This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk02: Good day and welcome to Denny's Corporation fourth quarter and fiscal year 2020 earnings 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, sir.
spk03: Thank you, Cody, and good afternoon, everyone. Thank you for joining us for Denny's fourth quarter and full year 2020 earnings conference call. With me today for management are John Miller, Denny's Chief Executive Officer, Mark Wolfinger, Denny's President, and Robert Verosteck, Denny's Senior Vice President and Chief Financial Officer. Please refer to our website at investor.denny.com to find our fourth quarter earnings press release, along with any reconciliation of 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 about our franchisees and development. Then Robert will provide a recap of our fourth quarter financial results and current trends. After that, we will 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 risk. uncertainties, and other factors that may cause the actual performance of any 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-K for the year ended December 25th, 2019, and in any subsequent Forms 8-K and quarterly reports on Form 10-Q. With that, I will now turn the call over to John Miller, Denny's Chief Executive Officer.
spk04: Thank you, Kurt, and good afternoon, everyone. I hope each of you have remained safe and healthy since we last shared an update on Denny's. Our fourth quarter was setting up to be the best sales performance since the pandemic began until a resurgence of COVID cases caused states and localities to reinstate stay-at-home orders and capacity restrictions in December. While losing access to outdoor dining in California, where 25% of our domestic system is located, was a pause in our recovery story, I'm so proud of how our teams kept up their focus on the future and ensuring that Denny's is well positioned for the recovery. As restrictions began to lift in January, domestic system-wide same-store sales thus far in February have improved to their highest point during the pandemic, despite having a similar level of capacity restrictions as the September through November timeframes. This indicates the consumers are ready to dine with us again, and the sentiment around vaccinations is starting to drive more consumers into our restaurants. The vaccination is expected to be available to a high percentage of the population by mid-year. We're looking forward to the second half of the year, and our exceptional team members and operators are ready to welcome guests back into more and more of our dining rooms. In this dynamically changing environment, we have been focused on four key guest-centric themes, reassurance, value, comfort, and convenience. I'll now touch briefly on each of these. As guests continue to return to our restaurants, it is more important than ever that you remain focused on the health and safety of our team members and our guests. We are committed to reassuring our guests that Dilley's provides a safe dining experience by consistently executing our enhanced cleanliness and sanitation procedures at all customer touch points. We've also provided multiple options for a safe experience beyond our dining rooms, including outdoor seating, curbside pickup, drive-up ordering, and contactless delivery. Our second area of focus is value, and it is known for everyday value, and we believe value will remain important in this economic environment as guests seek to maximize the impact of their dollars on quality food options for the whole family. We understand the value comes in different forms, and we consider our value approach to be a comprehensive balance between price, abundance, convenience, and bundled value. Starting with price value, our well-known 2468 venue has strong affinity with our guests at 14% incident level, We continue to feature abundant value options like our popular Super Slam, which sold nearly 11 million plates in 2020. With off-premise being a large focus, we strive to provide convenience-based value to our guests through free delivery and ordering through our website or mobile app, which has also induced new consumer trial. Additionally, we have seen our Danish Rewards members increase by over 25% since the beginning of the pandemic, allowing us to have more targeted offerings delivering directly to our guests. Lastly, we were able to feed nearly 385,000 families through our new bundled value lineup of shareable family meal packs, offering a delicious, cost-effective way to feed a family of four. Our third focus area is comfort. We strive to ensure that Denny's is a place where our guests feel welcomed 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. After issuing multiple streamlined menus, we began using a full core menu in November, providing more comfort food options, even though the menu is approximately 25% smaller than our pre-pandemic core menu. We will also be launching a comparably sized new core menu next week that continues to feature our culinary innovation with new creations within our bowls and melts categories. Our operations team has also reinforced their critical need for comfort by reminding our entire system of the rules we live by, including expectations that everyone is welcome to dine at Denny's, everyone is treated like our favorite guest, and everyone is shown kindness and respect. Our established heritage restaurant image has also received consistently positive guest feedback, largely due to its welcoming and relaxed feel. Despite the pandemic, our system completed 22 remodels in 2020, including five in the fourth quarter. And our final area of consumer focus is convenience. We believe our guests will continue to expect technology to bring enhanced value to their dining experience, whether in-restaurant or through off-premise options like our Denny's on-demand platform. They've also implemented curbside pickup parking signs to deliver a better experience for our guests and team members while promoting guest-controlled digital ordering from the parking lot. We recently launched our Apple Pay for our Denny's On Demand iOS mobile app, and we continue to promote outdoor dining solutions where permitted. We were fortunate to already have an established off-premise business through our Denny's On Demand platform prior to the pandemic. Average weekly sales for all off-premise transactions have doubled since the beginning of the pandemic, growing from approximately $4,000 per week per store a year ago to approximately $8,000 per week per store through the first two weeks in fiscal February. We have been pleased with our ability to sustain this higher level of off-premise sales as dine-in transactions have evolved. We are also excited that our test and learn culture has yielded two new virtual concepts that we believe will provide additional market share opportunities. The first of these is called the Burger Den. This concept allows us to focus on one of our strengths, great burgers, with new varieties using ingredients already in our pantry. Test results have been favorable and suggest the transactions from these tests are highly incremental. Over half of our domestic locations have signed up to participate in the three-phase rollout. The first group launched earlier this month, while the remaining two groups are slated to launch by the end of the first quarter. The second virtual concept called the Meltdown features handcrafted melts with fresh ingredients. This brand is able to utilize approximately 70% of items currently in our pantry. Our innovative culinary team has crafted new craveable products, such as the Gideon Melt featuring brisket burnt ends with sharp white cheddar, creamy barbecue sauce, and pickles on grilled artisan bread. Or the Talking Turkey Melt made of turkey, bacon, tomatoes, provolone cheese, and a creamy herb spread. Test results have been similarly encouraging for the meltdown, and over half of our domestic locations are expected to launch starting in the second quarter. These brands provide opportunities at dinner and late night to leverage underutilized labor and kitchen space. In fact, over 70% of transactions from the burger bin occur during the dinner and late night day parts. In closing, I sincerely want to thank our leadership team and franchise partners for their continued engagement, steadfast resolve, and unwavering commitment to this brand. I am very much looking forward to this new year and working collectively with our teams to reassure our guests, provide compelling value options, and deliver the comfort and convenience our guests seek, whether it be our dining rooms, on our patios, or in the comfort of their homes. With that, I'll turn the call over to Mark Wolfinger, Phoenix President, to discuss more about our franchise and development. Thank you, John. I want to echo your comments about our innovative and dedicated teams, and I also look forward to what this brand can accomplish in 2021 and beyond. Currently, 98% of our domestic system is open, including over 1,000 restaurants operating with open dining rooms. This is an increase of almost 25% from the end of December. However, we still only have approximately one-third of our domestic franchise restaurants operating 24 hours a day, seven days a week. While we cannot control state and local restrictions and the related impact on our sales trends, we have been working diligently with our franchisees to analyze the incremental sales and profitability potential from expanding their operating hours. Turning to development. We are very encouraged that even in the midst of a global pandemic, our franchisees opened 20 restaurants during the year, including four restaurants during the fourth quarter. This included eight international openings in four different countries, which brought our total number of restaurants to 1,650. Additionally, our system completed 22 remodels during the year, despite remodels being deferred until 2022. These openings and remodels underscore the confidence and future opportunities our franchisees see within the brand. However, the pandemic has also prompted higher closures than our historical run rate. During the fourth quarter, 17 franchise restaurants closed along with one company restaurant, bringing the year-to-date system total to 73 closures. Six of these closures during the year were due to lease expirations. The remaining 67 closures are related to franchise restaurants with averaging volumes of approximately $1 million prior to COVID-19, a level which is well below the 2019 franchise averaging volume of $1.7 million. We believe the pandemic accelerated these closings that we had otherwise anticipated over the next few years. However, this acceleration should ultimately enhance the overall health of the franchise system, allowing multi-unit franchisees to focus on their more viable restaurants. As a reminder, the average restaurant requires approximately 70% of its 2019 sales to cover both fixed and variable cost items. Although December was challenging for restaurants impacted by additional restrictions, we are pleased to say that on average, our restaurants continue to see sequential improvement in profitability with each successive quarter. This momentum coupled with the initial round of PPP funding was very helpful with almost all of our domestic franchise restaurants receiving stimulus support. We are currently supporting our franchisees in their efforts to secure another round of PPP funding and we believe they will be successful again. While we anticipate additional closures, we believe we have weathered the worst of the pandemic and are on an upward trajectory toward historical recovery. We look forward to returning to net restaurant growth in the future and are confident that we will do so, backed by our existing domestic and international development commitments, including over 75 commitments from our recently completed re-franchising strategy. At the same time, we believe our overbuilt industry will suffer an unfortunate and meaningful rationalization of seats through the pandemic, largely at the expense of small independent full-service operators. While we don't celebrate this prediction, we believe brands that survive will have an opportunity to gain market share. We have a proven record of converting existing spaces into Denny's locations. In fact, over 60% of our openings since 2011 have been conversions. These less capital-intensive opportunities provide enhanced ROIs for franchisees, and our experienced development team is already assessing the landscape for future Denny's locations. I will now turn the call to Robert Grostick, Denny's Chief Financial Officer, to discuss the quarterly performance.
spk01: Robert? Thank you, Mark, and good afternoon, everyone. I will share a brief review of our fourth quarter results and current trends. As a reminder, our fourth quarter results include an additional operating week as 2020 was a 53-week year for us. Domestic system-wide same-store sales declined 33% during the fourth quarter after momentum in October and November was overshadowed by the reinstatement of stay-at-home orders and additional capacity restrictions in December. In fact, for the first time since the pandemic began, Outdoor dining was prohibited in California, where approximately 25% of our domestic restaurants are located. Consequently, California restaurants weighed on the total domestic system-wide same-store sales results by approximately 7 percentage points in December and 5 percentage points during the fourth quarter. Same-store sales at domestic restaurants operating with open dining rooms declined approximately 25% for the fourth quarter, compared to a decline of approximately 48% at those domestic restaurants operating with closed dining rooms. Before discussing current trends, I want to mention that we will continue our standard practice of comparing 2021 domestic system-wide same-store sales to 2020. Additionally, we will provide a comparison of 2021 domestic system-wide same-store sales to 2019. We believe comparing to 2019 will provide a more consistent and informative representation of our recovery. With that being said, we have been encouraged by the sequential improvement in January and February as restrictions have started to ease. Domestic system-wide same-store sales for the first two fiscal weeks of February declined 25%, which is a significant improvement from December. 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. Domestic restaurants, which were open 24 hours in the fourth quarter, had a same-store sales decline of approximately 23%. compared to a decline of approximately 39% at domestic restaurants operating with limited hours. While we estimate that our overall same-store sales results in Q4 were impacted by approximately 8 to 10 percentage points from restaurants operating with limited hours, We were encouraged that the sales through the first two fiscal weeks of February declined only 6% for the approximately 375 restaurants operating 24 hours with open dining rooms. Franchise and license revenue decreased 27.4% to $47.2 million, primarily due to the impact of COVID-19 on sales at franchise restaurants, as well as fewer equivalent units partially offset by an additional operating week. Franchise operating margin was $21.4 million or 45.2% of franchise and license revenue compared to $31.8 million or 48.9% in the prior year quarter. This margin decrease was primarily driven by the impact of the COVID-19 pandemic on sales and fewer equivalent units, partially offset by an additional operating week. Company restaurant sales of $32.9 million were down 32.6% due to the impact of the pandemic on sales and fewer equivalent units, partially offset by an additional operating week. Company restaurant operating margin was $1.4 million or 4.3% compared to $8.7 million or 17.7% in the prior year quarter. This was due to the sales decline and related deleveraging impact of COVID-19 as well as the reduction in equivalent units. partially offset by approximately $1 million of favorable reserve adjustments and tax credits related to the CARES Act and an additional operating week. Total general and administrative expenses were $20.5 million compared to $15.4 million in the prior year quarter. This change was due to an increase in share-based compensation expense partially offset by a $3.1 million decrease in corporate administrative expenses from cost savings initiatives and previous reductions in personnel due to the COVID-19 pandemic, including approximately $900,000 in tax credits related to the CARES Act. These results collectively contributed to adjusted EBITDA of $8 million, with approximately $2 million attributable to the 53rd week. Interest expense was approximately $4.6 million compared to $3.6 million in the prior year quarter, with the increase primarily due to higher interest related to our recent debt amendments and the amortization of de-designated interest rate swap losses from accumulated other comprehensive loss nets. The benefit from income taxes was $100,000, yielding an effective income tax rate of 2.7%. Adjusted net loss per share was 5 cents compared to adjusted net income per share of 23 cents in the prior year quarter. Adjusted free cash flow after cash interest, cash taxes, and cash capital expenditures was $2.1 million compared to $12.1 million in the prior year quarter, primarily due to a reduction in adjusted EBITDA and higher cash interest, partially offset by lower capital expenditures and cash taxes. Cash capital expenditures, which included maintenance capital, were $1.5 million compared to $3.2 million in the prior year quarter, primarily due to the prior year real estate acquisitions related to our 2019 re-franchising and development strategy. We ended the quarter with approximately $225 million of total debt outstanding, including $210 million under our credit facility. This is the lowest reported balance since entering our credit facility in 2017. After considering cash on hand, the remaining capacity under our credit facility, and current liquidity covenants, we had approximately $82 million of total available liquidity at the end of 2020. The pandemic has 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. We are currently more comfortable with a range of between two times and three times. Turning to our business outlook. Given the dynamic and evolving impact of the COVID-19 pandemic on the company's operations and ongoing uncertainty around the timing and the extent of an anticipated recovery, the company cannot reasonably provide a business outlook for the fiscal year ending December 29, 2021 at this time. As a reminder, on December 15, 2020, we entered into the Third Amendment to our existing credit facility, which reduced the revolver commitment to $375 million, with an additional step down to $350 million on the first day of the third quarter of 2021. Financial maintenance covenants are waived through the first quarter of 2021, followed by the introduction of more favorable covenant levels in the second and third quarters of 2021. Under the amendment, we are prohibited from paying dividends, making stock or purchases, and other general investments until we deliver our 2021 third quarter results. Therefore, we intend to deploy cash towards paying down our revolver as we continue to enhance our overall liquidity position. Additionally, capital expenditures will be restricted through the third quarter of 2021. Finally, I want to mention how proud I am of how our field leadership and home office teams have remained focused on serving our guests while also managing business costs to support Denny's recovery through the challenges of the COVID-19 pandemic. 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&A portion of our call.
spk02: Thank you. If you'd like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure that your mute function is turned off to allow your signal to reach our equipment. Once again, that is star 1 if you'd like to ask a question. We'll take our first question from Nick Sutton with WebBush Securities. Please go ahead.
spk05: Hi, thank you. I think I heard a remark that in February, units that have both a dining room open and are open 24 hours, those units were down 6%. Did I hear you that correctly?
spk01: Hey, Nick, this is Robert. Yes, you did hear that. That was for the first couple of fiscal weeks of February. So we continue to make progress on our same-store sales results and are really encouraged by the fact that when we're 24 hours with the ability to serve guests in the restaurant, we are really making some headway. So, yes, those restaurants were down 6%. You did hear correctly.
spk05: And is there any way to maybe break down, like, the weekend comp versus the weekday comp? Is it possible that maybe the weekdays are already flat, maybe even positive, and it's mostly the weekend, the capacity constraints that are leading to the down six?
spk01: The work that we're kind of looking at the data we have available to us right now, Nick, that may be one that we have to take offline with Kayla and Kirk. Frankly, I don't know if we have any insight to what you're saying. But, again, down six in the 24-7 sign-ins are really positive. Really, and we broke this out in our results. It's in the investor deck on slide 13. If you look at that, we broke out the ones that have 24-hour operations. I think the key is really pushing forward on that 926 that are more limited right now as opposed to the weekend versus weekday. I think there's a large benefit to getting those restaurants opened. And we have been working with our Denny's Franchise Association board, And they are fully supportive of the movement towards 24-7 operations. And we have developed, in the process of developing those flowcharts, that kind of that if-then kind of logic that says, if you're in a state that has this level of capacity, then we want you to move to 24 hours over this timeframe. So that's really one of the key focuses as we move forward here.
spk05: Understood. I mean, that's pretty amazing that that's where they are, those stores. Regarding the virtual brands, you know, obviously, you know, the dinner and the non-breakfast day parts have been something that you've been, you know, kind of tackled for a long time. And, you know, it does seem like this could potentially be a pretty wonderful solution to, you know, the capacity and availability during those day parts. Any early indication in terms of, you know, what the average week in sales contribution could be from those brands?
spk04: Yeah, Nick, this is John. We have not given any indication yet and are not ready to guide. I would just say that the transactions were incremental. And, uh, therefore sort of reached the threshold that it made sense to expand the test and then beyond the test to a, a rollout on a signup basis. So as we've said, uh, in January, and then again, affirming on today's call that we'll, that, uh, about a thousand restaurants have signed up for the burger den and a similar number for, to roll out over the next two or three quarters, uh, for, um, um, uh, I'm sorry. I'm sorry. It was, um, about half the system. Let's check the script. But, you know, a significant number have signed up with, you know, the enthusiasm to get it going. Now, where it grows when you have, you know, the system behind it and more time and support, that'll be a different matter. There's probably seen enough on a modest test to continue to roll it. And I know there's a follow-up.
spk05: Yeah. Go ahead, I'm sorry. Just to follow up on that, I mean, what kind of, you know, support over time for those brands do you envision? You know, I guess maybe the answer is that, you know, just to really know exactly where that involves.
spk04: Sure. What kind of support? I think if you look at what's happened with a handful of brands that have done, you know, that have been talking about this more regularly, you know, they've had social media channels and different channels that support this more deliberately rather than just through search through DoorDash or LibreEats. So I think there's a difference between a launch platform where you discover them and something a little more deliberate in support when you have enough scale.
spk05: Understood. Thank you very much.
spk02: Thanks, Nick. Thank you. We'll move on to our next question from Michael Thomas with the Opera Center.
spk06: Hey, thanks. Hope everyone is doing well. It just seems like you guys have a lot of sales catalysts in front of you, from opening up at late night to the virtual brand and the menu changes you've talked about. So can you maybe rank, order, or bucket how you think the impact of these will be felt going forward? I mean, just from the outside, it seems easier to sort of flip the switch on the virtual brand versus trying to convince 70-ish percent of your franchisees to open at late night. There's Can you maybe just talk about how you think those sort of play out?
spk04: Sure. Well, I think, Peter, we're a brand that's been around for 68 years, and we've built tremendous equity in late night. We've been talking in the last year and a half since we've had post- sort of scale of our heritage remodel program to continue to work on four-day parts as an all-day diner. And they're just now wandering into sort of the middle innings on building dinner and late night brand equities beyond just breakfast all day equities. So the desire for the brand, for our whole brand, our franchisees to continue with our dinner and late night efforts is a frustrated desire because of the pandemic and what it's done to limiting hours. So I'd say our priority in order would be expanding the hours. Remember, it's part of our brand tradition. We don't want to lose. It's a long, historically built-up equity. We don't want to lose. And we have hooks and servers that, for whatever reason, have built their lifestyle around those day parks based on family needs and flexibility required for their livelihoods. So getting those folks back to work, getting those sales back in our system is a priority for us. And remember, even on the virtual brands, when other brands are closed and we are open late night with those virtual brands to be able to provide service, that's proven to be a benefit. for us, a unique benefit for us in particular as well. And then I'd say, you know, remember also, I just want to make this point, that a lot of those limitations are based on jurisdictional restriction, not necessarily franchisees' desire to open. So restaffing is a component of it, but a bigger component, I think, is just the permission to do so. So those will come in time. And then I think right behind that would be because the high profitability of dine-in sales is to build all four-day parts dine-in, but we don't want to lose, you know, what it means to have, you know, the high teams, low 20 margin of, you know, third-party delivery to go or in the high incrementality of it, the averaging down the age of our brand. Remember... Just in the last, from April till now, we've got about 40% of these to-go transactions up through age 45, and it'd be the inverse of that for dying in, where about 40% would be up through age 45, and then boomers and seniors would represent 40%. um 60 of dining so so these are beneficial for trial for our brand and so uh you know holding on to that share while also building dining would be the next priority and then of course you know virtual we think can be a key component to fill in those those day parts for our brand awesome thanks quick follow-up on that another question is there any sort of incentive program to get franchisees to open for late night i think like you guys were running during the fourth quarter
spk06: And then the real question is, you talked about for a little while now the pulled forward unit closures from future years. So does that mean that, you know, maybe as we get through 21 into 22 and beyond that there may be some below average closure years? Or, you know, how does that sort of play out here? Thanks.
spk01: Hey, Michael. It's Robert. I'll take the first piece of that with regard to the 24-7. You are correct. We did have an incentive in the fourth quarter, and we did improve the number of units that were open and operating in the fourth quarter by about 10% with that incentive. Currently, as we have moved into Q1, we have not implemented that incentive. In fact, our chosen path from this point now has been working directly with our Vandals Franchise Association leadership to get their support, and we will be and have already begun working our DMA meetings designated marketing area meetings with the various franchisees to move in that direction. As restaurant dining rooms continue to open up, there is more and more appetite to get to 24-7. So we will work through that, and I do believe that we will be successful with regard to that as we move forward. particularly, again, restrictions, curfews, dining rooms could get back open. We have a high sense that we will get back to that. And it really is with what John, really an extension of what John just said. It's our heritage, and we will get back to that.
spk04: Michael, it's Mark. I'll take the second part of your question here, and I think it's a real good one. It really speaks to, I think, the other side of the pandemic and Just a couple of fact set points here. One is our closing number in 2020 was 73. I mentioned in my comments 67 of those were franchise restaurants with AUVs averaging volumes of a million or less versus a million seven averaging a volume. So again, those are 2019 type of comparables because obviously 2020 has the impact of the pandemic. So 67 of the 73 closures were basically low volume stores. And just as a reminder to everybody on the phone, if you go back and look at the last five to 10 years, we've been averaging about half that number in closures, call it mid 30 range. So basically our closure number had doubled in the current year, obviously because of the pandemic. We do believe that this obviously was a pull forward of closures in the future because of the low volume aspects of that. And again, when I look at the other side of this, which is the opening equation, As I think all three of us mentioned in our comments today, we believe there's a thrive opportunity on the other side of this pandemic. I mentioned the fact that we continue to see a great deal of seats leaving the marketplace in full serve. A large portion of full serve dining in the U.S. is independent players. And, again, we don't relish or celebrate that situation. That clearly creates an opportunity on the opening side, especially in the domestic business. So, again, we're going to drive the opening number as we go forward. And the closure number, again, as I mentioned, we believe that probably was a pull forward, especially when you look at 67 to 73 with those low volume numbers of a million or less in average unit volume.
spk06: Awesome. Thanks, guys.
spk04: Thanks, Michael.
spk02: We'll take our next question from Jake Bartlett with True Securities.
spk04: great thanks for taking the questions um you know but my first was it was about off-premise mix and the off-premise um advertising sales that you mentioned um you know i think sometimes we look to florida to see what what the future might look like you know with much less restrictions people getting back to sort of normal a little bit in terms of the behavior but i'm curious in stores in florida or maybe others that have um less restrictions how have the off-premise sales um held up um any um you know i know the eight uh thousands kind of an average so if you can kind of break it down to you know stores that um that are kind of have less restrictions and has that does that remain elevated still in those types of markets you know well this is john we may want to take that one offline too we i have you know sort of the brand wide data and it's in i can sort of tell you february to february how it's moved and we dine in was 88% February year, you're at 66% now. Pickups gone from 7 to 18, third party from 4 to 14, and so forth. And I can give you that information on the year. I don't have at my fingertips the markets that have been like at 75% capacity. So that might be a question we have to address in future release. That's a great question.
spk01: Okay, Jake, this is Robert. Just a quick add-on to that. We really haven't broken that out specifically the way you looked at it, but one of the things that I think to pay attention to is with our comp, and we quoted within my script how California impacted the entire quarter. I think it was five points on the entire quarter. So that would mean other states, such as the Texases and Floridas, where there are less restrictions, are performing much better. And even within that, we have still maintained this nearly doubling of the off-prem sales. So while we haven't specifically said what Florida's off-prem is and with their less restrictions, it's safe to say that without a higher level of where they were in prior years, we wouldn't be able to maintain that doubling. So I hope you kind of get that loose correlation there.
spk04: That makes sense. What I'm really trying to get at is your level of confidence that the off-premise sales will remain elevated even as diners come back into the store. Right. I would say elevated is a good word. This is John again. But I think, you know, again, to predict precisely what happens and how people work, how they office, their use of third party and their desire to get out, all those things are predicted to be dynamic changes. So I'd say that we've come short. We'll maintain a good portion of this, but the percents are going to move around as restrictions continue to lift. Got it. Got it. And then I had a question about unit growth in 2021. I know you're not giving specific guidance, but I think you talked recently about, I think it was 50 to 75 stores that are in that kind of million to below AUVs and that would ignore kind of potentials for closings. I think you called it a guardrail for closures. Does that remain true? And has that change with the latest round of PPP? So I'm just trying to understand whether you expect elevated closures to stay around for the next couple quarters, or has the PPP changed things? Jake, it's Mark. That's a great question, a very broad one. So I'll try to sort of take it apart a little bit, and maybe John and Robert will jump in here as well if I missed something. So I think You know, back again on the annual number, we had 73 closures. Sixty-seven of those were low volume, a million or less in AUV. We did mention in one of our previous calls, I think it was in the third quarter call, the fact that I think it was in Robert's script, actually. Robert mentioned that before we had the question, we had identified somewhere between 50 and 75 more lower volume stores. And so obviously some of those closed during the fourth quarter to take our total number up to 67 closures on the low volume side, 73 in total, 67 low volume. I think the other part of your question was around PPP and really the second round of PPP, which obviously we're in the early stages of the application process. Again, we're supporting our franchise system and are optimistic about the PPP funding. I think I would stick probably with that 50 to 75 range that Robert provided and knowing that we also closed some during the fourth quarter as well. Again, an average unit volume of $1 million is not universal as far as the profitability of that location, depending upon where you are in the country. So obviously the higher operating environments like the West Coast, average unit volumes, obviously the expectation out there is stronger, the cost of real estate, the cost of labor, et cetera. But in other parts of the country, a lower volume store, lower below the chain average, and again, our franchise system average is $1.7 million. those stores actually may be profitable in different parts of the country. So it's tough to provide a universal response. But again, I go back to Robert's comments in third quarter. That was 50 to 75 more lower-volume stores. That was a U.S. number, by the way. We obviously closed several more during the fourth quarter. That took our number to 67 closures, low-volume side. And so that number, that 50 to 75 range, sort of sticks with some kind of adjustment, obviously, to fourth-quarter closures. So That's a long-winded response, but certainly happy for a follow-up question, Jake, if you have it. Great. Now, that's very helpful. And then really the last question is, on the virtual brand, you've mentioned that 50% are going with one concept, 50% are going with the other. Is there overlap between those two? I'm just trying to figure out whether you've given the franchises a choice of one or the other, or if not, what went into the decisions? Is it more of a mutual separation, or how is it that 50% of the franchises are a company?
Disclaimer