Dutch Bros (BROS) 10 Nov 222022 Q3 Earnings call transcript

Greetings, and welcome to the Dutch Bros Inc.

Third Quarter 2022 Conference Call [Operator Instructions].

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Paddy Warren. Thank you and you may begin.

welcome. and afternoon, Good Joth and by Jemley, and CFO. Ricci, joined CEO; President Charley I'm earnings the we'll release XX, issued press We our for in upcoming the closed XX-Q XXXX, market quarter today our and file the days. after September ended the will along now to there it well post relations our press investor deck, at site is posted information when with XX-Q earnings have supplemental available. The investors.dutchbros.com, our Web release, also been and we as in future and to statements facts, plans in XXXX. financial statements our other the meaning forward-looking Please those your condition, within are be aware than of of remarks questions Private that all including prepared statements results strategies, response of Litigation historical Securities Act the objectives, regarding and our or Reform inherently risks, to forward-looking All uncertainties are such statements assumptions. and subject statements. not qualified and guarantees by performance their entirety of are are in They expressly cautionary statements These are of as forward-looking today's made date. to statements new as required unanticipated no by law, we occurrence the results, events, events. circumstances, under are subsequent of forward-looking update obligation information, expectations or reflect Except these revised actual otherwise to in actually upon We disclosed or them. expectations undue therefore, forward-looking should statements, plans, and intentions not achieve no reliance any one may our place

and ending please the the in upcoming for December for be similarly and press our XXXX, to the risk our with quarterly filed with Form XX-Q to XXXX, XX, filed report XX, SEC. Form period March factors For earnings XXXX, the on which details, our more XX, on refer report ending on annual release XX-K September year will SEC the

non-GAAP measures These different understanding companies. measures investors' non-GAAP used of performance. by on financial also today's financial financial other the call overall We maybe will financial than measures enhance reference our non-GAAP to

are neither please not that rely any nor non-GAAP measure. reminder, under GAAP. to, single on substitutes measures for, business, When do a our evaluating As financial are prepared superior measures

the of our with call earnings I'd like measures GAAP press non-GAAP turn review You to to that, Joth. reconciliation financial comparable And release. can also over the the results in

Thank your and thank for also starting We time. you interest appreciate this Dutch continued Paddy Bros. on everyone. you, in Good afternoon,

a to execute and proven loyalty operational strong leveraging customers. our and quarter the with quarter, new to In shops continue margins and We shops, than over by of strategy, opened and we programs shop contribution year our open record our expanded XX, quarter. to number and connect over third more grew new existing our and year both growth XX% engage our level playbook team revenue

team's strong. to Our real openings estate shop and new pipeline execute ability our remain

XXXX we For entire perspective, we QX than opened the did year in of in XXXX. almost shops as many

XX shops a We our have as XXX full to opened now our reaching shops. year public XXXX development target off expect by we and of at quarters, least at least company first new in consecutive cap five fully

proud each continues I'm improving headline Revenue geographies Same as sequentially doubled in compared new Brand quality. of demonstrate year grew XX $XXX.X to proud months. equally of travel shops’ we I actually last strength quarter. to numbers, our of and penetrate to has While markets. these the into sales X.X% as and existing month in further new million grew we am our in QX shop QX XX% just QX, east

to last in July began which mentioned remarks, traffic stabilize into continued trends in quarter's and we August. As

were driven our and in the was cold performance Freeze which in XX Rebel strength by sales sales drove last business, store same headlined over of categories. Our Dutch and XX% by our the beverage days,

through XX.X%. year-over-year during sales September, evening. Same bringing with our across for and price. store Effective into to the greater in Additionally, the perspective was additional positive through pricing our quarter when modestly QX to we beginning we saw prices action. morning from September being pricing choose consistency term We X.X% effective to of Rebel increased timing the the take franchisees Separately, pricing the sold X. we itself benefited long based QX taking of on the sales X.X% keep and our closer try at menu from afternoon pricing to a coffee dayparts

philosophy a $XX.X top proposition; upsizing. value maintain and generating consistently centers strong clear margin opportunity to path present growth for our keep grew to the mind on: outpacing top One, XX% contribution of pricing expansion. operated and company Our a three, year-over-year to customize QX, In line customers; towards two, to shop million,

margin in XXXX P&L. QX, labor through better QX million as which the shop company in the as of sequential XX improvements, and In bps operated bps scheduling shop Importantly, were and to our in company saw QX, $X.X we QX expenses, XXXX XXX record incurred of improvement such operational we XXX impact pre-opening improvement quarter. from our flowed operated openings from pricing due elevated of

remained unexpected remained our year just staffed. margins enter turnover through growth XX years, invest the from turnover month with deeper XX quarter and Trailing now on to our staff operating is shops was journey, shop continue customer Third internal brand. and key a employee we remained below $XX at in shop averages, fully use XX% develop the and up increase five markets open of technology people least wherever customer $XX.X full shop shared company our people reached priorities. expectations our that consolidated next XX management entirely to new to and meeting X,XXX scratch with when objectives; in our EBITDA and over and was we in in the average attract from new awareness expand have This we since industry want and brand at turnover leverage. at sync but capital, beverages higher adjusted of beginning on plus million, often have just XX% engagement, experience guidance year these IPO public remaining below our start and QX, Recall building focused industry eye and great to our million. shops remained level been as encourage improve QX. It's an not In and

operator in organization, again staffed once average. digits the as double manager XX:X virtually and new bench below us industry shops, an fuel to view candidates nonexistent. growth. low which believe of choice far a shop The the hires, for was turnover of the us and applications employer And of deep we of whom in combination a frontline fully turnover that as operators, we to place ratio Importantly, confidence positions gives pieces qualified our we linchpins the of remains field right have our

growth field multi-unit nine September, Victoria broista working welcomed Legal of currently Dutch opportunities our our Director and first serves growing and months to Bros new Ann for have comparatively Independent where people to XX promoted first turnover. Chief Board shops an We've promote operators Across we Chief from Officer growth past People believe as we the being availability are deep and our August, continue to our outstanding committed Nike. our promoted drive with our our combination President crew recently third Victoria ever over realistic and last with new and our Miller, In are geographies, identify experience, we QX, in governance as outstanding brings organically, Legal in partnership providing XX we franchisees operators. organization joined perform. as new career potential. than members us ladder a Vice our appointments. joins capability Executive low from Officer. who fundamental the and to with made In responsibilities. we operator years. In several served she and XX and welcome Murphy's hires more Tullett In key to culture, Papa realize We

we maintain gains, County, four shops quickly in example, month. Since such but share days. in For first market several also strategy awareness shop have shop, Diego improved and San significant our consumer generated San generating Vegas, goodwill. in in Oceanside by demonstrated more efficiencies. Tucson sales Even encouraging, and the first successfully operations County, by California obviously and staying customer demand we thrilled strength experiences markets, increased warm Diego power open developed in brand including We're satisfy a its our a in operational must over Las the resulting and in $XXX,XXX this to XXXX, additional XXX,XXX reception of

pipeline Our new XXXX. for shop fully is populated

XXXX. are key opening disruptions of and chain many timelines keep able New sidestep to construction slated additions supply purchasing in and bulk proactive our been the pipeline we've stable. to for Through materials, ‘XX in

we ground we seen we have the XXXX, several shops XX% focused by encouraged publicly announced cost goal on XX% XXX labor, to While expect are range long returns, and escalations year on end strong goal XXXX, right remain of five remain the and game of skilled cash which our on work of total this to our site meet in schedule. inputs, cash resilience and the including and the In by leases. we operating of for

Since openings this states new and development XXX people our seven XXXX, we've can of new entered commit year. shop pipelines, strength year. to earlier new Tennessee now the Given unit we next reaching

we've moved greater have X.X AUV X.X Oklahoma across market. strong market million annualized in in including we Kansas and in the greater City million the million market, Nashville As greater X the country, the reception, City seen

month Our volumes of unit XXXX our produced XXXX approximately million, is which classes and than XX% XX average average. trailing system X.X higher

energy accelerate us good energy openings planet's Dutch gave grow, Since the we has renewable XXXX, across use. as steward to and And committed our purchased to our pace confidence into to Our of XXXX. diverse being our outsource decision in these success are XXXX in markets credits we resources. increase Bros

those began XXXX, bill. facility, all every are at shop expanded The include our first water solar of electricity In summer nearly roasting to new taking credits our covered saving XXXX, shops. our of we we installed headquarter integrated measures year, the the that on panels all now this program into and buildings. In

consuming will part the process Rewards that conserve inclusion customer will and believe ensure with instrument We're along help number in membership. stickiness identifying we're reduce comes Dutch alone Moving to know and environment. to count, creating that of awareness forward, new and sustainability water, dipper grow aren't has energy but the brand with moves process improved enough. measures wells. the executing to shops increasing an a we us shop doing engagement of our Together, the cleaning we have and continued for these other water all steps of feeling these

for achieve now Dutch This shop. X.X as members million end As day from the XX each approximately we is of and spending average, members X,XXX On and experience than operational customize earn users. of September active drink is create one X.X is up June. of Rewards XX, active QX, app from with had a the million When treat own have non-members payment employing our the In times. from an markets. their and our believe when drink power average within enhance of pay there's to our everyday perfect you, came through encourage We especially Yes, price of the program, benefit transactions runway Dutch to members. We users perfect XX% funds our their members that's explore, this Rewards the Pass, or program, in there to window additional Dutch preload XX% targeting membership. we specifically expand of to higher Dutch faster approximately newer one day. in believe Bros opportunity to personalization for

and high last our For which more in We're menu XX are customers well the up positioned encourage the encourage days the users of example, try months. have and target levels opportunity try XX Rebel offers drinkers mix Cold over to customization. of brew provide in coffee to over Top. made to cold beverages, with customizable, inherently to we to Soft last XX% XX%

in to accommodate QX, the from are our process. POS high was levels XX% Our year. systems order added of flexibility to taking Top bill of In XX% and up drinks, designed last Soft and drink op

Fruit sodas, also only Dutch Real Teas, the Bros. Dutch saw with launch which and the Rebel, unique Lemonades to modifier, of loved fun them success and to beverages, and adding create customers to customized from We

Dutch other investing brand of through innovated the are a to thousands vibes creating. to shared share In broista of cards amongst in to the to of capability free further their tens we our rewards plan redeemed good drinks. so is buy, and experiences. to In capability both send of mouth word by this we giving were app. extension customers, gift at and Rewards QX, of members drinks allowing In members users QX, in technology future, sending the customer the the by good the free We near improve engagement utilize by powerful expand digital forms

headwinds, advantage strategic our measured strong navigate a believe to expand XXXX, to modified operating leverage. total and agile through customers especially beverages. a committed taken over November, for XX.X% are we macroeconomic pricing Since In offer utilizing responding competitive have remains our we completed increase. we time remained us, as in productivity approach believe input Finally, with uncertainty. cost X.X% We price. in pricing value, price margins a approximately September, to We we both to we measures

and staffing labor Our efforts in and to line results into standards continued repair of QX our to bring QX. begin and throughout refinement maintenance show metrics and

Additionally, we have the achieve come growing will operated contribution help margin eastward. adding to as procurement company function efficiency efforts These yielded we QX, shop our expansion XXX scale in that quarters. begin resources greater to move of in optimizing with bps purchasing last two our

this company, and our is approach to we customers customers public to basis Always in brand light better the have near the delivering into more began a on pencils our too a QX. been two by of to us months and year, labor rebound. of we our to We've built Meanwhile, overtime, term remains made along, We profitability. Reflecting more lines us, of in increases we Balance trend down menu In to for have and hampered important sharpened take begin pricing inflation in moves. to strategy has quarter, on plus see XX benefits. double XXXX controllables. grow in careful are many margin the Earlier growth. the limiting that Bros measured because manage invest were schedules to moves generating not we predictable allowing long wisely our and of our that measured quarters, for on progression, percent typically then customers. record XX witnessed inputs, target demonstrating approaching macroeconomic But our key it to trailing first changes evident some XX continued shops, Last to and guiding of resourceful. top continued interests a resolute necessary, in in contribution our month are as pay at allowing to periods labor including to was industry. This times key see price small Dutch Cost over we reliably in Keeping changes. manner four When remain great environment a on a mind our adjust to we profits commodity levels inflation focused experiences reduce newest we within three our core leverage dairy which escalation uncertainty. and margins the our class revenue chose and when would to QX. constrain being stabilized margin we're thereafter, our our short, maturing our reached efficiently. of

XX proud as this make say, of excited wall the we, to fortune couldn't all difference. through years. more at Throughout our operating And are a a accomplished old have four held growth As teams next team Dutch company, more XX past of the year has Dutch like we year, we've and our fundamental uncertainty next I the the on I the good operating be XX Bros Bros, couldn't massive phase many economic of the what here together. strength of firm. of path be X,XXX shops cycles. in model we for to to the executing to

are and We for the are started. here we getting long just run

Now I'd review the to call turn over Charley to like our to financials.

that XX% years. We've shops. I a Joth’s some of which We're system approaching over quarters experienced the or with billion XXX four of will surpassed in massive XX facts. company change on X growth, in operated Joth. annual a months, three has upon strong sales over of revenue greater. past wide The several brand the indeed achieved perspective comments build successive QX. Thanks moment this provide period and perspective and business take were

of on to markets experiences markets, just growth remained of year the convenience new delivering because XX% standards, for and fortressing shop AUV and of customers We're sales high end executing a strong. at the the expand and on at rapidly are QX underpenetrated Fast and commitments million customers. existing year deserve, trending our not deliver infill than ago. are similarly. half shops people we're new space focused more always operated QX company demand does the are from XXX to track transfer Openings evenly openings expense come this our Our $X.X first our our of performance our the strategy, our operating on

shops targeting shop reminder, operated $X.XX above company a our to As AUV. perform we present, are or new that's approximately at At million.

margins with delivering expense. of and strips trend the release, our XX% New flow slides classes to in quarters shops includes plus as and 'XX pricing efficiency, supplemental takes borne the first our See year average in which expectations. are where gross margin increased year our in this to And XX menu X.X% ahead typically three of this efficiency commodity operations. Comparable costs expenses, new also toward depreciation declining of cash X.X% We on of inline and inclusive our our in pre-opening two metric new shop year of this depressed page Remember, shop actions. Web after contribution XX% impact target site depreciation posted investor four ramping this relations escalated with are of half QX. removes first earning from are Typically, it the X% QX. margins out of of continued this for sales the reach 'XX margins QX shops.

and Joth and Rebel mentioned, we strength differentiated Freeze. beverage in for As saw our afternoon in recovery the categories, example, cold

in same than are is store XXXX. sales levels. For same context, result higher of increase lapping store QX a same QX X.X% our sales X.X% XX.X% sales QX store pre-pandemic XXXX's

last points; with have our seen Since points strategy shop fortressing QX. recovering. QX, QX. is created at points XX basis moving at packaging is company ahead shops year-over-year supplemental slides expectations. which than most and ingredient ingredient volume at points XXX Key costs dairy, XXXX. detailed of unit three. quarter basis item XX average profitability the pressure. basket, basis we cost company to drag total operated of actions and operated despite basis of has XXX a takeaways by significant contribution Overall, that are; essentially is labor Despite for single level in shop shop now This XXX company basis inline This increased Page points points. relieved the seasonality. and XXX XXX lower system planned expenses Pricing margin quarter over XXX XX.X% XX% is of XX for operating points last pressures, increased year, this QX In provides expenses increased XXX a basis QX our XXX in drag packaging this by total, year; operated the a period have Our transfer margins of sales is look in increased in higher basis cost points; recovery remains year-over-year cost infill of now in basis now cost points pressure.

or excessive We very profit not be have inflation. careful from been to to

Our engine recover decade four see tier objective costs of intend has next behind the open top been as economic and four what we the thousands wall wall plus. is over a to shops model the preserve to That we model.

view to the competitive and important increase in September $XX.X speed first our our value segment, This the declining a The maintain SG&A. half of last million realized price the more million Gross products through Rebel in Dutch view and a set, we other rapid franchisees. franchisees. to and passing we We a QX environment are period ones we increases quickly long on we strong flat and $XX.X service we proposition now increase Blue for Shifting wait serve compared we approach with was is our chose operating our same franchise year. clear cost franchising instituted menu the pricing, as provide profit relative of quality the many at will other XXXX. price Coffee before good all taking introducing until a new many value. of be onward. to along segment on In held full It existing and X impact growth. to at are our a customers Similar to had in after and the to shop Bros customers the to to

associated quarter, based added reconciliation XX and QX in XXXX the in For revenue includes with of to was the anticipated QX infrastructure XX.X% as adjusted to growth total SG&A quarter we to was million between compared This Annually, Adjusted page people for this XX.X% $XX.X as Page SG&A investments. million of for in $XX.X leverage in outpaces million, a SG&A supplemental growth the revenue expect an last Refer is slides the and stock SG&A. of SG&A costs compensation. and clarity. year. additional adjusted $XX.X falling

Moving profitability. to adjusted strengthened to results overall million, prior $XX.X higher QX’s than EBITDA XX% year.

on than XX% QX. comments this higher Importantly, liquidity. A is few

Our balance well and strong capitalized. sheet is

liquidity we our in and of $XXX XX, of As million credit and September had cash on $XX facility. million $XXX equivalents undrawn million

net was remained and $XXX shift I'll to QX. this Our guidance. now debt with consistent million

full ‘XX, million With to ‘XX. approximately project expenditures are which late to million in our shops early will million least total be the approximately Total at XXXX, at guidance be estimated sales, CapEx we open year least least shop expected turn For revenue I'll system In shop estimated adjusted affirmed be is and Total range EBITDA $XX XXXX that projected of closing the to includes to least XXX in estimated shop system at our openings shop be shop XXX. and XXX, least are openings XXXX, revenues be at Same it will for are to for now to $XXX at are back $XXX to we growth to which be Joth $XXX our in remarks. Adjusted company guidance. expected raising million, facility $XX that, openings, are over new EBITDA’s same flat. of roasting operated. million. million. to Capital be sales $XX

you, Thank Charlie.

culture brand growth; and our and business an unit that shop nurturing engaged and economics; building curated Bros level remain across blocks team. successful engaged years, a the Dutch XX following; that relationships: attractive have is uniquely of and fuel powerful successful For people; we all and well authentic experienced that and and geographies; leadership and strong a capitalized consistent beverages; company company, ample has liquidity; co-founder in customer model to drive enduring and the a strong portable sheet been provides highly systems building balance highly a a highly an customizable including

for have people and we customers our We our our happy term through your Dutch footprint shareholders. there will environment. our please value to expand and be opportunity your and our lines. there Thank in as execute and expand Operator, difficult eyes our been we to take on for a Bros, continue long focused to real footprint operating Keeping again open interest create our you for the be we now to would keenly questions.

[Operator comes Instructions] from Charles from The Cowen. first Andrew question

by know to Charley, I about three an talk it's on look added more that at guys and pricing it at we if three the trends geometric look I on the a But year you year basis, basis. but wanted way dynamic, increased basis I about of more sales can we about think XXX sequentially investors see there's points look but at XXX same it from a XQ. that pricing points, little to bit store from base XQ, XQ

has can just seem sales perhaps between been from transfer XQ. October, do talk XQ high a traffic So recognizing these to ability just know it. the similar the for the digest trying numbers consumers But this? in and with you pretty what that outside, about and be in measured and observed you're September you I while bit to

year and transfer pointing year you're we both over sales XXX have out. So of basis as traffic, definitely sequentially negative points,

traffic afternoon -- talk trying being be is being as a sure, you in that -- SKUs bit the especially But more efforts just measured What are know the talk about to a guys occasion just layered little that in, with a pricing more that to discretionary you is possible? on make I place in can to just way gentle you can in as the this.

traffic, this if geographic isolate we element, you and a to time. last Well, is referred there that negative

So that's driver California market the we the decline. sort definitely In more the of income disposable of aren't that seeing where is that the traffic non-California drag seeing. markets, in we're constrained,

broad it we'd acute if we a decline, were different I have So have a with think than specific response decline. an

Page driving And stores like from looks store What's kind as that my from improvement volumes of open XX.X% most new profits similar million? ago. around a X.X% question, on supplemental, just last of to XX improved recently quarter remain $X gross the

economics move we the As continue Texas. in are to of We've shops a accretive. east, opened lot

upward. if at basis, you So driver the moving the that's a portfolio look margins of that on

The comes America. Sara from from question Senatore of Bank next

a quick follow then a separate up I and have question.

versus question. Just the traffic clarify ticket to

I negative think have you separate there's if or comps. ask probably sort XQ to the more so XQ, traffic, XXX also points wanted right. change the of on there's menu the I had just basis on of sure in pricing And I getting than make sequential price to was like anything if in besides question, mix And I'll any anything composition the going that please. then a in

price in X. So Sara, X% September, we took menu September over just

small, right? X%. that, than on actually So just less over effect quarter one it's is much quite the the So

sure of the to that going that. note fourth So quarter the builds make really from that. uptick I make be It's want you to

between roughly XQ had pricing similar you've So and XQ?

quarter. we in late And in Well, QX, took late June, then each X% under so same the took roughly the Let me -- that. took consider X% in quarter. so in in the we May, effect quarter we just

up related high geography, there you've new is anything historically daypart. then I about discretionary be you the And question of the Can very but want more to if on ask saw markets talk about you of a went units, to what know, volumes. some to opened the did dayparts. point, drag, to this of of just California that kind that And you -- tends to So I'm saw trying anything it just prices couple in just getting sort are as seeing high? first you of it things more to you're versus to enter across a used program? continues what about that, east. new reflects, normalization idea different more is there you're doing these -- your as gas being versus new understand you XXX, see you a Is with X.X people loyalty the farther you had there stores

just So the of to complexion the growth. understand line top kind of trying

We think, what components all dayparts QX. The couple in things. menu, real I except a night of call across late we positive saw growth

see fast categories the was our to board Rebel the are by a in recovery business. movement saw continue in team people we did to So those Freeze are our for us. we And categories. growing into Those the like across big and those strong categories dayparts. two We and strong attract Those businesses. growth

XX in one the grew we in in QX. that The from didn't We've on board, growth grow But where market market of still element it one area. that about in Sacramento was real touch market of we still on isolated just XX through. cut that the that track down was across that is strong growth Another didn't working the QX. we're that that half decline markets that

and market. up of in opening seeing sales lot As it that we're things that of trade I a transfer of also some that a comps we're relates the to that new opening up zones lot that to contribute and nature, we're think may shops

to many into other drop two but it going every as at shops it's modeling to one one, up the and So coming things going we're a number. cases, store two knock out not to we're store into because one zone those strong be that trade as open a things might market are in way in that we that won't open down, is

make and that doing. of got market we handle that's that's growth sure kind on that why we've So our how at total look

Baird. The David from from comes Tarantino question next

you to to I a Charley, clarify wanted comment. ask

to traffic that just down I year so interpret and sequentially, think over you mentioned wanted understand I to how year was that.

did traffic? talked by what you I guess, mean sequentially when you So about

seasonality from now from three quarter two small certainly have seen counts have three, some declines but excluding there we and year, decline we are to as we've sales in seen not decline quarter quarter over These traffic in year two, They're quarter well, then significant. sequentially, though. transfer. a So

I you're year however QX QX, think is little it. the in in -- softer mean, for over a So year than about to adjusted I seasonality, Was guess is that or that about trying you it typically or if what you change or say? think

seasonality. is over year from point. to a effect, be quarter, two be typically you an quarter can year So our your quarter effect to as move It seasonality wouldn't highest

I think in traffic, the pretty to advance price running of a quarter to three it, the call in characterize best slightly… place lot I'll two quarter is way much, change outside not

wanted then back guess full guess thinking literally I fourth a the fourth about taken comps implies quarter, a outcomes, the step quarter. decent range the just in to I to would imply how negative are but because of I you understand And guidance it year pretty

understand I little So wanted better. a bit to that

with it? is So why are And the equation? that case, back the pricing is turning then that's you're that is about if more one, thinking -- comps, how negative that, the in

we are We're three So projecting positive quarters. flat. through

small and that the decline are And that. transfer So yes, terms is pretty you is in expecting through QX. to consider are aggressive sales the lap comps. then quarter the in a fourth correct versus lap, we reported in There of QX

the of supplemental. make note that stacking provide data in we at that So look when you comp

add into a where to a end tougher and expecting guiding going softer, a year that of little are little period lap in are how over we we we stores, pricing, we full a we lower up of we kind guided. are are go going parts of have traffic to quarter moving year seasonality, So that's

then you was about one-to-one interested hearing the in more I And marketing Joth, mentioned. that

traffic? you capability near what to try sounds on plans planning your that was could vehicle and term, to to use that the elaborate are more like, are it I have in you hoping You whether aggressively now, protect the and

several done have programs. We different

created the of the to customer the at is a think what varying has through. nice team of degrees look going how I playbook

you see, behavior way. is trade promotional give another what's communicate customer down convert beverage a opportunity it maybe to the issue, into and opportunity is particular daypart program in a is category, a it the a Dutch engagement them issue, to create would Rewards customer with that the that seeing us a it certain literally that are can So we through

come different driving back So on other dayparts. that menus they parts we them of are frequency. It's to introducing so the

mining the that like. are still We looks out to through figure data what

that, going we which sharing we drive, QX, the the the that using can app in ability gift you we launching of the be are put holidays, we have the app. to that's I utilizing also, utilize scenario, digital we think to to in card a item and one that David, a we big pick are because for points like big that's that So could almost the say any But way promote that we program through that. place, and

other the year, of I The is we fourth challenges, were time. And that that strong think speak we were saw to year we very well had COVID just a I at on running that we QX of very were thing want quickly quarter really marketplace. doing because to open, in we was related and last comments Charley's last run last that

numbers what on think going who And still in settling in wasn't, what's happening some was so market I now. open, year-over-year the was and related down happening there's to who

think versus be what know I last is of up our that's quarter some more fourth hesitancy are year… to about So the we're against positive we

the highest face. we stack two It's year

Ivankoe you. Thank John question The Morgan. next from comes JP from

was think as follow this and of stores? certainly consistency, to that new have. stores, you Certainly, environmental speed give an you you opportunities the what of Could us any it that of on question have up. fits retrofit update taps The seeing have you're some you're the of I film. goals existing a And what seeing with with you about some

look the new begin launched picked actually July the into, system, half plan we for let's tap here year design we look probably the shop have half scale to We've stand kind XXXX of -- roll at back just the We right that looking program and tap to of a We Rebel to Grants that is in now John, and right a now colder out. really in in old new testing tap, a -- taps on we're and design in Pass, we're tap our a kind a kind back of say, programming, of new on new systems. as as we're at and the to through And as up shop. we've on now that roll launch that. new we right picked that working

you operationally? a significance, the from customer terms doing share can anything we you're employee perspective? aspect I And it? of is it, and see I certainly, but anything mean, ways its mean, again, in that why

I the think, Well, tremendous. been has feedback

many easy, the benefit full to In a so the of it's pour time now I customer the we're can end faster efficiency and there. -- product. hitting ability that the we're removing not cases, on mention cases of really back that simple, perfect the shipping to much Not drink. to it's so it's and we think button just in can approve deliver

in of even cases get and business, line and of to the we'll cases more we actually a But year. as back modeled. the sparkling it reduce haven't of it, we've of the of our of we numbers it cases got we to been brew, So do cold any I'm committing concentrate Rebel, But water haven't -- not tested -- finished see kind out. good until half really to continue we'll person, we business putting

Second question on turnover.

but wrote I XX. hourly XX down you. small think went from to I that's especially for turnover a Not unexpected increase, not

workers And similar don't quarter part from of think new a rate to the it. didn't before. second hourly are good to versus profitability at an shown industry where more both, markets I led an So I way have And why the curious, A that seeing know of to through perspective. of but last I how the frankly, can go in kind importantly But existing be lot and accelerated also relative opportunities this a the employees be they you've I reason. leaving employee are be phenomenon quite earn year? markets? I'm know guess, of might we others guess I tips some

make color more it get worse? turnover, any terms need that and and guys you of So an just if get see wanted doesn't you to as that issue guess, some sure in increase it to, I

now is And labor study the fascinating. that market right is just the case

of is One going higher. be a is always comments. So third that the our to turnover in couple quarter

Just of we the around turnover nature quarter. third great the driven reason tipping then school, we'll in the we And quarter, staying. the ending, just number we XX of turnover the and job second for the will lowest that quarter. again increase second in and why is have, and one. in quarter XXXX, higher a ever But had the of second see second quarter the turnover quarter a people quarter type of had month of that the quarter first to what third summer base actually back always they more quarter year. were the The first of probably off bounce first drop than higher first employee did increased higher happen is is fourth see phenomenon the XXXX. because and it'll were the which quarter, by third of we the the In trailing kind open, is question and it'll in we've see were we seen last The and

think we've all phenomenon in time, an that think the people to think as service number. But to business work. tipping we've that seen and the that, that do I it's we're amazing in a six interesting of a months, get everybody stay need work on they in does tip. make And that are I last hope every away sure tip across that opportunity and job I amazing well an great we're in that. I that At I'll we so seen increase all reduction from doing same the think I my segments that acknowledging opinion great

The from next Miller question Piper Nicole comes Sandler. on

a think On California down if modestly. comps California. been very very, like properly, and both was down talked would've something comp quarter, you have last this transfer think, I could if it it I about was exclude, sales And you lot I

of one. a phenomenon a context sight that so stimulus if if you was lasting was maybe really it in started But know, is a they you in and XQ. just and or had coming had sentiment earlier I of guess line knew into if was that they any like the was about technically that California, better, positive? of… that a they to inflation, the fact consumer feel kind is October, give California can event not or you to comp is Or there around for question some impact great know, You third driving an that, So which force quarter the absorbing the

the October, Sacramento what and to actually isolate so I in into far. want you're see so DMA. any didn't California back Sacramento the situation question And stimulus and to of call would the we area, California right, value was just that the But we a

If our total would same the that's much market system, of our system. our how same has that related source up to would be you -- system DMA on remove entire from X.X%, impact that sales that sales source an

that So was was number take X.X%. third that be second if down growth X.X%. quarter, quarter, X.X% down market the would In the market the that out. you In

ways to talked to we're kind we've of But an XX the being we Again, that focused we're still looking at it's going that, can to everywhere of work markets XX but work consider and isolating about well. do, that being there. back of what that, that seen would we figuring we on improvement be very also that that out up. market that is So have else we kind in

afternoon. you cold and was drinks know the -- And the was the recovery recovery

was year. shift mix half the turned the in mix first think I Has of a drag back positive? shift

Not necessarily.

traffic is is then, drag? it still Is price. a negative, really it traffic So and

traffic? or Mix

Mix.

down there, is logical. drag, on going which is Mix drag, slight trade probably a some

was so of said, whole I year asked flat have and comp. earlier, like XQ you then kind being negative this for down if And the

a think about So the traffic. or kind cited? ago, you with if questions know level, don't one is little price, And that those the of but again, of way that more so price, just to a more that three that Is given same was kind negative reasons bit I bit right? it little question

Slide over XX.X%. stack for year see to But you look two that big. again, because basis. at I'd Yes, really a on the encourage year QX It's is can year you X,

comp comparing in all you're you equation, two what part and to. the current a you deliver know it is frame what so, And that

concerned reporting that's a negative a about So we're why not that with lap. big number traffic

but that ultimately? put then does roasting on that do things real pressures the have from question, a cheaper? facility. And roasting just the mute, then anywhere, What me you make facility faster, a question and benefits real -- alleviate any happen Does

the on our supply of almost markets everything in are about expensive make shipping think that we you the the out we country When most chain, Coast. West

roasting currently we now probably pressure XX% of from And are some party our Grants using we the bean out produced Dallas the Pass. of market. of coming Pass the in that so market to facility right third in have volume a offload And our Grants we roasted

us As that throughout then market those we through market up we'll that chain to Dallas start supply ship to move comes directly Coast. East that Midwest things Texas, allows Houston and goes a into the the to and

is one make coast, which situation. supply roasting able the we're of the able out risk we'll summers and we then West some is So get facility the third own out more location. to situation, in be we're get into sure equation absolutely of on on we'll with and with want facing with the any situation And one in we'll of that having party one other expensive what's that regardless make. a to offload grid happening our fires to to the and things And also take

a of out our in of risk we'll add roasting we're run that. original to out And Ultimately, capacity. capacity we -- going lose environment don't node, like single to want

The Jeffrey from Barclays. next Bernstein from question comes

that we're I go the up guess Just seemly talking about in following-up third quarter. fourth quarter, would the on X% little the the pricing, a in which menu bit

price the that on consumer do how this know from test sure But be increases. going hold not increase a I wondering environment? the you margins is certain price to in needs at mean, you to about increases? smaller level? based is it income make lower do you I Just there outsized Or said you just a to at how arriving go prefer your more that determined pushback

Yes.

we create So of last a we've categories menu to continue how the that we've to degree. in. most we're have been We every measured it. We made that that be just we're to made going year. really want slow. our across is in X to for careful move want price the go position One The about that that do to about value

is put price we what taking want a to menu, our basically, there's So we that we as on we earn say price.

where impact So we this we've we've also during careful put about consumer been careful the and about time, been price. of the

on that of that the actually take that that you So premiumize done an a an so would We've item with. products customer choosing on. our is would things you price item that done we've lot --

places that We've customer take a that like of also at our other menu price. opportunity there. parts there's be in price our that other able may We protected we feel not to also the menu look against base

to year. seen the of with worth. last continue the it then and this We've again the way just end at be of So, very kind and look through year of out measured all pleased year that's about we the flow will as in so we're far, next of first get of that, half

for commodity into ‘XX, importantly, pressures. ‘XX. near-term outlook and And obviously, the in to for directionally pricing these inflationary fourth be labor mitigate helpful. your or what just the outlook wondering in and Hopefully, kind I'm quantify quarter would maybe inflation can quarter but the more we're quarter of ease you is the to expecting the the any things color third is place on basket current of if and

third Our inflation quarter XX%. overall the just year-over-year cost of basket in shy of goods was

driver in is on XX% don't a right in digit. of But that. now. -- single up high was that. wise don't lot quarter, escalation right is wage Our it's of to We Over just the or now. Coffee X% bank think as below the dairy. huge anticipate We is is change we've inflation up dairy a stated, third

degree anything not soon. that things we're hope are -- not we're gives Yes, high differently and shift of any that to us anytime Jeff, going hearing a

the that. in next the is little And bit watching, stay a on until you think it's price, more usually, if play is of out I [sea] that's spring we're all futures where down. But year. starting that, you're projected to at dairy The on come to game helpful.

think we're labor. that. we'll So then watch watching And I

first that's is and we're every watching one the the get our good we've this pretty through to of XX with and I as into applicants one hire, kind had hiring year. of get part inflation and we we're watch labor to a that going out feeling think the good. closely. run Obviously, we have But of wage

Zackfia The question from William comes from next Blair. Sharon

up quarter. pretty anything that labor And in leverage there I that labor into was the the markets else you XXXX. really Is leverage, talk the was good at then what there's I saw you curious I quarter? about put impressed And went could the mentioned time. in you you less if particularly by in scheduling that because think know comps new looking be and metric opening I you secondarily, for over might

write. to done side, sales the making a a and write the good limit schedule that work have time, and a the low can. schedules given sales have able effectively, we sure labor and the we that team has that had. On really And we're we schedule, accurately model. job reliable fine-tune turnover, more dayparts of then close that our we set to level as right get as that training over staffing remove and We're We relatively the we that expenses still forecast we just

the the quarter less environment because in third craft our at better disruptive. was got just we So

and Sharon, of look that XX% that. year next build And continue will if for shops Texas next color you open plan year, One markets that. at California of pieces a in the on out the about to for is we couple as of we

in planned markets it's into Alabama, also for XX lot So Kentucky. we'll Tennessee doing of existing a markets. now right about are -- in and areas, we've X Main be new then got locations those infill and

where use Knoxville, we'll approach and places that presence. that Lubbock And places into to where like that's So like in would really markets we'll grow. places in but will places be Hood a in and we'll we core Huntsville, Fort some consider College how like market that Lexington like Station good we go and places opened similar took like Texas, be a secondary, build maybe

the excited And about to that get just team started. at $XXX bit year. we're the is million, So next honestly chomping

from The next question Stifel. O'Cull comes from Chris

wanted an stimulus quickly traffic declines, then a Chris. This on but the I you was follow-up. driver the from at a I know of California up was curious rolled to And quarter? is out seen you that I you've payments impact beginning -- clarify if Patrick if fourth of have the in I key could for California, mentioned follow the on

kind that anything point now Yes, seen nor of related haven't that's have that bunch QX really so right time kind of really analyzing a we -- We we numbers. I had haven't what spent know just have to don't of effect far. or to to

have could So say really don't I we on on, but topic. much more, to wish I speak that

if company of the year? level also, during then a does it and fourth, the And third Joth, last as And have think maybe than about we higher activity the appreciate I did quarter the year could you promotional comments then as color last curious the what be season on the compared to around just level some might of lab, the but provide promotional well. on I'm activity holiday

have too volume drive the is we the promotional that efficiency. cases, that lines our that And because more in be people the part want the we we if into wait business lines operating lines. kind driving don't long, We're those pretty lose our strategy thing our many we're honestly And driving of company. a -- that to is that of managing traffic about store big we big because we're in to we're manage, -- with a not not we people we promotion are and in of

I of honestly, managed -- specifically kind promotions of why managed you our we're our promotion can promo us can if we trip discount is careful. not all and any way can that's it we drive in one-to-one the think in it, that stayed pretty not doing even large year how and promotions up within important. operationally kind has of that -- sort really so discount percentage rate we've we've So that that strategy our tell

ordinary the the and of in that. pretty our we've I way last disciplined would out team nothing been year, say, has run that So income

highlighted, and and of you And was you of I product out prepared beverage if your in Soft revenue add those And curious a Top in to customization you on then that options roll beverage innovations remarks. the I mentioned, you that modifiers opportunities I just think mean self-select or customers or any additional modifiers? like for additional provide driver know have lastly, you sort could incremental pipeline enhancements would high-margin as

done how gotten variety that have summer. -- Tops XX% we of kind of a the here which over work, to So is Soft number some

don't I two we later, our basically that starting growing and idea we're think Soft of it consumers I to any on think XX% as when plus and we be really would years launched Top, it it brew, had our beverages can baristas Rebel, that it lemonade, put can put product on on on -- hot doing on a on cold you nice you job can drink. offering it you see you can a a of put put

different of can we're there. drink you many That's ways. a putting And fruit it of beyond actually the fruit to and it has original and work launched nature then careful lemonades of in about your and way And been We're just the different the a without much so efficiency kind for in the again, volume to we get seeing the real it, Rebel's, teas soda we real of also a the innovation, order that seeing flavor run. maybe our expanded of that used variety and through. be You beverages now scoop it when because great up there, we syrup to real in put do a and inside of operational too in now idea. we're shops and it need way

menu and stands with in look next -- to -- But like just loaded currently. at Mangonada. great our launch from feedback very a our but not product is on We few with our and year. and our did We'll So the a products tested third well quarter got innovation that we a also from baristas. consumers, did finish Tajin then it the that in

that people. drinks with really hundreds Our is menu, amazing offered of menu, insider secret aren't by loaded other

to try especially to in customers, how beverages And our continue to Bros what those experience. think markets Dutch do that still we'll so have new and is to are I our showcase shop, learning the interact

further questions you, Ricci this at like the There sir. closing remarks. turn Joth to are Thank now no time. back call to I'd for

on everyone our hundreds thousands here HQ the that our want shops and of our we've the challenges employees that and of thank makes experience we've that on I customers has people year. thrown record the and been on, to to to taken call. a again, for again our our support way. XXXX This developed once is thank of marketplaces. us out in I and the also amazing along an So our created but teams want great and such baristas numbers worked

Thank So I the speaking joining to in safe want I and happy, forward holiday look quarter everyone first QX again you season, and wish at very to to call the our great thank on we of call. everybody for next year. you. a

you. Thank completes This today's teleconference.

participation. your disconnect and you lines your very for time, may thank much You this at