Todd Brooks

Todd Brooks inquired about the applicability of company-owned unit-level EBITDA metrics to the overall system, the decline in 2025 versus 2024, and the expected economic health improvement for the system after the identified 300 restaurant closures.

Answer

Ravi Thanawala (CFO and President, North America, Papa John's International) stated that while specific system-wide declines couldn't be provided, company-owned restaurants serve as a reasonable proxy, and he expects Four-Wall profitability to slightly increase in 2026. Todd Penegor (President and CEO, Papa John's International) emphasized that the strategic closures of underperforming restaurants are intended to strengthen the system and improve Four-Wall profitability, with AUVs expected to increase by about 3% on average.

Todd Brooks asked for more specific details on the decline in unit-level EBITDA for the overall system in 2025 compared to 2024, and how the identified 300 restaurant closures would economically strengthen the remaining system.

Answer

Ravi Thanawala, CFO and President, North America, stated that while specific system-wide declines couldn't be provided, company-owned restaurant performance (which saw a slight decline from $150,000 to $135,000 in Four-Wall margins) serves as a reasonable proxy. He reiterated the goal of recapturing 200 basis points of margin rate upside and expects a slight increase in Four-Wall profitability dollars in 2026. Todd Penegor, President and CEO, added that the strategic closures of underperforming restaurants (lowest AUV, challenged EBITDA) are designed to strengthen the system, improve Four-Wall profitability, and increase AUVs by approximately 3% on average, with healthy recapture rates varying by trade zone.

Todd Brooks of The Benchmark Company asked about the size of the opportunity to reactivate lapsed customers through the revamped loyalty program and requested a breakdown of the 0% to 2% same-store sales guidance into traffic, mix, and price.

Answer

CFO Ravi Thanawala noted that with over 14 million active 12-month users, there is a meaningful opportunity with lapsed customers, and the company is testing trigger-based campaigns to win them back. President and CEO Todd Penegor broke down the 0-2% comp guidance, stating that pricing is expected to be around 2% to offset inflation, implying that transactions would be flat in the best case and likely slightly down, but with sequential improvement throughout the year.

Todd Brooks from The Benchmark Company asked about the rollout pace of the activity-based labor model, specifically if 50% penetration is expected by celebration season, and the observed improvements in store performance metrics from early adopters. He also inquired about the Pizookie Meal Deal's (PMD) mix as a percentage of checks in Q4 2025 compared to Q3 2025.

Answer

President and CEO Lyle Tick stated that 50% penetration of the activity-based labor model is unlikely by celebration season due to a cautious, measured rollout to avoid disruption and allow GMs to adapt. He noted that early units show improvement across most metrics, with "pace" seeing the most significant movement. CFO Todd Wilson reported that the Pizookie Meal Deal accounted for almost 16% of checks in Q4 2025, an increase of nearly 2% year-over-year and up from Q3 2025, though these checks are about 5% lower in value. Tick added that PMD's percentage margin is similar to other checks, representing about 6% of sales, and reaching low twenties percentage of checks during weekdays.

Todd Brooks inquired about the projected rollout pace of the activity-based labor model (ABLM) for 2026, the quantifiable improvements observed in early adopter units, and the Pizookie Meal Deal's mix of checks in Q4 2025 compared to Q3 2025.

Answer

President and CEO Lyle Tick indicated that the ABLM rollout will continue in 2026, with caution during celebration season to avoid disruption, and that early units show improvement across most metrics, with pace seeing the most significant positive movement. CFO Todd Wilson stated that the Pizookie Meal Deal grew to almost 16% of checks in Q4 2025, up nearly 2% year-over-year and an increase from Q3, noting it carries about a 5% lower check but drives significant traffic. Lyle Tick added that PMD represented about 6% of sales for the full year 2025, with higher penetration during weekdays.

Todd Brooks from The Benchmark Company asked to dimensionalize the impact of the new pizza platform, seeking details on its prior mix and test results. He also inquired about operational learnings from the recent celebration season and expected menu pricing.

Answer

CEO & President Lyle Tick noted pizza previously mixed at 5-10% and that test markets for the new platform show increased sales, traffic, and profitability. SVP Daniel Duran added that tests indicate a 10-15% lift in pizza incidence with minimal cannibalization. Lyle Tick attributed the strong performance during the high-volume Mother's Day week to better preparation and a focus on operational fundamentals. Daniel Duran clarified that carried menu pricing in the second half of the year is expected to be around 2.5%.

Todd Brooks of The Benchmark Company asked about the size of the infill unit opportunity and whether same-store sales comparisons would become more difficult through Q2 given prior-year dynamics.

Answer

CFO Tom Houdek clarified that the infill strategy is a near-term focus for ramping up the pipeline, but market expansion remains part of the long-term strategy, as the brand travels well. Interim CEO Brad Richmond added that the ultimate unit potential could grow as box economics improve. Regarding Q2 comps, Houdek stated that the lap is 'pretty clean' outside of the Easter shift and that California's performance was only slightly above average, not indicating an outsized benefit from an easy comparison.

Todd Brooks of The Benchmark Company inquired about the fiscal 2025 marketing strategy, the approach to delivering value beyond the Pizookie meal deal, and the quantifiable impact of Q1 weather on comps.

Answer

President Lyle Tick explained that marketing will remain targeted and efficient, focusing on connected TV and digital channels in key markets, without a major shift in overall spend. He described the value strategy as multifaceted, aiming to satisfy both price-conscious guests and those seeking premium options. CFO Thomas Houdek quantified the Q1 weather impact at over 100 basis points so far, noting that January's performance was near the high end of the full-year guide before weather disruptions in February.

Todd Brooks asked about the timeline and geographic focus for driving brand awareness. He also questioned if the current 1.9% marketing spend is adequate and inquired about the expected moderation of mix drag on the average check in Q4.

Answer

President Lyle Tick explained the approach to building awareness will be targeted by market, not a single national push, using a 'test, learn, scale' model with tests beginning in the next few quarters. Interim CEO Brad Richmond noted that marketing spend is unlikely to reach levels of heavy media advertisers but that pulsing media makes sense. CFO Tom Houdek confirmed the negative mix impact on check moderated through Q3 and is expected to continue improving, forecasting a Q4 average check of around +1%.

Todd Brooks asked about Red Robin's pricing assumptions for the 2026 same-store sales guidance, noting the 1.6% price in Q4 2025. He also inquired about the implementation progress of the micro-targeted marketing strategy and the expected selling expense plan for 2026.

Answer

Interim CFO Chris Meyer stated that a 3.2% menu price increase was implemented in late January 2026, expected to have a similar full-year impact. President and CEO Dave Pace indicated that the micro-targeted marketing implementation is approximately two-thirds complete, with continuous reallocation based on response. Chris Meyer added that selling expense is expected to increase in 2026, particularly each quarter, given the success seen in late Q4 2025 and early Q1 2026.

Todd Brooks inquired about the pricing assumptions embedded in Red Robin's 2026 same-store sales guidance, noting the 1.6% price contribution in Q4 2025. He also asked for an update on the implementation progress of the micro-targeted marketing strategy and the expected selling expense plan for 2026.

Answer

Interim CFO Chris Meyer stated that a 3.2% menu price increase was implemented with the new menu launch in late January, expected to carry through for the full year 2026. President and CEO Dave Pace indicated that the micro-targeted marketing implementation is approximately two-thirds complete, with continuous reallocation based on response. Chris Meyer added that selling expenses are projected to increase in 2026, particularly each quarter, given the success observed in late Q4 2025 and early Q1 2026.

Todd Brooks asked about the sustainability of labor efficiency gains, the drivers behind the full-year restaurant margin guidance, and the specific assumptions for the 'Big Yum' value promotion's impact on mix and traffic.

Answer

President and CEO Dave Pace stated that operators are managing labor effectively without a hard target to protect the guest experience. Executive VP & CFO Todd Wilson added that the 'Big Yum' deal is forecasted to be a 1% drag on restaurant profitability for the remainder of the year, assuming a 9% guest mix for the offer, which translates to a 2-3% drag on PPA.

Asked about the sustainability of labor efficiency improvements, the components of the restaurant-level margin guidance (specifically the impact of the 'Big Yum' promotion and commodity costs), and the underlying assumptions for price, mix, and traffic in Q2 and the second half.

Answer

Executives explained that labor efficiency gains are from disciplined scheduling and will continue as long as the guest experience isn't compromised. The 'Big Yum' promotion is expected to be a ~1% drag on restaurant margins, assuming a 9% mix and a 2-3% PPA drag. This is a deliberate investment to drive traffic, which started Q3 down 4% but is expected to improve.

Todd Brooks of The Benchmark Company LLC inquired about the drivers of Q1 profitability, the decision to maintain full-year margin guidance despite the strong quarter, the expected cadence of menu price contribution for the remainder of the year, and the performance of the revamped loyalty program.

Answer

EVP & CFO Todd Wilson attributed the Q1 profit beat to faster-than-expected labor efficiencies. He explained that the full-year guidance of 12-13% restaurant-level margin is being maintained due to a more prudent traffic outlook (projecting a 4% decline) and anticipated tariff headwinds. Wilson also detailed the expected check growth cadence for the year. Former CEO G.J. Hart and President & CEO David Pace both affirmed the loyalty program's success in reactivating lapsed users and noted there is still significant opportunity for optimization.

Asked about the new Hot Honey menu platform, whether there were performance differences by consumer income cohort, and how customers are scoring the company on value.

Answer

The Hot Honey platform is a new menu roll capitalizing on the 'sweet and savory' trend. Executives have not seen any notable performance variability by income cohort, observing strength in both premium and value items. Customer satisfaction scores have improved across all metrics, including value, reversing a previous downward trend. They feel their current value offering is competitive and sufficient.

Todd Brooks asked for clarification on the expansion of the Tuesday cheeseburger promotion and whether this contributed to the incremental discounting in the guidance. He also inquired about the effectiveness of the Loyalty 2.0 program's 90-day reward expiration window in driving return visits.

Answer

Executive G.J. Hart confirmed that the cheeseburger promotion is indeed being stacked on top of other weekday deals. Executive Todd Wilson added that the company is 'exceedingly pleased' with the Loyalty 2.0 program, noting that reward redemptions have surpassed internal models and that guests are actively using their earned rewards, successfully driving revisitation.

Todd Brooks asked about the KDS rollout, now 80% complete, inquiring about the curve of a restaurant achieving efficiencies around digital order accuracy, the percentage of the base that has reached a "tipping point," and its impact on digital mix.

Answer

CFO Tricia Tolivar stated that the KDS transition is fairly quick, leading to overall improvements. She highlighted features like guest visibility into order status and improved accuracy. She noted it's impacting performance but not an "outsized driver" of traffic, and not significantly layered into guidance.

Todd Brooks asked about the Kitchen Display System (KDS) rollout, now that it's about 80% complete, inquiring about the typical curve for a restaurant to achieve efficiencies in digital order accuracy and drive digital mix higher, and what percentage of the base has reached that "tipping point."

Answer

CFO Tricia Tolivar stated that CAVA is still evaluating KDS performance but noted a fairly quick transition to the system, leading to overall improvements. She highlighted KDS features like increased guest visibility into order status and improved accuracy, which are expected to drive continued enhancements in guest experience and results, though it's not an outsized driver of overall traffic.

Todd Brooks with The Benchmark Company inquired about the specific focus of First Watch's enhanced marketing efforts in 2026, asking if it primarily targets non-First Watch breakfast daypart users and if there's a planned pivot to drive additional frequency among existing customers. He also asked if the 'overall category users' measure includes the existing customer base.

Answer

Chief Brand Officer Matt Eisenacher confirmed that the primary strategy for 2026 remains targeting active breakfast daypart users who may not be First Watch customers, leveraging data for efficient spend. He noted that while the long-term vision might include growing the overall occasion, the current focus is on responsible growth. He also clarified that different strategies and channels are used for new customers versus existing ones, with first-party audience data being part of their segmentation.

Todd Brooks asked about the focus of First Watch's enhanced marketing efforts in 2026, specifically whether it targets new breakfast daypart users or aims to drive additional frequency among existing customers.

Answer

Matt Eisenacher, Chief Brand Officer, confirmed that the 2026 marketing strategy will continue to primarily focus on targeting active breakfast daypart users who are not yet First Watch customers, leveraging a playbook similar to 2025. He also noted that different strategies and creative are applied for existing customers to pulse seasonal menu programs and drive frequency, utilizing first-party audience data.

Todd Brooks of The Benchmark Company LLC asked for a connection between the return to positive traffic and specific marketing tactics, seeking to quantify the effort's impact. He also inquired about the build costs and economics of second-generation restaurant sites compared to new builds.

Answer

Chief Brand Officer Matt Eisenacher explained that marketing efforts were focused on key geographies, and the company has seen tangible traction and positive results in those markets versus control markets. CEO Chris Tomasso added that they are targeting both existing customers for frequency and new category users. Regarding real estate, CFO Mel Hope stated that the net build cost for second-generation sites is often similar to new builds due to landlord incentives, and the financial underwriting criteria for returns remain the same.

Todd Brooks from The Benchmark Company asked about the expected net impact on average check from menu pricing versus mix-dilutive initiatives like 'Surprise and Delight' and new third-party delivery pricing. He also questioned the management philosophy behind the revised EBITDA guidance.

Answer

CFO Mel Hope indicated that the company does not guide on mix but generally projects it to be flattish. Regarding guidance, Hope and CEO Chris Tomasso explained that the revision is based on the best information available regarding cost pressures, not on building in a cushion, and that the long-term strategy is to grow market share and guest loyalty.

Todd Brooks of The Benchmark Company questioned the long-term strategic benefits First Watch might gain from the current challenging environment due to its scale advantage. He also asked for details on traffic trends in Florida versus the rest of the system.

Answer

CEO Chris Tomasso stated that First Watch's scale and operational excellence position it to benefit from potential competitor contraction. He also confirmed that the Florida market has stabilized and contributed to the sequentially improving in-restaurant traffic. CFO Mel Hope added that despite choppy comps, the company is extending its lead through growth and efficiencies.

Todd Brooks asked about the consistent improvement in KPIs like gross profit dollars per route and adjusted EBITDA per employee, questioning if this rate of improvement is sustainable as facility consolidations mature, and how menu changes related to protein consumption might impact the center-of-the-plate business.

Answer

CFO Jim Leddy stated that continued execution with 150-200 basis points of operating leverage will drive metric improvement, noting they are in the 'early innings' of leveraging post-COVID facility investments with more consolidations planned. CEO Chris Pappas added there's no ceiling to improvement, citing synergistic benefits from consolidation and technology. Mr. Pappas described menu evolution as normalizing, offering diverse options for various dietary preferences, which aligns with The Chefs' Warehouse's broad ingredient portfolio.

Todd Brooks inquired about the future rate of improvement for gross profit dollars per route and adjusted EBITDA per employee, considering facility consolidations, and the impact of consumer focus on protein consumption on menus and the center-of-the-plate business.

Answer

Jim Leddy, CFO, and Chris Pappas, Founder, Chairman, and CEO, expect continued improvement in these metrics, aligning with operating leverage of 150-200 basis points annually, as many facility investments are in early stages. Mr. Pappas noted that the consumer focus on protein is part of a broader normalization, with chefs offering diverse menu options to cater to various preferences, which positively impacts the company's ingredient portfolio.

Todd Brooks asked about the outlook for a strong holiday season based on recent momentum and the potential impact of large industry consolidations, specifically a hypothetical merger between Performance and US Foods, on The Chefs' Warehouse.

Answer

Chris Pappas, Founder, Chairman, and CEO, expressed cautious optimism for a good holiday season, citing strong bookings. He explained that historically, large industry consolidations have often benefited The Chefs' Warehouse by creating opportunities to gain new business as customers seek to hedge their bets and salespeople become nervous during integration.

Todd Brooks of The Benchmark Company followed up on the Hardee's business exits, asking for clarification on the net impact to sales and pricing, and inquired about the inflation outlook for the second half of the year.

Answer

CFO James Leddy explained that the best way to view the business is by excluding the exited programs. He stated that underlying aggregate inflation was approximately 3% in Q2 (2.3% for specialty, 4.1% for center-of-the-plate), and this moderate level is what the company expects for the remainder of the year, excluding any unforeseen impacts from potential tariffs.

Todd Brooks from The Benchmark Company asked about customer booking activity for the upcoming May-June season and sought clarification on inflation assumptions for the remainder of the year, particularly concerning the impact of cross-selling at Hardie's.

Answer

Christopher Pappas, Founder, Chairman and CEO, expressed cautious optimism, stating he hasn't heard any 'doom and gloom' from clients and expects core events and celebrations to proceed as planned. James Leddy, CFO, advised modeling overall inflation around 3% for the year, excluding the Hardie's cross-sell impact, and noted that chocolate and egg prices remain the most significant volatile components.

Todd Brooks asked for the key drivers of continued gross margin improvement into 2025 and inquired about potential supply chain pressures from labor availability, such as migrant labor for produce or meat processing labor.

Answer

CFO James Leddy explained that the 2025 guidance implies gross profit margins similar to 2024, as the company focuses on growing gross profit dollars, which can be affected by product mix. CEO Christopher Pappas added that the focus is on the spread between operating costs and GP dollars, which is more telling than margin percentages in a volatile cost environment. On labor, Pappas stated the company is ahead of the curve on wages, mitigating labor as a major headwind. Leddy also noted that investments in processing automation have reduced the need for certain skilled labor like butchers.

Todd Brooks asked about the goals for engaging a global consulting firm, the early outlook for the holiday season, and the inflation forecast for Q4 and beyond.

Answer

CEO Chris Pappas explained the consulting firm provides a 'fresh pair of eyes' to help optimize projects and leverage new technology like AI. He noted a positive tone for the holiday season, with strong last-minute bookings for parties and corporate events. CFO Jim Leddy indicated the Q4 inflation and growth outlook is consistent with achieving their full-year 6-7% organic growth target, with no material changes expected.

Todd Brooks from The Benchmark Company congratulated Marzetti on the Bachan’s acquisition and asked about the brand's Q4 2025 exit rate, considering SKU and door expansion. He also inquired about the Texas Roadhouse dinner rolls' current run rate, its potential to reach $100 million, and future extensions.

Answer

CEO Dave Ciesinski described Bachan’s as an authentic, clean-label brand with strong appeal to millennials and Gen Z, growing through Costco, mass, and retail. He noted its premium price point and margin-accretive nature, with significant synergy potential. He stated the business did $87 million in sales and emphasized the plan to refine distribution, drive new items, and extend into broader adjacencies, including international markets. For Texas Roadhouse dinner rolls, Ciesinski confirmed a $20 million run rate in the most recent period, with potential to reach a $100 million retail run rate by the end of the fiscal year, and mentioned ongoing discussions for pipeline items.

Todd Brooks asked for details on the Bachan’s acquisition, including its 2025 business size, exit run rate, and potential for SKU and distribution expansion. He also inquired about the performance and future outlook for Texas Roadhouse dinner rolls.

Answer

CEO Dave Ciesinski described Bachan’s as an authentic, fast-growing brand with strong appeal to millennials and Gen Z, noting its $87 million sales in 2025 and growth through Costco, mass, and retail. He highlighted the brand's broad applications and Marzetti's plans to leverage its culinary and product development capabilities for future growth. For Texas Roadhouse dinner rolls, Mr. Ciesinski confirmed continued strong growth, with a recent exit run rate of $20 million, and expressed confidence in reaching a $100 million retail run rate by the fiscal year-end, with ongoing discussions for new pipeline items.

Todd Brooks inquired about the rationale behind the reduction in advertising spend for the year and whether it reflects a need to stabilize the brand before more aggressive marketing, as well as incremental plans for the November-December holiday window and expectations for a traffic inflection point.

Answer

President and CEO Julie Masino explained the advertising spend reduction aligns with current traffic levels and the imperative to reduce non-guest-facing costs, with Q1 spend being elevated due to prior commitments. Senior Vice President and CFO Craig Pommells added that the loyalty program allows for more cost-effective direct communication with guests. Julie Masino further detailed the focus on in-store experience, brand rebuilding, and specific holiday promotions like the unique toy offer and the new military discount, while Craig Pommells noted the guidance range contemplates potential traffic improvement in the latter half of the year.

Todd Brooks asked about the reduction in advertising spend for the year, questioning if it reflects Q2 holiday period spending or a need to stabilize the brand before more aggressive advertising. He also inquired about incremental plans for the November-December holiday window and the expected timing of a potential traffic inflection.

Answer

President and CEO Julie Masino explained that Q1 marketing spend was elevated due to planned brand relaunch commitments. The reduced advertising for Q2-Q4, totaling $12-$16 million below prior year, aligns with current traffic levels and the imperative to reduce non-guest-facing costs. Senior Vice President and CFO Craig Pommells added that the loyalty program, now accounting for 40% of sales, offers a more cost-effective way to communicate with guests. Masino emphasized the company's commitment to regaining positive traffic trajectory through great in-store experiences, food, and hospitality, while also rebuilding brand trust. She highlighted holiday messaging, LTOs like Country Fried Turkey, and a unique toy promotion that activates both restaurant and retail. Pommells noted that the upper end of their guidance range assumes improvement, while the lower end reflects current trends, with various short-term and long-term actions underway to support traffic.

Todd Brooks of The Benchmark Company LLC asked for a framework for G&A expenses going forward, clarification on the components of the Q3 average check, and the expected menu mix impact from the Q4 Campfire promotion.

Answer

SVP and CFO Craig Pommels stated that detailed G&A guidance for FY26 will be provided in September, but the goal is to return to historical levels as a percent of sales. He broke down the Q3 check increase of 6.6% into 4.9% pricing and 1.7% positive mix. He also anticipates that the positive mix contribution will moderate in Q4 as the company begins to lap stronger prior-year comparisons.

Todd Brooks asked for quantification of the EBITDA margin improvement from Heat n' Serve and catering execution to better model the second half, and also sought confirmation that strategic transformation and proxy costs are finished for the year.

Answer

CFO Craig Pommells explained that while the Q2 profitability benefit from holiday channels was significant and repeatable, he did not provide a specific number. He noted that Q3 will include training investments for new initiatives, with labor savings ramping up in Q4. He confirmed that add-backs for strategic transformation and proxy contest costs are complete for the fiscal year and will not be treated as adjustments going forward.

Todd Brooks asked for the magnitude of average check growth, the customer mix utilizing value platforms like the Sunrise Special, and the specific year-over-year improvement in the company's value scores.

Answer

CFO Craig Pommells reported that average check grew 5.8%, comprising 4.7% price and 1.1% favorable mix driven by the successful dinner strategy. He explained they don't track value platform mix specifically, as the entire menu offers strong value compared to the industry. CEO Julie Masino added that for Cracker Barrel guests, value is about abundance and large portions, not just absolute price. Mr. Pommells noted that while internal and external value scores have improved, the company is not yet sharing the specific metric externally.

Todd Brooks asked about J&J Snack Foods' capital expenditure (CapEx) outlook for fiscal year 2026.

Answer

CFO Shawn Munsell stated that CapEx for fiscal year 2026 is expected to be approximately in line with fiscal year 2025, with ongoing efforts to trim it.

Todd Brooks from The Benchmark Company LLC asked about modeling for fiscal 2026, seeking to understand the potential materiality of the handheld business recovery and the impact of new programs, such as the churro and frozen beverage tests with major QSR partners.

Answer

CEO Dan Fachner projected a potential 10% to 20% sales lift for the handhelds business in fiscal 2026 as capacity is fully restored. He described the new QSR partnerships for churros and frozen beverages as potentially 'meaningful,' noting that tests are progressing well and ahead of expectations, though the full impact of the beverage rollout would likely be seen in the back half of the year due to implementation timelines.

Todd Brooks from The Benchmark Company asked if the low-30s gross margin target includes future pricing actions, requested an update on the theater channel's business mix, questioned the distribution cost outlook, and inquired about the impact of the Easter holiday shift.

Answer

Executive Daniel Fachner confirmed the margin outlook includes ongoing price realization and the seasonal mix shift to higher-margin products. He stated the theater channel remains about 25% of the frozen beverage business. Executive Shawn Munsell added that distribution costs are expected to be near 10% of sales in Q3. Fachner concluded that weather is a more significant factor than the Easter timing.

Todd Brooks from The Benchmark Company asked for a detailed breakdown of the gross margin decline, questioning the split between commodity costs, peso headwinds, and sales mix. He also inquired about the timing of new price increases and the potential for a negative volume response from consumers.

Answer

Executive Shawn Munsell explained that approximately 80 basis points of the gross margin decline were due to the gap between input costs and pricing, with the remainder attributed to unfavorable sales mix. He quantified the peso headwind at nearly $1 million. Munsell confirmed that new pricing actions implemented in Q2 would have closed that 80-basis-point gap if applied retroactively. CEO Daniel Fachner added that while the company is closely monitoring consumer reaction to higher prices, the increases were necessary due to industry-wide inflation in key inputs like chocolate and eggs.

Todd Brooks asked for a margin framework for fiscal 2025, specifically regarding expectations for gross margin and distribution costs relative to stated goals. He also inquired if management is more bullish on the Dippin' Dots business given its expansion into new channels and the upcoming retail launch.

Answer

CFO Ken Plunk projected the fiscal 2025 gross margin to be over 31%, showing improvement but noting that reaching the mid-30s target is a longer-term goal. He expects distribution costs to be in the mid-10% range of sales for the full year. CEO Daniel Fachner expressed significant excitement for the Dippin' Dots retail launch, believing it can be a major growth driver, and reiterated his confidence in doubling the brand's overall sales from its acquisition level.

The analyst inquired about the drivers of the increase in G&A expenses, the normalized run rate for FY26, and the outlook for cost savings programs, particularly related to manufacturing network optimization.

Answer

G&A spend increased due to marketing investments (almost half), transient legal and integration costs, and timing. The normalized base for FY26 should exclude the one-time integration costs. Cost savings in FY25 were driven by procurement, value engineering, and labor management. For FY26, the network optimization from closing the Milpitas facility and ramping up the Atlanta plant will be an additional major driver of savings, with benefits expected to materialize more in the second half of the fiscal year.

Questioned the sustainability of foodservice trends given potential LTO timing, the drivers of the strong retail operating margin, and sought an update on the potential for acquiring a manufacturing facility.

Answer

The company expects to maintain low single-digit growth in foodservice, driven by base business and new item activity, not just LTO timing. The improved retail margin is a result of cost-saving initiatives, exiting less profitable businesses, and pricing actions that have stuck. The company confirmed it is actively exploring opportunities to acquire a facility to strengthen its manufacturing network as part of its long-term strategy.

Todd Brooks of The Benchmark Company LLC asked about the impact of tariffs being passed to customers, the breakdown of Q2 revenue growth between price and volume, and the expected timeline for realizing efficiencies from the new ERP system, including any quantified margin targets for 2026.

Answer

CEO Felix Lin stated that while strategic pricing boosted Q2 results, the company is not overly concerned about tariffs due to the specialty nature of its products. He identified declining foot traffic as a more significant risk. Lin noted it was too early to precisely break down price versus volume due to the new ERP system but suggested pricing was the main driver. Regarding the ERP, he explained that it's difficult to quantify a specific margin benefit due to their spot-market business model. Instead, the company focuses on growing gross profit dollars, with a long-term goal of achieving a 5% adjusted EBITDA margin over the next 3-5 years.

The analyst inquired about the impact of tariffs on customers, the breakdown of revenue growth between price and volume, and the timeline and potential margin benefits from the new ERP system implementation.

Answer

The CEO stated that foot traffic is a greater concern than tariffs, which are managed through strategic spot-market purchasing and inventory management. The 4% revenue growth was driven mostly by pricing. While the new ERP system's exact margin benefit is hard to quantify, the company is focused on growing gross profit dollars and aims for a 5% EBITDA margin within 3-5 years through various strategic initiatives.

Todd Brooks from The Benchmark Company LLC asked about the off-premise business, inquiring if the rollout of the digital kitchen system (KDS) has enabled managers to service more demand. He also asked how high the off-premise mix is for the top-performing quartile of stores.

Answer

CEO Gerald Morgan confirmed that the KDS, now in 80% of restaurants, is a component helping to increase to-go capacity and improve the guest and employee experience. Michael Bailen, Senior Director & Head of IR, added that while he didn't have specific quartile data, there are definitely restaurants with higher to-go percentages, indicating further opportunity for the system.

Todd Brooks asked about the new bar menu relaunch, inquiring about its origin, how it was tested, and its potential impact on the bar's profitability profile.

Answer

CEO Gerald Morgan explained that the initiative, especially the '$5 all day everyday' value offerings, was driven by direct consumer feedback. Operators were supportive and had input on the selections. He also noted that the popular new mocktails were another consumer-driven addition, and 2025 will be the first full year they are on the menu.

Todd Brooks of The Benchmark Company LLC asked about the long-term EBITDA potential of the Conway production footprint over the next three to five years. He also inquired about the momentum of cross-selling products to customers across WestRock's various business lines.

Answer

CEO Scott Ford stated that the company is working towards a goal of driving EBITDA to $200 million within three to four years, up from $60 million last year, and believes they have the customer relationships to achieve this. Ford also explained that cross-selling momentum is strongest among their top 20-30 mega-brand customers, who have been more aggressive than expected in adopting products across categories like RTD. Other customer segments, like c-stores, are more exploratory, while many traditional customers remain single-product buyers.

Todd Brooks from The Benchmark Company questioned whether the current need to expand capacity is driven by a few large 'whale' customers or a broader base of clients. He also requested a macro-level update on coffee demand amid high prices and potential tariffs.

Answer

CEO Scott Ford explained that growth is driven by both large 'whale' accounts, which provide scale, and a broad base of smaller customers who benefit from the resulting infrastructure and cost efficiencies. Regarding the macro environment, Ford stated that while the core roast and ground business saw some softness, it has been improving. He noted Westrock's overall performance is strong due to significant market share gains, and the impact of tariffs has so far been offset by a corresponding drop in coffee commodity prices.

Todd Brooks inquired whether the growth from the Conway facility is primarily a market share gain or driven by new product development, and asked how the company is managing its take-or-pay contracts with customers amid shifting timelines.

Answer

CEO Scott Ford stated that growth is a mix, but the most significant wins are from new, large brands bringing their entire product portfolios to Westrock, leveraging the company's integrated capabilities. Regarding contracts, Ford emphasized a flexible 'do right rule' approach, noting that accelerated demand from some customers has offset delays from others, keeping the 2026 full run-rate EBITDA target of $130M-$150M on track.

Todd Brooks inquired about the fiscal 2025 outlook, specifically seeking assurance on the production ramp-up slope for the new Conway facility and what contractual mechanisms prevent further customer-driven delays.

Answer

CEO Scott Ford explained that the previous delay was a rare, strategic accommodation that secured a contract extension. He clarified that new contracts for the Conway facility are structured as take-or-pay or include price adjustments for lower volumes, providing much greater certainty. He also noted that the company used 2024 to complete all necessary product approvals, allowing for an immediate and steep commercial ramp-up in Q1 2025 for already-approved products.

Todd Brooks from The Benchmark Company LLC inquired about the realization timeline for the signed franchise deal pipeline and the company's plans for corporate store openings in 2026.

Answer

CEO Bob Wright explained that the franchise development timeline varies, with smaller deals having a shorter timeframe (one year per unit) and incentives in place for early openings. He reiterated that while they have visibility into a strong 2026 pipeline, they are not yet guiding for it. He confirmed the company still plans to build up to 20 corporate units per year in specific, high-margin markets where they don't have franchisee growth, viewing it as an earnings builder that complements franchise expansion.

Todd Brooks asked about the product innovation pipeline for the remainder of the year and how Potbelly is managing its menu to maintain operational efficiency. He also requested a forward look at the Perks loyalty program, asking what new capabilities and personalization would result from current digital investments.

Answer

CEO Bob Wright stated that the innovation process is disciplined, with new items required to clear financial, consumer, and operational hurdles to avoid slowing service. He assured that they are carefully monitoring product mix to manage complexity. Looking ahead a year, Wright explained that investments in the digital platform will enable more sophisticated and automated customer journeys. This will allow for more discrete and efficient promotions tailored to smaller customer groups, ultimately driving frequency and visits with less reliance on broad-based discounting.

Todd Brooks asked if the menu innovation pipeline contains opportunities as meaningful as the recent Q4 launches, the timing of benefits from digital and data analytics investments, the breakdown of the Q1 same-store sales guidance, and specifics on the planned company-owned store openings.

Answer

CEO Robert Wright explained that the innovation pipeline is robust, rooted in long-term consumer insights, and will likely include both breakthrough and incremental items. He confirmed that benefits from digital and remodel investments are factored into 2025 guidance. Wright also clarified that a mid-to-high single-digit number of company stores will open, mostly backloaded in 2025, in markets like the Midwest and Texas. CFO Steven Cirulis added that 2025 pricing is expected to be around 3% and that customer mix is holding steady.

Todd Brooks sought clarification on the Q4 same-store sales guidance, asking what factors would drive outcomes to the high or low end of the range. He also questioned if 10% unit growth is possible in 2025 and asked about the frequency lift from the revamped Perks loyalty program.

Answer

EVP & CFO Steven Cirulis stated the Q4 guidance reflects sequential growth, with the low end implying a tougher consumer environment and the high end reflecting strong performance from new menu launches. President & CEO Robert Wright addressed unit growth, confirming the company is 'well on our way' to its long-term growth range and that momentum is building. On the Perks program, he confirmed it is performing as designed, with every frequency cohort growing in both membership and visit frequency, driven by the base redemption program and segmented campaigns.

Todd Brooks of The Benchmark Company inquired about the strategy for the company-owned stores, asking for the expected timeline to return these units to profitability and the key milestones to watch.

Answer

CEO John Peyton stated the target holding period is approximately three years to improve operations before refranchising. CFO Vance Chang elaborated that current performance is choppy due to transitory issues like delays in re-acquiring liquor licenses, temporary closures for remodels, and investments in staffing. Chang outlined a clear path to profitability, projecting a run-rate AUV of $2.0-$2.5 million with low-to-mid teens four-wall margins once these one-time disruptions are resolved.

Todd Brooks asked about the strategic path forward for the Club Applebee's loyalty program, including the quality of its data and its potential as a frequency driver.

Answer

CEO John Peyton explained that the strategy for Club Applebee's is to provide 'inside access' and special privileges rather than a points-based currency like IHOP's program. He stated the member data is 'good and getting better,' especially after consolidating CRM, digital, and off-premise teams under a single leader. This allows for better use of purchase history and demographic data to personalize offers and drive frequency.

Todd Brooks of The Benchmark Company inquired about the strategic rationale for taking back 47 Applebee's restaurants from franchisees and the expected timeline for refranchising these units.

Answer

CEO John Peyton explained the takeback serves three strategic purposes: 1) to revitalize and refranchise the units for a profit within approximately three years; 2) to use 30 of the restaurants to pilot and showcase the new 'Looking Good' remodel program; and 3) to convert about six locations into dual-brand concepts, accelerating that key growth initiative.

Todd Brooks asked if the new value strategies would create incremental negative mix in Q4. He also asked what Q4 2023 promotions Applebee's is lapping and how the new approach differs.

Answer

CFO Vance Chang stated he does not expect the current sales mix trends (flat at Applebee's, slightly negative at IHOP) to be interrupted in Q4. Applebee's President Tony Moralejo specified they are lapping last year's 'Holiday Skillets' promotion, which is being replaced by a completely different, all-encompassing value campaign.

Todd Brooks of The Benchmark Company LLC inquired about the breakdown of the value mix between everyday value and LTOs, the strategy behind the refranchising of three Kiki's locations, and sought clarity on the components of the 3% average check increase.

Answer

CEO Kelli Valade explained that the current focus is on LTO value to address consumer volatility, with plans to re-engineer the everyday value platform for the fall. EVP & CFO Robert Verostek clarified the Kiki's refranchising was to optimize operations in Orlando, not part of the 'seed and feed' strategy. He also stated the 3% check growth was predominantly from rollover pricing, with mix being roughly flat.

Todd Brooks asked for the forward outlook on menu pricing and the expected impact of the BOGO offer on menu mix. He also inquired about the progress of Keke's refranchising efforts and whether the current economic environment is delaying franchisee interest.

Answer

CFO Robert Verostek outlined a 2025 pricing outlook of 4% to 4.5%, comprised of rollover and new pricing, and stated the BOGO offer has a minimal impact on overall check. On Keke's, he noted the refranchising timeline for 'seed' markets might extend to the original 18-24 months, but other refranchising deals are proceeding. CEO Kelli Valade added that franchisee interest in Keke's remains strong.

Todd Brooks asked about the components of the 5% price/mix in Q2, the sales mix of the new '$2, $4, $6, $8, $10' value menu and its margin impact, specific same-store sales performance in California post-FAST Act, and for an update on the Keke's development pipeline and franchisee interest.

Answer

CFO Robert Verostek clarified that the 5% net pricing included a roughly -1% negative mix impact from increased value offerings. He noted California's sales were slightly below the system average but that Denny's gained share from QSR in the state. CEO Kelli Valade added that the new value menu is mixing in the mid-teens in tests without margin erosion, thanks to its engineering with add-on categories. Regarding Keke's, she confirmed strong franchisee interest following the high performance of new Tennessee locations, though there was no material change to the overall pipeline.

Todd Brooks inquired about early learnings from the new reservation system, including its impact on different dayparts and the strategy for promoting it beyond loyalty members. He also asked for qualitative details on the fiscal 2026 IP partnership pipeline.

Answer

SVP Benjamin Porten explained that promotion has so far been limited to rewards members, but broader marketing is planned, which they believe will be a catalyst for new member registrations. He shared that over half of guests with reservations are seated within two minutes of arrival. Regarding the IP pipeline, Porten noted that fiscal 2026 will have the most campaigns ever (7-8), including major partners like Demon Slayer, One Piece, and Nintendo's Kirby, allowing for more experimentation and opportunities for success.

Todd Brooks sought to clarify the timing and cadence of upcoming IP partnerships, asking if they would run continuously for the rest of the year and if the increased number of collaborations for fiscal '26 still meets a high-impact threshold. He also asked about the reservation system test results.

Answer

CFO Jeff Uttz confirmed that IP partnerships will run from May through the balance of the fiscal year and that the expanded FY26 pipeline maintains a focus on impactful collaborations. Benjamin Porten described the reservation system test as a major success, noting that guest response in the high-volume Austin store was immediate and significant, which is fueling the desire to accelerate the system-wide rollout.

Todd Brooks asked for the rollout timeline of the new reservation system, the expected traffic lift, the total reduction in staffing from recent initiatives, and the number of IP partnerships planned for the second half of the year.

Answer

Benjamin Porten outlined an ambitious goal for a full system-wide rollout of the reservation platform by the end of the fiscal year, with testing in February and a wider launch in April. While unable to quantify a specific traffic lift, he emphasized the project's guaranteed benefits in labor savings and guest satisfaction. He estimated that peak staffing has been reduced by about two people each in the front and back of house versus pre-pandemic levels. Hajime Uba confirmed two strong IP collaborations are planned for the back half of the year.

Todd Brooks sought to understand the wide regional spread in same-store sales, particularly the weakness in the Southwest, and asked about the evolving strategy for IP collaborations. He also questioned whether the shift away from a fixed number of collaborations was a factor in the conservative revenue guidance.

Answer

CEO Hajime Uba, through interpreter Benjamin Porten, explained that regional comp differences are an artifact of growth patterns and infill, not an indication of market popularity, specifically citing new stores in Dallas and Houston impacting the comp base. Mr. Porten clarified the new IP strategy is to be more discerning, focusing on high-impact partnerships rather than a fixed number of 'rolling collabs'. He and CFO Jeff Uttz confirmed that revenue guidance has never contemplated the impact of IP collaborations, so any success from them represents potential upside.

Todd Brooks of The Benchmark Company LLC asked about the number of new game cabinets rolled out and the cadence for refreshing the game floor, and also requested a traffic versus check breakdown for Q1.

Answer

CFO Darin Harper stated that about 10 new items (8 cabinets, 2 attractions) were rolled out per location, consistent with pre-COVID levels. While declining to provide a specific traffic/check split, he confirmed the sales improvement was predominantly driven by traffic, with moderated discounting compared to the prior year.

Todd Brooks asked two clarification questions: how much the remodel hurdle rate could be lowered with a more reasonable spend, and what the target mix between TV and digital advertising would be for fiscal 2025.

Answer

CFO Darin Harper explained that by optimizing the remodel program, the investment hurdle rate could decrease to a mid-to-high single-digit percentage, down from a mid-teen rate previously. Interim CEO Kevin Sheehan added that the marketing mix is moving back towards a 50/50 split between TV and digital, but the shift will be gradual and dependent on measured ROI.

Todd Brooks from The Benchmark Company asked management to quantify the same-store sales drag in Q3 from the combined impact of weather and remodel construction. He also questioned if the disruption from the remodels was larger than initially anticipated.

Answer

CFO Darin Harper estimated that the combined pressure from adverse weather and remodel construction had a 50 to 100 basis point negative impact on the quarter's like-for-like comparable sales decline of 7.7%. He also noted that unoptimized marketing efforts were a factor, with improvements and enhancements to the marketing strategy expected to be implemented in Q4 and beyond.

Todd Brooks asked for the quantified impact of weather and remodel disruption on Q3 same-store sales and whether the drag from remodels was larger than anticipated.

Answer

CFO Darin Harper estimated that the combined pressure from weather and remodel construction had a 50 to 100 basis point negative impact on the quarter's like-for-like comparable store sales decline of 7.7%. He did not specify if the remodel disruption was larger than expected but highlighted it as a notable factor alongside macro headwinds and unoptimized marketing.

Todd Brooks from Craig-Hallum inquired about the same-store sales trend during Q1 and into Q2, the potential causes for recent weakness, the revenue contribution from incubator projects versus core restaurant growth, and the operational specifics of the new dual-concept store featuring Kan Sushi.

Answer

CFO Thomas Croal confirmed that same-store sales were strong in January and February but turned negative in March, a trend that continued into Q2, which he attributed to macro-economic pressures. CEO Wook Kim clarified that the projected $300 million revenue run rate is expected to come entirely from new and existing restaurants, not incubator projects. Thomas Croal then detailed the Kan Sushi dual-concept, explaining it has a separate entrance and interior without grills, and is designed to share back-of-house infrastructure to improve operating margins and capture customer overflow from GEN.

Todd Brooks from The Benchmark Company inquired about the marketing strategy for the new menu, asking if the initial high investment level would be sustained throughout the year. He also asked for a comparison of how loyalty members have responded to the new menu versus new or non-loyalty customers.

Answer

CEO Andrew Madsen explained that the company roughly doubled its media investment for the launch, expanding into broader channels like connected TV and digital audio, and is now evaluating the ROI to determine future spending levels. He noted that the new creative messaging is resonating well, driving traffic and sales. Madsen confirmed that loyalty members have responded strongly, with double-digit transaction growth and high engagement in a recent promotion. While it's too early to read new customer frequency, he highlighted encouraging signs like increased loyalty sign-ups and brand search traffic.

Todd Brooks asked how much market share Domino's has gained in both the carryout and delivery channels since the 'Hungry for MORE' strategy was launched.

Answer

Chief Executive Officer Russell Weiner answered more broadly, highlighting the company's consistent track record of gaining about one point of total pizza market share per year. He expressed confidence this will continue, driven by Domino's scale, advertising budget, and superior franchisee profitability compared to competitors, which can be seen by comparing AUVs.

Todd Brooks asked about the drivers behind the quarter-to-date slowdown in same-store sales, the sustainability of high restaurant margins without positive traffic, and the expected sales lift from the planned system-wide remodels.

Answer

CEO Elizabeth Williams attributed the sales slowdown to increased consumer demand for value and the diminishing impact of repeat promotions, noting the launch of new $5 value offers to drive traffic. CFO Ira Fils added that Q4 pricing would soften and that significant cost-saving initiatives, particularly in procurement, support further margin growth. Williams also stated that past remodels have generated mid-single-digit sales lifts and they anticipate similar results from the new, more cost-effective designs.

Todd Brooks asked about the drivers behind the sequential slowdown in same-store sales, the sustainability of high restaurant margins without traffic growth, and the expected sales lift from the upcoming remodel program.

Answer

CEO Elizabeth Williams attributed the sales slowdown to value-seeking consumers and less effective 'rehit' promotions, noting the launch of new value offers like the $5 Pollo Bowl and Taco Tuesday to address this. CFO Ira Fils added that Q4 pricing would soften slightly. Regarding margins, Ira Fils highlighted ongoing cost-saving initiatives, while Elizabeth Williams emphasized that the company will not sacrifice traffic for higher margins. Williams also stated that past remodels have yielded a mid-single-digit sales lift.