give any more detail on how your new menu items are mixing, what you're seeing from the beer and wine tests. Thank you. Why don't I start this off, Fred? And then maybe Jill, you add, whatever additional color. Let's talk about technology first. We're really excited. We've got a variety of initiatives. As a foundational issue, I'm excited that we're going to restart the installation of our new PTO S systems. So that, as Jill mentioned, we'll be doing, I think we said, will be about 500 by the end of the year. That's right. That allows us as a platform to then have whether it's tablets at the table or we've got a labor system, a new food system, all of which we'll be able to sort of layer on to that. In terms of the digital initiative, we are rolling our digital store in the next few weeks, that's sort of a foundational piece that and as a beginning, sort of integrate a variety of functions that currently sort of operate on a stand alone basis. It's going to be a much better experience for our guests to be able to just enter the brand. And then whether they want to get on the wait list or order something catering or whatever they want to however they want to interact with the brand. That is not really a very disruptive in the field. That's our IT team, and we have a digital team that'll be rolling that functionality over time. What it will help in terms of empowering the guests which will help our field. So for example, currently curbside is an important part of our off premise business. New functionality that our digital initiative will allow, was you to be able to pull up and on your device, let us know you're there. And also if you haven't paid already, you could pay either while you are in your car on your device or it will allow a server to be able to take payment through a tablet, but at your car. So some of this functionality, it will be slightly disruptive as we inform the stores and do a little bit of training, but it will the operation going forward. In terms of the dinner menu, and then I'll turn it over. I'll get all mine in to with, we're really pleased with the guest reaction to our, our initial relaunch of the dinner menu, it, what it was doing was allowing us to highlights some new craveable items, as well as do a better job of reminding people about our signature offers. It a better job in my opinion of highlighting our value. It's difficult, to get a read given everything going on. But, we believe that, is making it easier on our operators and we are getting a lot of positive feedback from our guests. So we're pleased. So I guess what I would add, this is Jill, on the investment portion, probably the biggest portion will be around capital to support our overall POS. So with we said we'll spend about approximately $100,000,000 in capital in fiscal 'twenty one. Of that, about 20% is to support our new store growth. About 30% is our strategic priorities or initiatives. And of that half of it is the POS. And really the remaining portion of that is store maintenance. So that's probably the biggest area where you're going to see some of the investments. The next question comes from John Tower from Wells Fargo. Please go ahead. So the cost savings you outlined in the call, Jill, $10,000,000 realized to date, there was $50,000,000 target on last call given. But I believe there's also an $11,000,000 from the previous initiative that was there. So can you just remind us whether or not that was the $50,000,000 was in addition to the $11,000,000? Did that include the $11,000,000 that already in place? Yes. So the $50,000,000 were new cost savings. I will say that some of those were contemplated prior to and we pulled those, forward. So to address the $11,000,000, just as a reminder, in fiscal 'twenty, we achieved $12,000,000 in the cost savings. And so it's, to be clear, that was for initiatives that were planned in 2020 and those were separate from the 50,000,000. So as you forecast out then, the 50,000,000 is expected to impact Of course, it impacted our fourth quarter of the last fiscal year a little bit in the 3rd quarter. And you'll primarily see the benefits in Q1 through Q3 of fiscal 2021. Okay. Thank you. And then just on the G and A line in the quarter itself, it seems like it was a little bit higher than at least I was anticipating excluding the sale leaseback fees. Was there anything else in there that you could speak to perhaps there were some costs around getting the Bureau Wine initiative up and going or some of the other investments that you are making for the business right now? Sure. Yes. So as you look at the G and A for the fourth quarter, there was some spending in the fourth quarter tied to, our initiatives. Specifically around beer and wine. As you look to prior year, I know some people, some the analyst expectations had all of the cost savings in G And A. And as we've outlined about half of those should be up in labor and then most of them remaining in G And A. I will say in G And A, there were some timing shifts based on some accruals as well as, I believe you just called out that there were some professional fees associated with closing on both sale leaseback transactions. The next question comes from Jake Bartlett from Truist Securities. Please go ahead. Great. Thanks for taking the questions. My first question, I have a couple here. The first question is just, Sandy, on the alcohol test, If you could give us any color what you're seeing at the stores that you've had it in test for a while now, who'd be trying to kind of assess what the longer term impact might be to the model. And then you mentioned that you expect it to be completely rolled out by the end of the fiscal year. What should we expect for the cadence of that I mean, should we is it going to be a gradual roll out or really kind of more lumpy? So it's, as I mentioned, it's currently in about 100 stores, which is, concentrate Florida, Kentucky and about 20 stores Tennessee. We anticipate it next, I think the Indiana Mississippi Virginia, the cadence is dependent to some, to a large degree, on the licensing, requirements in the communities we're in and to what degree we can move through that. So that's how the rollout will go. It's difficult to predict. And as I mentioned, I think we expect to have it in about 600 stores by the end of least some noise due to traffic declines and then we have a new dinner menu. So we've got a lot of things going on right now. But overall, we're pleased. We have not yet really started to promote it. But I'm encouraged with how strong continue to be especially in Mimosas continue to be the most popular, but we'll continue to relook at the assortment. In fact, I think we're testing some new items and our first seasonal mimosa, in maybe its next quarter, even in Florida. And so, and Jake, on the financial results, it is it's achieving our expectations. We would like to get a little more time under our belt and hopefully we can give you a little more color on our next call. Great. And then in terms of the POS rollout and the ultimate savings that you can achieve from that. I believe that that was all part of the kind of the 20, I think 2015 through 2018 or 2017 plan, or maybe it wasn't clear. The last kind of 3 year target that you had a $40,000,000, I think a large portion or I believe the large portion was from the POS rollout. So if you could just remind us what kind of savings, and I think a big chunk was going to be software that was going to be layered on through labor and then a big chunk was going to be from software that was going to be layered on for food costs. But just remind us what kind of savings you can ultimately get once that POS system is rolled out. Okay, great. Jake, this is Jill. So what we like about the new POS system is it provides more function reality that we will that we believe both benefits the employee experience as well as the guest experience. So, you're right. It enables a new system that will be implementing, a new labor management system and a new food waste management system that we believe will generate savings. We believe it's honestly, it's easier for the team members to use So it's easier to learn on and from a training standpoint, it enables tablets, which we're in probably close to 100 and 70 restaurants as well. And the beauty of tablets is it keeps the server on the floor. So they have more time to interact with the guests. It helps with the speed of the guest experience. And it's again easier for the team members to use. And then just in general, it'll help enable some of the digital technology that Sandy mentioned. The next question comes from Gregory Francfort from Bank of America. Please go ahead. Hey, thanks for the question. I have one clarification and 2 questions. And the first one is just on the $25,000,000 rent comment Is that a gross number not excluding what you're rolling off? Just to clarify that. It's a I mean, just going to correct me, but it's a net number So it's $25,000,000 in incremental rent. It's net of all the transactions of that 8,900,000 cash rent. Most of it's the amortization piece of it. Got it. Okay. Got it. And then That's helpful. I mean, just the questions I had. The first is, margins have, I think, been better than I would have expected or the anyone would have expected 3 or 4 months ago. And I think one of the important questions for the investment community is if you get back to 100% AOV recovery, I guess, I should say when, like, what do you think margins go? Do you think they're like a couple 100 basis points higher because of the alcohol program? You guys have kind of sound efficiencies on the menu? Do you think it's maybe lower because you have some incremental costs around safety and food safety? Or what's your thought in terms of 100% of your recovery and where the margins might go on that? So excellent question. And we're all looking towards the period when we are in a more normalized time period and we have more normalized sales I guess what I would say is there's going to be a number of puts and takes. So from the on the expense side will have more normalized expenses kind of back in the business. But we will benefit from our, accelerated cost savings of the $50,000,000 cost savings. And then I guess another piece of it will be where the sales are coming from. So I think we've talked a little bit in the past that off premise sales has a slightly lower flow through just based on the higher supply cost. Okay. Okay. And then maybe my other question is, Is it Chile's moved recently to do their version of a ghost kitchen? I think the market very excited. And I'm curious maybe Sandy, what's your thoughts are on? I use Ghost Kitchen, I think the word loosely, but your thoughts on how that plays out, how Cracker Barrel might into that trend or if you guys want to participate in that trend and how it might work? Thanks. We've been thinking about that as well. And one thing I figured out is that people use the word Ghost Kitchen to mean a lot of different things. So let me tell you how we're thinking about the opportunity, for Cracker Barrel and how we intend to at least go after go after it initially. So, we are going to be converting one of our locations in Indianapolis, actually. To be a catering only kitchen. And what I mean by that is it'll be a location that will focus on just developing in that to either have the equipment, the expertise or the time to produce, it will be able to concentrate sales, delivery capabilities in one place. We're also planned to use it to do individual to go for things like DoorDash, we might choose to use it to supplement the store needs at peak holiday seasons, where sometimes our capacity strength constraint at times like Thanksgiving is the, is our location's ability to manage the volume of the off premise with the dining guests. So we're going to explore how having this asset might allow us to even further expand the seasonal business that we're doing in our stores. So that's the way we're going to start out looking at it. I'm excited to get into it and to give you an update on our next call. The next question comes from Alton Stump from Longbow Research. Okay. Thank you and good morning everybody. Thanks for taking the call. I actually had kind of one question, but just before I get to that, kind of going back to the point about heading into winter season, any outdoor seating. If I do my math right, over 40% of your stores are in Sunbelt state, so to speak. I always think that people would actually want to eat outside more often, in those hot states versus the mid summer. Am I wrong on that or just kind of what's your thought process is as far as that offsetting obviously up north where clearly there won't be as much outdoor seating? You're right. We're hoping that, you know, we have a nice dry fall all through the Sunbelt and through Florida. And you certainly are able and lots of places where we do business we believe we will be able to leverage our outdoor seating, for as for the majority of the year. But even here in Tennessee, we do have days where you would not want to sit outside. Yes. That makes sense. And then kind of the main question was just it's going to take back over the last 6 months out of off premise being up to 35% of your sales here in 4Q. I was curious as to what kind of other things you have learned over the last 6 months that you could use once we do eventually get past COVID, it's helped bolster your long term on the sales? Lots of, lots of learnings. And I think, anyone who has, after going through this as hopefully taking a minute to figure out what have they learned and how they can apply it to being even better going forward. So We've learned that the brand can be more innovative than maybe we expected our operators and their capacity and resilience in dealing with a rapidly changing environment just magnificent. I think that we have realized that our guests are forgiving in these times and they have been really flexible when it has response to a particular community's requirements or whether we've had menu items or temporary shortages and items or limited menus to deal with and we're loving it and our guests love it, but we weren't really designed to do that. So it's a little bit more difficult on our servers to take care of the guests out the freedom to try some things. I think that was a big learning. We, we didn't learn, but I was pleased to, have confirmed that we have a lot of employees who were ready, willing and able to come when we needed them to. And that has been a great benefit to us, to do our brand and our guests. And then we learned about how loyal our guests are to the brand and how much they missed the food we offer and how much I think our brand and the experience in our brand reminds people of just safer, happier times. And that role that we play for them and their families, whether they're celebrating something or they're just all trying to get back to normal. Great. Thanks so much for the color. The next question comes from Robert Derrington from Telsey Advisory. Please go ahead. Yes, thank you. Sandy, can you give us a little bit of color? When you talk about the digital store rollout, are we talking about an upgraded, an improved app Can you give us some kind of color on that and how it essentially will help the business? It is an upgraded app. So you're probably if it's 150 stores you happen to be in the proximity of one of those and you were to log on to our app, it'll redirect you, to the new Cracker Barrel app what it does is give you a much more integrated and improved user experience for both ordering food. So it's just the way it helps you navigate the menu and customize your order is more clear as well as attach retail to it. So that's what the initial pilot is really foundation. It's about integrating get on the wait list in a way that we think that guests will understand better and will be a better experience. And then as I mentioned, on that platform, we intend to then add additional functionality that will help us be able to personalize and remember you, personalize, make suggestions customized, and then eventually support a loyalty program. That's great. And as a follow-up, traditionally in the Southeast and I think in a lot parts of the country. Football season is a really big time for travel for weekends as far morning breakfast after a game, The fact that so many schools are essentially kind of shutting down are really dramatically restricting the number of consumers who can go a football game, does that give you any pause for concern? Are there enough programs that can offset that? What little perspective there, if you could? Well, you've just listed just one of the many issues that we have been trying to understand the impact of as we think about our sales expectations for the fall. I mean, you're right. Those, those football weekends at the big SEC schools, that's not going to happened in the same way they certainly did before. Whether that'll be offset with families who would have flown somewhere and now they're a vacation plans are going to be get the family in a car and just travel somewhere by car and do smaller vacations. And maybe that'll be a benefit to us as an offset, we're hoping so. But although the football weekends might be the big events that you remember, but just whether or not kids are going to go back to school and stay in school and soccer tournaments. And just the normal movement of the country, we're going to have to see how it's how it plays out in the fall. And, and what we hope is that we're going to be a brand they trust it will be an experience that they have confidence in and that we will be there, staffed and ready to go, whenever they try to use I'd like to turn the conference back over to Sandy Cochran, CEO, for any closing remarks. So the last several months have presented significant disruptions and unprecedented challenges, which we are likely to be facing for some time. But that said, I have great confidence in our with loyal guests. We believe we have a strong value proposition with great appeal in any economic environment and we're confident that we have the right and to drive long term value creation. So thank you all for joining us today. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.