Denny's - Earnings Call - Q1 2021
May 4, 2021
Transcript
Speaker 0
Good day, and welcome to the Denny's Corporation Q1 twenty twenty one Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Curt Nichols, Vice President, Investor Relations and Financial Planning and Analysis. Please go ahead.
Speaker 1
Thank you, Tony, and good afternoon, everyone. Thank you for joining us for Denny's First Quarter twenty twenty one Earnings Conference Call. With me today from management are John Miller, Chief Executive Officer Mark Wolfinger, Denny's President and Robert Barostik, Denny's Executive Vice President and Chief Financial Officer. Please refer to our website, investor. Dennys dot com, to find our first quarter earnings press release along with the reconciliations of any non GAAP financial measures mentioned on the call today.
This call is being webcast, and an archive of the webcast will be available on our website later today. John will begin today's call with a business update. Mark will then provide some comments around restaurant capacities, our franchisees and development. And Robert will provide a recap of our first quarter financial results and current trends. After that, we'll open it up for questions.
Before we begin, let me remind you that in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the company knows that certain matters to be discussed by members of management during this call may constitute forward looking statements. Management urges caution in considering its current trends and any outlook on earnings provided during this call. Such statements are subject to risks, uncertainties and other factors that may cause the actual performance of Denny's to be materially different from the performance indicated or implied by such statements. Such risks and factors are set forth in the company's most recent annual report on Form 10 ks for the year ended 12/30/2020 and in subsequent forms eight ks and quarterly reports on Form 10 Q. With that, I will now turn the call over to John Miller, Dinnie's Chief Executive Officer.
Speaker 2
Thank you, Curt, and good afternoon, everyone. I hope each of you have remained safe and healthy since we last shared an update on Dinnie's. And while the first quarter started off with uncertainty about the pace of reopenings due to expanding vaccine deployment, the easing of restrictions and federal stimulus, I'm happy to say that we are quickly approaching twenty nineteen sales levels in April. I'm even more encouraged by the stickiness of our off premise business as dining rooms have reopened. This is a testament to the hard work and dedication of our teams to balance near term labor challenges while welcoming guests back into our dining room safely and still maintaining focus on growing our off premise business.
We remain focused on our four key guest centric themes, reassurance, value, comfort and convenience, and I'll now touch briefly on each. As guests return to our restaurants, it is more important than ever that we ensure the health and safety of our teams and guests. We are committed to reassuring our guests that Denny's provides a safe dining experience by consistently executing our enhanced cleanliness and sanitation procedures at all consumer touch points. Our second area of focus is value. We understand that value comes in different forms and has a different meaning for each type of guest.
We consider our value approach to be a comprehensive balance between price, abundance, convenience, and bundled value. Our third focus area is comfort. We strive to ensure that Denny's is a place where our guests feel welcome and valued. Whether dining with a large family or as a party of one, we believe our guests view the Denny's experience as a time to build connections in an environment that is both inviting and comfortable. This is reflected in our new Bowls and Melts as well as our established heritage restaurant image, which received consistently positive guest feedback largely due to its welcoming and relaxed feel.
And additionally, even as we face hiring challenges, our operations team continues to reinforce the critical need for comfort by reminding our entire system of the rules we live by, including the expectations that, number one, everyone is welcome to dine at Denny's. Number two, everyone is treated like our favorite guests. And number three, everyone has shown kindness and respect. And our final area of consumer focus is convenience. We believe guests will continue to expect technology to bring enhanced value to their dining experience, whether in our restaurants or through off premise options like our well established Denny's On Demand platform or our new virtual brands.
We've been pleased with our ability to retain off premise sales, which have been more than doubled since the start of the pandemic even as dine in transactions have evolved. Turning to virtual brands, I'm excited to say that we substantially completed our rollout of the Burger Den in April. This concept allows us to focus on one of our strengths, great burgers, with new varieties using ingredients already in our pantry. And during testing, we established a success criteria for sales of $650 per week per restaurant. Results during the test were encouraging and gave us the confidence to initiate a national rollout of the brand.
Robert will give more specifics on the performance of these restaurants. However, these transactions are highly incremental and leverage underutilized labor to maximize kitchen efficiency. And our second virtual concept called the Meltdown is a DoorDash exclusive brand that features handcrafted sandwich melts with fresh ingredients and unique flavor combinations. While this brand is able to utilize approximately 70% of the items currently in our pantry, our innovative culinary team has crafted new craveable products with premium ingredients such as slow smoked brisket burn ins. Test results have been similarly encouraging for the meltdown and over half of our domestic locations will be launching during the second quarter.
In fact, we've already launched over 175 locations and an additional 175 expected to launch this week. These brands provide opportunities not only at dinner and late night to leverage underutilized labor and kitchen space, but we are also seeing a meaningful number of transactions during the week versus the weekend. In closing, we are simply delighted to see the return of guests to our dining rooms. We are still the place where people can come in, sit down and connect with one another over great food, but also a place with a continued focus on the health and safety of our guests, employees and suppliers. With sales approaching pre pandemic levels,
Speaker 3
the launch of two new virtual brands, market share opportunities on the horizon, an extraordinary group of franchisees and our exceptional Denny's team members, I'm very optimistic about the future of this brand. So with that, I'll turn
Speaker 2
the call over to Mark Wulfinger, Denny's President, to discuss more about our franchisees and development. Mark?
Speaker 3
Thank you, John. And I want to add to your comments about our outstanding business team and franchise system. And I too look forward to what this brand can accomplish during the balance of this year. While we currently have 11 domestic restaurants that are temporarily closed, I'm very pleased to say that nearly all of our operating domestic restaurants have opened dining rooms with an effective capacity of approximately 75%. This is very encouraging considering just two months ago, we had only 70% of our domestic restaurants with open dining rooms at an effective capacity of approximately 45%.
We experienced slight improvement in our 20 fourseven operations during the quarter. However, we still only have approximately onethree of our domestic franchise restaurants operating twenty four hours a day, seven days a week. As John mentioned, we are facing labor availability challenges, and this is the primary headwind preventing franchisees from opening at late night. To assist our franchisees with the estimated 20,000 employees that need to be hired, we've engaged with a vendor that will enhance our online recruiting to allow them to post open positions on our career website in order to provide greater visibility to potential applicants. Additionally, we will be hosting a national hiring event in June.
That's next month. We believe these staffing challenges are temporary, and we are confident in our ability to reestablish our historical position as America's twenty four hour diner. Turning to development. Franchisees opened three restaurants during the quarter, including two international restaurants. Additionally, franchisees closed four restaurants during the quarter, yielding a net decline of only one restaurant, bringing our total number of restaurants to sixteen forty nine locations.
This deceleration in net unit declines underscores the confidence and future opportunities our franchisees see within the brand. I would now like to take a few moments to update you on the health of our franchise system. With off premise sales remaining strong even as dining rooms reopen, we are very pleased to see franchisee profitability continue to improve. In the month of April, over 80% of our domestic franchise restaurants exceeded the 70% of 2019 sales threshold required to cover both fixed and variable costs, and over 40% of the domestic system generated positive sales. We are also currently supporting our franchisees in their efforts to secure funding through the second round of PPP and the Restaurant Remodelization Fund.
Franchisees representing approximately 98% of the domestic franchise restaurants have applied for the second round of PPP, approximately 60% of those restaurants have received funding to date. Improving sales, additional federal stimulus available to franchisees and the net decline of only one restaurant during the first quarter gives us confidence in our franchise system's ability to prevail and emerge on the other side of the pandemic more focused and driven than ever. We look forward to seeing this historic recovery unfold and returning to net restaurant growth in the future backed by our existing domestic and international development commitments, including over 75 commitments from our recently completed refranchising strategy. Additionally, while we do not celebrate the disproportionate impact of closures to small chains and independent restaurants, we do believe it will present an opportunity to capture additional market share and convert vacated space into Denny's locations as we move through 2021 and beyond. We have a proven record of converting existing spaces into Denny's locations.
In the last ten years, approximately 60% of our openings have been conversions. These less capital intensive opportunities provide enhanced ROIs for franchisees, and our experienced development teams is already assessing the landscape for future Denny's locations. I'll now turn the call over to Robert Vorasik, Denny's Chief Financial Officer, to discuss the quarterly performance. Robert?
Speaker 4
Thank you, Mark, and good afternoon, everyone. I would now like to share a brief review of our first quarter results and current trends. As a reminder, I will be comparing our 2021 domestic system wide same store sales to 2019 as we believe this comparison will provide a more consistent and informative representation of our recovery. Additionally, we will continue practice of comparing to the 2020 prior year in our press release. Domestic system wide same store sales during the first quarter declined 20% compared to 2019.
We experienced sequential improvement on a monthly basis during the first quarter as stay at home orders and capacity restrictions began to ease. While transactions are steadily improving with only slight pricing, we are seeing higher check mostly for mix changes. Specifically, we streamlined our 02/1968 menu and are seeing trades into more lunch and dinner items. However, California, where approximately 25% of our domestic restaurants are located, was restricted to off premise only through the middle of fiscal March. Consequently, California restaurants weighed on the total domestic system wide same store sales results
Speaker 0
by approximately six percentage points during the first
Speaker 4
quarter. Weighed Same store sales at domestic restaurants operating with open dining rooms of various capacities declined approximately 11% during the first quarter compared to a decline of approximately 42% at those domestic restaurants operating with closed dining rooms. These results were heavily weighted towards January and February prior to the easing of restrictions. In addition to the weight of government imposed restrictions on our business, we have also discussed the impact of stores operating with limited hours during the pandemic. As Mark mentioned, the availability of labor continues to challenge our path towards twenty four hour operations, with only one third of our domestic restaurants open 20 fourseven.
Domestic restaurants, which were open twenty four hours in the first quarter, had a same store sales decline of approximately 10% versus 2019 compared to a decline of approximately 27% at domestic restaurants operating with limited hours. We estimate that our overall same store sales results in Q1 were impacted by approximately eight to 10 percentage points from restaurants operating with limited hours. With that being said, the easing of dine in restrictions coupled with the fiscal stimulus and rollout of our two new virtual brands yielded preliminary April same store sales results within two percentage points of pre pandemic sales levels. We were also encouraged that preliminary sales results for April increased 11% for the five sixty five restaurants operating twenty four hours with open dining rooms. I want to spend a few moments providing more detail on the launch of our virtual brands.
As John mentioned, these transactions are highly incremental and leverage underutilized labor to maximize kitchen efficiency. In fact, approximately 70% of transactions from the Burger Den occurred during the dinner and late night dayparts compared to approximately 35% of transactions for the Denny's based brand. Not only are we lever leveraging underutilized dayparts, but the Burger Den also over deck over indexes during the weekdays compared to the Denny's based brand, providing additional opportunities to leverage underutilized labor. Approximately 75% of the Burger Den transactions occurred during the weekday compared to approximately 65% from Denny's based brand. Over 1,100 locations are live with the Burger Den with an average check similar to Denny's off premise transactions.
These locations are generating average weekly sales per restaurant of approximately $900. While these transactions being highly incremental and over indexing at dinner and late night compared to Denny's base brand off premise sales, margins range from the mid-twenty percent to the low-thirty percent after considering product costs, delivery fees and labor efficiencies. Now turning to our first quarter results. Franchise and license revenue decreased 13.6% to $47,000,000 compared to the impact of COVID-nineteen on sales at franchise restaurants and fewer equivalent units. Franchise operating margin was $23,200,000 or 49.5 percent of franchise and license revenue compared to $25,200,000 or 46.4% in the prior year quarter.
This decrease in margin dollars was primarily due impact of COVID nineteen on sales and fewer equivalent units, partially offset by abatements and bad debt expense recorded in the prior year quarter. Company restaurant sales of $33,600,000 were down 20.6% due to the impact of the pandemic on sales and fewer equivalent units. Company restaurant operating margin was $3,400,000 or 10.1% compared to $6,200,000 or 14.6% in the prior year quarter. This change in margin was primarily due to the impact of the COVID-nineteen pandemic on sales and fewer equivalent units. Total general and administrative expenses were $16,900,000 compared to $7,700,000 in the prior year quarter.
This change was due primarily to an increase in share based compensation expense and market valuation changes in our deferred compensation plan liabilities, both of which are noncash items and do not impact adjusted EBITDA. As a reminder, in the prior year quarter, we reversed a meaningful amount of expense related to both our short term and long term incentive compensation plans given the uncertainty of both the duration and magnitude of the pandemic. These increases were partially offset by a $900,000 decrease in corporate administrative expenses, primarily due to cost savings initiatives implemented after the start of the pandemic. We estimate that approximately $3,500,000 of permanent annualized savings have been realized over the last twelve months, which is reflected in this improvement. These results collectively contributed to adjusted EBITDA of $11,800,000.
The provision for income taxes was $8,100,000 yielding an effective income tax rate of 25.9%. Adjusted net income per share was $01 compared to adjusted net income per share of $0.17 in the prior year quarter. I am very pleased to say that during the first quarter, we generated our highest adjusted free cash flow of $5,200,000 since the beginning of the pandemic, bringing a significant portion of every adjusted EBITDA dollar to the bottom line. In our adjusted free cash flow was cash capital expenditures, which included maintenance capital of $1,600,000 compared to $2,800,000 in the prior year quarter. We ended the quarter with approximately $230,000,000 of debt total debt outstanding, including 215,000,000 under our credit facility.
After considering cash on hand, the remaining capacity under our credit facility and current liquidity covenants, we had approximately $87,000,000 of total available liquidity at the end of the first quarter. The pandemic has certainly affirmed for us the value of a conservative leverage philosophy. Prior to the pandemic, we would have targeted longer term leverage somewhere between three times and four times adjusted EBITDA. However, we are currently more comfortable with a range of between two times and three times. As such, subsequent to the end of the first quarter, we paid down an additional $15,000,000 on our revolving credit facility, bringing our current outstanding balance to $200,000,000.
Turning to our business outlook. Given the dynamic and evolving impact of the COVID nineteen pandemic on our operations and uncertainty about the timing and extent of an anticipated recovery, we cannot reasonably provide a business outlook for the fiscal year ending 12/29/2021 at this time. As we work to overcome near term staffing challenges and return more stores to 20 fourseven operations, we are optimistic about building upon our ongoing sales trends. With that said, costs associated with recruiting, hiring and training new employees may proceed additional sales growth and as a consequence could have a temporary impact on margins. Additionally, excluding deferred the deferred compensation valuation adjustments, which move with the market, for the second quarter, we expect our core G and A, corporate incentive compensation and core based and share based sorry, and share based compensation will be in line with q one results.
As a reminder, on 12/15/2020, we entered into the third amendment to our existing credit facility. This reduced the revolver commitment to $375,000,000 and has an additional step down to $350,000,000 on the first day of the third quarter of two thousand twenty one. Financial maintenance covenants are waived through the first quarter of two thousand twenty one, followed by the introduction of more favorable covenant levels in the second and third quarters of two thousand twenty one. Under the amendment, capital expenditures are restricted to $12,000,000 from mid May two thousand twenty through the third quarter of two thousand twenty one. Under We have utilized approximately 4,000,000 through the first quarter with an additional $8,000,000 available.
Additionally, we are prohibited from paying dividends, making stock repurchases and other general investments until we deliver our first quarter results. Therefore, we intend to deploy cash towards paying down our revolver as we continue to enhance our overall liquidity position. We look forward to emerging from these constraints during the fourth quarter and continuing our long standing practice of returning capital to shareholders while also investing in the business. Finally, I want to mention how proud I am of our franchisees and the entire Denny's team who have remained focused on safely serving our guests, whether dine in or off premise, while continuously managing business costs to support Denny's post pandemic recovery. In doing so, we have and will continue to leverage the strength of our asset light business model and fortified balance sheet to ensure the success of our dedicated franchisees and this brand.
That wraps up our prepared remarks. I will now turn the call over to the operator to begin the Q and A portion of our call.
Speaker 0
Thank you. We'll take our first question from James Rutherford from Stephens Inc. Please go ahead.
Speaker 5
Hey, thanks for taking the questions and congrats on the improvement, especially here in April. That's really impressive. Thanks, James. I wanted to yeah, I wanted to ask about the I think I heard comment that virtual brands are running in the mid-20s to low-30s margin. I just wanted to ask a clarification on that, whether that includes the delivery fees.
And then as a broader question on the virtual brands, how are you marketing those today? What level of marketing investment do you think is necessary to sustain those for the long term?
Speaker 4
James, I'll start. This is Robert. So with regard to that clarifying question, I can tell you that the mid-20s to low-30s does include the impact from the fees related to that. So it's inclusive of that. And it does leverage that underutilized labor that we're talking about as it is focused.
It has a focus into those dinner and late night dayparts where we typically seek to have some traffic gains. I'll pass it over to John for the marketing question.
Speaker 2
James, it's a great question. The Marketing Brand Advisory Council with our Franchisee Association Chair who used to work on the corporate side, Sam Walensky, he leads the Marketing Brand Advisory Council and he works with our Chief Brand Officer, John Dillon. And those are the kind of topics that come up. We want to build equities deep equities in our brand for quality food and move consumer along the channels. But there are some that, you know, sort of may resist family dining.
It's a category they skipped. Or they just are experimental. And when they go online to door dash another outlets, they're looking for something new and interesting. They have fatigue from being at home during Covid. And so there is going to be a, you know, a high trial period where people are exploring new brands.
So we think we've got the balance just right here of promoting these two virtual brands where it is disclosed that they're prepared by Denny's, but it's it's sort of a soft touch. And and, you know, it's it's not the headline, but it's it's there if you're if you're looking for it. And so we're using the Denny's brand building fund. These are sales that are generated through through a Denny's and through social media and other ways we are we are promoting these brands mildly. The meltdown is through DoorDash only, and so they're sort of assisting in that launch by being exclusive on the front side.
And then over time, we believe, you know, even with a a melt promotion going on in the core brand Denny's right now, that some of these things can show up in our menu and build core equities to the brand, both as a virtual brand and inside Denny's at the same time.
Speaker 5
That's helpful. And then on the 11% positive comp for the restaurants opened twenty four seven in April, do you feel like that kind of a result will be replicated by the rest of the system when they open 20 fourseven? Or is it something unique about those? And then how long do you think that you can kind of sustain that sort of level of sales? Thank you.
Speaker 2
Sure. Well, obviously, it's a little early to guide. We're feeling our way through, you know, where we are. It is very promising. We're pleased that that third shows like it does.
The pace at which we can staff will be the challenge. And so as staffing challenges abate and the ability to to cover those shifts more fully and and to open and expand those hours, we expect them to become obviously, you know, it's a capacity issue. You become a lot more positive. We're also pleased to see this, you know, higher trial period with people used to be at home after five and ordering to go after five, a daypart that has not doesn't have deep equities in our positioning. The trial going on in both our virtual brands and then also in our late night daypart is promising.
So part of that is the fact that they're open and available to serve to go food and part of it is that that they're staffed and available to do that and and the guest is giving a good experience. So both from the culinary expectation and availability of capacity expectation, it does look promising. It's too early to guide how the whole system will perform.
Speaker 6
Okay. I appreciate those thoughts. Thank you.
Speaker 4
Thanks, James.
Speaker 0
Thank you. We'll take our next question from Nick Setyan with Wedbush Securities. Please go ahead.
Speaker 6
Thank you. Good to see April trends almost in line with pre COVID levels. You know, obviously, we were going through refranchising in 2019 and post refranchising, there was an expectation that the company owned margins should be closer to 18%. With sales back to pre COVID levels or substantially there, how should we think about margins in a post COVID world, company owned margins specifically?
Speaker 4
Yes. Hey, Nick. This is Robert. Good to hear your voice. So, yes, you are correct that during the refranchising process of 2019, we did talk about those 18% to 19% margins.
Handful of puts and takes right now with regard to that. So the first kind of the to the good side would be that we are experiencing mixed benefits, more dinner and and late night plates being sold, moving away from some of that value. We're seeing that through come through mixed benefits. So check is up, but not through really through pricing, but more through that mix. So we'll need to understand how that evolves as we move through, the pandemic.
We we don't have crystal clarity on that. The other the other kind of puts and takes there, right, we we do have commodity inflation. Historically, we would tell you that that's between 13%. We price through that pretty efficiently historically. Again, not not too many surprises there, although, again, not looking to guide on that point.
Labor is one of those areas that that will have both a give and a take in it. With regard to that, the the benefit would be leveraging these underutilized virtual brands and driving traffic into these dinner and late night dayparts. That's just a gain, that leveraging of efficiency, just putting more traffic through there. Conversely, in the short term, as we mentioned, there will be cost of re staffing these units, getting them up to speed. John just talked about the need to staff our our to get to twenty four seven.
Mark talked about our June staffing initiative, our our staff update. So that will be a near term hit. And then you have the administration talking about minimum wage increases, which will provide a that we will be dealing with on a longer term timeframe. Packaging, we are very pleased to see that the off premise is holding. Even as we moved into April, I I think, looking at chart slide 11 in the investor deck, about $9,000 to $10,000 still of off premise sales, which was very similar to what we were seeing, throughout the pandemic.
So that's holding. That comes with an increased cost, so that will weigh on margins. Although, great margins, although penny properties definitely benefited from those. And that doesn't even account all of the various initiatives that we work through over the course of the pandemic. Our ops services group was finding various ways to save money.
We we saved some meaningful amounts on the waste line, which would be an offset to commodity. So there's a lot of puts and takes right now that we're dealing with that we don't have perfect clarity towards, that we look to to to to gain clarity and be able to ultimately re guide. But, I think the best I can give you is to to give you a sense of how we're thinking about the various components.
Speaker 6
That's very helpful. April can you maybe talk to how how April trends progressed? I guess, you know, what I'm trying to ask is did we exit April in positive territory?
Speaker 4
So I think I we we were talking about down two, so we had two points of the pre pandemic level. April's pretty choppy, Nick. It's Brad. Wouldn't give you, as much insight as you think because we're rolling over a two week between 2019 and 02/2021, a two week kind of offset in in the way Easter spring break rolled out. So so there's some choppiness in in the way April kind of progressed.
So I I don't think that that's why we didn't give it, and it's probably not as helpful as you might think at this point.
Speaker 6
Okay. Okay. And then on g and a, any I guess for the year, you know, appreciating the the q two commentary. For the year, how should we think about GNA?
Speaker 4
Yeah. So what we did speak to, again, is is we said pretty much q two would look a lot like q one. We did capture if you go and look at the chart on Slide 33 in the investor deck, we talked about the the permanent cost reductions that we captured from the refranchising of approximately $7,000,000. We talked about on that chart $7,000,000 of pandemic savings, of which we, in my script, we talked about half of that being permanent. So while we were really kind of comfortable giving that next quarter, but not really calling it out too far into the future.
Again, it'll talk we we will speak to about ramp ups there and and when things begin to move around and we start moving around the country. Again, not trying to be coy, but we really want to focus on the next quarter.
Speaker 6
Okay. Thank you very much.
Speaker 1
Thanks, Nick.
Speaker 0
Thank you. We'll now take our next question from Todd Brooks from CL King and Associates. Please go ahead.
Speaker 7
Hey, good afternoon, everybody. Congratulations on the bounce back here. Great to see.
Speaker 4
Yes. Thanks, Todd.
Speaker 7
If I'm not putting a clock on you guys for when you get there, if you look at franchise volumes kind of in that 1,600,000,000.0 to 1,700,000,000.0 range in fiscal twenty nineteen pre pandemic, What are you guys looking to build back to as far as how much off premise are you hoping to retain if we take what looks like the incrementality of the virtual brands? What does Denny's come out of the pandemic looking like relative to what it went in without without burdening it on a specific year?
Speaker 2
Yes. That's a great question. This is John. I I think, you know, from from a brand and its relationship with the consumer, I'll I'll I'll speak at 30,000 feet for just a second. You know, you know, our our goal is to sort of be that home away from home, America's Diner with four active productive day parts to do different things for consumers but in the same neighborhood.
So you've got you've got breakfast and then you have weekend breakfast. You have, you know, lunch and weekend lunch. You have dinner and and the weekends, and then you have late night. And all four do slightly different things. We're trying to with the last eight or nine years, we focused on sort of the foundational appeal of the environment, getting the service model right for breakfast and lunch.
We invested in pancakes and fresh buttermilk and put in a better burger program and better shakes and a few things, expanded our omelet line, put in some value propositions to assure some frequency on the weekends. And so we built some positive momentum, basically focused on, you know, one and a half day parts. And so now our goal is to sort of transform the brand to build deep equities and credibility for all four day parts as a diner. And I think, you know, to unlock unlock traffic building potential in all four day parts is the goal. When and how fast we get there, you know, it it just sort
Speaker 7
of high hard to guide from where
Speaker 2
we stand right here post pandemic at the end of q one. But but I I would like to be able to continue to provide more color on that very question. We're not quite ready to answer your question specifically. But but my view is the upside potential compared to other marketplace evidences of smaller brands with less buying power and advertising capabilities. One once we get our momentum toward these things, much like we did over the last several years on breakfast and lunch, I think we can really unlock some power in this brand.
Speaker 7
Okay. Great. Thanks, John. And then the second question I have is around the labor availability standpoint. I guess, understanding it was highlighted from not being able to reopen many more stores in the twenty fourseven model.
I guess two questions. One, is it a current pinch for operations at all? Is it requiring any kind of overtime or labor inefficiency to service the spike in demand that you've seen over the course of late March into April? And secondly, is the expectation that this is fairly transitory? And when we get to September and the expiration of the enhanced benefits that you're expecting to see the market really hopefully ease and that you can really start to make a push against the twenty four seven reopenings?
Thanks.
Speaker 2
I think I think that's exactly right. What you just described is exactly what's going on. We have a broad array of circumstantial or situational headwinds depending on the area or the store, the strength of the general manager. We'll see managers cooking in late night shifts to cover. Some of those say, like, I can't do it until I get staffed.
I gotta invest in a daytime cook until I can convert them to a nighttime cook. So let's limit those hours for now until we're really ready. I don't wanna abuse the guests. Some say, let's try it and, guest complaints go up a little bit, so they pull back. So there are some overtime consequences or not.
It's it's sort of all over the map. I we do think, some have the view that it'll mitigate earlier than September as people say, you know, back to school is not normally a strong hiring period for full service. So people won't wanna wait till the last minute to grab one of those cook or serve jobs. Others say, you know, wait till a few weeks after it expires before you'll see people highly motivated. It it's hard to know.
We because we have a third of the system already there, yes, that's two thirds missing. But and because of their outperforming the rest of the system, our franchisees are highly motivated to move in that direction as soon as they're able. So we do think this will pass in due time. And I don't know if you had a p and l or modeling related question for Robert or no. Just verify I answered it.
Speaker 7
No. It's it's really just operational pinch now as as people are scrambling to get through at the restaurant level, and then it was kind of a view into when you thought it might mitigate. So that was that was great. Thanks.
Speaker 0
Thank you. And now we're on to our next question from Michael Tamas with Oppenheimer and Company. Please go ahead.
Speaker 8
Hi. Thanks. Hope everybody's doing well. You know, when I
Speaker 3
look at Hey, Michael. Hey,
Speaker 8
guys. When I look across the system April and just kind of focus on the sales volumes that you disclosed for on premise and compare that to April, the math roughly says that you're doing a little bit better than the capacity of 75% would have implied on premise. Just wondering, is that fairly accurate? And then why do you think that is? It seems to be a common theme we're seeing across restaurants.
How do you think you're able to sort of generate higher sales and what your capacity on premise, you know, against separating the off premise from that? Thanks.
Speaker 2
Yeah. So I I think that that's in sort of the funny flow of a week. All dayparts are not equal. So, you know, a Monday night, whether it's 25% capacity or a 100% capacity, you probably need 13% of your total capacity to be even with twenty nineteen. That was a made up number.
But for illustration. So so but whereas on the other hand, when you're at only 75% on Saturday from ten to two, you're still compromised in the number of people you can serve. So, you know, throughout the course of q one, you have until late in the quarter, California is still not open. So so it's a it's a real tricky set of math to figure out exactly, you know, a a 45% capacity for the whole quarter is a funny number. It's it's
Speaker 3
have to you have to apply it to where the day parts are the busiest. You have
Speaker 2
to see the third parties really helped after five and late night, and then you have to see how our footprint is sort of overweight towards states that will have compared to most national chains. We have a higher percentage of our total footprint in more restricted areas. So it's I think that helps answer it. And and if you turn to the earnings release, I think sort of there's a table in there that really helps to kinda explain some of how that unfolds. I'm probably adding confusion instead of clarity, but I'll try.
Speaker 6
No, no, no problem at all.
Speaker 8
And then just on the unit closures, they were really low, and they were great to see in the first quarter. Just wondering, is there any update that you guys have in terms of where you think that ultimately shakes out? Was that just sort of a timing in the first quarter? Or has the sales boost that we've seen recently helped the unit economics to the point where maybe some of those closures that were on the table are no longer on the table?
Speaker 6
Yes,
Speaker 3
Michael, it's Mark. I'll try to address your question here. I think, first of all, just to repeat the number, and you diving in on this, we had four closures in first quarter. We opened three stores. So the net loss was one unit.
We obviously, like anybody else, we went back in history and take a look at that, and that's actually the lowest closure number we had in the last eight years in Q1. We actually closed 16 in Q1 of twenty twenty. So that was last year. And if you recall, we closed 73 stores in total during 2020. At this point, obviously, haven't given any guidance or outlook towards closures.
Certainly part of that, we believe, although obviously it's there's not a lot of data to prove it, but certainly a lot of that is the fact that the number of closures we hit last year is 73. That's a double a normal year for us, first comment. Second comment is obviously we're in round two of the PPP support and other type of government support programs, which have worked very well for our franchise system. We talked about nearly 100% of our franchisees received Round one of PPP. Round two of PPP is close to finishing, but it's not entirely finished yet.
So clearly, that's an encouraging part and perhaps led to only four closures in Q1. But I would tell you again, just as a matter of recall last year, you'll remember that of the 73 closures, about 67 of those were low volume. And really much the same pattern of the four that we closed, which were all domestic closures. But those four were on the low volume side as well. So again, like to give you clear guidance, Ken, at this point, perhaps sometime in the future quarters, but it gives you a little bit of a commentary behind the closure number.
Speaker 6
Yep. Makes sense. Thank you very much.
Speaker 3
I might also add real
Speaker 2
quick that we we just completed our our April meeting with our franchisees at the first time we were together live since February. And the positive outlook among both our vendor community and our franchisees, it was quite positive and enthusiastic about our strategic initiatives and the overall direction of the brand. So I think I think there is a desire to sort of hold on to locations. But again, that's not guidance as much as it is sort of, the sentiment of our system.
Speaker 6
Thanks again.
Speaker 1
Thanks, Franco.
Speaker 0
Thank you. We'll take our next question from Jake Bartlett with Truist Securities.
Speaker 9
Great. Thanks for taking the question. My first was on the off premise sales and just looking at the chart you referenced, which is pretty impressive to see March and April off premise sales remaining high, you know, as the on premise sales are are increasing so much. And I'm just wondering if there's anything particular you did to support the off premise sales as we're as we're emerging, you know, as restrictions are are ending. Anything like special offers or, or not?
And and then and maybe in answering that question, where if you have any idea or any expectation of of where off premise, sales could really settle out.
Speaker 4
Hey. Yeah. This is Robert. So, yeah, it is an impressive chart. We we are very pleased with that chart actually, Jake.
So with regard to the was there any promotional activity? I I was looking over at Kurt. We believe that there was a two week stint in there where we had a free delivery program going on in there, but but nothing completely out of the norm for the way that we've run that segment of our business over the last year. So nothing that that would be propping that up significantly is online or on premise transactions came back. So, again, that's still a very encouraging result there.
So so the the the other part of your question, I'm sorry, was it was with where where that'll eventually cap out. That that that's the the million dollar question. Right? Is it because we are not back to a a complement of a a 100% of our units open completely. So what I can tell you, and this was some interesting information that we've captured here over the last little bit, is the way some of the segments have moved.
So our boomers, interestingly, we thought that, that may have been an area of concern. But on a percentage basis of our transactions, they actually held up quite well, over the pandemic time frame. This is information and some consumer insight information that we received that they held on. And and largely, what is some of the the insight that we captured was they were less impacted by things such as furloughs and requiring a job. So, in large part, they've come through.
We believe that they will move back in more aggressively to to on prem dining as they become more and more vaccinated. So so there's an upside there. Conversely, the area that that we thought may be less susceptible to the pandemic itself, actually, in our insight consumer insight, the the millennial group actually trailed. They were a compared to the the boomers, they actually were impacted by job reductions, furloughs and losing jobs. So they were as a percentage of our makeup, they actually trail slightly.
They are now coming back. They are utilizing the off prem. Again, if you think about how we've talked about off prem historically, on prem dining was predominant to boomers or the when you looked at that chart from kind of left to right, younger to older, on on prem skewed older, off prem skewed younger. It's moving back towards that. But but, again, I thought that was pretty in interesting information.
All that to say is we're still working through that. Right? So I'm again, not not trying to be coy here either. We just don't know where that's going to land. We are very optimistic.
Again, if you think about the virtual brands, particularly the Burger Den that I gave details on, 1,100 units with $900 a week, per unit in sales. We are very encouraged by that. We are very encouraged by what we're seeing on the chart here on on slide 11. But, again, just don't know where to guide that, where that will ultimately fall out. Just wanted to to convey some optimism here.
Speaker 9
Got it. No. I I appreciate it. Would've been impressive because it actually knew the answer to that question. But but my my next question is is about I mean, there's there's some particular forces at work here, namely the the twenty four seven operations that are limiting, you know, limiting sales versus what we're hearing from from, you know, a number of other casual dining concepts.
And I'm I'm I'm wondering also whether the exposure to breakfast, whether that is still, you know, a meaningful meaningful drag versus kind of the the the concepts that don't rely on breakfast. How would you frame how, you know, how breakfast sales have print have have been trending, as we've started to open up here?
Speaker 2
Yeah. So so this is John again. Right now, and it again, it varies by operating hours. So as we've improved sales, breakfast looks good because we're open. Breakfast.
And that daypart's actually performed pretty well for us year to date. It's our best performing weekend breakfast, our best performing daypart overall, and that's where we have the deepest activities. And then, of course, with virtual brands, dinner and late nights done really well. So so it's a great question. But so far, what I'd say is the more people wanna do breakfast and all the complication of managing an all day menu with a breakfast, go ahead and give it a go and go loud on air and advertise it and you'll help us out quite a bit.
It is selling some of our records. We were happy to see these initiatives unfold.
Speaker 9
Great. Great. And just the last question on on the labor piece. And I understand there's, you know, there's pressures now and you're you're anxious to get, you know, people hired. Does that have a long tail effect?
Meaning, if you're you have, you know or, you know, maybe one question is, you know, how you're tracking those people? If it's if it's purely higher wages, I guess you can't lower the wages when the when the market, you eases.
Speaker 0
But how do you do you
Speaker 9
think this is, you know, really a, you know, longer term impact on the the near term pressure that that we're seeing now?
Speaker 4
I do you know Jake this Robert again I would say that we will work through this I I don't think that in large part it is been salary or wages at that that is been the the. Issue a a getting staffed at this point in time. We just can't even really find the the individuals to interview currently. So as Mark spoke to, we we will have a a hiring day in June. We have deployed additional recruiters and consultants to help the franchisee staff.
So I'm not sure that it's the wage issue at hand. The near term will be the staffing up, the training and all that. We'll work through that. Candidly, in the current periods, across both the company and franchise, we're running less labor than what we would like. So the labor line is actually probably leveraging more than than what we would even care for.
But longer term, I I think it's a the the question really is beyond what the pandemic will bring, but the the general approach to, how wages and minimum wages will evolve. And we do believe in a moderate increase in minimum minimum wage in a tempered way. So so we'll look at that, and we'll continue to focus upon that and work through that, to understand how that will impact us. But I think that's the bigger influence than than what the longer term pandemic will throw at us.
Speaker 9
Got it. Makes sense. I appreciate it.
Speaker 4
Thanks, Jake.
Speaker 0
Thank you. We'll hear next from Jon Tower with Wells Fargo.
Speaker 6
Great. Thanks. I guess I'll jump around maybe into the cost side of the equation and the model first digging in there, if I may. It looks like some of the franchise occupancy costs have kind of leveled out here and below where you've been trending at least in late twenty nineteen and early twenty twenty, and even some of the direct costs, which might be maybe was tied to bad debt expense. I'm curious if you could help us think about, particularly the occupancy side, where that could settle out over time?
That's my first question.
Speaker 4
Hey, John. This is Robert. So when you think about our portfolio of real estate that we own and then we sublease to franchisees, we have about 82 units that we own. I believe about 68 of those sit under franchise units, then we have another two twenty or so that we are on the master lease and sublease to our franchisees. What's happening there?
It's a very pretty consistent pattern. We roll off about 20 of those leases every year, 20 to 25 of those leases. So you'll lose corresponding revenue and the corresponding occupancy expense on the franchise P and L. So those kind of work in concert. Over 2020, what you were working with were various deferrals that that we had put in place, so that'll make that year, look pretty choppy.
The franchise margin itself, year over year, is a function of the the deferrals that we made and the corresponding assumptions that we've made around bad debt with regard to those. I think that there's a million and a half dollars of liability that we put on over the course of 2020 related to those deferrals. And as we have moved in to 2021 and those deferrals have have begun to be repaid, we can roll off some of that bad debt expense that that we have put up. So there I think there's a $250,000, margin improvement for the bad debt expense that we had rolled off in the current quarter for that we had booked in the in the prior year. So a lot of moving pieces in there, but isolated to the occupancy expense, nothing overly dramatic other than the the general peel off of about 10% of those master leases every year, those sub leases that we are on the master.
Speaker 6
Okay. Yeah. I'm just trying to figure out in terms of thinking about that that franchise profit line going forward and the margin percentage, I guess. I mean, it it does seem like inability to get back to, say, twenty nineteen levels is is not out of the question at all anytime soon. I think it's forty eight eight and nineteen, if I'm not mistaken.
Speaker 4
Yeah. The the the other piece that we're just talking about it in the room too, another complicating factor, is the way the the marketing is is flowing through there because of the way RevRec came in and on a lower base of advertising dollars that were collected last year and into this year, it makes the margin percent look higher. So as we move back to it to a more permanent full level of collections of royalties advertising, that that may put some pressure on that. Again, the advertising is dollar cost neutral, but it makes that rate look, pretty funky. Prior to rev rec, our our EBITDA franchise margins were 80%.
So again, the the movement within that advertising line can can make that look, pretty odd from time. So
Speaker 6
Okay. And then just thinking about the cost side of the equation of the virtual brands, obviously, knowing exactly where sales will settle out is challenging. It sounds like you're having some great success early on, which is great. But in terms of thinking about, particularly late night, what sort of incremental costs might need to come in as those sales grow? Mean, maybe you need another cook in the kitchen and perhaps supplies, but is that 20% to 30% or so incremental margin that you're seeing on these transactions with all the fees today, you know, is there an ability to essentially see that move higher over time?
Or there's some governors in place that'll keep that kinda in check?
Speaker 2
Yeah. There's there's no governor per se. Just a traditional fixed variable model. So labor will come to get more labor for all the transactions you get is fundamentally how restaurant scheduling works. You know, Denny's being no exception.
So the more transactions forget
Speaker 5
a minute, the more, you
Speaker 2
know, labor you'd be allocated. So the more transactions that come in during a soft day part, the more leverage you get and that margin could be could improve. And then it stair steps when you finally sort of reach the threshold that another cut cook, it may step down for a moment, but it's still incremental pennies in all cases. The fact that it's highly incremental, we like the idea of having a couple of virtual brands around as long as they're complementary to the station and the complexity of what a cook sort of has to learn and and manage. So they're not really operating multiple brands within a brand.
They're the kinds of things that we sell and and sort of in our wheelhouse, so to speak. So in that sense, they're they're incremental no matter what. I understand you're trying to get some precision around the model, you know, what's the fixed variable model here on virtual brands. And so that that's the complicity of these are new and and therefore complicated. But I think over time, they'll prove not to be and you treat them in the near term, I think, like any go transaction.
Whether they're a Denny's or a virtual transaction, they're they're to go. They're not as profitable as dine in, but they're profitable and beneficial and incremental. And, you know, I don't know, Robert, you wanna add anything to this margin side?
Speaker 4
Yes, John. With regard to that, John, I would suggest that we've called it out previously that the Denny's On Demand transactions, things that from the base brand run high teens to mid-20s with regard to margin. We called out the mid-20s to low-30s with regard to the virtual brand. In that, we did take into account the fact that we are leveraging dayparts where labor has not been the most efficiently deployed for us. We have to have cooks on the line regardless of the number of people that come into the unit.
So that that is the differential. So in in large part, we have accounted for that, underutilized, capturing the efficiency of that underutilized in that 20 to 30 low 30% range.
Speaker 6
Got it. No. I appreciate that color. And then lastly, just kind of following up to some of the unit conversation earlier. I think we talked a little bit about the closure piece of it, but I'm curious more on opening side.
Mark, I think you in the prepared remarks have talked about the idea of, yes, there are some units coming out there or some stores perhaps on the conversion side that might be out there and something. Have you started having conversations with franchisees about an appetite picking up for reaccelerating unit growth? Or is it still kind of too early in the recovery phase for those discussions to be taking place?
Speaker 3
I'm going to answer the question in two pieces, and then maybe John will jump in here as well, having just come off the conference he referenced with the franchisees. So, John, it is early still. But at the same time, I mentioned, all of the assistance has come obviously in the two rounds of PPP and the fact that obviously we've seen this sales turnaround that we discussed both in the month of March but also April specifically. You can imagine out there the energy is really building in our franchise system. As we've said before, we're really over the last decade as far as new unit openings, we're really pretty much a conversion machine as
Speaker 2
a
Speaker 3
brand. And I think we've talked about the fact that nearly 60% of our new unit openings over the last decade have really been conversions of an existing building. So we know there's a lot of real estate out there. There's a lot of opportunity. Interest rates are still low.
There's a lot of flexibility in landlords. And we've got a brand and a franchise system that is building in dynamic way as we go through this recovery. So not specific answer to your question, but just more of the tone, I think, of what we're seeing. John?
Speaker 2
Yes. I agree with that. The only thing I'd add is you remember in Mark's script that we talked about he said over 75 of these development commitments came from refranchising effort. I believe it's 78 precisely. And so those will unfold in time.
To your question about timing, it is a little early for us to go lean hard and say, let's step up to these commitments. So there was some grace around remodels and restarting the development program. But they will they will come in time. The unit economics are solid. And because of the conversion opportunities, we believe that that those will favor our development numbers,
Speaker 6
but
Speaker 2
it's too early to predict when that kicks in.
Speaker 6
Got it. I appreciate the time and taking the questions. Thanks.
Speaker 10
Thanks, John.
Speaker 0
Thank you. We'll take our next question from Eric Gonzalez with KeyBanc Capital Markets.
Speaker 10
Hey, thanks for the question and good evening everyone. Curious about your marketing plans this year. You know, if demand exceeds supply right now and staffing may not be in a position to keep pace with sales, Maybe how are you altering your spending on marketing and advertising? Can you save the funds for a time that it makes sense? Just curious about how much flexibility you have to run surplus in that ad fund.
Speaker 2
Yes. As you can imagine, getting through 2020, we we tested the limits with, you know, advertising buyers, both digital and broadcast, on, you know, how far to press commitments into and to parlay that into wait, stop, delay, fifty weeks instead of those. So we we we've done quite a bit of that. I think, generally, you wanna advertise, you know, fish when the fish are biting. We've had you know, we are staffed at breakfast generally, and we're having, you know, stronger breakfast response and recovery.
That's where the deeper equities of our brand are. So we're not afraid to push out some of our breakfast initiatives right now. During the first quarter, we had a couple of weeks with free delivery and a couple of weeks with free pancakes. So so those sort of, you know, were supporting to go, which made sense. Third party delivery during q one.
Well, people are still not getting out, and there weren't as many restrictions lifted just quite yet. So I think we're trying to time things with the expectations of how the year unfolds. As we get into the holidays, there's usually holiday specific promotions, you know, pies and holiday entree specials and turkey dinners and the like, and we expect that we will be staffed by then. But if not, then we'll we'll balance the media plan accordingly.
Speaker 10
That's helpful. And, you know, just another one on labor. Wondering how the the current labor conditions change the economic model of that late night business. Presumably, you have to you may have to pay some overtime or perhaps you had some other incentives to staff that dayparts. I was wondering how the addition, you know, as you look to build back the late night late night daypart and the rest of your store base, wondering how that could impact those store level margins in the current environment.
Speaker 2
You described it accurately. It it is a it is a process of adding back personnel for that daypart with the with the view that when you open, you'll have the transaction to support their labor. But first, those folks have to come on as incremental to another daypart, get trained, and then moved on the roster. So it's a step function change. We've been a twenty four hour operation, say, for a handful of locations.
In our system for 60 so it is it is a staffing rigor and scheduling challenge that's familiar to our brand. And so it would not be done by stretching people too far or excess overtime. It would be done by filling the roster with regularly filled positions during those dayparts. Near term, because of staffing challenges, clearly, are some overtime challenges for the entire industry, not just innings.
Speaker 10
Got it. And and maybe just the last question for me on on capital allocation. You know, not not that sales are seemingly, you know, at a full recovery versus or hosted for recovery versus 2019. I'd imagine that the EBITDA recovery will follow over the next year or so. So with that, could you discuss maybe your current thinking on capital allocation in the past?
You know, there are another plans to take the leverage above three times. Just wondering if the pandemic has made you more cautious or perhaps more confident having stress test the model that you might consider moving above that that three times level once it's permissible to
Speaker 0
do so later this year?
Speaker 4
Hey, Eric. This is Robert. Yeah. Excellent question. I appreciate the opportunity to talk on that.
With regard to our near term philosophy, we the pandemic really did cement for us, at least in the near term, that we really benefited from lower leverage profile that we had in place. We had talked prior coming through the refranchising strategy of 2019, we talked about taking leverage up. We talked about a three to four times range. I talked today about really being comfortable in the two to three times range. And the reality is, as you point back, if sales come back, EBITDA will come back.
Well, our hands, because of the debt amendment that we signed, we signed one in May and then followed up in December, just to give us ultimate flexibility, our hands are tied from returning value capital to shareholders until we report our Q3 earnings. So that'll put us into Q4. So the EBITDA that we're generating, the cash that we're generating off of that, we will deploy against our credit facility. That's where it can go. Our hands are tied with returning value to shareholders, capital to shareholders.
To a degree, they're tied with with CapEx. So as I noted, we paid down an additional $15,000,000 on a revolver post the balance sheet date. So we sit at $200,000,000 with regard to our credit facility currently. Again, we to to with what you said, yes, as sales return, EBITDA will continue to grow. We will use that cash to pay down our revolver short term.
We'll reassess beyond that, but we we do really value returning capital to shareholders. On slide 39, the funds that we're very proud of in our investor debt, we talk about the $554,000,000 that we returned to shareholders beginning in 2010. That represented a 44% net reduction in our outstanding shares. And that price was just over $10 in doing so. So we are very proud of that chart and look to to add to that chart once we have that flexibility to do so in beginning in q four.
Speaker 10
That's very helpful. Thank you for the questions.
Speaker 2
Thank you.
Speaker 0
Thank you. And we'll take our final question from Brett Levy with MKM Partners.
Speaker 11
Great. Thanks for taking the question. Good job on the numbers.
Speaker 0
I guess
Speaker 10
Thank two different questions.
Speaker 11
One is if you could just give a little bit more granular, numbers on the virtual brands and twenty fourseven. Just you gave us some good, insights into the average numbers. But what are you seeing from those that have been established earliest in terms of twenty fourseven or in terms of the virtual brand? And then the second question is, with respect to remodels and heritage, you've given yourself a little bit of a pause in the in the, the ability to open them. Does this change any thoughts in what you might need or might want to do, given the success you're seeing with on demand and virtual?
Speaker 2
Let me start with the portfolio, Robert. And then if you don't I mean, you can answer the twenty four seven
Speaker 4
Sure.
Speaker 2
Virtual. So so on on the remodels, we did we did give a pause. We felt like that it was important for our franchisees to regain their footing. And, you know, over the long term, those relationships and sensitivities to their challenges we think is critically important. And while PPP played a tremendous role in assuring, you know, confidence that they'd come through it.
You know, you you don't know as you're coming through it how long things will last. And, obviously, there's a lot more light at the end of the tunnel and the silver lining from the from the PPP program. But and so we're just now entering into those discussions about where things go from here. We do have, again, in the regular Development Brand Advisory Council meetings where a certain group of franchisees are dedicated to representing our entire franchise body on all things related to development. So they focus on prototype imagery.
They focus on heritage remodel schemes. They focus on cost optimization of those. And they focus on what parts sort of matter to the guests and move them to Insight data. And so while we've taken this pause, we've sort of enriched the amount of data that we were able to share with that body on how powerful the heritage remodel and then the the next round of remodel programs can be. And they continue to return mid single digit lifts over a modest investment.
So our franchisees are committed. There's no objection. They like the program and they like the process in which we engage them in creating remodel scopes. It's really just a matter of timing to get back on track. And, again, we haven't guided yet.
And then, Robert, if you wanna talk about providing a little more precision around twenty four seven and
Speaker 9
the balance of the question.
Speaker 4
Yeah. So hey, Brett. This is Robert. With regard to the the virtual brands and then twenty four seven, give you some additional specificity with regard to the virtual brands. You can see on slides twenty six and twenty seven, we put the bullet chart or kind of map charts within there that show where the brands are rolled out.
The reality is and it's really exciting with regard to the Burger Den specifically, 90% of the twenty four seven units, the 565 units that I talked about, have actually deployed the Burger Den. So 90% of that five sixty five have deployed the Burger Den. And again, it helps to talk about, they lead into that 11% positive number that we had seen in the month of April coming from that. Because again, it adds strength into those dinner and late night dayparts, areas where Helps them staff. Yes.
It helps them staff, helps the sales within there. So it's really exciting with regard to that. We did again, just to reiterate the point, we have deployed 1,100 of those units, of the Bergmann units. And the sales, the average weekly sales amongst those units, as you can see on slide 11 here, are $900 per unit per week. So the simple math would suggest almost $1,000,000 a week coming from the Burger Den, itself.
We will provide additional clarity with regard to the meltdown. We are equally excited about that brand. But we just rolled out the first 175 of those or so and getting ready to launch in the next 175 very soon. So as you can see, as we promised previous on previous calls that once the data matured that we would provide insight, we did that with the Burger Den. That will be the same as we work through the meltdown.
Speaker 0
Thank you. And with that, that does conclude our question and answer session. I'd like to turn the conference back over to Mr. Nichols for any additional or closing remarks.
Speaker 1
Thank you, Cody. I'd like to thank everyone again for joining us on today's call. We look forward to speaking with you on our next earnings conference call in early August. During the rest, we will discuss our second quarter twenty twenty one results. Thank you all and have a great evening.
Speaker 0
Thank you. And that does conclude today's conference. We do thank you all for your participation. You may now disconnect.