Capital Allocation Priorities
Q: What are your plans for capital use going forward?
A: Management reiterated their capital allocation priorities: first, focus on growth through new store builds and acquisitions; second, manage leverage on the balance sheet targeting a leverage ratio of 2.5 to 3.5x (currently at 3.7x); third, return excess capital to shareholders via share repurchases. They will monitor leverage in relation to future share repurchases and report to investors quarterly.

Comp Guidance Adjustment
Q: Why are you trimming the upper end of comp guidance?
A: The year-to-date same-store sales comp of 7.4% included a 60 basis point benefit from leap day. Management adjusted down the top end of the range to set expectations for consistent performance, noting no underlying change in business tempo and consistent expectations for the back half of the year.

Store Openings and Franchise Growth
Q: How should we think about the pace of store openings?
A: Year-to-date, franchise partners have delivered 33 new units compared to 24 last year, with 50% being ground-up builds. Management expects to be well within the guidance range of 140 to 170 total new stores, with 55 to 70 coming from franchisees. They see strong engagement from franchise partners and expect more balanced openings in Q3 and Q4.

Internal Control Issues
Q: What was the internal control issue, and how will you fix it?
A: The issue was primarily around IT general controls following the new system implementation on January 1. Challenges included user access controls and system design issues causing invoicing delays to franchisees. There was no material day-to-day impact on operations. Management expects to complete remediation by the end of the fiscal year.

Impact of EV Adoption
Q: How does slower EV adoption affect your franchise discussions?
A: While current EV sales have moderated, long-term EV penetration forecasts remain unchanged. The company continues to research services appropriate for battery electric vehicles. Franchisees, especially in areas with low EV sales, see more upside in serving the existing car parc and remain interested in EV-related developments.

Labor Costs and Leverage
Q: Why do you expect less labor efficiency in the second half?
A: The company anticipates labor leverage in the back half but not at the levels seen in the second quarter due to strong prior-year comparisons. They expect continued labor efficiency but believe the opportunity for significant leverage is smaller in the back half of the year.

Price Cost on Oil
Q: How is the pricing environment for oil affecting you?
A: Management has seen modest changes in supply chain and product costs for lubricants. They benefited from slight declines in the first half and expect modest increases in the back half, with no material impact anticipated. They continue to monitor macroeconomic factors but do not expect unusual effects in the near term.

Volume Growth Breakdown
Q: Can you break down your volume growth this quarter?
A: Ticket represented about 70% of same-store sales system-wide, while transactions accounted for 30%. Within ticket growth, non-oil-change revenue (NOCR), driven by both price and penetration, was the largest contributor, followed by pricing and premium mix.

Service Growth and Expansion
Q: Where did you see the most traction in services?
A: The company focused on basics like cabin air filters, air filters, wiper blades, light bulbs, and batteries. They saw the biggest increase in OEM recommended services, such as transmission services, due to improved training and team retention. They continue to explore additional services but have no new offerings to report yet.

Store Format and Build-Out Costs
Q: What progress have you made on lower-cost store formats?
A: The team developed a modular design allowing for a 2-bay store that can be expanded to a third bay later, reducing initial capital outlay. This approach is being adopted in company operations and with developing franchisees, aiming to improve return on invested capital.

Low-Income Consumer Impact
Q: Are tighter budgets among low-income consumers affecting you?
A: Management is not seeing any impact from lower-income consumers. There is no trade down in services or slowdown in non-oil-change revenue. Retention rates and visit intervals remain consistent across income levels, and the company continues to monitor the situation closely.

Battery Offering Update
Q: How did the battery offering perform during winter?
A: The battery offering is complex due to diverse battery types and storage challenges. While there's more opportunity, complexities like testing devices and last-mile delivery need addressing. The offering is part of the plan for the remainder of this year and into next year.

Company vs. Franchise Store Performance
Q: What's the comp difference between company-operated and franchise stores?
A: Franchise partners saw a little outperformance with stronger ticket performance, but overall, performance between franchise and company stores was very consistent, with both benefiting from the adoption of the SuperPro process.