Dine Brands Global, Inc. (DIN)

Investor Day 2018

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Feb 21, 2018

Good morning. Welcome. I'm Ken Dipti, Executive Director of Investor Relations. Before we begin, I'd like to show you our disclaimer regarding forward looking statements, which can also be found on the IR section of our website. This covers all the comments we will make today. Let me briefly cover today's agenda. First, you will hear from our CEO, Steve Joyce then our Brand Presidents, Darren Rebellis and John Cywinski followed by William Yarego, Regional Vice President of The Americas and our CIO, Adrian Butler. Finally, you'll hear from our CFO, Greg Calvin. There will also be a Q and A session following all presentations. And with that, it's my pleasure to turn the program over to Steve Joyce. Good morning, everyone, and thank you for coming. It is truly my pleasure to welcome all of you here today as well as those participating via the webcast. We are obviously very excited to provide an update on the business and discuss our long term plan to drive growth and create value for our shareholders and for our franchisees. So we've got a lot to cover today. I'm going to start off with a company overview before turning it over to our Brand Presidents, Darren Rebellez and John Cywinski, who will each discuss all of the compelling initiatives being implemented at IHOP and Applebee's, respectively. Our Regional Vice President, William Ruego, will then provide details on our International division and the results there, followed by our CIO, Adrian Butler, who will tell you how we're using technology to create a differentiated guest experience. And then finally, you'll hear from Greg Calvin, who will take you through the financial summary. Okay. Let's get started with an overview of the business. Dine is an incredibly strong company that is in transition, but we already have a lot of things going for us. We have two very incredibly iconic brands with brand awareness, which is the highest in the industry, both of which are number one in their respective categories for the last ten consecutive years. Anybody that knows this business knows that's quite an achievement and a testament to the commitment and the hard work of our franchisees and their team members. With over 3,700 restaurants globally, Dine is one of the largest full service restaurant companies on the planet. Additionally, we are continuing to expand our international presence, which we view as an important growth engine for the company. We have 100% franchise and asset business model, which is the envy of the industry. It enables us to generate substantial and stable free cash flow, of which we have returned a significant amount to our shareholders while continuing to invest in the long term growth of the brands. Let me be very clear. We have one priority, and that is returning capital to shareholders. We have a solid track record of doing that, and we will continue to do that going forward. Lastly, the stability of our business model has allowed us to maintain incredibly robust EBITDA margins even relative to our highly franchised peers. So prior to joining Dine last September, I was CEO of Choice Hotels for nearly ten years. And before that, I spent twenty six years at Marriott in several senior roles. Both companies have strong global consumer franchise businesses, which made Dine the perfect fit for me. I've also been a member of the Board since 2012. So I already had a pretty deep understanding of the business, the strengths, the opportunities and the areas that we need to focus on. This level of insight provided me with a close-up view of what has worked, but probably more importantly, what has not. Dine has a very seasoned leadership team, which we have significantly enhanced over the last year. Over the course of the last year, several talented individuals joined us in key areas across the organization, including brand leadership, culinary, marketing, consumer insights and operations. The Brand President is going to talk a lot more about their respective teams later. But we believe that investing in talent is necessary to accelerate and maintain sustainable growth. We will continue to strengthen our leadership team and further develop a value based performance culture. I strongly believe that leadership drives culture. And leadership, from my perspective, is all about partnering with your team and adding their best thinking to yours to create something truly special. And I am pleased to say that at Dine, we have an incredibly talented team with a clear, thoughtful and determined mission. The entire leadership and our franchisees are committed to succeeding and transitioning Dine back to a growth company. With that said, we are currently implementing a comprehensive plan to significantly improve performance at IHOP and Applebee's. We are executing on several initiatives at both brands to change the trajectory of comp sales and traffic and build on what was a very positive performance in January. Darren and John will discuss brand specific strategies in detail a little bit later. We are well on our way to executing a new strategy to improve and further strengthening our two category leading brands. To achieve this, we have taken steps to ensure that Applebee's and IHOP have the resources and structure in place to quickly respond to unique opportunities and to the competitive landscape. Our initial step was to transfer two of our shared service functions, operations services and development directly into the brands to empower them through greater autonomy and accountability. We also focused on creating best in class consumer insights and analytics capabilities, which we continue to build on. These are critical to providing necessary customer information to support our decision making. And those are just a few of the many initiatives we've implemented throughout the organization to better position Dine and our brands to predict and react to changes and challenges in the environment in which we operate. These collective steps have made us very excited about the future that lays before us. We will continue to prudently invest for growth, both in our people and in our brands. We are confident in our ability to return to a growth company and continue to provide meaningful value to our shareholders and equally as importantly, our franchisees. So Dine has several key investment highlights, which make it a significant and compelling opportunity for current and potential shareholders. And after yesterday, we apparently have a bunch of new shareholders. So let me provide a brief overview. As I mentioned early, we have two strong and iconic brands, which lead their respective categories and have for the past decade. In 2017, both brands combined to generate approximately $7,400,000,000 in domestic system wide sales. We have a presence in all 50 states in a way that no other restaurant company in our category has. This gives us the muscle and the reach to serve our customers in ways that others cannot. And we're continuing to expand our international footprint. As you can see, approximately 6% of all IHOP restaurants are located outside The U. S. And about 8% for Applebee's. Our international division represents a significant opportunity for us. The next slide provides a visual snapshot of our significant domestic scale with strong presence on the Southern Region and on both coasts. In 2017, franchisees opened a gross total of 96 restaurants across both brands. Now while development at Applebee's has temporarily slowed, which we expect to recover in 2020, we continue to see a strong and consistent development from our IHOP franchisees. For over a decade, IHOP franchisees have opened an average of about 62 restaurants annually on a gross basis. Last year, best year in a decade, they exceeded that by 25%. To penetrate markets for both brands that cannot accommodate a traditional restaurant, our strategy focuses on nontraditional development. This includes locations such as airports, casinos, interstate travel centers and who knows, maybe even cruise ships. We've made great progress with these formats, and we'll continue to look for ways to be where our guests are and however they want to buy. Not only do Applebee's and IHOP have both a significant presence and high consumer awareness, our restaurants also have strong brand equity outside of The U. S. In 2017, we experienced the strongest international growth in a decade with 37 restaurants open. That represents a 23% increase over last year. In the last ten years, our international footprint has grown at a compounded annual growth rate of 9%. Internationally, we are succeeding in cultivating key development partnerships to continue to expand our global footprint. Currently, our key target markets are Mexico, Canada and The Middle East as we believe that these regions have the largest growth opportunity for us. And we've made real progress since launching our International division in 2013. We've created a strong foundation for growth. We're focused on signing long term development agreements with franchisees in targeted markets and growing this important segment of the business. We're also looking at opportunities in The United Kingdom, Taiwan, Japan, South Asia and The Caribbean. You're going to hear a little bit more about that in our international vision from William later on. Our brands have very favorable guest dynamics and appeal to a wide demographic, as you can see. In particular, we index fairly high with younger guests, to the surprise of many, obviously, in the media compared to some of our family dining and casual dining peers. At IHOP and Applebee's, over close to 50% of our guests are under the age of 34. You will see that we have pretty even representation of guests across the 35 to 54 range and above 55. This is proof positive that both brands appeal broadly to the American public. We represent the 99%. People know that we're friendly, that we're accepting, that they can come with their genuine, authentic self, and we will welcome them with warmth, with great food, with great service and with a memorable dining experience. Now I'm highly amused about reading about the death of casual dining on a regular basis, including yesterday. But I will tell you, our numbers beg to differ. Our demographic would suggest that we have a long and prosperous run-in front of us. Let me provide a little more color on the guest profile for each brand. Our guests are evenly split between male and female. We skew young, but we have meaningful representation in each generation. Our customers are generally in the 50,000 to $75,000 income range. They work hard for their money, and they expect value from us, and we will deliver. As you know, we'll say it a lot, we're 100% franchise. We have the ultimate asset light business model with minimal CapEx requirements, which enables outstanding and incredibly stable cash flow. In fact, an incremental restaurant in our system flows through at 90 plus percent. Dine is the highest percentage franchise company amongst its family and dining peers, and it reached an asset like business model that everybody else wants to duplicate. We have a talented and seasoned group of operators in IHOP and our Applebee's systems. Both sets of franchisees are highly engaged, highly engaged and supportive of our business strategy to drive sustainable positive sales and traffic. Let's provide a little color on the longevity of our franchisees. The average tenure of our franchisee is fifteen years, fifteen years. That is a testament to the long term relationships that we have developed with our franchisees across both brands. The IHOP franchisee base remains in strong financial health, and we are continuing to work with much success closely with the Applebee's franchisees on this top tier brand. Both of our brands have been ranked number one in their respective category for the last ten consecutive years for domestic system wide sales according to National Restaurant News. We are extremely proud of this accomplishment. But we will not be content until we have built an insurmountable lead in both categories. We will continue to tirelessly execute against our strategies to further differentiate our brands and to deliver a unique guest experience with the ultimate objective to drive sustainable sales and traffic growth. As a result of our model, we have an incredibly attractive margin profile, which significantly outpaces the industry. We believe that there's an opportunity to grow our margins from current levels through both cost optimization and growing the core business. As I mentioned earlier, our business model generates significant cash. Given that we have minimal capital expenditures, we are able to make an ongoing investment in our brands to drive long term growth and provide a very attractive return of capital to shareholders. Regarding brand investments, we have committed a onetime $30,000,000 contribution to the Applebee's advertising fund in 2018 to provide additional support to stabilize and grow our traffic and sales performance. John is going to discuss the results that will be generated from this contribution a little later. As I've said in the past, our top priority has been and always will be the return of capital to our shareholders. We have maintained a shareholder friendly capital return policy through a combination of quarterly cash dividends and share repurchase. As you can see here, we have returned over $340,000,000 in the form of dividends and share repurchase in just the last three years. After a very thorough and comprehensive review, we believe that our move in our current dividend provides the opportunity for a more efficient return of capital to shareholders through share repurchase. We will, however, though, still have the highest and most attractive dividend yield in the industry. We believe our dividend is going to grow over time, and we're going to range the target ratio of dividend to somewhere between 3545% of free cash flow. We intend to keep our yield at the higher end of the industry. The change in our dividend approach will allow us to significantly increase our share repurchases, which represents a compelling upside investment for the company. We view this as a means to create even more meaningful value for our existing shareholders. To tie in all of this exciting new initiatives being implemented companywide, we announced a name change to Dine Brands Global Inc, or Dine Brands. While the name change itself isn't all that important, what is important is it represents a shift in our culture, our strategy and our way of thinking about this business. We will be bolder. We will take more calculated risk, and we will move more forward quickly. And most importantly, we will return this company to high growth. We are developing a high performance value based culture. Look, Dyna is not a brand. Dyna is a holding company with two incredibly strong brands today. But we're going to look for opportunities to scale the business through strategic tuck in acquisitions or joint ventures, adding new brands to our portfolio in different categories. You can expect us, though, to continually differentiate ourselves and lead any respective category we happen to be in. So if you don't notice, we're pretty excited about where we're going and about Vision 2022, which has several major components. We are working diligently on many initiatives, which we believe will improve performance and drive sustainable long term growth. This includes investments in restaurant remodel designs, game changing marketing across digital and traditional channels, consumer insights data and analytics and innovative technology to continually enhance the guest experience. As I discussed earlier, we have also shifted investment into the brands from corporate to establish greater accountability, but more importantly, a level of focus and passion at the brand level and for greater efficiency for our brands. We have strong support from our franchisees on our go forward plans to drive performance. We understand that our success is dependent on our franchisees' success. To that end, we've restructured the organization to more efficiently provide support to our brands, making us more agile and able to quickly respond to changes in the competitive environment. We've made investments and we'll continue to make investments in our data and analytics capabilities. That enables us to better understand our guests and how we can get them to visit us more frequently. We know more about our guests than ever before, and we're using this information to exceed their value expectations and further enhance their experience, either in the restaurants or increasingly, as you will hear, off premises. We define value as more than just a price point. It's what the guest receives across the entire spectrum of the dining experience, including the atmosphere, the service and, oh yes, most importantly, the food. So frankly, I believe the environments in our restaurants and our food are a much better value than the industry, and we're going to build from here. We've made great strides in technology. We have a strong presence in digital and social media at both brands. We are creating additional touch points for IHOP and Applebee's, which enable the guests to access our brands how and when they like. We're addressing the convenience needs of guests, which in today's highly competitive environment has a big influence on dining decisions. To that end, online ordering is now available nationwide at both brands. We are currently testing delivery and very excited to have been selected amongst only a few restaurant companies to participate in the online ordering platform for General Motors vehicles. We were one of the few companies that were asked to participate, and we're very excited to be part of it. So as you can see, we are moving full speed ahead, utilizing technology to further enhance the guest experience no matter where they are. We're also going to closely manage our G and A while investing in the long term growth of our brands. You can expect us to rightsize G and A in 2018 as we continue to maintain the strong financial discipline that you've known us for. To summarize, we're moving the dividend to what we believe is an appropriate level. We expect to see a significant increase in returns to shareholders and still maintain one of the highest dividend yields in the restaurant category. We continue we intend to continue to position the dividend so that its yield remains attractive and the highest. We will apply available capital to share repurchases, which we believe represents a compelling investment opportunity for us. After the stabilization of both brands, we intend to explore additional small tuck in acquisitions or joint ventures to drive additional long term growth. Our business model, the franchise business model, is extraordinarily scalable. We have well capitalized franchisees who are looking for more product from us. We generate robust cash flow for continued investment. We will continue to evaluate growth opportunities as we go forward. So to recap, here's a snapshot of the expected results from these activities, which Greg is going to discuss in much more detail later on. Our Vision 2022 positions Dine to be an even stronger company with compelling growth potential across all key metrics, meaningful margin expansion and an improving free cash flow profile. With low single digit comp growth increases in our existing brands only, we expect to see margins expand 10% and generate mid single digit growth of EBITDA, which will lead to growth of approximately $175,000,000 in adjusted free cash flow annually and adjusted EPS growth from $4.15 today to over $10 in the next five years. That is a compelling picture worth fighting for. So I'm strongly committed to the success of this company, to our franchisees and to our team members because together, we can achieve our goal of restoring Dine Brands to growth and build an insurmountable lead in both of our categories. So now to give you a little more color on the great work that's being done at IHOP, I'd like to introduce you to Darren Rebelez. Thank you, Steve, and good morning, everyone. I hope everyone had a chance to enjoy the wonderful breakfast that Chef Neville prepared for you this morning. That is just a mere taste of what's in store for this iconic brand. This morning, I'm going to share with you our plan to win. I'll start with a little bit of context around how we view the industry and IHOP's position in the family dining category. I'll touch on our historical performance and our track record of growth that we've established. I'll also review the tremendous assets that we bring to bear in the marketplace, the love folks have for the IHOP brand, the diverse franchise population that operate our restaurants and the world class team that we've assembled to lead this brand into the future. My primary focus, however, is going to be around the four key pillars of our strategy: enhancing the guest experience, running great restaurants, driving traffic to those restaurants and being where the guest is. And I'll wrap things up with how all of this comes together into a compelling growth story. Now 2018 marks IHOP's sixtieth year as a brand, and we've been a leader in family dining ever since we were founded in 1958. We have the strength of sixteen seventy one restaurants in the domestic business, 100% of which are operated by our three zero one franchisees. Our domestic business generated $3,300,000,000 in revenue in 2017 and was the market share leader in the family dining category for the tenth consecutive year. I'd like to highlight a couple of other areas of our competitive advantage. First is our significant strength in breakfast with nearly half of our business coming from the breakfast daypart. IHOP is top of mind among guests for breakfast and enjoys clear leadership in this space. Now importantly, the breakfast daypart also enjoys the lowest food cost of any other daypart by anywhere between four hundred and six hundred basis points, which makes the unit economics for IHOP restaurants and the profitability of our franchisees a compelling proposition. This strength in breakfast also represents meaningful upside opportunity for us to grow the base business by expanding the lunch and dinner dayparts. Secondly, in spite of being called the International House of Pancakes, we're largely a domestic business with only 6% of the restaurants outside of The U. S. This also represents meaningful growth opportunities for us in the future. Now family dining overall is becoming more attractive, and the macro trends around breakfast play to IHOP's strengths. Over the last several years, interest in breakfast foods as well as breakfast daypart visits have grown. The IHOP brand enjoys incredible awareness and credibility in this space with over 90% aided awareness among family dining consumers. We're also viewed as a leader in the category that's not afraid to innovate or take risks. Now while this has made for a more dynamic and competitive landscape, it also has presented us with a significant opportunity to leverage our expertise in all things breakfast into other dayparts. This trend in breakfast and family dining is not only just a domestic trend. The family dining category globally is a $55,000,000,000 business, of which we have virtually no share outside of The U. S. This, again, represents a tremendous growth opportunity for the IHOP brand internationally, and we're already seeing strong interest for the brand around the world. William Urego will share more about the global prospects for IHOP later this morning. As I mentioned previously, IHOP remains the category leader for the tenth consecutive year. We have the highest system wide sales in family dining at $3,100,000,000 in 2016 and the second highest unit count at sixteen thirty seven. This scale is instrumental in driving unit economics for our franchisees. We've been very successful at leveraging this scale into more efficient purchasing through our purchasing co op, which continues to support lower costs for our franchisees. This scale also allows us the ability to raise more funds for advertising and for driving traffic into those restaurants. That being said, this speaks not only to the sheer size of the business but also to the quality of the business at the unit level. IHOP has a demonstrated track record of being able to grow incremental restaurants without cannibalizing the existing restaurant base. Now growing with both quantity and quality remains a top priority for the IHOP brand. As I mentioned previously, we have a demonstrated track record of growing both sales and units. Over the past five years, IHOP has grown system wide sales at a 3% CAGR, the second fastest growth pace in the category. And at the same time, we've grown the restaurant base by 1.4% on a net basis, which leads all peers in the category. Our 100% franchise model, in conjunction with our demonstrated ability to grow incremental restaurants in an accretive manner, has resulted in category leading segment profit margins. In the last four years, we've grown nearly 100 net new restaurants with no erosion to average unit volume. And the pace of new restaurant development is accelerating with 2017 being the biggest development year on a net basis since 2011. This speaks to the confidence our franchisees have in the IHOP brand, their ability to identify and develop quality sites and the return that they generate on their investments. This growth trajectory, combined with solid cost discipline, has resulted in consistent growth in segment earnings and in margin. Segment margins for the IHOP brand have expanded 500 basis points in the last four years alone. Now the ability to grow this business in such a consistent and meaningful way is rooted in the love that people have for the IHOP brand. And in fact, when asked, eight in 10 consumers will say that they love IHOP, not like IHOP, love IHOP. In fact, I'm going to challenge you. When you leave today and you're talking to people about what you did this morning, tell people you had a meeting about IHOP and see what they first say. They're going to say, I love IHOP because that's what everybody does. Guess' gives us high marks for being innovative and always coming up with something new. They also believe we're a brand with positive momentum, which means they feel that the IHOP brand is on the way up and has a lot going for it. Now this love for the brand manifests itself in a number of ways, particularly in social media, which I'll discuss a little bit later. Now absolutely critical to the success of the IHOP brand is the quality and the diversity of the IHOP franchisee community. We're fortunate enough to enjoy a population of over 300 franchisees with significant tenure and experience in our brand. This is a passionate group of restaurateurs who have syrup flowing through their veins. Now there's strength in the diversity of this group. They come from all walks of life and all nationalities. Many of them began their careers working in an IHOP restaurant. Now 60% of the restaurants are owned and operated by franchisees with 11 or more restaurants. These franchisees have demonstrated capacity to grow and acquire restaurants. They bring us a broader, more strategic viewpoint to the business, provide us with valuable insights into how to grow and innovate the brand. Now 40% of the restaurants are owned and operated by franchisees that have less than 10 restaurants. Many of these franchisees operate just one or two restaurants. Now these operators, they're the heart and soul of the IHOP brand. Many of these franchisees work hands on in their restaurants every day. They provide us with a very pragmatic point of view on how we can improve operations within the four walls of the business. Now they're embedded and beloved in the communities that they serve. Now we seek to leverage this great diversity through formal collaboration with the Franchise Leadership Council and its various committees. This group of elected franchisees represents a franchisee community from around the country and provides valuable input into strategic decisions and tactical plans. And I would say that the relationship between IHOP and the franchise community today is as strong as it has ever been. Now the IHOP team is as important to the success of the brand as is the franchisee base. In the last twelve months, we've made a concerted effort to build a world class leadership team for the IHOP brand. This is a high caliber team comprised of seasoned professionals who are experts in their respective areas of business. Jay Johns, our Head of Operations, is a seasoned restaurant operator with over twenty five years restaurant operations experience with both TGI Fridays and with the Applebee's brand. He most recently led our strategic operations group for Dine, supporting both IHOP and Applebee's. Brad Haley, our Chief Marketing Officer, is a career restaurant marketing professional. He joined IHOP recently after a successful sixteen year run as the CMO of CKE Restaurants. Neville Pantaki, our Head of Culinary, is an Indian born chef who embodies the essence of our international brand. He's a CIA graduate, worked under Danny Meyer right here in New York City and was the Head of Culinary for Chang's and Peiwei. Carrie Stojak, our VP of Consumer Insights, joined IHOP this year from Taco Bell. There, she was instrumental in uncovering the insights that led to their Live Mas positioning. Adam Snow, our VP of Strategy and Analytics, joined IHOP this year from Disney, where he led strategy for the Downtown Disney business. He's a career strategist, having worked at HP, Dell and at Bain Consulting. Greg Benvenuto is our VP of Development, and he's been with IHOP for six years. He had previous development experience with Yum! Brands and Taco Bell specifically for sixteen years. And lastly, Elisa Gemelik, our VP of Marketing, has been with IHOP for six years. She has over twenty years restaurant marketing experience with brands like McDonald's and Burger King. And we have a very clear strategy built with franchisee input and collaboration and grounded in guests' needs. Our purpose is to give all folks a place to pancake together. I'm going to let you marinate on that one. I'll come back to it here in a minute. Our objective is to drive profitable growth for franchisees and for the IHOP brand. Now we keep both of those goals in mind in everything that we do. We don't view this as a zero sum game, but rather an endeavor where all bullets rise when we succeed together. Everything we do is grounded in a deep understanding of the guest. In building out this strategy, we identified specific themes around technology, hospitality, food, customization and convenience that guided our decisions. Central to the strategy are four key pillars: reinventing the guest experience, running great restaurants, driving traffic to those restaurants and being where the guest is. All of this is underpinned by a servant leadership culture, where we lead by serving those who serve our guests and the communities where we operate. Now in building out our brand purpose, we sought to better understand four broad areas: our consumers, our category, our company itself and the culture that we're living in and what role IHOP played in all of those areas. Now what we learned was that our guests didn't just view us as a place to eat, but they viewed us more like home. They told us that IHOP was more of a society where everyone was welcome without judgment. People come as they are and everyone gets along. Now it's also about the pancakes all the time. And even though we sell other items, pancakes represent who we are. Everyone loves pancakes. They're warm, they're comforting, they're inviting, they're just like our restaurants. And in today's divisive society, we believe that we offer a truly differentiated experience and one that's more sought after than ever before. We offer folks a place to pancake together. Now for us, pancake is a verb, too, and it means to indulge in any way you want knowing that you'll always be accepted. Now when assessing our guests' needs, we also take a holistic and disciplined approach. We've made it a priority to build a best in class consumer insights team and have doubled the size of that team in the last nine months. Our insights team is focused on connecting the dots across a myriad of different data sources as well as seeking out subject matter experts to ensure a three sixty degree view of the guest. These insights provide us a better understanding of our guests' needs, their dining habits and their decision making process about where to go and dine out. At a more fundamental level, appeals to a broad demographic set. As Steve mentioned previously, we serve the 99% of the population. Now that being said, IHOP has particular appeal among younger families and younger consumers. Nearly 50% of IHOP guests are aged 34 years and younger. This makes us far less reliant on older demographics that are reducing their dining out frequency over time. It also gives us the ability to replenish our demand, which has been the key to this brand's ability to thrive for sixty years. The first pillar of our strategy is to reinvent the guest experience. Now to that end, we're evolving all touch points with the guest to bring them a more contemporary and yet familiar experience. We began this process in 2016 with our Rise and Shine remodel program. This remodel touches both interior and exterior treatments, including the restrooms, and is the most significant scope of remodel in the brand's sixty year history. In just two years, our franchisees have remodeled six twenty restaurants, representing 37% of the domestic system. Our plan is to continue on a similar pace of two fifty to 300 remodels per year until the entire system is complete. Now reinventing the guest experience is more than just enhancing the physical plan. Our guests told us that they expect us to leverage technology to make their experience more enjoyable. Now our goal is to employ technology that removes the friction from the guest experience, simplifies the operation and makes the brand more accessible. So we're in the process right now of adding WiFi to all of our restaurants, and we expect to have that complete by the end of the year. We're also testing technology to simplify the ordering process, reduce guest wait time and to streamline the payment process. All of this is designed to yield a more enjoyable experience for the guests while facilitating higher throughput in the restaurants. Now reinventing the guest experience is also not limited to the four walls of the restaurant. Our objective is to make the online experience every bit as enjoyable as the in restaurant experience. And on that front, we've made dramatic progress in 2017. With our franchisees, we completed the deployment of our online ordering capability in all restaurants to support our new IHOP and GO platform, which I'll discuss a little bit later. In addition, we completed the launch of an enhanced website, which facilitate easier navigation throughout the site as well as supporting online ordering. Lastly, we also launched a new IHOP mobile app, also designed to enhance the online ordering experience. And we're going to continue to evolve and build more capabilities on the mobile app and our online presence over time. The second pillar of our strategy is running great restaurants. Our focus on this is centered around two key areas. The first is on hospitality, and it's what we call iHospitality. This is a unique way that our restaurant teams treat our guests every day, that inclusive, always welcoming feeling that we capture with our brand promise. This program includes a recognition program that rewards restaurant level employees for great eye hospitality. The second area is the launch of our DinePlate training platform. DinePlate is an online training platform that leverages technology and adult learning principles to create a more efficient and effective training experience. Now this focus on running great restaurants has resulted in our highest overall satisfaction scores in recent history. The third pillar of our strategy is to drive traffic to our restaurants. And we'll accomplish this through a specific plan around culinary innovation and menu optimization, a compelling value proposition, improved advertising and more effective media. With respect to the menu, we will protect our significant leadership and equity in breakfast, while at the same time evolving our offering to close the gaps and seize the significant opportunity we have to grow the lunch and dinner dayparts. At the same time, we'll continue to lead the category in innovation and creativity, especially around breakfast. Now perhaps one of the largest opportunities we have to drive traffic is around delivering a compelling value proposition to our guests. Now IHOP already gets really high marks for the quality of the food and the experience for the price paid. That being said, we don't get the level of frequency from our core guests that we believe we deserve. So we have an opportunity to create a more sustainable value platform that allows our guests to enjoy the great IHOP experience they've come to love just more often. Now central to communicating our core equities, our innovation and our value is breakthrough creative advertising. In 2017, we conducted a deep dive analysis into our sales and traffic challenges, leveraging both guest insights and external data. What we learned was that our advertising, while it was consistent with our brand, was in many ways invisible to consumers. Simply put, it lacked the tension and the creativity to break through all the clutter and to be remembered. Now as a result of that analysis, we selected a new creative agency to help us bring the IHOP brand to life and to communicate our brand purpose. Droga5 is widely regarded as the leading creative agency in The U. S. And is a recipient of numerous Effie Awards for the business results that they generate with their work. Now to accelerate our growth, we needed to go beyond advertising sweet, decadent meals. We needed to create a higher emotional brand value. But we wanted this emotional value to be tied to something that we could own more than anyone else. So we look to where it all started, with pancakes. Everyone loves pancakes. They're a uniquely universal food, and we do them better than anybody else. They're like blank canvases that can be customized to all kinds of delicious and even sometimes kind of quirky ways. And we wish everything could be about pancakes, and we bring the same fun and creativity into pancakes in all that we do. Now we've got pancakes on the brain, and we express that idea as pancakes, pancakes, pancakes. So now I want to show you a little bit of our creative. This first spot I'm going to show you is currently running right now in support of our omelettes window that we're running. Now one of the insights that led to this was that our guests said they love our savory products, but at the same time, they're reluctant to give up on their sweet. Now fortunately for us, pancakes come with omelettes. So now this spot is trying to bring that connection to life. Some pancakes, but if I go this way, I could omelet some omelets. Omelet pancake. Omelet pancake. Alas, do I pancake or do I omelet? Give me the omelet. Hey. Just go to IHOP. They have all kind of omelets that come with pancakes. You don't have to choose. Where is this IHOP? It's right there. You're in trouble. I don't want that. Hey. Don't leave that horse. IHOP's omelettes omelettes omelettes come with pancakes, pancakes, pancakes. Okay. So that was our first one that's running right now. The next two I want to show you were the first executions that Droga did around our all you can eat pancakes promotion. Now historically, we've run this but without a price point. And this time, we actually introduced the price point to it and got a little more of a retail twist to it to drive more traffic. So we'll first show pilots and then we'll show stacks. Have you checked the pancake? Pancakes. And what about the pancake? Pancakes and pancakes. And pancakes? Yes, we're pancakes, sir. Well, that sounds flipping pancakes to me. Yes. It does. Ladies and gentlemen, we are cleared for pancakes. They're $3.99 all you can eat for a limited time. Perfect. $3.99 all you can eat pancakes, pancakes, pancakes at IHOP. Hurry in IHOP for all you can eat pancakes for $3.99. So you can eat pancakes and pancakes and pancakes and pan God. Oh, I got something in my eye. Something in my eye. Wait. I blinked it out. Hang on a sec. Okay. We're good. Pancakes. Oh, and pancakes. And more pancakes. All you can eat pancakes for $3.99 IHOP. Pancakes, pancakes, pancakes. Okay. And our last one is a little sneak preview. This hasn't played yet. But as I mentioned on the call yesterday, we have our IHOP's National Pancake Day on Tuesday next week. And so this spot is about to run starting today in support of that effort. My fellow pancakes, today we come together in the name of pancaking to make February 27 IHOP National Pancake Day. Pancakes. Every pancake Pancakes. Every pancake is entitled to the pursuit of pancakes. Let us sign and protect the pancaking of this great great pancake forever. Pancakes. Hey. What'd I tell you bozos about playing in the exhibits? To not. Is that my mop? Maybe. All right. So a key element of continuing to build the IHOP brand and drive traffic to our restaurants is our use of digital advertising and social media. With a refreshed brand voice and new creative direction, we are able to break through the clutter and leverage our significant social media exposure or to generate unpaid and free exposure. With 90% aided awareness, this is a highly efficient way to keep IHOP top of mind among guests. Now we're also getting better at where to place this content. We're now employing advanced media analytics to better understand our guests' actual digital viewing habits. And this enables us to more efficiently deliver content to guests that are more likely to respond favorably and to visit an IHOP restaurant. Now this is even more critical given the enormous following IHOP has in social media. IHOP commands nearly 50% share of voice among branded breakfast conversations. Guests love to take pictures of our delicious food and share their experiences with their friends, and they're not alone. With almost 5,000,000 followers, IHOP has more social media fans and followers than any other family dining concept and specifically has the largest following within Facebook and Instagram. And in addition to social media, our most loyal fans are members of Pancake Revolution, which is our loyalty club. Now we have over 4,300,000 active fans in Pancake Revolution. Now with this program, we have the ability to deliver content and offers directly to members on a system wide basis. And franchisees can also deliver restaurant specific offers to the fans registered with their restaurants. The fourth pillar of our brand strategy is being where the guest is. Now this begins with our with ensuring that our guests can get their favorite IHOP food whenever and wherever they want. In 2017, we launched our comprehensive IHOP and Go platform in response to our guest insights work that revealed IHOP guests were increasingly interested enjoying IHOP food at home and while on the go. Now working side by side with a franchisee task force, we developed and launched a holistic program. This program included new state of the art packaging that was specifically engineered to protect the integrity of our breakfast foods and particularly our original buttermilk pancakes. The program also included new training content and a certification program for restaurant level employees. Lastly, we employed our online ordering platform and launched our enhanced website and mobile app to create a complete omnichannel experience for our guests. And the results are really speaking for themselves. As we completed the rollout of the packaging and procedures in third quarter and the online ordering in fourth quarter, we experienced a significant growth in off premise orders. Now importantly, we also experienced meaningful check growth with online orders versus call in orders. Now with our enhanced capabilities on the website and the new mobile app, we're expecting to see a shift from call in orders to online ordering and the result in check increases. Now in spite of all of that effort and the results, we're still under indexed in the category for off premise occasions. Now we believe that gap presents us with a significant upside opportunity, particularly as we begin testing delivery. Now we're currently in active tests with Amazon Restaurants, Grubhub and DoorDash, and we anticipate rolling a program out system wide sometime later in 2018. Now being where the guest is also includes having restaurants where the guests want us. Now as I previously mentioned, we have a demonstrated ability to grow the restaurant base with high quality sites that are accretive to the brand, And we'll continue to grow our traditional restaurant base. In 2017, we launched a new small format IHOP prototype. This format has the same offering as a traditional IHOP but with 2,000 less square feet. The prototype costs approximately 30 percent less to build and 15% less to operate, making it a very attractive alternative for our franchisee developers. This format will also allow us to penetrate higher cost trade areas as well as rural areas. Now we believe we still have meaningful white space to develop our traditional IHOP restaurants and expect to grow the restaurant base to 1,900 restaurants by the year 2022. In addition to that, we have meaningful growth opportunities in nontraditional formats. We're currently focused on growing the IHOP brand in other venues such as travel centers, airports, casinos and universities. And this is an emerging development opportunity for IHOP, and there is great interest in bringing the IHOP experience to these nontraditional venues. Also important to the IHOP brand is how we serve the communities in which we operate. Our franchisees are passionate about engaging with their local communities and support philanthropic efforts throughout the year. Now on a national basis, we work with our franchisees to support two major efforts, both of which are advocates for the needs of children. The first is the Children's Miracle Network of hospitals. We engage with Children's Miracle Network in conjunction with our national Pancake Day to raise money for the children's hospitals around the country in the markets where we operate. To date, IHOP and our franchisees have raised $30,000,000 for these hospitals. And in the fall, we also engaged in a Veterans Day partnership with the Children of Fallen Patriots Foundation. This foundation provides college scholarships to children who have lost a military parent in the line of duty. This year, IHOP and its franchisees donated a portion of the proceeds from the sale of our red, white and blue combo meals to the children of fallen patriots. Now our future performance is going to be driven by growing the restaurant base to 1,900 restaurants through traditional and nontraditional formats, growing average unit volumes at a three percent five year CAGR through our menu innovation and value, breakthrough advertising and growing new platforms like IHOP and GO and delivery and running great newly remodeled restaurants with guest facing technology and a stable and engaged franchisee community. Now we expect to deliver a 4% system wide revenue CAGR and over 200 basis points of margin expansion from 45% to 47% over time. And when you pull all of that together, it creates a compelling financial story for IHOP. So to wrap things up. We have a new world class leadership team in place, and we've built a comprehensive strategy with franchisee collaboration. And our strategy is grounded in deep guest insights and advanced analytics. We have significant upside potential for future growth with daypart and platform expansion opportunities, and we have the ability to accelerate restaurant growth with newly developed formats in underpenetrated and nontraditional markets. So ultimately, our goal is to achieve industry leading growth and create significant future value for shareholders and franchisees. Now I'll turn it over to John Cywinski for a discussion of the Applebee's business. Thank you. Hey, good morning, everyone. Darren, great job. I've got pancakes, pancakes, pancakes on the brain. Let's shift gears for just a moment. It's nice to see some familiar faces here in the audience. I don't know if you know this, but Applebee's is a bit of a homecoming for me. After being a franchisee with a couple of other brands in Chicago and holding leadership roles with Brinker International and Yum! Brands, I decided to come back to Applebee's for one reason, because I genuinely believe this brand is a sleeping giant with truly unlimited potential. So we have a very clear vision for Applebee's, and I'd like to paint that picture for you over the next thirty minutes or so. I'll provide a brief overview of the business, our franchisee portfolio and our new leadership team. I'll also provide some color on our guest profile. I'll then frame our growth strategy and expectations around future performance. Now Applebee's is a thirty seven year old brand that was founded in Atlanta by a gentleman by the name of Bill Palmer. We're the number one casual dining brand in The U. S, and we're extremely well positioned for growth. The vast majority of our restaurants are in The U. S, but there remains significant incremental potential internationally as well. Now as you're fully aware, casual dining is a mature and overdeveloped category, but it's beginning to show some signs of life. The category is in the midst of a supply demand correction. And we like Applebee's position as chains are outperforming independents and grill and bar restaurants steal share from others. Now off premise has certainly received a lot of press of late, rightly so. It represents meaningful growth, and I'll touch on that in just a moment. After a two- to three year period of suboptimized performance, Applebee's remains the CDR leader in both U. S. System sales and units. For comparison purposes, this chart reflects 2016 data as we don't yet have twenty seventeen data for competition. However, I'm confident our leadership position will hold in both cases once twenty seventeen data becomes available. Now let's take a closer look at, our past four year performance. Our reduction in operating revenue here on the left is the direct result of negative comp sales, planned restaurant closures as well as some challenges that we've shared with you previously about collecting royalty, particularly in 2017. In the interest of long term brand health, we made a strategic decision to close restaurants that likely should have closed previously. These are typically well below average unit volumes, where the franchisee benefits financially from the closure, and the brand certainly benefits because guests are no longer experiencing a substandard Applebee's. As you can see on the right, we've closed about 100 restaurants in The U. S. Over the past two years and ended last year with about seventeen seventy restaurants with an average unit volume of about $2,300,000 I fully expect we'll end this year with about 1,700 U. S. Restaurants as a go forward baseline. That's consistent with our prior two year guidance. Now Applebee's is certainly a brand in transition, and 2017 was very much a foundational or transitional year very much by design. We know precisely what went wrong, and we put a comprehensive plan in place to enhance relevance and drive sustained growth. The good news is we have momentum, perhaps a little earlier than expected. I'll provide some insight into the what we consider the four key components of this plan: partnership, structure, strategy and, of course, execution. Let's start with our franchisees. We have 30 to 35 franchise partners here in The U. S. With sophisticated leadership and capability, which I view as an enormous brand strength for Applebee's. These partners own all of our restaurants, and we can get them in a room, the partners, not the restaurants, for alignment purposes, which we do frequently. This allows us to be nimble and quick in this environment with active breast excuse me, slip of the tongue, best practice sharing and smart implementation. Most importantly, we've established three things that are essential for this business: trust, partnership and belief, which are all required for sustained success moving forward. From my perspective, and I believe most franchisees would agree, and we've got one here in the room today who I'll introduce in just a moment, our partnership is better than it's been in years. Collectively, we're very bullish about our future. While the majority of franchisees are regaining financial stability, we're providing financial assistance to select franchisees on a case by case basis. Enhanced revenue growth and active P and L benchmarking are improving the financial health of the overall brand as we speak. With that said, the portfolio will indeed evolve. I certainly anticipate and welcome some consolidation among existing franchisees as well as the introduction of perhaps a new franchisee or two over the next twelve months. Now on the structural side, we've set out to reestablish Applebee's unique brand identity and culture. And this means shifting Dine service shared service resource into the brand where they belong. This change was completed last year. And the outcome is a very distinct results orientation with crystal clear accountability and absolutely no ambiguity. And this is important. This team now eats literally eats, breathes, sleeps Applebee's with relentless focus. In addition, I've been very thoughtful and methodical in handpicking a truly talented leadership team over the past year, and that team is now in place. Their talent is clear, their experience is deep and their results orientation is unparalleled as is their capacity for strategic innovation in restaurant level execution, two critically important components of our success. And most importantly, they're committed to winning at the expense of their competitors, and they know how to do so. Nine of the 10 leaders that you see here, they're new in role and new to Applebee's over the past year. Equally important, these leaders have earned the trust and respect of our franchise partners. Okay. So where do we start with this great team? The foundation was our willingness to take a brutally honest look in the mirror. We sought to understand our reality, our reality from a guest, franchisee and team member perspective, regardless of how painful, and we did that last year in-depth. As a result, it was clear to me that we needed to redefine who we are and what we stand for at Applebee's. Candidly, we lost sight of our core guests and probably created some confusion and complexity along the way. We now have a firm grasp of what makes us unique and how to properly leverage Applebee's for sustained growth. This is a classic case of a brand getting back to its roots and embracing its essence. Applebee's is a wonderfully familiar, likable, even all American brand were viewed as an affordable indulgence, perhaps a little escape from your stressful, hectic, hurried life. Applebee's is local and neighborly, a place where folks come to connect with family and friends. And we're comfortable with who we are, and we wouldn't pretend to be an overly hip or trendy brand. Abundant value and variety are at our core, and we plan to leverage these strengths in a meaningful way moving forward. As Steve outlined, our guest profile is both broad and wonderfully appealing. A little more than half of our guests have income under $75,000 while gender and ethnicity reflect the general U. S. Population. And as you can see here, the guest distribution that we have at Applebee's is wonderfully diverse. It's a real brand strength with equal percentage millennials, Gen Xers and boomers, and we actually have a mix of Gen Z in there, a meaningful mix, perhaps surprisingly. And we've seen very good progress over the past several months in changing perceptions and enhancing relevance across all of these demos. From an occasion and need state perspective, we've identified, and I've shared this with you before, two important segments for Applebee's, routine traditionalists and value seekers. Routine traditionalists are predisposed to like chain restaurants, CDR chain restaurants in particular. They tend to be a bit older. They're willing to pay for quality and they're very loyal. Essentially, I would describe these folks as creatures of habit. They don't stray too far from their familiar favorites. We like them, and they really like us. Now value seekers, they also like CDR chains, but they're very much driven by price, not surprisingly. They seek the best deal, and therefore, they're pretty active brand switchers within the category. Together, these segments represent our proverbial bullseye and account for more than half of Applebee's visits. Let's pause here for just a moment. I'd like you to take a peek at this chart. If there's one attribute that's tightly correlated to Applebee's sales performance, it's value for the money. And as you can see here with the bold red line, after attaining a leadership position in 2014, we slipped a bit in 2015 and 2016 before reestablishing that leadership position again this past year in 2017. Now this is great news and something we'll strive to maintain as we progress. Our financial goal is clear. We plan to generate an incremental $300,000 per restaurant over the next five years. This represents a 3% annual growth rate, comp sales growth rate, with most of that growth coming from traffic. This is both realistic and achievable, and it will come at the direct expense of our competitors, moving us to an approximate average unit volume of about 2,600,000 Now our initiatives are beginning to take hold as we posted strong results for Q4. Comp sales were up 1.3%, and positive comp sales have continued here into Q1. The very good news here is that traffic growth has returned to Applebee's in both Q4 and in Q1 for the first time since late twenty fourteen, and we're proud of that. Additionally, Applebee's has outperformed the CDR category over the same time frame. While still in the very early stages of our initiatives, we're pleased with that change in trajectory that we've been able to achieve. Our growth strategy can be summarized in six points. Number one, without question, our top priority as a brand is guest satisfaction, and our franchisees are committed to walking the talk on restaurant excellence. Number two, we've invested heavily in technology to enable our initiatives, and we'll continue to do so. Number three, we're committed to reestablishing Applebee's culinary DNA. I see Stephen Bulgarelli back there, and you know exactly what I'm talking about, Stephen, and relevant a relevant innovation pipeline, and I'll share some more on that. Number four, our marketing will be guest driven and best in class, not just within casual dining. Our marketing will be best in class across the entire restaurant industry. Number five, off premise is indeed a growth engine, and I'll provide some context on how we leverage it moving forward. And number six, once we've restructured the asset portfolio, we'll return to smart selective growth beginning in 2020. Let's address each of these with and let's start with restaurant excellence. So Kevin Carroll, our new Chief Operations Officer. He's a talented veteran leader. He's a real pro. He knows how to reduce operational variability and elevate restaurant execution. Brand standards and guest metrics are clear and will hold our franchisees accountable for performance. We are actively simplifying operations, which is about removing kitchen complexity and recipe complexity as opposed to maybe removing menu items, which we believe is a slippery slope. Additionally, we've partnered with PricewaterhouseCoopers on a cross functional initiative designed to remove about 300 basis points of cost from our P and Ls over the next three years. Now I've worked extensively and previously with PwC, different brand, and they know how to unlock value without compromising the guest experience. Franchisees are indeed excited about this initiative. We fully leverage scale while enabling reinvestment back into the brand, which is what we expect to do with those 300 basis points. Now as you see here, we've made some very meaningful progress from 2016 to 2017 with all of our ops metrics improving, most notably, guest satisfaction, increasing about seven percentage points. This robust data comes to us from our guests who completed more than 5,000,000 tabletop device surveys last year. In addition, a very important metric, and we track guests experiencing a problem, moved meaningfully down from about 8%, and it was previously double digit, to about 5% in 2017, which is where we would expect it moving forward. Very significant progress under Kevin's leadership. This 2017 progress was also confirmed externally by NPD Crest as Applebee's moved into the number two position on overall satisfaction. That's a move from 46% from 42% to 46%, and we jumped both Outback and Buffalo Wild Wings in the process, and we like that. Our goal is to claim that leadership position on this important brand metric moving forward. On the technology front, we view our investments as an essential enabler of all of our brand initiatives. Our website and app were recently enhanced with substantial improvements around functionality and user friendliness. Thank you, Adrian. We're particularly focused on the to go experience at the moment with investments in arrival notification and handheld transacting coming very soon. And finally, the entire system is embarking upon a multiyear conversion to a new POS platform, which will really provide our GMs, our restaurant general managers, meaningful tools to improve their restaurant performance. And you'll hear more from Adrian on that in just a moment. On the culinary front, we brought in Stephen Bulgarelli, who you'll meet. He's in his Chef Whites back there, and he's provided some lunch for us when we leave today in our to go packaging about eight months ago. And Stephen is a difference maker. He's a CDR veteran who understands how to commercialize culinary initiatives on a large scale with an incredibly strong operations orientation and a real passion for franchisee collaboration. Quite simply, we're back to embracing broadly appealing and mainstream flavor profiles at Applebee's. To be clear, we're not about quinoa, sriracha and pomegranate as a few examples. It's just not who we are. While we'll be sure to have something for everyone, we'll never forget that our guests love indulgent, familiar favorites, not to mention a little barbecue sauce, bacon and cheese along the way. We have significant strengths in our menu, but equally important, we know where we have value and quality gaps, and we're attacking those gaps right now with a vengeance. And then on the marketing front, we brought in our Chief Marketing Officer, Joel Yashinsky, from McDonald's just recently, where he was extraordinarily well regarded with deep experience in a mature, overdeveloped and intensely competitive category. Sounds familiar. He's hit the ground running, driving a truly buzzworthy marketing calendar, grounded in leverageable insights. Our team is focused on relevant information, relevant innovation and value throughout a new disciplined validation process that we implemented last year, very important for our success moving forward. We've invested in talent, developed an eighteen month plan and elevated our collaboration with franchisees to a genuine partnership. We fundamentally altered our media strategy in 2017, given our core guest profile and our stated objective to bust up our approximate one hundred day purchase cycle. And we've returned to what I believe is the most distinctive brand voice and personality in the category and one that is just so right for Applebee's, Eatin' Good in the neighborhood. It's a tremendous brand equity. It's candidly a latent brand equity as we haven't leveraged this unique position in perhaps more than a decade. Bottom line, it still very much resonates with our guests and our franchisees, and it differentiates Applebee's in very compelling fashion. It's not corporate. It's not contrived. Simply stated, eatin' good in the neighborhood embodies our brand essence. It's authentic, it's relatable and likable, and we own it. And we plan to leverage it moving forward. It's uniquely Applebee's in all of its grammatically incorrect glory, right? It's our way of getting back to who we are and what we stand for. And as part of this position, we'll elevate our emotional brand appeal. And from my view, in a category that's far too reliant upon tactical clutter, that emotional connection and that point of difference is essential. We'll surprise and delight our guests with the most distinctive campaign in the industry. We'll make them hungry. We'll certainly make them smile. And we'll make their toes tap to a wonderfully recognizable soundtrack of Americana with each edit having a and choice of music, a real distinct reason for being. Most importantly, we will cause folks to think differently about Applebee's and begin to rebuild preference and loyalty along the way. Okay. So let's give you a sense of where we're going with Eatin' Good in the neighborhood. I'd like to share five of our most recent ads. The first ad ran in support of our very successful All You Can Eat Riblets event, Riblets and Tenders, in January. And what better way to communicate an all you can eat proposition than a terrific 1970s tune, KC and the Sunshine Band, Keep It Coming, Love. By the way, we sold more than 4,000,000 orders of Riblets and Tenders, a wonderfully successful program. Let's run that ad. If you keep on eating, we'll keep it coming. All you can eat, Rebblets and Tenders at Applebee's. Now that's eating good in the neighborhood. Some terrific work being done by Gray Advertising, our partner here in New York. We're pleased with that partnership. It's relatively new. Our voice is very clear. We produced actually a second and a third ad for all you can eat, but I'm to show you the second one. Now this one targets females, and it does so in a pretty lighthearted fashion by showcasing this particular guest that you see here, completely lost in her own very personal and intimate Riblet moment. Interpret that however you may. Of course, we tapped into the perfect Celine Dion track from the 1980s. Let's go ahead and roll that, please. All you can eat is back, baby. Applebee's, eating good in the neighborhood. So we certainly tapped into a fairly good number of hogs across The U. S. In the month of January. Great program. You would think Riblets primarily skews male au contraire, right? We've got males and females very interested in that proposition at Applebee's. And then shifting gears, we jumped into the month of February here. We're currently on air with three ads, all right? And they feature Applebee's handcrafted burgers. We felt it was important to price all seven of these burgers at $7.99 given the state of this category and highlight the fact that all of these burgers are made from 100% fresh, never frozen ground beef, not something all of our competitors can say, and we'll continue to leverage that moving forward. And then rather than communicate a broad message about the entire burger line, we decided to bring to life the distinct flavor profile and personality of our three most popular burgers, each complemented by the absolute perfect choice of music. So we'll run these back to back to back. Here are brunch burger, quesadilla burger and whiskey bacon burger. Applebee's Handcrafted Burgers. Any burger, just $7.99. Now that's even good in the neighborhood. Applebee's Handcrafted Burgers. Any burger, just $7.99. Now that's eating good neighborhood. Applebee's Handcrafted Burgers. So our objective is to make our guests hungry, right? And to break out of the clutter that you have in the category, we think we're being very effective. Our programs are resonating with our guests. They're embraced by our franchisees. They're executing them at a very high level. Now 15% of Applebee's grill and bar business is indeed alcohol, and we're proud of it. Patrick Kirk and his team have activated a compelling alcohol strategy customized for that value oriented guest of ours. We started with Dollar Rita and have since implemented Dollar LIT, two Blue Moon. And currently, I suggest that you all get out and try Dollar Mama's at Applebee's, which is currently in restaurant. These have proven to be a terrific complement to our culinary innovation strategy and in the process, has really diversified our guest profile, very important for us. On the off premise front and under the leadership of Scott Gladstone, we're focused on relaunching Applebee's to go later this year as yet another growth engine for the brand. We've been working to first optimize that guest experience with enhanced technology, packaging and service initiatives. At present, To Go represents about 9% of our revenue, and we plan to double that to 18% over the next five years. We also expect to move from 36% online ordering to 90% online ordering over that five year time frame. With more than 1,700 restaurant locations and a compelling value proposition, we believe Applebee's is best positioned to win in this convenience driven occasion. When we do ultimately go on air with to go, you can expect that same eating good in the neighborhood construct with a focus on convenience and in home consumption. As a sneak peek, I'd like to share two ads. The first ad showcasing by the way, these are still relatively rough. They don't represent finished film, but they're good enough to share with you today. First showcases dad as hero to a great Billy Ocean track, also from the 1980s. Get out of my dreams, get into my car. Let's take a look. Applebee's to go. Order online and get $10 off $30. Now that's eating good in the neighborhood. Alright. Coming soon. Now the second ad that I'd like to show, it follows the same approach, same template. This time, with our female lead on her home, on her way home from either work or wherever she's been. Binge watching is the objective here. Netflix, on the couch. Don't misinterpret that. Both edits illustrate Applebee's ease of use through relevant contemporary and engaging storytelling. This one comes to life with what I happen to believe is the perfect piece of music. It's the Melissa Etheridge classic Come to My Window. Self explanatory. Let's roll it. Applebee's to go. Order online and get $10 off $30. Now that's eating good in the neighborhood. In both cases, these lyrics, this is what we strive to do in every execution. They're just perfect for our story, and they help us differentiate. Now on the delivery front, we're actively partnering with Amazon, Grubhub, DoorDash and Uber Eats. And those four together, if you want to think about coverage across The U. S, they would provide about 40% coverage of our Applebee's restaurants at the moment. This small but growing segment of the business demonstrates clear incrementality worthy of ongoing investment and development, and our plan is to capture that full array of Applebee's off premise occasions as we look forward. The final component of our growth strategy is an eventual return to new restaurant development. 92% of our restaurants have been remodeled since 2012, so the portfolio is in pretty good shape. As I mentioned earlier, we'll likely get down to about just north of 1,700 restaurants in The U. S. By the end of this year. And while the number actual number remains a bit fluid, twenty nineteen represents the base level unit level for our restaurants moving forward for our brand. From that point forward, we expect to begin both traditional and nontraditional development again. We'll be smart and selective. And we have several underpenetrated geographies as well as partners, current and new, with an appetite for investment. With an annual steady state closure rate of about 10 plus restaurants, the result will be net growth beginning in 2020. And what you see here on the left is Applebee's revenue growing at an approximate 3% annual rate from this point forward, moving from about $160,000,000 last year to more than $180,000,000 in five years. And on the right, after a bit of bad debt in our ad fund contributions in 2017 and 2018, we expect Applebee's profit margin to move right back up to 98% over the next several years. So in summary, I couldn't be more confident about unlocking the growth within this Applebee's brand. The leadership team is new. They're talented and experienced, and they're experienced in delivering results in challenged environments, which is what we have. We have a guest driven plan to leverage our core strengths for growth, and we're fixated on relevant innovation and relentless restaurant level execution. For those requiring financial assistance, we're actively partnering to ensure stability while we optimize the brand. Most importantly, we have a tremendous partnership with our franchisees that, quite frankly, didn't exist twelve months ago. Together, we're confident, aligned and extraordinarily optimistic about Applebee's future. And at this point, we felt it might be appropriate and helpful for you to hear directly from our largest franchisee and a member of our business council, Greg Flynn. Greg is Founder, Chairman and CEO of Flynn Restaurant Group. He owns four seventy five Applebee's in 26 states across The U. S. As well as large portfolios within the Taco Bell and Panera brands. He is the recipient of Nation's Restaurant News 2017 Operator of the Year as well as our own twenty seventeen Franchisee of the Year. And given the challenges that we've had over the past few years, we thought you'd appreciate Greg's perspective on the business and how we're looking at this growth strategy moving forward. So with that, Greg, join me on stage, please. Thanks, John. Hi, everyone. Thanks for letting me join your meeting. I'm really honored to be here. And I think the very fact that I'm here speaks volumes to the sea change at Dine Equity. I've never been on one of these stages before at their invitation. And to my knowledge, no franchisee has ever been here before. I love watching the ads. Don't you love the ads? Always the best part of these meetings. I got to say, though, my favorite is the Celine Dion ad, but you need a little tag at the end, a woman saying, I'll have what she's having. All right. So we needed change at Applebee's and Dine Equity, and we got it, right? And change requires changes in leadership often, and we got that. And I tell you, it's the biggest upgrade I've ever seen in my career. So you've heard from Steve and John. But behind John, he's built a bench of just world class leaders. I mean there's Stephen Bulgreli in culinary, Joel Yashinsky in marketing, Steve Levine in consumer insights, Kevin Carroll in ops. Like it's the A team. And we've seen a lot of teams over the years, and I've seen teams in the other brands. And this is really the strongest team I've ever seen in a brand, and we need it right now. So thank you. There is a new spirit of partnership and collaboration in the relationship that is totally different and totally healthy. It's just great. There's real dialogue. We debate all of our opportunities and our challenges and align on actions going forward, and therefore, we implement them better. We understand where the decisions came from, we're the ones who are charged with making them real in the field, right? And so we go out and do them better with a level of trust and collaboration, the process of reaching decisions. John and team really understand Applebee's. They understand who our core guests are, where we have credibility with them, what they want from us, and we're totally focused on giving them that, right? We went a little sideways trying to be things to people that we weren't, that we weren't competitive at. And John is bringing it back home, which is there are things that people want from us, let's give them that. And the level of focus is really different and effective. They challenged the status quo. There are no sacred cows, right? Nothing is off the table. And as a result, we're able to figure out what is the best thing to do and do it without regard to what we said was the best thing to do last year, right? We're lying behind the strategic plan. It's very guest driven. We needed to go much deeper in consumer insights and understand our guests and what they want from us. And John and Steve have made the commitment to be world class at that. I'm just really confident in the future of Applebee's. Like I think 2016 and 2017 were tough, but brands go through tough times. 2018, I think, is going to prove to be the pivotal year, the breakout year, right? And I'm excited to be part of the brand. We are excited about continuing to operate in it and invest in it, and I'm appreciative of being here to share it. So thank you. So look, hopefully, we've done a very good job here painting the domestic picture on these two enormously powerful brands. We're now going to segue to our view to the international business and the growth engine it represents. And for that, I'd like to introduce Mr. William Yurego. Thank you, John. Welcome, everybody, here in the room and for those who are watching us through the webcast right now. So today, I want to take you on a tour around the world and show you what the international development over the past fifteen years. So let's take a look at this video. Well, hope you enjoyed that quick video about the international development. So definitely, the future is ours. So this morning, I would like to take you around the world and show you why and so excited about the future of our two iconic brands, IHOP and Applebee's, and why we see international as a true engine of growth for Dine. Today, we will review the global footprint, discuss a general overview of the business and review the historical business performance. We'll take a deeper look at our history and the transformations our brand went four years ago that led us to year over year growth internationally as well as a strategic approach to operating and marketing our brands in different countries. We'll also take a look at the strategic target approach we are taking to identify and develop our brands in key markets, where we see the greatest potential for growth. As you know, today, we announced our name change to Dine Brands Global. This is a true reflection of our commitment to international expansion. But our international presence began almost fifty years ago, in 1969, when we first opened our iHub outside The United States in British Columbia, in Canada. And by the way, that restaurant is still open and operating today. Applebee's also opened its first international location in Canada as well, in Manitoba, in 1994. So as you can see, our presence has grown considerably since then and carries a non spinning global footprint of our two brands. Breaking it down by brand, we have an international presence for both brands. And while historically, that international presence is larger for Applebee's, over the last several years, there has been a tremendous interest in the IHOP globally. This is due to the awareness of the brand as a breakfast leader. And that breakfast is a fast developing category, providing a great opportunity in an increasing number of countries. Last year alone, we added India, Thailand, Panama and Lebanon as new territories for the brand. So while much of the current interest has been on IHOP, we continue to nurture Applebee's as well, and we continue to see interest from new countries. Again, last year, we added Bahrain and Panama to the list of new Applebee's countries. Internationally, we have been in a solid growth trajectory since 2011, with positive growth exponentially every year for both IHOP and Applebee's, and that is a trend we see continuing. We feel confident that this trajectory will continue. And based on our past experience, we have set what we believe is an attainable goal, having a global presence of about 500 restaurants by 2022. So you will notice our development and presence started to increase in 2014. And as I mentioned, that was largely due to the shift of how we at Dine approach international. Previously, each brand handled its own international business as part of its business. But at the end of 2013, Dine created separate organizational structure that was dedicated solely to international, bringing both brands' international development, operations, training and other functions together. This allowed us to dedicate and concentrate our resources directly on our international operations and growth. We also embarked on the largest international consumer survey, more than 2,000 people participated in key countries around the world. We gained insights on how to best to address the needs for our guests outside The United States. These actionable insights led to the development of a new international brand positioning for both brands. For IHOP, research show that internationally, there's a great affinity for the long and unique heritage of the brand, which we incorporated in our new logo by adding Spreading Happiness since 1958. This reinforces our expertise as breakfast leaders. Applebee's research demonstrated the guests view our restaurants as a place to celebrate. So we extended that by letting guests know that each day brings new reasons to celebrate. And these two new positions influence brand evolutions for IHOP and Applebee's that were carried out throughout all the four pillars that make up our guest experience in any of our restaurants. First, we have the place. It's the environment. It's the ambiance of the restaurant, which sets the tone for the dine in experience. Pricing and promotion, how we add value to that guest experience and how we communicate our message across different media channels product, craveable classics and innovative offerings for each one of our brands And last but not least, our people, our brand ambassadors, they are our team members who embody hospitality for our brands. You can see how each brand's positioning is reflected in the design of the restaurant. For our IHOP California heritage design, draws on the international love for the Southern California, IHOP's birthplace, and highlights IHOP's sixty year heritage. The celebration design for Applebee's emphasizes heritage as well, focusing Applebee's history as America's grill and bar. At IHOP, both the interior and exterior pay homage to the colors and heritage of the brand while adapting them to reflect the international brand positioning. At Applebee's, we chose to highlight those two elements that are part of our name, our heritage and our success. First, the grill, which is highly visible to reinforce to our guests that meals are freshly prepared in front of them. And second, the bar, which is a warm, inviting place to have a drink with friends and family that are being prepared by dedicated and trained bartenders. While our position may be slightly different internationally, we work hand in hand with The U. S. Teams, including development, so that learnings from both our teams can be shared and utilized by each other. A key strategy is our ability to be flexible with our formats in terms of size, menu and design. This allows us to have access to many areas where the traditional IHOP or Applebee's will not be possible or even viable, particularly in urban areas and malls. We are also innovating brand extensions, including the fast casual IHOP model internationally, as you can see from our location in Panama City. This restaurant has a more limited menu than our regular IHOP, still featuring our best loved classics. It also has a more compact footprint in a different labor model. Our guests come in, they order and pay at the register. And they have the option to whether they can take it to go or they can pick a table and sit down and enjoy it. Again, these learnings from international and domestic are shared between all of us, which provides valuable insights that can be utilized both in The U. S. And international locations, such as airports, stadiums, universities and travel centers. Our marketing strategy is geared to each particular region for each brand, which allows us to directly address a particular marketplace and take advantage of local events and cultural trends. We're expanding into partnerships that make sense for our brands and our target markets, and that helps drive traffic as well to provide new ways to spread awareness among our target markets. Recently, we partnered up with twenty first Century Fox International, the studio that distributed the hit comedy Boss Baby in Mexico. We created both a specific IHOP commercial tied to the film as well as Boss Baby special pancake, of course, which attracted the children and their parents as well. So this promotion led to an increase in comp sales and traffic as well as more than 5,000,000 fan interactions on Facebook. So we are continuing this relationship with the studio, adding to IHOP's cultural relevance and expanding the partnership, not only from Mexico, but now we're going global outside The United States. Our next initiative will be tied out to the re release of the classic movie Ice Age on home video, with the most awaited movie for 2019, The Kid Who Will Be King. Also in Mexico, we are able to create a national advertising fund similar to the one in The U. S, which enable us to create market specific television commercials like this. Let's watch. Definitely, there's always a reason to celebrate. So getting out of that situation, awesome. So we also do substantial local marketing initiatives, which allows us to take advantage of the holidays and occasions, whether it's extending our U. S. Brand initiatives like National Pancake Day, which by the way, is going to be celebrated for the fifth year in a row in Mexico, Canada, Guam and Puerto Rico on the same day that The U. S. Does, so February 27. We also demonstrate our commitment to local culture by recognizing country unique holidays, such as Remember State in Canada, which is on November 11, and this Canada's Day of recognizing the sacrifices of military personnel. Also a key to our strategy is our success is our third pillar, the product. We feature the classic menu items that have made our brand successful. But we also include different dishes with a little twist here and there and not here and there to just local taste and cultures. We have created a necklace pancake for our IHOP guests in India. We also serve beef ribs for The Middle East Applebee's. And as I mentioned, with Applebee's is America's favorite grill and bar, in many Middle Eastern countries, it's not legal to serve or consume alcohol, which is why we created both a juice bar and delicious nonalcoholic mocktails. Our people pillar for both brands reinforces our culture of hospitality and extends our branding through the uniforms that reflect our positioning of the Southern California heritage for IHOP and the celebration theme for Applebee's. They are crisp, they're distinctive, they're modern. Our guests love it. And as importantly, our team members love them too. And we offer training programs such as the Dine Plate that are tailored to specific international cultural and norms. What is acceptable in terms of service hospitality may be different from one place to another, from one culture to another. With four years of record growth behind us, we are squarely focused on development, expanding our relationship with existing franchisees, opening more restaurants in their markets and forming new relationships with others who have a franchise experience in countries that either continues to exist in markets and that is going to allow us to take advantage of existing supply chain and on the ground team members. But we are doing this strategically. We have identified three key target markets for growth where we will expand. We look for new markets in countries that have a demonstrated awareness and desire for each brand and what it offers, an economy that provides disposable income for consumers, strong franchisee candidates who are well capitalized, who have experience and are involved and most importantly, who share our values. Based on our strong franchisee support and relationship, we already have several commitments from our existing franchisees to open more restaurants in that five year pipeline. We have over 130 new restaurants that we'll be opening in the next five years. We also believe we have the resources to be successful internationally. With underground team members located in the largest markets, we make sense because also they can provide easy access across the region. Our diverse team represents a diversity of cultures, backgrounds and language capabilities. In fact, we have dedicated team members in Canada, Mexico, The Middle East and Asia Pacific. Our team represent 11 different nationalities, and we are fluent in a combined 10 languages. They know their market. They know their greatest base. Why? Because they are part of them. They live there. So as you can see, we have an aggressive and realistic growth strategy and objective that will continue to see our brands grow at the right pace, in the right places, with the right franchisees. And as a company, the ION Brands Global is well positioned, is well resourced. We have the talent and the vision to fulfill that international goal of strategic, sustained growth. So as we say international, thank you, gracias, chaperon, obrigado, taknavat. Thanks. Thanks. Now we're going to take a fifteen minute break, please. So we'll be here at 10:15. Ladies and gentlemen, the program will begin in two minutes. Ladies and gentlemen, the program is about to begin. Good morning. My name is Adrian Butler, Chief Information Officer of Dine Brands. As you've heard throughout the day, we are focused on driving growth and value for our shareholders and franchisees and enhancing the guest experience. Our guests expect us to serve them on their terms with a personalized, friction free and consistent experience to enjoy our brands and our delicious IHOP and Applebee's food. Applebee's and IHOP are in the perfect position to provide our guests with a unique experience, thanks to the innovative approach of our brand and technology teams combined with a guest centered approach to everything that we do. Today, I'll provide you with an overview of how we're using technology to enhance our operations, delight our guests and elevate our brands to new heights. I'll provide you an overview of key trends, of our 2017 progress as well as an overview of our technology approach or something we call our four dimensions of technology or 4Ds, specifically focused on data, discovery, dining and delivery, an approach we believe will allow us to deliver on commitments to our shareholders and our franchisees, all the while creating a delightful in restaurant experience and off premise experience for our guests. Guest expectations and demands have been driving change across the entire restaurant market, especially in how guests want to be engaged and dine, creating a new revenue opportunity across all segments. This phenomenon is most present in the digital space with the Amazon effect on guest expectations and buying behavior. These expectations have moved to every aspect of the guest purchase decision process and has created a need for additional functionality and ease of use on our digital platforms to help drive traffic. A direct result is the expansion of our off premise channels, such as the delivery and improve the go programs, largely driven by guest expectations and demand. And a need to maintain current and acquire new guests using business analytics to maximize our marketing platforms and deliver relevant and customized offers. In addition to increased guest demand, there's a growing need for relief against cost pressures in the running of our franchisees' restaurants. Through these lenses, we focus on four main tenets to ground our approach: guest convenience, to order and pay on their terms, be in the restaurant or online speed and convenience to improve order accuracy and get the food to the guests more quickly by using tools like server tablets order simplification and kitchen display systems to avoid errors and waste and reducing friction by piloting tools like waitlisting and solving for mobile and table side payment. And lastly, off premise, to bring our food to where the guest is, whether that be to go or delivery. These four tenants are all focused on meeting guest needs and driving a consistent and memorable experience. To create competitive advantage, we have implemented a multidimensional strategy to how and where technology has to play a role for our brands, something we call four d. The purpose of this strategic approach is to transform the guest experience by innovating and investing in four key areas of the guest experience: data, discovery, dining and delivery. First of the four Ds is data. In this lens, it is all about leveraging the data and analytics of our guests and operations to craft a personalized experience that resonates with our customers. It is the gathering and use of data to conduct deep insights and rich analytics to build a long lasting affinity to our brands and products, both in our restaurants as well as off premise. In 2017, we've made significant progress on the foundational work to modernize our data and analytics environment, aggregating data about our guests that can be used to provide them better offers and service. As we look forward, data is a strategy that we believe will continue to strengthen our customer core through this notion of a one to one engagement to drive additional visits as well as attract new guests with personalized and relevant offers and marketing that resonate and entice. The second D in the four Ds is all about discovery. This is an area where we spent a significant amount of time and capital in 2017, advancing our digital and mobile technologies. With our mobile first strategy, we reinvented the guest experience and how they engage with us and how we provide service to them. We introduced new and improved websites for Applebee's and IHOP, an improved mobile app for Applebee's. And for the first time, we introduced an e commerce mobile app for IHOP with online ordering as a key capability. In addition, we focused on innovation. And I'm happy to announce that IHOP and Applebee's were one of the first restaurant brands included in the Google Assistant and Google Home voice ordering platforms. In addition, we were launch partners with General Motors for their in dash connected car ordering platform. Showing that we have a deep commitment to creating an innovative and engaging experience and new and exciting channels for our guests to order our delicious IHOP and Applebee's food. And third D in the four Ds is dining. IHOP and Applebee's are iconic brands. And at the heart of it all, it is still about coming into the restaurant, whether it's for one of our IHOP omelettes or $7.99 burger special at Applebee's. Our core and foundation still remains within the warmth and comfort of our restaurants. We listen to our guests and heard them loud and clear. They want a new and improved modernized in restaurant experience that they feel a part of and engaged. It is with that in mind that we continue to develop new technologies for ordering and payment to keep pace with the demand of our guests. We have started to roll out solutions to improve order speed and accuracy, things like the use of handheld ordering tablets for the servers or the benefit of WiFi so our guests can stay connected. A modernized point of sale system in Applebee's and the hub designed for the twenty first century, backed by the power of a modern kitchen display system to ensure all the food comes out fast and at the right temperature a new in restaurant tabletop device that allows guest ordering and payment, putting the control of the dining experience in the hands of our guests and finally, providing our guests with the ability to order and pay on their own mobile device or via handheld payment device. As I mentioned earlier, Applebee's and IHOP are in the perfect position to provide exceptional in restaurant and to go experiences, in my opinion, like no other brand. The fourth D in our four d strategy is delivery. We have reinvented the to go experience from top to bottom by introducing best in class packaging and branding, along with partnering with some of the best in the delivery industry. Our guests demand speed and accuracy as well as a friction free way to order and pay. By partnering with Amazon and Grubhub and DoorDash, we have started testing of delivery for both our brands to provide our guests the convenience of dining on their terms, be that on the go, at home or even in their office. Most importantly, our delivery experience will be fully integrated throughout our entire guest facing technology portfolio, providing a safe and consistent method for our guests to order and to pay. As Darren and John noted, off premise, including to go and delivery, are major components of our 2018 strategy. We've already seen positive growth in these areas and we'll continue to drive these very important channels for our guests. As we continue to develop and execute against our four d technology approach using data, discovery, dining and delivery, We see that when we drive the right guest experiences utilizing data, guests engage with us more frequently through this notion of an omnichannel approach, be that in the restaurant, over the web, mobile, voice or even in their car. And we're able to serve our guests more completely by adding off premise and improved restaurant solutions that delivers to them on their terms and provides a uniquely differentiated and personalized experience for them. This helps drive loyalty and repeat visits, which is good for our guests, and in turn, provides value for our shareholders and profitability for our franchisees. Thank you. And now I'd like to welcome up Greg Cavan to the stage who will overview our financial plan. Hello, everyone, and welcome. I'd like to share with you a summary of the following areas that will be the primary drivers of our 2018 to 2022 financial plan. First, we'll review with you our historical and projected financial performance. I will then talk about our opportunities to increase margin and then briefly review the impact to Dine of the recently enacted tax legislation covering both current and future implications. Finally, I'll review with you the results of our future financial performance in terms of cash flow generation, capital allocation priorities and growth inclusive of EPS, dividends and share repurchases that form our shareholder growth algorithm. Regarding our commitment to financial success. To begin my presentation, I'd like to comment on our key commitments to success over the next five years. We believe that our brands will return to growth after a challenging 2017. Although we believe our cost structure is appropriate, we'll continue to pursue savings and opportunities as they arise. Our franchise business model is very strong and designed to deliver growing cash flow and earnings per share through 2022. Excess cash flow will be used for internal investments and returned to shareholders through dividends and share repurchases. Next, we recap our total of net units by brand, inclusive of international. This has remained flat over the past few years given the recent pruning of the Applebee's business. Although we expect additional Applebee's net closures in 2018, we believe the business will be stabilized at that point and small net unit development will occur going forward. For twenty fifteen to twenty seventeen, the IHOP and international businesses have mostly offset the net of Applebee's closures. AUVs historically show a reduction in the for the Applebee's business for the three year period based on twenty sixteen to twenty seventeen same restaurant sales being down approximately 5% each year, with IHOP remaining relatively flat for this period. Touching on our twenty fifteen to twenty seventeen revenues and segment profits. The decline over this period was primarily due to the downturn in the Applebee's same store sales and the resulting revenue collectability issues we experienced over the last year. Here is our future five year projected revenue growth. We have broken this out among the following components of our business model: first, our IHOP for our revenue for IHOP then Applebee's franchise revenue. In aggregate, these businesses will produce steady low single digit CAGR growth over the next five years. Going into our projected unit counts and AUVs. We expect an approximately 2% CAGR over the planned period. The approximately four thirty net units is comprised of 200 each for IHOP and international and a net 30 for Applebee's. Resulting AUVs over this time period will increase from 2.3% to 2.6% for Applebee's and 1,900,000.0 to $2,200,000 for IHOP. We expect regarding G and A, we expect to reduce G and A in 2018, as Steve previously mentioned. Excluding certain onetime items, our run rate has been approximately mid-one $150,000,000 over the past several years. 2017 includes two nonrecurring costs. The first are a onetime severance cost of $9,000,000 for our former CEO. The second of approximately $8,000,000 relates to the third party Applebee's brand stabilization costs incurred primarily in the 2017. Adjusting for these items brings us back to the $150,000,000 run rate going forward, which we believe is currently appropriate for our business. With that said, we're continually reviewing the size and appropriateness of all G and A costs, and we'll make future adjustments accordingly. One of the financial attractions of our business model is our EBITDA flow through for each incremental dollar. With our two primary costs being G and A and franchise expenses becoming primary flattish in real inflation adjusted dollars over our five year forecast, our margins are expected to continually trend upward. We expect margins to increase 10% from 46% to 56% over the five year period. Regarding our tax implications. Let me speak to the December enactment of the Tax Cuts and Job Act. Prior to this legislation, our tax rate on adjusted EPS basis ranged from the high 30s to 40%. Given the 35% to 21% corporate rate reduction, our taxes should decline by approximately this amount based on the current law and is expected to approximate 26% throughout the five year forecast. There are other impacts to us under the new law besides the rate reduction, but they tend to offset each other. This savings is all expected to translate to cash, which we expect to utilize by investing in our existing brands, opportunistically repurchasing additional shares and as Steve has discussed, invest in new concepts and brands. We plan to generate approximately $104,000,000 of adjusted free cash flow in 2018, growing to $175,000,000 by 2022. We are first committed to investing in our business to generate long term growth. Next, return of capital through dividends to our shareholders is a top focus of ours. We believe that an approximately 35% to 45% payout ratio of adjusted free cash flow is appropriate for our business model. Additional uses of our free cash flow will be used for share buybacks and investments in future scalable concepts and brands. We believe that this overall approach will result in the most efficient use of free cash flow for our investors. Here's a summary of the uses of free cash flow that I reviewed on the previous slide, plus the addition of our commitment to closely monitoring our long term debt, which I'll speak to shortly. Let me now speak to an important use of our capital, investment in our existing brands. Both Darren and John have spoken to our future vehicles for our future vehicles for growth, and I will add that where the ROIs are cost effective, we are financially committed to achieving these goals. This slide is a summary of potential areas where additional investments may occur. These investments can vary between people, direct financial investments and partnering with franchisees and third parties either separately or a combination of these approaches. Some of these investments are ongoing or have already occurred, such as consumer insights and business analytics teams being firmly entrenched in the brands. Previously, these teams were housed at a corporate level, which was not as effective. Regarding our dividend. Given our commitment to current returning approximately 35% to 45% of our adjusted free cash flow to our shareholders, here is the result. Our first quarter twenty eighteen dividend is set at $0.63 per share or $2.52 annualized. This results in an approximate 4.7% current dividend based on a $54 share price. The dividend rate will provide an approximately 44% payout ratio based on our estimated 2018 adjusted free cash flow. This ratio level will provide us the opportunity for meaningful share repurchases and the flexibility for investment in our brands for future growth and investments in scalable platforms. Regarding repurchase of shares, we are committed to be best in class on capital returns. Our reduced dividend provides us an opportunity for meaningful share repurchases. Our level of yearly repurchases will generally be based on our analysis of the company's intrinsic value for all periods throughout the year. Regarding our long term debt. Given the recent underperformance of our business, our current debt to EBITDA leverage ratio under our securitization currently stands at about 5.7x. Under our five year plan, we expect this ratio to trend downward in 2018 to closer to 5x by the end of the year and then towards low 4x as we approach the securitization end date of October 2021. We are currently comfortable with a 5x leverage ratio under our existing business model. While we are still almost four years away from the end of our current loan, we are consistently monitoring existing credit markets to be positioned to act on a refinancing opportunity if and when we believe the economics are right. We released guidance on yesterday's earnings call, and I'd be happy to answer any additional questions during our upcoming Q and A. The final roll up of our five year plan is as follows: for Applebee's and IHOP, approximately 32% yearly growth, respectively for International, a 15% yearly growth rate. EBITDA is expected to grow from $224,000,000 in 2017 to over $315,000,000 in 2022, with margins expanding over 10%. Adjusted free cash flow is expected to triple over the five year period, with adjusted EPS growing approximately 2.5x. A significant majority of our free cash flow is expected to be returned to shareholders. The result of our five year plan is a significant organic EPS growth. Our forecasts do not build in potential acquisitions or other investment opportunities, which would complement our existing scalable platform with a clear focus on accretion to earnings. Our plan calls for us to grow EPS at a high teens percentage compound annual growth rate over the next five years, which leads me to our final slide, which is our projected annual shareholder growth algorithm, which is as follows: When combined with our expected 4.7% dividend, our current plan provides for a 20 plus percent per year total shareholder return from 2018 to 2022. That, everyone, is the conclusion of my prepared comments. And with that, I'll turn the presentation back over to Steve for his closing remarks. Okay. Thank you, Greg. Thank you for being here. Thank you for your patience. Look, it is really hard not to be excited about all of the great work that's being done across the entire organization. I am very confident that the steps we're taking ensure the long term success and position us and our brands for sustainable growth. With that, I'm going to give the opportunity for question and answers. I'm going to invite the team back up. If you folks want to join me. So we've got first question over here. Can you wait for the microphone so we can make sure everybody on the line can hear as well? Can you hear me okay? Nice presentation. Mike Gallo, CL King. A question on the long term outlook. I was wondering what you assumed in terms of category growth in each of the respective areas, whether you've assumed any improvement or whether you assume kind of continuation of the current trend? And then also what you've assumed for share repurchase? It would seem to be back in the envelope taking out. Just looking at the EBITDA growth, you'd be roughly in the $9 area, but I was wondering if you could just bridge the difference there. Sure. So let's start with the categories themselves. So we are not assuming much improvement in the categories. We're assuming relatively stable state, and we'll talk I'll have each of the folks talk about their individual brands. But we believe our job is about stealing share. It's that simple because the category is not going to grow in any significant measure. We believe we obviously got a big opportunity internationally, as we've discussed. But for these brands, it is about executing and being better than the competition. And look, we're having some initial success. We are not confused that, that creates long term sustainable growth. We know we're going to have to innovate and change as we go forward because people are going to start following what we're doing because they're going to see some of the success. So we just need to make sure that we're constantly a step ahead of them. We're going to do that through, as we discussed, a very strong quantitative data analytics consumer insight approach. We're going to build one of look, we're not following anybody else in our categories. We are following the best in class in the industry and across the board. So I'm very used to having a very large, very sophisticated quant shop helping to make all of our decisions much more rational and much more objective. So with that, let me turn it over to Darren, you and John want to talk a little bit about your individual categories? Yes. Thanks, Steve. I would just echo what Steve said. We really look at the family dining category as maintaining somewhat flat growth over the next several years. And we really look at this as a market share game at this point. So we're not anticipating any net new dining occasions coming from this category. What we're really anticipating is having to take those incremental dining occasions from our nearest end competitors. Yes. I can't express it any better or differently. It's a market share battle. We're going to have to earn it. It's going to come at the expense of our competitors. We do know where we're to source that from a competitive standpoint. And the casual dining segment, in particular, has been slightly negative, and it is challenged, and we expect to win at the expense of those competitors. So then on the share repurchase question, I'll let Greg get into a little more detail. I think our general approach is this. When we started out, we assumed that we would take the savings from the dividend change and plow those back into share repurchase. Quite frankly, the administration has done us a favor because they've created additional cash flow, which will which we will, in large part, probably allocate to share repurchase as well. You can expect us to be an opportunistic share repurchase organization. We will buy based on multiple and based on intrinsic value. And so you'll see us being an active player in that market. But we basically view the opportunity today. We want to we clearly want to have one of the leading dividends out there. We know we're a dividend play for a lot of investors, and we're to maintain a leadership position with that dividend. But at the same time, we believe we've got a significant opportunity based on what you saw here for share repurchase that's going to be incredibly accretive to our shareholder base. And you're going to see us be very active in that market. Greg? Yes. I'll just add a couple of things. I think we want to be cognizant as the Applebee's business goes through this rebound. We've also set aside some funds for potential to use our balance sheet financially to assist franchisees as the turnaround gets better, if you will, just like we did for the advertising in 2018. So that's something that we're focused on as a part of our free cash flow in addition to the dividend plus the share repurchases. And also, we have a little debt paydown to make under our existing securitization in 2018. So those are the other two main pieces that comprises our free cash flow for 2018 with the share repurchases being, as Steve said, we'll base that on an intrinsic value of the company for a given period. John Ivankoe from JPMorgan. A follow-up on that franchisee health question, which, I mean, you kind of just addressed to some extent. Is there a way for us to talk about just overall leverage at the at the franchise community, you know, debt to EBITDA, however that may be, of just kind of a spectrum in terms of, you know, the number of stores that you feel good, you feel great, you feel marginal, that you feel poor? I mean, is there, you know, it's a question we have been asking for years and, quite frankly, haven't gotten an answer to, you know, just what the State you know, the overall financial state is, looking into the franchisees business itself, you know, not just average unit volume and implied store profitability, but organization level cash flow? Yes. So let's take this in a couple of different chunks. So first of all, as you can imagine, it varies widely amongst the organizations. We have sort of a traditional group of franchisees that have relatively moderate leverage. And then we have folks that have taken the opportunity over the years to pull capital out of their investments and have leveraged to higher levels. We had a number of issues with a number of franchise entities on the Applebee's side. With IHOP, the IHOP system is healthy. So and we're actually relatively low leverage. On the Applebee's side, we have a mixture, but we had a number of folks that were struggling given the performance at the 2016, particularly for 2017. We stepped in with several different resources, and they were actually led in part by the franchisees. And so we wanted to have a very transparent and across the board level of assistance that created some consistency and some a philosophical approach to each situation, which was structured in a way that made sense for the franchisee but also made sense for the company and was viewed as equitable. So we had literally had workout committees that franchisees sat on to have those discussions. We are have worked through the bulk of the situations that we were facing, and there is a path to a solution in almost every case. We have one large existing relationship left to resolve, and I will tell you it's unresolved at this point. But we have hope that there is a path to a solution. We've identified it. We're trying to work through with the franchisee and try to create a situation where they can they will eventually prosper from the growth of the brand, but also stabilize their business, which needs to be done. So that involves our capital, which we have allocated in some pretty significant ways. We are done with the most part. We've got probably one or two scenarios where there will be some additional capital on our part put into a potential solution for particularly as one franchise partner. And so as we work through that, our goal is twofold. One is, look, I've done a lot of workouts over the years. I don't want to do a workout twice. We're going to create a situation that stabilizes the position of the franchisee long term, not if things get dramatically better, not a hope note, sort of with realistic assessments as to where we think the business is going to go and what they need to do to stabilize their business and eventually grow it. So I would say, while we had a number of issues to work through starting the year, gradually, we've sort of worked through each one. Most of them are in pretty good position with one significant one remaining. But we are encouraged that there is a solution to be had, just a question of whether or not we can get there. So Greg, do want to add any color? No, that covers most of it. Go ahead. John? I'll well, wait, I have many more questions, but I'm going to hand the mic over after this, and I can read it if there's time. Could you review your contingent liabilities with the franchisees that I think is all part of the refranchising over the past decade? You know, the likelihood that any of that would actually, I guess, called from you, for the lack of a better word? And then, secondly, you know, I mean, as part of when you think about, you know, broader workout, you think about, you know, 'eighteen and 'nineteen and, you know and the difficulty of growing traffic profitability in this current environment nothing to say about you, but just this current environment you know, could could those contingent liabilities be expanded? And is that something that you're considering in the overall arsenal? Well, I I think, look, we haven't had any issues with our contingent liabilities to date. It's and the stores are sold. It's a fully franchised system, so we wouldn't take on any other contingent liabilities directly related to the sale of those stores. And it's been pretty minimal, if nonexistent, at this point. I mean, as these workouts go along, I mean, you're working with landlords, you're working with other parties that all have an interest in this. But you know, given given what we've gone through, we've we've still avoided having any any payouts. They've been basically zero on on the contingent liability side. And so we've we've gotten through that pretty well. And what would the scenario be to the extent that any of those would be called? I mean, would it be just like the entity itself would be bankrupt and then you would take the stores before you could sell them? Just I mean, it's a relatively big number still based on your cash flow. Just talk about like how meaningful that number is and in what scenario that you would have to pay that, the overall maximum amount versus some amount significantly less than what you've disclosed? Well, if you take the stores and you take them back and you're operating them, we would pay the rent. So it wouldn't be an issue. It's if you close stores down close a number of stores. And as we've said, we're going to close about 60 stores in 2018. So that's what we're essentially looking at before we start to turn this around and get some small growth in 2020 and 2021. So to the extent we operate, we will it's not going be an issue because we pay the rent out of the profits of the stores. Yes. And we've so we've done this over time, not in the magnitude that we're talking about currently. And so we've in both brands, we've taken over restaurants from folks that were struggling, stabilized them and then eventually returned them to a franchise scenario. That has been a discussion in a couple of these relationships that needed to be stabilized, and we are fully prepared to step in and do that. But I will tell you, we really like the 100% franchise model. We like everything it does. And so while we would, if need be, to stabilize part of the system, we have to step into ownership. We are prepared to do that. We have the capital to do it. It's all these scenarios are the same. Everybody is going to give something. The landlord is going to give something, the bank is going to give something, Dine is going give something and eventually, the equity will give something. So when we look at it, it's clearly an option. It's not our most desired outcome. Our most desire is to fix it with the folks in place, if that's doable. But we are prepared to step in if necessary. We actually don't think that's going to occur. But on the other hand, we've still got one significant relationship out there that we need to work through. Thanks for some very good presentations this morning and laying out long term targets for us. I was wondering, I hear a lot of management teams talk about the benefits of shared services. I'd be very interested to hear the benefit you guys think you'll get from splitting them apart. So look, I've been around shared services for a very long time. I will tell you where they work and where they don't work. Where they work is you have when you have very stable businesses that are very predictable, that don't require a lot of innovation and don't require a lot of change, okay? So there so that is where a matrix based shared service organization works. That is not the business we're in. We're in a business that's highly competitive, that is changing regularly, and we need to be innovative and we need to be changing on a regular basis what our offerings are, what appeals, what programs we want. We want to be we want to have LTOs, limited term offers out there that drive customers into our stores. You don't do that with shared services, okay? I need people, John needs people, Darren needs people that eat, live and breathe their brand. They bleed it. That's what the franchisees want. And in this environment, that's the only way we're going to be successful. So and this whole idea originally that Dine was some brand, Dine is a holding company. That's all it is. We provide resources to the brands. We help them be successful. We'll provide corporate services to them, but everything else needs to be in the brand and needs to be dedicated to that brand's mission. So you will not see us look for Matrix organization anytime soon because it's not the business we're in. If we were selling widgets and we could predict four years from now how many widgets we're going to sell, maybe shared services makes sense. In this business, you need innovation every day. No. And I would add the primary benefit of dedicated resource, marketing, operations, culinary, consumer insights, development, is accountability, right? Clear accountability for results within a brand. And perhaps there was some ambiguity there. Historically, it doesn't exist anymore. We like the structure. And we'll talk about accountability amongst this team. I've explained to them my philosophy, and that is that, okay, technically, I'm in charge, and I will take responsibility, but I will take all of you with me going down if we don't make this work. Thanks, Steve. You're welcome. Other questions? Thank you. It's Steve Anderson from Maxim Group. So just for William, I wanted to ask about the plans for international expansion. And specifically, what do you think is the biggest obstacle with regard to generating unit growth outside The U. S? In other words, do you see a lot of the same issues affecting casual dining, family dining as you do in The U. S? Thanks for the question. And we always face challenges, but how we are preparing ourselves for the international expansion is taking a look at the different models and what those challenges are. So for instance, real estate is one of the challenges that we face all over international. We don't have the luxury that we might have here in United States to have 4,000 or 5,000 square feet space. So we have to adapt and be flexible to that footprint. So we are looking, as I mentioned before, with IHOP, the fast casual model where we can go in into 1,500 square feet spaces, so we can reach the guests where they want us to be. So that's one of the challenges that this is how we're facing that one. Now the category is in a different life cycle in internationally, independent on the country and when we enter, then we're in a different lifestyle. So for instance, Applebee's, right now, with a new celebration design has taken a different life. So we are attracting guests that are looking for that celebration moment that are more modern, that is more upbeat, that they can identify with. So with IHOP, it's all about the food, it's about the experiences, the love in the house, it's coming together as a family, as friends to be able to share that moment in one of our great places. So right now, the category for breakfast is pretty much untapped in many international markets as the culture in some places is still the breakfast is at home. So we're creating this new segment that hasn't been exploited as much. So that's one of the things that we're doing as well. So if you look at the growth of international business, and I've been responsible for growing several businesses globally, there are several fundamental keys that we're going to follow. So the first is we're going to go where our brands are desired. And that means they need to love American brands. We're not going to hide who we are. Everybody knows. And so you go where the demand for American brands is still strong, okay, number one. Number two, you go where culturally the food that you're offering fits. Breakfast is not a regular meal in a lot of places. That doesn't make sense to go heavy IHOP there. So culturally, we adjust the menu, but it can't be it's not within the cultural bounds of that community, okay? Then third, where you're going to go, go big. Don't drop flags in lots of different countries to say you're global. You need to penetrate each market with a significant number of units. Particularly for us, we don't make that much money per individual unit. If we're not going in and doing 40 or 50 in a market, it makes no sense for us to be there. So and then lastly, and he touched on this, particularly in markets where real estate is expensive, we've got to have different models. Now the great thing is the customers allow us to experiment internationally, and then we can utilize those formats domestically. So it's a great laboratory for us to learn. Right now, we need a small format restaurant for both brands because we want to go into The UK. In The UK, you're not going to go in with full size restaurants. You're just not. And so we need to develop, and we're in the process of delivering a light version of our standard restaurant, which is going to fit on significant less square footage and therefore, be more feasible in expensive real estate markets. But if you want to go, we want to be in The UK, we want to be in Taiwan, we want to be in Japan. You're not going to get there with full size restaurants. So this idea of the multiple formats, we're actually going to do a number of fast casual concepts for the brands in The Middle East. I'm going over shortly. We're going to look at sort of some of the first ones that we're going to do in a lot of shopping centers and airports. And so we think the opportunity is there, but we've got to adjust the formula for each country that we're entering. But we do want to have density and significant investment in each market that we enter. And the last thing that I'll talk about is it doesn't matter what you do if you pick the wrong partners. It is all about the right partner in the right market. And so we are spending a lot of time looking at who the right partners are for us to invest with. And we believe that if we do that well, our chance of success is a lot higher. You. Brian Vaccaro with Raymond James. I wanted to circle back, Steve, on a comment you made earlier about the Dine's investment in stabilizing the Applebee's system. Just wanted to confirm, that was included within the G and A, that sort of 8 to $9,000,000 range that was in the Yes. G and A for 20 It's all built in the model. And just and we've talked about this before. Our primary contributions are we have rolled monies that were due into long term notes. We have forgiven closure fees. That's a significant part of it. We've obviously invested in the marketing fund and the brand. And so I think if you talk to our franchisees, I think they would say, you know what, we needed it, but they stepped up. And so and the good news is we're through most of that. Everything we believe we need to finish this turn of the system is built into that model. We have I don't want to say there's upside to it, but we have built in what we believe is required to make sure that the entire system is stabilized. And I think with the way things are going today, I would say we have a good chance of clearly living within what we've shown you, maybe a little better. Let me just add geographically, most of these this money will flow through the franchise expense line, not through our G and A. So that the G and A portion that we experienced in the prior year, that won't recur. And that was part of those two, recurring nonrecurring items that will be added back, that will recover for 2018. Okay. Okay. And just also on the bridge, I noticed a slide where it showed the Applebee's segment, income or profitability dipping a little bit in 2018 and then a pretty sharp normalization, if you will, in 2019 and beyond. Can you walk through the bridge? I know there's the NAF contribution, I believe, within that franchise expense, but also maybe touch on the royalty collection, assumptions specifically within that. Yes. There are two primary components. So there's been some bad debt, right? So our challenge in 'seventeen, in particular, around, collection of royalty. And certainly, contributions to the ad fund both in 'seventeen and here in the first half of 'eighteen will be the two primary components. Yes. And so we made a commitment in 2017 around what we're going do for the ad fund. We're following through that commitment this year. We do not anticipate that going forward. Okay. And then just one more, if I could. Shifting gears to the Applebee's advertising strategy. I think you've increased the NAF contribution, like you said, to around 3.5%, up 25 basis points or so. And then you've got the $30,000,000 investment, coming from the company as well in the NAF. Can you give us a sense of how much your media weights, or ad spend overall might be up in 'eighteen versus 'seventeen and just discuss how you see the mix of media evolving over the next few years? Sure. Brian, I prefer not to talk about year over year comparison in the ad fund. But what I would convey is that there are several components that benefit, right? We've been challenged in terms of our on air weeks, in terms of our ability to properly test and validate propositions, all of this coming through the ad fund. Our ability to have sufficient TRP levels, our ability to have sufficient thirty second units. And suffice it to say, with where we are at the moment, we're fully leveraging all of those components with the resource that we have. So certainly, an enhancement from where we were last year, but I'm not going to provide detail on a year over year comparison. And I would suggest, should we perform, and we do expect to perform, that I wouldn't make the assumption that our contribution rate remains the same moving forward, right? We have a partnership with our franchisees, and they like growth, and they're willing to invest in growth. Yes. Thanks for the presentations today. Very insightful. So my question is on the dividend. And I get that historically, Dine equity was sort of viewed as a dividend yield vehicle. But I think that the plan you presented today takes pretty long term operational vision. So if you're confident in hitting $315,000,000 in EBITDA in the 2022 time frame, do you think that would you be willing to just take the dividend to zero and retire more shares? Because for the long term oriented shareholder, that is probably a more compelling path to value creation in 2022 versus just paying out a dividend, which is tax inefficient? Well, got to admit, that's the first time I've ever gotten that question. So the conversation usually goes the other direction. Look, I think given the tax treatment of dividends at this point, it still is a viable vehicle for return to shareholders. Clearly, if you believe your stock has upside, which we do, it makes share repurchase compelling. I'm a proponent of doing both. And particularly given this company's history on the dividend side, I think it's important that we remain with a vital and industry leading level dividend that's within the framework we provided and then using the share repurchase as a balancing act in an opportunistic, strong purchase scenario. And so when we when we look at when we look at the capital allocation process, we like the balancing of those two. We felt that they were out of balance, and we were spending too much on the dividend. Obviously, that's what led to the change. But we also think that a regular, vital and growing dividend policy is a very attractive thing for the stock. And we think the combination of that and share repurchase is sort of the right balance. Okay. Thanks. But thank you for the question. I got a lot of I got a lot of advice around the dividend, and none of it went that direction. I'm a bit new to the company. Could you just explain stock ownership by senior management and compensation moving forward, what the metrics are? Okay. So like most companies, we have a requirement of our senior executives to own significant portions of stock and be a part of their overall portfolio. And they're if you looked across the board, it's very similar to what other companies do. Obviously, I'm heavily vested in the stock. And one of the reasons that I came to this company because I thought that this was a unique opportunity to create some real value for the shareholders and see a company that could optimize its performance and its share price in relatively short order. And so all the folks on this stage have requirements in terms of ownership, and it ranges a little. But you should assume that it's a significant chunk of their individual wealth portfolio, and we're hoping to make it bigger. I'm a big believer in equity as an incentive. We still do stock options. I don't agree with people that believe that options don't align management with the shareholders. I think it does precisely. And so you'll see us continue to do that. Each of their each of our executives through the top 50 or 60 folks in the company have a combination of equity, which is a restricted stock performance based stock, which is based on total shareholder return and other objectives and then an option component for the most senior management team. And so we believe that, that structure aligns us closely with the shareholder. And look, this company is a little different than I've been in. I worked for two families for my entire career. I worked for the Marriotts and I worked for the Banhams. They were the primary shareholders in their companies. You knew who your shareholder was on a regular basis. This is a little different because our spread is a little wider in terms of the investing in our group. But we believe that and I believe strongly that we need to align the incentives for the folks on the team with the performance for the shareholder, and it's got to be in sync. And I think we've got a pretty good design and comp plan that leads to that. We have another question over here. Ken? Steve Anderson with a follow-up. It's for Darren. I know on one of the slides, you talked about what are these strategies to boost sales at IHOP. And I think one of things you mentioned was I tried to reduce the gap in the off peak, meaning the lunch and dinner hours. And this over the years, there's been an area that's been elusive for IHOP. I just wanted to see if you can maybe do a little bit more of a description of what you plan to do for the off breakfast hours. Sure. I don't want to get into a lot of detail for competitive purposes, but I think we've over the years, we've tried to solve this by being all things to all people, and, that's not really the approach we're going to take now. We're going to, pick a couple of areas where we believe that based on our guests' insights, our guests tell us they that we have credibility in and that we have believability in our ability to execute and execute well, and we're going to go deep in those categories and tie it with a value proposition to encourage people to give us a try. But we have such a strength in culinary around breakfast. It's really been a shame that we haven't laddered that into the lunch and dinner daypart. So you're going to see us leveraging that great in restaurant culinary expertise into some categories. But again, we'll pick a couple that have wide appeal, that have credibility with the guests, and we'll go deep on those. And quite frankly, we've seen others in our category who have made gains in these other meal periods, which we think clearly should be within our Bailiwick because we've got a better product, better restaurant and better experience. And so we see that as a significant opportunity for growth, and we've seen it in others, and we believe we should own it. Thank you. I have an Applebee's question first, and then I have a question. First on Applebee's. Doing price pointed LTOs is something that industry just broadly speaking, the restaurant industry has been trying to get off for years. It adds some volatility in your business year over year, some unpredictability in your business year over year. And when that promotion ends, it's possible to disappoint consumers that maybe saw a $7.99 burger on TV and come in two days after that promotion ends and gets a different price point. So I guess talk about how strategic these price pointed LTOs are for your business. Maybe it's just you're trying to give the business a shot in the arm in 'eighteen and not to expect that in 'nineteen and 'twenty and how you feel as a brand manager being being able to comp the comp and kind of rebuilding the brand, it's something that has proven to be very difficult over time for this industry. Yes. John, that's a terrific question. The first point that I would make is we're extraordinarily thoughtful in our strategy and the tactics that support that. So when I'm looking at Greg Flynn, we have a franchise business council. And we partner on a very frequent basis around strategic and tactical decisions. And so when it comes to the use of price, we wouldn't lean into that on a regular basis, right? As Steve referenced, we have multiple ways to deliver value, abundant value, may not come with price. But we will be selective in utilizing that tool, the price point tool, in particular, for those guests. And a fair percentage of our guests are value oriented and price speaks to them. But we try to do so in a way where we engineer profitability. We're all about enhancing relevance. We think price plays a role. It wouldn't be the primary role. As you saw from the slide, we're making progress on value for the money. We're making progress on affordability. But those decisions come with and this is, I think, part of the secret to our recent success, 100% alignment. There aren't any franchisees fighting those propositions, and we frame them in very specific consumer insights. And in some cases, we test and validate at the market level, in geographically dispersed restaurants to validate that, in fact, we can drive the incremental result that we want. And the final point I'd make, John, and you hit on it, we are a brand that is attempting to generate retrial among all of our guests at Applebee's. And so we'll be creative and fairly aggressive in how we do that moving forward. Okay. And then secondly, on IHOP. I mean you talked about your competitive set. You kind of showed a number of different family diners, Cracker Barrel, Denny's, some others I think. How important and competitive and relevant is traditional QSR? I mean McDonald's for example, I don't know the number exactly, probably has $10,000,000,000 of breakfast sales. It's multiple sizes of the IHOP brand overall. And just how sensitive is the brand to quick service? How much do you have to react to that brand in quick service? And when we see things like $1 $2 and $3 types of price points, how important is it for the IHOP brand to begin to dip prices down to what QSR can offer and actually make money doing? Well, yes, John. I would say that I don't feel any need to try to match up price points with QSRs. I mean, that's our value proposition is just different. The level of quality of our food is higher, and the level of the experience is much better to the point that I wouldn't feel the need, to compete on a price basis. That being said, there's a lot of those restaurants out there, right? And they all are, right now, going after value and going after breakfast. And so they are competitors, and they have the ability to peel off maybe a little bit. It's but it's a very different experience coming to an IHOP than it is through the drive thru of a McDonald's, as an example. And so we've tried to position ourselves more around the experience and the quality of the food as opposed to the price point itself. And so can it have some impact? Yes, it can have a little bit, but it's really a completely different occasion, a completely different experience. The other thing I would add is that now that we've developed this off premise capability, we feel like we can compete very favorable again on the quality of the product for the price that we charge, and it creates a very different experience than the quality of food you might get at a QSR. And your consumer research I mean, I know you guys are obviously getting more into data analytics are saying that your consumer for that occasion are choosing amongst other family dining type of occasions and QSR wasn't in that decision set? No, that wouldn't be the case. I mean QSR plays a certain role in certain decisions. So if there's a ninety second occasion for a consumer of breakfast, they're probably not coming to IHOP. Although we believe now with an online ordering capability, we have the ability to take some of that back because you can order online and just come into the restaurant, pick it up and go, and you can get into that ninety second transaction window. So certainly, based on that occasion, but people are eating breakfast seven days a week, but depending on their needs state at a particular time, they may choose a QSR versus a full service. But I think through both brands, there's one there's a critical factor. There's two things at play. One is the the creative tension between the franchise community and the brand is often about price point and value, okay? And so it's a lot easier for us to come up with programs. They're the ones that have to decide whether or they're making money on it. So that's a very strong test of the programs we're running. However, our core customer makes is a $75,000 a year family, okay? They come by their money hard. They do not want to part with it easily, and they expect and demand value. That's never going to change. So we have to have within our restaurants the ability for the consumer to come in and get in and out for a relatively lower price point or if they want to indulge, they can go for a higher price point. Our average checks in the entire industry have been going up, up and up as traffic counts go down, down, down. That is not a great formula for a surviving business. Our view is we got to have both. We got to have programs and LTOs that spark interest and drive traffic into the restaurant. We have to give people options as to why they can come in and get out for less than what they'd expect, and we want them to know that, and that's a permanent part of what we do. And you're going to see that in both brands. And then where the upsell potential is there, we want to take it. One of the great things about the online ordering system is the average check that we're seeing is dramatically higher than a phone call. You want know why? Because that system upsells perfectly every single time. And you can see it in the check. So we're getting a lot more business. We think it's going be a major component for us. But that check goes up because the upsell is there and it's done perfectly. Now if we could execute that in restaurants, we actually all be doing well. So I think what you can expect from us, though, is given who we are and who we represent, we are never going to move away from value. Now whether or not every single offer has a price point on it will vary based on what the consumer tells us. But I think one of the differentiating factors for these two brands is we are going to be known for value always, and we will continue to market ourselves in that vein. Mike Gallo, CL King. Question for John. I think when you started the original, analysis with Pricewaterhouse, I thought my recollection is you were talking 100 to 200 basis points of potential cost savings. I thought I heard you say in the presentation today you were looking at potentially 300. Obviously, a large number, so, and it's moved up from what you said previously. So can you speak to some of the components and how quickly you think you'll be able to actually start to get that stuff rolled out within the Applebee system? Sure, Mike. The yes, you heard that correctly. So I would say 200 to 300 basis points over a three year time frame. And the reason that number that's not an arbitrary number. We have, early on, identified categories, opportunities from a food standpoint, a packaging standpoint, and we're beginning to address labor as well. The path to 300 points basis points is very clear to us. In terms of when Greg and our franchise partners begin to realize that P and L benefit, I would expect fourth quarter of this year, perhaps back half of this year and then ongoing into 2019 and 2020. And we wouldn't see ourselves stopping, right? So this is smart optimization. It's leveraging scale that many of our competitors can't. And we do anticipate PwC exiting it at the proper time and our supply chain partners picking up the ball and running with it. So we're optimistic. We have, we certainly have visibility to those categories and the actions required, and none of them affect guest satisfaction. In fact, many of them enhance our quality and reduce cost, in the process, which sounds counterintuitive, but it's underway. And you'll see some of it back half of the year. Yes. That was the comment I was going to make is that we're doing the same initiative with the same team on the IHOP side as well. And so you'll see similar improvements there. But what's really been most encouraging is their ability to elevate the level of quality on certain ingredients as they're going through that process and at the same time, reducing costs. So this isn't a takeaway from the guests in any way, shape or form. In fact, in most cases, it's an added benefit to the guests and, at the same time, a benefit to the franchisees through lower food costs. But you are right. The estimates of the savings have gone up because we've expanded the program. Because like others have experienced, they got in we think we're a very efficient purveyor of goods. When you get experts in, you can always get better. And I think what the nice surprise was, we felt by expanding the program, there was additional cost to be saved. And that's why actually the estimates have actually expanded somewhat. And it's a in my experience, having done this previously with another very large brand, is getting started cross functionally between marketing, operations, supply chain, franchisees. Getting started takes about six to nine months. Once that ball starts rolling and once those teams are committed to finding these opportunities, it's a bit self perpetuating, and we don't have a choice. Given the escalating costs, generally speaking, in the marketplace, we need to do this. And it's a distinct from our view, a very distinct competitive advantage moving forward. Okay. So I want to be respectful of people's time. So why don't we take maybe two more questions? Steve Anderson, Maxim Group. Just a general question on delivery. I know you've talked about some of your delivery partners. I want to see if your customers have reacted. Usually, there's like about 20%, 30% markup in terms of the delivery cost and see if are your customers have they accepted that? And also, do you see any opportunity maybe to internalize the delivery function, to maybe take some ownership of the delivery database? You want me to go ahead and I'll The start on so as to whether the guest has any resistance to a 20% or 25%, perhaps even more percent markup, we're not seeing that. We do anticipate that those percentages, which do vary depending on whether we're talking DoorDash or Grubhub or Uber Eats or Amazon, come down over time with scale. But the they're willing to pay that from what we see for the benefit of the sheer benefit of convenience. So we work actively to reduce those service fees. Darren, any thoughts there? Yes. I would echo that. We're still early stages in our test, but we haven't seen any reluctance on the part of the guests to engage in this. I think you would see say industry wide with a quick adaptation and the growth in that space that certainly, guest is willing to pay that at this point. I think ultimately, longer term, you're going to start to see some consolidation and some fallout from some of these providers, and that may start to bring some of those fees down as that segment gets a little more competitive. In terms of whether we bring that capability in house or not, that really hasn't been on our radar screen yet. I think there's a lot that we can learn from the third party providers at this point. And if we think it's appropriate to go down the road of bringing delivery capabilities in house, then we would work with our franchisees on exploring something like that. And I would say, on the Applebee's side, we are simultaneously exploring third party delivery and in house delivery, right? There are some brands, certainly Panera would be one of those, who have taken that model in house. And so we're going to evaluate both on a simultaneous time line and evaluate which makes the most sense because we see this as not only growing but highly incremental. And so we'll get it right, and we'll have news on that over the next eighteen months. Anyone last question? Outstanding. Okay. Well, thank you very much for your time. Thank you. Lunch is going be served outside.

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