Operator
Good morning, ladies and gentlemen. Thank you for standing by. Welcome to European WAC Center's second quarter fiscal 2024 earnings call. At this time, all participants on the listen-only mode. After this previous presentation, there will be Q&A session. In order to facilitate as many participants as possible, we ask that you please limit yourself to one question and one follow-up during the Q&A session. If you have additional questions, you may rejoin the queue. On the call today are David Berg, Chief Executive Officer, and Stacey Shirley, Chief Financial Officer. I would now like to send the conference over to Betany Charns, Director of Investinations. Ma'am, you may begin.
Betany Charns
Thank you, and welcome to European WAC Center's second quarter fiscal 2024 earnings call. On today's call, David Berg will begin with a brief review of our second quarter performance and discuss our priorities for the balance of 2024. Then Stacey will provide additional details regarding our financial performance and updates to our fiscal 2024 outlook. Following the prepared remarks, the team will be available to take questions. Before we start, I would like to remind you of our legal disclaimer. We will make certain statements today which are forward-looking within the meaning of the federal securities laws, including statements about the outlook of our business and other matters referenced in our earnings release issued today. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings as well as our earnings release issued today for a more detailed description of the risk factors that may affect our results. Please also note that these forward-looking statements reflect our opinions only as of the date of this call, and we take no obligation to revise or publicly release the results of any revision to our forward-looking statements in light of new information or future events. Also during the call, we will discuss non-GAAP financial measures, which adjust our GAAP results to eliminate the impact of certain items. You will find additional information regarding these non-GAAP financial measures and a reconciliation of these non-GAAP to GAAP measures in our earnings release. A live broadcast of this call is also available on the investor relations section of our website at .waccenters.com. I will now turn the call over to David Berg.
David Berg
Thanks, Bethany, and good morning, everyone. Thank you for joining us today. Let me start by saying how excited I am to be back at European WAC Center, speaking with you all today as CEO once again. I first joined EWC six years ago and was energized by the opportunity to build and expand an iconic, -a-kind brand. I was most excited about the company's undisputed leadership position, significant white space, passionate associates, and consistent recurring revenue model that allowed our franchise partners to generate strong financial returns and reinvest in the brand. What I learned over the course of the past six years is there is a deep love for this brand, from our guests, from our franchisees, and also from our associates, who are guided by our core values while feeling empowered to be their authentic selves, all of which make European WAC Center a great place to work. These unique attributes still exist at EWC today, and I remain excited and optimistic about the potential that lies ahead for our company. At the same time, I know there is much work to be done to realize our potential and reposition EWC for sustainable long-term growth. We're navigating an ongoing, difficult macroeconomic environment that is affecting consumer spending across many categories and income levels. Yet it is our job to do everything we can do to drive growth despite the external challenges we are facing. There is strong alignment between the board and the executive team on what needs to be done to deliver long-term value to our guests, franchisees, associates, and shareholders. I believe that we have built a solid foundation from which to address those challenges, but it is important to refocus on the strategies that will move the needle and ultimately drive results. Before I jump into the details of the quarter and our outlook, I would also like to extend a thank you to David Willis for all he's done for EWC in his eight-year tenure and for being an invaluable partner to me over the past six years. He played an integral part of our unit growth and development story, and I truly wish him all the best in his future endeavors. Now, let me turn to a brief recap of our second quarter performance, our outlook and my key priorities as I step back into the CEO role. During the second quarter, our top line was modestly below our expectations. System-wide sales grew .3% to $260 million. Total revenue was just under $60 million, and same store sales increased 1.6%. We also opened at eight net new centers in the quarter. I will go into more detail on our unit growth strategy in a few moments. We managed bottom line performance well, with adjusted EBITDA coming in at $20.6 million and adjusted EBITDA margin of 34.5%. During the second quarter, we continued to see a challenging macro environment, with consumers being more selective with their spend. Last quarter, we highlighted a few key initiatives designed to drive transaction volume in our centers, which we expected to ramp up substantially in the back half of this year. While delivering some improvement, the impact from these initiatives has not been large enough to offset softer transaction and new guest growth in this environment. As a result, we are reducing our outlook for the back half of 2024. Stacey will cover our updated guidance in a few minutes. We recognize we need to improve the effectiveness of our efforts to better position our franchise partners for long-term success. Driving transaction growth in ramping and mature centers is a top priority for both our franchisees and management, and we are actively collaborating with the network to refine our plans and achieve this objective. In pursuit of our shared goals and in light of the current operating environment, we have been working with our franchise partners over the past several weeks to reevaluate near-term development plans and extend the timeline of new center openings. As a result, we are lowering our unit growth outlook for 2024. While we don't take this action lightly, it is the right thing to do, as we believe it will provide us and our franchise partners with more capacity and resources to address near-term macro-related challenges. Additionally, we are actively working with franchisees in certain geographies who are facing increased rent and labor costs to mitigate potential closures, including facilitating transfers to stronger operators. We continue to be pleased with the desire of our franchisee group to expand with the brand and support the network through these efforts. Importantly, existing franchisees remain committed to their long-term development plans. The health of our franchisees remain strong, as does our robust pipeline of over 370 locations. We are focused on the long-term success of the network. Our franchisees have helped make us the undisputed leader in -of-home waxing. They are the ones who serve our guests day in and day out, and our job is to ensure they can do that to the best of their ability. Therefore, we have and will continue to explore ways to support them as we navigate this important time together. So what are we doing? What are our focus areas? Our financial performance and our new center productivity are inextricably linked, and the underlying drivers for the accelerating to a level that meet our expectations are the same, namely, one, driving new guests to the brand, two, reactivating lapsed guests, three, fostering an amazing guest experience, and four, prudently investing in capabilities that will enhance financial performance. And above all, maintaining a close connection with our franchisees to confirm we are hearing our guests as we work together to grow four-wall profitability. Let me double-click on each of these in detail where our opportunities lie. We must, first and foremost, stay focused. The business model remains sound, our franchisees are engaged, our guests love the brand and the services they receive. Thus, our focused efforts will be, first, inviting new guests to the brand, our enhanced data analytics capabilities allow us to verify that we capture a high ROI on our marketing spend using the right channels and the right creative. We are pleased with the progress we are making and media efforts are driving incremental reservations, but we must build on this. We know, as the category leader in what is still a vastly fragmented market, that we have significantly more advertising dollars than the competition to deploy towards attracting new guests. Specifically, we are targeting both current waxers and those new to waxing. We must continue to optimize our use of franchisees' marketing funds to be as efficient as possible in supporting our network, so we can put more dollars towards actively recruiting new guests to the brand. Second, we must do better at reactivating last guests. This is our bring them back strategy. We know the ongoing challenging macroeconomic situation has impacted consumers' behavior across many categories, including ours. We are fortunate that our core wax pass and routine guests, who comprise of approximately 75% of our sales, consider -of-home waxing with EWC to be non-discretionary, and their spend and visit frequency has remained stable, providing predictable and recurring revenue for us and our franchisees. However, we need to be better at re-engaging guests already in our system. We have an opportunity to be more aggressive in our efforts to get lapsed guests back. We believe we have untapped potential in delivering great service to these guests and converting them into core guests over time, thereby increasing their loyalty to both their waxing routine and our brand. Our leadership position provides us with this unique capability. Our third focused effort, we must foster an amazing experience at center level. We are relentlessly focused on partnering with our franchisees and deepening our relationship with our franchise advisory councils, so they have the support they need and deserve from us. To start, as you may know, we launched a program referred to as Operation Elevate, the goal of which is to elevate four-wall performance in select markets through training, coaching, and ongoing development by our field trainers. We are encouraged by the early results here. On a per-center basis, participants are demonstrating sustainable improvement in dollars per ticket, wax pass sales, product purchases, and other key KPI. However, we have an opportunity to accelerate adoption. As we continue to scale the program, we're making informed adjustments to enhance its impact. We've also seen promising results from our new center pre-opening playbook. New centers opened in Q2, using the playbook are outperforming the 2022 and 2023 cohorts with notably higher sales and transactions in their first three months. We will take those applicable learnings and operationalize them in mature centers as well. Next, we will continue to focus on staffing levels. We know that properly staffed centers produce better results, so we will do a thorough review and ensure franchisees feel properly supported in this area. Finally, European Wax Center has always been known for cleanliness, hygiene, efficiency, and expertise. This is demonstrated by our net promoter scores, which continue to be best in class. We must maintain this competitive advantage across all centers and continue to delight our guests with every service so they can walk in and strut out. And finally, our fourth and final focus effort. We will make thoughtful investments to support our goals of driving new guests and elevating the guest experience. In the past, I've led successful gain share structured agreements. We plan to evaluate partnerships with experts in marketing and technology, including AI, to help drive transactions and incentivize those partners based upon delivering improved performance. We also have the opportunity to leverage our significant customer base and seek brand partnerships that can cast a wider net and introduce EWC to new guests. Even as the leader in this highly fragmented category, we have less than 15% market share. Gaining market share remains a large opportunity, and we are pleased to have already driven a 22% increase in brand awareness year over year. We need to make deliberate investments in our app and website to make it easy for guests to book an appointment at the center of their choice for the time they want and the service they desire. Finally, we continue to advance our laser hair removal pilot, which has proven to be a valuable opportunity to add new guests to the brand and increase share of wallet from existing customers. We have made specific investments in laser expertise and marketing talent dedicated to this initiative. We plan to further expand the test to Florida, Pennsylvania, and Ohio, bringing us to approximately 30 pilot centers in four states by the end of Q3. As I mentioned, our financial performance and our new center productivity are inextricably linked. Driving and retaining new guests and improving transaction counts feed the flywheel for center development and expansion. When new centers ramp faster, our franchisees can generate higher four-wall EBITDA and in turn continue to reinvest in the brand. In closing, my commitment to our associates, guests, franchise partners, and shareholders is that we will continue to be guided by our values and relentlessly focused on driving new guests, retaining existing guests, and making them loyalists to the brand while improving our financial performance and expanding our leadership position. While it will take some time for us to get back to our full potential, we can assure you we are incredibly action-oriented at EWC with a can-do attitude. I know I can count on our amazing associates and franchisees to keep accelerating EWC forward. I'm encouraged by our franchisees' long-term commitments to drive continued predictable unit growth as reflected in our robust pipeline. By narrowing our focus on the key priorities I highlighted earlier, I am confident that our say's and do's will match as we move forward and earn back your trust. I was excited about this brand's prospects when I joined as CEO in 2018, and as I rejoined as CEO in 2024, I have even more conviction that our best days are ahead of us. We will update you as we progress in our journey, and with that, I'd like to hand the call over to Stacey Shirley to discuss our Q2 financial performance and guidance for the balance of the year. Stacey?
Stacey Shirley
Thanks, David, and welcome back. Before I begin my remarks, I'd like to remind everyone that in some instances, I will speak to adjusted metrics on this call. You can find reconciliation tables to the most comparable gap figures in our press release and 10Q filed with the SEC today. As a reminder, both fiscal years 2022 and 2023 included a 53rd week, but fiscal 2024 returns to a 52-week year. Now let's begin with our second quarter financial results. We added eight net new centers during the quarter, and system-wide sales increased .3% to $260.2 million. During our semiannual WaxPass promotional period, WaxPass conversion grew solidly year over year and demonstrated both the value of our WaxPass as well as the continued stability of our WaxPass guests. Same-store sales increased 1.6%, and total revenue, which includes wax and retail products we sell to the network, increased .3% to $59.9 million. As expected, gross margin improved 180 basis points to 73.2%, primarily due to product cost savings versus the prior year. Q2 SG&A decreased .7% to 12.9 million and improved 230 basis points to .6% of revenue. SG&A this year benefited from lower incentive compensation expense and the receipt of legal judgment proceeds. Partially offset by an increase in technology expense. The improvements in gross margin in SG&A I just described were more than offset by a $2.9 million or 460 basis point increase in Q2 advertising spend year over year, which was in line with the expectations we communicated last quarter. This planned investment largely contributed to the second quarter adjusted EBITDA decrease of .6% to $20.6 million, and adjusted EBITDA margin decrease of 140 basis points to 34.5%. With higher interest income in 2024, net interest expense decreased to $6.4 million from $6.8 million in the same period last year. Income tax expense decreased to $1.7 million from $2.8 million last year, as our effective tax rate improved to .5% from 33.1%. Gap net income increased .3% to $6 million, and adjusted net income grew 4% to $7.3 million. Turning to the balance sheet, we ended Q2 with $55.7 million in cash, and net cash provided by operating activities was $14.4 million compared to less than $200,000 in investing outflows. One of the most attractive characteristics of European WAC Center is our ability to generate strong free cash flow. Even in a constrained macro environment, our asset light, capital light model generates excess liquidity. During the quarter, we deployed $10 million of that cash flow to repurchase class A shares, demonstrating our conviction in the underlying value of our business model, and its long-term financial potential. We have $40 million remaining under our current share repurchase authorization, and our $40 million revolver remains fully undrawn. At quarter end, we had $392 million outstanding under our senior secured notes, and net leverage was 4.3 times adjusted EBITDA. Turning now to our revised outlook for the balance of 2024. As we shared last quarter, our initial 2024 guidance was predicated on both a stable macro environment and the ramping impact of our key early stage initiatives that would primarily benefit the second half of the year. Our national media, local marketing, and operational initiatives are each driving improvement in their respective areas. However, as David noted, that improvement has not been sufficient to overcome the softer macro environment and its impact on new guests and transaction growth. As a result, we are revising our financial guidance to reflect current trends through the back half of 2024. As we learn more about what is resonating with guests in this environment, we will make adjustments to our current initiatives to increase their effectiveness while also exploring new opportunities to drive guest acquisition and transactions. As David mentioned, given lower than expected transaction volumes, we have partnered with franchisees to reevaluate near-term development plans, translating to a revised 2024 outlook of 27 to 32 net new center openings. We believe this reset will allow us and the network to devote resources to driving more new guests and increasing transactions, which we expect will support higher average unit volumes. We believe that the re-acceleration of center openings will be closely tied to the rebound in transaction growth at existing centers. I do want to reiterate David's comments that we remain confident in the strength of our 370 unit pipeline, as well as our long-term market opportunity. Returning to our 2024 financial guidance, our system-wide sales outlook for the year now moves to a range of $930 to $950 million. Adjusting for the 53rd week of fiscal 2023, a revised guidance translates to approximately flat growth at the midpoint. We expect same-store sales to be in the range of down .5% to up half a percent, with total revenue of $216 to $221 million. Our current trends are tracking in line with these ranges. In terms of profitability, we continue to expect that cost savings will drive growth margin improvement to approximately 73% for the year. We now expect adjusted EBITDA between $70 and $74 million, which continues to include an incremental investment of up to $4 million of operating expenses to support the expansion of our laser hair removal pilot, the majority of which will be spent in the coming quarters. Higher interest income is benefiting net interest expense, and as a result, our full year interest expense outlook is now $26.5 million. We are currently projecting our 2024 effective tax rate will be approximately 25%, the four discrete items. Given our capital structure, we expect our blended statutory tax rate will be approximately 20% and expect it to increase over time as pre-IPO shareholders exchange their Class B shares for Class A shares. As a result, we expect adjusted net income between $19 million and $22 million. And finally, for modeling purposes, we currently expect that fourth quarter top line and bottom line dollars will look fairly similar to the first quarter this year. While the majority of our remarks today have been on near term dynamics, I'd like to take a moment to focus on the long-term opportunity that remains core to the European WAC Center story. We have a highly cash generative and asset light model that gives us the ability to invest in our business and drive shareholder value. Even in a challenging operating environment, we believe EWC's cash on cash returns remain compelling on both an absolute and relative basis. And our franchise partners remain committed to developing their portfolios over time. In turn, we remain committed to driving new guests to the brand, supporting our franchise partners and generating long-term shareholder returns. With approximately 1,060 centers today and a long growth runway ahead of us, we remain confident in our unmatched leadership position in the highly fragmented out of home hair removal industry. We'd now like to turn over the call for questions. Operator. Thank
Operator
you. Ladies and gentlemen, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. And as a reminder, please limit yourself to one question and follow up. If you have additional questions, you may rejoin the queue. Please stand by while we compile the Q&A roster. Now, first question coming from the line of Randy Koenig with Jeffrey, CLNS Open.
Randy Koenig
Yeah, thanks a lot and good morning, everybody. I guess Stacey, as a point of clarification, when I'm looking at the revised guidance, you know, the EBITDA dollar guide is not all that, you know, it's not down significantly. I think you spoke about some cost saves. Are those, as we think about, you know, beyond this year and into the coming years, are those cost saves kind of temporary? Are they permanent? I'm just trying to get a sense of, you know, you have a very high margin structure that seems sticky. And I wanna just kind of get some perspective on, you know, is it in fact gonna remain sticky, you know, in the out years going forward? Thanks.
Stacey Shirley
Good morning. Thanks, Randy, for the question. Yeah, so a couple of things. One, as you, as we've talked about and seen the past couple of quarters, our gross margin, right? We've seen an improvement there year over year. And we've talked about that from a cost saving perspective and we would expect that that would continue. We're expecting to be around that 73% for the full year. And there's no reason for us to anticipate that that would go down in future years. And then from an expense perspective, we would expect to leverage that top line. We did have some favorability in the quarter, some of which was timing, some of it is just, you know, trying to be obviously as conscious as we can from an expense standpoint in this, you know, very difficult environment.
David Berg
Yeah, Randy, I think, listen, we've been consistent in this story that as we grow top line, we've got the opportunity to expand EBITDA margin. Our cost structure here at HQ does not require continued, you know, adding of heads and expense. So as Stacey said, as we grow top line, we would continue to believe that EBITDA margins will expand.
Randy Koenig
Got it. And I guess, David, just lastly for you, you gave us a couple, you know, a number of points that you're focused on. Maybe give us some perspective on, you know, the top one or two things you're kind of, you're really focused on day to day, you know, prior. I just want to like, how you're prioritizing all the different points you kind of set forth on the call this morning. You know, what's most important to you and to the army of the employee base, what are you most kind of getting, what are the top one or two messages you want to get across to them, you know, over the coming six months and year?
David Berg
Yeah, yeah, Randy, thanks for the question. Listen, I think you know me and one of my key tenants in our leadership responsibility is to be crystal clear about what we're focused on and what our priorities are. If I sort of canvas what I've heard from franchisees and what we think is the most important thing in this business, it's two things. And they're really kind of the top two priorities that I spoke to. One is how do we drive more new guests into this brand? How do we attract more? And then second, how do we drive transactions? If we, you know, this flywheel that where we can get centers that have faster ramping, better four wall EBITDA, that just is an opportunity for our franchisees to reinvest in this amazing brand and that flywheel just keeps moving. We've got to do a better job at number one, driving new guests into the brand, retaining them and increasing transactions. Those are the top two key priorities for the organization.
Randy Koenig
Super helpful, thanks guys.
David Berg
All right, Randy, thank you.
Randy
Thanks.
Operator
And our next question coming from the lineup, Scott MacRaeley with Truett, the line is open.
Scott MacRaeley
Hey, good morning, this is Josh Young on for Scott. You know, so obviously the new center openings are down significantly for 24, but can you just give us any idea when you think you might be able to get back to a more normal pace here? You know, is it something that happened in 25 or you think that's further out?
David Berg
Hey, Josh, thanks for the question. I, you know, listen, I think you're, it's a great question because we really view the action that we took and as we said, not a decision that we took lightly. This is a temporary reset. We think it's really important in concert with our franchisees to really focus on driving those top two initiatives that we spoke to. Our view is we get tickets back on track. We get new guest counts moving in the direction that we want and we will go back to the kind of growth that we're accustomed to in terms of new center openings. We feel incredibly confident as we look long-term, given our pipeline and given our franchisees, real desire to continue to invest in this brand. So this is a temporary reset, a temporary hold, and we expect to get back on track to our normal growth rates and NCOs as soon as possible.
Scott MacRaeley
Yeah, that's helpful. Thank you. And then just one other one. So it sounds like the four-wall productivity has come down quite a bit for some centers here. Can you just help quantify that decline for us? And then is that widespread across the base or are there more, you know, there were specific regions or pockets where you're seeing that more pronounced?
Stacey Shirley
So I'll start this and David, you can add any color, but yeah, certainly the four-wall profitability has been pressured as we've been very challenged from the standpoint of the new guest and the transactions. As it relates to geography, there are certain geographies that are more impacted. We've talked before about the West Coast as it relates to higher rents and higher labor costs and that certainly has put more pressure on the cashflow perspective on some of those particular franchisees centers.
Randy
Okay, that's helpful. Thank you. Thanks, Josh.
Operator
Thank you. And our next question coming from the line out, Dana Tilsie with Tilsie Advisory Group. Yolana is open.
Dana Tilsie
Hi, good morning, everyone. And nice to hear from you again, David. David, as you think about your two initiatives of driving new guests to the brand and reactivating last guests, at this time is one weaker than the other. Is the cadence of what you expected from new guests weaker than what you're seeing in reactivating last guests? Second, you had a new national media agency you hired, you were testing some local media agencies. Is that initiative still in place and what are you learning? And lastly, you mentioned higher rents and potential center closings. Had you seen that at all? And is there any adjustments that you need to make to the franchise model in terms of fees that the franchisees are asking for? Thank you.
David Berg
Yeah, thanks, Dana. Listen, I think if you look at those top two priorities, probably the driving of new guests outweighs the retention. I think the opportunity for us with last guests, given our enhanced capabilities and data analytics, we can really identify those guests that haven't been visited us in six months. That's what we define as a last guest. So we can go back and target that guest very specifically. As I mentioned in my opening remarks, how do we get a bit more aggressive in terms of getting that guest back so that we can wow her with an amazing experience when she comes into the center? But if I had to handicap both of those or prioritize both of those, really driving new guests, continuing to drive new guests into the brand is the top priority. We talked about those initiatives that you called out that help drive new guests. The national media change, as well as an increased focus on local marketing, we have been very pleased with the results that we've seen there in terms of driving reservations. But remember that those marketing efforts are just one piece of, or one leg of the, maybe a four or five-legged stool in terms of driving new guests in. And we'll continue to invest those dollars that have the highest ROI from a marketing standpoint to drive new guests. So we're pleased with those, Dana. We'll continue those. And it's our job to think of some other opportunities where we can attract new guests into the brand. I think the higher rents and the closures, we wanted to be open with that and transparent about, particularly in California, where rent rates have gone up, certainly labor costs, we're all aware of what's going on, even at entry-level positions, that that is impacting particularly our California centers. The team has done an amazing job where we might have a center or a group of centers that just say, hey, it's gotten a little bit too tough that we brought in stronger operators to take over some of those locations. That's happened in California. So that gives us great encouragement that we've got franchisees in this brand that love this brand and are absolutely willing to step in and help. So we continue to mitigate that. Joel Larkin and his team are working constantly with our franchisees on if they've got a rent renegotiation, how we manage those labor costs. I alluded to the notion of labor staffing is really critically important for all of our centers. So those are things that we just continue to work with our franchisees on every day. If I got, if I'm not sure, Dana, I understood that the fees comment, but at this point we don't see any change to our structure in our franchise or marketing fees at this time.
Stacey Shirley
One thing I would add to that as it relates to the centers, let's not forget that from a cash on cash perspective, they are still very, very strong, plus 50%. And so although there has been some pressure with the tickets and transactions overall, they're still overall a really incredible four wall profitability model.
David Berg
Yeah, Stacey, that's a great point. And Dana, I mean, one of the things we really haven't done in a conservative effort, because we've got such great group of franchisees that reinvest in this brand, we know that even at 20% four wall EBITDA margins, this is a very attractive model for franchisee. And as Stacey said, 50 plus percent cash on cash returns. We've got folks that are continually looking to come into the brand, and we will ramp up our efforts to bring more folks into this franchise network because the business model is so strong. And we've got a real high demand there, folks that wanna come in. So that's, again, I think a real positive for the brand.
Dana Tilsie
Thank
David Berg
you. All right, Dana, thank you.
Operator
Thank you. And our next question coming from the line of Lauren Hutchinson with Bank of America, Alana Shelton.
Lauren Hutchinson
Hey, Lorraine. Good morning.
Operator
Good
Lorraine
morning, David. I just wanted to follow up on the decision to delay some of the new center openings. Was that something that was driven by franchisees or purely an EWC decision? And also, are you hearing any pullback or concern in the long-term pipeline of franchisee interest?
David Berg
Yeah, Lorraine, thanks for the question. It was, as you know, we try very hard to make sure that we've got a great relationship with all of our franchisees, and particularly our franchise advisory council. So we're in conversations with them at all times. We thought the initiatives that we launched in Q1 were gonna have a faster impact when those things did not quite develop as fast as we thought, given the macroeconomic situation. We started having conversations with our franchisees, and as Q2 results kind of unfolded, went back to our franchisees, talked with them and just said, hey, what makes the best sense? And we agreed in concert with them that the right thing to do is to focus on the key initiatives that we have to drive our business. I wanna reassure you and all the folks on the call that the long-term development goals are the same for us. So this is just moving things out a bit so that we can focus on this near-term opportunity we've got with the current situation. But we feel incredibly confident of our growth rate, of our franchisees' commitment to continue to develop. And as I said in my opening comments, this is really just a short-term pause to get us back on track and get the business righted from a core level.
Lorraine
Thank you.