Allison Arfstrom

Allison Arfstrom inquired about the performance of IHOP's expanded value menu on weekends and its reception among franchisees.

Answer

CEO John Peyton directed the question to President of IHOP Lawrence Kim, who confirmed that the IHOP Value Menu, expanded to seven days a week, maintained weekend incidents at approximately 10% of total checks. He noted strong partnership with franchisees, prior testing in key markets, and continued momentum, with the program extending throughout 2026, driving traffic.

Allison Arfstrom inquired about the cadence of R&D and SG&A step-ups for 2026, the path toward sustained cash flow positivity, and whether the existing commercial infrastructure is sufficient to achieve the $1 billion IBSRELA target by 2029.

Answer

CFO Sue Hohenleitner explained that OpEx will increase by 25% to fuel growth, focusing on proven, high-ROI programs, and noted two consecutive quarters of positive cash flow. CEO Mike Raab and Chief Commercial Officer Eric Foster discussed optimizing and expanding the commercial team, including new ABD roles and doubling the field reimbursement team, alongside increased patient-focused digital marketing.

Allison Arfstrom from Piper Sandler Companies asked CFO Sue Hohenleitner for more color on the cadence of R&D and SG&A step-ups for 2026 and the path toward sustained cash flow positivity. She also questioned whether the existing commercial infrastructure is sufficient for hitting the longer-term $1 billion IBSRELA guidance by 2029, or if incremental investments are anticipated.

Answer

CFO Sue Hohenleitner stated that OpEx would increase by approximately 25% year-over-year, less than the top-line growth, with investments focused on proven, high-ROI programs for commercial growth and pipeline advancement. CEO Mike Raab and CCO Eric Foster confirmed ongoing optimization and expansion of the sales force (adding 15-20 ABD roles), doubling the field reimbursement team, and increasing patient-focused digital marketing to support both near-term and long-term IBSRELA growth, including future CIC opportunities.

Speaking for Brian Mullan, Allison Arfstrom asked for an update on management's confidence in expanding both company and franchise margins, a topic from the previous call, in light of the current challenging environment.

Answer

CFO Robert Verostek reaffirmed his confidence in achieving the long-term margin targets of mid-teens for Denny's and upper-teens for mature Keke's. However, he acknowledged that the current economic volatility has likely delayed the timing for reaching these goals, though the ultimate potential remains unchanged.

Allison Arfstrom, on for Brian Mullan, asked about the outlook for restaurant-level margins in the upcoming fiscal year, including potential headwinds and tailwinds to consider following the 20.9% margin reported in the quarter.

Answer

CEO Hajime Uba, speaking through interpreter Benjamin Porten, reiterated that while the company does not provide specific margin guidance, a primary goal is to maintain full-year restaurant-level operating profit margins above 20%. He expressed confidence in achieving this again in fiscal 2025, especially given the cost-saving measures implemented to navigate the previous year's sales headwinds.