Brinker International, Inc. (EAT)

Investor Day 2019

← View all transcripts

Aug 15, 2019

All right. Good morning, everyone. Welcome to Dallas and welcome to the new Brinker Restaurant Support Center. We're glad you all made it. Hopefully, everyone had smooth travels. I know nowadays that's always a question, but we're glad you're here. I think I've worked with everyone in the room, but just in case, I'm Mike Ware, VP of Finance and Investor Relations. I've been in this role about 2 years, just under 2 years. I've been with Brinker over 31 years. So very long time in history with the company. Before this position, I was on the Chili's leadership team for 7 years as a VP of Finance. So I'm very happy to see you all today. So we have a great day in store. Let me show you. We're going to hear from some wonderful senior Brinker leaders. For those of you here with us in Dallas, we're also going to move over to the test kitchen. You're going to have opportunity to have lunch, with a lot of the Brinker Leaders here. And then, for those of you that can join us, we're going to move over to Chili's Valley Ranch, which is just minutes away. And we will, check out that prototype, which has some of the new prototype elements and the reimage elements in it. So it should be a very great day. So before we start, I do want to formally introduce our speakers and I'm going to use my notes. And so we're going to start with Mr. Wyman Roberts. So Wyman, he is our President and Chief Executive Officer of Brinker International and he's also the President of Chili's. Prior to being named CEO, Wyman held key leadership roles, including President of Maggiano's, Brinker's Chief Marketing Officer and President of Chili's. So Wyman Roberts. We also have Eli Dotti, Senior Vice President of Marketing at Brinker, where she is responsible for Chili's domestic and international marketing, including food and beverage innovation, consumer insights and all marketing and advertising channels. We'll hear from Wade Allen, our Senior Vice President and Chief Digital Officer at Brinker, where he oversees information technology, data security and analytics. His team bridges technology and marketing to create seamless digital experience for Chili's and Maggiano's guests and team members. Steve Provo is Vice President and Chief Concept Officer here at Brinker, where he oversees strategic growth for the company, including off premise, culinary innovation, supply chain and supply chain management. I also like to call him the man of the future, so in his role. Steve has multiple leadership roles, including President of Maggiano's and Chief Marketing Innovation Officer for Chili's. We have Mr. Kelly C. Baltus, who serves as President of Maggiano's and Executive Vice President of Brinker. He is a seasoned restaurant executive with more than 30 years of leadership, including previous leadership roles at Cheddar's, Red Lobsters, Olive Garden and Good Smoke Holdings. And finally, you will hear from Joe Taylor, our Executive Vice President and Chief Financial Officer for Brinker International. He oversees corporate finance, planning and analysis, Investor Relations, treasury, accounting, tax and internal audit. With 20 years experience at Brinker, he's held multiple leadership roles in Finance, Corporate Communications and Public Policy. Okay, so I know you guys are to get started. But of course, we have to start with this to keep the lawyers happy. I'm not going to read the whole thing. But please refer to the screen to our Safe Harbor statement as I remind you, during these presentations and in response to your questions, management may discuss certain items which are not based entirely on historical facts. Any such items should be considered forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All such statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such risks and uncertainties include factors more completely described in our reports filed with the SEC. And with that, I would like to welcome Wyman up to the front. Thanks, Michael. There you go. Say welcome. We really appreciate you taking the time to come and visit us. It's been a little while since we've had an investor conference and we know your time is valuable. We know there's some stuff going on probably in every one of your markets and obviously out on the street. So we think we've got some information to share with you today that's worth the trip and we appreciate you making it and those that are watching online. Thanks for taking the time as well. What we want to talk to you about today and the reason I think this is worthwhile is, on the calls, we just want to give you a little bit more insight, right, get a little deeper into why we what we talk about over the calls and in the releases, what some of the more substantive things are and some maybe some more granularity as to why we're excited about kind of where we're at and what the future looks like for Brinker and specifically for the brands. We'll talk about the results we've delivered more recently, but more importantly, why we think the strategy that brought those results to the fore are going to be leverageable going forward and why we think that we are positioned well for future growth. And so that's what we hope to clarify for you today. We've got some great speakers in terms of their knowledge of the business. You can tell with the thing I like about Brinker and where we're at from a leadership perspective is, you have a Michael Ware with 31 years of experience and we have a Kelly Baltus, which he just celebrated his 1 year anniversary. And we have industry experience within this leadership team that's varied. So we have some very tenured leaders within the brand and know the business and history and that's important. And if you get a chance as you if you're in the building and you walk out and you walk down the hall the other way, you'll see our little history wall. There's a this business and this brand and the Brinker name, it's got a lot of history and heritage to it. And that's important to kind of remember. But at the same time, we pride ourselves on staying fresh and relevant, and I think the leadership team kind of personifies that. So today, again, some of this is pretty basic, so we'll blow through it. I assume, because you follow us and you made the trip, you probably know some of this like, hey, we're in the restaurant and we have a couple of brands. At one point in time, we had a big portfolio. We don't consider ourselves a portfolio company. We consider ourselves a company with a couple of really strong brands. Chili's leader in casual dining, 1600 restaurants, we've got a pretty solid international footprint, 30 countries, 2 territories, and then we've got Maggiano's, one of the premier casual dining, casual polished brands out there. Again, 53 restaurants now, 52 company owned, one our first foray this year into a franchise airport location. Kelly will talk more about that. This is an interesting slide. When you think about Brinker and the mix of ownership, and if you were to look at this model, you'd say, oh, man, they're kind of very diversified. They got 60% company and 18 franchise and 22% international. And that kind of tells a story, but it really doesn't. I think you want to break it out into North America, domestic, Chili's and Maggiano's and international. And when you do that, a little bit of a story. We're 86% after the transaction is going to close here in a week or so. We're going to be 86% company owned restaurants in North America and 14% franchised. We believe in the company owned model. I'll talk more about that and why and why we think that's where we are and where we're at. It doesn't mean we don't appreciate our franchisees, but for reasons we'll again get into more detail later, the power of owning company restaurants in casual dining, think is the winning model and that's the model we're behind. That's why we've made this investment into these 116 restaurants that we're bringing on board is because it just to again bring scale and move the business forward in a much more rapid way. And we think that's the best way to compete in casual dining in the U. S. Now internationally, we're 100% franchised and we believe that's the best way to compete internationally. We do not want to be running restaurants in the Middle East. So what's been happening, especially within Chili's over the last couple of years? So we had a couple of soft years. Interesting, we didn't have an Analyst Day that. So why are we having this? Because we were struggling a little bit and we didn't really have a story to tell you and we were working through it. And let's be honest about it. It wasn't those weren't the best times and we were losing some share specifically on traffic and we made a commitment. I came back into the Chili's brand exactly a year ago. The team had already put some great things in place. Our focus was on some really strong initiatives and strategies just got tightened up and we made this commitment, hey, we're going to bring traffic back into Chili's and we understood what it was going to take to do that and we just had to make sure we could do that and money. And we did that, and this year, we outperformed the category by 3 80 basis points. This is our 7th quarter. We're in our 7th quarter of taking share from the category, and we will share at a significant pace. From a sales standpoint, we weren't nearly as the differences weren't as dramatic. We made up all the 2 year gap this year to the category. And this is our 6th quarter of positive comp sales, our 5th quarter of share steel in sales, and it's our strongest quarter to date in the tracking data that we've got for Chili's with Black Box sorry, no, I'm using that source for that statement because that's 4 years. So we are continuing the gap at better rates than we have in a long time, the industry at Chili's. So where are we building on? So at Brinker, we think there's these are kind of the strategic areas that we think we can differentiate ourselves in and that we need to be focused on to continue to move forward and take share. First, it's the power of quality food and craveable food. And we can talk we'll talk about how we continue to push and move forward on the food front. Again, we believe in scale. It's a dogfight right now. This is a battle in the domestic market, especially for share and size matters. If you're going to go into a fight, there's a reason there's weight classes. And I think having some weight in this class right now is powerful if you use it correctly. I think this building, for those of you that haven't been here before, this is a good example. And we hope to show you that this isn't a hopefully, you don't look at this building and go, hey, this is a frivolous investment. This is some this is an investment in scale to bring resources together to support 1600 restaurants in a way that small companies cannot do. And when you get up and you're in this building, we'll take you up and show you the 4th floor and our IT department and the technology investments we've made there. Again, those are things that just don't happen if you don't have the resources to put behind it. And that kind of moves into, if you're going to play big in technology, you have to have some scale. Those are not cheap areas to move into. And all of you know that, you all know how hard it is and how challenging it is to move into technology fields. And we have talked to you over the years of our stumbles in loyalty programs and using technology and building out databases and then kind of recalibrating. And that's what we and we had no problem with that, because we decided we early on, over 5 years ago, we decided to build the infrastructure, put the team in place and start to grab data and own data and build on that and test things out and make some bets that were a little riskier to just see in this area. And so today though, we are so much smarter, wiser and bigger about how we use data both to run restaurants, to be more efficient, to drive marketing and consumer engagement, it just is a powerful tool for us and we continue to see big opportunities moving forward. And then finally, convenience and off premise, again, it kind of links with these other things, but it's not we don't believe it's a trend. Steve is going to talk to you specifically about our more recent deal and where we see this. But we have taken just the to go business last year when we talk about the results and we waited. We were a little bit behind the curve because we needed to we wanted to leverage our technology before we push to go. Why? Because it made it easier for our operators. And so at the end of the day, owning restaurants made us very much we're sensitive to what goes on in our restaurants. And so we don't just push the top, not necessarily understanding what's really going on in the restaurants. We're always sensitive to, hey, if you we can push the top, but if it's blowing up in the restaurant, it's going to have a consequence, either with the guests or with the P and L or with the operator themselves. And you're either going to lose team members, you're going to lose guests or you're going to run into trouble with your P and L. And so we coordinated all that. So when we pushed to go to double digit growth this year, it was smooth. And we waited on delivery. We've been testing delivery for 2 years at least with all the major players. So when we turn on 900 restaurants literally with a flip of a switch, we turned on 900 restaurants overnight, flip the switch, everybody was lined up with DoorDash, integrated into our systems and running the next day because of scale, technology and our understanding now of that deal and how it works that we could make money and our operators could deliver. There's not an iPad in any of our restaurants that says DoorDash. That's important. It doesn't blow up our system. So let's just talk a little bit about these brands. So we've been tracking really since I came here 14 years ago, we started a competitive tracker. And we track most of our major competitors' proprietary research on executional elements as well as brand attributes. So what I'm sharing with you isn't just my opinion of how these brands are. This is what consumers tell us separates these brands and differentiates them. So at Chili's, the beauty of Chili's is it's just comfortable. It's a place people go to hang out with family and friends. And it works across lunch, dinner, meet and greet with your friends after work. It's got a lot of occasional use. It's very convenient come as you are place. Interestingly, what's it's very hard to change a brand attribute. It shows a 45 year old brand. To get people to think about it differently, these attributes do not change. In the 14 years I've been tracking it, they don't they're kind of glacial, right. That's a good news, bad news about a solid brand. One thing that has absolutely moved and now Chili's leads on is this technology thing. Part of it is because we were the 1st people to put technology on the table in a major way. And so when we ask about technology and the ability and the connection of the brand technology, we score at the top of the list. And I think that's important because technology is going to integrate more and more into brands and brands that are associated with that, like Chili's, have more permission. So we have that permission. And then we have a very strong value platform, both on price and on what you get for the money. And in today's consumer world, especially if you believe what happened yesterday, that maybe some tougher times are coming, that's you got to have that. You got to have that strong value platform, that foundational strength that people can afford you and that they are not going to they're not thinking about, hey, this is an expense that I can make when I'm not pressed. And we couple that with, hey, our bar is considered legit and that separates us from a lot of these other competitors who are coming in some other categories in the fast casual world especially as they try and create an opportunity to sell liquor. Well, there's one thing about selling liquor is another thing to have an atmosphere that creates a bar feel where people feel comfortable to have a drink, watch some TV, watch a game. So Chili is really strongly positioned and executes well, but also thought of in the way we'd like it to be positioned. Maggiano, I'll just say it's just a beautiful brand. I mean, and how do you know that? Well, because people are willing to do and have their most important kind of moments in life at this brand. They will have their weddings, their anniversaries and their birthdays at Maggiano's. It's trusted, it's quality, it's got that credibility around the integrity with which they provide great food and service, and Kelly will walk you through some of the details that make that happen. But authentic, no one scores higher on authenticity across all the brands we track than Maggionis. And so we'll talk a little bit about scale. So again, we talked about this building and the power of scale as it represents just what we're here looking at today. But the other area that's been unbelievably and we were a little late frankly at Brinker to understand the power of the supply chain. But about 7 years ago, when Doug was CEO, we sat down with the leadership team and said, we are not leveraging our supply chain. And so we brought in new leadership because it always starts there. Charlie's come in with that leadership as well. And we've been able to and I can I mean, this is documented? You can see the difference between our cost of sales index and our competitors over the last 5 6 years and it's gapped. And it's not because we've cut quality or cut portions, it's because we've leveraged this team. And so if we look at our index to cost of sales relative to the category over the last 5 years, we've got at least 120 basis points to 180 basis point benefit from supply chain. And I think that allows us, so when people talk about, well, how are you going to maintain pricing at 1 to 2 with all the headwinds? Well, because we have a great supply chain. And they continue to find ways to help us with our partners innovate around and not do the easy stuff. This isn't about cutting portions and cutting costs because we haven't done that. Even on our 3 for 10 the thing that blows people away on 3 for 10 is that is not a we didn't change anything. We actually improved the quality of the product. We put a bigger burger on it. We made the burger bigger and sold it for that. We it's not a special portion. Those aren't half price or half size portion. We are not we are committed to not trying to game the consumer. And so we have to leverage our supply We've talked about technology. It starts with the tabletop, but it really rolls through. And again, some of the ways we're able to be efficient is by leveraging technology, gathering the data both from our guests and from our business and then sharing that back to our operators in a way that allows them to run a system that is better than the competitors. Better because it gives them more timely information, better because it helps them understand how to put more money in their team members pockets, so their turnover is lower, so they don't have to train as much, those kind of things. And then we share services and I don't think there's a lower G and A percentage in the industry of anyone of any well, anyone of any size. Nobody runs a more efficient G and A line than Brinker. And that's really stems from the beginning. Norman Brinker Brinker never had a company plan, never. We didn't have to sell it. We never owned one. These guys never they just never did it. This was one of the they had that mentality about, hey, we make money every day in the restaurant and we know how hard it is for those restaurant tourists to make that money and for our guests to get it. And there was never frivolous spending at Barinka. So it wasn't something that somebody had to come in and change. It's just embedded into the culture, and the team is very good at kind of living that culture. And we represent we stay very close to our restaurants and so we appreciate all the hard work they do, so we manage their money very carefully. And finally, with scale, we have growth opportunities. Again, I'll just say this 100 $1,000,000 plus investment we're going to make in ourselves to buy back our own restaurants is a good example, but we see other opportunities on the horizon where we can continue to grow both organically within the brands we have and maybe other opportunities as well. But the scale gives us that and the cash flow that this company generates gives us that wherewithal to consider options. Why we like the company owned strategy? I know this kind of came up, I don't know if it's one of you guys, I can't remember who asked the question, was that you, Jeff, about franchising? Yes, I think at the end of the day, we think we can deliver better returns to our shareholders over time. Now is the risk profile different? Sure, you got more capital at work, there's some of that. But over time, it's a better model. I don't see a casual dining model with franchising that's working very well, frankly. And why? Well, I and I think it's a combination of things. We have franchisees, we love our franchisees. They're good. But I will tell you, we track all of our guests across all of our restaurants, company and franchise, and company perform better from a guest perspective. Why? I think it has to do with scale and size and systems and the fact that we are able to kind of put them in. We share those with our franchisees. We want them to draft, but it's just a little harder. And so you get a little more, what I'll call, wobble. And part of that is also the investments in casual dining are a little bit more substantial at times than QSR, and it sometimes makes it more difficult for a franchisee to pony up and stay ahead. And so when we're talking about investments in technology, you don't this isn't buy an iPad, this is get a server and own a database or do some of that stuff. That just doesn't happen at a small scale. And so you need that massive company ownership. And in the franchise model, that work gets farmed out or it doesn't get done or they try and do a 3rd party. I mean, there's been some very innovative. I mean, you look at Domino's, how did they pull it off? It's an interesting model. But they committed the technology in a different way that's not typical of the franchise model. So we think that's another reason why company owned is better and then your ability to move quickly. So again, I talked to you about how quickly we flip the switch and we're on DoorDash, nationally, tomorrow. Now there are people that are announcing, they're doing stuff, but when they announce it, McDonald's or a franchise organization, they've made a deal with somebody like a DoorDash or another third party deliver, what they're saying is the corporate guys made the deal. What the franchisees do is totally independent. They can't every franchisee has to sign their own contract. Whether they sign that same contract, whether they live up to those terms, that's where it all starts to fall apart and do you really get that scale and that momentum in everything you're looking for. So we think in this environment, where things are moving rapidly, regionally as well as nationally, I mean, you're seeing it. We've seen it. You know, you get an oil thing, all of a sudden, Texas, how are you going to move on Texas? Well, we got scale. We can move on Texas quickly. We're doing some things differently in some regions today, where we'll say, hey, let's crank the dial up over there. They're going to need more. And we'll crank it down here and you can do that when you have this and you need to do that more and more because it's just moving that fast. All right, so our results. I know it's what you're going to do for me tomorrow, but Brinker has been a fairly dependable company over time. You can see our CAGR on EPS growth over the last 10 years has been double digit. And that, I think, gets lost sometimes in the more recent maybe slippage. And then you kind of say, okay, well, so how can you continue this and there's a lot of doubts. Well, it's not we look at it and go, well, it's not like we haven't done this for the most of our lives. So we're confident. Cash flow, again, pretty consistent cash flow model. Last year was an aberration, right? And we and I don't know how much this plays in, because it was very complicated year last year with accounting rule changes and a big sale leaseback that had a huge tax burden with it, but came with a huge share buyback opportunity in a way to leverage ourselves that doesn't really put a lot of fixed debt on us, it just I think was complicated. And we understand it, but I don't think it was necessarily easily understood by everybody else. And so if that's part of the challenge, we get back to normalcy, if you will, going forward. Our projections now are to get back to that $160,000,000 $175,000,000 free cash flow. That's kind of the model that we've been running for a long, long time. Last year was absolutely an abnormality and we're back at And with that free cash flow, we got a lot of opportunity. And we've been consistently giving money back to our shareholders, and capital back to our shareholders. So we've paid over 300 close to $350,000,000 in dividends in the last 5 years. We've given back over 1,300,000,000 dollars in capital through share repurchase over the last 5 years. We are absolutely more focused on finding organic growth opportunities as well, but we are committed to giving back capital when we don't have it. And if we don't have a big opportunity to do that with all that free cash flow, we will continue to return cash to the shareholders. So we talk about double digit returns. What's the model look like? How hard is it going to be to really do this? We've got a lot of challenges ahead of us, all of those things. It's not to us, it's not a crazy model. We need about 1.5% to 2% comp sales growth. Depending on the day and the year and the week and the month and how come you know that, some days that may look really daunting and some days you kind of go, hey, listen, if you can get your price increase and just maintain some traffic and you can either. And that CAGR that I showed you at 13%, that doesn't even close dividend yield, which by the way today is like some crazy 4% number. So the return the total shareholder return jumps to 13% to 18%, a benchmark it. I don't you're not going to find very many companies in our category that have returned that have those kind of shareholder return numbers associated with them. And that's all we have to do to give you that, maintain our dividend, continue to grow at that double digit EPS growth and that can do it and we are confident that we can do that in this business. So just a summary on Brinker. Brands are performing well. We're back on an EPS growth trajectory that we like double digit this year. I think this year was, Joe, it was 12%. Strong free cash flow story back in play, solid returns to our shareholders and we've got a strategy. This isn't we're just not going day to day here. Okay, so I'm going to change hats on you now. So a year ago, I left just being the CEO of Brinker and I came back to be the President of Chili's. And so I'm going to talk a little bit about Chili's and I'm going to have the rest of the team fill in a lot of the details, but I'll just give you a little bit of the story about Chili's. So the business today, and I'll hit one of the key pillars that we're working on, and then Ellie and Wade and Steve will pick it up. So first, one of the things I just want to share with you, I think people think because Chili's is a 45 year old brand, that there's just a bunch of guys like me sitting in there kind of hanging out, and it's not. I mean, we are not a baby boomer brand. We are absolutely the 75%, 74% of our guests are younger than 55. And you can see that the very young demographic below 34 makes up close to 50% of the traffic in Chili's. Chili's resonates with today's consumers at all kind of demographic points. And if I were to put some income demographics on here, it'd look very appealing as well. Good breadth of household income representation. It's not just lower income or middle income. We've got good representation up and down the scale. And people this for different occasions depending on where they're at in their life cycle and where they're at in their income. So if you're upper income, we could be the place you go for the drive through and you're not we're your fast food place a little more, because it's better quality food and a better experience. And if you're a middle income family, we're the place you come to have that special dinner. And some places, we're on Valentine's Day, we're packed. I mean, Chili's is wall to wall because we're a special occasion place for so many Americans that, you know, they just don't get to eat out that often. They can't afford it. And this is their special night. So it works across, all the demographics. When you think about how we make money, primarily, we've been a dine in business. Now we've had a nice to go business, about 10%, and we've grown that again up to 12%. But you can see delivery, we chose not to play in delivery, less than 1%. And it's not like we don't understand delivery. 12 years ago, when I came well, 14 years ago, I came to Maggiano's, I said, man, you know what would be really powerful? Delivery. So I bought a bunch of delivery trucks and we started delivery business and we've been delivering at Amagiano's for 12 years. We started from scratch. We were doing that way before this whole thing started because we saw the power in that business model to perform and build a business on delivery that made sense. We just didn't have the we couldn't see that clarity with delivery in this business. So we spent the last 2 years trying to figure out, okay, can you get there? And we have. And that's why we're now and look at so now you're talking about 1%. There's very little cannibalization. So we're not worried about what there's just upside to our delivery business at Chili's and it's big upside. This is all I'm going to talk about globally just because it is part of the Chili's portfolio. It's a nice piece of business and we've been in it for years. We have very strong footholds in Mexico. We've been in Mexico for over 20 years, got great partner in Alsea and CMR and CRM, CMR. And they've been growing well. We've got a really strong foothold in the Middle East, been there for 20 years. And now we've been expanding. And you can see at 30 kind of that 20 to 30 restaurants a year in casual dining, there's nobody opening those kind of numbers in casual dining across the globe. We are starting to put a little more focus on some of our fringe partners, I'll say. So this year, there's been a little bit of contraction in some of our global restaurants as we kind of called and said, hey, listen, where's the brand doing well? Where are we struggling with some partnerships? And maybe rather than continue to support partners that are kind of obscure or out there are not doing kind of now it's necessarily the business that they need or we need to, let's just kind of simplify the world and get bigger partners doing bigger things. So that's a little bit of what's happened this year. But going forward, we're very excited about continuing to grow at that 20 to 30 range, and we are excited about some of the new markets we've entered, specifically China. So this is our first Chili's in China with our partner there. It's in Shanghai. It's on the bund. It's doing very well. We're very excited about the opportunity to expose Chili's to 1,000,000,000 or so other guests potentially in the world. And so Asia is really kind of the area that we're looking at for new growth, although we've still got plenty of potential development opportunities in South America, Mexico, Central America and even in the Middle East still. So it's an all franchise business. So obviously, the business model plays a little differently internationally for us, but it works really well. So now I'll get back to Chili's. So this is what's been going on with Chili's and we talked about this earlier, this whole change in traffic trend and moving from a negative position to a positive traffic position this year, a 380 point gap, 15 out of 16 months continuing in this month and this quarter, continuing to take share. I'll talk a little bit more about how this happened, but coming back into Chili's as an operations partner, the thing that's been most exciting to me beyond even more so than just the sales and traffic that we've seen through some of the marketing and the takeout initiatives and technology is in what's been going on with our operators in the field as it relates to guest service. So in all our guest metrics, they have gotten better. And we can talk about why, but food great and server attentive are up, intent to return comes with that and our guess with problems has dropped significantly. And all of those things we know based on years of tracking this data are good solid indicators, leading indicators to future traffic, as you would expect. If they tell you they're going to intern their intent to return is better, guess what? They come back more often. It's not rocket science. So Chile has momentum, we've seen top line growth, we're capturing market share, our guest metrics are all time high. So maybe a little bit more into now how do we get there? What are our strategies moving forward? So this is our strategic map for Chili's. The pillars are going to get touched on today. I'm going to cover the first one, best in class operations and talk to you a little bit in a little more detail about how we delivered some of those results and give you maybe some color that we aren't able to give in a typical call. And then again, obviously, when we get to Q and A, feel free to delve in another level of detail if you need to. But what I'm going to focus on is really the power of systems and the systems that we have. So if you think about scale and you think about how you're going to differentiate and you think about a category that has a lot of independence, I mean, I think we forget sometimes because we're so focused on publicly traded companies and obviously, you know, in our space, they're becoming less and less publicly traded companies, right, even some of the big, if you think about Buffalo Wild Wings is off the map now and some of those that were big publicly traded competitors are not now. The visibility to what's really going on in our space isn't quite as clear. And that's only half of we typically have only been looking at half the world, because there's a whole world of independence and small chains that we don't even see, right? These are the mom and pops that really compete head to head with us in this category. And our ability to put systems together that work really well, that leverage the scale and the technology and the leadership and all of the things that we've talked about is how we're going to beat them, frankly. I mean, that is just what they just have no time and energy or resources to make that happen. Their scale does allow them to even the scale on an individual basis. So our systems are our competitive advantage. The systems I'll talk you through a little bit are how we kind of tie together our guest system, our labor system for efficiency, our guest system from a guest perspective, but then all the way down to our people systems to how do we choose which servers should be working for us or which servers need some development and which servers just need to move on. So here's an example. So labor, nobody cares about labor. I know it's not a big topic and not a concern for anybody that's tracking or in the industry. So yes, probably our biggest headwind, it's the one, no one's immune to it. I mean, it's a lot of it's driven by headwind, it's the one no one's immune to it. I mean, it's a lot of it's driven by mandated minimum wage increases. And so there's a lot of concern about what happens. And And then people look at us and they go, well, you've managed your labor line fairly effectively. How are you doing that? Is it at the cost of the guest? Well, I've just told you our metrics have never been better. We track attentive service. We track so if we're squeezing the we're squeezing it too hard, and it's just and we're taking away from the guests, we know that, they tell us. But that doesn't mean we can just take it for granted. We run a more efficient system than most casual dining restaurants. Why? Well, the easy answer would be, well, because you make more money. That's not really the case. The reason we are more we run a more efficient system, why we put more guests in front of less servers is because that's how they make money. And if servers aren't making money, guess what they do? They leave, and they go make money somewhere else, and then you get turnover. And then or the good ones leave, and you get the bad ones. And so putting money in team members' pockets is our number one priority, because we know by doing so, we help them and they help us. And so a more efficient system does that, but that system has to be managed, because it's not in a server's DNA to work as a team. They like to have any of you been servers? Any of you guys ever served at waited tables? 50% of countries worked in a restaurant. So that question usually gets a bigger response. But I mean, I worked as a waiter my whole life. I mean, I've been as a kid in Hawaii, I start and it's all about me taking care of you, because guess what, you're going to pay me. And so when I bring somebody else in to help, it's kind of uncomfortable. And so we force a team service approach. And if we don't do that, then our model doesn't work as well. But if we do, then it works better. They make more money because they can wait on more people. We make more money because it's more efficient and the guest gets a great experience. So how do we do that? So we start with these tabletop devices. There's data in there. We get 20 percent of our guests telling us, how is that experience tonight? 20% real time. That's crazy. When I was in the industry, up until we had tabletop devices, if you got 1% to 2% through some 800 number or go to the website or unaudited, very hard to tell if somebody was gaming you, small sample sizes, not predictable to the server level. You just didn't know. So you had a vague reason or you shopped restaurants. And shopping restaurants is very valid. You just can't do enough samples. I remember when we did it at a concept that I was familiar with a long time ago, and they shopped them every day. But it's one visit every day. It was unbelievably expensive, and it's still not it's one out of they did 500 guests a day. Well, you got one. So the data that we get now through our tabletop devices is powerful, and it allows us to then do this model with large shared stations and help us better understand who's doing a good job and who's not. Then we take that and make sure because they're doing that, they're making the right money. And a server at Chili's today makes $20 to over $30 an hour in California. Our servers in California are making $30 plus an hour. So it's a good job. Then we take that data, we keep using it and we just keep this circle going. Here's an example of a report that we get every day in every restaurant. It would have every server on it. It has what our objectives are as a company, and then it has how are they doing. So if you look here, James, sorry for those of you on video, you're not going to see my great pointer execution here. But so James is doing an 87 on a server tentative, which is great. Our average is 73, so that puts you pretty much in the top probably quartile of the company of all we have this for all, I don't know, 30,000 servers. His GWAP at 4.1 is good, not great. I mean, this Ashley has got a 2.6, that's fantastic. You can see hourly earnings, he's making about $24 an hour. Now are we paying him $24 an hour? Hell no, we can't afford $24 an hour. But with his tips and what we pay, he's making $24 an hour. And we got rid of this. When you walked into a restaurant at Chili's years ago and you asked a server, what are you making? They would tell you whatever the minimum wage was. And I said, well, that's crazy. That's not what you're making. You're making tips as well. So we started tracking that, and every server and every restaurant knows what they're really making. So they know how good a job this is. I remember years ago when we first started doing this, a server came and she told me, she goes, you know, I worked at a dental clinic, and I was quitting to go back full time there because I just didn't think I could have, you know, they offered me $12 an hour. And then she realized that she was making a lot more than $12 an hour at Chili's. And she goes, Yeah, now I'm back here, and I just didn't realize. And then we changed it. And so when we talk about are we stretching labor, how many guests an hour do our team members serve? I've asked that question to hundreds of team members. How many guests an hour do you think you can serve? I've never had one team member tell me less than double digits, 10, 12, some people 20. On average, our team members serve 6 guests an hour or 7 guests an hour is our goal, 7 guests an hour. Now you go, that's crazy, that's not very many. But you got to think about how the business runs, right? There's inefficient time when you start up, then you fill your station, then you get busy, and then it tails off. But we're not 30 people through a server. And with 7 guests an hour, they can make $20 to $30 an hour. And then we care about how much they pay at the table. Why is pay at the table important? Because it takes about 5 minutes to run a check if you do it manually. If they pay at the table, it takes 0 minutes to run a check. If you've got 3 or 4 tables, that could be 20, 15, 20 minutes an hour, where you're doing a process that really doesn't add a whole lot of value to the guest. As matter of fact, it tends to be a pain point for guests who want to go and they can't find their server. So we want them to understand the technology that we put on the table is there for a reason. It's to make you more efficient, so you can have more tables, so you can provide better service to those tables and make more money. And that's how this all works. And that's why scale and systems and the data and the tracking is so powerful and important, and it's one of the reasons that we're able to provide a more efficient guest experience and a good guest experience. So how this labor model works as well, so then we take all that information, we say, okay, how many guests an hour do I need for how many guests I anticipate getting. So I've got this model front and back of the house, how many cooks am I going to need, how many servers am I going to need, and then forecasting and scheduling become critical. And our forecasting and scheduling tools get better and better. And so they're better able to predict how many team members they need. And that's important because you do not want to be bringing people in and sending them home, which is another thing that people in the industry do sometimes. And that's not I mean, you can imagine you get up, you get your kids ready, you do whatever you need to do, you drive to work, and then they say, oh, guess what, we're not that busy, we're going to send you home. That doesn't work either. They got to make money. They have bills, they have commitments, we make sure they make money, we schedule them, they run the shift, we get the reporting, we look This year has been an interesting year. We had a big traffic build, right, 2, 3. People are kind of wondering, well, are you squeezing labor? Is that how you're getting this you're squeezing it too much with the traffic and the better labor numbers? Our hours are up consistent with our traffic. It's a variable model to a large degree. Traffic goes up, we're able to flex both ways. There's a little bit of efficiency with scale. We talk about that flow through a lot of it in fixed cost, a little bit in labor. But we move the model up and down and put the bodies when the traffic is there. This has been a system that's been really powerful this year. And it's again, it's one of those things that saved us some money, but it really is so much more powerful than that. So we had a belief, I don't know who started this belief, but it's been around forever, that if you wanted to hire managers, you really needed to go outside and hire externally. And so we were hiring primarily external, 25% to 35% of our manager hires were coming from inside the restaurant, 65% 65% to 75% were coming from outside. And again, we got some new leadership, we started to look harder at this and the data didn't make sense. I mean, we have better results, guess metrics, financial metrics with that cohort that came from internal. So we're like, well, why are we going outside? Why don't we think about a career path that starts really from the minute you walk in as a teenager, as a hostess, and then you could become a runner or and then a and then you could go to the back of the house and cook if you wanted to, or you could be a server, and then a CSL, and then a manager, and then a GM, and you could be making $100,000 a year on a career path that didn't necessarily put you in debt up to your eyes with a college degree that you didn't necessarily need. If you want to go to college, fine, but you don't have to. We've promoted from the CSL program. We just had our national manager meeting last week. Rick, how many CSLs do we have? The GMs? So we have 7 CSLs that started as team members who are now running restaurants as GMs. That career path and progression is powerful. And now all we had to do is just turn our managers and say, hey, quit looking out here and just start looking here. You know these people. You had 25 people on your team every day. There's some really good people in there that would consider a career path option that we've got for them. And that's what's happened. There's a lot of there's so many benefits to it, but this idea about giving people that we know and that know our culture and know our standards already, it just makes all the sense in the world. So we're moving that way. We're about 80% there. We'll get to we're getting to that top of where we'll have CSLs in pretty much every restaurant and that's just our model. And how does it kind of play out? So all of this training and our training system now is 100% digital. So again, back to systems and scale, and I have my phones over there. But when I walk into a restaurant now, I don't know the recipes on everything, but I can pull up our training documents and I can go right to the recipe. So if I'm in the back of the house, I don't have to have that memorized. I can sit there with a cook and say, Hey, I thought didn't we change that pico recipe? Knock and violate. So it's again, I think it's best in industry. You've got all of our training front and back of the house is on there, our management training systems. We're doing online recruiting. We've changed we've upgraded our kitchen system, so how we order, automate it and allow them to schedule prep is getting better and more consistent. It allows us to run better at actual versus theoretical, so that flows through. And it shows up in our key metrics. So our lagging indicator is turnover. And we've seen this go up. So 104, we're not happy with 104 yet, significantly better than the industry, it's gone up a little this year, as everyone's happy 4%, but we're not happy with that. And we know that if we train better, that's down. We're committed to training even more because one of the things we've seen is the correlation between if they're trained, they stay. So we're training more and more. Now that it's all online, we can actually tell if they took the training. We can track. We didn't when it was a paper system, we didn't know who was actually getting trained and who wasn't. Now we know. We also know that engagement scores and we measure every member of the team from me to everyone in the restaurants takes an engagement survey at least once a year. And our scores are industry leading, 74%, again, this year consistent with where we've been. So we know we have opportunities, because they give us great feedback, but we also know that the teams engage and they understand where we're going. Okay, so now you've heard about operations. I think, I appreciate you taking the time to listen to me talk about the business. I got a passion for Chili's and for Brinker. Ellie is going to come up now and just kind of give you some insights into our value proposition and our bold food you crave strategy. Ellie? Thank you, Ryan. Okay, great. All right. Hi, everybody. I'm Ellie. I lead marketing for Chili's. I've been around for about 2 years and have been in this role for about 8 months. So super excited about what we have in store for F 2020 and I know all of you are too. So I'm going to talk about our value proposition. And I think everybody's familiar with a value proposition means a lot more than a price point, right? It means what you get for what you pay. And that actually I'm going to break into 4 points. The first one being making an impression versus buying 1. So in fact, how we do our marketing is part of strengthening our value proposition. And we've made some significant changes there. 2 is focusing on families. So at Chili's, we serve lots and lots of people. Lots of people come to Chili's because it's convenient or it's right by where you need to go. But with families, we have a disproportionate chance to win with them. So we're super focused on how we can make that happen. And then everyday value, you're familiar with our 3 for 10 proposition. I'm going to give you a few key insights about why that one's going to be great in F 2020 as it was in 2019. And then finally, innovation. You all are going to have a chance to eat some of our food innovation a little bit later today and we'll give you a lot more information there, but I'm going to hit the high points here. So first, make an impression, don't buy 1. I'm actually starting with the second part of that phrase, don't buy 1. So you guys have heard from us over the course of the last few quarters that we have actually made some pretty significant changes in the way we buy our media. This is what I mean by don't buy 1. So, what I'm showing you here is first what's happened to our TV spend in the last 3 years, gone down 55%. So, in F17, we were spending $80,000,000 in mass channels and last year we spent 44,000,000. Huge change out of mass. And the reason for that is because that's not a good investment anymore. That's not where people want to consume your brand messages and that's not how they want to engage with brands. They want a much more personalized and one to one experience. So, that's where our money is going. I'm using our digital spend to exemplify that. That spend has gone from 15 to 35 over the course of the last 3 years and that's an increase of 43%. But just talking about media isn't enough to talk about where our investments have gone when it comes to making impressions. I have to talk also about loyalty. We're making significant investments in personalizing our experience and understanding our guests. You're going to hear a lot more information about that later, but I did want to draw the correlation here for you that in the last couple of years we've really taken control of our loyalty proposition. We're using machine learning to know our guests. We've gotten a lot higher impact in how we leverage this group. So our investment has gone up. In fact, it's gone up 13,000,000 in the course of the last couple years in loyalty comp. On the make an impression part of make an impression, don't buy 1, one of the most fun things you get to do as marketers is be part of a relevant cultural proposition, be part of culture. One of the main reasons I joined Chili's just 2 years ago is because there's nothing more fun than to work on a brand that people want to engage with, and they want to engage with our brand. The way I'm making that point for you here today is really about influence. Now please don't mistake influence with influencers. I know that's a hot word out there right now. This is not influencers I'm talking about. This is Chili's brand influence in social media. Our score here is 98 out of 100. So what does that mean? It means when we talk, our followers listen and they like to talk back to us. They're highly engaged with us. The score is essentially of brands you like, how much do you engage with them? And they engage with us a lot more than they engage with other brands they like. And I've put a few benchmarks up here just so you know why we think 90 8 is pretty good at an overall, like how do you get much better than that? However, when you look at Friday's, Applebee's and Roadhouse, we still outrank them. So, we're a brand in culture and that's where we're leaning our marketing effort, making an impression versus buying one. Now, my second point when I come to focusing on families, you heard from Wyman already that we actually are not a brand that over indexes with the Boomer Group. You can see what I'm doing here is comparing Chili's demographics with CDR demographics. And you see in CDR, you do have a pretty significant group in that 55 and up, but at Chili's, that's not actually the case. 75% of our guests are under 55. And you can see how many of them are actually in the under 18 group. The reason we're excited about that is because that's where the prize is. So, I'm showing you a chart on the other side about industry meal and snack occasions and how big that 18 to 54 group is. There's a lot to win from that group. And Chili's has reason to believe we can win it. I wanted to show you why we're focused on family. So what you're looking at here on the far side is how traffic share of parties with kids from casual dining, is about 29%, from bar and grill is about 33%, for Chili's, it's 42%. That's a lot of parties with kids that are coming to Chili's. We know that Millennials are growing up, that powerhouse generation. They're having kids and acting a little different when they had kids. They have fewer of them and they invite them into their adult experiences. So they like a lively bar atmosphere. They're more likely to order a margarita with their meal than previous generations, and these are strengths of Chili's that we can capitalize on. Out in terms of traffic share with parties with kids brands like Chick Fil A? That's a lot. So, we know what their needs are. So, as we build our plans going forward, we're focused on affordability, craveability, and ease. I'm going to talk the most about affordability and craveability, and then we've got 2 other great speakers that are going to go real deep on ease. So, first of all, on affordability. Our friends and our everyday value proposition that have been powerhouses for us in 2019, 3 for 10 and our $5 monthly mark. 3 for 10 has really changed the trajectory of our traffic in both daypart's lunch and dinner and in party composition in the course of 2019. And our $5 Margarita has helped us dominate in Margarita leadership. We're able to offer an amazing value at $5 by partnering with premium liquors. Our guests see that and they can't believe the value they can get at $5 from our margaritas. Let me make a few key points about 3 for 10 that I think might be interesting for you as you look at 2020. The first is, 3 for 10 users are more valuable to us over time. So as we look at about 6 months' worth of their usage, in this middle box here, I've got their party check. You can see it's a little bit lower, yes, but only by about $1 and that's because they're usually bigger parties, eating 3%. And when you look over here at visit frequency, we get nearly double the frequency from these guests. So that means they're worth a lot more to us over time. In fact, over this time frame, they're worth $102.64 versus a non user at 61.5 $3 So since this visit frequency is so important to us, we want to make sure we're creating great experiences for them. And in fact we are. As we look out across all our guest experience metrics, if you bought 3 for 10, you have a better experience with Chili's than if you didn't. That's great news for frequency. What I've got here is their overall experience is better, their intent to return, their server attentiveness, service speed, food great and good value. All the things that matter to getting another visit out of our guests are better when they buy 3%. So we know in the last few months, our competitors have come hard after us and they have launched some efforts to compete with 3 for 10. So we've been keeping track of that, watching it and ensuring that we're always on the cutting. We're still dominant in this position, and in fact, we are. So we track with every time we promote 3 for 10 how our guests perceive that value. And we know even in the last wave with all of these competitors playing in this space that 70%, 72% of our guests are saying Chili's offer is still the best thing most recently and better than most. So they get it about this deal. It's full size, top quality, amazing deal. And even though we've been on it for a year, we know 45% of Chili's users still don't even know we've got it. So as we look into year 2, we're really going hard after that incremental traffic. It's the next big prize for us. And so there's 4 things that we're doing to get that. 1st is focused reach media. So you heard me talk some about how we're changing our media mix. We're actually adding in some new media, including it may not seem like new media, but our radio is a big reach media for these families, especially. Positioning for families. So I've got a screenshot here of the ad been on this summer. At $10 a Head, Trevor can stay. So we're really trying to find those benefits of 3 for 10 that are unique for families. So in this one, for example, that your kid's friend is always around, no worries, he can stay because it's only $10 a head. And then, we're also testing out a big kid, 3 for 10. So we know our kids meal is great for families with kids that are under 10, but once they get to 10, they really want to go main menu, but they're not mom's not really ready to pay $16 for their 10 year old. So 3 for 10 is a great segue there, stops that fight. So many of the reason we're doing this is many of our guests figured it out on their own and they switch from the kids' meal to the 3 for 10 for their bigger kids. So we're just helping them out with there. Huge element of incrementality there. Off premise occasions, huge win for pleasing a group at home. And so we've got lots of growth there. And innovation, I'm going to flip to the next side to talk about innovation. We're really approaching innovation in a connected way. So every one of the innovations we're coming out with actually has a 3 for 10 component with it. And none of those 3 for 10 components raise our cost of sales on our 3 for 10 line item. So we've innovated around them so that there's still full quality and full size, but without taking the cost of sale line up. So, first of all, we're launching on our menu a brand new chicken sandwich called a Chicky Chicky Blue sandwich. You guys are going to get a chance to eat that at lunch today. It's hand breaded, hand pounded chicken. Then we've got a new steak in town. We're really excited about this carne asada product. You also are also going to get a chance to try that. And that is offered on 3 for 10. It's in test now and it's selling very well. 2 new ways to get your sizzle on. So this is a great way for us to take advantage of protein innovation. We know new trends in protein and when it comes to fajitas, what guests want is really brilliant basics. Make me a great fajita, do the basics right. So we're offering them in this test is a carnitas tajita and a brisket tajita. And then finally, a penny for your thoughts. You may wonder why Chili's might play in the pasta game. We've actually got a pasta on our menu that is one of our top sellers. So Chili's sells a lot of pasta. It's called a Cajun chicken pasta. So we're innovating in that space and pasta the way only Chili's could do it. This one's called a Southwest chicken pasta. It's got 2 proteins in it and served on a sizzling skillet. It's quite unique and only at Chili. So look, I mentioned affordability, craveability, and ease. The ease component Wade and Steve are going to talk about, but I did want to hit 2 key points. The first one being personalization. So, super important to these families that we're able to anticipate their needs and offer them just what they need. So we're look we're using machine learning and growth of our loyalty database to do that. And then secondarily, get into new convenience driven occasions. So the occasion for these families to eat out at Chili's are honestly pretty limited. So when we can get into their homes, we get into lots and lots more opportunity with them. So it's a huge growth opportunity for our future. With that, I'm going to pass it off to Wade to talk about leveraging technology. Thank you. Okay. Good morning. Wade Allen, Chief Digital Officer. Been with the brand about 6 years, in my role about a year and a half. I want to start by talking a little bit about personalization. I'm excited to talk to you about tech and big data, but I think the conversation starts around personalization. This is a term I'm sure you've probably heard multiple times when referenced not only today, but throughout the industry. But let's level set on what we mean here at Brinker and here at Chili's about personalization. It's about knowing our guests better than everybody else or anybody else knows them and be able to predict their needs and wants. That's what it comes down to. We're not alone in this thinking. There are different organizations across the world that have this approach, usually big data firms like Google. Jason Spiro, who's on the slide, has been known repeatedly to quote this from the Google perspective about brands that will evolve their strategies in the predict consumer intent. And we follow this philosophy. Now, what does that look like in a framework? So for the past 5 plus years, we've been working the same framework and it's pretty simple and you see it up there on the slide. And it's really a multilayered approach. It's pretty simple, but I'm going to walk you through it. And it's taken from the perspective of the guest. Those words are deliberate on the slide. Know me, show me, know me and show me I'm valued. The outside layer about know me is all about data. Transactional data, profile data, demographic data, anything that we can know more about our guests to know who they are. The second layer is really about showing you know me. This is a communication strategy or communications approach. It's about the content. It's about the cadence. It's about the channel that the guest prefers to be communicated. And then that inner circle there that you see that's kind of surrounding that kind of clear view around the guest is about show me I'm valued. Ellie talked about this a little bit, but value is different to different people. Sometimes that's an incentive and an offer because it's about a value as prices related and value as a transaction. And sometimes that's shared values, like family and kids and St. Jude. And so when you put those all together and you focus those lens across all of our guests, you start to get a very different picture and a personalized way in which to communicate and interact with our audience. And so let me show you what this looks like from kind of a practical standpoint, right? It starts with the data. Now we can get the data in a couple of different ways, but we found that the best way to gather that data is to let the guests self identify themselves. This happens in 2 ways. It happens in online through web and app and it also happens in our restaurants in that physical mash up with that tablet, where you can identify yourself through a loyalty ID and all that transactional data can be stored and tracked. When you add that to really sophisticated machine learning and artificial intelligent models that are focused on delivering value, right, whatever that value is to the guest, to drive sales and profitability. And then you run that through a very orchestrated, detailed communication model that's really focused on delivering the right message at the right time to the right person. And what you end up with and what the result for us has been is a 6 +1000000 member database, loyalty program that is highly active, highly engaged. They're opening, they're clicking, they're transacting, they're redeeming, and it becomes a very powerful asset. An asset that is at scale to many of the mass vehicles that we've used before. So it ultimately drives better business results. It gives us a flexible customer retention marketing lever to use to drive very incremental sales, a strong ROI. In fact, so much so, Ellie talked about this, we've been able to shift some of our marketing database like you would if you were just throttling communications about the latest generic offer, right? You maintain that integrity of that database because it's a relevant contextual conversation you're having with the guest. Now, this isn't easy to do. And many across the space, different businesses will just throttle more communication and text. It's a fruitless model and eventually collapse on you. And so this focus really says we know the guests better and we're going to continue to evolve. This is an ever evolving model as well. So as my needs change and my life stage changes. So I have 4 little kids today. I lose one to college in a year. That's going to change the way we come and eat in the restaurant. I may end up with a dietary restriction. I may end up with a fixed income at some point. Whatever that is, as that changes and evolves, that data is all captured. So we're constantly maintaining our relevancy with the guest and being able to help predict needs and wants. I also think and I think we believe in general that this is the future of where we can go into the restaurant. What I mean by that is, we know our guests pretty intimately in outbound communication and outbound messaging to bring them in the restaurant. But what if you knew them that well when they entered the restaurant? So instead of saying, Hi, welcome to Chili's, it was, Hi, Wade. Welcome back to Chili's. Thanks for being a My Chili's Rewards member. And let's get your chips and salsa going. And it looks like you have a gluten allergy. Let's make sure not to put flour tortillas with fajitas, but do corn instead. Right? That's a very different conversation to have with a guest and at the table to make you feel a much more personalized experience. And that's not outside of the bounds of what we're able to do now because we have that asset, that database of all that repository of knowledge. We also have made the investments, as Juan alluded to, being of scale. We put some of these big capital investments now down into the restaurant from a technology perspective. Every guest carries a mobile phone. We know that. It's all smartphone driven. But we also have the tabletop devices on all of our tables in all of our restaurants. And in about 20% of our restaurants today, we're utilizing a handheld with our team member. It's a point of sale handheld device, an iPad, but it can be used to put data, smart bits of data on there to inform them of who just came in and who just sat down on table 26 and how do you become and how do you create a better experience for them, a personalized experience. So this this will deliver in the future a very integrated total personalized experience. It enhances the team member knowledge about who's walked in so they can cross sell, up sell and have a better personalized experience for that guest. And it allows us to integrate data and the technology to seamlessly flow that to the right person for the right time. I haven't touched on the team member handheld much, and so I just want to take a minute and kind of dive a little bit deeper on what that looks like. I'm referencing it here on the slide as a mobile point of sale system. And effectively, in a very rudimentary state, that's what it is, right? You walk up now, we've now democratized the POS system and a third of our front of house staff now have a handheld that they can hold and have a conversation with the guests about the orders that they want right there in the moment. But it's an operating model change, right? Because 2 thirds of the front of house staff is now running food from the kitchen, from the bar, from the different drink stations and the appetizer stations. And it results in a hand in a myriad and a handful of great things, right? 1st and foremost, the team member is front and center at the table and more accessible than ever before because they're right there on the floor. They never have to leave to run back to fulfill point of sale orders or take themselves off the floor. The second thing that's pretty critical is that it improves the speed and accuracy. At the end of the day, accuracy is affected when a team member has to walk away, gets pulled away at the bar, gets pulled away with another guest and they can't remember, was it hold the pickle or add the pickle, right? So in the moment at the table, this has a very, very powerful effect of speed and accuracy of food. The third one is that the operating model is pretty powerful because it creates a career progression. Wyman talked about this a little bit earlier about moving from a host to a runner to a server with a handheld, right? That career progression and how when otherwise not thought to be a career, it can be now considered a career because there's opportunity to move up. But the 4th one that I'm the most excited about, I kind of already mentioned it, but I'm still geeking out about this opportunity as we look into this is the ability to make a personalized experience there at the table that everybody seeks because you can put the right information in the hands of the team member to be able to make that experience that much better for our guests. So just kind of to summarize a little bit about what we've just talked about and where we've been in the last 5 years. We have a track record of being an industry leader in this space from a digital perspective. 5 plus years ago, we put tablets on the table. We were the 1st organization to do that. We've modified and enhanced our online ordering system using Ollo. We've added a state of the art mobile app capability and features and functions that allow you to geolocate when you pull into our parking lot to have the food brought to the car. We've launched a My Chili's Reward program that now has 6 +1000000 active engaged members that is going to bring an enormous amount of power to bear in efficient return on investment around driving our marketing and guests back to the restaurant. But we have it we've also invested in the to go and delivery space. And while I really want to talk about this, I'm going to turn it to Steve because he's best positioned to talk about it. But we've done some great investments and I'm going to let him walk you through what we've done with Online ordering, what we're going to do in delivery and how we think it's an accelerator for the future. Thanks, Wade. So biggest question in the category today, probably you're thinking biggest question as you look at is off premise third party delivery. SpringBoard that's going to give us the momentum to roll over that 3% traffic lift last year at a time when the yield curve is inverting. You can tell me on a break what the yield curve inverting actually means in recession warnings are flashing in red. Or is it a trap? Are you going to end up substituting higher margin sales for lower margin sales and tightening the pressure on margins that are a big challenge in this category. You got 20 minutes to convince you of the former, not the latter, then Wyman is going to wrap up and you can go take a well deserved 10 minute break to think about it. Here's what I'm going to argue. We are capitalizing on a high growth segment, it is not going away. We have leveraged the scale we have, the investments Wade just talked about that we can win economically and win technologically to deliver a distinctive guest experience. We've got more upside than others because we already start with an off premise business that's in the top tier of preference in the casual dining category and we're just getting into delivery. And we've got a lot of momentum. To go is the 2nd biggest driver of our 3 percent traffic lift last year and for the last 24 months in our turnaround and we really haven't even gotten started. Okay. Now, the first question I have to answer for you is, is this thing real? We all know it's being subsidized. There's a great medium post last month. The millennials said, hey, go out and order lunch today because global capitalists are financing your sandwich and subsidizing it big time. So the true economic cost haven't been felt by the guests yet. So it's fair to ask, is this the ice bucket challenge, the Beanie Babies, the Pokemon GO of 2019? We don't think so. You know that last year Crest and Technomic both did massive omnibus studies, 2,000 plus guests to ask their attitude about this accelerating syndrome of I just want to get my burger, stay on my couch and watch Netflix and the only thing I want to do is pick it up at the door. And you guys have read all those studies. Many of you have paid for your own. So I'm not going to drain this slide, I'm just going to point out one study, one fact from the Technomic study. 30% of the millennials who were asked reported ordering delivery one time a week. I didn't say one time a year or one time a month, I said one time a week. Now our belief is this trend is going to continue and accelerate. Habits are being formed among an entire generation of consumers. And I'm old, so I can say this, you would not have wanted to bet against the drive thru in QSR in 1970, against delivery in pizza in 1980, against the double drive thru that came into QSR in the early part of this century. I would not bet today, I would not bet against this trend, convenience always wins, okay? So we believe it's a trend. Now, some of you are going to say, Kate, I'm with you on that. How is this trend good for Chili's and Casual Dine? We will soon own in a couple of weeks 1050 restaurants, we franchise another 200 that will bid for the pre digital age. They 5,000 square feet, they have 2 20 seats. They sit on land that carries a lease that is higher than you would be paying if you were just building to plug into a delivery network. And they've got a kitchen that produces food very quickly to get it to table 45, not your home at 45 Liberty Street. And by the way, just because Wade tells you we have all personal information all of you, I don't know anyone lives at 45 Liberty Street. That's actually my home address. But you could very much argue how do you conquer those challenges? Go performance, those challenges are all conquerable. But they are dwarfed by the opportunity to dramatically change and quintuple the size of our total addressable market. Now I grew up in QSR 17 years. When I got here 10 years ago, what blew me away was how small the number of occasions we are fighting for. Crest said last year that the average American family has 17 times a year they feel like going out, sitting around a table, maybe having a margarita and reconnecting with family and friends. That's the core of our business and it will always be. But it's declining, it's small and it's why there's been so much pressure on this category for so long. We suddenly wake up in this digital age though and there's this much, much larger playing field that we're now equal. There's 185 total food away from home occasions last year. To be fair, 18% of those are breakfast. We don't play in breakfast right now. But 145 to 50 are so we're talking to pool 145 to 50, more than 50% of those occasions are the simple, I don't feel like cooking tonight occasion. It just happens, it's unplanned, it's impulsive and we have never played in that occasion. But now we play. Now we get into that consideration, sir. That's a pretty bold assumption. If I were you, I would ask me, show me some data that proves that. So I'm going to talk about 2 pieces of data I didn't want to put on the slide because our competitors are watching. 1 from our 2 years last 2 years' experience with ToGo, 1 from our last 2 months experience since we launched DoorDash. So we looked at that 6,500,000 active database that Wade talked about, about a quarter of those people have ordered to go in the last 48 months. That shows how much upside we have just in the guests who love us both. They on average have used Chili's twice as much as guests who have not used this at home. That is evidence that we're breaking out of that celebratory occasion into the I just don't know, feel like cooking tonight. Since we last launched Dorex, the 1st week in May, guess what our 2nd biggest growing day of the is? The worst day of casual dining, Monday evenings. If you ever want to if you don't really want to work as a server, schedule yourself for a Monday evening shift. You're not going to get pressed at all. But if you're like me and most American consumers, Monday ultimate, I don't feel like cooking occasion. I go to bed every Sunday night. I got a to do list. I swear on the to do list is I am going to cook a meal at home Monday night. I'm on the episodic keto diet. It only happens every once in a while. And I swear I'm going to do it. And then what happens, I get to the gym late, somebody schedules an extra meeting, I jump on Waze, welcome to the lands of cars here in Texas. And my commute is going to take 15 minutes more. And historically, what I would do is call my wife and say, hey, you know, I'm going to run through Wendy's. I'll stop by Chipotle. But now it's all on an app. You see what's on that app? Yes, Wendy's, Chipotle and there's Chip. We think this is the best news the category has had in a long, long time. Now, that's fine. If I were you, I would say, okay, well, show me that you can actually win in this category because it's not the same as, say, serving food to Table 45. And here's what I'll show you. This is our off premise business at the end of the last fiscal year. Now full disclosure, that delivery number is slightly inflated because we were testing DoorDash during this time and includes a little bit of our launch of DoorDash. But what you can see is we got a little bit of a catering business we inherited from a franchisee we bought in the Northeast. We've got a little bit of a delivery business more from our testing in our legacy partnerships. We got a whole lot of to go business. We were 13% of sales Wyman showed you that's in the top tier of casual dining off premise businesses today. The people who are below us and ahead of us have been playing in either delivery or catering and we're just getting started. Now, how is that possible? Well, 2 things that might surprise you about Chili's. 1 is our food travels pretty well. We have this big broad menu and there are certainly things I would tell you not to order at your house. The number 1 is French fries. We tell guests that all the time, but you know what, they want french fries. But we have other categories of our menu like pasta, like chicken crisps, like ribs that travel very well. And in fact, they index higher on preference through our off premise channels than they do in restaurant. The second thing and this is why Wade doesn't want to do it because he's a modest guy and doesn't want to brag about it. We've made a tremendous investment the last 5 years in the technological infrastructure that makes this possible. Let me give you 3 facts. Wade talked about 50 plus percent of our guests we can identify. Either through an app or a website. Those orders have a high check, people add on more online, which fascinates me because when you have a human being in front of you, you don't want to be the pig and go, hey, I'll take an extra order of fries, but you'll do it more online. 2nd, the meal is packed and finished quicker when it's ordered online. 3rd, we make fewer mistakes. Okay? The second is we have an app that's got more than a 1000000 active users and a website. 18 months ago, our conversion rate, the number of people who go on our app or website and actually finish the check and use their credit card was about 70%. It's climbed to 77%. You know what 1% increase for a brand the size of Chili's Meats? $2,000,000 in incremental sales. That's what digital marketing really looks like. It's not the glamour of the big TV ad, it's data scientists sitting around and improving your app and your website one day at a time. Here's the third thing. When we go into delivery, we go in by building an API that allows DoorDash and anyone else we want to partner in to plug right into our POS system. The orders show up just as if they were ordered at a table. And most of the people in this industry use a middleware software. So there's another hand in the pot taking a little more of the fight for the money. We don't have that because our tech team built this commerce API system. That's how you build digital leadership. That's why we have had this kind of growth in the to go business. We've gone from 11% to 13% preference, again to go alone, 23% 2 year growth. Okay, so follow me. This trend is real. It's the best news that Chili's has seen in a long time. Our to go leadership the last 4 months in size demonstrates that we're pretty good at this. But then there's questions about, okay, but what about 3rd party delivery? This is just like Spotify. We're Jay Z. We're the artists. They're the content provider. How do you structure a relationship and an agreement with partners or a partner that both sides can actually win? Well, let me explain that and I'm going to spend a little time on this. First, Joe said something on Tuesday that may cause some of you to really scratch your heads. And I know Joe said some a lot of things that may cause some of you to scratch your heads. But this one was, we got a best in class deal for 3rd party delivery. How can Chili's get a best in class deal when companies like McDonald's and my old company Yum! Actually make cash investments in these nascent companies. Well, at this moment in time, Chili's brings a lot to this battle for market share that's raging in 3rd party delivery. Let me walk you through what that is. We bring 60,000,000 unique guests every quarter. If you're going to win this battle for market share and you're going to keep the drivers, you need lots of guests and lots of turns. Ellie showed you that half our guests are millennial or younger, QSR can bring you that. But a third of our households are 100,000 or more. You don't get that from McDonald's. God bless them, you don't get that from Taco Bell, okay? The second thing we bring is, we've got company dominance, Wyman told you, 86% of our restaurants. Now I grew up with franchisees, I used to head of franchising at Yum! I love franchisees. They taught me the business. But if you take the leaders of these delivery companies out for a beer and they're honest with you, they will tell you that they have learned a lot in the last 24 months about the limitations of franchise dominant company. One is what Wyman referenced, you're not making a deal with 1 entity, you're making a deal with 20 entities or 80 entities or more than 100 entities. 2nd is technology requires investments and that middleware challenge is a great example of integrating with 1 POS system is hard, integrating with multiple POS systems is more investment, more work. And a lot of times, the easy solve is middleware, which puts another hand in the pot of trying to achieve profitability. And the third is kind of funny is look at a lot of these franchisees are boomers. They grew up in a very big mass marketing way. There was a very clear delineation of my royalty goes for this. My ad contribution goes to put a 32nd spot on NBC. When you start talking about investments in things like data storage in the cloud or cleaning our data every month or building APIs to have smoother interactions with multiple POS systems, the fight breaks out of who's actually going to pick. So having a system that's 86% company dominant and can move on a dime is a huge advantage. The third thing is check. Remember how this marketplace works. This is the ultimate form of capitalism, this new 10.99 workforce. I'm a dasher. I get 3 orders at the same time, McDonald's, Chipotle and Chili's. I get to choose. I don't have a boss. I get to choose which one I want to fulfill. We bring a check average that's 3 times McDonald's and 2 times Chili's. And finally sorry, 2x Chipotle. And then finally, we bring this track record of digital innovation that we talked about. Okay. Now, why did we go with DoorDash? I'm going to be very transparent with you. First of all, we looked at 4 different options of how to win and deliver. We looked at building our own network. Wyman referenced, Kelly runs the most successful on a per restaurant basis delivery company in America, Maage Al's La Lily does more $250,000 in delivery catering out of each restaurant. I wish you could be in a Maage Al's in December just see the tables lined up with the bags and boxes to take orders out. We know very well the margins in that channel and we know very well the stress on operations because if you don't get enough turns from 4 to 9, guess who takes the order at 4:30? The manager. That's not exactly consistent with our number one strategy of improving Chile's operations every day. We also looked at just sitting on the sidelines and continuing to sit on the sidelines like others are doing in casual dining. Our conclusion was this is very real, early adopters are moving fast today, people are developing sticky relationships with these 3rd party partners and now is the time to move. Then we looked at what you might call the Hannah on The Bachelorette strategy. Why don't we date a lot of people? Why don't we thank you, love The Bachelorette, I got $3 so that but why don't we do Grubhub in New York? Why don't we do Postmates in L. A? Why don't we do DoorDash in Dallas and Uber Eats in Houston and throw in Bite Squad in Louisiana and Arkansas? And basically what we concluded is you have no economic leverage if you take that route. So we decided and these are very specific words to enter into an exclusive strategic partnership with DoorDash. Those words exclusive strategic partnership. We went out and terminated relationships, some that lasted for 15 to 20 years with 50 odd delivery partners, some very small regional out there. Now why do we choose DoorDash? The first reason we chose DoorDash is they are the most technologically nimble of these partners. We worked for 2 years and challenged everyone, including Amazon by the way, to integrate into our POS system. Casual dining menus are long and broad and they have more customization than fast food menus. You can customize your burger, hold the pickle, you can a digital strategy. If your training manual, even if it's digitalized, starts with the words, take the order off a tablet and retype it into a POS system. It might as well say, and on the break, play Donkey Kong. I mean, that is not 2019. Okay, number 2 reason we chose DoorDash is they lead in market share where it matters to us. Now let's be upfront. If you're in Hollywood and you're Post Malone, you're calling Postmates. If you are in Barcelona, Spain, Uber Eats is Uber Grande. If you live in Manhattan, I know a few of you do, I'm calling Seamless Scrub. But if you're in Paramus, New Jersey, Alpharetta, Georgia, Plano, Texas Irvine, California DoorDash has 50% plus market share in those trade areas where our Chili's restaurants are located and they are adding to that market share every month for the last 18 months. And finally, we chose DoorDash because since their inception when Tony Hsu came up with this idea in his dorm room at Stanford, we've been very clear they want to be a merchant partner. Remember, there's 2 businesses going on here, a marketing portal and a logistics business, and they are logistics business first. And we were basically able because what we brought to the table to negotiate a deal that will give us a sustained economic advantage over both independent restaurants, that doesn't shock you, but also over we believe large chain restaurants in QSR and casual dining that are dominated by franchisees. Okay? And that's critical. So how we do? Well, we launched on May 3, and we are right now experiencing exactly what we saw in test. We are experiencing high single digit orders per restaurant today, let me be even more, it's the highest single digit that exists. 2 things I would point out about that. We've spent no marketing behind it except for the 1st day we had one offer on 1 burger. All we're doing is showing up on DoorDash's app and their website for their 8,000,000 active users who are hungry and looking for food at their home or office every month. The second thing is, we launched at the trough of seasonality for delivery. Delivery seasonality is tough to measure because this is a exploding nascent category, but basically it goes like this, summer everybody is out, it troughs, then it starts to build through the fall. The peak is no surprise Q3 when the weather is our Q3 when the weather is worse in January, February, March. So there's only upside from here. 2nd, highly incremental, Joe said it on the call, to be very precise, what we saw in test, what we're seeing right now is 84% incrementality. Number 3, increased check versus to go. We made a very deliberate decision not to put 3 $10 or $2 for $25 into our delivery channel because we're managing channels and this channel is aimed at the young and the affluent coming out of the gate, those who are willing to pay extra for the privilege of having food brought to them right now, right where they want it. And our guest feedback is on target. We are averaging 4.7 rating on Doordak for Chili's 36 minutes last week on our average delivery compliment Kelly, they told Tony Hsu was here last week and told us that Maggiano's has the highest rating anyone they partner with on their platform. Okay? Now, what comes next? Well, what comes next probably won't shock you is Chili's delivery. On our app, on our website, we integrate into that. We will launch this in Q2. We control through that channel the delivery cost structure, the service fee and delivery fee and obviously we control the data, they're ordering directly off our platforms. It's targeted to our 6 +1000000 loyalty guests. Wade talked to you about personalized journeys. To me, this is the ultimate journey. If it's raining out in a DMA, we can offer $0 delivery fees. If it's 4th July weekend when our restaurants are empty, we can offer a deal. If we know that you only visit Chili's once a year on a birthday, we can offer the ultimate convenience to you because we know that will be a highly incremental occasion. And we're launching it nationally in Q2. Take a look at what our this mock up of what our app will look like in Q2. This to me shows what a multi channel strategy really looks like. You're going to be able to access Chili's 4 ways. Come in, sit at a table, have a server, enjoy a cocktail. You can pull up at curbside. If you love tech, just hit a button on your phone and we will bring the food out to your car. It's more convenient to Chick Fil A. If you don't trust tech, come on in, pick it up at the to go station. If you don't want to play the delivery fee, if you don't want to move off your couch, just hit our app or DoorDash and you can get delivery brought to you. That's what a multi channel strategy really looks like. Now what will come after that? Well, this year we will test these innovations. We will test actually marketing to go through DoorDash's app and website with the 8,000,000 active users every month. We'll evaluate the return on that fee we pay to DoorDash versus $1 spent on Google search or the Discovery Channel for a 15 second to TV commercial or Spotify for an audio commercial. As Ellie told you, we are not in the spray and mass media business that I grew up in. We are agnostic of media channels. We go where the return is highest. The value of most of these digital media channels and the beauty of delivery is they end with a retail like order now. There's no distance between the stimuli and the decision to go, Okay? The second thing is DoorDash will integrate our loyalty program onto their app and website. That has 2 advantages for our guests. It means they can get their free chips and salsa, even if they're using DoorDash. For us, it means we get the same level of check detail knowledge from their transactions that we can even better target those personal journeys that Wade talked about. We will test their subscription service, DAP Pass, which as you know is an aggressive offer that drives high, high frequency among people who use delivery a lot during the month. And finally, Birdash is committed to working with us as part of this deal to developing a catering project. We own more intellectual property on how to do catering right than anyone through our Maggi Elmo's brand and we're sharing that with them because it's a very different business, very high touch. The guest is spending north of $100 Many times the guest job is riding on everything showing up and being purpose. Majao's has been doing that for 14 years. And we think that's great upside. We'll evaluate each of these tests separately for incrementality and profitability and also collectively for ongoing incrementality and profitability. Because going back to that Spotify or Netflix analogy, our deal with DoorDash is this has to be a win on both sides. Okay. Let me close with a little bit of a confession. I'm a baby boomer. Now for those of you baby boomers in the room, it's not quite as bad these days as saying you were in a federal for a whole year. It's getting there sometimes, if you like. Baby Boomer history, right? This is a week, long time ago, a big cultural event happened that shaped Baby Boomer's ad. I'm not talking about the 50th anniversary of Woodstock. A 40 year, 6 months and one day ago, the movie Monty Python and the Holy Grail first appeared in theaters. You're a baby boomer. A lot of what you believe about life comes from that 90 minute movie. There's a scene where Graham Chapman plays King Arthur and comes upon a castle and it's populated by all these smart aleck French guys and he's seeking the key to eternal life, the Holy Grail. And he goes, hey, you have the Holy Grail. And the Frenchmen talk amongst themselves and they go they utter those words that have been used for 44 years since whenever you want to just blow people off and tell them to go away. So tell them we already got one. So my guess is as you go around to these conferences and sit on these calls, when it comes to digital strategy, you hear a lot, we already got one. Here's the four questions I would ask. Have you made the kind of technical investment that Wade and I have talked about to give the true personalization and reliability of the experience? Do you have a database active and growing in a loyal program that keeps people sticky to your brand because that's going to be the foundation of your do you have a track record that you can execute in this off premise space like we've shown with this double digit to go growth over the last 24 months? And then have you really thought through how you're going to win not just tomorrow in off premise, but down the line? I think Chili's checks all four of those boxes and that's why I think the answer to this question delivery for for Chip's momentum for mix opportunity is momentum all the way. I'll turn it back over Juan. Thanks. All right. So you're going on a break really. We're late. I just want to correct Steve on one thing. I love his energy and as Suzanne sometimes he gets a little details a little bit off. We rolled DoorDash June 3, not May 3. So it's really not in our Q4 numbers much at all. And that's I know for some of you good, well, but who reads the slide when Steve's talking, I mean, come on. So the just to kind of put a cap on Chili's and then we'll have a break and Kelly will come up and talk about Marjane's a little bit. But hopefully, you've heard some more details really around what we've been talking about for quite a while with you, that we have a solid strategy. It's not a one time thing. The lap that everyone was concerned about is not keeping us awake and that because it's not a lap strategy. It's a foundational strategy with multi years and multi layers put onto it. There's levers to pull. Steve just talked to you about delivery. I mean, it's we're in Phase 1 of a multi phase approach. Phase 2 comes in the 2nd quarter and then Phase 3 and 4 behind that. And through every one of these phases, there will be checkpoints. There will be opportunities for us to determine that we're not committed or obligated to do anything, if it's not incrementally driving traffic and profitability. So but we're confident that it will and we will continue to push forward. So lots of opportunity. There's some headwinds out there in the category. I get it. We see the numbers. Malcolm sends them and shares them with all of us. It's been a little bit of a choppier time period. Frankly, I'm torn on that. I mean, yes, it's I think sometimes I say, that's a little headwind, and let's get some of these weaker players out of the field, because it is going to happen sooner or later, and we're going to be here. I mean, this brand is not going anywhere. This company is not going anywhere. We've got the value proposition. We've got the guest loyalty, and we've got the products and the leadership team and the people in the restaurants running restaurants every day to win the battle. So we don't panic over a little downturn. Matter of fact, we see it as an opportunity to maybe clear some of the weaker players off and then we move on. So thanks for your attendance and your focus here. We'll take a break for 15 minutes, 10 minutes, 10 minutes. And I would like to introduce Mr. Kelly Baltus to talk a little bit about that wonderful brand, Maggios. Thank you. I'll just make a couple of things really clear. I am not going to open or close with the Monty Python's quote. So we should be good. So I had the opportunity to join Brinker and Maggiano's a year ago July. And to be able to join a world class organization like Brinker is really, really cool, awesome, and it's been amazing. And I got the best job here today because I also get to lead Maggiano's and I get to share the excitement that I have for Maggiano's with all of you. My first Maggiano's visit was back in 1997. I went to my first Maggiano in Schaumburg, Illinois and it was maybe a life changing event. It was really, really a special experience. So I've been a fan and a user of Maggiano's since that first visit back in fall of 1997 in Schaumburg. So today, what I get to do is share a little bit about Maggiano's. I won't go quite as in-depth as maybe we've had time for Chili's, But I am pretty fired up about it. And the things we'll talk about today, I'll give you a little highlight on the business, we'll hear some performance highlights and most importantly, growth opportunities. That's one of the reasons why I came here and joined it because I believe in the brand and I really believe that there are huge opportunities for us to continue to grow. And that was one of the reasons why I'm here. So we'll jump into it. Wyman said, Maggiano's is a beautiful brand and it really is. It is a special brand. One of the reasons is people come to see us for such a variety of occasions. And it could be something as important as a first date. It might be a birthday, an anniversary. Some people not only have their wedding receptions in our banquet rooms, some people have their weddings in our banquet rooms. The occasions are absolutely amazing. And by the way, some of those occasions are just a great meal out, just a great break from what's going on. And that's pretty cool. And that's really the trust that Maggiano's has earned over the course of time. One of the reasons why they come is for our classic Italian American food. And it's made in house. It is a full scratch kitchen that has an executive chef in each and every restaurant. So we do a lot of work here. You'll see our kitchen along with Chili's later today, but the hard work really happens in the restaurant. Each restaurant has a trained team of professionals and that chef led kitchen is absolutely amazing and it's a huge advantage that we have and we'll talk about that. So when I started with Maggiano's back in July of last year, the first thing I did, knowing the brand and having been a user for many, many years, I spent my first 90 days visiting and spending a half day or more in each and every restaurant. And when I tell you that the team has a culture and a tradition built around excellence, it's really there and it's living and breathing in the restaurants. Myself, everyone on the Maggiano's team, we set out each day with the core purpose of making people feel special. And when you go back to the occasions that I mentioned, you really have to deliver on that. If you don't deliver on that, they're going to tell you pretty quick because of so many special occasions and the high expectations that come along with that. That making people feel special, so how do we do it? Well, we're committed, we believe in it, and then we have high expectations for our operators. And then we have have systems that are built around that so that it's easy to execute at that high level each and every day. So something along the lines of what we call kitchen perfection. That means that we execute at a high level, got systems, we got training and then we set out to deliver on that each and every day. We also have world class service where we truly personalize things in a way and you've heard about personalizing from a data and a guest experience. That happens and it has been for a long period of time at Maggiano's, an opportunity for us to continue to make progress there. On that trip of in my first 90 days spending time in each of our 53 restaurants, you really feel that effort and that actual delivery of how we make guests feel special each and every day. And that results in a very high level brand affinity. And I know that this and read this earlier this year, it's a study by Market Force that was conducted and it named Maggiano's America's favorite casual dining restaurant. That's pretty cool and it actually is very consistent with what I've experienced in each of our restaurants, both on that initial tour and ongoing. And when you think being personalized with guests, there's nothing more personal than an allergy or a dietary need that one of our guests have. And once again, this is Allergy Eats. In 2019, Maggiano's was named the most allergy friendly restaurant in America. So personalized on a special occasion taking care of guests' very specific needs. So if you think about that executive chef, our procedure for when someone says, I've got celiac here at the table, I've got a celiac disease, our executive chef or executive sous chef delivers goes out to each table, takes the order themselves and walks it through the kitchen. That's how we make people feel special in all kinds of personalized environments. So by doing all of that, we're able to run very high volume restaurants. Our average unit volume is over $8,000,000 $8,300,000 a year average unit volume. We have some a little higher, we have some a little lower. That is a very strong model for a guy who's been in casual dining his entire career, 8.3%. Well, how do we get there? You look and you see 68% of it comes in the dining room. So you now know, so our AUV versus our competitive set, select competitors on the right there, our dining rooms, which is dining room, bar, patio, our dining rooms do all is nearing $6,000,000 a year. That's more than the majority of the competitors that you see on the right hand side. So the dining room bar patio is a strong part of our business. That's a big model that helps us leverage all kinds of things. In addition to that, the majority of our restaurants, not all, have banquet space. And those special occasions, business meetings, family gatherings, large parties, reunions, things like that, that 18% is a significant part of our business around $1,500,000 a year. That is split about half social and half on the corporate side. So within Banquet itself, it is diversified there. You'll also see that 14% of our business is off premise and that's in catering, delivery, carryout and that includes 3rd party. So as Steve mentioned, there's a big chunk of our business that's already established. And you already heard that that part of our business is a little bit more mature than maybe what Chili's has experienced after testing for a couple of years and going into that. So the model itself, when I just think about how strong is the model, how great is this, dollars $11,000,000 and it has some great diverse revenue streams, so that as the consumer need continues to adjust and change, we're in a great position to continue to capture that. I'll talk about a couple of performance highlights here. I'll start with improving comp sales. It is great that over the last couple of years, it continues to go up. I'm even more encouraged about the choices that we're going to make in the short term and in the longer term as far as our clear priorities about growing the business. I'm excited about where we can take this and let all of the diversity that we have in the revenue streams. And our GAAP for our segment, which is the upscale casual segment, our GAAP continues to get better. And the reason it gets better is because we continue to improve on the level of execution. Again, the stakes are high when it's a special occasion, But every great experience and this gap is as a result of some of the guest metrics, which we use as leading indicators, you'll see what's helping to drive this. And I'm really excited about this continuing to move in a very positive situation. So off premise business, you saw on the earlier slide, it represents 14% of our business overall, catering delivery, carryout and 3rd party. As Wyman shared earlier and Steve shared just a minute ago, we've been in this business for over 12 years, between 12 14 years. We have delivery vehicles in every one of our locations and we also have trained teammates. They know what they're doing off premise. And again, it's part of our core. And I think the really neat thing is that even though it's part of our core and it's been part of us for a long time, we've been in 3rd party for between 3 4 years. We've worked with a lot of them, which has helped have some opportunity for Chili's and the Brinker team to see how that's worked over years. But even having been in it that long, last year in off premise we grew at double digit growth, which is pretty cool even having been in it for quite some time. So why are we showing some improvement in comp restaurant sales? And why is our gap growing versus our competitive set in upscale casual? Well, it's being driven by our experience. Our experiencing things at a higher level, they're getting more and it's happening more consistently through all of our restaurants. So when you look at the left and you see the overall guest experience move to the degree that it has over the last couple of years, it's significant. And that is starting to really shape the desire to come back and have another great food likelihood to rent to $2.9 which is a great number. Now I've been doing this for a very long time. This has been in casual dining my entire career. It's been just a couple of years. I have never worked with an intent to return over 80%. I've never seen it. I've never seen anyone else have it. It is truly remarkable. So when you think about it, you've got a special occasion or just a great night out. As our guests leave, they're thinking, when are we coming back? I can't wait to come back. That's really powerful and this as a leading indicator is very, very exciting and we're not done here by the way. Well, our guests tell us with our internal metrics, they tell us we do a great job, that's improving. And also from a social standpoint, when they get out on social and their comment and they do surveys there, this is a aggregated Google OpenTable and TripAdvisor. You'll see that ratings are high, they continue to move up and that is also exciting. On growth opportunities, I said that's one of the reasons why I came here. I want to give you enough so you have a kind of an overview of some of the things that we are doing to work on growth in the near term and in the long term. So near term, 4 areas that I will share that we are working on and all of these 4 areas consider the teammate experience to make it better, to make it easier, to make it more engaging for them. And they also have the guest experience as well as the ability to continue to contribute to traffic and sales growth. So all 4 of these priorities are set, have been formed and tested and put on them with those considerations in mind. So operating fundamentals, Wyman said, we love operating restaurants. It's an advantage. Let me tell you, a high volume Maggiano's restaurant doing $8,000,000 plus, you've got to operate it and you've got to operate it well. So we continue to work on our system, which includes using technology to enable and get some efficiency in our core operating fundamentals so that we can do it better tomorrow than what we did today. And another example here, our operating fundamentals is working on times of peak demand. So when the guests really want to use us, P6 is our busiest period of the year around the holidays, When they really want to use us, whether it's a Friday night or it's holidays and people are out, they're celebrating, we've got to be as efficient and effective in delivering that, making guests feel special every day. So this year, we're working on continuing to improve some operating fundamentals, the core systems of our business. 2nd, hopefully, did you have anyone have breakfast? How was breakfast this morning? That was a sampling of what we do at Maggiano's for brunch every Saturday Sunday. We continue to work on enhancing our menu. What's really great is by having an executive chef in each of our restaurants, we have the ability of running features ongoing. So every time you visit Maggiano's, there's something different going on and we do that with our executive chef led kitchens. So we've always used that innovation to influence our core menu. What I would share and we're going to continue to do that. What I would share today is that we're going to continue to do that, but we're going to work on innovation around the core menu as well. So that those that people have always had, we're looking at very detailed satisfaction data, menu item specific to continue to get better and better. And the actual format of the menu, for those of you familiar, we've got in test an entirely new format to make guest experience a little bit easier and to make sure that that aligns with our broader upscale casual position. We've got that new formatted menu. We've got that in test in 6 restaurants. We put that in, in late June. So it's a good sample for us. And we're continuing to learn. In addition to that, we're looking at simplifying a little bit around the edges of the menu while driving that innovation to the core. And we're excited about how we believe it's going to improve our teammate experience, the guest experience and that it will contribute to drive our comp sales. Next, we'll talk a little bit about data from our guests, that data capture. And we are working very hard at Maggiano's to broaden that capture. And I'll give you one example. Now Steve and Wade shared a ton about that personalized data and the advantages that we have because of what we've done in building the infrastructure and the investments we've made in technology. We get to benefit from all of that. We get to draft off of Chili's a little bit and that's really helpful for us, leveraging all of what Brinker has and the experiences they have. That's a huge advantage for us and we definitely take advantage of it. The number that they shared was number of engaged actors over 6,000,000 at Chili's. That's a healthy number. Not just number of people in the program, but they're engaged at a high level. For Maggiano's, we have an active guest email club, which we are working on. We have over 1,100,000 for our 53 restaurants. And that's over 21,000 per restaurant. People who are engaged, they want to be engaged with us, they want to hear messaging from us. So not only capturing more, but finding ways of personalizing that journey to be more effective is something that we're working a great deal on. And the picture next to the number 3, that's in test, that's a table payment device. That's in test in 2 restaurants. It's been in 2 for about 8 weeks now. And what that allows us to do is to drop the check, providing the guest with a very polished opportunity to close out the check, do the payment themselves and then also engage. The adoption rate that we have in this test for people who will give us more feedback on the guest experience is high. It's over 30%. 35% of the people are giving us a score, which gives us more insight, more data, more reliability around it to know how we're doing in each restaurant, server specific, things like that. So that's really good. The other thing that it does is it allows them to sign up to be part of that over 1,000,000 engaged users. At the rate that they are signing up for today, that would allow us to double that in about a year's time once we're turned on to that's a already strong proposition that we have and it allows us to leverage it 2 times. So we're really excited about this and that test is ongoing. We continue to learn from it. And lastly, we do believe this is another near term growth opportunity that will help us continue to build our net sales and that's leveraging the growth of that long established delivery business. And I can tell you the great thing about being in this business already for 12, 14 years in delivery and catering, 3rd party for the last 3 or 4 years, it puts us in a position where we can get really good at it and drive that guest experience even higher. Our food travels amazingly well and that works. So we're excited about not just driving more sales here, you saw that on the growth slide for 3 years. We continue to grow it, but to improve and continue to build on the guest experience is really, really powerful. And those are our clear near term priorities for growth. Well, I shared I came for longer term growth too. So I'll share a couple of things that I'm excited about and that we are working on for the longer term, which will drive not only our market share, but our same restaurant sales, etcetera. 1st, even though our guests love us, the brand affinity is very high. They tell us great things. They trust us for all these different occasions. After 28 years, yes, even Maggiano's needs to have a little bit of a refresh for the restaurant. And this year, we have brought in a great outside firm to partner with for us to complete a re image project to then learn from and make adjustments to. So I'm excited about this because of the strength that we're starting from and then the ability to refresh that image a little bit. And that will translate to sales. We'll get that exact model and that exact investment figured out. And by the way, that firm that helps us drive that reimage, that refresh, it's not a repositioning by the way, we're in a position of strength. But all is going to also feed this next, which is new traditional restaurant development. So if we go back to that last slide that showed our AUV and our diverse revenue streams, is a great proposition for growth, 8,300,000 AUV with very diverse revenue centers. This is an opportunity and again, this is one of the reasons why I'm here. We've done a ton of work creating a very disciplined process for new restaurant growth. And that started with taking all of the success, running the data on the attributes that has contributed to Maggiano's most successful restaurants, taking that data, scanning the country and seeing what that opportunity looks like. The greenfield is wide open with 53 restaurants. As we continue to get better at running restaurants at an even higher level that this is a compelling part of our future. So we're working on our pipeline, we have a disciplined process in place and we plan to open our first new restaurant in the next fiscal year. As you know, with the lead time, we're very active on that and excited about that. For anyone traveling in and out of DFW on your way here, I hope that you will stop by the Maggiano's, that's our 53rd restaurant. I hope you'll stop by on your way out. It's worth the ride even if you're in a different terminal. It's at C-seventeen, right across the gate from C-seventeen. This is our first partnership in our first restaurant in an airport. It's a non traditional. I got to tell you, it's cool because everything that makes us great in our regular restaurant, you can get it at the airport. Like you get real food at the airport, it's made in house, we're not trucking it in from a different restaurant. We've made some choices, it's just under 6,000 square feet and it is an oasis for traveling with great chef driven food made for you. And by the way, they do have a hot grab and go, so you are no longer required to grab the salad or the wrap. As you're running to your lane, you can take something that's been made and is absolutely amazing. There is a huge demand for this type of development, this opportunity. We have 1 and we're learning a tonne from it. And by the way, those things that we're learning from that 6,000 square foot restaurant at DFW, those things help translate to other parts of our business too. So we have one additional non traditional development that we will open sometime later this fiscal year and we are very active because there is a demand for people with other opportunities in this and we are actively engaged with those things. So long term growth opportunities are, I believe, significant and they're exciting because it allows us to keep introducing Maggiano's to more and more guests. By the way, we're in 23 states and the District of Columbia. So that growth, there's a great wide open space for us there. I'll wrap it up and we can talk more lunch and through Q and A, but we have a distinct advantage with our business model with way we run our restaurants. It is a competitive advantage. I'm excited about the guest metrics. I'm excited about our traffic, our sales. Things are moving in the right direction, So thank you for your time. I'll see you at lunch also. Thank you. I'll bring up our CFO, Jim Taylor. Thank you. Thank you, Kelly. Good morning, everybody. It's actually been a real pleasure and great experience to get to spend the last year working with Kelly as he's joined the team, the expertise he's brought, the focus on the new strategies and opportunities to grow Maggiano's. It's an exciting time to see where he's going to be taking that brand working with the rest of the Maggiano's team. Obviously, we want to spend a little bit time talking about finance. Today is really principally about the opportunity for you to come in and get to listen to the breadth of this management I think you can quickly take away the expertise they have, the experience they have, and just as importantly, the passion they have for this business, the fact that they're looking out on how do you build off of such a strong foundation, such strong brands, but understand the directions, the evolutions and the opportunities that the business brings and funnel that all together into models that work as the process changes and the evolution takes place and how we stay out in front and be a leader in that evolution. Obviously, there's a number of other members of the team here that aren't speaking, but are here obviously to meet and mingle and hopefully get a chance to understand that depth and that breadth too. So I thank all of you for participating. Let's spend a little bit time putting the finishing touch on the formal parts of the presentation and talk about some of the finance pieces. Quickly run through the performance highlights. We obviously talked about that on Tuesday on the call after issuing our Q4 and annual year release. We'll touch through capital allocation, validating the continuation of the approach we have to capital allocation And they give you some insights as it relates to both the current year guidance that we talked about and how we're approaching the business financially, how this all comes together in the financial model that will drive double digit shareholder returns. Again, putting a bow on F 2019, great year for us. We were real pleased to get the traction. A lot of hard work went in even before the fiscal year on defining those strategies. Everybody came together and I think we saw a multi layered approach to the ability to drive business in a highly competitive environment and drive through a lots of volatility and ups and downs in our space. So again, real pleased with the way the model, both comp sales driven by traffic, which again is a key piece of the equation, running above 2% on a combined basis, little bit stronger at Chili's. And back into double digit growth on the EPS side, going from $3.50 to the high end of the raised guidance we provided throughout the year of $3.93 So real happy with just the results that we were able to present to the shareholders this year and how we grow the business and set the momentum up to keep going forward. Revenues continuing to move up traffic, we gapped you've heard you're probably getting tired a little bit of us, but we're going to keep talking about it because we'll keep doing it. We're gapping the industry on traffic. We're capturing market share and beating the competition in this tough game. For the year, we gapped by 380 basis points. That's not winning by a little, that's winning by a lot. And we're continuing and we did it throughout the entire year and we're continuing to do it as we move through this fiscal year. A lot going obviously from a margin standpoint. There's a lot more discussion it seems right now around margins than maybe this time a year ago. And we did some things that we thought were appropriate for the business between the sale leaseback and some things you have to do from accounting standard standpoint. And once you factor those out, we hit right on the guidance that we gave you a year ago, when we said that our margins would be impacted by 160 basis points, 180 basis points. They were impacted by 170 basis points. So again, great job by our operators, That's where it starts. I mean, we roll all the numbers up together. We look at all the forecasts. We make all the determinations. But margin management starts in our restaurants. And that starts with the systems that we've talked about and the ability for the operators to engage and execute against those systems to deliver that kind of execution. Obviously, we did a large structured share repurchase at the end of fiscal 2018, which was then effectively refinanced by the sale leaseback, which allowed a WASS reduction of over 15%. So again, a fairly significant financially engineered move to adjust WASS down by that level. We continue to pay dividends. Again, we will talk about the free cash flows. We're very focused on free cash flow and free cash flow growth and that helps support dividends. So we continue to pay at that consistent level about $60,000,000 this year. Capital allocation, there's not really a lot of new news here for you all, but I want to validate our approach to capital allocation because it's consistent and it's what is driving both the business from an investment standpoint and driving the ability to return shareholder dollars and to drive return in that fashion. 1st and foremost, we're going to invest for growth. We spent the last couple of hours really talking about that subject, how we're investing for growth across the business. It's a multi tiered investment. It's not just one thing. It's not just delivery. It's not just value. It's a multi tier piece of the equation. We're going to continue to put those guardrails of maintaining a flexible balance sheet. We're very comfortable with the leverage perspective we have. We're comfortable and I'll get in a little more detail, primarily based on the business, the trajectory of the business and the cash flows that it generates. But I also feel it's well structured and has great durations when you look at it. And then we'll continue to return shareholder capital, pay dividends and we will be in the share repurchase market as free cash flows are generated throughout the year. So from an investment standpoint, you've seen us jump up investment the last 2 years. It's the right time to be making these investments back into the business. We moved up a little bit higher than we thought we would this last year, but took the opportunity in several cases to make some incremental investments both in our restaurants and with some new restaurants, spending about $168,000,000 We're guiding that we'll spend about and $40,000,000 to $150,000,000 I do want to make sure that we balance that investment, so that the free cash flow is also there from the other part of the capital allocation strategy. So very focused on making sure we rationalize that amount of capital expenditures. But it drives the business from new restaurant development, reimage is a big piece of what we're doing right now. And I guess we can't probably say technology investment too many times in this presentation, but that is a current and will be an ongoing significant amount of investment we make back into the business. I mentioned the call, and I think you all perked up when I said we had an exciting new prototype that you would get to see. And this is a rendering of that new prototype. We have a great design and development team that has worked closely with the brand over the last couple of years to come up with what is the next generation Chile is going to look like and here's the rendering of it. I think you all agree it has an incredibly appealing drive up look to it. It has great finish outs, very vibrant interior, a lot of great lighting and open space and energy that will flow in that restaurant. For those of you that will visit or have visited the restaurant near here, you get a taste of that. That's not a new prototype, but you'll get a taste of what that interior design looks like. And it's now going to give us the opportunity to do to ratchet up our expansion and our capacity growth. That's an important piece of the whole equation when we think about how we develop shareholder returns. We've been running a little bit lower, probably closer to that 0.5 percent capacity growth. And we think about capacity growth from a sales week standpoint. And this is now going to give us the opportunity to move that back up again a notch and get back up closer to that 1% translates to about moving from 10 new restaurants a year or so, net up into the higher teens to 20 over a period of time. There is a pipeline that goes with has to be created to do that. But this new prototype actually comes to the fleet starting Monday. Monday, they we open our first new prototype. It is an opportunity we had in a market in Florida. It's a new market for us. There was a it's a conversion actually the first one because the conversion is for an old brand. It's a franchise operation that's had to close a lot of restaurants over the course of the last couple of years. And we were able to acquire a space that we think is an exciting opportunity and convert it into the new Chili's prototype. And this is the Lake City, Florida Chili's that opens on Monday down there. Already a lot of buzz in the market. I had a chance to talk to the GM that will be running this restaurant last week at the conference and she's extremely excited about what she's extremely excited about what she's already hearing, in the community as people are shopping by the restaurant. I was really excited about how quickly she staffed it. I mean, that's the other thing about this. This is a place people want to work. And, she staffed the restaurant faster than she had ever expected to. But you can see it's in its final stages of getting ready for the guests. And a little bit look at the interior. So that's probably a different look than some of you have seen at Achille's, but great finish outs, nice wood finishings, flooring. It's an open style. You can get a sense for it. It's clearly still in its prep mode. But I think it's going to be a wow in that market. We will do roughly 10 or 11 more of these this year in markets around the country and then we'll hopefully start to build that pipeline ratcheting up from there. Reimage is ongoing and we've talked a lot about the reimage, but I just want to make sure we're updated as to where that stands. We've done about 300 restaurants in total around the markets around the country that includes this year and the prior year and testing that we have done. It is generating that incremental sales if we want, that low single digit incremental sales lift. And that's incremental to the lift that the brand is getting from the other operations business. So we have control groups in place to make sure that we're seeing that as we go through. And the nice thing about it is we haven't had to put local marketing to work behind it like we did the last time and we continue to see the build as you kind of move through the cycle, you kind of get out in that 4th 5th and 6th month. And so the natural cycle of customers from a casual dining standpoint starts to even ratchet up the return that we see in both cases. As we go forward, we have kind of 2 versions of it. There's a little variation in those versions, but 65% of the remaining restaurants will get about will get what we consider to be the full investment and about 35% will get just a lighter version. There's just some elements in any one given restaurant that differentiate between those 2. But basically, it's $120,000 to $200,000 per restaurant now investment. Another great thing we've been able to do as you go through this multi year process is you value engineer, you validate what you're seeing in the markets where the guests are giving you that great data that we get. We drill it right down to what we can understand about how they appreciate, re images and where they really what really impacts their response. We make sure we're putting the money to work in the right places. This year, we'll do probably about, we'll do between 140 to 100 and restaurants. And that's kind of the pace that we'll keep over the course of the next couple of years. ERJ will be a part of that opportunity once we close that acquisition and kind of start to develop what those plans look like. I don't envision any re images in the ERJ system until probably right near the end of the fiscal year. By the time you get in and have to do some planning, the design work is there's a whole process that goes upfront before you actually start some construction. And then, of course, you have weather considerations to take into place and where some of those markets are located. But I think by the Q4, we'll be able to probably start incorporating ERJ into that process. It won't be an incremental incorporation. And by that, I mean with in any given fiscal year, we'll extend the life of the program and continue to re image at the same pace, not add on 116 on top of the pace we already have. So I envision now re imaging going into kind of mid-twenty 23. So if you think about this year, the next 2021, 2022 kind of full reimage programs and then we will extend into 2023 with capital spend related to reimage. And again, technology, and you've heard us, technology has played its way through, I think, every presentation we've made today. We view it as a principal investment. Think we are investing at paces that exceed most of the competition. We will continue to invest in that $18,000,000 to $22,000,000 range in any given period of time, because it is that of an important of a differentiating competitive advantage to us. So it gets a very significant amount of time and attention. And then every now and then as we talk to you, get the chance to make a significant bet on yourselves. And that's really what this is down. We're putting $100,000,000 of chips on the table, because we know this is a great opportunity to move the business forward. It is 116 restaurants. Obviously, the ERJ franchise operation is creating the Midwest region for us. And it'll actually be run by one of our experienced operators. Aaron White is now taking over as the VP Operations Integration. Some we give we come up with some great titles. But she has been running for the brand, she's been running our ops services team. So a wealth of experience and is going to really is already working closely with members of the RJ team, who will be involved in the region and developing both the transition and integration of that in fully into the corporate side of the equation. On manual basis, it generates a little over $300,000,000 in revenue. Now, we'll close it roughly two periods into the year. So from an impact this year to capacity, it's about a 250 $1,000,000 incremental capacity at its current run rate. And I want to be clear on that too is that we've incorporated into our guidance kind of at its existing run rate. So we're not building a thought process in guidance for you this year of big upside to we grow this piece of the equation. I think it's there, but I think the prudent thing to do from a guidance perspective is bring it in as we know it currently exists. We get our hands involved. There's a lot of great systems and processes. This is a good operator. So let don't get it run. They run good restaurants. That's not the reason for the acquisition. But again, the scale opportunities, the systems we bring, I think some of the overtraining and oversight will be additive over time. I just don't want to commit to it right away. So a little bit of a conservative approach to how we think about it from a modeling standpoint. Ensuring a flexible balance sheet, we do think we have, again, demonstrated by our abilities to make this kind of acquisition in the context of our leverage position, we have optionality that drives off of our cash flows and our balance sheet. We've made a relatively consistent level of debt. You see too little F-eighteen on both sides, you kind of see a little spike there. And that's really the timing difference over year end of that structured share repurchase we did right at the end of F 2018, which was then refinanced early F 2019 by the sale leaseback. If you normalize for that end of fiscal year timing difference, it's a pretty static level of leverage on a funded debt, which I don't think it's enough time and attention because that's really an important of the equation, just a little over 3 times on a very consistent basis. And then on a lease adjusted EBITDAR basis, we've been hitting right around 4 times, just under 4 times. I think we finished this year at 3.96. And that is a target we have to return back to post acquisition by the end of the fiscal year. We're targeting to get back right down to that 4x level. Just like we did in 2018, we bump up a little bit, not dramatically, it's more in the 4.10% range. And over time, we will over the fiscal year bring us back into that piece equation. But I think it's also important to look at the structure of debt. And this is, I think, a well balanced conservative structured tiering of debt, very focused on that. It's a 75%, 25% fixed to floating. We're not taking floating rate risk to any meaningful extent here. I know that was a bigger deal. Go back, what, 9, 10 months when suddenly the Fed was raising rates through the roof and now we're all wondering how many cuts are coming. But it's important that we want to maintain a perspective that doesn't bring a lot of volatility in the business just from interest rate cycles. So obviously, you see that largest tier of debt and it's at least adjustment that we'd like to make to debt in this industry. That's the red bar at the top. We have 2 bond offerings with nice maturities established for them that were very effectively executed at the time we did them. That is the next tier. And then you have the revolver that sits below it that provides both the flexibility and how we execute and the liquidity that sits behind those large cash flows that we have. So it's a $1,000,000,000 revolver. So in essence, you see over $400,000,000 at fiscal year end in liquidity just from a revolver perspective. So again, I like the tearing, I like the fixed to floating structure of it. I think it's a conservative approach to leverage and it sets us up well from an optionality standpoint and how we may take advantage of investing back into the business. And the durations look very good too. Again, there's no maturities that we're faced with the next couple of years. The first one coming up is early in fiscal year 2022 and that's the revolver maturity. We'll extend the revolver well before we get close to that date. So you typically look a year out or so to manage your revolver debt. But great support from our banks and we'll deal with that over the course of next year, year and a half. You have the 2 bond offerings, 2 bond notes that I talked about that have an F23 and F25 maturity. So obviously, the lease piece of debt to the extent you consider that debt is extended periods of time over the next 5 to 25 years, so very long duration of maturities that are in just a normal operating lease structure there. So debt is very well positioned. It gives us the optionality and flexibility to approach the business and make the investments that we need to make when they present themselves. And then we'll continue to return the capital shareholders. We've talked about this already, but I just want to continue to emphasize dividends and share repurchase is the balanced approach that we take. We will continue to take. We will be in the share repurchase market as we move forward with our free cash flows and continue to build on that $1,700,000,000 of capital that has been returned to the shareholders since 2015. That number will continue to move up. That number will continue to move up. And as I mentioned, cash flow is one, it's important to us. It's a strength of the business. We will be moving cash flows up again this year from a guidance perspective. We believe that our EBITDA will grow $380,000,000 plus and with that will come a free cash flow expansion year over year, getting us back really into what we consider almost a more normalized free cash flow position. We did the sale leaseback had some impacts to the way that free cash flow was reported and then we also invested into the business at that higher level. If you remember that $168,000,000 we took advantage of a little bit higher level of CapEx than we would typically do over the course of this last year. So comfortable with that guidance we've given you of $160,000,000 to $175,000,000 of free cash flow for this year. And as the business grows, you should see both of those cash flows continue to move up. So let's talk a little bit about our financial outlook. And I'm going to start obviously with the guidance we provided everybody on Tuesday. We had a chance to talk a little bit about it on the call on Tuesday, but I want to kind of walk through a couple of things, give you maybe a little more insights and understanding as to why we are so comfortable and confident that this is the right level of guidance to be giving you. Let's start with net comp sales. I have an understanding that there might have been a couple of questions about the guidance on net comp sales at $175,000,000 to $2,500,000 and we've had a chance to discuss some of that over the course last 2 days. We think it's an appropriate range. It is a multi tier driven. Again, we roll this up from initiative by initiative by initiative. It's not one thing that's driving the underlying level of comp sales that we think the businesses can perform. And we're out of the gate exactly where we need to be. I mean, we're about, what are we now, 2.5, well, 1.5 periods into halfway through our Q1. And we're running well above 2% from a comp sales growth. And that's coming through powering through in a very nice form, what you all have told me was one of the more difficult operating months for the industry. It was not a difficult operating period for us. So we're running above 2%, really slightly above the halfway mark of that range, if you want to think about it on a net comp basis. So again, liking what we're seeing from the way that we're coming out of the gate from a comp sales perspective. And the other thing before I get into restaurant operating margin, G and A at flat. One data point to be aware of and that is incentive compensation for profit sharing that runs through G and A is again, it was a great year in 2019 and the incentive compensation that runs to all the team members outside of the brands reflects that. There's about so we've reset G and A back to its target rate. So just like we've talked about manager bonuses where they get reset to target bonus, it might actually create some perceived headwinds in the labor side of the equation. This is the exact opposite as we're bringing profit sharing number that you saw in G and A this last year back down to target. That's about a $6,500,000 delta. So we're what you see in 2019 includes $6,500,000 above what was the guided target for G and A this last year. So when you're wondering where the flatten is, there is inflation in G and A. Obviously, there's some normal labor inflation. IT has some inflation associated with it. We have incorporated some expectations around G and A as it relates to the acquisition, not a lot. It comes without a lot of incremental G and A, but there is as to that. And then from a restaurant operating margin, kind of look at the 3 major components, so you understand kind of where some of the puts and takes lie in that. Cost of sales, again, we do expect to see some commodity pressures, particularly when you think about what may be happening in some of the produce markets. The protein markets people are watching closely, but we've also made sure and again that Charlie and his team just do a phenomenal job of looking at the markets, understanding the potential directions and then making appropriate actions from a contracting standpoint to take volatility. They want to bring pricing structures to our operators that the operators can depend on and they've done that very well over the years. But we do expect to see kind of in that 1% to 3 percent general commodity inflation environment, you obviously get some price benefit. And another thing to remember too is now that we're normalizing kind of 3 for 10 versus 3 for 10 environments, you're going to have a much more normalized mix component of that. So where mix was a drag on cost of sales as we've moved aggressively into that 3 for 10 environment, you're not going to see that kind of change year over year as we go through this year. So about a 10 to 20 basis point negativity as we think about cost of sales. Labor, obviously, we've talked about headwinds, no great surprises. Higher wage rates, we expect to see wage rates continue kind of in that mid 3s. So we have a fairly consistent experience now with the way that our wage rate inflation works. And it's right in that mid-3s. So let's kind of that 3.2 to 3.7, but really centers very tightly around that mid-3s. We also expect the health insurance environment to be inflationary. That's no great surprise, but we build that into our forecasting and we're not bashful about the inflation rates we expect to see there. And then incentive based compensation from a managerial bonus standpoint is set back to target. So that's a flex point that we talk a lot about that maybe needs a little bit more. So they have bonuses, target bonuses set based on our plan and that and they have bonus structures that are based on top line, on bottom line and on guest metrics. And so depending as they move through the performance levels and how they may be doing in any one of those different criteria, you may have results of payout that are different from the target and we flex off of that. But we think it's appropriate to go into the guidance with a target base. We would love to pay out at target. We'd love to pay out above target because that means that they're performing at the highest levels and exceeding expectations of tough plans. But that is a variable that takes place within the labor side of the equation. And then this one might be where you get a little bit of surprise that we do see a 40 to 60 basis points favorability within our restaurant expense. And this is where leverage really is coming to play and leverage driven a lot by the acquisition. So there are costs already in that line from an advertising perspective, from a credit card management perspective, some things like that. They're there and they're static regardless of the acquisition. Because again, we did the advertising, we do the advertising across the brand, franchise partners contributes to the advertising fund. But remember that accounting change move that contribution up into other revenue, franchise and other revenue. As it relates to the acquisition, it now brings those dollars those dollars now flow into company sales and have the leverage ability against the costs that are sitting down in restaurant expense again. So we're going to pick up 40 to 60 basis points in favor and there's obviously other fixed costs that will be impacted too by the leverage ability of that capacity. But that's kind of the build and so you kind of see really nice situation on restaurant expense offsetting headwinds on labor with when somebody give you that flat to down 20 basis points guidance. That's the makeup of how we got to that on a big picture standpoint. So basically, the long term financial objectives are intact and very similar to what we've been talking to you about. We're bringing them to life now and you're actually seeing them printed as we go through quarter by quarter. But we're bringing organic growth back into the equation. And I'll admit, we've been very, very much driven by financial engineering over the course of the last couple of years. But now organic growth is coming back in positive comp sales, capacity growth and starting to drive the business in a much more balanced manner. Obviously, we will continue to as that growth takes place to expand the cash flows, which is the ultimate underlying key strength of the credit and then generate growth and return that I think are very much appropriate to what you would expect to see from a double digit shareholder return standpoint. And then similar to what we showed you a couple of years ago when we did it, this is kind of the graphical representation of what we think makes a lot of sense from a long term algorithm as it relates to returns. As you can grow the business kind of in that 1.5% to 2% range, so if you think about that, if we can flow through the pricing of 1.5% to 2% that we target on an annual basis. So balance price and mix, add capacity back in the equation. I think you heard today on capacity additions that we're going to be looking at taking up both at Chili's and Maggiano's. But if you're in that 0.5% to 1%, that should give you organic growth from a shareholder return standpoint in that 5% to 7% range. That's a margin neutral approach to things. So it's not to say that you won't get spikes in any given year, any given quarter, any given time. But those comp growth and capacity growth rates, assuming some continuation of the inflationary environments that we've seen for the last couple of years, should keep us in a relatively margin neutral standpoint and allow that kind of return. Then you add in the dividends and the share repurchase. Share repurchase again on an ongoing basis should generate in that 6% to 8% return standpoint. And then I put a dividend yield of 2% to 3%. I'd like the current yield we have to down. Obviously, 2 ways to get that yield and I prefer to normalize it back into that 2 to 3% when I think the market should recognize the undervalued nature of this business and start to recognize the significant number of quarters of performance that this team is putting on the table. So all in, we're comfortable with the long term algorithm that lies in that total return in that 13% to 18%, that nice mid teens level. So to sum it up, I hope you take away that we're on a great trajectory. This is not a one time wonder. It's not something we're doing over the course of just a couple of quarters. Now what do we do next? It's a multi layered approach that is driving the business. It's a guest centric, it's a traffic centric. And by the way, we are when you talk about lap overlaps, we're bringing a whole new channel to the equation. But it's not a 1 channel business. It's going to be multi tiered and multi channeled, and they're all going to work hand in hand together. With that, I think we're going to pause the formal presentation. We're going to get some chairs. And I know you guys have probably been writing down questions. And I do believe we have the option of also looking for questions coming from the folks that might be still dialed in. We appreciate their time dialing in online. So let's get set up and then we'll turn it over for Q and A. Not a big setup, it takes all of Done. Elaborate. Okay. John. John, we got you guys had to sit together. John with the mic. I mean, I'm sure we'll have some comments. It's John Ivankoe from JPMorgan. The question is on independent restaurant performance versus chain restaurant performance. We covered the distributors and one of the pretty common themes that's coming out of them and some would say it's been happening since late 2014 is that independents have been taking share versus chains that would obviously argue against the importance of scale in terms of driving market share in this space. So comment on that, your view on that, if there's anything kind of in the data or maybe below the data that maybe can make both points relevant. And as you think about whether independents or micro chains or regional chains, there's a lot of kind of different things that are tossed around, whether their access to low cost social media, their access to at least come on to a delivery platform, if not with the same weight of Chili's, actually does give them maybe some long term advantages that previously did not exist in this industry. Good. I'm going to MC, so I get turn that over to you to take a first bite after that. Yes. No, I think well, first of all, if you just look at the data, right, and so it's always interesting, right, if you just look at what Malcolm puts out broad and it's like, hey, here's where the winning or losing? And for the most part, they're winning. I mean, I don't I sit there and see Malcolm's number early and then it's like, okay, here comes Darden, they're always 1st because they're a month ahead of everybody and they beat it. And then you get the big companies beating it for the most part. Everyone's beating the average on the well, no, because I will be here a while. You can talk at the break, Malcolm. So there's one point. The data is there. I think at the end of the day, there's some inconsistency in the data and when you look at it, but the way we look at it and how it's been reported to us and how we feel is there's some there's always hot concepts that pop up in every market and there's always a lot of energy around them. It's kind of like apps, is the best analogy I can I've heard about this is, there's a hot app that's put out there, but if you track what's really happened to apps overall, they're shrinking. And so I think that's kind of what's happened. The new hot restaurants get some buzz and everyone's focused on them, but then overall, they're consolidating. And if you just think about the pressure in especially in this wage rate markets where for an independent get that the rest of us don't, there's no way that scale can't help. In all those aspects, we buy cheaper, we're smarter on media, we're smarter on and more efficient on labor. It just doesn't make sense to me. So I would say that's not something we lose sleep over. Yes. I think, again, it's not I don't know that it's an either or situation, John. I think, again, I think good operators are good operators. So if you're a good operator, it's a chain. I think you're going to capture market share as we have over the course, you know, 3 80 basis points in the last fiscal year. I think if you're a good independent operator within that market, you're probably going to capture some market share. As always. That's just a good operator is a good operator. So I don't I think you can have both happening the same. I think in both independents and chains, you definitely have moved into a have and have not situation. So again, when you look under some of the other data and you talk about number of restaurants, what you're starting to see is the haves are maintaining and growing numbers of restaurants that have nots and we're seeing independent. And so the data tells us that independents from a number of restaurant perspective shrank 4% this last year and probably at that continued pace. So I think it's I think that game plays out in both segments. My question is on growth in the portfolio. Most of your peers are growing capacity faster and they're either doing it through organic, their brand is younger or smaller or they're making acquisitions, right? We saw that most recently just in the last quarter. So why is it and I think growth has a lot of advantages, right? Leverage your infrastructure, you just talked about scale being important. And so these there is an advantage to growing. And I think shareholders reward that. I think if you look at the performance of those growing brands, they're generally higher valuation versus lower when you're more dependent on comps, it's more volatile and therefore it's more risk and I think that gets So taking all that into account, why isn't this business, which once was a portfolio, willing to think about more aggressive growth in 0 to sort of essentially 1% capacity growth? Why and how can you think about doing that or is your appetite for making a larger acquisition over time? Or is it international as a strategy that grows the business? How do you think about Well, I think a lot of the acquisition and growth strategy through new brands generates shareholder value and return. I think people are generates shareholder value and return. I think people are paying historically too much for some of these brands and some of these businesses, and we'll see how the value plays out. And sometimes, if you're a big enough portfolio and you make an acquisition that doesn't necessarily generate great returns, it gets covered by the thing, the big brand that's paying for it all anyway. And that's historically what happens in portfolios. I think is the big brand, Chili's per se, would cover a lot. We've had a lot of experience with that of other brands coming in. And when you get into challenges, the big brand gets pressed. And it's pushed into some strategic positions that it's covering not only its own challenges, but other brands' challenges and that's risky. That said, we're open to growing shareholder value in ways that include acquisition. We just are very selective on what we look at. And we don't believe in the let's buy it small and grow it big over some period of time. I don't think anyone has shown that to be a very successful approach. And we don't believe in paying a really outrageous what I would consider outrageous multiple and praying for some big synergistic or operational challenge change that you're going to take a brand to a new level. Those are just very risky bets that we aren't willing to make. So but we are always out there talking to the street about, hey, what are the opportunities and how can we participate? And more and more of those are coming available as more and more pressure gets put on the category. And so we're patiently watching and evaluating. Yes. I think in particular, I think, 1, we just did it. I mean, so again, I mean, there's a reason that we have capacity growth of almost 10% this year is because we put those chips onto the table. And there were a lot of options throughout this last year. I mean, you guys are all very well aware of the brands that have been out and marketed over the years. And we get the calls, we get the books, we get to see what's going on. And when you weigh all those options and where are we going to when are we going to put that level of bet into the game, this was the right one to do. Because again, as we've said, we know it well. We're betting on ourselves. It brings a scale that is immediately impactful to the business. So yes, and we did it, you know, 2015 when we've done it before too. So again, when those right opportunities present itself, we'll put the chips on the table. Hi, it's Crystal Coll with Stifel. Questions on delivery. Do you have any initial statistics on just the awareness level of Chili's delivery channel? And how important is it to allocate marketing dollars this 1st year to really drive awareness for that channel? We have no we've got big upside to just make people think about casual dining as a, I don't feel like cooking tonight occasion. Far as marketing dollars, part of our arrangement, we have a subsidized marketing fund, and we'll use it selectively when we need it. And right now, we don't need it. Okay. And then just one follow-up on that. In terms of the average order size, I didn't recall if you put that on the slide or not, but what does the average order size look like for a delivery order versus a takeout versus a dine in? For compared to to go very similar in size, 1.8 to 2 people. So and that's our restaurant average party is just slightly above. Are you talking dollars or people? No, I was going to dollars. Oh, in dollars, delivery is highest to go, delivery then dine in and then to come. So you can give them a level. Donna? Yes. So delivery is $27.50 and to go is a couple of bucks below that. Perfect. Thanks. You now have all the pieces to do some math. Question on sales trends and the sales build as we think about 2020. So we've talked about the industry being somewhat volatile and fairly weak here recently. You guys clearly are not implying that your gap accelerating. So I guess my broader question is, should we think about this as a sort of trends continuing plus delivery bump or is something else happening that you feel like is building kind of behind that as well? I think our base trends relative to the industry and wrap are solid. And then we've got the delivery bump and the to go delivery bump. So again, to go wrapped on to go really in the Q3. So we've been wrapped on to go all the way through the Q4. And again, we're not immune to the industry stuff. We talked about it on the call. April was a soft month for the industry. We felt some of that headwind, but we continued the gap. And then we continued to see that kind of sequential growth back into the higher levels as the industry got stronger. And now with the industry maybe getting a little bit more challenged, we continue to see the gap and now we've got just more horsepower with the delivery vehicle intact. Thank you. Jeff Farmer with just some follow-up questions on delivery. So I think you mentioned delivery sales were 84% incremental. How did you guys feel about that number? We tested it at a test and control, Mark. So we put in 100 geographically dispersed a similar sales trend and demographic over the previous 12 months. And that's how we evaluate incrementality. Once you launch it, evaluating incrementality on a longitudinal basis becomes more sophisticated and more challenging. We're pretty confident we have methodologies to isolate as we grow add more channels to isolate which channels remain, incremental. And we've been very upfront with DoorDash in the first conversation, but that's critical to our partnership. And we both align on the methodologies. Methodologies of that. And there's some very sophisticated methodologies that we're going to use in terms of individual tracking of guests through non specific personalized data. But we also our portfolio is very large, right? So we have restaurants that don't have delivery, delivery, that is not even in a DoorDash area, not very many, but so you have a built in control set to some degree of and then you've got some that are doing huge amounts of delivery and some that are on more moderate. So it's we always have a bell curve. When you've got this many restaurants, we always have a bell curve and the data sample is big enough that the curve matters and we can see, okay, well, what happened when delivery kicked on and we saw these orders, but in these restaurants that didn't even get any, what happened. So we've got an internal way to just calibrate early on. And then we've got a much more sophisticated way to actually track, okay, here is a guest that we knew that was coming in and here's their pattern over time and did it change. Sort of alluded to it, so just one more on delivery. So 9 delivery orders per day, virtually no marketing. I'm just curious if DoorDash has shared with you some of their case study work with other casual dining concepts in terms of once you turn on your own advertising and then once they begin to support you with free delivery or whatever it is, either what the ramp curve looks like or does 9 turn into 18, 27, 36, anything you can share there? They've shared obviously case studies from their other strategic partners and their other unique. Obviously, they've got a brand that's in white label that's getting the same amount of out of white label as they are out of marketplace. They have another brand that is advertising to go on their marketplace like we're going to test and it's getting almost a third of units. I would hesitate to give you something to pull in the model except to say, this probably is the trough because we're at low seasonality, we're not marketing it and we expect it to grow from there. Bob? Yes. Bob Derrington, Telsey. Joe, when we think about the store level margin color that you provided us, it's easy enough to understand the food inflation piece on the COGS. But there's some dynamics between the other two lines I'm trying to understand. You got some benefit from the certified shift leader program this last year. I would have expected some of that to carry forward into the new year, kind of mitigating some of the other wage rate pressure, etcetera. And then in the operating costs, you've shown a lot more leverage in that line than I guess I would have guessed if delivery comes with your bigger piece and there's more packaging and to go. So how do we understand the dynamics between those two lines, if you could help us? Yes. Good question. And certified shift leader does continue to derive some benefits. One, it was a ramp throughout 2019. So particularly as you go through 1st and second quarters, you'll see some year over year benefits assuming even if it stays at that kind of 80% level. We think there's probably some upside to the 80%. At any given time, you're going to have shift leaders moving into a restaurant or out of a restaurant based again on that progression, career laddering progression. But there's probably a little bit incrementality we can bring into that. So underlying there is probably in the range of $2,500,000 to $3,000,000 of additional benefit that we will see out of the certified shift leader. So it is there is an embedded belief from a mitigation standpoint in that. The I think you're calling out one of the pieces of the equation as we kind of move further into the delivery piece of the equation and the same for any line of business we have. So delivery, I think everybody can focus on quickly. But when we build those out on a initiative by initiative basis, we're building out all the way down the P and L. So you're trying to understand at assumed levels of growth, what are the obviously assumed related cost structures that go with that. So it's a full P and L approach to the equation. Delivery has just as to go has, has supply with it. Now remember, it's a full P and L. So there's a lot of costs associated with in dining restaurant side of the equation that don't equate to delivery. You don't have the R and M expense. You don't have the software expense. You don't softwares, not software, but you have a lot of that. But you don't have the softwares expense. You don't have the same levels from chemicals and cleaning. I think there's credit card fees, things like bad debt, things like that. All of I mean, we got to remember, it's a multi tiered P and L and some play in dining and some play less to those costs less to go in delivery. So when we break it down and look at it on a fully allocated basis, 1, it is a very profitable, guest. I mean, what you don't want to see over time is a significant shift in the preferences of your overall guest structure, because then you're going to have to start to think about and realign some of those cost structures. But there are some costs that go with it. And if any one of our assumptions on growth is off the charts and not incremental, you could have some cost issues to deal with. And we'll keep an eye on that and obviously, we'll update if we think it's appropriate as we kind of go. A quick follow-up. The directional as we look at the store level margin through the course of the year, there's obviously a lot of pushes and pulls, seasonality, sales leverage, etcetera. It sounds directionally like some of the benefits and the negatives will kind of offset. Is it relatively stable through the course of the year? Stable from a On a fiscal on the for the full fiscal year, basically down flat to down The margin piece of the equation. Yes. Yes, it is relatively stable throughout the year. You do have some I mean, again, we talked about some of the first quarter issues. So we did the accounting, which is a G and A issue as opposed to just again to remind everybody what we talked about on Tuesday. Jeff Bernstein from Barclays. Two questions. Just one on the idea of maybe over promising and under delivering from a corporate perspective. I know you mentioned you get questions about the comp and can you put up that type of comp? And prior to this past year, it was tough the few years before that. Now the industry is softening and we're going into a recession. And then we think about total shareholder return We're walking over the ledge, yes. And the total shareholder return, you talk about a 1.13% to 18%, but I know you mentioned a few times double digit. So I'm just wondering why I need the front in this environment where you don't feel like you're getting credit for it in the 1st place, might you set yourself up for what could be a more challenging 12 or 24 months ahead versus temper that down and beat expectations for several years to go would seem like a better approach? And I had one follow-up. Yes. So I don't know. We saw what we just put together what we think is going to happen. We build a plan. And then we look at the plan, and we put it up against all of the things we know about the industry and know about what we're going to do and we say, okay, let's take to the street what we think is a reasonable set assumptions. Believe me, we're not bringing you the best case scenario. I mean, we're not stupid in terms of like, hey, if everything added up the way it would have added up on paper, we'd be bringing in a much bigger number. We're not also naive to the fact that a 1.75% to a 2.5% is a big number and not something that we would put out there without having some experience and some belief that, hey, that's doable. We also think we, as a brand and a company, have to stretch ourselves because there's not a lot of belief that Brinker can deliver. That's you've told us. You, the broader you, the Street that said, hey, first they said prove it and then they said lap it. And so we feel like if we come out with a, okay, well, we'll just go with the 403 number that you that The Street had for us, we could have done that. And it's like, okay, well, we're investing $100,000,000 in a brand that we know and we think can build. Where's that $100,000,000 payback? And then what do our plans tell us we're going to do? And that gets us to the number we gave you. And again, the world changes, right? Maybe we're off a little bit or but we don't feel like we're like throwing a Hail Mary here. This is not, oh my gosh, how did I hope you heard on the call and you're here today, we're confident. Listen, I guess the whole world got a little scared yesterday because of an inverted yield curve and what does that mean? And I don't know, maybe I should be a lot more nervous. But today, I'm like, we know what we see. We see the numbers every day. I mean, we wake up every day and see what's going on. It's not like we have to wait. And living with the numbers and with what the team's been able to pull off, we brought you what we thought was a doable parameters of a forecast. And I know some of you have really been great supporters of the brand and the business kind of probably questioned why we went to stretch. And I'll just tell you, it doesn't feel stretched to us. And this year, we hit and beat and frankly didn't impress. So we felt like we couldn't set too low because I mean, maybe that's what was still out there. So again, it goes back to those that's kind of the environment we're in. And just on Maggiano's, just I know you used to run Maggiano's a long time ago. I did. At least running it now. I'm the only one that has it. We like to pass that brand around. I'll tell you, fun job. And each leader give a very compelling reason why a 50 units shows tremendous white space. Your big box competitors with a lot of volumes like Cheesecake, BJ's, I mean they have 200 plus units and they're still opening up 5 to 10 a year. I'm just wondering, it would seem like the white space is there. It would seem like the real estate is probably there and the offers are there. Why aren't we seeing 10 a year? I mean, that's a stretch, but it seems like the past 5 years, it's been 50 plus and it's always like that really seems great. But if that was its own standalone brand, nobody would be investing in it because it's just not growing. It would seem like there's energy to do it, but it just doesn't seem to. Grow. I like them. I'm not sure I like them at 10 year, but that's maybe not next year. All three of us have a point of view, but I'll let Kelly. Shut up. Yes, listen, the business model is compelling, as compelling as the brand is. And I can't answer as to why we've grown to the point we are before I came in. But what I saw coming in is there is a compelling brand. It's a proposition that is resonating at a very high level. And the amount of investment that it will take to develop new restaurants is going to generate the return that we can be excited about. So I'm doing the hard work, but I'm also very focused on the organic side of the business as well. And we're working a disciplined process, a great pipeline, so we're going to grow. So before that, the other 2 guys can answer that. Well, I'll just say we're protective of the business and maybe we're a little too cautious with it. And it's a great brand as we shared with you today. It's a great business. It does contribute. There's a reason. There's 2 brands in this business because they both carry their own weight. And we've been careful about that. We have seen other high polished casual brands push too fast in the Italian space and implode. And we've been maybe a little more cautious than we should be. And so we're actually giving Kelly, I think, room to say, hey, let's take some chances and do the homework. But we're excited about getting it cranked up a little bit here and going forward. And that's where, again, things like airports and alternatives are showing up. And so I don't think you have to look at it and say, well, it took you 28 years to get to 52, and it's going to take you another 28 years to get to 52? No, not necessarily. Greg? I have a few questions. The first is, I think you referenced 2 questions. You referenced just capacity growth and particularly in the independents, I think being down 4%. Is that a change from what you've seen in the last few years? And are you seeing a shakeout that maybe is encouraging per store traffic to come back to existing restaurants? And if so, kind of what do you think happens now going forward? Do you think that you're going to continue to see capacity come down and then that will be basically what stabilizes per store traffic? I think capacity continues to be one of the big issues in the sector, whether it's independent or chain. And again, you're I mean, we have a lot of examples over the course of the last couple of years of significant closures on the chain side. Some folks have had to rationalize their fleets. I think we're now when you talk to some of the data folks, some of 3rd party data folks, they're starting to believe we're kind of into the second and probably moving forward with further contraction, a lot of it coming out of the independent side of the equation. The good news is we're not seeing huge ramp ups on the development side either from a capacity standpoint. So I think that's going to continue Again, the hurdles and then if you think across all of the dynamics of what we just talked about from restaurant operating margin, independents are not immune to that. And they, in fact, have very few options on how to mitigate. I'm amazed when I drive around even some of the neighborhoods in the Dallas area and you see the number of closures that have popped up for long time independents. So I mean independence, we're not talking about open it and try and run it for 2 years and move on to something else. So I think you're always going to get a churning, but I do think we're starting to get that slow step down in capacity, and taking capacity out of this system, I think you mentioned a benefit of a economic slowdown may help in that regard is going to benefit those of us that can operate restaurants effectively through the downturns. And volume is important there too. If you're running a $3,000,000 plus restaurant, you've got some cushion. If you're running a 2.5 percent or a 2 percent, you don't you're on the edge. I mean, there's just fixed costs associated with it. And so you feel a little pressure at 2,000,000 AV. You don't have a lot of room. There's just not I mean, if you're going to stay open, you got to have people running it, you got to have management team, you got to be so just to turn the lights on. And so when you look at our average volume relative to kind of key competitors in the place, we've got that gap gives us more cushion. The other thing I would just say from a positive tailwind macro thing, it's really the demographics get favorable. The demographic kind of flow has moved out of the prime casual dining space at a pretty rapid pace over the last really 7, 8 years. And now it's moving with Xers coming in to those kind of high use years, we start to see a growth now of that cohort. And so when you think about longer term over the next 3 to 4 years, that cohort grows now. The prime cohort for casual dining grows at plus low single digits versus being a headwind at minus single digits. So there's some real opportunity there too as well. Helpful perspective. And then maybe just the other one can you go back to the other operating expenses and explain what's happening with the mechanics of the acquisition and why that's a benefit? And then what's your assumptions are in terms of I think most of that would be fixed, but are there annual step ups and what are you assuming for annual step ups in the big buckets of other operating expenses at 1%, 2%, what's kind of the rough range there? Thank you. Taking almost in reverse, we typically don't give that kind of granularity. So again, we're comfortable when it relates to the big buckets, and I mentioned some of them. We're taking enough conservatism in the inflationary factors associated with the health care. So a big item there, we have an amazing PW team that works those programs pretty aggressively. So, I'm looking for a beat, but we understand the dynamics of that. So I think we've embedded enough there. The other so again, like any capacity that comes into the system, you're going to leverage your fixed costs. So that's going on anyways, and we're bringing 116 restaurants worth of capacity into the system. But there's costs that were already in the system and advertising is a big piece of the equation, credit card processing another piece. They were helping pay for that. The flow of that payment had to move up into that franchise and other revenue. It now moves back in through company sales, which is the ROM calculation. So you have the same level of advertising expense, whether or not they were a franchise or company owned restaurants, they're now helping cover that from a ROM standpoint, since they are coming through company sales. That's a pretty powerful leverage point that comes through there. Dennis Geiger, UBS. Just wondering if you could talk a bit more about that long term guidance, specifically the margin piece. I think about flat is kind of embedded in there, but is that the target? I know a couple of years back there was the expansion. We're in a different environment from a cost perspective now. But just if there are any other how you think about margins over the long term, if that kind of comp range that you gave, if that's good to kind of hold margins flat, if there are other okay, I want to keep margins flat. So I start there and then I work my way back up to the okay, I want to keep margins flat. So I start there and then I work my way back up to what it we really look at the what do we think how do we think we can grow the business and what does that look like by the time we put the different constructs together on the top line. So the 1.5% to 2% comp growth is a long term target that we think is very achievable with the way we can build that top line business. Now we're also then, at the same time looking at the various major expense lines and what do we think the inflationary factors will be as we move forward. So we do expect inflation to hit the commodity cycle. You're coming off of pretty low level commodity environments. Now again, we're not seeing a lot out there that is systemic to create a big alarm on commodities. But the reality of the world is it's going to have inflation as you kind of move forward. Same thing on the labor side of the equation. Now in any given 1 or 2 or 3 year period of time, are you going to get variations of that based on economic conditions and cycles? We're in a very low unemployment rate right now. So that obviously has ramifications to cost of labor. If you're not in that, you have different kind of but generally over time, we're building in what we think to be our pretty reasonable inflationary factors. When you come down through all of that and understanding the different dynamics, then you look at what does the margin look like. And we think that is a flat margin environment when you take all of those things into consideration. So it's really the output, not the starting place. But I know it's something that you all want to know from a margin standpoint as you kind of move forward. Hi. Nicole Miller, Piper Jaffray. Back on delivery, just a couple of follow ups. When you turned on delivery, what happened to go sales? Did they go up, stay the same or did increases diminish? And then what with your marketplace partner are the data deliverables? Maybe share some of the things that they shared with you that you didn't know about your customer? And then the final question is, why do these delivery why does delivery replace Cooking at Home? I would sometimes think it's just sounds like you're saying you don't go to the grocery store, when in fact it sounds like you would just not go to the restaurant and replace it that way? Thank you. Sure. Let me take my reverse over. Replacing Cooking at Home is more the dominant QSR and then became the fast casual of the unplanned period. So people are pretty clear about when they want to cook at home and it really provides by households, but a lot of time life happens. And so the plan to cook at home. And growing up in QSR, that's what we live off of is, there's no people in casual dining often think about I'm going to Chili's the day before. It's a planned occasion with other I don't have time. Something happened to my schedule. We just haven't it's I don't have time, something happened in my schedule. We just haven't played it. So that's why we think the incrementality will be higher in casual dining than it is in fast casual and in QSR. They have shared with us integrating data. One thing I mentioned about is we will put our loyalty integration into their marketplaces. That will give us the same customized journeys that give guests offers that really matter. And aggregate, what we've seen from DoorDash, not surprising given that their big bet 3 years ago was to go suburbs first, where their competitors were looking at it saying, you're not going to get the turns in the suburbs to justify the number of drivers you need, they decided to go suburbs first. So no surprise, their core is families. And our core is the same. And that's really good. What was the first question? What happened to To Go? To Go, interestingly, our roll we were rolling over single digits in Q4. We're now rolling over double digits from Q1 of last year and it's still growing in the mid single digits with delivery coming in incremental on top of it. We're cannibalizing that 84% incrementality. What we're losing is that that little bit we're losing is a to go order. We may have become aware of DoorDash. Which is not a bad trade off. And again, go back to the fact that 3 for $10 is not offered on DoorDash delivery. And I think you do have a we have a guest that likes a value oriented guest that is focused on that 3 for 10 and more than willing to utilize the traditional to go to access that. So it's not so they're not having to make trade offs for what they want to do and how they think about the business. I think too from an off premise standpoint, we're not without giving specific numbers, I mean, we've seen a significant increase in the growth rates of off premise as we move into delivery side of the equation. So yes, there's a little bit of probably trade off between off premise pieces of the equation, but we've done a stair step on off premise growth overall. And the following I would say, I think, was really a question about how much can this build. One thing we saw last year that is very encouraging, when we went on with mass advertising not only saw a substantial lift in our to go business, it sustained when we went off there. Exactly. Casual dining, Chili's is an alternative at 4:30 in the afternoon. What are we going to do? Anything from online? Anybody watching online? They're having lunch, which Hey, it's Eric Gonzalez from KeyBanc. Just back to delivery for a second. I just want to know, I think you mentioned that your delivery times are about 36 minutes, which maybe at the higher end of what we hear from some of the fast food chains. So is the playing field truly equal between or is it level between casual dining and fast food? And what I mean by that is, since you're doing real cooking in the restaurants, is it hard to execute delivery for a full service chain? And is there a technology solution that can limit that driver wait time? And are you seeing from the drivers like do they prioritize casual dining over fast food or vice versa? A lot of questions in there. Let me ask answer a couple of them. One of the technological keys is getting the driver wait time, correct, which is based off of the algorithms we use. We put in when an order comes in, whether it comes in from a table in the dining room, whether it comes in to go, whether it comes in delivery, we have the cook times of each of our items in and that calculates how often the drivers should how frequently the drivers should come. Full disclosure, we're still working on perfection with DoorDash 8 weeks in. If there was a bias, they're probably waiting a little too long more than some of their strategic partners who've been doing it for a year. The I have not seen any QSR times. Clearly, QSR food is available more correctly. I have seen the Technomic study, the CREST study showed an expectation of 40 to 45 minutes. Out of the gate, we're beating that for the average consumer. We think that's encouraging, especially given the quality. 15 minutes, then it's a problem. The other thing that's just I mean, it's kind of common sense, but I mean, everyone's studying this category, right? And they ask people, which brand would you like to have delivered? And guess who shows way up high on the list? Chili's. I mean people want this product, they know it, they see it, and they're like, yes, I'd love that Chili's we're very optimistic about what can happen when we put it in front of some of our consumers as well as Ellie starts talking to the broader audiences out there, not just through and we're just talking right now, we're getting everything we're getting, competing with everybody that's on the DoorDash marketplace. I mean, we're just one of and we're doing really well. So it's like, okay, that's kind of a nice thing to know that, hey, by the way, this is where scale comes in handy. We do have a marketing department. We do have the ability to go out and talk to people. Oh, we do have a 6,000,000 member database. We have the ability to get the message out. We haven't even done anything. So and from a driver perspective, just to clarify, they're not the drivers aren't waiting. I mean, we're timing that. They're not waiting for the because we tell them, hey, it's going to be 30 come when it's ready. And our system, because of our technology, is pretty sophisticated on knowing, hey, it's going to take us 20 minutes to get it out of the kitchen. Is it more complicated? Sure. Look at our menu relative to a fast food or a Chipotle. But that's what's beautiful too because if like me, when I take my family out to eat and they don't want to eat Mexican, it's like, okay, Chipotle is off the list. Well, Chili's, you want pasta? We got an amazing Cajun chicken pasta. You want a fajita or a taco, fine. Or you want a burger, it's done. And the variety is powerful, and I think that's what separates us from a lot of those others. I think we have to want opportunity to talk together. We're running over on the webcast side of the equation. So we're going to need to bring that to a close. We've got a couple of things we're going to do here, including lunch with you all to get to see some of the technology, some of the food innovations. I'd like to thank everybody that's been on the webcast for participating. Obviously, you can follow-up through Mike and the Investor Relations with any questions that you might have. And I will bid you all good day and thank you for So are we off the webcast now? Yes, exactly. No press releases, don't worry.

• Slides