Carrols Restaurant (TAST) 11 Aug 222022 Q2 Earnings call transcript

Welcome to Carrols Restaurant Group, Inc.'s Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode.

Following the presentation, we will conduct a question-and-answer session. Instructions on how to ask a question will be given at that time. I would like to remind everyone that this conference call is being recorded today, Thursday August 11, 2022, at 8:30 a.m. be replay. will and time available for Eastern I Miles, Carrols' turn the to Gretta conference over Controller. will now Please go ahead.

You may begin at this time.

Thank By now, at www.carrols.com our good are both morning, have presentation the our our and earlier to website on and released earnings you, access announcement Investor that morning earnings under available you operator, should this everyone. Relations section.

answers or may remarks, I our or everyone with discussion, including remind include to would that management to statements to our to like begin strategies, posed we or future aspects statements plans of future comments reliance them. Before respect and the direction forward-looking questions guarantees our be not to revenues, performance, These input business. not costs therefore, undue on should other our and of pertaining placed are intentions

filings results, you that the things, among both as refer more details, forward-looking our and respect risks the well of as also business for including, to with our SEC to statements COVID-XX. other impact impact with could We

accounting Paulo? call, measures a now earnings we evaluating Pena. principles, generally to our comparable During call reconciliation over GAAP for in measures information this the a presentation of or turn with in believe The should as useful will accordance additional we With that, prepared in isolation and President is Paulo non-GAAP today's CEO, substitute accepted our with will available and be release. be performance. I considered can to discuss results certain our not that

everyone. Carrols. Thanks, We your in interest Gretta. appreciate And good time morning and

guest our X, using team initiatives. our poll, a and locations operational that bar X, of turnover productivity on on our few our employ. challenged mentioned excellence experience. early turning restaurant restaurants leaders engaging and improving on May most motivating our stemming focusing the playbook And already been X, proven by I most members. around As and overall I've raising a

to you each efforts will already are that several financial results these confident I'm begin achieving pay see our We of off over next areas. our considerable in the traction with quarters.

overall the experience, and focusing food improving Our on first speed, began by guest we excellence initiative, and service operational quality.

early metric at Our guest have our our Burger restaurants. by validated efforts King satisfaction been

has score last since is early improved now Our steadily at highest year. its and

the This booking this as we a in on the positive We XX% on environment. forward. this we build also metric by past system intend approximately is outperformed current One that quarter. to move accomplishment

expect to more to leading would you return our higher satisfied As to customers are restaurants more traffic. likely frequently

thru this metric priority of On improve to improving drive is all of we our restaurants. summer a us. for times speed member team service So, across challenges this implemented

have XXXX times We already below and to seen results wait reducing XXXX levels.

us to our allowing motivating we and initiative, gradually restaurant restaurants, out productivity staffing their team very levels improvements, improved store to at on focusing our second are hours. members bring our We've our engaging best. expand Turning to

In fact, returned restaurants. nearly operations have all full our we to of at virtually

done also have and this while premium We minimizing pay. overtime

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specific local restaurant excellent Lastly, turning restaurants these our identifying to is of results focused to of In restaurants, typically our our team for the operating on opportunities up highest by the supported are and the underperforming performing Carrols' district We teams managers. are quality an basis. attribute action and monitoring bring the carefully mobilize third restaurants, ongoing on common around standards we initiative, special then on improvement. through quickly plans

supported in that and well and the identified. we we at when aren't procedures first. trained, the is accordance seek find this We typically have focus processes is potential well that So, operating where their ensure restaurants performing we to team with

and I'll let's lower growth cover the to for highlights into X.X%, profitable team sales and promotional second top the plan We'll operating Burger my financials. coming Tony thoughts is detailed into will drive and strategy mentioned look X.X%, I quarter some challenge of In cover the This prior forward the status meantime, is dig we the the May half Comparable price increases King check are increase the of many to I overall back on would traffic that quarter. would of As Average sharing on restaurants growth. our when was meaningful confident it are X.X%. a also the second reflected offset decline performance was it change results. and business. by activity. generate in XX.X% It year from I The rose quo focus it's with share ready. which you XXXX. developing and which

our the Popeyes versus which of to in Comparable second revenues the X% decrease restaurants period X.X% during same the total represented restaurant of increased previous year. quarter. Turning X% a sales in

prior impact the Our to quarter. commodities and adjusted margins on X compared our greatest EBITDA headwinds, significant cost both year had labor

I skewed to were think restaurants. optimizations towards items, activity, both able aiding price thereby Burger somewhat as mitigated headwind well promotional King our full as many decrease We at profitability.

print coupons have We designed are past. in been usage be but they seeing the have than been to greater to us the coupon digital more and profitable

the QX Notably, by menu late trailed including QX over still traffic cumulative May early year June. high of Our sequentially months, it we pricing. basis increases all price of King XXX in XX this QX in approximately actions over despite points Burger past restaurants took XXXX in and had X.X% improved

customers our our constructive. been increase far lapse disciplined higher expected like unsurprised their pricing and incremental given conversations we can menu. certainly We customers they and seem optimistic inflationary value price In we with our that working are it they do prices is modest not another to have actions. Well, it looking pricing for as rather begin favorite September that year's by items for paying approach to menu last so general take trend. expect cautiously Anecdotally, on to find within

before QX XXXX. improvement for to compared an second labor, represented we experienced the hourly during increase of this XX.X% wage year. This to QX overtime members the average by from Turning quarter our during XX% team rates increased

We might XX% digit This increases XXXX. That prices said of pound on there up beef this commodity wage us. the to of quarter fallen mentioned On cost costs be moderated to QX our mid inflation has two or worst typically are grilling over from XX.X% are range subsiding beef we been basis and were during QX quarter they In up the the of across per week the commodity was high the would of month over our seem basket. penny a to and in of summer about unit season. XXXX. rest was to Beef now Commodity XX.X% reported May the single over Inflationary basket demand We is inflation see remain impact have an over seasonally commodity that have that quarters. outsized experienced we they and lowest lapped per think holds elevated relative high QX beginning a QX signs cost third in In costs for XXXX. in sales, line QX of be likely have experienced remained QX by pressures elevated high last that inclusive true. since XXXX. we the overall. expect the commodity quarter hourly represents increases, This year a despite XX.X% This in overall beef QX as four for this XXXX. a most the for still the behind of to for on consecutive March.

a of environment, inflation XXXX their reduced just to manage for inflation inflationary with We've an working Still cooperative also to for It recent franchisors operations our months. prudent better X Restaurant in are purchasing costs. highs. improve the every food its actively aspect if we franchisee first examining traffic manage ongoing moderates King projections been International. and seems closely Our Burger Brands comprehensive opportunities time plan partnering even of drive find the from economics. to continue with to In particular at on rate

with menu, closely and you share King month. operations, to employee their working them Burger execute marketing restaurant experience, strategy technology. multiyear details develop value next are franchisees with and guest proposition, that We plant addresses of a will

we on apprised you to and We are keep eager work important partner our this progress. with of them will

the over financials Tony let to make review to second final call quarter two our Before points. me I turn

past encouraged we are cost months, that maybe the First, a XX moderating. significant over our hampered inflation performance that

operating are business. We performance traffic such we been the woods of This leverage yet and profitability headwind on a year, provide initiatives believe drive to may our but restaurant not past that pressures turned out improving forward. combined should our focus going benefit and the out have and the start franchisors' our to over with margin

recessionary QSR Commodity and labor pressures consumers is periods. to as moderate downturns economic broad fast downturn Second, as fast other the in many of tighten restaurant down and during history operators to full that outperform event budgets. their during tend segments because well. they casual demonstrates trade service food cost a This

Financial us pass now over or macroeconomic the we our whether call ahead the So, will Hull. sailing turbulence, Tony well I I believe are clear Officer, positioned. environment that to brings Chief

Beginning line million prior million sales and $XXX.X the increased Thank in our quarter $XXX.X X.X% you, top year. with Paulo. second restaurant total

digit the that stimulus and comp Burger weeks June, continued overall mid by from We In April Well, sales increases. turned comparable May still but April and comp we of in payments July, for in last two trends, month. King were June the the see the lapping this. year, monthly most and mid-single-digit impacted the comparable were, growth. sales May by the believe X.X%, last While rose negative single part, unaffected of positive while was both terms January to

day believe approximately sales, last room $XX.XX South average Delivery last for delivery for sales particular, In $X.XX across to is trends and King strong sales all back King this with to of time restaurant strongest average the Southeast. were We terms Digital we is of positive its XX%. while in in our total quarter. late delivery, trending performances past this of and while sequentially, about On $XX.XX The year. pre-pandemic strongest basis rose trend revenue. in performance improved the relatively increased has operating comparable night X% now a service saw check lunch compared our Burger is restaurants, usage to sales, regional hours. quarter period from dining levels compared declined while evening channels, rose towards to including given $X.XX first same breakfast to the increased periods, year. to the drive-thru overall, and in to regions due increased Burger modestly the XX.X% check By part, XX%

guest and quarter, believe outperformance system restaurants of comparable U.S. this at earlier. restaurant by hours the is driven Burger sales mentioned second experience We it During XXX this many quarter, by we past outperformed system improvement that was in years basis operations of a the we King our points. that in continuation and

sales. lower points, primarily beef, because packaging XXX to of as adjusted promotional normal adjusted $XX.X X.X% a beverage sales price partially U.S. As basis of menu EBITDA commodity costs costs. operating the XX.X% percentage million we which Popeyes a potato related to believe basis by million, resumption inflationary points second experienced increases points, outperformed decreased net restaurant of XXX Cost offset is restaurant higher our concerned, and the was hours. of and Because and of far while the basis we and increased Popeyes chicken as These food, quarter, system to $XX.X by activity. challenges higher margin during decreased were EBITDA to of is XXX

our are profitability. per in costs quarter, beef period averaged from year. $X.XX major up a earlier, the during of second pound last driver referenced Beef the same As $X.XX

steady as million, earlier, to basis beef, increased quarter increases. prior levels XX million costs in expenses $XX hourly compared number beef due increase on $X.XX Other estimate to discussed XXX remaining utility per to rose in increased a the the sales $X.X expense wage EBITDA rate of points rent last second XX.X% would Productive about annual prices higher or repair factors, the a year. $X.XX including decrease due costs in are to that We percentage basis net maintenance moderating. Restaurant labor for as labor basis pay operating relative premiums, these about million pound all year $X.X and expense as primarily higher a sales expenses held same ago. of percentage However, we the a points quarter decrease price insurance an year compared Restaurant restaurant currently by period. to equal. of per was else and a and

operating percentage a points Smart year-over-year added XX of now to of to held basis improved sequentially basically that Safes security, the majority period. compared expenses efficiencies, pressure QX expenses. in XXXX. collection labor initiative has from We also sales and cash to our our year as Overall, but provide this administrative have constant and locations General for QX greater of the by prior faster margin

write-down diluted was period, share. Free in $X.XX the $XX.X quarter goodwill year other source Popeyes elimination The to payment a transaction the was million the $X.X of second second the includes a loss adjusted restaurants last the of basis, non-operating $X.X The cash interest million senior this for period. year $X.X X-month to impairment we $X.X in compared year's On the prior was our of diluted net quarter charge the the a the adjusted tax XXXX. as certain was million earnings to share. Our their per of acquisition June excluding quarter. related per the flow reflects same and $XX.X on in of net primarily per was million items, prior net of net charge noncash time notes $X.XX due second reduced diluted a or the impairment The the issued second adjusted million In $XX,XXX $XX.X in in and second income $X.XX to an loss an $X.X million or or at million year to loss of net of period Cambridge greater assigned relative year the or of part in to outflow quarter prior May before charge $X.XX compared per quarter second diluted in million. share share use XXXX period. loss

be finance $X.X drawn We payment and We liabilities third year. the generation ended cash and million $XXX.X seasonally to including with the $X.X of certain bond expect beneficial the current back flow the cash absence million that of lease There the letters of borrowings of million will free attributes the in capital long-term of debt, working equivalents the interest and was cash $XX of in million. quarter second strong and XXXX down the quarter of quarter and our portion credit of half balance the issued had balance at the and free significant adjusted credit working XXXX. $XXX we the September. revolver cash of We believe of facility to third quarter, to at flow under currently will end coupled end $XXX.X unused of the cash generated favorable portion the us million cash EBITDA including with credit of deploy revolving second facility of end revolving million capital pay quarter, during enable a our the by of

balance the end borrow. than with capacity and revolver. quarter ratio our at a our we are that our utilize in or is As credit our compliance or required to secured to available senior $XXX.X quarter leverage under available is with be restricted senior million no in covenant at of threshold limitation more $XX to million of reminder, borrow currently our the requirement with covenants below had to any million used XX% under order We our -- one revolver the facility. to were the due in senior ability being end Only consequently $XX of not

that rise our We for the require future secured our will leverage that borrowings foreseeable ratio. of revolver to not would levels senior measurement expect

being and late renewed require purchases focus deployed This reduction We and as expenditures in remodeling projects. $XX by our capital Capital was restaurants as be approximately a are annual that reduced in needs began for ROI for XXXX $XX equipment in projects a completing expenditures on XXXX. net now forecasting for from million is high critical for well level XXXX. maintenance XXXX will million, driven that

revolver of the year, includes restaurants our balances will being being or on new Any open six borrowings, XXXX. in cash Our have B the Term that utilized is Loan generated clear began and mandatory to business a obtain of construction view repay we four Burger making amortization the our payments environment. until building capital during remaining time CapEx also for which King plan

We levels, that, business trends us given capital open being these sales leverage to that are more and are well. reduced strong position the are Commodities space stabilizing, the our the We and uncertainties. disciplined questions. result performing And our lines seeing labor let's go believe as will an of improving operator, operationally. our better restaurant for executing is tightly operate managed, coupled in are picture affords which, and ahead with allocation with ongoing liquidity we

[Operator Instructions] Our line first Truist Jake Securities. question of comes from Bartlett the with

I your on just little COGS. for want with out a detail to a more clarification, maybe start outlook

the XXXX you your mentioned RSI lowered what. but didn't that say projection, You to

of So the an to deceleration you we your do we the give so back for idea year, half? the What about had for in year. inflation in expectation can XX% expect half first full commodity as the

Tony. that fourth we'll we're go low going of back that for QX We're as year. QX progresses, levels to we the is was to to and quarter. sort expecting This And year the then teens, see in mid-teens the the highest think low

inflation like commodities peaked. sort at beginning we So right was it's look source the though thing. as of at happened interesting was the to and year, you fell this you we inflation most higher thought phenomenon going back -- period, if we than We 'XXs really sort of show right And that of soybean, -- after see it's it's in now. the commodities can at on are corn, to the lap wheat, least back trending even it direction you charts if dramatically that commodities, trending, what during look they be, that

are is basket heading going pork, know encouraged always a in different. -- direction, So do one are it's in all time good direction. we right it's But to commodities in of this everything the sure It's really, that's except our moving -- looks which around. else the for we that for we like if happens don't be what

on just COGS then question. And lastly Great. that

the help the fourth expect the For pricing and quarter, you're in third just more, taking of level pricing year-over-year -- us maybe fourth understand in third you some the quarter? the absolute what what and

landed on price the a look do what other increases, yet. at. haven't what We're stores we competition We on King We levels when is what it. we number in carefully at DMAs, they're -- working our the Burger doing,

-- to for we're still don't not just of It's want be So be going to be it's going strategic think type sure, strategic. think blanket the going not there's we just where a we very increase, get to but competition. it's we ahead to opportunity,

bigger maybe then in income question, Kings' I a from if that's to and you and your environment. during than QSR Burger Paulo, true of now one of perception, would the just a lower Maybe value Burger slightly Hamburger kind a the the consumer brand positioned whole. Great. confirm versus as helpful. probably perception picture that think commentary platform Any recession, how really believe that can more there last somewhat perspective? And is be just exposure King has positioning this it's I maybe is

Hi, Jack.

Burger in areas, So the of coming are comments, of how period number sort partnering a as approach across I mentioned various on working we King marketing and including with the initiatives we and and value.

that right well is think is and I placed. there the that in the work direction that's ongoing the moving brand

well value placed economic that such the lead do think well and the looking consumers where a the will appeals the are, I fit As conditions that that in environment. initiatives it if of brand menu is point that for that's are architecture to coming to that is us and consumers where that are

terms simplicity. the sandwich, for Crispy benefit Great. and how And margins to in been change I and a be testing handful on impact on switching quickly. King impact Royal in that Crispy King, the kind the sales probably -- would a switching of make biggest half out of real would Chicken the test One an King operational material the that one out I in last markets. I you're is, you've sandwich? Chicken year? Burger understand to your of back feedback question markets Royal your And believe for margins cost, this in But the any the of then of think that

King is different and innovation -- testing constantly just -- working think I menu general so a on on as comment, Look, Burger products.

mentioned, this you so that is, test And as has a run.

make terms help that we we'll how that brand as have is in and announcement are see soon looking we may in that go. what half back positively, But pipeline, direction think of few tested of changes the think I develop. the terms will in they The in us to the will products any an next of year. the weeks the

of line the Bank from Mary comes question of next with Gresla Our America.

inflation acceleration? in you mentioned you that commodities first, commodity on which Can touch accelerated beef but drove just inflation the overall So quarter. decelerated

was -- ones all was were had across we ones board, X/X if The the And the to headwinds it beef -- out add increase all chicken potatoes, it was Really, shortening, basket. beef be. the commodity but biggest of Mary. cheese the turned other from you was what -- up

So inflation that's QX. why overall went to up number the QX from

And the on of or delaying a it. result reduction? CapEx are as then going that you Got for reduction, what projects

progressed remodeling less some the that as really perspective. sense from the in restaurants current costs, It's we've ROI projects the an input given year made

we're really BK of last just to doing environment, about been this given we're higher opening encouraging. rest remodels for six is opening. very even remodel super restaurants year. folks high But the think on year. started inflationary King, in for remodeling that last related the we started the seen the constant six Popeyes restaurants one We're communication But we're we're Honestly, those for Again, And the with in environment? we've completing I So on that current started the cautious year. four ROIs being and have ROI. just Burger we the focused this

the quarter will in your expect driving it. lastly, favorable repay working revolver? will third that just on you to be Got allow what touch And you that you will capital

Well, is -- the our our two the notes of end our coupon the payments two on I made guess, annual biggest -- quarter. thing most by we've second semiannual Sure. that

QX or So we QX. don't in number have million $X.X that

vendors from mainly third come quarter. one helps. some and So second of they our in that we is And get the rebates the

of if -- positive is capital in periods back generally that. we you look because quarter show third working that So

-- just but the capital sorry. August, a it's So working the twice didn't say year, standpoint, big April, April. in from statement, come meant payment But year. I evenly income mean they're in to the a spread I during is they

of question next Fred Whiteman with from Wolfe comes Our the Research. line

just sort if I back It like of you and it we looks momentum. three-year line on quarter. go look wanted comps top the as to on at through the decelerated moved the touch trend,

So of the that of you just a, can sort think noticing? b, and Or Is on, the behavior you touch of case driving is dynamics? that's that? is sort just what if in sort it a broader consumer it change industry-type you're

think like on we July. I first and comp, a actually we quarter. the continued don't and a feel we they that, for at we saw X-year mid-single June, once during quarter. the May digit then numbers And -- I once a improved comp on and decelerated stimulus -- were the they lapping -- then past least during lapping talk because type that I that were think we into we April, were in we lap saw the

So see I on check which on is most loss. X-year average the comp much in pretty a traffic driven we the by in it's -- some But single digits the during made up the we third a mostly deterioration offset didn't quarter quarter. we're by basis, any X-year think basis, on X-year higher high

more just coupon that there's or touch on usage understand But of I guess previously. ramifications. divergence the would as been uptick other can sort cohorts it across you're income the not you dilutive coupon made the where Maybe of a just higher on most if sort sort big I the geographies seeing you have margin comment of Okay. side? where or as that it's usage. you're guys on on seeing

it's they're very I've not still much board. number pretty think Burger the income of are there regionally getting think offers that that. I We to board. think King anything across focused traction. has coupons, good strong. the on I think but like the whether it's the that don't I coupons, ones have any significantly the response I focused across seen reduced it's or And the or group on paper out are or just digital been pretty

look the improving Do as And September would people like brand-specific? be want bringing feel of brand Fair. is I the of sort Carrols in you Okay. feel the view leverage to of some relative in announcement terms evaluate franchisee at you specific guess like of the BK Paolo. the this turnover then cohort? how to forward, of specific here the of catalyst? and going business? you Do of versus bigger What lower-performing for are you sort more maybe up convention importance you that do sort company

improving convention that work year. mentioned business think I the Carrols King there benefiting around we at Burger think I and continuing mentioned. a latter the certainly cost focused you combine we the operating brand, the do to that specific, brand as we'll that doing From we're that areas of operations, -- going the the shortly all will for I the that in leverage that us forward. part are three restaurants, on that provide those is moderating, improve will it provide I thing lifting bottom is help announce headwinds see will us. momentum the then the And September, three, are the think in when which performing

Our of with Jeremy Group. from Craig-Hallum question comes Hamblin the Capital next line

I think here. a beef like a to if minute So the that about maybe we get terms a are in just as to a X of the co-op better tick to it QX too coming that. it's QX expectations a can thinking get but $X.XX where down get week, to if here from could it at overall, maybe wanted far, a you in again it's sounds I And see slight to be we and QX if for to down about mid-XXs mean, to range. then down clarification back wanted in prices XX.X% are the we in I a there. for pound in to in forecast, had $X.XX you on And tracking XXX based a by this then then there And is sense down look wanted QX. come bit going in on pound. looking they're might costs at the what food be or that

to second in a to agree percentage answer the level now. the XXX your the to we is like question $XXX $XXX The progresses. the level, So $XXX, answer COGS right first expect track down assessment as to sales question we year on of right more it mark million where And are is your with as your is on QX.

nice increases hourly labor, there in a the you pretty year? And year. you're can price percent high it. a to here. labor of menu made Got Do carrying more of mid-single-digit second And the expected efficient, making for some think single-digit then you've you're wage you position back a thinking be in year-over-year in flat in where you sales it progress said that I here, quite lever as about slightly of or the like feel the half half of bit

the with at the or have shortages regional and staffing cope focus on that a are like more staffing of continues that absolute we to sales, still not of managers big restaurant like to other that going we've have as mean I I and deal district COVID that think on. will we mean, do how managers depend anymore, obviously, learned but area sort have anything because restaurants. from the spending optimize but I how on repercussions with the labor managers

restaurants. of terms is, on lot the The eliminating way members per in pre-COVID team of progress pay back XX, day we're eliminating seeing our overtime, per at and to biggest change that we've the we So I made was pre-COVID, world premium think store. getting a XX were staffing

And but as During to back down think, XX%. low like call, of like XX%. to our it as was at we're went I XX%, now as last obviously COVID

staffing XX% So I this think is to the stay post probably going COVID at level.

I hit of think that the running the with comfortable we've operators in number the are stores. terms

So in disciplined -- that and more doing they're basis. a

so thing. hours, with peak all they're staffing really just the and the they during -- are but better they're hours they're and just covering -- -- the sort that So increasing more and straight it they're of hours, doing eliminating time

get we another the it were improved it's the again, quarter, we much was. sort of So of still better adjusting normalization flow staffing. -- team than they in first that the And post quality -- really members from to scrambling we we're to select COVID can has applicant sort and of now is because

we're just lower go the just run way was going pre-COVID a it trying to back to with to we're back to -- requirement stores. So the staffing

week. Just focus discipline very and restaurant our to labor and a at throughout that ensuring demand -- restaurant-by-restaurant to restaurant level our a throughout by is tightly of we comments, at reinforce Anthony's lot the the day aligned have a

that for are we pre-COVID obviously so much existed us That a discipline. at that's focus and very Carrols now. returning And to

Got it.

little In the terms they quarter? tougher compares a Do here? of same-store the the for from get ease sales here bit performance July, remainder do mid-single-digit in in the of

we year the because a were increases traffic. went on your off we tougher those traffic get that's some we're August to component price had quarter of Day, that answers that as yang progresses. I should last of away the we bit what roll and last the that question, the the the when I we we -- little through kind thinking last Labor easier are of year, about. but are think I comps lap yin year because aggressive the don't and know believe those some in fairly think gets as if and sizable had so pretty July ease But going promotions that

about last in QX Yes. XXXX. I the absolute downtick impact a you compares in guys And easier which talking of were of the significant because had was the absolute I an from lapping you just -- a was much the year, half comp on COVID year mean, X.X% when basis. first pretty

of digit absolute a was August and they of 'XX. context compares get of just or and on those to -- kind sense forward July, in August not how that on in the what mid-single I were basis comps what going or you were trying whether relative in have in July September, So September than better worse a and the

better Because of last these year. They Promotions. were

All Okay. right.

So a little compares. tougher

there. then seeing getting for Okay. is just And a thing you're what out last sense

of reduced promotions types items competition, cetera? from obviously, of are -- what out you promos, types from are seeing that Are your or et rampant there you're you you You've bundling, promoted to the everywhere. inflation seeing competitive what seeing changes seeing the changes pretty

the landscape. remains looking a what does from from and certainly the far, competition country. stay a our offers -- it's in line any we've the plays industry -- at it's much much promotions on in pull mentioned of eye terms of Yes. we promotions there close on the then has competitive competition very the are a brand -- keep to of to we competition on pricing out to done think with standpoint, back Look, how discounts that in market-by-market also pinpoint and and we competitive that. what's so there this basis. we been specifics. are And well, brand environment earlier, stay like very And and do the a as we we're sure mean, We -- because been aware specifics. very environment into out hard sort competitive mostly pinpoint -- around any able closely I making I very But

that's so far, benefit. And

think I sort offerings. of the that of major is and value similar thing way competitors meal, meal the the very have have year one value our we type -- have competitors each -- one a the

across movement any that. one -- have So those, near-term long of that as I is on and we of have but disciplined staying think change promotion pretty discounts where industry don't I we as one right the that's on of everyone are as sort we think sort of now can. now those, see because But right they they could

the half of in luck second Good year. the

from Bartlett line the Truist comes Jake with Securities. of next Our question

going thing. leverage you forward. clarify prepared to expected want one the just in Paolo, I mentioned operating remarks, your

that level think was going operating leverage restaurant I forward. margin for

I So you clear that starting make third loud the expect margins and that is expand year-over-year messages quarter. want to to just level in the sure restaurant

as and moderate. It I to Yes, forward we referring as going level operating expand was cost headwinds sales leverage -- restaurant is.

just in that here? level figure Or to is second of operating this the kind first it should seasonal. would But the just like And there that, within forward? is labor or in from week I costs per still overtime look labor some versus it at up that's spiked And I Great. looks the then quarter, trending. think out how -- really that's spending moderate outsized meaning kind of I'm of continue that wondering, training quarter, in per week a operating going any

and sort that still still operationally and quarter, in to premium to managed the taken our some pay, increases some managers, in nothing. were almost increases we've was There overtime pay and pay, lapping managers our we third we gave of over lapse not some lapping, premium down

think I two in those So beneficial things be QX. would

be maybe initiatives it these underperforming the Is half And already mentioned beyond? some on think Okay. just that, initiatives. that and has stores wondering you to do that a When -- mentioned lastly, or new should of XXXX story? about 'XX really and material then focusing you've probably productivity material is begun, back you or of I'm but margins. has Is what there. that and opportunity more

the we'll of that really of gains more initiatives end we and seeing think XXXX I benefit I what have think, the year, see the that terms hold as the into couple begin look, back stabilized last these we've we'll go deployed some we benefit. I -- momentum and see we of are as initiatives that the started into to environment think benefit. the take months, of in operating But we've of increasing over

Okay.

to But years? going this before part a that Burger talk of to be you're is just incentive impression come. you King is probably you something co-investment to Burger for the remodel us the or In about remodeled not where tell maybe in but and going that's do King? enter more. something one brand case, guess be program few are comprehensive able But the to really is Or maybe turnaround we announcement that to -- sorry, later. you'll that I And our RBI, is by scenario want see yet from -- you a the some next

we'll ROI too announcement. doing we on That's are is going and to that. make prioritizing forward with think it's be high and doing, Burger we'll our we're projects. spend early what comments be King King's on working What prior Burger our I doing, to focus,

and capital. generalize to high see we opportunity that's spend, as ROI remodels other through so we'll capital focus And our where

bang for ROI higher of to money that when And because whole and doing going them by to spending shifted we've want folks about because had make -- with mindset high is helps on from a it franchise of that agreement remodel we're buck this. us which remodel up because your to want just where emphasize the Burger sure I a you're the the most to Miami on helps it get made in projects. we've lot discussion the King I obviously, has -- royalties

in the the evolved pre that's has been pretty happen I of that's a whole beginning is in to So going think September over something already even since whatever dramatic change that year. last -- philosophy change this

that's will going our So to forward. in where important in I be think activity of focused terms keep mind

to Mr. we end like Paulo of the back gentlemen, and this call question-and-answer session. I have remarks. turn over Ladies today's Pena reached to would for closing

us Thank your joining you for morning questions. again this you, and for operator. Thank

about now goal and already for our blocking become more just appropriate the positive more and we months. about in on over improved the I Now of four appreciate better seasoned role operating within we signs The what tackling, Carrols strong seeing new this I optimistic can across and the and been are to organization, accomplish. right basic a this future have I've we that learn I leaders path. current implement operating the is organization version environment. immediate for I'm My our and

the we that we meaningfully and our our restaurant do and margins I in combined, earnings are our from parallel, plan partnership portfolio. with long-term will mentioned, we we franchisor. generate developing these improve believe that strategic As efforts

We All we're and long-term quarter. meaningful look confident generate to in time, seek highly your speaking of shareholders. for as appreciate on next the you this we with that to me our future. makes I our like I trajectory value forward

This today's conference. concludes

at your You may time. enjoy the this rest day. your of lines you your participation, for Thank disconnect