Brinker International, Inc. (EAT)

Investor Day 2021

← View all transcripts

Oct 20, 2021

All right. Good morning, everyone. I want to welcome you to Brinker International's 2021 Investor Day. I want to say a special thanks to everyone in the room that traveled all the way to Dallas to join us live. And I want to welcome all the people joining us virtually. Just in case, I think I know almost everyone, but my name is Micah Ware. I am the Vice President of Finance and Investor Relations. And I think we have a really good day set up for you today. So as you know, we released our Q1 numbers yesterday afternoon. So we're going to start the day discussing those results and then we're going to jump quickly into the long term and talk about the long term strategy and share some of our insights and expectations moving forward. Let's see. So we're also going to have a lot of time for Q and A. So I know that's very important. And to do that, I have some key Brinker leaders in the room that I'd like to introduce you to. So we're going to start right here with Wyman Roberts. He is our Chief Executive Officer and President of Brinker. I got to get my glasses here to read, so I don't forget anyone. We have Joe Taylor, everyone I think knows Joe, our Chief Financial Officer. We have Wade Allen, he's joining us. He is our Senior Vice President of Innovation. He's going to talk to us today about our virtual brands. We have Doug Cummings in the room. He is our Co Chief Operating Officer of Chili's along with Erin White. She is our other Co Chief Operating Officer of Chili's. We have Steve Provo in the room. He is our President of Maggiano's. We have Larry Kanicki in the room. He is our Chief Operating Officer of Maggiano's. We have Rick Badgley in the room. Rick is our Chief People Officer. We have Charlie Louis Leon, he is our Chief Supply Chain Officer. And finally, we have Dan Fuller. He is our General Counsel and Secretary. Thank you, Dan, for joining us. And so since this is a hybrid meeting, we're going to have a mix of obviously virtual and live people here. We're going to have some live speakers along with some videos in the restaurant. So we can take you there if not live virtually. And not to make our virtual guests jealous, but at the end we are going to have some delicious food. We're going to serve you lunch. We'll have It's Just Wings and Maggiano's Italian Classics. Okay. And the last thing that I need to do, which is always my job, you guys hear me do it every quarter, is remind you of the Safe Harbor statement. And Dan is not going to make me read the whole thing, but I do have to read the beginning. Again, I need my glasses to do that. During these presentations and in response to your questions, certain items may be discussed, 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 as amended. So please take some time to read the rest of the statement on the screen. Okay. And with that, let's get started and Let's welcome Joe. There you go, Joe. Thank you. Thank you, Micah, and good morning, everybody. It's nice to see people back in the office and thank you for joining us here in person at the RSC. Also good morning to the folks that are watching virtually. We do like the fact that we're able to have Live meetings again and we look forward to continuing that as we kind of go forward. I want to start the day before we get into the longer term and the Strategic thought processes, talking a little bit about the Q1 results that we reported yesterday evening In conjunction with this, we put out certain operational aspects of the Q1 for your review. I'm going to make a few comments, give you some Perspective on that and then we're going to get quickly into Q and A as it relates to the Q1, we'll have opportunity to Q and A on the longer term as we Get farther into that. The basic perspective, again, it was a quarter with mixed sentiment from our side of the page, a very strong top line. We're very pleased with the Continuation of the recovery curve on the top line. We had $136,000,000 increase in total revenues, dollars 90,000,000 over the comparable pre COVID quarter of F 'twenty. So continuing to do a good job On the top line, lots of consumer demand out there. Obviously, the issue was in the middle of the P and L with a compressed Restaurant operating margin as we worked our way down the P and L, eventually getting to a $0.34 EPS versus the $0.28 the last year. So we're comfortable and confident in our ability to drive the top line. We're disappointed for this quarter and the ability to flow as much of that Pointed for this quarter and the ability to flow as much of that through as we anticipated. But We're working diligently and we have a good line of sight on how to continue to improve that as we work our way through really the turbulence that is going on Right now, lots of discussion out there about labor and supply chain. We are experiencing that, but we're also coming at it from a perspective of Strong top line, which is really when you think about working your way through this environment and getting back into a more normalized situation, The strength of that top line is going to be important to make it an effective move as we go forward. From a top line perspective, again, We have focused significant time and attention on driving traffic and we continue to perform well on the traffic side of the equation. We think that is a linchpin for long term success for the company, a 9% gap to the industry again in that 1st quarter. So that's a continuation of a theme you've heard us talk about now for really a couple of years. And it does resonate, I think well with our operators and how we continue to see more foot traffic into the restaurants and continue to build that base of folks That are coming into the Chili's and the Maggiano side of the equation. Chili's, as you can see, the entire quarter working above pre COVID levels. Again, Once they moved out of that last winter's pandemic phase, you saw a nice move above pre COVID levels and continuing To maintain that and it's great to see their improvement in the recovery that Maggiano's is making on the top line to working their way back, obviously, Little dip in August through the COVID surge piece of the equation, but getting back by the end of the quarter to parity with what they were doing Pre COVID, and that's a nice move in recovery on the Maggiano side. You'll hear Steve talk a lot later about the improvements they've made in the business and the Advancements they're making from a recovery standpoint. So we're real pleased to see the direction of that brand. I want to show you the average weekly sales, so you kind of understand what Some of the nuances that went on within the quarter itself, because you remember us talking in August that we had had a really solid nice July top to bottom. So that environment was working well. And then we got to really kind of mid August through September and you saw a little difference in The top line that worked its way down through the P and L also with some other headwinds coming in from other aspects of the cost side of the equation. When you look at the gold bars, that's the F 2019, well, it's a calendar 2019 monthly Average weekly sales, the blue is the F21, the current. So you can kind of see Again, how we outperformed pre COVID all the way up through really getting into those summer months. But one thing to point out, when you If we look at July August, those are typically parity months from an average weekly sales standpoint, running roughly the same throughout Those two summer periods. But as you can see with the COVID surge, it started really impacting in August, a marked decrease In average weekly sales July to August, that would typically be an anomaly for how our sales flow throughout the year And then an incremental step down in the September, so from 58 down to 54 in September. That's an opportunity for us, because again, as pleased as we are with our ability to drive top line, We're still leaving sales on the table. We still have restaurants that have not been able to fully open. Staffing issues Are forcing some restaurants into limited hours, inability to open fully, particularly when you think about Fridays Saturdays, where you really get those volumes Running through the system and still constrained. And looking at the numbers, we think we left somewhere in the 3% to 4% comp range It's like the Midwest, California, as it started its recovery curve in that July, August timeframe, More constraints going through those systems that frankly we look at as opportunity. And so again, we're going to continue to drive the top line As we get those restaurants fully open and back online, we think there's another step up from a top line perspective that we can gain as we kind of The good news is we're starting to see that as we move into October. So the 1st 2 weeks of October, we have now started to see that step up again In average weekly sales coming up now to 55,000 per restaurant per week. So it's good to start to see Attraction coming back into the system, our intent obviously is to continue to grow that number as we move forward both from a Recovery standpoint and also from the initiatives we're going to be talking about as we move forward today. Let's get to the middle of the P and L because I know there's probably a lot of questions And comments you want to hear from us on that. Clearly, a compressed restaurant operating margin of 10.4% And it led by labor. Labor had 150 basis points delta between the current fiscal year and the prior fiscal year, But we had impacts across all three of the major components of restaurant operating margin. And let me unpack that a little bit for you. So from a food cost perspective, it was critical in this environment to maintain access to product And getting that product in a timely manner to the restaurants to meet the demand, because again part of this is being driven by great consumer demand that we're seeing out in The restaurants, yeoman work done by our supply chain team in making that happen, working pretty much around Clock with our distributors and our vendor partners to make sure that, that access was maintained and they did a great job of that. It did come at a price. So in the quarter, we saw about 100 basis points of commodity inflation work its way into the system. We did have to go outside of some contracts to source product in the short run and we had to restructure a couple of contracts To make them realistic to where the markets were going to assure that we had that product access. So there's also some Impact from the turnover that you're going to hear us talk a lot about and a more inexperienced Staffing levels that we are working our way through, because again embedded in that 100 basis points is probably 10 basis points, 15 basis points of Increased ADT beyond what we would typically see. And that's a matter of getting new team members up to speed on how to run the systems and making But the key is ability to continue to maintain supply and meet the demand as it's coming into the restaurants. Labor. So again, the heart of the issue here was the outsized year over year impact in this quarter from a labor perspective. And I want to break that 2 categories. There's both transitory from our perspective and structural changes going on in the labor market and I've kind of laid those out for you in this bridge. 130 basis points of that impact in that quarter we feel is very much in the transitory category and we will deal with that as we go forward. And we will deal with that as we go forward. 50 basis points of training, 40 basis points of less Productivity, again, a new workforce coming through the restaurants that need training, need to become more adept So you can get that muscle memory going of the systems and how we approach thing and we'll accomplish that and get those costs out of the system as we move Forward in this year. And then some structural changes, wage rates did increase in that 5% to 6% range that we had talked about before. So, they are behaving kind of as anticipated. And then some leverage working its way in as we continue to drive the top line side of the equation. So Where do we go from here on a labor margin standpoint? As we work our way through the rest of the fiscal year, As we move pricing actions, we took a price action yesterday, as a matter of fact. So we're and we have Line of side of the incremental pricing as we kind of move forward. As we take advantage of seasonal Revenue flows that we will start to see in our higher quarters as we move through the rest of the fiscal year. And as you see these initiatives we're going to talk about today continue To build the top line, we will impact favorably that number that you saw for this quarter. I would anticipate that as we move farther into the fiscal year, you'll see this number down in the mid-34s. And We will make headway as it relates to improving the labor side of the equation. And then restaurant expense. Obviously, this is the area you would anticipate we would make sales leverage. As you add that top line in, You're going to see most of the sales leverage hit in this area since a lot of fixed costs. Now there are costs in this quarter That are associated with having restaurants open at a much higher rate than we did a year ago. So when you see the R and M and utilities and some of those expenses, that's bringing restaurants back online. And again, I think if as we unlock The incremental sales opportunities that we can see, the leverage opportunities here within restaurant expense should flow through. So where we are right now is, yes, from a bottom line standpoint, flow through standpoint, disappointing quarter for But we have really good line of sight from our perspective on driving top line and margin recovery as we move through the rest of the fiscal year. There are expenses in here that are not going to remain and not become structural as we move forward. We will get those out of the systems We can continue to work to normalize the staffing levels, get the training where it needs to be and get that muscle memory moving on utilizing our systems that we know are very effective in driving restaurants. And we're stepping up to the plate to take more pricing actions as well as obviously driving top line growth Through the initiatives we've laid out. So that gives you kind of a little bit of an overview, our perspective on the quarter. We obviously have a Quarterly call also scheduled for November 3, which we'll have even more discussion or an opportunity around these numbers, But wanted to make sure that we had an opportunity to at least dig into it in the short term and answer some questions. Wyman, why don't you join me up here and we'll do about a 15 minute Q and A for the Q1 side of the equation. I'm going to look to the audience here to kind of be the proxy. Mike is also going to be monitoring online questions coming And we'll just kind of go back and forth between 2. Nick? And I'm going to ask you to So that if people on the virtual can hear, we have mics that will be roaming around and that will allow them. I guess, is there a way Go back and say if we had taken the pricing that we're taking now and that gets you to sort of 3% to 3 5% for the year. If that pricing was flowing through in Q1, what would the margin have been? Is there a way to Well, in the Q1, we're only recognizing about what 0.6% of price in the Q1. So If you think about another 150 or 200 basis points of price on that, it would have a significant impact on the margin hit. So I don't know. Yes, our expectations for the quarter would have been for margins to be in that mid-eleven percent range. So when we're looking at our plan, that was our thought process and it did not So improving the utilization of the systems and getting those transitory costs is probably going to be as big of an opportunity as we move forward. But As we move forward, but we underperformed by about 1% in the quarter when I think about the ROM side of the equation. And let me just ask the second question, if I may, the volatility month to month in terms of sales, I mean, is there a way to quantify how much that impacted Labor productivity efficiencies, you couldn't maybe staff effectively because you didn't have the visibility month to month. What kind of an effect was that? I think the volatility, it has I mean, when we obviously, when we run higher volumes, we're more So what really so when you think about that July to August drop, that was really primarily COVID related, We lose some efficiency there. And in the midst of all that, you've got this turnover. The good news is the spike in turnover It's kind of past us now. So we saw a dramatic increase in turnover both labor, hourly labor and management labor, early summer. So April, really May, June, July, we were dealing with that when we talked to you in August and it looked like, but then the impact of that Into the restaurant through the P and L was kind of what happened once, especially once you started to lose some leverage with sales. So that combination of what was going on in the restaurant with regard to staffing and being able to staff and have restaurants open, Whether it was because of just not finding bodies or whether it was because of COVID exclusions, coupled with a deceleration of sales due to the COVID restrictions, kind of Brought more pressure to the P and L than we had anticipated. A lot of that stuff now, turnover is now moving in the right direction, it's stabilizing, it's Much closer or moving back towards the trends we're used to seeing. And these aren't even restaurant industry trends, right? I mean 20,000,000 people left their jobs Between April August of this year across the country, a record 60% more than last year at this time is a Wall Street Journal article that was just written this weekend. And obviously in our industry, those numbers are probably bigger, because we have a more transient industry, well above the pre pandemic level. So you had a Lot of people moving in this environment jobs and you could speculate why. But that's That was just happening out there and that created a lot of it made us less efficient, frankly. We're all about running systems, Whether it's with our hourly team members or our management staff and you have to know those systems, you have to be trained on to be competition at them and that takes time And take some experience. And so with all of that going on and a deceleration, we just became less efficient. And Brinker is known for efficiency. I mean, that's one of the things we Ourselves on across the P and L, you'll rarely find somebody that runs restaurants as well as we do from an efficiency perspective and it's just got a little Tougher to do in that environment. Good news is staffing levels are moving back to where they need to be. We're seeing a slowdown, significant Slow down in turnover and getting back to those kind of levels. And so we're confident that we'll get back to running kind of restaurant systems that we need to deliver margins. Chip, David? He's right there, Clark. Question on Delivery and pricing strategy there, basically big picture thing because obviously you're going to keep on pushing on the off premise as a growth lever. So we want I know what we're getting into. If you look at fiscal 2021, it looks like your delivery fees and paper would be Somewhere up in the low 200s as a percent of sales versus 2019. So sort of this journey is costing you that. And you think about your incremental off premise business, it feels like back of the envelope that this is an incremental margin that's not as good as we Probably would like it long term for that off premise business. Obviously, some of your major competitors aren't really even doing delivery. So your competition is You're seeing Chipotle taking up pricing 17% on delivery. So I guess I wanted to get your sense about What you're thinking about pricing, pricing power on the off premise business and how you're thinking about, you're going to be doing taking other steps here? Well, I think first, let's just talk about our overall strategy with regard to price. We're probably going to be A little more conservative and a little more deliberate than most, especially with the Chili's brand. This is a brand that's got a foot and I'll share some of this with you when we talk strategy. It's got a foothold in affordability. It's got a broad based Consumer demographic, a lot of family, a lot of kind of budget eaters. It's why we have the footprint we have And the demographics we have coming to us, so we price very thoughtfully. So That's why we're a little late frankly in this quarter. We wanted to understand structural versus transitory. Structural, we kind of got don't want to get ahead of ourselves and start to chase consumers off in the long run. And that's why we're focused on traffic as well. So what is that how does that relate To the takeout and delivery side of the business, similar, but we feel there's more elasticity there. We've already priced more In those channels and we'll continue to kind of push that model, till we start to feel some Negative trade offs. And again, we're all about trying to keep traffic into the restaurants. The strength of a brand, I think, is how many bodies you have Coming in long term strength, I mean, even by a quarter with a big price increase, but are you going to be around for another 47 years. That's the question and that's why we really take pricing very seriously and we may get behind in a quarter or 2. But we'll be there in the long run and we'll push that channel a little further because it does have elasticity. Now are we going to go 17%, I'm not sure. I doubt we'll go all that way. But we know there's room there. There's those consumers tend to be a little less And willing to pay a little more. So we'll continue to push. Yes. And you'll see later today, Wade is going to walk you through of the virtual brand, what that model and P and L looks like. And there's one, it is good margins for the incremental business that it's generating and it has flexibility in it. So how we think about pricing, how we think about advertising, things of those natures Within the context of those virtual brands, we have good optionality there, but there are also new brands. So we want to make sure that we continue to build the awareness And the receptivity from a consumer standpoint as we move forward. So how you think about price for that generation of brands versus 47 Whatever years from some of the other competition is a little bit different. Hi, it's John Ivankoe. Two questions, I guess, on Transitory side, if I can. Firstly, can you elaborate on the 140 basis points increase in repair and maintenance? I mean, I think that's versus calendar 2019, correct? That's a very big increase relative to what I think a normal R and M budget is. So was there talk about fiscal 'twenty In terms of I mean, what was the level of R and M spending? Were you under spending for that given quarter that just that we missed? Was there some type of a difference in Allocation between CapEx and OpEx, that either will continue going forward or won't continue going forward. Yes, I think you're seeing a high watermark there. Again, there was an ongoing level of R Spend as you look back over the last year and again from a quarter to quarter, Q1 to Q1 last year, Where you had significantly lower number of reopened restaurants, you're going to see a bigger delta, I think, in these quarters. That's going to normalize As you move forward and we get into second, 3rd and 4th quarters where the operating perspective of the brand starts To be same over, same over. So I think that's the high watermark. And we need to make sure we have the right disciplines Governance in place, which I think we do. So I don't anticipate seeing that kind of delta going forward anymore. I may have missed that in my follow-up. It was 2020 to 2021. Okay. So that was September the September 2020 quarter, the September 21, 2020? Correct. Yes. Okay. Do you remember what that was versus Excuse me for embarrassing myself. Can you remember what that was versus 2019? I mean, was that a normal R and M spend versus 2019? At least that's It's a little higher than that on a per restaurant basis, but not terribly. As you can imagine, that's the Q1, really, really The first big quarter after the pandemic, a lot of everybody, this is when everybody was saying we found all these margin No, you haven't. I mean, you just aren't you got nobody in your restaurant. Of course, you're not having to repair a lot of stuff. There's nobody in your restaurant. We knew that was going to come back. Now has it come back a little heavier than we thought? Yeah, probably a little delay there and some pickup. There's also some issues happening With regard to supply chain. So we have equipment now that we would like to replace, because it's just life's We can't get it. And so we're having to repair it. And so our R and M expense is going up a little bit. So they're just these are the Without trying to complicate the story and keep it focused, there are things happening every day in the restaurants still around supply chain and distribution Especially that are aren't a surprise, right? I mean, all those boats sitting out in Long Beach, they impact us as I mean there's stuff on those boats, there's stuff in other countries that we need to get here that will eventually start to move through That doesn't get the same kind of exposure as your Christmas present, but it impacts our restaurants and one of them is just getting Refrigeration units, getting air conditioning units, so that we can open our buildings. So we've got to Getting these restaurants, we've got a great pipeline of new restaurant openings and just making sure we have all the parts necessary to open the restaurant now is a little bit of a challenge. We're getting We're going to work through it and we're committing to it, but it's not easy. It's not as easy as it used to be, as you would expect in these But that's probably a smaller piece of it, but it's in the margin. And I think historically there are 2 leading indicators Turnover, especially as it relates to retaining employees and also running good restaurants. I mean, one is general manager turnover. To comment what What we're seeing in that and I don't know if you look at 60 day or 90 day turnover of new employees. Can you comment in a very real time in terms of what's happening in both of those important factors? So So as I mentioned, they're getting better. So we saw significant increase in both hourly and management turnover, primarily the turnover It was driven by early tenured managers, right? Ask GM, the newest employee. GM has always been A teen number, low turnover number for us. It jumped from where its base has been. We've always had and I'll show you some numbers here in my presentation later. I mean, we have a very tenured GM staff. The average GM is over 10 years With us. So we have a very tenured GM staff. We did lose some and that's important, but we have even a better metric. We ask our team members twice a year, how you feel? And we asked them that in March and the number wasn't great. It was and we didn't expect it to be great. Nobody was feeling great in March. And that's the better indicator of what are they going to stay or are they going to leave? And We're asking them that same question, the survey is out there today and we'll have a better insight. So we keep track by restaurant of what's the You know, how do our team members feel both managers and hourly on an ongoing basis twice a year, we take a pulse of, hey, how's it going? And that's You're actually the better indicator. And in March, we got an indication that, hey, we could see some Turnover and it wasn't so much about what was going on in our restaurants about the overall environment and having to work in a restaurant through a COVID experience for the This year was weighing on people. And the number one reason we're seeing for turnover is really about quality of life. And it's Like, hey, this has been a very difficult time period for the industry and some people are kind of making decisions and The good news is most of those decisions are behind us and we're starting to see people kind of normalize back into the organization. And we're dealing with these issues that make it easier to work in this business. And I think as of today too, we're feeling pretty confident and comfortable Where we are from a GM perspective and the normal turnover rates that we would expect to see there. We've seen improvement on the manager side of the equation And a lot more stability as we work through both the heart of the house and the front of the house. Again, Midwest is probably our most Balanced area right now and a lot of time and effort going in to improving that. California is probably the second piece of the equation there. When I talk about the constraints that we are seeing on revenues from a labor kind of standpoint, those are the 2 hotspots that We're looking at very closely. That probably represents a third of what we thought we left on the table. So the great news there, if you want to say great news, but the news there is, we have good line of sight and it's not system It is very defined into certain markets. So it's that eighty-twenty rule is very much in play and we can move the ball on that. Yes, which again gives us a lot Comfort that, hey, we know once we put out some of these fires that There's a lot of restaurants running very well right now and delivering great results. I think Jared, you had. Jared Garber from Goldman. I have two questions, 1 on the top line and then one on margins. On the Top line, you gave some nice color on the outperformance versus the industry. It looks like that shrank in August. Obviously, we all know the industry shrank as well in August, but anything that you I think drove that deceleration from sort of a low single digit outperformance to I think it was 20 basis points or so in August there. Is that Geographically driven, is it something there that you think drove that? Yes, I think geographic, the geography played a lot into that. When you really saw The greater impact of a surge, you were seeing a lot of the southern tier markets. We over index in those markets relative to the industry. I think that was that's that's The other big thing though is if you look at the traffic, it didn't drop. So it's really pricing. So other again, Other folks price more aggressively early on. The gap between those two is really differential in price mix, right. So we're almost double digits or high single digits in traffic. And now we're running kind of Now we're running kind of low single digits on sale. So there's that price gap that we're again being more Liberate about crossing and we'll take traffic and a line of sight to a great P and L and future business than just going Full throttle right now on pricing. That's definitely helpful. And then my second question is just on both COGS In labor, inflation expectations for the rest of the year on COGS, how are you thinking about that? And then in terms of labor costs, obviously, You gave some good color on the what we think are transitory headwinds. But as it relates to sort of average weekly costs in the labor line, how should we think about the pace Going forward, are we at a place now where that number is generally going to be stable going forward? There's probably some puts and takes to the number here. Is that how we should be thinking about For the balance of the year? Yes, again, taking major environmental changes out of the equation because that can obviously have an We think there would be definitely much more stability in the equation from a COGS standpoint. Again, that range we had given you, I think it's still applicable that mid single digits. It's probably ticked up a little bit. Before we talked about the lower end of the mid single digits, Probably a little bit more center to that piece of the equation. And from a wage standpoint, very similar. I think it's Be again that mid single digits at the higher end of that range as we kind of continue to work our way through. But I think more Stability and again, we'll take those transitory costs off the table as we move forward too. Micah, do we have anything online? They are a lot of the same questions, a lot about pricing about commodities and labors, what the inflation numbers are, how they're going to work through the P and L. So I think we're covering them. You may want to throw in a little bit about staffing levels where we are today. Do you want to talk about staffing? Yeah. So let me hit staffing. Again, trends are much better. We're Basically staffed to pre COVID levels on average. So when you look at a typical Chili's, The number of front of the house servers and heart of the house cooks and prep people were about almost exactly We were pre COVID on a per restaurant basis, so that's good. As Joe mentioned, we've got some spots, some hotspots. Regionally, it's probably the Midwest is the biggest regional and then every town. We've had dozens of restaurants in Dallas. There are a couple here that are struggling to fill a position or 2. I remind our operators, pre pandemic, Our biggest issue was staffing. So this is there's always a staffing issue in the casual dining restaurant industry. We're always kind of dealing with that. We're I'd say past as a company, kind of the what we would we call it 911. Hey, This is something we got to really get focused on. It's more of an emerging. We're past that as a system, but we're still dealing with it kind of from regional standpoint, probably the Midwest Region, I'd say it's big enough there. We still need to support them and it's mostly front of the house there interestingly enough. And then it's spot, It's spots and I think you hear that from most operators nowadays. So we feel good about where we're at. The turnover, as I've mentioned, I think this is the 3rd or 4th time is coming down, starting to move So back towards that direction management turnover, especially the GM level, back way off from what we saw that little spike Earlier in the summer, back down to kind of more traditional levels. We love the trend and we love the trajectory. The issue that we're dealing with and we're getting through it is, you know, when you lose a manager, it's a 10 week training period. You know, I mean, it takes a while To get a manager ready to go. So and we always have an inventory of managers available, but we just didn't anticipate having this many needs. So we're getting that Pipeline filled and while you're doing that, you see things like the transitory costs around training, even those are team members, The transitory costs around training managers is, oh, well, they may not know how to run A versus T and waste in the production system as Well, they may not understand how to schedule quite as well. So they're not as efficient on running the labor model. And those are things that we're working with them to tighten up. And again, our history We run a pretty tight ship. We just have to have everybody trained and ready to go before we can hold them accountable. We owe them this whole idea of, hey, you got Got to invest in them to help them understand how to run these systems that are world class, invest in class and then you get to hold them accountable to running them and we're in that process and moving towards that Accountability phase, but it's taken a little bit longer and had a little bit more impact than we would ever have expected. Thanks. Alok Estrada, Stifel. I mean, you talked about some of these issues That make working in the restaurant more challenging. Obviously, there's some elements that you can't change, but what have you been doing to kind of take some of the stress It's a great question. So the question is, there are a lot of things that we're having to deal with. Talk about this strategically too, this is where scale really helps. So this issue of training, typically we have virtual training and modules and it's part of the really part of the managers job to make everybody's trained and to train other managers. One of the things we're kicking off now, Rick's put a great program in place, we'll start it here soon, Is in this building, we will now offer classes live, that we will live Train different managers across different aspects of the business, labor model, the production model, A versus T, your own well-being. And we'll have experts in this building doing this exact same thing we're doing with you to our managers. What that does is it first it gets them trained From the experts firsthand better than just going to a model or a module and it takes that burden off the managers in the restaurants. They don't have to worry about training, they just have to give them the hour and tell them to go sign up and the classes are available at convenient times, multiple times a week. Those are things we've accelerated and we're testing and I think again, kind of industry leading in terms of how we're embracing, how do we make the managers jobs easier And make that team more effective and get these systems that we've kind of taken for granted because we haven't seen this kind of a spike in turnover that everybody knows. What are we doing to own making sure they understand it, so we can get back to kind of running restaurants as efficiently as effectively as we have in the past. So that's one example. It goes, there are a lot of others. I will tell you not too many, not too long ago, we had an issue with a distributor here locally, Who just basically came to us and said, hey, well we're going to cut your case rate, we don't have drivers. We're in Dallas. You get 80% or 90% of your cases delivered. So you have 2 choices, do 10% less business or figure it out. So So we had trucks coming into the parking lot here. We rented U Haul trucks. This team broke them down, Broke the semis down, loaded the U Hauls and drove to restaurants for a couple of weeks until the supply chain team found an alternative distribution And that's what we did to make sure that the managers are supplied and supported. And we got restaurants done. Now, is there a cost to that? Is there Is that an efficient way to be doing it? No. But does that what scale allows you to do and we have teams and ingenuity, while the supply chain team then figures How to use a different distribution method to get some products to the restaurant, so we don't have to say, okay, we're cutting now we're cutting sales, because we can't get product. So or we're disappointing guests because they don't have their favorite item. And I think one of the things in late August that I think really Started to move the ball forward too on improvement as we were able to host a GM conference here in Dallas. We brought all of our GMs fully vaccinated into Dallas for a 2.5 day conference and where those conferences are often focused On systems and training and things of that nature, it was focused on wellness. Again, so we've recognized the issue. We lean into the issue from A support team and we brought them, I think, very effective programming. It was great to have them. We hadn't had them in one place in a while. And just the act of getting together again as a team and recognizing the issues that are going on there and dealing with it and helping to provide them Tools and methodologies, I think was a big step forward and the feedback, I think coming out of that very favorable from how the Yeah, again, we're getting a little bit ahead into the presentation, but well-being and the importance of our managers and our team members well-being is we think critical to retention. And that's a great example that Joe just shared in terms of what we did at our conference. It wasn't about we didn't train them on Any new systems, we basically embraced them, thank them, recognize them and talked about how they could be better supported Financially, emotionally, physically, what can we do to make their lives better, so they feel good about working for And I think those things pay off and that's part of the cultural stuff we're doing to help. We actually need to keep the schedule going. If We'll have another Q and A. And we'll have another Q and A, we can always pick it back up and obviously, Micah, Clark, myself are available as we You get a chance to dig through the numbers, but here's the clicker. I'm going to turn it over to you for the beginning of the presentations. All right. So And I know it's hard to separate kind of the short term kind of what we just announced And especially with questions as to what the implications are with the longer term strategies, but we really want to Some of the strategies, you'll hear some see some videos as well. Wade Allen is going to follow and really dig deeper into virtual brands is Important part of our strategy. And then Joe will come back up at the end and kind of tie it all together with what's that mean from a business model perspective? How do we see capital? What do we think about margins as we think forward the next 3 to 5 years? So and again, some of this is going to be very familiar for some of you. Some of You are relatively new, so I'm not going to dwell on it, but I do think it's important to talk to at the foundation of Our strategy in our business is some amazingly strong brands. And when we talk about strength of brands, when you think about The Bar and Grill category and all the turmoil that's gone through Bar and Grill over, I mean, how many of you were Born in 1975. Yeah, unfortunately, there's a few of us, but most of you not. Some of these John and yes, that's what I mean. You, John and I, and this side of the room, mostly not. Chili's is a 47 year old brand. It's got an amazing 100% basically brand awareness. If you don't know Chili's, you've been living under a rock. And it's Survived and thrived in a category that's seen a lot of turmoil over that time period. When you think about Bar and Grill 50 years ago, who was leading it and where they're at today And how Chili's has navigated and continues to lead the category and be an amazingly strong brand. It's very impressive. Maggiano is a similar 30 year old brand that really almost any time you ask a consumer that experiences that brand, obviously not Quite the breadth of awareness and experiences with 52 or 54 restaurants as a Chili's, but boy does it have An affinity with its guests and it almost wins every guest based contest With regard to best brand in the class or favorite restaurant. So 2 really powerful brands that have got a lot of history And connectivity with their guests. And then we just added to what's now kind of turning into a little bit of a portfolio Two virtual brands that we're very, very excited about their future. And obviously, the wings, we'll talk about the position of that more in the future here. And you've got a Maggiano's Kind of hybrid brand that leverages a lot of the attributes that Maggiano's brings to the table Across a very compelling segment. When we think about our desire and our commitment to run restaurants, We're committed to that. We think ownership is important in the casual dining space. And then you could debate that, but that's our belief and that's our business model and our Strategy is that if you run casual dining restaurants, you get a scale and a familiarity with the P and L up and down That you are able to do the things necessary to keep brands around and healthy for a long period of time. And again, we could Just look back in history and see casual dining brands that have struggled as they've not been run well. And so we like Owning restaurants and running them well, we're 90% owned in the domestic market here in the US. That's the model we will lean into. We'll always have a few franchisees in the U. S, because we like being in airports in places we won't be able to own a restaurant. But for the Prior we're very we have a high preference to owning and we like, but we do like to be international and we're in 29 countries and 2 territories with Chili's brand, all of that all of those 3 62 restaurants are run by really strong local franchisees in those markets. They Continue to look to grow the brand and the business where we've opened a restaurant in China. Rick is heading up the international piece for us now and it's done Extremely well in Shanghai. We're looking to open another one here in the not too distant future. So we're consistently out there looking for partners and And supporting our partners in ways that they appreciate. So that's kind of the foundation. We've talked a lot about COVID over the last But I just want to remind you to kind of how we performed during COVID, and I think it's best in class. When you think about our ability to shift To an all takeout strategy, really almost instantaneously. We were able to do that because we had Invested 1st, we believed in the consumer proposition that convenience was going to be a driver. So we were ahead of the curve there. We invested in technology Really better than anyone else in our class. And so when it became necessary, it wasn't that hard. We just Shifted over and then as we were able to open restaurants back up, we just were able to migrate through and navigate that and manage the cost and can take And significantly outperformed the category and take a significant amount of share. And oh, by the way, in the middle of that, we introduced a virtual brand to over 1,000 restaurants overnight. All of that happens because of the commitment in and the strategic Kind of development that was done prior to that. I mean, that didn't happen. We didn't think up it's just wings or all the technology necessary to do that In March or April, it had been done years before on technology front. And we've been talking about virtual brands for months in testing and prior to that. So All these things were already in place when the pandemic happened and really through the pandemic, we actually strengthened our financial position. So Last 18 months have been challenging, but also rewarding for this team, because they really outperformed. But let's talk about the future. So we continue to think our strategies are aligned. You'll see a couple of tweaks for those of you that have seen our strategic presentations in the past. They don't change Dramatically and I think our strategies have proven to be kind of successful. So we're modifying them slightly, but moving forward. Big part of that is virtual brands. They're here to stay. We're committed to them. These are not transitory nor are we do we take them lightly. We invest in these brands and we think they have a long term track and we're looking to kind of continue to grow that. And we do expect More normalcy back into the business and the things that we've been known for in the past, we will continue to be known for and that's really running greater restaurant operations and a tight P and L And delivering great guest experiences. So Joe showed you the 1 year Chili's and Maggiano sales and traffic But the story really goes further than that. So this is a 2 year trend. And you can see the big differences that we experienced When COVID hit, right? But if you took this back, Chili's is on its 15th quarter Of comp sales or comp traffic outperformance of the category and 13th quarter of sales out So this is a multi year into our 4th year of outperforming the category at Chili's. So strategically, It's been working. This is not something that just happened because we came up with a virtual brand strategy in the middle of the night last June. This has been something that the foundation of Chili's is strong. It's been working and now we're augmenting it with some additional strategies Continue to help us grow, but the strategies have been working. And again, where they've really been working is on traffic. And that we're running significantly higher traffic and positive traffic to the pre COVID levels is important to us. So what are we leveraging to kind of make that stuff happen? Well, we'll talk about these 4 things. Again, first, it Goes back it always starts and ends with the brands. So with Chili's, you've got those 47 years In the casual dining, probably the toughest category in casual dining that we've been able to navigate, got a strong value proposition. Maggiano is again Very much ingrained in its consumer positioning around authentic Italian American cuisines, quality product and affordable prices and then these new virtual brands that Are just establishing themselves, but we're very excited and way to walk you through a little bit more of the details on how they're positioned and what they're doing to get us excited about their future Opportunities and how we can grow them going forward. You'll hear us talk a lot about scale. It comes across, It's critical to some of the other things that we think are important. With scale, we're able to invest more in technology. So and technology is going to be talked about a lot today in terms of how we see ourselves, not only navigating to a better consumer Opposition, but becoming more efficient. And if we're going to become more productive, how do we do that in a way that still Delivers a great guest experience, but also works for us from a business perspective and scale allows us to do that. We've got an amazing Anyone want to take a tour of our 4th floor, I'll take you up to our data center. It's world class, got one of the best views in the country for Data center, I'm not sure why we put it on the 4th floor overlooking the lake, but our computer guys appreciate it a lot. And we've just made that investment. We continue to put capital into the technology side of the business and supporting our operators and our team members. We've talked about some examples of how scale helps us from a supply chain standpoint and the quality of that team and how they bring And for the first time in my history, we've actually had to go outside contracts where we've made we negotiate some of the best deals in the industry because of Scale and in this weird environment, we've actually had suppliers come to us and say, hey, we just can't meet that number now. I mean, it's just not possible. And we've said, hey, We're in this for the long haul, we'll adjust. We'll have to pay you a little more, we get it. But overall, that just The supply chain in our scale just comes to bear on the cost of sales part of the equation in spades. And then things like development, Having the capital available and the resources to go out and find these sites that are now that are more abundant for us now because we've opened a bigger trade areas and because the P and L is working harder for us, that's where scale kind of comes in. And I've talked about it really playing a role in technology. The scale allows us to then unlock our strategic point of differentiation Embracing technology and this is just an example of where all these systems on the left are Things we've implemented, systems we've implemented that are technology driven that have done things like take our digital sales footprint from Really nothing 6 years ago, 2.9% to over 34%. Now some of that is driven obviously by the pandemic and more people not coming into restaurants, but it's not it's going to stay in that high 30 low mid to high 30 range in the future. We don't anticipate this is going to come down. So that's what technology has allowed us to do and that's why again, especially during the pandemic, we were so much quicker and more able to Address and interact with consumers. And then it's positioning the brand, having a brand that's got great awareness is one thing, but having Strong positioning, especially around understanding your value proposition. Again, these are things all tied to why we're a little more deliberate with price and understanding, Because we understand the importance of having an affordable concept or affordability and a strong value proposition for a brand like Chili's. And so this is just Some consumer research we do and we track on an ongoing basis to understand, hey, how is our affordability rating? What's happening? How does it relate to some other key competitors that we're looking at? And then just we just threw on the other axis, this whole idea of okay, well, if you say technology is a strategic Advantage for you and you want to be consumer facing, how does the consumer tell you? How do they feel about your technology and do they like And you can see on both affordability and the use of technology enable the consumer experience to be better, we're best in class with the Chili's brand. And so those are things that we so we monitor these strategies to make sure that the consumer is playing back for us what we would expect them to, if we say this is how we're going to win in the marketplace. So let's talk about the strategy itself and I'll focus on Chili's. We've got Steve going to share some video in restaurant. We really wish more people were here and we would have taken you to a restaurant. And so these are that over the years that have been with us Restaurants, we know that's really the best way to talk about this business, but unfortunately we'll have to do it a little more virtually this year. So these are strategic pillars. These are the 6 pillars that we use to drive initiatives, to kind of frame initiatives that are going Our business going forward. So I'll walk you through those fairly quickly here. So the first is best in class operations and we've talked about this through the Q and A, so all this stuff should be tying. It really is about a systems driven model. Our whole idea is scale and systems to support operators to able to run a fairly complex casual dining model, not overly complex, but fairly complex, because we're offering consumers variety and choice In a way that allows them to be successful both with their guests, their team members and the P and L. Those systems are what we We lean into and that's why when they're not trained on those systems, they can get a little wobbly. We got to tighten that up and get those systems back in place. I could spend all day talking to you about each one of these, the manager's Online, kitchen, sink, quality, all of these systems, but we won't do that to you. We'll focus more on where we're headed Where we've been focusing a little more recently. So obviously with the increase in takeout and delivery, a lot of emphasis on our Out the side door, we call it system. So curbside to go. Aaron is going to talk to you a little bit about that in the future In a few minutes. But what we're in the middle of right now today is rolling out TSC, team service evolution. So John's heard me talk about this for as long as he's been tracking it. So we implemented a team service evolution model 3 or 4 years ago in California, it worked the model works great, the technology didn't. And what I mean by that was, it would break on a Saturday night in the middle of volume. It just couldn't handle capacity. And so we've had to over the years basically Build it ourselves. We were using 3rd party, we had to we used our guys upstairs to rewrite the program to Integrated with different hardware and now we've got and we're in the process. Rather than me walk you through it, Doug has done a nice job in restaurants. So let's go to that video and have him kind of walk you through TSC. Team Service Evolution Or TSC as we call it here at Chili's is currently rolling out to all of our restaurants. The journey has been a long time coming and we want to make sure that we got this right for our team members And our guests. We've spent 3 years testing this new handheld system and have implemented proprietary processes Around software to make sure TSE runs smoothly in our restaurants. At the end of the day, we needed to make sure that the system does not go down On a busy Friday night, enabling us to take great care of our guests. By having technology and the new labor model in the restaurant, This allows us to create a much better guest experience. Let's see how this works. There are 3 key pieces to the new team service model. We have new technology with iPad Minis running our POS software for each server. New kitchen display screens installed in the bar and beverage areas. In a new labor model with a runner position to assist servers on the floor, team service evolution improves the guest experience in several ways. The first way is having engaged attentive servers taking care of our guests. Servers are out on the floor greeting guests, Taking orders and interacting with the table. They take orders using the tablet, repeat the order back and oftentimes The drinks are delivered by the food runner before the servers even left the table, creating a wow moment for the guest. No more waiting in line at the back POS To enter an order and no more guests wondering, when am I going to get my drink? The new system creates an improved food and drink order flow to the kitchen As servers ring and send each meal segment. This keeps from stacking food orders and then flooding the kitchen with multiple orders at once. Now, How does it impact our restaurants and our team member experience? TSE allows for smoother shifts and simplifies the job for our team members By creating clear direction of what their roles are. With the creation of the runner role, we are creating another career progression for our team members. From host to runner to server or bartender, we have a path that will help our team members be successful. Each role is critical And it provides steps along the way to engage and leverage the team members' talents. As they are promoted through the system, their earning potential also increases. So I hope you have a better understanding of how TSC works. In summary, with this new system, we have seen improved guest satisfaction scores, Experience better productivity from our team members and made their jobs easier. This is definitely a win win situation. We believe TSC is a competitive advantage for the brand. We're excited about the benefits for years to come. All right. So TSC, it's out. It's about Half the system has it actually running today, it will be done by December. So by the end of this calendar year, everyone will be on this system. And as Doug's mentioned, because the servers stay out on the floor, they can take a bigger section. That means they make more money. That also means we need less of them. That means we get to keep the best of them. So on a Friday night, oftentimes in a restaurant on a Friday night where you need more bodies, you're oftentimes going to somebody to come work in the restaurant who's not that skilled, That's only working maybe 1 or 2 shifts a week. And that's the last place you want somebody who's not very skilled is in your restaurant, Messing with your kitchen and your POS when you're very busy. And so it does a lot of things to simplify and make the job of the manager a lot easier. You get your best people They make more money, so they stay longer and they run the system smoother. And then it gives that career progression. You actually go from server Bartender to certified shift leader to manager to GM. So the whole cycle of A career progression that can have you entering at Chili's and becoming $100,000 a year plus GM is very clear and evident to somebody. And we're excited about what that does too, because the next one is really about engaging team members and building a tenured workforce, which is critical if you're going to be best in class operator, Right. And we've talked a little bit about this in the Q and A. So I won't kind of dwell on it much more to just say we're focused. This is a new pillar. So when I talk about the strategy has changed a little bit, this is a strategy improvement or a change from the last time, because based on what we see in the environment Now and looking forward, we know this is going to be more critical than ever. It's always been important to us, but now we've said, hey, it's a strategic pillar. We have to become an employer of Choice, we have to make sure that we have the best GMs in the business. And we have to make sure that we're focused on not just how they perform their job in the restaurant, But their overall well-being that we commit and connect to them on aspects of their life that are outside the four walls of our restaurant. And we're doing that and we talked The manager meeting being a good example of how that works, because when you look at our tenure, it's impressive. I mean, the average GM at Chili's is almost 12 years. The above restaurant Director of Operations is 19 and the VPs are 18. So we have a very tenured organization, Doug Cummings, 27 years with Chili's, Aaron 20 years and a prior GM of the Year for this business. So We have this amazingly powerful tenured and really excellent operations team and we want to continue that. I share this The last data point here is just to give you a little bit of insight into kind of what has always been the case is, there's always people that Leave the organization and then they come back. And in the past, it's been about 4% of our management hires are people that have worked for us before, whether as an hourly or as a manager and they left and they're Back a little higher on the hourly, some of that students, they work in summer, they left, they come back, we hire them. But you can see what's happened more recently, those numbers have doubled. So a lot of this transient stuff we're talking about, a lot of this turnover we've seen, A lot of those people are coming back and we're seeing them again. And so I think there's a lot of Testing the waters, I'll say, for our people of all industries to kind of say, hey, listen, I'm going to try something new. There are more opportunities out there than ever But we're seeing a lot of those folks coming back home to Chili's and to Maggiano's to say, hey, I tried that, Didn't work out so well. I don't want to come back to the restaurant business. I know what I I know what you're about and I know what this job is about and that's encouraging to us that we're seeing that uptake As we've seen the turnover go up, we're seeing the repeat come back. So engaging team members and a tenured work This is a critical strategic initiative for us and a lot of initiatives around that. This is really about a powerful menu, but it's really about having That's especially with Chili's, that's broad and diverse. Again, so we appeal to a lot of people and that's One of the strengths of this brand, if you look at from a psychographic perspective, we lead with experienced seekers and we pretty much run the gamut. This is a Segmentation done by an outside consulting firm that segments the whole industry this way. This isn't just us. This is how They've looked at multiple concepts that they've consulted with and they've looked at they've consulted with almost all of us. And this is how they break out and we We mirror the industry. So the beauty of Chili's is we're represented equally almost as the industry and even though you see, hey, there's 4 percent of the healthy eaters at Chili's, which you go, wow, who what healthy eater walked into a Chili's? Well, maybe they got drug in, but the thing you need to know In the category, it's only 5%. So all of casual dining only 5% are. So it's still the smallest segment, but it's to become a big enough segment and we got 4 we got 4 we got 80% of it, so coming into a Chili's brand. So again, how they come and how they use us, we have to be Available or make ourselves available for Chili's. And so variety is important. When you think about a demographic mix, 80% more than 80% of the Chili's Guest base is 55, less than 55. And so again, a large skew of families, younger kids And really a good generational mix. So the brand is moving through its 40s and into its 50s With a lot of folks that are just coming in and still appreciating it. And it has to do a lot with the menu. Again, affordability, A strong affordability proposition that gives people a ease and a comfort with that brand, variety that allows people to eat regardless Whether you're healthy or whether you're more an indulgent eater or you're a basic budget family. And then we leverage these iconic menu offerings. It starts with things like our Presidente Margarita, our Big Mac Burgers And the chocolate molten and then we give most of our guests are putting a chip in their mouth. And it's a fresh chip made every day With fresh salsa and that's those are the kind of iconic offerings that kind of make Chili's not only broad based, but also compelling to individual. So really staying on top of this menu and our commitment to the Chili's base brand. I know we'll talk a lot about virtual brands, but at the end of the day, the base business Is number 1, we're not neglecting it, we're all over making sure that this brand continues to be unbelievably powerful. Again, you'll hear technology a lot today. We've just talked about TSC. We've talked about handhelds. When we shifted to an environment where people weren't sure they want to touch menus, we were quickly able to go to a QR code We had all that technology in place. And so we didn't just go to a PDF, but we had a virtual menu on your device, on your phone, so that we Could continue to sell your category and push items to you and have you sign up for the rewards program and all the things that we need to do To be successful, because we have that technology and we were able to turn that on quickly. I mentioned previously that we've been focusing on How to make our off premise experience better, both from a guest standpoint, but also from an operator standpoint. We've pushed a lot more food out that side door. We didn't build these restaurants with the expectation that the mix would be what it is today. And so how do we support And technology is a way we can help make sure that even though the geography and the restaurant may not have been perfectly Built to do this technology helps us kind of overcome that and make it work for him. So Aaron is going to walk us through on This video kind of what we've done with off premise, our off premise convenience system. Welcome to Chili's to go. This has always been a big focus for us at Chili's and has become even more important in the last few years as we've seen a huge increase in our off premise business. Convenience is an emerging trend and having multiple ways to access our food with a frictionless experience is paying off. We've been working hard to improve our efficiencies in our to go systems. We recognize that our guests are wanting a differentiated curbside by leveraging handheld technology, custom software and processes for our to go team members. We focus on all aspects of the guest experience. So let's take a look how the new curbside for all works. Curbside for all allows us to create a more efficient curbside experience for all to go orders for both our guests And team members. 1st, guests place their order via the app and are able to pay online. Once a team member has a completed order They mark the order ready in the system, which sends a text to our guests, letting them know that their order is ready. Once they arrive at the restaurant, Our new to go signage will direct them to check-in with their parking spot number and then kick back and relax. This will mark them as currently waiting and alert us through KDS. So you place the order, we tell you when it's ready. You tell us when you're here, although we're getting to the point with near field communications, we'll know when you pulled in. We can actually say, oh, you're here, just tell us what And this conversation with the guests and these promises, hey, now you don't have to get out of your car, especially if we start to get into some more inclement weather. It's nice to know, hey, first they know I'm here. I know my food is ready because they've already told me my It's ready and it's going to be coming out. I don't have to worry about getting in and out. It also simplifies our operations, because now we don't have people in that section of The restaurant kind of piled in and backed up. It's not a very big area, right? We didn't build it for 20%, 30% of our mix. So now it all happens outside We've just moved that whole transaction outside. So it's a great example of how we're continuing to leverage technology to run a better, more efficient restaurant and deliver a better guest experience. The next pillar I'm going to just hit lightly because you're going to hear Wade in a second here talk about it in a lot more detail. But We think virtual brands and delivery are key to our growth going forward. It really is about unlocking There was always a knock on the industry that it was overbuilt, casual dining is overbuilt. And our premise was, hey, maybe we're not overbuilt, maybe we're just underutilized. And so how do we better utilize the capacity that's out there or create additional capacity without expending a lot of capital. And that's what we're doing to bring virtual brands in and we're very excited about what they can do for us and what they're doing for us today. And then finally, there's just additional growth vehicles. Some of these are more traditional, but we have the opportunity to accelerate new restaurant openings. We are looking and Joe will walk you through kind of some more details specifically, but franchise acquisitions to lean into this ownership Model and open up bigger areas and trade areas to grow in where we haven't seen as much development. And then we We're going to continue to reinvest back into these brands with reimage programs and other things like technology to keep them fresh, to keep Around to make sure that these iconic brands are here for a long time. So just to kind of summarize that it is about strong brands and keeping these brands strong With Maggiano's and Chili's at the foundation, but our new virtual brands are very exciting and they will continue to be very strong brands. It's about And then positioned in a way that make them strong, but also that deliver a business model that we think is solid and that our operational expertise allows us to lean And deliver the kind of results that we know we need for our shareholders. And then finding these growth opportunities, both organic within the brands And with virtual brands and other ways to grow the business. And all of that is kind of foundationally built Around technology, I mean frankly it's a pillar, but it's a foundational building block as well, because at the end of the day, There's rarely an initiative we think of that doesn't require technology now and doesn't incorporate our technology And our infrastructure to make it happen in a positive way. And those are things that are barriers to entry, not just to the small mom and pops that make up a lot of Category, but even some of the larger concepts that have a hard time, especially in a franchise model, getting all the franchisees to align on a technology solution and execute it. So those are the reasons we're excited about the growth. We're excited about the future within Brinker. And now I'd like to bring Wade Allen up to talk about It's a virtual brands. Wade joined us 8 years ago. He came in as a marketer. Really then we He's got a background in technology. He ran our technology group. He's VP of Technology for years and more recently We've moved him over to innovation. He's running virtual brands as well as doing a lot of other very cool things. So Wade? Awesome. Thanks, Simon. As Amit said, I've run innovation. Part of my day is doing crazy stuff like thinking about last mile delivery, autonomous vehicle, drones, robotics, but the lion's share of my day is spending on virtual brands and thinking about how this So I'm going to walk you through our strategy and talk about growth opportunities in virtual brand, explain a little bit about we're going to first dive into market opportunity Around these virtual brands and give you a perspective of how we see it. And then we'll dive into virtual brands themselves, Why we're winning in this space? Why we are the market leader with our virtual brands? And then we'll finish on plans for growth And lay out how we're going to get a path to a sizable amount of revenue in the future around virtual brands. So, to start with the market opportunity, you first have to kind of understand just off premise. This is what fuels Virtual brands. A lot of questions around off premise in the past, but we believe and we see the data that it is here to stay, Right. There is a demand and Wyman talked a lot about it, to have food where I am, right, whether that's in a rest or outside of a restaurant Or at a soccer game or where that may be. That trend, you see it here in the off premise. Our data prior to the pandemic, In and around that 17% of a mix of off premise and now into this pandemic and where we are in this process Hovering in that mid-30s range. We knew this was growing before. We had made investments prior to. We were industry leading prior to the pandemic. So we knew there was a tipping point. We didn't know It's going to be a pandemic that was going to tip this, but we knew there was a demand for guests to get this food off premise. So we continue to see that growing. Another trend that's interesting You can't talk about off premise unless you're also talking about delivery. We see delivery continuing to grow. The most recent data That I've seen said that in the last year, meal delivery growth is up 20% year over year. Along in that same study, it indicated that 50% of the US roughly 50% of the U. S. Consumer base had purchased at least one meal from the big delivery companies out there. Further indicating that this is continuing to grow and continuing to fuel this demand at home. Interesting on this slide, if you take note, you can see the market Share breakout from the different delivery partners. I'm going to talk later in the presentation about a growth opportunity. So a little bit of a foreshadow Found that market share. Let's talk about ghost kitchens for a minute, because this is another one that's if you're out in the industry and you're talking in the industry and you're aware in the industry, you hear this a lot, Ghost Kitchen. But Ghost Kitchen is another one that's fueling this idea Virtual brands, an opportunity outside and away from the restaurant with food. In 2019, an analysis This was done, it said, by 2027, dollars 42,000,000,000 of restaurant sales would be recouped in 2027 from this Analysis, they restated that in 20, just recently, a couple of months ago, that metric changed and the restatement was now $71,000,000,000 In restaurant sales by 2027. So, that's a massive change Through this COVID experience we're having and continues to convey this demand for food at home. It doesn't mean restaurants are going away. It Just means there is a new demand that's being met today in this space. And what that allows us to do is shape up what the market share looks like or the market opportunity looks like For the 2 different virtual brands that we have today. So specifically around wings, when you look at everything that we've talked about and you look at some of the Industry data, we think that's a $6,500,000,000 total addressable market for wings. On the Italian side, I've seen metrics and I've Seeing analysis done that says this is much larger $20,000,000,000 But when you pair it back to just think casual dining and you take pizza out of that equation, It's still a sizable opportunity at $7,000,000,000 So significant for us in our brands. So if you didn't move in and start to talk about, hey, let's look at the virtual brands and the performance we've done today. There are 3 things that have driven our success In our virtual brand space and made us market leaders and it really comes down to being very methodical and specific about our brands and the target That we appeal to. The second piece is the operational systems. You hear him, Wanda, talk a lot about the importance of systems and we're going to dive into that And show you what we mean by making sure that we have powerful operation systems in place that don't disrupt our Chili's brand and still allow To deliver a high quality and great product through that kitchen that were at times it can be chaotic. And then 3rd, Talk about distribution. To be a winner in virtual brands, you have to have distribution, right? It's all about Reaching the guests. So, let's talk about our superior brands for just a minute and the work that we've done around this. On the left, you'll notice it's just wings. You know this brand I'll talk just for a second, of the target. When we started this back in June and all the testing prior to that, we knew very specifically The target was. It was focused on young males that were all about sports. It was a value brand. It was killer wings, stupid prices, Free fries and it was value then and it's value today and that's where we're focused. Interesting thing about this is our best restaurants for It's Just Wings Tend to be around college campuses. It's pretty interesting, right? The target for Mahjong's entire classics is very different. It It's more female. It's family oriented. It's meal around the table. It's affordability, but it's more about abundance and quality. And it is really bringing authentic Italian American food home with this brand. So with those targets in mind, let's dive into the some of the success that we've seen with It's Just Wings. I can brag about this And all day long. I think we've sometimes I tell my team that we've accomplished more in 18 months with this brand than many brands accomplished in their lifetime. Some key metrics to pull out here. We are the largest virtual brand in the world today with over 1300 locations worldwide. We did $1,000,000 in system sales in the U. S. Last year. There is rarely an article, a podcast, a white paper that's written that doesn't include The success that we've had with It's Just Wings in our 1st year. In fact, just recently, we were awarded the Innovation Of the Year Award by Nation's Restaurant News, in Colorado. My team and I had a chance to go up and accept that. And so I tell you these results, again, There's a little bit of bragging here of the power of this brand, but what really matters is the guest metrics, right? And the guest metrics are super strong. When you look at the strong repeat rates and frequency rates, it tells you the power of this brand. 60% of our guests will come back and purchase For a second time with our brand, we see that consistently period after period, quarter after quarter. This is over a 90 day time The frequency transaction cycle, I always call it recency. How what was the last time they came back and purchased? And for our loyal guests, it's on average about 25 days. That leads this category. It bests those other wings players as well as our own brand, here at Chili's. So a powerful brand, I call it sticky, right? When people come and they try the brand, they come back. They love this brand. Another Interesting dynamic with wings is it is no surprise, it follows the traditional sports cycle, right? If our target is male, love sports and that's what they're focused on, then obviously this is going to follow that seasonality. So we see Lower sales in the summer and the springtime and a build that happens in the fall with a culmination in the winter. And you can imagine as football season kicks up, as we see The NFL season turn on as we see Major League Baseball playoffs happen. A lot more interest around getting people together, having wings, having the fries and enjoying That experience. And then in the wintertime, with college football playoffs, with the NFL Super Bowl, with the NCAA Basketball Tournament season and specifically March Madness, you see this really kind of flourish and grow at our high point. There is a wrinkle here and that wrinkle is This also appeals to an audience that loves gaming. And we're investigating this now. We've kind of uncovered this. But there's this gaming That exists here online gaming element that is not seasonal, that is consistent. And as we focus on that target And exploit that wrinkle a little bit. This can help us smooth some of those seasonal low points and being consistent as work with different platforms and providers to market to those gamers that love wings and our product. Alright. I'm going to turn back just for a minute for Because I've talked a lot about wings. Maggiano's Italian classics, we haven't spent a lot of time on. We are 450 restaurants deep in our rollout with a plan to be at about 900 by the end of our fiscal year. This target is very different. We talked about it, female, family, quality and abundance, But that also implies the check averages are larger for this type of meal at home. And that check average along with the market share and the opportunity that we see In front of us, believe this is a scalable beyond $100,000,000 annually. So we get really excited about this opportunity. So I'm going to then drive, we've talked about our brands, we've talked about Genel's Classics, we'll take some questions later about these brands, but I Jump into operational systems. There's been a lot of conversation. I've spent some time at different conferences and different events to talk about virtual brands and ghost kitchens. And there's this Thought at times that you can just launch a ghost kitchen and put 10 brands into a kitchen. That couldn't be further from the truth in my opinion, from our When we look at the operational element of this, there is a strategy and a methodology that is very important. So to kind of talk through this and convey this a little bit better, I wanted to show you a Chili's Kitchen. What you see on the screen It's a flow, a basic design of a standard Chili's Kitchen. It's kind of in a U format. You'll see 3 different zones, zone 1, zone 2 and zone 3. When we Bring our virtual brands into a kitchen, we're very specific about where they reside in order not to disrupt the flow of that kitchen because as the food is cooking these different zones, It then moves forward through zone 2 into the quality assurance area and then out to our guests in the parking lot or in the case of Chili's out to the dining room as well. So when we built It's Just Wings, we worked closely with Doug and Aaron to make sure that we built the right systems. There's a lot of fried food that comes out Of our menu for It's Just Wings. And so the natural place for this was right next to the fryer. So we built a system, the appropriate kitchen equipment and technology To allow somebody to work in a small space to have that kitchen flow seamlessly, just like it would if it was coming from zone 1 up through the kitchen. Similarly, on the other side, we did the same thing with Maggiano's Italian Classics. We were very focused on how this works, so not to disrupt the flow. Kitchen equipment technology, everything needed right there for an individual to work that station. And then again, using that methodology of running up through Zone 3 and then Out to the QA area without disrupting the flow of the kitchen. I can talk a long time on this picture, but it's probably better to show you. Doug and Erin were nice enough to do or produce a video for us to actually get in the restaurant and see what it looks like. So I'm going to have them run that video now. Hi, it's Doug and I'm here in our Chili's Kitchen to show how we execute our virtual brands. Virtual brands are a big part of our strategy and they're here to stay. As an operator, it was important to me that we design our brands to complement our base business at Chili's and Maggiano's and not complicate So how do we do that? We design each virtual brand to be an extension of our current kitchen setup and design it in a way And at the end is where we put our virtual brands. I'm standing in front of our entire It's Just Wings setup. Each restaurant is equipped with a KDS screen for viewing our orders, coolers that hold our wings and our French fries, Power for our sauces and our containers for sauce in our wings. We want to ensure that team members are efficient in the kitchen and have exactly what they need In their space, it's amazing that the whole brand can be executed in this little 3 by 3 space. We also leverage our existing SKUs for wings And boneless wings and many of our sauces to minimize the new items we had to bring in for the brand, thus simplifying prep, ordering and execution processes For our part of the house team members. Once prepared, we place the items in the special packaging that's visibly different to allow our team members to identify that It's Just Wings Food when preparing to go orders. Finally, our food is placed in a special location for our to go team members. That way they're able to help our DoorDash drivers get the order Selected properly and quickly and get them out the door hot for our guests. Now I'll turn it over to Erin to talk about the Maggiano's Italian Classics. Hi, it's Erin, and I'm at the other end of the U shaped kitchen where we execute Maggiano's Italian Classics. We have created a full equipment package that includes technology, coolers, hot wells and a small wares package. Just like It's Just Wings, we are able to execute the whole brand in a very small space at the other end of the kitchen. When we are busy, one team member can take care of All the Maggiano is Italian classics orders. And when we're not as busy, it's just like it's just wings, we are able to leverage the heart of the house team members To execute Chili's and the virtual brand. We are proud of our Maggiano's brand and wanted to make sure that we continue to maintain the same high quality food standards That our guests expect. We work closely with our chefs at Mangiano's to ensure that our pastas and sauces are meeting our quality promise. We worked hard to design a menu that provides easy execution for our team members and that same fresh taste for our guests. With our virtual brands, we cross utilize our delicious hand pies in both Maggiano's Italian Classics and It's Just Wings To increase our usage as well as expand our footprint in the dessert category. Once the order is placed, our team members make the items, Placed them in special packaging to indicate a Maggiano's Italian Classics order and then sends it to the window to be packaged for delivery pickup. And just like that, we have 3 amazing brands in 1 Chili's Kitchen. Side of a Chili's Kitchen. The last piece of our success, again, we talked about this earlier, was broad distribution. And I don't want this to get brushed aside, because I think this An important point. To win in a virtual brand space really requires scale. You'll hear a lot of people talk in the industry Hey, we launched a virtual brand or we've rolled it to 5 locations or 10 locations or even 50 locations. That's great, but you're not going to ever lead the industry and be the major player in the space without the scale that we bring like that Brinker brings With a 1,000 plus, 1100 plus kitchens. That's given us an enormous amount of strength in this space to launch not only the Wings brand, But then to bring on 900 Maggiano's Italian Classics brands. So if we then move to plans for growth, this is the section that I have a lot of passion around. So if I get animated or excited, you'll know why. But this is the future and this is where I think as an organization, We're going to change we're going to make some big changes that happen in the industry. Before we jump into the layout of this and you can see the slide in front of you as we talk about it, I want to give you some context. All of the success that we've had to date has been primarily through one marketing channel And one distribution channel, right. Our partners and they've been a great partner at DoorDash. The opportunity in front of us Is about diversifying. We have to be broader in our branding and reach more customers with our branding And that awareness, that means we have to evolve that marketing model and we have to diversify our distribution channels and expand that To reach more and more guests. And then 3rd, it's about growing our footprint beyond the existing asset we just talked about. How do you grow beyond that using of ghost kitchens and new kitchen formats that are specifically to delivery and to go. So let's jump in and talk about These different areas. 1st is about building brand awareness. What's a great presentation without the marketing slide? This is the marketing slide and this is how we're going To extend our voice and our advertising to guests who have not been able to hear about our virtual brands today. A couple of key points on this slide. First is direct marketing. I'll make the bold statement that I don't believe there's anybody else in the industry Has as much muscle and as much expertise in the direct marketing space than Brinker and Chili's. We have State of the art loyalty program, we know direct marketing and we know customer retention marketing better than anyone. I led that initiative when I was marketing department, I'm proud of the effort that's been done there. We're going to bring that expertise and muscle here and implement it to grow these brands. We're going to lean into this new and evolving media model that we've created that's really focused on digital, mobile first, SEO SEM, keyword search and winning the local search battle because that matters. We're going to do some great social work And establish our personality online. And then we're going to lean into brand activations. Brand activations, Get animated and excited about because it is something that is really interesting and evolving. And I want to kind of show you what this looks like It's just wings. We as you know, the NCAA recently changed the rules around working with college athletes to promote brands in Other aspects, we've been working with a company that's given us access to over a 100 athletes across the United States from these different universities. And And it's allowed us to turn them into brand ambassadors. And as you see on the screen, these are athletes from colleges like Notre Dame, Arkansas, North Carolina. We've been working With Florida State, Brigham Young University, these different athletes that now embody our brand. They get the wings, they enjoy the product, we give them the swag, they get to talk about it They're also involved in a gaming platform that kind of brings together Wings, Our Target and Sports. It's a really powerful brand activation that we're working on. So it's through that mechanism that we're going to actually change the dialogue around our marketing And move away from just a single channel of marketing today and diversify. Along with that conversation comes about diversifying our distribution points. As we talked about earlier, we have our success today has been in one channel, a good channel, a strong channel. DoorDash is our great partner, but it's about moving beyond that one channel. So immediately, we've already started to move to grow and We have it'sjustwings.com. We're currently building out maggiano's italianclassics.com. This will allow guests to access that, Quickly order, select if they want to have that delivered or if they want to pick it up in the restaurant for further value. Another part of this is Google Food Ordering. It's a little bit of a complex offering, but if you understand it, it makes total sense. We've gone and tagged all of our Chili's across the country It's Just Wings locations, for example. And now when you search in Google in the mapping section, you find physical locations for It's Just Wings, which helps us win in the search Optimization area, with that allows a click to purchase and using a transaction Widget that we've built in concert with Google allows a 1 or 2 click transaction to happen for It's Just Wings. It's one more mechanism to reach the guest in a quick and efficient fashion Through digital media. But the biggest opportunity and the closest in opportunity really resides in diversifying Into other third party delivery partners. If you'll think back at that slide at the beginning of the presentation, and I said it would be a foreshadow to the growth As part of this conversation and you think about the market share, our current provider, Our exclusive provider today provides the lion's share of that market share. There is a sizable amount left to work with And that's what we're now starting to test. We think that is a big opportunity for us. We're going to continue to evaluate that, test it and Look to move in that direction in the not too distant future. All right. Last on the list From the growth perspective is about growing our own footprint. We have this asset base, but we have to go beyond the existing asset base that we have today. That comes through again, 2 mechanisms, ghost kitchens, smaller formatted kitchens and Overall, our own owned small format kitchens, I think 12 to 15, 12 to 1600 square feet that are delivery and to go only. That will afford us the opportunity to get to places where our Chili's brand has not been able to get to before. Dense urban And college towns. So next month, we are going to launch our first ghost kitchen test in New York City in Manhattan and it's going to be both Chili's and It's Just Wings available in Midtown. We think that is a huge Opportunity to unlocking future growth in growing our footprint. Along with those, we have multiple sites identified today In college or in and around college towns, close proximity to grow these smaller Footprints to meet that captive audience that we already know loves our product in both It's Just Wings, Maggiano's Classics and Chili's. All right. So that is the growth strategy. I'm going to turn the page a little bit and talk a little around margin and flow through. Wanted you to see the P and L lines for our virtual brands. This is a good representation. We see this period to period quarter to quarter. And as you can see, those profit margins are very strong in and around that mid-thirty Percent. The one line on there that may have some of you kind of turning your head a little the marketing line. And why haven't we talked about this? We have that in at 9%. But I will tell you, we can throttle that number up and down depending on if we're in a growth mode. When you're growing small brands For the first time, you're going to lean into marketing pretty heavily. And so that's why you see that in that 9% and sometimes 10% range. But again, we have that as Throttle to pull back if needed. So all of this, when you put it all together on the growth and the opportunity, We're very confident that we're set to deliver significant revenue in the next 3 years between $300,000,000 to $400,000,000 annually. This is something we think is very achievable. And again, confident that these numbers are realistic and attainable. So just in summary, strong brands, we've been doing this a long time. We have a great in the short amount of time, we've been we are the market leaders. We know these brands well. They are incremental to our business. We have strong flow through and there's a lot of growth to be had With some diversification of our marketing, our distribution and growth of our footprint. So with that, I'm going to conclude my section of the presentation. We're going to take a 15 minute break. I think we're still on track to do 15? If you could come back and say that it's better because we are running a little behind and we started 10 minutes late. Okay. So we're going to run through Everyone hurry when you get back, we're going to keep All right. So we'll break. Thank you guys very much. Somebody give me a thumbs up. Yes. All right. We're back online. So we're going to actually finish the day with A video from Steve, again, we really wish we could have had some opportunity to take you into restaurants. And so without being able to do that, we wanted to get some videos Of the restaurants, so you get a sense for kind of exactly what we're talking about in the real space. So Steve Provo, who's 12 year Brinker head, ran Maggiano's well, Steve and I ran Maggiano's for a few years together. He was heading up marketing for me and then took over Maggiano's, did an amazing job there for years and then came over to the Chili's brand and worked On marketing for Chili's as we were kind of working through some transitions and really started the innovation group and was The leader that got virtual brands up and running. So Steve's had a huge impact throughout his career here with us. He Went back to the Maggiano's brand with all the changes from COVID, because we really needed that Stability and leadership and he and Larry have done an amazing job setting Maggiano's up for the success they're seeing now. And I what you'll see, what you should know about Maggiano's is, yeah, they struggled during COVID, right? Because it's a Brand that's built on getting groups of people together in big numbers in a space. And so the 1st year COVID was more challenging. They did some amazing things To modify their business that Steve will walk you through, but that's a brand we weren't as concerned about Their value proposition is strong, plus we need to take a little bit more risk because of everything that was going on. And so Steve and Larry, they made some bigger bets and their margin situation is Strong. So when you think about what we're experiencing in the Q1, it's not a broad it's not a it happened to be Influencing impacting Chile's much more so than Maggiano's. And I share that with you because it's not like we don't understand how we deliver A business model and the kind of profitability. We're just a little bit behind at Chili's because of our desire to stay, Really understand the cost structure. Maggiano's are ahead of the curve and doing a great job delivering that in sales. So let's watch this video from Welcome to Maggiano's. Our purpose in life is to bring together family and friends in celebration, but the root of that celebrations began here Every morning in our scratch kitchens with 25% of our sales prior to the pandemic in either banquets or corporate catering and with 20% of our restaurants in downtown locations are tourist destinations. We're not exactly a cruise ship, but 19 months of social distancing has posed some Very hard challenges. So guided by the Maggiano's way, we've used that time to strengthen our business model, To remove barriers to guest frequency and to really blow out our off premise business. And you're going to see those results And F 'twenty two. Let me start in here, the prep kitchen. We use this time to consolidate some of our prep labor. Our chefs found 40 recipes representing about 15% of sales and 40 ingredients, everything from a Vesuvio potato To a Crouton to a finished recipe like our delicious Italian dressing and they found a way to make them outside the restaurant. We put them in our restaurants on the East Coast. We measured guest feedback for more than 6 months and we only kept those items that were rated equal or better than a scratch made product. Then we cut our menu. We cut our menu by 20%. Prior to the pandemic, our top 10 best selling items represented 23% of sales. Today, they represent 43% of sales And we had 35 or more entrees that were mixing in less than 1% preference. Now we just have 8 entrees The mix of 1% or less. Why is that less and more so critical? Because our average restaurant is hiring back 15 or more cooks We need to execute as good as our veterans coming out of this pandemic. We also asked our managers and shifts To rewrite every labor schedule in our restaurant, preserving some of the efficiencies we all learned about in the last 18 months Well, we were running restaurants down 10%, 30% and 50% in sales. This is jobs from host to prep cook It's a banquet servers. And as a result, we have operator buy in, but our restaurants are much more efficient. And then we changed the way we do classic pastas. For 10 years prior to the pandemic, if you came in and ordered a delicious lasagna or ravioli, you walked out With another lasagna ravioli for free, guests loved it. But a year ago, we raised the price on the second Costed to $5 and today almost one out of every 5 guests are taking advantage of it and we've had no pushback On the $5 as this TikTok video from last week illustrates. The dad's right on the autos And he's very excited because we just found out we can order 5 take home entrees per guest for $5 Yes. So we can order 10. But we don't need 10 lasagna. And they're 5 They're 5 books. So you could order we could get 5 bombs lasagnas, It's actually $300 worth of cost in retail. That was worth it. Add these changes all up. That's 250 basis points in margin improvement that we generated during the pandemic. Now we're going to add back a little bit in teammate wages and Paying our managers more in this inflationary environment post pandemic, but we have lots of room to maneuver on our P and L. This is the Imaginal's Banker Room, home to the most differentiated and profitable part of Imaginal's restaurant. Now when COVID hit and Banquets We use this opportunity to transform 2 parts of our banquet experience. The first is how we sell banquets. With the pandemic, we've introduced new software. So our banquet sales team can work from home and sell multiple Maggiano's. This software allows guests to actually place their orders Online for a menu to actually pay online and our banquet sales women come to work every day and find a digital follow-up list Based on any guests who might have reached out the day before. As a result, we have headcount 2 thirds smaller than we used to And we're actually responding more quickly to the calls and the emails that come in. Now the second thing we're doing is we're transforming the look And feel of our banquet rooms. If you ever had a banquet in Maggiano's, think old school, dark wood, sopranos vibe. That's gone now. Now in these new banquet rooms, we have new classier floors, we have modern chandeliers And on the walls is a much lighter texture and look. This is banquets for today's millennial and Gen Z guests Because she is a meeting planner, wedding planner wants to put her imprint on a more neutral palette so that she can then spread The pictures of her event on Instagram and cause her friends to have a massive case of fear of missing out. So this is banquets for the new generation and we'll have 2 complete before Thanksgiving, 1 in Dallas and 1 in Chicago To see how guests grew up. Here's a question. Can the very same restaurant be the special place you Day. We launched curbside for carryout and DoorDash. Unlike our polished casual competitors who raised prices in those channels, We actually lowered prices in the carryout channel, offering some of our most popular items for $12 a price competitive with Fast casual restaurants and we also price at parity and DoorDash and through both channels now you can order one delicious entree and get a 2nd one at a reduced price. We also take great care with how we execute just like in our dining room. Our packaging is 1st class. We wrap every entree in plastic. We go the extra mile and include for free Alfredo sauce And bread and even your utensils. And we separate hot and cold food for you. All that's why we're attracting new guests and having Our existing guests use us 2 times more often than they were prior to the pandemic. But don't take my word for it. Right now, the average Maggiano's Is on track to deliver $2,000,000 in off premise sales this year. And we think that will only keep building because of the differentiation of what we offer. Here's the lasagna you ordered. I included the second lasagna for $5 I threw in some fresh bread, your extra marinara sauce and Your utensils, so you don't have to wash any dishes at home. Have a great night. Now, no one knows what's going to happen in the holiday. We do a lot of Corporate catering and we do a lot of corporate banquets historically. Most likely, they won't come back this year. But here's what you should know. And in the Q1, Margiano's even with banquets not recovered was able to match our pre pandemic sales. Also, when you take out banquets, Our traffic outperformed Black Box Polish Casual and our profits are looking really good Because of the margin business that we did. So don't think of us as Brinker's core cruise line business. Think of us as a business that will surprise on the upside Great. And thank you. The real Steve is here joining us too and he'll join us For Q and A in a few minutes so that you can dig into any questions you might have on that presentation, but great work again being done On the Maggiano's team, we knew their recovery curve would be a little bit slower, and they've exceeded expectations, Came very close to a record 1st quarter profit whisker away this last year. So we're looking forward to the holiday season and Really seeing the initiatives pay off as we move through that critical quarter for them. I want to end our formal presentations by kind of bringing all these initiatives together and give you a feel for What we believe this is going to look like over the course of the next 3, 4, 5 years as we continue to implement against a strategy that frankly has been working For us despite the pandemic, despite the headwinds over the course of the last couple of years. And as I do that, I want to really start with where we're at right now, because again, our journey for the next several years has to begin. And we're at a really strong beginning place To implement against the next 3 to 5 years, strong base businesses. One thing that I think is important to Understand is not only the recovery that I just talked about with Maggiano's, but Chili's continues to operate above that COVID level. Even without wings, we get some questions that there's a Chili's based business performing because of wings and the The answer is Chile's based business is before me because Chile's based business is doing a good job almost every week with the exception of maybe a couple during the height of the August Surge, we saw Chili's performing above pre pandemic levels. And we also have obviously the virtual brands and And now the ability to invest back into new restaurant development at a much greater pace. As I indicated Before, again, the curves of these businesses have been very steady and very up into the right as we've moved through the recovery periods. It's again not fully recovered quite yet. We'll continue to unlock that capacity as we go forward, but run those businesses At levels higher to we were doing going into the pandemic. We've talked a lot today about the shift off premise And we have been in the sweet spot of being able to run our business as well from the to go side of the equation, from the delivery side of the equation. Chili's was at little below 20% going into the pandemic and now seems to be landing into that It's 30 mid-30s there you see in the Q1 at just under 35%. But Maggiano's is also taking advantage of that. And as Steve went through In his video, they're now into the mid-20s, up again from the 16 ish mid teens and Now into the mid-20s and done a great job of really reintroducing and in some cases, introducing The Maggiano's availability from a to go standpoint and the fact that you can get such high quality Italian food at great prices With the convenience that you want. So I think a great opportunity to elevate that business on the carryout side of the equation. And then the other position that we start from that is essential to really driving the business forward is strong cash flows. And as we bring our cash flows back, you see Where we dipped on EBITDA during the pandemic back up into the mid-300s in F 'twenty one, and we're heading above $400,000,000 as we move Through this fiscal year, expecting EBITDA for F 'twenty two to be north of $400,000,000 And that allows us again to execute against our capital allocation strategy that has been in place, but is going to be consistent as we kind of move forward, Generating that cash flow, investing more aggressively back into the business, doing it from a stronger balance than you've seen in the last several years. We will continue to reduce debt and take advantage of better leverage positions as we grow the cash flow side of the equation and then after all of that has been done, take excess cash and return it to shareholders. We've reinitiated the share repurchase program, which we talked about on the last call and we've kind of reinitiated some of those share repurchases As we move through this quarter and we will continue to do that as warranted as we kind of move forward. Let's talk about how we invest back into the business. From a capital expenditure standpoint, We're going to up the game a little bit. Now this is not a radical change, but it's definitely a step up a little bit above where we were pre pandemic. We were running in that 150 range for several years heading into the pandemic years. And now we're looking at 160 180 as we kind of move out over the next 3, 4, 5 years because we have the opportunity to invest across a number of initiatives that we've talked about here. We have the financial wherewithal, the financial positioning from a balance sheet to do this very effectively To drive incremental cash and incremental bottom line returns. Unit growth, we are Upping our pipeline of unit growth into the 20 to 30 units a year. And we've already taken the steps to put those teams in place, continuing to bolster that And have a pipeline that has now moved north of 'twenty. Those openings will start to pick a pace as we get into calendar 'twenty two. Obviously, there's a timeframe that takes to get development up and rolling, but we're at that place now and excited about where we're going With new unit development and what's what really is an opportunity there is where we see new restaurants opening in this past Really 18 months, opening at really nice volumes and being able to take this new prototype that is contemporary and look It's very appealing from a curbside perspective and works extremely well from a guest satisfaction inefficiency standpoint on the inside. And we've been able to take it into some markets that we haven't penetrated more recently and seeing it done small market And large suburban market at higher volume. So a lot of opportunities as we continue that development pace going forward. Franchise acquisitions, we're very forward in our belief that Corporate ownership is the best way over time to drive returns in this segment and we're continuing to Bring franchise operations back onto the corporate side of the equation. Going back a number of years, again, the Northeast, that Bluer color was done several years ago. We more recently announced the Mid Atlantic, that lighter blue, We closed on at the earlier part of this month of last month. Obviously, the Midwest Was an acquisition we did roughly 2 years ago, that green color, a lot of work going into those restaurants right now. And we're now moving towards a close of another franchise operation that I would expect to get done in the next couple of weeks, that is that red 37 restaurants kind of in the Great Lakes area working over towards the Mid Atlantic Philadelphia area. So Another good long term partnership, but a great opportunity to bring those restaurants back into the Chili's corporate fold. And the opportunity still exists for several other operations that are out there. Once the Great Lakes acquisition It's complete. We'll be running north of 90% of our restaurants in the United States being Corporate owned. And I would expect over time to see that number kind of move a little bit north of there. We've been reimaging restaurants on an ongoing basis and we'll continue to invest back into our existing fleet. Chili's Has a program underway. We're doing roughly 12 to 15 restaurants a month. We'll continue that pace for the foreseeable future, focusing very much right now on high volume markets. If you think about the Miami's, Utah's, places of that nature, Plus these restaurants that we are acquiring back in. In many cases, while the restaurants are decently maintained, Probably not re imaged at the same level that we would re image those restaurants. So focusing on newly acquired restaurants, but also restaurants where that Have the ability to drive incremental volumes when you give them a new look and feel and focusing on areas within the restaurant that have the largest Opportunity. What do you do around the bar spaces to make that a more appealing opportunity for guests when they're using the restaurant, things of that nature, They tend to have a greater and quicker return to us from the amount we're investing in. And as Steve mentioned, we're excited about The opportunity to start the reimage program on Maggiano's. That's a 30 little over 30 year plus brand. This will be the first time That it has a significant reimage as we move forward. 2 of them are works in process that should be done here in the not too distant future or prior to the holiday Season and then we'll start a disciplined approach to doing a handful of those as we kind of move forward each year and get a new fresh And updated look back into that brand to go along with the quality, service and the excellent Italian food you can get. And then technology, of course, I mean, we talk and believe technology continues to be a significant Rich ending factor for us and we will continue to invest at pretty decent levels as we go forward. Technology has a lot of opportunity for us. It's also the gift that Keeps on giving and needs the feeding and investment that goes with it. We have typically invested in that $50,000,000 plus, probably taking it up A notch this year as we roll out TSE in particular, which Wyman spoke about earlier is a great opportunity and how we improve the Operations within the Chili's Restaurants. Those numbers are combined both capital and G and A that are related to The technology investment, but I want you to see both numbers to understand that this is a very meaningful amount of spend That we take seriously from helping drive the business going forward. So as we make those investments and we Implement the strategic initiatives that we've talked about, there's some long term growth targets that I want to kind of review with you. So based on those four items that we talked about from an investment standpoint, over the next, I'm going to say, 3 to 4 years, I would Expect to add $1,000,000,000 to the top line of Brinker International. We will also do it by expanding margins. Again, I think we despite the headwinds that we've talked about today In the short run and what's going on in some of our labor markets, there is opportunity to leverage the P and L as we move forward. We're very strong believers in our ability to drive top line growth and the opportunity it presents to expand margins. We can see A minimum of 50 basis points, 100 basis point improvement in margins off of our pre COVID. I've given you a pre COVID 13 0.2 number there to kind of represent a little more normalized opportunity and grow the margins as we kind of move forward from that point. Also have targets established for protecting the balance sheet and improving the leverage position there. We're continuing to move down. We moved obviously well down from that COVID impact into 2.5 times, close to 2.5 times at the End of the fiscal year, I expect that to continue to tick down this fiscal year and then move in out Here is down below 2 times on a funded debt to EBITDA and below 3 times on a lease adjusted Debt to EBITDAR. So again, wanting to make sure that our balance sheet is strong, giving us the flexibility and optionality On how we maneuver the business around it. Now when I bring it all together From a multiple and we think we are laying out a strategy that allows for multiple expansion. If we can deliver on these numbers On a consistent basis, we strongly believe there's an opportunity to grow the multiple related to the stock. Total revenue growth should average 6% to 8%. I would caveat that with a deal that will be very high the next Year or 2. So again, when you think about what we're doing from a franchise acquisition standpoint, from a rollout of a virtual brand standpoint This fiscal year, you can expect to see revenue growth that is really more in the mid teens in In this fiscal year, then probably stair stepping down as we kind of move through those 2, 3, 4 kind of years out. You get some benefit of the lap of that as you move into year 2 and then you probably normalize down in the lower single digits as you get out Later on in that forecast period of time, but averaging out to that 6% to 8% over the time. We talked about the margin expansion And the opportunities particularly that that top line growth brings to margins. And when I bring that together, I Expect to see EBITDA grow in the 8% to 10% range over the next 3, 4, 5 And I expect to see our EPS growth, both from a combination of organic improvement in the business and our capital Allocation policy to be north of 15% year over year. So those are the targets we're committed to and that we strongly believe This strategy has the ability to deliver on a consistent basis. Short term turbulence that's going on, we all are aware of that, that's nothing new. We're working our way through that very effectively and comfortable that once we clear that turbulence, we have a lot Of incremental upside as we move forward in a great place. And as we wrap it up, I think I'm going to ask Wyman, Wade and Steve to come on up and we're going to open it up for As long a Q and A session as you guys want to have. So why don't we take some seats over here, because I think we got some talk Start with, John has the mic first and then we'll go to Dennis right after that, okay? Yes, I gave you a 3 to 4, 5 ish kind Timeframe. So kind of let's you can take the midpoint of that John and say 4 years, okay. Yes, I think we'll, I mean, again, we'll continue to invest a portion of that Technology investment I talk about goes through the G and A accounts. We want to make sure we're providing a strong support system and team here As you look at the organic growth dynamics, when you think about development, we have to have that development, construction, design teams all in place. So we're Investing appropriately there. But I do think you will see G and A leverage as you move through that opportunity. We like to target 4% in that range. But I think there's some opportunities there. I'm not looking for a big delta one way or the But I don't see a delevering at all, but we'll invest G and A as long as it's appropriate on how to drive the business going forward. And the final question, it's John Ivankoe, I guess I wasn't on the microphone before. $64,000,000 of technology spend in fiscal 'twenty two. It's interesting to see some of these next generation point of sale systems that have come out. Toast is One that really does come to mind. You'll have I mean, I really have I mean, it's a step function change for what the industry, especially the independent industry had 3 to 5 years ago. How does that make you or does that make you in any way think about what you do in house, the money that you spend in house, your Drone development engine versus using some technologies off the shelf by others that would probably be pretty hard for you to Yourself were at least maintained at the level of some of these other which are now quite large companies at least from a market cap. From a market cap Perspective, they're amazingly large. I'll just we just go to experiences, right? The reality is we don't want to be like Developing software and we'd prefer to use outside sources and be more of an integrator and a modifier. With the case of TSE, this is not they don't hold up, frankly. I mean, if you go right to it, some of these Products that are out there now that are getting a lot of buzz, they just can't handle the kind of volume and the kind of pressure that a high High volume restaurant like a Chili's and Amagiano's put them through. And so it's interesting. So if you're a mom and pop cafe and you've got a handful of people and you're doing whatever, they seem to be We'll see how the equipment holds up in 2 or 3 years to some abuse and those are the things that are important. We have to have. So to answer your question, right now we're doing what we have to do from a technology standpoint to Be leading and if we find a partner that can help us with that, we'll engage them. But right now, We're finding that we're having to carry a little more of that weight ourselves for multiple reasons. But the end of the day is so that we can guarantee our operators that the system we provide them works. It works day in, day out under volume and that we're not dealing with R and M issues down the road, because those are Very difficult to deal with. The only thing I'd just on the G and A, I would Obviously with acquisition and with virtual brands, extremely good leverage from a G and A perspective. We don't add a lot of resources at all when we at the restaurant support center when we're doing these acquisitions And with the case of virtual brands, this team is able to scale up from with what we've got. Dennis Geiger, UBS. And thanks to the team for putting this event together for us. First question, Wyman, just going back to the beginning Of the presentation, you talked about staffing being basically at pre COVID levels, I think. And just want to marry that up relative to the 3 to 4 point headwind, I think you mentioned, As it related to comps, similar staffing levels, but I guess your volumes are higher. So is there a percentage that you're understaffed right now where you want to get to kind of close that operational gap, capture the sales impact. Absolutely. We're still dealing with some under staffing issues. Again, I think I mentioned Whether you want to call it a 911 restaurant in terms of, hey, they just don't have enough bodies to run a full shift or the full operating hours that we The percentages are, again, regionally, it's probably the Midwest is the only region I would say. Hey, that's a fairly large part of the country that's got more Than its fair share of challenges beyond that then it's more just restaurant by restaurant within the individual markets and trader to trader. There are a small number of restaurants Relative to the system, but they're disproportionately impacting the system. So their impact for Runch of reasons. The deleverage issue is the biggest one, right? We talked about how much we know we can leverage the business when we get it up and running and sales are there and it works the opposite when Not open and we're still running a lot of the same cost structure. So 100% focus on really supporting Restaurants, so that they can run well and the management teams can rest easier. So that's our number one priority, but also has obviously great business implications going forward and we're making progress. So that number gets lower every day. We're starting to see these turnover trends Recede and move more towards normalcy, still elevated, but nowhere near where they were 2 months ago. So all All that says, yeah, we're still seeing some of that headwind and that's kind of why that number is there. We didn't mention, but one of the ways we Give operators an option too, it's like listen, if you're getting slammed and you're understaffed, you have to turn off Olo. Well, we'd rather have you turn it off Then disappoint guests. So when we say, oh, so you know, they'll turn off the takeout and delivery mechanism. And so that That happens more than it needs to happen when we're fully staffed. And so those are some of the things that are taking place today that we know and we know exactly where that's happening Johnson, what times of day and week and we're focused on getting them, so they won't have to do that going forward. And then just one other one, Joe, just as it relates to the $400,000,000 greater than $400,000,000 EBITDA target for the year. Just wondering if You gave a lot of color earlier. Anything more on the considerations or the assumptions that go into that areas of sort of upside Risk downside risk, obviously, a lot of volatility, a tough year from everything going on, but anything more that you could speak to kind of that feeds into that Feeds into that number for 'twenty two. Thank you. Yes. I think the greatest risk, I think, is going to be operational environment. And again, as you I mean, As we saw last, it's interesting, if you go back to the Q2 last year, you saw a COVID wave hit the You saw our margins decreased about 10.7, Ram, similar to this last quarter where you see and then you saw Meaningful recovery and improvement coming out of that. So, we're anticipating kind of a similar recovery Cycle as we come through that. Again, I think there's risk, but great opportunity as you work through the second Quarter as it relates to the recovery curve of where Maggiano's is at. Again, I'm feeling more and more comfortable about that as we kind of get closer To that taking place and the pipeline they see from a banquet standpoint and things of that nature. But that's an unknown that we'll work our way through. Again, our ability to effectively In a timely manner, get the transitory costs out of the system is a key driver to that success. I'm comfortable the seasonality will be there. We will have higher volume quarters as we work our way through the rest of the year and that will be beneficial and And impactful to us too as we go forward. So there's the big ones, I think. Yeah. I mean, we've got a call in 2 weeks. 2 weeks, maybe at that point, maybe we'll be able to provide a little bit more color on some of the details. I know you're all anxious to model, Right now, I think we'd leave it at that. Sean, let me know. I was wondering if you guys dig in a little bit more on just kind of what you're seeing as far as activation or deactivation of Olo. You mentioned that and I might have misheard this that when you're fully staffed, you're still seeing people turn it off. So I just be curious to hear how you're seeing that trend over the last couple of months? No, again fully staffed in the system, but hotspots in areas, right? And so again, when we look at the totality of the restaurants on average, we're in pretty good shape, but that we still have challenged restaurants and in those restaurants on a given Shift on a Friday or Saturday night, when they don't have enough cooks to handle the dining room and all the takeout, They can turn it off. They can turn it off, so we don't disappoint guests. And so the number without giving you the exact number, it's meaningful. Joe talked about, hey, we feel like we're giving somewhere 2, 3 points of sales up right now, because we're not running full Capacity in all restaurants at all day parts and that includes that would be a component of that. And so we're all focused and the operator are Okay, well let's get ourselves staffed, trained and ready to run restaurants the way we typically run them. And the way we're running them in a lot of place. I mean again, a lot of restaurants We're seeing double digit growth in a lot of markets around the country. The 7% average is made up of A fairly broad range of restaurants doing double digit growth and some regional area It's pulling that down. We also know that on the weekend, We are our pre COVID to current results are Much stronger weekday, because we don't have capacity constraints. So again, we're not putting as much pressure. It's on the weekends where we're starting to level off more, Where we're bumping into these capacity constraints, some of them driven by staffing issues. Got you. And would it be fair to say that there is slightly weakening, just given You see Chipotle saying like mid single digits like offline for their Olo. I guess kind of how is it trending? Yes, we're getting better. We're not turning it off as much. The operators have got better systems first off to identify where, when and where we need to turn it off. It's just culturally now, people are better understanding. In the middle of this, Pretty now, people are better understanding. In the middle of this pandemic has come in different waves, right? You had the initial wave of what the heck, you know, I mean, you A wave of what the heck, you know, I mean, you close your doors. And then you've had all these subsequent waves. This last wave, which started in March, where Economy heated up and it became a labor and staffing challenge more so than anything else and then you start to see the inflationary pressures, Right. That's been a different operating environment. So COVID hasn't been the same over the last 19 months. It's come in these Different ways, and Maggiano is a great example. Maggiano is now in this last wave is doing significantly better above prior pre COVID levels where they were running 30%, 40% below, banquet businesses come back. But now it's a staffing, it's a supply chain, it's those kind of issues and in the middle of that you have a restaurant operator, Who is working and has been working through all of this COVID in a very difficult environment. And we have to be very sensitive to put our arms around those people, embrace them, give them the systems that they need, let them know how much we care about them. We've raised Pay, we've changed bonuses. We paid out in this quarter that we just ended that we're disappointed with. We increased the bonus payout significantly, Because these people are working hard. They're dealing with supply chain issues. They're dealing with staffing issues and they're dealing with And we embrace and appreciate everything they're doing for us, even though we're not happy with the result and they know that either. They're not happy with the financial result either. And so that's kind of what I'd like you to understand. We know this is transitory though. This will go past as we've been around for decades. We know how to run restaurants, get back to running them the way we are. All we just need to do is get the bodies in place and train them up in a way we'll go. Gotcha. Super Thanks, guys. Thanks, John. It's Alex from Jefferies. I just want Follow-up on some of the margin outlook and Joe maybe just the multi year restaurant level margin view, what you're baking And in terms of commodity inflation, labor inflation, pricing, just are you being excessively I don't think we're being excess conservative, but I think we're being realistic to What the current environment is telling us, again, a lot of what commodity side of the equation is And we expect to see cyclicality kind of through that period of time. You have seen obviously Commodity price increases of a fairly substantive nature, working their way through the systems. I don't think that is sustainable over the course of that 3 to 5 years. So we expect to see a level of inflation, but probably back more in that normal low single digit rates, but you'll have Cyclicality of that as you kind of move. Again, we feel we can maintain pricing power as we go through that period of time. So We won't model in as aggressive pricing as you might see us do here in the short run. But again, I think That 2% range of pricing optionality is still going to be there as we kind of go forward. And again, I think that The incrementality from a wage rate, I think that those inflationary pressures that we've seen Are at the high end right now. So I don't expect those to continue to maintain themselves as you go through the next several years, but Labor will continue to have an inflationary factor. I think it's going to be running at a level Somewhat below what we have kind of experienced this last year, but it will be real. So we're factoring all of that in. Again, that $1,000,000,000 Top line growth helps us deal with a lot of those factors as we kind of move forward. But we're definitely cooking Increased costs into those thought processes. But for the most part, Joe, would you say we're structurally the structural costs with cost of sales and labor, we think our pricing Strategy covers and the improvement in margin really comes from higher volumes and leverage. It's not like Not like we're saying, oh, we're going to get a lot of that margin improvement by becoming even more efficient. The efficiencies we will bring to bear, like with TSE will help mitigate some of the labor pressure that you're going to see in the system and help us outperform others that may not have those kind of technology solutions. And the TSE model and the handhelds, what do you think that amounts to in terms of efficiency for staffing? I think the jury is still out. Again, we see where the optionality may come there. I'm not going to Melody may come there. I'm not going to kind of pinpoint a number quite yet. Until we get it rolled out and we get kind of the muscle memory around I think we like what we see from a labor improvement standpoint as you get more proficient with that system, but it's there. And as we get Farther down that rollout and understand it a little bit better, I think we'll give you some more insights as we go. So I'm going to Deflect you on that one for right now, but it's going to help manage the overall labor system. And I would just add that It eliminates pricing. Again, we've got we're very cautious about the affordability position of Chili's. And so if we can maintain our margins And deliver a good business model and these technology solutions help us compete more effectively And not have to price more aggressively, then we'll take it that way versus ensuring that everything flows through. We know with TSC, we need 20% less servers. Now we add some runners, so we add some additional bodies in, but they're at a little lower rate. And so, again, back to a management model, it also just makes that's just fewer bodies you have in a critical position, You know, who's interacting with your guests and how are they interacting with your kitchen in terms of communication and data? That's a huge win there. It lowers That number and so in an environment where it's harder to find servers right now, we don't have to find as many. We don't this year we'll hire less servers than last year for the same amount of sales by a significant number. Now we got to go find some runners, but finding somebody that can run food out of the kitchen is a lot lower hurdle than finding a server who's Got the hospitality, personality and the skill set and is able to walk in at a very quick time and Understand a fairly complicated POS system. We bypass a lot of that now and simplify the life for our managers. In the meantime, we These new team members in who are now evaluating these them as runners to say, oh, okay, well that's somebody that can step up and become a server. So we'll start training them in house. So it just makes the whole kind of employee lifecycle, if you will, a much easier to staff. The same thing happened when we went A certified shift leader program from as the feeder to our management system. We used to do 70 Percent of our management recruitment was external. Now 70% comes from internal and that ability to kind of know, hey, I know you, you've worked for me as a server or as a You make a great manager. Are you interested? Yeah. They'll let me get you up to speed. It just it changes the model from a lot of perspectives and that's what TSE does as well. Slipping back. Why don't you guys get microphones Nick, I think was next. Go Europe, Nick. Nick, go ahead. Nick Setyan from Wedbush. A question on the incrementality of it's just wings. And I think we talked about 30 Including 20% food costs. I think your nearest peer Even in the most deflationary year at 3%, 3% or so in terms of food costs back in 2018. So I guess, can you just compare and contrast the differences there? And then second, in terms of just the timeframe around the margin recovery here that we're talking about in terms of the longer term Margin guidance, are you thinking that 23 maybe is at the lower end of that range in terms of the range that you provided 13.7 to 14.2% when are we build from there? Or could we actually see a jump into the midpoint of that range In 'twenty three, and then maybe stay there. I guess, how are we thinking about that build over time? Thank you. Clear on this, so the question was specifically around the food cost 28% in the comparative to our, to our competition in and around the 30 and incrementality. So, I mean, the brand itself, clearly, we see the incrementality, right? Different customer growth that continues to grow from a sales perspective. From the cost perspective on the food cost, I'm not sure how to answer that other than that I know consistently that's what we see. You break out packaging. Yeah, It's packaging. We don't add packaging, but I think a lot of competitors have packaging in that COGS number. Yeah, what you're probably comparing are 2 different numbers, Right. So ours was just straight food. And I think the number you're referencing has to have that package. It has to have to have that package. With our pricing and our portions, We're putting more on the plate in that brand than anyone that we know of scale, right? So you know the big wings players. They're all I mean, we're it's again, it's killer wing stupid prices. I mean, we're a value play in that brand and we put it more on the plate from a product Standpoint. Now we're very there's not a whole lot, it's the plate. That's all you get. You get that and the sauce and that's how that And position, so I think our margin on cost of sales, product, protein is Probably high. On a lot of the other stuff, we probably are lower. And then there's nothing else to it. You saw the space, right? That's it. It's 3 by 3 as Doug said, we just basically bang out wings and fries there, put them in a pasta and send them out the door and that's Why it works so well. Key point is, I think the competition buys on the spot market all the time where we're able to contract a little bit more. Yes. Volumes allow us to put product away and hopefully take advantage of price cycles where they're typically We've had to buy in the spot a little bit more in recently to ensure product. And then again, we're also talking with Across the whole bird. So not the whole bird, but a broader array of the bird than some other folks might be doing. You've kind of seen some moves that direction. No beater Yeah, no piece of the clause over here. Probably always reminds me it's not the whole bird, but a greater portion of the bird, which gives us a little more, I think negotiating powers, we kind of move through that. I got the mic. Jared from Goldman. Joe, I wanted to dig in on the margin guidance a little bit further. So if we think about that 30% margins or so on the virtual brands, Let's call that $350,000,000 visavis your $1,000,000,000 opportunity. It would imply if we hold the base business margins Flat, it would imply something in the 30 to 40 basis points higher than the margin guidance you provided in terms of incrementality there. So I wanted an understanding of how you're thinking about the base business margins going forward and headwinds, tailwinds within that business and what you're projecting out over the next three 4 years in that front. Yes, I'm not going to argue with your the math and where you arrive very quickly at. Again, I think We probably would expect to see a little bit more margin pressure in the base business depending on how you allocate those cost structures, because again, More management side of the equation on the base businesses, a little bit more labor going in as you kind of build Those businesses have. So I think they will have, again, it's that leverage ability of how we produce the virtual brands and really take the advantage of the of the production within the Chili's and Maggiano's side of the equation. So they don't carry quite as much of that labor exposure. They get Got high volumes and that takes care of itself. If you have an Ann Arbor, Michigan putting ungodly numbers of wings out the door on a Weekend, so the first part of the incrementality of labor really is going to probably reside more in the base businesses than it On the virtual brand side of the equation. And again, any forecast I give you, I'm going to give myself a little bit of headwind when I put the numbers out Fair enough. And I just had one other follow-up on some of the EBITDA growth metrics that you put up. I think there was a discrepancy in 2 of the slides. 1 called for a 10% to 12% growth 1 showed an 8% to 10% growth. I just wanted to make sure if there's It's a 10% 8% to 10% is the correct number. Okay. I just wanted to make sure that was not something We should be thinking about in terms of timing or if it was just Sorry about that. Thank you for pointing that out to everybody. Sorry about that. I appreciate that. It is 8% to 10% on the EBITDA side of the equation. Eric, Alec. Alec, Stifel. You showed how the virtual brands kind of exist within the kitchen. I'm curious how much an annual sales capacity can you kind of have in that 3 by 3 space without needing to expand that region. And are you hitting any ceiling and high volume restaurants there today? So I don't know how I can't tell you. I don't know what the upward is. I can tell you that in that space, they're able to deliver in the Sales turnover we're seeing today. So they're pumping out food, they're working out, especially when you have on a busy Friday Saturday night and you have 2 individuals there, one just working that station, Right, you can do a high volume of orders that run through there. We see that happening in, like Joe mentioned, Ann Arbor, Michigan on a weekend or Salt Lake City on Utah on a weekend. Your second, your second aspect, your second part Question, I think I missed it. It was you talked about the volume and then Hitting any ceiling in any high volume restaurants. So there is a ceiling for Sure. I think, but it tends to be product that we've run into in this environment where we'll see them shut down because it's 8 30 at night and they don't have the the wings, right? We've got to drop off and we've lost fries that goes on every plate. But you know, we're really seeing where That's going to take us as we go through this restaurant. I'll tell you by putting that system in, it allows us a lot more headroom for success. I don't think we've tapped that yet. I think We're going to see that in the near future probably as we kind of really run a sizable amount of volume through these restaurants, but yet to see that with that new system And individuals working there. Steve, we have 4, dense urban, downtown Boston, downtown Chicago, downtown Philly. They did half a1000000 Wing sales last year on Super Bowl Sunday, we sold more wings than we sold Maggiano's. So in those restaurants, there's a lot of upside for 96% of restaurants. Correct. That's and that's the case. It's 1 fryer, 1 station. Yes. The ceilings are going to be the anomaly, and going to be typically a very, very event driven Super Bowl kind of deal. But if you benchmark on Super Bowl, it's kind like what we tell our operators, sometimes you only know what you see. So as an operator, if you've run a $3,000,000 restaurant, You know, if you go to 35, you think you're like, well, I'm at capacity and then you have to remind them, we've got a restaurant in Miami that does 5,000,000 in the same box, in the same Footprint and so it's just opening their eyes up more than anything. And so again, Mother's Day and Valentine's Day are the days you kind of go, hey, These boxes will do some big volume. And now we know on wings, it's Super Bowl. And believe me, if we did Super Bowl Every day, which we can, we know we can do the number, the wings business would be well over the number we just gave you, right? So we know we have capacity. So now it's just how do you get those points of distribution and the better marketing. That's really Yes. We'd love to start again, capacity and I love to deal with capacity issues. Those are fun. Capacity and staffing are actually fun. Low sales and no guess, those are the worst problems to be dealing with. And those aren't what we're dealing with right now. So as much as this headwind is a little bit annoying and troublesome, these are not the things that keep me these are not the kind of headwinds that keep me up at night after a long Keep me up at night after a long career in this industry. It's when people don't show up, that's when it's a problem. That's when you really start to kind of You have to wonder, okay, what am I going to do to drive traffic? David, do you have a Dave Palmer, Evercore I do want to get back to the incremental margins question because there are companies out there that have had their AUVs. They're not even going to get back to their past levels and their margins are going to be higher just structurally. You will be higher in BUVs this next year, but your margins will be lower. I know there's a lot of funky stuff going on this very moment, but if you could help us walk past Some of the more acute stuff, maybe even help us think about what post recovery in dining room would look like in terms of your restaurant Level margins, you've been at 15% before. Could we be looking at north of theirs or perhaps even North of there, if we just have a normalized cost environment and normalized dining room traffic environment. And I have a quick follow-up. Again, I think that's probably getting on the aggressive end. Yes, we've been at 15, 16 before. Obviously, there's been some structural changes from a rent structure that Impact of that from sale leaseback. I guess the question is, what's normalized look like? And so again, if I was dealing with a With a normalized environment of pre COVID that didn't have quite the same near term line of sight on inflationary costs, I might be a little More comfortable there. Can I move back in that direction? Yes. Again, we've always talked about the margin As being a directional play as opposed to a definitive, I'm going to get to X margin. Can I increase my margins is a high degree of confidence? You're asking for what's a normalized margin structure on cost of goods and labor in 3 years. I think we're comfortable with what we're forecasting in there, but that's an unknown. But can I get the margins higher? Yes. That's not I don't think that is a question. But to your point, David, it's interesting times that People are growing margins on lower volumes. Do you think that's sustainable? And What are the two variables that they're pulling to make that happen? Pricing and marketing and promotional mix. Okay, so where do those usually come back to haunt you? The thing I told you that makes me lose sleep. Where did my traffic go? So again, these things have Play themselves out. The history would tell you that that's how it Unless the whole marketing scenario has changed dramatically and what we've done is Re thought our marketing spend and reinvested it back into growth channels, not pocketed it. We could have pocketed it all and we haven't. And there are people out there pocketing it and then the question is and you've asked these questions of these players, is That's sustainable and you get a relatively, at least what I've heard, uncertain answer, because nobody knows. We're We're not banking on that. We could have banked that money. We could have said, hey, listen, let's just pocket the marketing And not invest in things that grow the business like these virtual brands and like delivery and takeout that have a cost structure that you talked You know that we may have to price more aggressively for in the future, but that's why some of our margins are I think a little less Under a little more pressure than others, because that's how we see the industry kind of dealing with some of these things. And just a quick follow-up on Maggiano's Classics. At some level, it feels like you're getting to you mentioned the 2 stations. It feels like that's a pretty full kitchen. In other words, another brand, you start really thinking virtual kitchens How do you think about that? And then even about the incremental margins of this, even the second one being a little bit That's brought on and perhaps margin dilutive or perhaps hurting the core margins a little bit because you're not leveraging As well, say. Yes. So I would, so I'll tell you, you're right. I don't think there's an unlimited number of brands. We're very focused on the 2 brands we have in the restaurant today, you saw the system. There is complexity in the kitchen. On a busy Friday night, disrupting that complexity comes At the detriment of the core brand and the other brands. And so, we're very focused on the 2 that we have today. What does the future look like in new, in a new footprint? We haven't really untapped that yet and looked at that. But today, we're just super focused on the brands that we have in the kitchen. Around the margin conversation, you know, I did we Didn't show the P and L for MODS Classics. We're still rolling that out. We're working on it. I will tell you it skews a little bit lower. You said there's some extra costs in there. Yes, but it's In a blended range of right in and around when you bring both of those virtual brands together in around that 30%. So You know, there is a little bit more prep work on the Maggiano's Italian classic side. So not necessarily on the line in the moment, right? That's pasta sauce, Cheese out the door kind of thing. It's a little bit more effort around the prep side and so we've been very deliberate in that P and L to assume for any additional Costs around labor to make sure that prep work is done prior to and that's where that extra cost comes when you look at that P and L. Much higher checkout rate, so much That's labor on a per order basis too. So it doesn't so doing the same $100,000,000 in sales of Wings relative to Maggiano's taps less labor in the kitchen, right, per order. And so, yes, it's a little more complex, but you're getting a lot less orders to get to the same sales volume. So it's less cumbersome that way. The key is As Wade just articulated, everything's first high quality that we're doing justice to the brand. And secondly, It's easily executed at the point where it's most important, which is 7 o'clock at night on a busy Friday night. Anything online that we haven't touched on here. Right. Actually you've touched on a lot of them. We have We have a Maggiano's question for Steve, he's good. There is a Maggiano's question. I'm going to go ahead and ask it because we haven't addressed it, but they want to know with all the changes at Maggiano's, Does this mean that there could be a growth opportunity at Maggiano's? I'm not allowed to answer that question. Oh, yes, I know. Yeah, I think, yeah, the great thing about Mount Jones is it's a beloved brand. Remember, we have 7 of the 50 Or that were built without banquets and, they're much smaller footprint, 7,500 Square Feet. So from a real estate standpoint, They're much more doable and you can do a lot of them. And right now, when you add that In their circumstance, a 1,500,000 of non off premise volume, your sales efficiency has climbed One of the best in the entire industry. So we're looking closely at that. We'll get through the holidays, see if it holds and then we'll be Yes, but I think it's very encouraging what we're seeing with this shift in business and with the takeout business and the virtual brands, what it It allowed us to do. We didn't just up the new restaurant openings from the teens to the 20s 30s because we It's like now the business model is much stronger. The real estate availability is much better is more accessible to us now with Some of these acquisitions we've done and that's the same thing with Maggiano. Now we're seeing with this revised model, let's let the world kind of settle back into a more normal environment, But it doesn't look like it's going anywhere near to where it was, which is actually a good thing from a Maggiano's growth perspective for that Smaller prototype without the big banquet space. We're very encouraged even in October, we're actually growing off premise over last year. So not 2 We're going over last year in a pandemic. And I think I know of only 2 brands that can say that. It's sticking So again, we're very optimistic about what's going to happen at Maggiano's. Steve's a little conservative on When business groups will show back up, because that bank with businesses is real critical, Holidays are really when Maggiano's is at its best and when it really makes a lot of money. It's a very profitable brand, Especially in November December. And so we'll by the end of the second quarter, we'll have a much better sense. It's going to be a much better year than last year, obviously, And it could be a record setting year if we get some of the kind of tailwinds from the corporate. When you corporate bank was when you kind of align that with what they've done to the margin story and better labor, better value Proposition from a flow through standpoint that consumers so far are not pushing back on. So, really some nice work. A marketing question too about the virtual brand. So, Wade, this could be for you, so listen up. You mentioned building brand awareness using direct marketing with email and text. That implies you're cross marketing the virtual brands to your existing base of Chili's for customers. How successful has that been? And are the virtual brand customers mostly different from the core Chili's customer? So the assumption that we are across pollinating, I mean, so here's what I would say. There is an affinity across some of these brands. We have reached Reached out to a few of our Chili's guests and a few promotional activities to see if they would engage with the wings. And we've had, we've seen some of that. But we're getting sources of Those customers from other places as well are partnered with DoorDash in helping build that kind of capability. We're working with other third parties to help us kind of source those names in Those opportunities for growth. So in that question, there was an assumption that this is the case. That's part of the story, right? There's a broader story of where those names and opportunities come from. And there was one more part of that, Micah, that at the end of the question they asked that I wanted to add a little bit more detail. Yeah. They said are they are your virtual customers different from your Yes. That's what I would tell you. Very different consumer, right? Chili's has always had a great wing product and a great opportunity, But never had, you know, lack of better term, the credibility to be a wing shop. What we've done with It's Just Wings is positioned it right there And that's allowed a very different consumer that otherwise would have selected a Chili's now to come to Wings. And that's that young gamer sports, you know, lover That now has embraced that brand. So 2 very different consumers. To be clear that we're not using the Chili's database Full force to market wings. We're being very sensitive to that consumer and That Chili's loyalists and members of our loyalty program, we've sampled elements to try and understand the cross and we've used Some consumer names that may have been not as frequent to Chili's to say, oh, well maybe we're very good at calling our database. When we talk About 9,000,000 names in the Chili's database and you go, wow, that's just 9,000,000. I mean, you've heard bigger numbers, much bigger numbers from other people, because we call Out names at a very aggressive rate, much more than if I were to tell you how many millions of people have It's very different. It might be, it's a significantly higher number than 9,000,000. And so we have these names that we can then say, oh, well, maybe they'd be interested in a different message that because they're not really engaging in this brand as much as they used to or they maybe never did. This brand as much as they used to or they maybe never did. Dennis? Thank you. Just on It's Just Wings, wondering if you Could you talk a little bit about the pickup opportunity or what you've seen thus far from that opportunity and maybe where it goes from here? And I guess just the second part is you talk about Working with other 3P delivery providers, are there any offsets or benefits that you lose that you are able to speak to by going in and Working with some other partners. Yeah. So on the pickup side of it, it's still in its infancy. We're still working. We've launched it. We're working through it. We've had pickup available in Door Dash, the marketplace today, very, very small number there. Most people don't go to DoorDash to have something picked up, right? They're having it delivered. So there is a small piece of That we're using the Google Food ordering piece as well, which we're seeing a little bit more traction there. And then we have our direct, it's justwings.comgrowth. Overall, you're seeing Small single digits today per restaurant per day on that usage, but that's where the opportunity lies for us and you saw that in the chart that I explained earlier of A momentum shift and a focus on that opportunity. That also goes back to the marketing question of direct to consumer marketing. It's that flywheel that will get moving Here in the next short term, but we have the infrastructure in play to start to build those from low single digits to mid to hopefully double digits over time. The second part of your question specifically around 3rd party. 3rd party. Yeah, I can handle that. Oh, Yes, so we're we've had this relationship with DoorDash exclusivity for years now. They've been a Partner, we continue to partner with them. They'll be a preferred partner for ours in the future. But we do see an Opportunity to open up additional lines of distribution. Obviously, there are implications to that For both of us, but we're well underway in terms of understanding what that means. And we're excited about that both from our relationship With DoorDash to continue to be strong and to then open up channels. Again, our issue Isn't sales. And so there's no need to rush into this right now, because we're probably right now we've got almost more sales And so we're working on the foundational structural piece. And the good news is we got growth vehicles to turn on At a fairly easy rate in the not too distant future. It's from day 1, it was very apparent that Chili's is very Valuable to 3rd party providers because of check. You know, a lot of the early partnerships were with QSRs and they almost took down a couple of the 3rd Providers because if you're delivering 3 tacos in Ames, Iowa, there's not enough money for the driver and the company. And so when you bring a brand That has a, dollars 20 $24 $30 check-in March in house case. There's it's It is possible to structure productive partnerships on both sides. And I think when you talk about Implications of this, it's not a negative situation. It's across really all of the players. Those are positive implications Maybe just a point of clarification, but I wanted to just make sure I had this right. The collegeurban environment opportunity You talked about, is that really just a virtual or a ghost kitchen opportunity or are you thinking about small format stores and then leveraging those small That's to also execute this digital brand opportunity. I just want to make sure I was clear on that. It's a combination. Okay. And then how are you thinking Potential margins in that business relative to We're not really talking about dining rooms though. In Wade's presentation, those are non dining rooms. Those are all To go delivery, to go smaller pickup, but not dining. And that's really helpful color. And then how are you thinking about Margins of those units versus a base business in a Chili's traditional Chili's location? I think the margins need to be representative of the business as a whole. That's one of the things we're working on figuring out what those volume levels would look Like coming out of those units. So again, if we're going to do a multi brand small footprint, for instance, looking at Chili's Wings and And Maj Classics coming out of, can we drive the volumes necessary, that your labor structures are going to be different. They're going to be more shift leader kind of oriented Structures with fewer numbers of cooks, you obviously don't have the front of the house staffing issues to So again, we have to balance all of those pieces of equation. But until we fully understand, I think the sales opportunity, I can't give you a real Focus on what the margins would be. I would anticipate if we would move forward with it, you're going to see something that is at or additive to the equation. Got Good return. Yeah. Just to jump back on 3rd party. So, it's interesting, we talked about the traditional third parties. Wade has He's head of innovation, right. So I want you to understand, I'm sharing this story with you because there's a lot of stuff we're doing that we're not sharing with you because it's infancy and we may or may not go anywhere or we like it, and we just don't want to get it out there too publicly. But today, we have a restaurant in a Market that's having its just wings delivered via drone. So we now have a third party delivery System that really is unique, where you know, you go online, you order your wings and it shows up What, 100 feet above your backyard? You were with a consumer getting it. It drops into your backyard or your front yard. Drops into your backyard and away it goes and it's more efficient than the 3rd Party systems that are out there today from a consumer and a brand standpoint. So there's some very exciting stuff going on in the space. You know, you obviously have seen Domino's Neuro, so everybody knows about driverless technology, but this drone stuff is very interesting and it's getting commercialized And we're at the front end of it. And we'll see. So again, points of access. So look for a drone near you with an Itch Dus Wings banner on it. Well, good. Mike, John, I think John, let's do one more than I think we are running out of time and you guys should be getting hungry. Okay. I don't know if this is necessarily a conclusion worry, But anyway, these are my that's my questions. I don't know if that's good anyway. So as we think about calendar 'twenty two second half first half of your fiscal 'twenty three, I mean, are we looking at some of the bigger commodities where you've had contracts at this point in terms of some significant rollovers, whether it is on pork ribs or it is on some The beef side or how you're looking in terms of rolling over some of those chicken contracts is kind of the first question. And secondly, you're acquiring enough franchise Restaurants work to matter to us how those restaurants are actually doing from an average unit volume and margin perspective relative to your Company, are those additive or dilutive to your company store AUVs and company store margins? Thanks. Yeah. So several different pieces there. From a COGS standpoint, I think when we talked about the year in whole, we viewed the exposures, larger exposures I think is there chicken would be the biggest question mark I have right now as we kind of start the process. That's an April timeframe. I think that's correct, Charlie, right, April kind of timeframe. So we're starting to work through that process and we'll see where that goes. Ribs, we've started to see some improvement in the rib market, which is good when you look at where that market is going And so hopefully we can take advantage of that as we kind of move through the second half of the year. Those are big exposures that are sitting out there. Obviously, you always are dealing with the spot markets around ground beef from our perspective and watching that closely. But I think the big one rolling In the second half of the year will be the chicken side of the equation. The second part of your con was the The tail end of 'twenty two. Acquisitions, generally speaking, they are lower AAVs than our average right now. Couple 100,000 coming in is probably a good benchmark for that. They Should I think once we are once we've acquired and are running the systems, we definitely find opportunities To improve their margins, we've seen that I think in the prior acquisitions, particularly in the Midwest as we get in and kind of systematize The operations of this performance, obviously, the Midwest has been functioning pretty much in a COVID environment Acquisition, so a lot of opportunity there, but I would expect to see some margin improvements come in and get them aligned pretty quickly. That we can typically do that. But to the lower volume levels, I mean, again, volumes matter to margins And they'll be on the lower book, so they will deliver a lower margin than a one to Several $100,000 more typically. Again, where you buy them matters too. So What the rent structures are like, there's all kinds of not buying them in California. So we already own those. So we own the highest cost structure in the lowest margin markets already. So these are all average or better, I think, For the most part. Well, great. Anything else, Mica? Well, I mean, again, I think we need To sign off on the online side of the equation. So appreciate everybody watching online. No, I think that we could you can maybe end on one different So we've covered a lot of these are pricing, labor questions as we've covered in the room, but just making sure that development is still on track even with the given labor market and all the equipment things we issued. So maybe just talk about that. Yes, development definitely is on track. You have to Stay out ahead of it, maybe again from a scheduling standpoint, making sure we're not running into issues from a product sourcing standpoint and on a Construction side of the equation, we're making sure we're developing lead times around equipment packages and things of that nature. It takes a little bit more foresight and planning and scheduling out ahead of things as we go there, as we go through there. So again, I don't see Any slowdowns in the development side coming out of any of those dislocations right now? Next is we actually have It's Just Wings and Maggiano's Italian Classics right outside the doors for everyone who's here to try. Yes, for virtual folks, we appreciate your listening in and time and We're available for questions. With that, we can sign off online. Yep. Thank you.

• Slides