Thanks everyone for joining us this afternoon. My name is Chris O'Cull. I'm the restaurant analyst with Stifel, and welcome to our CSI conference. Our fireside chat today is with Chuy's. With us today is CEO Steve Hislop, just to the left of me, and VP of Development, Mike Hatcher, to the far left. I won't give too much details about Chuy's because, Steve is gonna kick us off with a few slides with a description of the company and the concept. Thank you. I'll hand it over to you, Steve. Thank you, Chris. We got Mike there. Again, quick little hi, so we're a small, little concept based out of Austin, Texas. We're fresh, authentic Mexican, Tex-Mex inspired cuisine. We have a great value, and a broad customer appeal, a relevant brand, which differentiates our concept. Flex-- We have a flexible business, business model that we'll show in a second here. We have a tremendously strong balance sheet, and the culture is just very unique. Industry-leading metrics. Our restaurant generated a 19.6% LTM restaurant-level operating margin, which is one of the best in the industry. Comp to, comp, restaurant LTM average of $4.5 million. Our highest volume store is based at the North Austin. It's actually Round Rock. It does $9.8 million, right around $10 million so far as we move forward this year. Significant value proposition. This is a key. Most of our menu items are priced around $12-$20. Our check average is $19.02. That's with about a 15.5%-16% liquor mix that's included in that. If you look at this slide, go back to when we went public, we were probably somewhere between Olive Garden and Chili's and those price points, and over the years, we've made a concerted effort to make sure we were the best value in town. Restaurant level margins. You know, this is key. Through COVID, horrible time for everybody in the industry or any person alive at that particular time, obviously all of us. But we used this opportunity to really look at our whole model and look at our whole mouse trap and, and reorganize our models. As you see, we've always said, in the last couple of years, that we always expected to keep our increase in margin in that 300-350 range. As you can see here, trailing 12 months, we're at 20. That's basically 460 basis point. We still believe we live in that 350-400. Where Chuy's wants to live as far as margin goes, for not only today, but as we move forward, is in between that 19%-20% range as we move forward, and anything more than that would give back to the guest. With that, Chris, that's just a quick down and dirty. Okay, perfect. Well, let's start the discussion. So Steve, the hot topic right now across the industry is the signs of weakness many chains are seeing among low-income consumers, and just the industry's tilt towards value. As you pointed out, Chuy's has been a lot more judicious with its price increases than a lot of your competitive set. Just from your vantage point, though, what are you seeing in terms of current trends regarding the health of consumer spending? Yeah, I think just like everybody, Chris, we definitely have seen a little bit on the lower-income people, although for us, we're our value menu. You know, there's a lot of competitors out there doing two for $20 or, you know, $1 margaritas and some other concepts. We have that within our menu all day long. So value is very, very important to us. So we've stayed on that, but there is weakness, and coupled with that is really go back from a year ago today is the consumer going to the grocery store. The grocery store inflation was actually higher than the restaurants, and now it's actually flipped back the other way. So that's another dynamic that we're dealing with. So we just got to make sure we're executing inside our four walls, and really, our message has been really talking about our defining differences on all our social media in the past, which is made from scratch food, you know, a hand squeeze in your limes for every margarita and all that type of stuff. We've actually shifted, which social media allows you to move quickly on this, that we're really starting to talk about value. It's not so much price points, but we're showing the full plates and stuff like that. But we will even go to the price point a little bit, like on our burritos, our $12.99 burritos, which is as big as your face burrito that we show it, and we, we will do a little bit of that, and that's what's happening currently with us, just to get that value message shoved out to everybody. Because, again, we're the best value. If you're looking at our price point and maybe a Chipotle, for example, which is two totally different experiences, just $0.20 different on price point, take away the liquor. So our value is there, so we just need to make sure we're pushing that out and talking about it even more. So the company's traffic has been down the past three quarters at a bit of an accelerating rate, but the full-year comp guidance implies a reversal of that trend. On the first quarter earnings call, the company highlighted several reasons why the trend should improve. So what I wanted to do was explore some of that today, and I wanted to start with the menu innovation, and then we can get into marketing as well. Sure. But first, I was hoping you could update us on the performance of the new Burrito Bowls, and I believe they are a permanent menu item. How are those things mixing? And, just tell us a little, maybe describe them too, and tell us- Sure ... a little about them. Yeah, that's great. Well, we ran a burrito bowls last year as part of our CKOs, which is Chuy's Knockouts, which is our limited time offers, and we did that early last year. Did tremendously well in our six-week window that we did that. And so as we looked at this year, in February, I added them permanently onto our menu. So it came in, it's a, it's really a burrito without the burrito, the tortilla. So that's what it is in a bowl, and it's done very, very well with us. It's really not adding any more complexity into the kitchens because it's really the same ingredients that you're putting into a bowl and just dressing it up. So it's done very, very well for us, and it's actually moved up our burrito category into that section. So we're real excited about that. We also brought back, at the same time, our appetizer plate that was a long time gone from our menu, and we added that on. As we move forward, though, anything that you'll see in the future that we add on, there'll be some reciprocal of something that will come off. 'Cause we feel great. I have that 42-44 menu items, and you gotta stay consistent within the kitchen and making sure you can execute what you have. And right now, it's a very linear process, not only in our pricing, but also where each item comes off which station. So that's very, very important. It seems like a lot of these new menu items, though, appear they seem to be priced at the higher end of the menu range, or at least within their categories. This, this would seem to be an item, like the Burrito Bowls, that is intended to boost the check average, maybe more so than drive traffic. Is that what's happening with these type of menu items, and is there a strategy you need items like this on the menu so that you can afford to offer more value-oriented items? I mean, is this part of a barbell strategy? It is, but not specifically the burrito bowl. The burrito bowl is priced very similar to the burrito, okay? So it's pretty, pretty neutral as far as that goes, as far as the price point or our PPA. What we do do in CKOs is we usually run one item that's more of a barbell approach, and it'll be an item that, y ou know, our menu ranges from somewhere between $9.99 and, let's say, $14.99. But our barbell will be somewhere between $18 and $23 items that will be in the CKO, and we'll pick one per quarter. You know, a couple quarters ago, we did a short rib, you know. Mm-hmm. Right now, we're actually doing a green chile barbecue ribs, that's running, and it's doing well. It will normally be one of the lowest-selling items in the CKO, but again, it's something to show the price elasticity of our guests. Those items will never make it on the menu because I want our menu to scream value. But as far as the CKO, to see what the how elastic our price points can be, it makes a whole bunch of sense. Again, with one of three items, it's not gonna move the PPA per se or anything like that, as far as significant, but it is just giving another choice and get rid of the veto vote, is what we're looking for. Let's talk a little bit about marketing mediums and how you guys market and maybe do a better job of marketing some of this value, as you initially were talking about. Like, what's the strategy today that you're using to get that value message to the consumer? And where do you think there's opportunities to maybe either change the media mix or to maybe look at new mediums so that you can reach more consumers and tell them that, you know, you are comparatively speaking, a better value than a lot of the other casual dining chains? Yeah. I think it's... Let's go back to where we started. You know, one thing that really makes us different, you know, part of our defining differences is we make everything from scratch. You know, and those are our, what we call our defining differences, and I really paid most of my attention when we're out there marketing and all of the whether it be YouTube, TikTok, or any of the social media or digital advertising, is I really said why we're different than anybody in our competitive set, which is we make everything from scratch. We have 10 sauces that we make from scratch daily. We don't have freezers in our building, except for a small one where we put the kids' ice creams. All those are defining differences that no one in the casual dining space can really talk about. So that's where most of my media and most of my messages were. Now, I will tell you, over the last 2 quarters, I've switched that up. We're gonna keep the defining differences, but we need to be screaming value a little bit, 'cause we don't discount. We never will discount. What we do, you know, a lot of people are out there doing 2 for $20s and all that type of stuff. Well, you can eat in our menu all day long for 2 for $20, but I still need to get that message out. So I'm always hesitant to put any price points on there, but as I mentioned earlier, we will have our burrito, which is big as your face burrito, and you look at a plate that has no white space on it, nice, full, big, and they see a $12.99 price point on that, so tremendous value. So we will start doing that. We also, for happy hours, we do what we call Chips & Dips. There's four different dips that are layered on, and you get them all for $5 during happy hour. We'll hit that a little bit. So we'll hit some of those price points, but again, value also is a full plate of food with no white space on it. So we're definitely gonna do that, and we'll hit that on all on digital. We're gonna hit it in YouTube. We're gonna definitely do it on all our TikToks, and our influencers. We have some paid influencers that do a lot of stuff for us, and that's talked to us. And in every single store, we instituted a year ago, that every single store has a social media manager, and each store that has their own local stuff that we put on the social media on a regular basis every month. So that's gonna be a little bit more of a hard-pushing message, just to deal with all the stuff that really started last October, when, you know, for three years, there was no discounting in our industry for a while during COVID. It came back last October, and now it's going hard and heavy, and what I've usually see there, that will run a year in itself, and then the customer will realize that I'm still getting a price off, but it's the same old food that I always got. So that's where the competitive advantage for us, and we'll lap that in the next couple of months. Have you guys considered, and especially in markets like Texas, where you've got a lot of stores, using more traditional media too, like billboards, radio, or maybe even spot TV? Yeah, definitely billboards. Not only billboards, but also the directional boards- Mm-hmm ... are, are something that we have now, probably about 50 of them. So we're doing that, and a lot of them are in Texas, and also the directional boards we're doing. And we're on YouTube, and we're on programmatic TV right now. Right. Probably not on major network TV because everybody's going through that so quickly. So, you know, the key thing is, and any 30-second ad is skippable. It's 15 and 6 seconds that you can get where they can't skip it, so that's where we're spending most of our time. Makes sense. I know the last time we spoke, you were still in the process of evaluating some marketing efforts on Uber Eats. Has the company decided on the best approach to marketing- Yeah ... on that platform? We're doing it both. We're doing DoorDash and Uber Eats. Last year was our first year doing Uber Eats, so it is part of the program. This year, we do have a spender, which is equal to DoorDash, and we do it quarterly. And it's, you know, it's roughly about a $40,000 on each medium to spend, and that's quarterly we do that. And it's also looking at lapsed customers and new customers, is where it's directed at. . What is the mix right now on those platforms in terms of your sales or? Oh, it's actually increasing, and we're one of the few ones that's still increasing. Last period was up about 12% of our to-go. Mm. The prior year was, like, around 10. It's up, it's up, 200 basis points. You know, given that food travels, your food especially travels really well, and I believe you guys are priced to be largely channel-agnostic right now. Mm-hmm. Why wouldn't you look to maybe get more aggressive growing the aggregator channel and market to, you know, market to those users maybe at a more aggressive rate, especially given there is growth in those channels still. You guys seem to be capturing that growth. I mean, is that something that could become a more meaningful- Yeah ... part of the business? You know, right now, we think it's, we're being aggressive right now with it. Okay. We're doing it every single quarter. We'll look at expanding that, but then you do get fatigue in those, and there will be some fatigue, but we're definitely looking at it because right now we run them eight weeks out of the quarter, of a 12, 13-week quarter, and we'll look at that. But that's something, again, you evaluate, and you can turn on a dime when you need to. So let's just, let's do the hypothetical. If traffic doesn't respond and maybe gets weaker in the industry, and you guys are starting to see some more pressure than you initially expected, how do you respond to that? What leverage can you pull? Yeah. The leverage is we're just one quarter now into the value message of showing it, so we're not even in a full quarter into that yet. We'll push that, continue now. We have a new creative coming out in the fourth quarter, that's also definitely on a value message still in the fourth quarter, and that will be all new creative that we're shooting currently right now. And we'll look at all of it. The thing about what we do mostly on our digital process is you can spin on a dime. So your message can change, and you can add, you can delete. So we'll definitely have that available to us, and we'll continue to monitor that. You know, one thing, as you mentioned earlier, you were talking about the sales cadence for the year. And going into this year, we were rolling over in the first quarter of 8.5% sales increase from a year ago. A variety of reasons for that. The variety of reasons was, number one, we were coming off of COVID right then, so you had the pent-up demand of January specifically, 'cause in January alone, we were up against a 15.5% sales increase last year. So we actually projected to be down even more than the 4.3 that we actually were. But as for you look through the year, we're expected to be, you know, down about 2% in the second quarter, and then we have a lift in the whole back half of the year, where we expect to be flat to up as the year goes on. So that's what we're planning, but we definitely have our marketing efforts that we can turn up a notch if we need to. But I think the message that we're talking about, which is a value message, but still really talking about why we're different, what our defining differences are compared to anybody in the casual dining, it still resonates. I think that's our play for the second half of the year. I know the company was on track to have, I think it's called ezCater- Mm-hmm ... fully rolled out by now, I think. Mm-hmm. Can you, can you briefly explain how that platform works for those maybe not familiar with it? And then, can you help us understand what the lift looks like in the stores that have had it in place for some time, and maybe just how quickly that ramps up? Yeah. You know, what this is mostly, ezCater is, is really done for office buildings, and it's mostly lunch, never, hardly ever for dinner. Might be a dinner meeting here and there, but you're talking, you know, probably meals from eight to 20, where catering is much bigger than that, bigger than weddings and so forth. And we do, we rolled them all out. We actually had them all rolled out finally now as we're sitting here talking. And it's roughly about $45,000, you know, a period, right now. And we'll have some expansion on that, especially as offices continue to keep coming back into vogue again, let's say that, like that. But it's definitely a big part of it. But, you know, one thing that we're really proud of is, before COVID, we were about 12-13% to-go. Currently, we finished the first quarter at 29.1%, which includes catering, ezCater, all our to-go is in that. And we're up in every single category, including catering, ezCater, and also DoorDash and Uber. We're up in all of those. So we're pretty excited about that. We've always said we'll end up in our to-go business, probably in that 25+ range, and we still feel good about that. Right now, our catering is something that we're really pushing in the last couple months. And I've always said that we can get to 4%-6%, you know, long term on that. On the fourth quarter, we were over 4%. We finished the first period, I mean, first quarter, about $3.5, $3.6. So we're gonna get there probably before the end of the year, and continue to grow that. Right now, we have 17, what we call vans, in each of our markets. Now I'm adding second vans, and so this year you'll probably see me add, you know, four to five more vans, and that will also be helping us roll. But I'd see catering, as far as all the to-go, that'd be our biggest initiative, even above ezCater. There's no reason you can't continue to increase that long-term goal. It's not like you're gonna stop. Correct. Okay. Oh, yeah, yeah. I- We might get there quicker than my 3-5 years, though. Right. That's my point. Okay. You know, I know you internally promoted a new COO into the role late last year. As you think about some of the operational opportunities you have over the next 12 to 24 months, what are some of the most notable opportunities in terms of either operations in the four walls or maybe even procurement that you think can help drive efficiencies in the business? I think this is key. You know, this fella is a guy we promoted probably about a year ago. I met him 16 years ago when he was a kitchen manager in North Lamar. Tremendous operator, a tremendous four-wall operator, tremendous food man. And really specifically, he, he's up with the times and all the digital information, and that's where he's great for us. But one thing that I pride myself and our company on, and definitely him, is we believe in our turtle mentality. And when things are tough, get inside that shell and work on your four walls. And that's what he does best. And he's-- but he's solid. He goes through schedules, he understands the hours, he understands how many, how much money you do per 15 minutes when you open at 11:00 A.M. to 11:15 A.M., and understanding what staff you need on that. Having an operator like that is, is instrumental to us keeping that edge, because too many people are out there looking for what they call silver bullets, or doing these price-offs, or doing these buy twos and all that stuff. Those aren't silver bullets, that's just giving your stuff away. All right? So what we want to do is work on the hospitality and put the hospitality back into our restaurants, specifically Chuy's, while everybody else is out there looking for a silver bullet, and that's what he's, his strength will be. And as far as procurement goes, you know, we're always looking for, you know, with our CKOs, we're always looking for the new items or the new and efficient items, but never forgetting your old mainstays is what people come back and back and back for. So those are key things for us, is make sure when everything we do, we improve it something, not take something away. Okay, I want to shift to development. So Mike, you're going to get a turn here. There you go. Can you just update us on how the pipeline's shaping up for the rest of this year, and then just, you know, your level of confidence in accelerating the rate of growth to that 10% target, I think, for 25? Sure. We've got everything set for this year. We're targeting six to eight this year, and by 2025, we want to be back to that 10% new store growth. We've got those stores in the pipeline and ready to roll. We're working on 2026 deals at this point, so the pipeline has never looked better. We've made a lot of changes since Covid. Really dove headfirst into analytics, more so than we ever have. So we brought on a couple of software programs. eSite is a modeling program or predictive modeling program that we use, and it's had great success. We've kind of retooled that since Covid to kind of have a post-Covid model and a pre-Covid model that we're looking at. And then we brought on Placer.ai to verify traffic in different markets, and we use those tools together to really analyze different sites, different markets. It's been great. We brought on a director of real estate that is... And the reason we brought him on is his extensive experience with analytics. So he's able to drive that, drive that program for us, and he's done a fantastic job. Very excited about that. We brought on a new master brokerage firm, JLL, again, because of their analytics capacity in their local office in Austin. And so that has been a big help to us. So the pipeline looks great. We're pretty excited about it. Yeah, and the key thing with Mike said is that, you know, once we went—when COVID happened, we dismantled the whole development department- Mm-hmm ... 'cause we weren't growing, obviously. And so Michael put all that back together, starting in 2020, 2021. Mm-hmm. It's just revamped the whole process, and that's part of the reason that we're evolving our development now, well, specifically over the next three to five years, really be in five states. Am I right to say that? So we, we've focused on one of the things that, we used eSite for, is really analyze, which states, which markets that we do well, which, which ones have the highest AUVs, the highest margins. So we picked Texas, Oklahoma, Arkansas, Tennessee, Kentucky, are the five, states that we're gonna focus on. And within those five states, we determined that we could open up another 100 stores without cannibalizing any of the existing stores by more than 5% and still hit our target margins and sales. And so, you know, it doubles the company just focusing on those five states alone. We added Ohio and Indiana into the mix, for a total of seven now that we'll kind of focus on for the next few years. We're in 16 states currently, but there's a lot of growth in those seven, so there's no reason to take the extra risk and go to those kind of outlying markets. Yeah. The key for us is in those five states. Right now, our AUVs are about 4.5, as Mike said. In those five states, we average about 15% higher than that. So it's safe, especially when you're dealing with the construction costs over the last few years. It's up roughly 35%-40%. Mm-hmm ... to make safe and solid decisions as we move forward. So we feel very comfortable in these five states. How many leases have you already signed for the development for this year and maybe even next year? Well, this year is done. Next year is done. We might have one- One left ... one left to do next year. It's actually a piece of property that we're purchasing- Mm ... that is under contract. We're working on 2026 deals at this point. You've already signed leases or and/or purchased property for the openings scheduled for 2025? Correct. Yep. Okay. All those are put- We have one to finish up. One to finish up. Okay. You know, I know you laid out the potential for, I think, north of 350 units in the US. You're just over 100 units today, and the 10% unit growth is obviously a good level. The absolute number of stores, though, is still relatively low. I'm just curious. What's holding you back from opening, let's say, 15-20 units a year? You know, there's nothing. I—First of all, Chris, opening stores is hard. It's, it's hard. It's not relative, it's hard. And ten percent is a great number. You're not gonna get any credit for opening any more than ten, to be honest with you. I think there's more of a higher risk on that. But I mean, we have the infrastructure. I have four VPs of operations that basically crisscross the United States that can go in each one, and they have the ability to go up to 100 stores a piece. So we have the ability, it's just making sure in the right environment and the cost structures, that it's commonsensical. 'Cause opening stores is tough. It's hard, and 10%, honestly, is a real strong and robust number, I believe. So there's been some notable bankruptcy announcements in the casual dining space recently. I know you guys have been opportunistic in terms of conversions in the past, and I was just wondering, have you seen an uptick in those types of site opportunities? You know, Go ahead, Mike. We've got a few of those. It's something we always look at, because we love second-gen space. We've got a saying: "If you've seen one Chuy's, you've seen one Chuy's. Right. We love having restaurants different size, different shape, different sizes. The last thing we wanna be is a cookie cutter with the same building five miles up the road everywhere you go. We want people to, to really walk in and say, "This is my Chuy's," and we hear that quite a bit. Anytime there's an opportunity to take a second-gen space, or Hermit Crab, as we like to call it, we'll, we'll take a look at that. We've got a few of those in the pipeline. The problem is, with the cost of construction these days, we're not the only ones looking at those. So even the big boys, Darden, is now fighting for the same second-gen space that I was looking at in the past, and so it's a lot of those are tough to get, but we definitely will look at those. Yeah. We got a few, like, our old concept. Mm. We've got another one in Evansville we're looking at- Mm ... and all that stuff. So we're definitely... We love remodels. That'd be our favorite thing to do. I was gonna say, that would still be favorable from a cost standpoint, right? Yes. Yeah. Yes. Absolutely. I know you guys have been working to bring down the build costs with third-party architects and some consultants. Where are you in that effort now? And, I'm just curious how much progress you've made, at least on paper, in terms of what it's gonna cost to build a future Chuy's. We've made a lot of progress over the last few years, you know, construction costs being up 40% pre-COVID versus post-COVID. We had a great design-build program that we were using pre-COVID with a GC architect or design-build firm out of the Dallas area pre-COVID, and they did 100 stores for us, 100 plus, actually. They've really struggled coming out of COVID, but it's given us the opportunity to really take a look and see what else is out in the market. So we've engaged three other architects that we're using and three additional GCs that we're now using. We're getting bids on new projects coming up with those folks. The early numbers have been fantastic. I've got three projects that are out for bid right now that are about to start construction, and the numbers are looking great. We should see some savings coming up pretty soon on those. So that inflation on construction costs has kind of stabilized, and I think we're now starting to see that come back the other direction. We changed the prototype a little bit. We did change the prototype. We shrunk that down from about 7,500 sq ft to about 5,500 sq ft, so saving some money just on pure building less square footage. But we should really see some numbers, look in line here in the next six months or so. Yeah, and, and you don't lose any sales on that. Again, 'cause you're talking about a, a 25%-30% to-go rate compared to the old days of 12%. Just to end here, on the unit economics for new stores, the target AUV is right around $3.8 million? I'd say minimum is $33,375. Yep. Okay, and then the investment costs that you're hoping to achieve? 3.5-four. In the restaurant margin, cash margins in that high teens? High teens. Okay. Yep, high teens. Yep, and a cash-on-cash return in that 25%-30% in year three. Okay. That's great. Well, with that, Steve, Mike, thank you guys for your time today. Okay. Thank you, sir. Thanks, everyone, for attending. Thanks, everybody.