Jon Tower

Jon Tower inquired about Sweetgreen's comparable sales guidance for 2026, specifically regarding pricing strategy, the anticipated timing and impact of wraps if launched, and other potential top-line drivers. He also asked about the building blocks for restoring restaurant margins to high teens/low 20s, including specific cost levers planned for 2026.

Answer

CFO Jamie McConnell stated that the company expects 2026 comparable sales to decline between -4% and -2%, with a cautious approach to pricing given the consumer backdrop. She highlighted operational inefficiencies and supply chain optimization as key margin levers. Co-founder and CEO Jonathan Neman added that improved head coach stability and reduced turnover would also contribute to higher margins.

Jon Tower asked about Sweetgreen's comparable sales guidance, future pricing strategy, and the key drivers for restoring restaurant-level margins to the high teens or low 20s.

Answer

CFO Jamie McConnell outlined a comp guidance of -4% to -2%, noting a choppy start to the year but optimism for wraps launching in Q2. She indicated a cautious approach to pricing given the consumer environment. For margin improvement, Jamie McConnell highlighted sales leverage, operational efficiencies like optimizing ordering systems and supply chain streamlining. CEO Jonathan Neman added that stable head coaches and reduced turnover also contribute to higher productivity and margins.

Jon Tower from Citigroup inquired about the drivers behind the year-over-year improvement in labor costs per store week and asked if other markets beyond New York City were being considered for store closures.

Answer

CFO Mitch Reback attributed the labor improvements to effective workforce management, lower team member turnover, and record-high head coach stability, stating he anticipates further gains. He clarified that the NYC closures were strategic relocations of older, smaller-footprint stores with expiring leases, not a sign of market trouble, and that only a handful of similar opportunities might exist in other mature urban centers.

Jon Tower from Citigroup inquired about the total cost impact of tariffs on new restaurant build-outs, including the Infinite Kitchen, and asked about the strategy and communication plan for introducing lower-priced menu items to attract value-conscious guests.

Answer

CFO Mitch Reback clarified that tariffs would add approximately $150,000 to a standard $1.5 million build-out and $100,000 to a $500,000 Infinite Kitchen, a total impact of just over 10%. CEO Jonathan Neman added that they have pre-purchased materials to mitigate the 2025 impact and are working on cost optimization. Regarding value offerings, Neman explained they would introduce items through seasonal menus and core offerings to fill price gaps, rather than a "value menu," and leverage the new loyalty program for targeted promotions.

Jon Tower from Piper Sandler inquired about the specifics of Sweetgreen's 2025 marketing and media strategy changes and their expected financial impact on the P&L.

Answer

CEO Jonathan Neman explained that a key learning from 2024 was the importance of newness, leading to a strategy of creating a 'drumbeat' of new menu launches, including seasonal items, chef collaborations, and fries. This will be supported by a full-funnel marketing approach, with capital being shifted from G&A to marketing. CFO Mitch Reback added that the increased marketing spend will primarily occur from Q2 through the end of the year.

Jon Tower inquired about same-store sales trends throughout Q3 and into Q4-to-date, and asked for an update on the company's evolving marketing strategy, including tests of new channels to drive traffic and brand awareness.

Answer

CFO Mitch Reback stated that September was the strongest month of Q3 and that the momentum continued into October, with comps tracking within the updated 6-7% guidance. CEO Jonathan Neman added that the marketing strategy has shifted to a full-funnel approach, with a focus on local and community marketing, and highlighted the upcoming 2025 loyalty program as a key lever.

Jon Tower asked about the factors driving the strong late-night business, whether off-premise sales contribute to this strength, the potential for late-night average unit volume recovery, and the key design and cost features of the new restaurant prototype planned for 2026 openings.

Answer

President and CEO Lyle Tick attributed late-night growth to a great environment, a good happy hour offer, and potentially less late-night supply in the market, noting no specific unique marketing push. CFO Todd Wilson clarified that the strength is primarily in the dine-in business, with off-premise seeing declines. Tick stated that the new prototype will be a familiar but contemporized expression of the brand, leveraging evolved branding elements and craft brew heritage nods. He emphasized a "right size, right cost, right place" approach, targeting mid-teens or better IRRs, with flexibility for different footprints and conversions to achieve desired returns.

Jon Tower from Citi inquired about the drivers behind BJ's Restaurants' strong late-night business, whether specific initiatives are in place, and if this strength includes off-premise sales. He also asked about the potential for late-night average weekly sales to recover to peak levels and details on the new restaurant prototype, including design, square footage flexibility, and target IRRs.

Answer

President and CEO Lyle Tick attributed late-night strength to a great environment, a good happy hour offer, and potentially reduced market supply, rather than unique marketing pushes. CFO Todd Wilson clarified that the strength is primarily in the dine-in business, with off-premise sales declining. Tick did not have specific pre-COVID late-night AUVs but noted continued Q1 2026 strength. Regarding the new prototype, Tick described it as a contemporized yet familiar brand expression, with flexible footprints ("right size, right cost, right place") for various market needs, including conversions and different square footages. The goal is to achieve attractive IRRs, targeting mid-teens or better.

Jon Tower from Citigroup asked for details on the Pizookie Meal Deal's sales mix, customer trade-up behavior, the expected economic impact of the activity-based labor model, and the competitive landscape in key markets.

Answer

CEO & President Lyle Tick stated the Pizookie Meal Deal mixes at approximately 15% of total weekly sales and 22% during weekdays, with healthy checks in the high $40s. He emphasized that these guests return more frequently and often become high-value omnichannel customers. On the labor model, Tick clarified its primary goal is improving hospitality and sales, with labor efficiency being a secondary benefit. He also noted seeing no significant changes in restaurant closures or openings in their key markets.

Jon Tower of Citigroup inquired about menu optimization around core pillars, the future marketing spend strategy, and the performance of the off-premise business.

Answer

President Lyle Tick explained the menu strategy involves a category-by-category approach to eliminate the long tail of low-margin items, citing a reduction of three Pizookie SKUs as an example. On marketing, he stated there are no plans for material changes in spend, with a continued focus on targeted, narrowcast media and social listening. Regarding off-premise, CFO Tom Houdek noted it trended slightly better than the overall business, driven by third-party delivery, while Tick acknowledged there is still significant opportunity to reduce friction and optimize merchandising for that channel.

Jon Tower with Citi Group inquired about the operational improvements and back-of-house benefits, such as reduced SKUs and prep time, expected from the new core menu enhancement. He also asked about the anticipated impact of tax refunds on First Watch's business, considering their customer demographic.

Answer

CEO Chris Tomasso stated that while the new menu offers some back-of-house efficiencies like reduced prep time and single-use SKUs, its primary focus is on consumer appeal and bringing back popular items. CFO Mel Hope noted that historically, First Watch's higher household income customer demographic doesn't typically react significantly to tax refunds in terms of restaurant attendance, making them less impacted by windfalls or refunds compared to quick-service restaurants.

Jon Tower asked about the operational improvements derived from the new core menu and how First Watch considers the impact of tax refunds on its business.

Answer

Chris Tomasso, CEO and President, stated that the new core menu redesign offers some back-of-house efficiencies, such as reduced prep time and elimination of single-use SKUs, but its primary focus is consumer appeal. Mel Hope, Chief Financial Officer, explained that First Watch's customer demographic, which skews higher in household income, typically makes them less reactive to tax refunds compared to quick-service restaurants.

Jon Tower from Citigroup followed up on marketing spend, asking if it was driving frequency from existing customers or attracting new ones, and across which channels. He also questioned the long-term outlook for the mix of second-generation sites in the development pipeline, asking if the current 40% rate would persist or grow.

Answer

President & CEO Chris Tomasso indicated it was too soon to determine the exact impact on visit frequency but noted the company is getting 'first calls' on newly available high-quality sites, suggesting the trend will continue for the next few years. CFO Mel Hope added that the company has become very proficient at converting these larger, second-generation spaces quickly and profitably, which supports their development strategy.

Jon Tower of Citi inquired about any early improvements in consumer value scores, sought clarity on labor cost drivers beyond inflation, and asked for the specific source of the new tariff pressures.

Answer

CFO Mel Hope stated it was too early to analyze consumer value scores but noted that higher labor costs are partly due to carrying extra managers to support rapid new unit growth. Hope also clarified that the tariff pressures relate primarily to supplies from Asia, such as packaging and paper goods.

Jon Tower from Citigroup questioned if the current marketing spend is sufficient for the brand's growth goals, asked for quantification of the drag from third-party delivery, and sought reasons for the outperformance of new restaurants versus underwriting.

Answer

CEO Chris Tomasso stated that marketing spend is evaluated for efficiency, not as a fixed ratio, and is under review for 2025. CFO Mel Hope quantified the third-party traffic decline as mid-teens. Tomasso attributed new unit outperformance to improved site selection, restaurant design, and operational execution, leading to significantly higher AUVs.

Jon Tower asked about other menu opportunities beyond the recent beverage innovations like mocktails, dirty sodas, and the $5 all-day special, specifically if there are underperforming items or new ideas from operators being considered.

Answer

Jerry Morgan, CEO, noted the popularity of mocktails, dirty sodas, and the $5 all-day beer and margarita special. On the food side, he mentioned constantly looking at innovative ideas with operators, testing different menu items, smothers, or sidekicks. He added that few items underperform enough to be replaced, and new additions would need to be 'superstars.'

Jon Tower asked Jerry Morgan if there are any other menu opportunities beyond beverages (mocktails, dirty sodas, $5 specials) that the company is currently focusing on, either new items or underperforming existing ones, based on internal expectations or operator feedback.

Answer

Jerry Morgan (CEO) confirmed that mocktails and dirty sodas are popular, and the $5 margarita has been very popular. On the food side, he stated they are always looking at innovative ideas, testing different menu items, add-ons (smothers, Sidekicks), and constantly monitoring them for potential regional or nationwide impact. He noted that few items underperform to the point of replacement, so new additions would need to be 'superstars.'

Jon Tower of Citigroup Inc. sought clarification on whether restaurant relocations are counted in the 2025 opening guidance and asked how the company maintains consumer mindshare without using traditional media advertising.

Answer

CFO David Monroe confirmed that the nine planned relocations are not included in the 30 new company-owned restaurant openings for 2025. CEO Gerald Morgan explained their marketing strategy relies on local store marketing, early dine features, Wild West Wednesday promotions, and a $5 all-day everyday drink menu, including mocktails, to drive value and stay top-of-mind.

Jon Tower from Citigroup asked for details on the drivers of the 4-5% labor inflation outlook for 2025, beyond the mandated increases. He also inquired about the higher CapEx guidance and the performance of the Bun and Butter retail rollout.

Answer

Executive Michael Bailen attributed the additional labor inflation to underlying wage pressure, performance-based rewards, and the impact of acquiring stores in California. CFO David Monroe explained the higher CapEx is for store maintenance and value-adding investments like kitchen expansions. CEO Gerald Morgan noted the retail rollout is exceeding early expectations and driving brand awareness.

Jon Tower asked about potential accounting headwinds from Wingstop's loyalty program implementation and whether the Wingstop Smart Kitchen's impact on lunch daypart traffic has influenced the overall product mix.

Answer

SVP and CFO Alex Kaleida confirmed no material accounting headwinds for the loyalty program, expecting it to be margin accretive by focusing on rewards over discounting. President and CEO Michael Skipworth stated there was no significant impact on product mix from increased lunch traffic in Wingstop Smart Kitchen-enabled restaurants, only strength in that daypart.

Jon Tower asked if Wingstop is embedding any accounting headwinds related to the implementation of its loyalty program. He also inquired if the Smart Kitchen's impact on consumers pivoting to lunch has resulted in any changes to the overall mix.

Answer

SVP and CFO Alex Kaleida stated that there are no material accounting headwinds anticipated for the loyalty program, noting that it is designed to be margin accretive over time through rewards for merch and experiences, rather than heavy discounting. President and CEO Michael Skipworth confirmed no significant changes to the overall mix, but reiterated that restaurants consistently delivering on the 10-minute speed expectation are seeing strength in the lunch daypart.

Jon Tower asked about the development side, specifically if Dutch Bros is experiencing any pressures on site availability or cost increases for new locations due to increased competition from large coffee players and smaller growing chains in their markets.

Answer

Christine Barone, CEO and President, stated that Dutch Bros is not observing pressures on site availability or increasing build costs. She noted great real estate availability and that Dutch Bros is an attractive tenant. Barone also highlighted that the shift to build-to-suit leases has successfully reduced their CapEx per shop from $1.8 million in Q4 2024 to $1.3 million in Q4 2025.

Jon Tower asked about potential development-side pressures, specifically concerning site availability and rising costs for new locations due to increased competition from large and smaller growing coffee chains entering Dutch Bros' markets.

Answer

Christine Barone, CEO and President, stated that Dutch Bros is not experiencing pressures on site availability or rising build costs, noting great real estate availability and their attractiveness as a tenant. She highlighted that the shift to build-to-suit leases has significantly lowered CapEx per shop from $1.8 million in Q4 2024 to $1.3 million in Q4 2025.

Jon Tower (Citi) inquired about McDonald's strategy regarding GLP-1 adoption in the U.S., how the company is thinking about menu adjustments to address shifts in consumption, and whether operators are asking for guidance on this trend.

Answer

Chairman and CEO Chris Kempczinski confirmed close attention to GLP-1, noting no material business impact yet but anticipating growing adoption and behavioral changes (fewer calories, different mix). He highlighted protein as a strength for McDonald's and mentioned experimenting with menu items to address less snacking and reduced sugary drink consumption. Executive Vice President and President of International Operated Markets Jill McDonald added that McDonald's has a history of adapting its menu, is already protein-forward, and will continue to learn from customers, with some longer-term ideas in development.

Jon Tower asked about McDonald's strategy regarding the anticipated increase in GLP-1 adoption, its potential impact on the menu, and whether operators are seeking guidance on this consumption shift.

Answer

Chairman and CEO Chris Kempczinski confirmed McDonald's is closely monitoring GLP-1 adoption, which has not yet materially impacted the business but is expected to grow. He noted that GLP-1 users generally consume fewer calories and shift their mix towards protein, an area where McDonald's has strong offerings. Changes in snacking and sugary drink consumption are also being observed and factored into menu experimentation and testing. Executive Vice President and President of International Operated Markets Jill McDonald added that McDonald's has a history of adapting its menu and already offers many protein-forward items, with plans to highlight these and explore longer-term ideas based on customer demand.

Jon Tower asked about the potential global expansion of the beverage platform (CosMc's-related offerings) and how the value-centric pricing strategy in the U.S. might translate or differ in international markets.

Answer

Chairman and CEO Chris Kempczinski confirmed that the U.S. beverage test will be replicated in some international markets, potentially with some differences. He clarified that beverages are seen as an exciting incremental opportunity to drive traffic and check-add, not primarily a value platform. The strategy involves competitive pricing relative to the competitive set to ensure value and drive margin, an approach that will be maintained in international tests.

Jon Tower asked about McDonald's plans to expand its beverage platform, derived from CosMc's, globally. He questioned whether the global approach would maintain the value-centric price point seen in the US test or if the platform would be positioned differently across international markets.

Answer

CEO Chris Kempczinski confirmed that the US beverage offerings will be tested in some international markets, potentially with some variations. He clarified that beverages represent an exciting incremental opportunity to drive traffic and increase check, with many benefits. He emphasized that for the platform to succeed, it needs to be priced at a competitive value, but it is not intended as a 'value platform' per se. Instead, it's designed to drive margin and check, with pricing mindful of the competitive set. He stated that the same approach will be taken in international tests, and global rollout beyond the US will depend on performance in those markets.

Jon Tower sought clarification on the back-half weighting of G&A spend and asked about the strategic positioning of the upcoming beverage test, specifically whether it's intended to be a value driver or a premium, full-margin offering.

Answer

EVP & CFO Ian Borden confirmed that G&A spend is typically weighted to the second half of the year, particularly in 2025 due to the timing of transformation and tech projects. Chairman & CEO Chris Kempczinski explained that while some beverages will always be part of the value menu, the larger opportunity is in full-margin products. He noted that learnings from CosMc's suggest they can offer compelling beverages that are priced attractively relative to competitors but still deliver strong margins for the system.

Jon Tower requested more details on the planned beverage test, including potential franchisee investments, market positioning, and the overall size of the opportunity.

Answer

CEO Christopher Kempczinski described beverages as a significant, profitable growth opportunity where McDonald's is under-indexed. He shared that learnings from the CosMc's test showed that operational complexity is manageable and that consumers expect food with any McDonald's-branded beverage offering. These insights are informing the new in-restaurant test, though the ultimate investment requirements are still being determined.

Jon Tower pointed out the lack of discussion on the beverage platform, particularly McCafé, and asked for an update on its strategic importance and growth opportunity, referencing its prominence at the late 2023 Investor Day.

Answer

CEO Christopher Kempczinski reaffirmed that the company remains very bullish on the high-growth, high-margin beverage category. He noted that learnings from the CosMc's test are ongoing, with smaller-format stores with drive-thrus showing better performance. The company is still evaluating whether to capture the opportunity through stand-alone concepts like CosMc's or by enhancing offerings within existing McDonald's restaurants.

Jon Tower asked about the outlook for store margins into 2025 given the value strategy, and inquired about the brand's pricing power in the current U.S. macro environment.

Answer

CFO Ian Borden expressed confidence in driving margin growth as sales momentum is restored, emphasizing that volume is the key driver. Regarding pricing, he noted consumer resistance and stated that future price increases would be at 'more conservative levels' until momentum fully returns. He also highlighted influencing mix with full-margin promotions as another way to achieve 'effective pricing'.

Jon Tower from Citi asked for details on Taco Bell's 2025 comp growth, specifically the contribution from traffic, distinguishing between increased guest frequency and new guest acquisition, and the demographic profile of these new guests, including higher-income consumers.

Answer

CEO Chris Turner highlighted Taco Bell U.S.'s strong same-store sales growth, outpacing the category by 5+ points, driven by transaction growth from both penetration and frequency. He noted transaction growth across all income bands, with the highest penetration growth in the 18-24 age range, and increased engagement from higher-income consumers and families.

Jon Tower asked for details on Taco Bell's comp growth in 2025, specifically the traffic contribution, the breakdown between increased guest frequency and new guests, and the demographics of new guests, particularly regarding higher income levels.

Answer

CEO Chris Turner reported healthy 2025 growth for Taco Bell U.S., with strong same-store sales and transaction growth significantly ahead of the category. He noted that transaction growth was driven by both penetration and frequency across all income bands, including higher-income consumers, younger guests (18-24 age range saw highest penetration growth), and families. Turner attributed this success to Taco Bell's culturally relevant brand, craveability, value, and convenient experience.

Jon Tower requested more detail on net unit growth, specifically the risk of missing the 5% target for the year, and how regional weaknesses and challenges for smaller franchisees might impact the 2025 development outlook.

Answer

CEO David Gibbs clarified that the risk to the 5% net unit growth target was minor, with projections landing in the 4.5% to 5.0% range, which would still round to 5%. He emphasized that closures were concentrated among lower-volume units and not a widespread issue. CFO Chris Turner added that approximately two-thirds of the deceleration in net new unit growth was tied to the Middle East conflict. He also noted that the closing units have an average unit volume of only 60% of the global average, minimizing the impact on system sales growth.

Jon Tower inquired about Brinker's strategy for store-level incentives for Chili's managers, current state versus optimal, and their alignment with the goal of achieving $6 million EUVs (Estimated Unit Volumes).

Answer

Kevin Hochman, CEO and President of Brinker International, discussed the company's goal of empowering managers to be true owners of the business, drawing insights from best-in-class competitors. He outlined the initial steps of training managers on a new P&L tool and 'extreme ownership' principles. Kevin indicated that while incentive structure changes are anticipated for directors first, manager incentives are 1-2 years out, pending further skill and capability development.

Jon Tower inquired if Brinker International is approaching the marketing of the new chicken sandwich lineup differently than previous product launches, such as '3 For Me' or burgers. He also asked about the strategy for store-level manager incentives, considering the goal of achieving $6 million AUVs across Chili's stores.

Answer

CEO Kevin Hochman stated that the marketing strategy will continue to emphasize unbeatable value and abundance, directly addressing consumer frustration with high pricing, as this approach has proven successful. Regarding manager incentives, Kevin noted they are studying best-in-class ownership models and are focused on training managers to be true business owners, including P&L understanding and 'extreme ownership' principles. Changes to the manager incentive structure are anticipated 1-2 years out, with potential earlier adjustments for directors and above.

Jon Tower asked about the initial draw of new guest cohorts to the brand (e.g., 3 for Me) and their subsequent purchase behavior, and inquired about any anticipated shifts in advertising spend for the balance of FY2026 after Q2's ramp-up.

Answer

Kevin Hochman, President and CEO of Brinker International, noted they lack transaction-level data for new guests' first baskets but confirmed 3 for Me and Triple Dipper guests are more valuable due to higher frequency. Mika Ware, EVP and CFO, reiterated that Q2 has the largest year-over-year advertising increase ($9M-$10M), with incremental spend in Q3 and flattish spend in Q4, consistent with previous expectations.

Jon Tower asked about how new guests are initially drawn to the brand, whether through 3 for Me or Triple Dipper, and their subsequent purchase behavior. He also inquired about any anticipated shifts in advertising spend for the balance of FY2026 after Q2's ramp-up.

Answer

CEO Kevin Hochman noted that 3 for Me and Triple Dipper guests are more valuable due to higher frequency, but they haven't yet analyzed the first basket of new guests. CFO Mika Ware reiterated that Q2 has the biggest year-over-year increase in Chili's advertising spend ($9-10 million), with incremental spend in Q3 and Q4 being closer to flattish.

Jon Tower from Citigroup asked for clarity on the outlook for depreciation expense in fiscal 2026 and requested more details on the 'north of six' initiatives aimed at high-volume restaurants.

Answer

CFO Mika Ware advised that backing out the recent accelerated depreciation provides a good dollar run-rate for fiscal 2026. CEO Kevin Hochman explained the 'north of six' initiative involves applying best practices from restaurants with over $6M AUVs to the rest of the system. This includes operational changes like staffing, scheduling, and increasing delivery frequency to improve throughput within the existing restaurant footprint.

Jon Tower asked for modeling guidance on fourth-quarter G&A and D&A, and also requested a breakdown of the impressive traffic growth between new, lapsed, or more frequent existing guests.

Answer

CFO Mika Ware guided that Q4 G&A and D&A, in absolute dollar terms, would be very similar to Q3. Regarding traffic, she explained that with growth over 20%, it is coming from all sources: all income levels, all age groups, new guests trying the brand, and existing guests returning more frequently.

Jon Tower of Citigroup questioned the long-term advertising strategy, asking if the company has reached a saturation point with traditional media and how the marketing mix might evolve. He also asked for performance details across different dayparts or weekdays versus weekends.

Answer

CEO Kevin Hochman stated that the current marketing mix is working exceptionally well, so there are no plans for a major shift in the allocation between channels like TV and social media in the near term. CFO Mika Ware added that what is most encouraging is the consistency of growth across all segments: every income level, demographic, daypart, and service mode is growing, reinforcing the sustainability of the turnaround.

Jon Tower inquired about the lighter portions menu rollout at Olive Garden, asking if media has been tested, the intention behind marketing it, and the trade-off with potential business pressure. He also asked if lighter portions would be available for first-party delivery guests and for color on the unit growth update, specifically which brands are driving it and if it's a pull forward from fiscal 2027.

Answer

CEO Rick Cardenas stated that Darden is not currently planning to market the lighter portions menu as it's performing well on the menu and driving frequency, with word-of-mouth expected to contribute. He confirmed that menu items are generally available for first-party delivery. Regarding unit growth, he noted that a couple of brands are driving the additional five units, and it's not necessarily a pull forward that will dampen next year's growth, as teams are actively securing sites faster.

Jon Tower inquired about Darden's strategy for the Olive Garden lighter portions menu, specifically if media has been tested, the intention behind marketing it, and the trade-off with potential negative mix. He also asked if these small plates would be available for 1P delivery and for an update on unit growth, including whether the increased openings are a pull-forward from fiscal 2027.

Answer

CEO Rick Cardenas stated there are no current plans to market the lighter portions menu, as it's performing well on its own and driving frequency, but plans could change. He confirmed that menu items are generally available for 1P delivery. Regarding unit growth, he attributed the increase to a couple of brands, noting it's not necessarily a pull-forward that would dampen next year's growth due to a strong development pipeline.

Jon Tower inquired about the cost impact of Darden's affordability pivot and the Uber Direct amplification on restaurant margins during the quarter. He also asked for more details on Olive Garden's delivery business, specifically the frequency of delivery guests compared to in-store diners, and any observed seasonality.

Answer

Raj Vennam, CFO, clarified that the affordability and Uber Direct initiatives were planned investments, and despite them, Olive Garden's segment profit margin remained strong. He estimated these two items had roughly a 20 basis point impact each on the margin percentage. Rick Cardenas, President and CEO, confirmed that delivery guests show higher frequency than in-dining guests, noted it's still early to assess seasonality, but observed that summer delivery orders did not fall off as typically expected.

Jon Tower asked about the cost impact of Darden's affordability pivot and UberDirect delivery amplification on restaurant margins during the quarter, and for more details on Olive Garden's delivery business, including guest frequency and seasonal usage patterns.

Answer

Raj Vennam, SVP & CFO, clarified that the affordability initiatives and delivery fees were planned investments, each impacting Olive Garden's segment profit margin by approximately 20 basis points, despite pricing below total inflation. Rick Cardenas, President, CEO & Director, reported that Olive Garden's delivery guests show higher frequency than in-dining guests, and while seasonality data is still early, summer delivery orders did not fall off as typically expected.

Jon Tower inquired about the drivers of recent sales improvements, questioning whether they stemmed from brand-specific initiatives or broader industry trends, and asked for an update on spending patterns of consumers in the $50,000 to $100,000 income bracket.

Answer

President and CEO Ricardo Cardenas stated he was pleased with the performance of Darden's brands, particularly Olive Garden and LongHorn, which contributed to the Q4 same-restaurant sales growth guidance of over 3%. He noted that while the $50k-$100k consumer segment is still growing, its growth has moderated. After adjusting for weather, the only income demographic with negative trends was the under-$50,000 group.

Jon Tower asked for an update on speed-of-service initiatives and the role of new technology, and also inquired about the use and cost-effectiveness of connected TV in marketing.

Answer

Executive Ricardo Cardenas confirmed gradual improvements in speed of service across all brands, which will be aided by the next-generation POS system. He also stated that Darden has been testing connected TV for years and finds it highly effective due to its targeting capabilities, making its cost comparable to linear TV when accounting for its effectiveness.

Jon Tower questioned Darden's plans for advertising the new Uber delivery option, specifically on the Uber Eats platform. He also asked if the Uber partnership is factored into fiscal 2025 guidance and whether the initiative to improve service speed would require significant new investments in technology or staffing.

Answer

President and CEO Rick Cardenas stated there are no plans to advertise on the Uber Eats platform itself. Instead, Darden will use marketing funds provided by Uber to drive traffic to its own websites and apps. He confirmed the Uber partnership is contemplated in the current guidance but will take time to build. Regarding service speed, Cardenas explained that improvements will be driven primarily by operational changes and leveraging their existing technology roadmap, and should not require major new capital or staffing investments.

Jon Tower asked about the plans for the convertible debt maturing later in the fiscal year.

Answer

Senior Vice President and CFO Craig Pommells stated that the plan is to pay the convertible debt maturing in June 2026 by drawing down on the revolver, noting that about half of the original convert has already been repaid during a refinancing a few months prior.

Jon Tower asked for clarification on the company's plans for the debt maturing later in the year, specifically the convertible debt.

Answer

Senior Vice President and CFO Craig Pommells stated that the plan is to pay the convertible debt maturing in June 2026 by drawing down on the revolver. He noted that about half of the original convertible debt was repaid during a refinancing a few months prior, and the company has sufficient capacity on the revolver to cover the remaining balance.

Jon Tower questioned the simultaneous occurrence of traffic declines and an uptick in loyalty program signups, asking if any internal store activities were driving increased program participation. He also sought clarification on the long-term baseline for maintenance CapEx, specifically whether $80 million-$90 million or the historical $125 million (inflation-adjusted) is a more appropriate figure. Finally, he asked for details on the tariff remediation measures, such as sourcing changes or pricing adjustments.

Answer

Julie Masino, President and CEO, confirmed that loyalty program signups are ahead of plan (400,000 QTD, 300,000 since August 19th) and not impacted by recent events, with no specific changes made in stores to boost participation. She highlighted the upcoming 'Front Porch Feedback' initiative for loyal guests. Craig Pommells, SVP and CFO, clarified that $125 million (inflation-adjusted) has been the historical base spend for maintenance and ongoing projects. He noted incremental investments in 2025-2026 to catch up on deferred maintenance and for technology, after which the $125 million (inflation-adjusted) is a good baseline. For tariffs, Craig explained that the $25 million incremental tariffs in fiscal 2026 are largely mitigated by vendor negotiations, assortment adjustments (not selling unprofitable items), pricing, country of origin changes, and a 10% reduction in retail SKU count. Julie Masino added that vendors partnered well in these efforts.

Jon Tower questioned the apparent contradiction between recent traffic declines and a significant uptick in loyalty program sign-ups, asking if specific in-store activities were driving this. He also inquired about the long-term baseline for maintenance CapEx and the specific measures taken for tariff remediation.

Answer

Julie Felss Masino (President & CEO) confirmed that loyalty program sign-ups are ahead of plan, with 300,000 new members since August 19th, and no specific in-store changes are driving this; it's due to the program's inherent value. She highlighted the upcoming 'front porch feedback' initiative for loyal guests. Craig Pommells (SVP & CFO) stated that an inflation-adjusted $125 million has been the historical base for maintenance CapEx, with incremental investments in fiscal 2025 and 2026 to catch up on deferred maintenance and technology. He detailed tariff remediation efforts, including vendor negotiations, assortment adjustments, pricing, country of origin changes, and a planned 10% reduction in retail SKU count by the end of fiscal 2026, largely mitigating the $25 million incremental tariffs expected.

Jon Tower asked about the simultaneous traffic declines and increased loyalty program sign-ups, specifically inquiring if internal store activities were driving the loyalty growth. He also questioned if the $80-90 million maintenance CapEx for fiscal 2026 represents a good long-term baseline. Lastly, he sought details on Cracker Barrel's tariff remediation measures, asking if they involved sourcing changes or pricing adjustments.

Answer

President and CEO Julie Felss Masino confirmed that loyalty program sign-ups are ahead of plan, with 300,000 new members since August 19th, without specific changes in stores, and highlighted the upcoming 'front porch feedback' initiative. SVP and CFO Craig Pommells stated that the historical inflation-adjusted base CapEx has been around $125 million, which includes maintenance and ongoing projects, with incremental investments in fiscal 2025 and 2026 to catch up on deferred maintenance and technology. He detailed tariff remediation efforts, including vendor negotiations, assortment adjustments, pricing, country of origin changes, and a planned 10% reduction in retail SKU count by the end of fiscal 2026.

Jon Tower requested a breakdown of the quarter's mix and traffic, quantification of the calendar shift impact, details on the new service model and its labor implications, and any early insights on the performance of store remodels.

Answer

CFO Craig Pommells provided the comp breakdown (7.4% check, -2.7% traffic) and explained the negative traffic was partly due to a strategic deprioritization of lower-margin holiday business, which benefited dine-in. CEO Julie Masino described the service model change as a guest-centric evolution of standards. She reiterated that it is a test-and-learn year for remodels and a full update would be provided on the Q4 call, though they remain pleased with initial results.

Jon Tower sought clarification on the timing of recent pricing actions and asked about advertising spend plans for fiscal 2025, including the messaging focus. He also inquired about the potential for further store closures after last year's portfolio cleanup and asked for the current average guest frequency.

Answer

CFO Craig Pommels confirmed that pricing actions are small and frequent, with the 5% guidance representing a blended rate. CEO Julie Masino stated there is no planned increase in marketing spend as a percentage of sales for fiscal 2025, with a focus on refining the media mix. She noted that messaging for both value and new premium items is resonating. CFO Pommels said there are no currently planned closures. CEO Masino stated average frequency is just under 2x a year, with loyalty members visiting 50% more often.

Jon Tower asked about CAVA's pricing strategy for 2026, specifically if modest price increases are expected, and about strategies for 2026 store builds to avoid 'honeymooning' issues in 2027.

Answer

CFO Tricia Tolivar confirmed that price increases in 2026 will be very modest, less than those in 2025. For 2026 store openings, CAVA is being thoughtful about balancing and pacing new restaurants, especially in new markets, to mitigate the 'honeymoon' phenomenon. She reiterated that the brand is resonating well, driving strong demand and cash-on-cash returns.

Jon Tower asked about CAVA's 2026 pricing strategy, specifically if modest price increases are expected, and about the labor discussion and 2026 store builds to avoid 'honeymoon' issues.

Answer

Tricia Tolivar, CFO, confirmed that CAVA plans very modest price increases for 2026, less than in 2025. Regarding new store openings, she stated that CAVA is being thoughtful about pacing, especially in new markets, to balance the 'honeymoon' phenomenon. She noted that strong demand in new stores is driving higher cash-on-cash returns, which is beneficial for the business.

Jon Tower of Citigroup asked about the strategic initiatives driving the high productivity of new restaurants and what has changed over the past one to two years to achieve these results.

Answer

CEO Brett Schulman attributed the success to a combination of a balanced real estate portfolio strategy, significant brand awareness growth amplified by social and earned media, and effective community-based opening activities. He noted this approach creates strong initial demand in both new and existing markets.

Jon Tower requested more detail on the 8-percentage-point increase in brand awareness since the IPO, specifically asking which demographics were driving the growth.

Answer

CEO Brett Schulman responded that the growth has been broad-based across all age groups and income levels, with the brand's appeal expanding down the income strata. He specifically highlighted that younger cohorts like Gen Z and Gen Alpha are growing at a faster rate, driven by strong momentum on social media channels.

Jon Tower asked about the strategy for promoting lower-priced bowls and bites into 2026 and the pricing strategy for The Cheesecake Factory's core menu for the same period. He also inquired about the cannibalization impact on North Italia's comps and future development planning to mitigate sales transfer.

Answer

David Gordon, President, outlined continued promotion of bites and bowls through social media, menu cards, and Cheesecake Rewards, with new items planned. Matt Clark, EVP and CFO, stated pricing would moderate to ~3.5% in Q4 and effectively ~2.5% for consumers in H1 2026. Matt Clark also clarified that North Italia's comp decline included ~2 points from cannibalization and ~1 point from LA fires, with site selection prioritizing long-term investment returns.

Jon Tower asked about the company's strategy for promoting lower-priced menu items like bites and bowls into next year, and how pricing at the core Cheesecake Factory would be managed into 2026. He also questioned the cannibalization impact on North Italia's comparable sales and whether 2026 development plans would mitigate similar sales transfers.

Answer

David Gordon, President, stated that bites and bowls are performing well with strong attachment rates and no negative check impact, and the company plans to continue leveraging menu innovation and the Cheesecake Rewards program for awareness. Matt Clark, EVP and Chief Financial Officer, added that Q4 pricing would be around 3.5%, moderating to an effective 2% in the first half of 2026. Regarding North Italia, Matt Clark clarified that about 2 points of comp decline were from cannibalization and 1 point from the LA fires, with the broader macro environment impacting midweek lunch. He emphasized that site selection prioritizes long-term investment returns over short-term regional pressure.

Jon Tower asked about specific marketing efforts for the new lower-priced menu items, particularly for the lunch daypart. He also questioned if there was a ceiling on Flower Child's new store opening pace due to human capital or other constraints.

Answer

David Gordon, President, explained that the rewards program's data is key for targeted messaging to drive specific dayparts like lunch. Matthew Clark, CFO, added that the new 'bowls' are also designed to perform well in the delivery channel. Regarding Flower Child's growth, David Gordon stated that while they could build faster, they are comfortable with the current ~20% growth rate to ensure operational excellence and proper manager development, which is the key focus.

Jon Tower of Citigroup inquired about the sustainability of labor productivity gains and whether any new initiatives might alter the trend. He also requested specific metrics on the Cheesecake Rewards program, such as member count, and the quantified P&L drag from marketing in Q1.

Answer

EVP and CFO Matt Clark credited operators for productivity gains driven by improved retention, which led to lower training and overtime costs, but suggested the rate of improvement may taper. He quantified the marketing and rewards drag on other OpEx at about 15 basis points. Both Clark and President David Gordon humorously declined to provide a specific member count, stating only that it is 'a lot' and continues to grow.

Jon Tower asked if the 2025 guidance contemplates the refinancing of convertible debt, sought an update on the Cheesecake Rewards program's impact and potential expansion, and inquired about pricing expectations for 2025.

Answer

EVP and CFO Matt Clark confirmed the guidance includes assumptions for refinancing the convertible debt. President David Gordon stated the rewards program is performing well, with member acquisition exceeding expectations, but will remain focused on The Cheesecake Factory for now. Clark added that effective pricing in 2025 is expected to be around 4%, consistent with prior plans.

Jon Tower of Citigroup asked about the advertising spend strategy, questioning if the company would concentrate spend on fewer campaigns and whether it would contribute company funds to the ad budget given the decline in system-wide sales.

Answer

Interim CEO & CFO Ken Cook confirmed that advertising spend is expected to be down in 2025 due to lower-than-expected sales, which compresses the ad fund budget, particularly in the second half. He stated the focus is on increasing media effectiveness through new data analytics and optimizing the media mix. While not committing to a specific contribution, he said the company will always evaluate investing company funds where there is a good ROI for the system, keeping the option on the table.

Jon Tower requested more detail on the first quarter's performance, asking how the unexpected weakness in March specifically manifested across different dayparts, weekdays versus weekends, or consumer income levels.

Answer

Ken Cook, CFO, characterized Q1 as a 'noisy quarter' due to weather impacts early on. He noted that while the Thin Mints Frosty launch drove positive sales in late February, a significant deterioration in consumer confidence led to a pullback in March. Cook specified that the pressure was broad-based but more acute for households with incomes under $75,000, and that the breakfast daypart underperformed the rest of the day during this period.

Jon Tower of Citigroup questioned the decision to use funds from the dividend reduction for share repurchases rather than further business reinvestment, and also asked why the company is refinancing debt instead of paying it down.

Answer

CEO Kirk Tanner explained the capital allocation policy provides flexibility to both pay an attractive dividend and accelerate growth investments in units and technology. He added that the current stock price presents an attractive opportunity for repurchases. CFO Ken Cook clarified the plan is to refinance $400 million of debt maturing in 2025 and 2026, while expecting total gross debt to decline slightly through amortization, aiming to lower the net leverage ratio via EBITDA growth.

Jon Tower of Citigroup asked how the Biggie Bag platform performed against competitor value offerings in Q3 and how Wendy's plans to respond to a competitor's anticipated relaunch of an everyday value platform.

Answer

CFO Gunther Plosch reported that the Biggie Bag platform performed well, with its sales mix increasing year-over-year and helping to maintain market share. He outlined a holistic value strategy that extends beyond price, focusing on menu innovation, a strong core menu, and superior operational execution to win with value-seeking consumers.

Jon Tower of Citigroup asked how Jack in the Box plans to secure franchisee buy-in for a more consistent, everyday value strategy beyond LTOs and whether the review of menu architecture includes reducing the menu's overall size.

Answer

CEO Lance Tucker explained that franchisees understand the need to drive traffic and that a balanced, profitable barbell strategy is key to gaining their support. He confirmed a third-party is helping review menu architecture to add more entry-level 'good' options. While menu size is being considered, he stressed that variety is a core brand equity. EVP Ryan Ostrom added the goal is to fill the value gap between the sub-$4 and $10+ price points.

Jon Tower asked how the company balances communicating its extensive new product news with operational execution to ensure a good return on advertising spend, and also inquired about pricing plans for fiscal 2025.

Answer

CEO Darin Harris explained their strategy focuses on brand positioning and optimizing media spend to target the right audience with tailored offers across dayparts and digital channels. CFO Brian Scott provided specific pricing guidance for FY2025: 3-4% for Jack in the Box and 5-6% for Del Taco, noting the Del Taco increase is partly tied to its new menu rollout.

Jon Tower of Citigroup questioned the decision to move away from the successful 'Buy One, Get One for $1' promotion and asked about the nature of the outsized sales drag from key markets like Los Angeles, San Francisco, Houston, and Phoenix.

Answer

CEO Kelli Valade explained the promotional shift was to refresh the value offer for summer and balance franchisee profitability, noting the new offer was also margin-positive. She stated the pressure in key markets was tied to specific headlines that peaked in mid-June but have since shown signs of moderating. EVP & CFO Robert Verostek added that margin recovery is expected due to easing commodity costs and G&A savings.

Jon Tower asked for quantification of the sales benefit from the temporary egg surcharge, store-level strategies to mitigate BOGO margin pressure, the risk of store closures exceeding guidance, and the potential impact of tariffs on construction costs.

Answer

CFO Robert Verostek said the egg surcharge impact was minimal. CEO Kelli Valade detailed margin mitigation efforts, including promoting beverage add-ons, growing the high-margin off-premise business (now 22% of sales), and improving operational efficiency. She also expressed confidence in the 70-90 closure guidance. Robert Verostek noted the main tariff risk is macroeconomic rather than direct build costs.

Jon Tower of Citigroup inquired about how value will be incorporated into new product innovation, such as through different cup sizes or price points, and asked about the outlook for incremental pricing into 2026.

Answer

CEO Brian Niccol explained that innovation will be designed to be relevant for specific dayparts and occasions, which may involve different sizes or price points. He stressed that while Starbucks is a premium brand, it can deliver value in premium ways. Regarding future pricing, he reiterated his philosophy that it is the 'last lever' to pull and will only be used when necessary and in the smallest amount possible.

Jon Tower from Citigroup inquired how 'value' fits into the new product innovation pipeline, including potential for different sizes or price points, and asked about the outlook for incremental pricing into 2026.

Answer

Chairman & CEO Brian Niccol explained that innovation will be tailored to specific dayparts and occasions, which could involve different sizes and price points. He stressed that as a premium brand, any value offered will be through a premium lens. Regarding future price increases, he reiterated his stance that pricing is the 'last lever' to pull and will be used as minimally as possible only when necessary.

Jon Tower asked if the new labor model pilot would be deployed across the entire U.S. system and whether there were plans to adjust store-level incentives for managers or hourly partners.

Answer

Brian Niccol, Chairman and Chief Executive Officer, confirmed the 'Green Apron service model' will roll out to all U.S. company-operated stores. He explained it will be adapted to fit different store formats, such as adding labor for mobile order fulfillment in busy urban cafes or dedicating a partner to the drive-thru in suburban locations. The goal is to improve service and drive transaction growth.

Jon Tower of Citigroup asked for clarification on the Q2 EPS outlook and posed a high-level question on how Starbucks can balance its premium pricing power while simultaneously pursuing massive unit growth, such as doubling its U.S. store count.

Answer

CFO Rachel Ruggeri clarified that Q2 EPS will be the lowest of the year on an absolute basis and that year-over-year pressure will intensify. CEO Brian Niccol addressed the strategic question by emphasizing that innovation in both food and beverage is key. He explained that by innovating across occasions and taste profiles, the company can manage its pricing architecture to remain a premium, yet accessible, brand, even as it expands its physical footprint.

Jon Tower asked for quantification of revenue from items targeted for simplification and from non-dairy upcharges. He also questioned if the brand is over-distributed in the U.S. and how new initiatives would apply to licensed stores.

Answer

CEO Brian Niccol expressed confidence that licensed partners like Target will embrace the 'back to Starbucks' strategy. While not quantifying the financial impact of menu simplification, he stated that removing the non-dairy upcharge is the 'right investment' to reengage customers. CFO Rachel Ruggeri noted that investments will be weighted to the first half of the fiscal year, with results expected to build in the second half.

Jon Tower from Citigroup asked about the rollout of the new e-commerce platform, seeking details on any observed changes in consumer behavior and the impact on store-level operations in test markets.

Answer

CEO Russell Weiner explained that they are conducting A/B testing between the old and new platforms and are progressively moving more customers to the new site as it demonstrates superior performance on metrics like sales and conversion. CFO Sandeep Reddy added that the rollout is intentionally measured and cautious to ensure a smooth transition, given that 85% of U.S. sales are digital.

Jon Tower sought clarification on the math behind the DoorDash sales contribution and asked why the new Stuffed Crust pizza is only available in a medium size.

Answer

Chief Financial Officer Sandeep Reddy confirmed that while DoorDash's gross sales are 2x Uber's, the 50% incrementality means the net contribution will be slightly less than double. Chief Executive Officer Russell Weiner explained the medium-only size is due to a unique, buttery dough used for the product, which also supports a premium $4 ticket upcharge.

Jon Tower from Citigroup asked for details on international unit growth, specifically the headwinds from the Australian master franchisee's (DPE) store closures, the confidence in a 2026 reacceleration, and whether other markets face similar consolidation risks.

Answer

CEO Russell Weiner stated that the impact from DPE's 200+ closures should be behind them by year-end, and highlighted that growth markets like China and India remain strong. CFO Sandeep Reddy added that improving store profitability outside of DPE is a leading indicator for future healthy growth.

Jon Tower from Citigroup asked about Domino's long-term pricing power in the U.S., given that consumers are aggressively pivoting to deals and the overall pizza category is growing slowly. He questioned how pricing trickles into the company's 3% annual comp target.

Answer

CEO Russell Weiner emphasized that Domino's is built to win in a value-focused environment due to its system capacity, advertising scale, supply chain efficiencies, and strong franchisee profitability. CFO Sandeep Reddy added that a key to winning in 2024 was taking 'almost no pricing,' noting a 1.6% price increase in Q3 was inclusive of high single-digit pricing in California. He stressed that this disciplined approach to pricing is a core intention of the 'Hungry for MORE' strategy.

Jon Tower questioned the company's pricing strategy in response to potential tariffs, asked for details on the new 'light rice' option, and sought clarity on the new vs. existing market split for FY26 openings and the confidence in the expanded IP collaboration schedule.

Answer

CFO Jeff Uttz reiterated that taking price is a last resort for offsetting tariffs, noting they have some pricing power available as effective pricing drops to 1% in November. SVP Benjamin Porten described the 'light rice' option as a way for guests to order sushi with smaller rice portions, which he believes will drive higher plate consumption and average check. For FY26, the new store pipeline is expected to be 70% existing and 30% new markets. He added that having more IP campaigns provides more opportunities to find successful partners and repeat them.

Jon Tower inquired about the level of pricing in Q1 and Q2, the reason for the seemingly conservative full-year revenue guidance, the cost difference for marketing campaigns, and the company's future marketing strategy.

Answer

Jeff Uttz clarified that effective pricing was about 4.5% in Q1 and is expected to be slightly over 5% in Q2. He explained the revenue guidance is intentionally conservative to ensure targets are met, avoiding a repeat of a prior-year guidance reduction. Hajime Uba, through interpreter Benjamin Porten, stated that an IP collaboration costs approximately $200,000 more than a food-focused campaign. Benjamin Porten assured that the marketing calendar would remain packed with food-focused promotions even without an IP collaboration in Q2.

Jon Tower asked for clarification on the fiscal 2025 revenue guidance, which appears conservative compared to the company's new store growth plans and bullish commentary. He also inquired about new store productivity, the durability of back-of-house labor savings as sales volumes recover, and the company's pricing strategy for Q4 and the upcoming year.

Answer

CEO Hajime Uba, speaking through interpreter Benjamin Porten, confirmed the revenue guidance is conservative to avoid a repeat of last year's downward revision, citing the unpredictable macro environment. CFO Jeff Uttz added that while they don't give comp guidance, the assumption for fiscal 2025 is not negative. Mr. Uba stated that the labor-saving initiatives are structural and should lead to improved labor costs year-over-year. Mr. Uttz noted Q4 pricing was about 4% and that the company plans to take its next price increase before the end of the calendar year to capture holiday demand.

Jon Tower asked for a breakdown of the key drivers that will enable the company to achieve its full-year guidance of 8%+ adjusted operating income growth, especially since Q1 was guided to be the low point of the year. He specifically asked about the contribution from lower G&A.

Answer

CFO Sami Siddiqui expressed confidence in hitting the 8%+ AOI growth target through a combination of top-line growth and operating leverage. He cited improving sales trends and ~3% unit growth for a healthy system-wide sales increase. On the cost side, he highlighted a ~$20 million year-over-year decrease in segment G&A and a significant $60 million structural tailwind from advertising spend rolling off at Burger King U.S. This is partially offset by a $19 million headwind from the accounting treatment of BK China.

Jon Tower asked for confirmation on the launch of the '$1 Million Whopper' campaign for Burger King U.S. in November and requested details on the financial returns, including sales lifts and paybacks, being generated from the ongoing restaurant remodel program.

Answer

CEO Josh Kobza confirmed the '$1 Million Whopper' campaign is on track for November. Regarding remodels, he stated the sales lifts are trending 'a little bit better' than the mid-teens percentage they had anticipated. This results in realized returns on capital that are also slightly ahead of their low-teens target. He also expressed excitement for the new 'Sizzle' image, which is showing 'tremendous results'.

Jon Tower asked if the new summer LTO signals a permanent shift to a more frequent LTO cadence and requested clarification on what reinvesting savings from new equipment into hospitality entails.

Answer

CEO Scott Boatwright indicated a potential future shift to a three LTO per year calendar to maintain consumer engagement more effectively. Regarding reinvestment, he suggested savings would likely be used to add labor during peak hours to improve throughput, but emphasized that plans are still in the testing phase and not finalized.

Jon Tower from Citigroup inquired about unit growth, asking what might prevent the company from reaching the high end of its 2025 guidance. He also questioned why marketing spend as a percentage of sales is guided lower than historical levels.

Answer

CEO Scott Boatwright noted that permitting can be a factor but expressed confidence in the strong 2025 pipeline and the goal of getting closer to 10% annual growth. CFO Adam Rymer explained the lower marketing percentage reflects seeking leverage after past price increases, but emphasized that the absolute dollar spend is still up significantly and they will invest more if good return opportunities arise.

Jon Tower of Citigroup inquired if stores have the necessary equipment for the menu transformation, if more training spend is needed, and how the company will adjust marketing spend and messaging after moving away from LTOs.

Answer

CEO Mike Spanos affirmed that restaurants have the necessary equipment and that moving away from LTOs actually reduces training costs associated with temporary items, allowing for better focus on core execution. He noted the shift away from LTOs could save approximately $10 million in non-working marketing spend, which can be re-invested into promoting everyday value or taken as savings.

Jon Tower asked for the capital expenditure allocated to the Brazil business over the past 12 months and inquired about the new CEO's perspective on the off-premise and delivery channels, noting it was absent from earlier comments about operator feedback.

Answer

CFO Michael Healy stated that approximately $40 million in CapEx was allocated to the Brazil business over the past 12 months. CEO Mike Spanos acknowledged that Bloomin' Brands was a pioneer in off-premise and that it remains an important channel. He conveyed that operator feedback emphasizes the need for a great guest experience regardless of channel, which means being thoughtful about which menu items travel well and ensuring a positive delivery interaction. The goal is to balance the off-premise business with a focus on food quality and guest satisfaction.

Jon Tower confirmed that refranchising is not in the 2025 guidance, asked about the strategic rationale for pivoting marketing towards the Original Glazed doughnut, and inquired where consumer softness is most apparent across sales channels.

Answer

CFO Jeremiah Ashukian confirmed refranchising is not in the guide. CEO Josh Charlesworth explained the marketing pivot to the Original Glazed is because it's their most differentiated, affordable, and highest-margin product. He specified that consumer softness is primarily being seen in traditional retail doughnut shops, while the Delivered Fresh Daily and digital channels remain strong.