Good day, thank you for standing by. Welcome to the Dine Brands Global Q1 2023 Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one, one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star 1one, one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to the speakers today. Please go ahead. Good morning, welcome to Dine Brands Global's Q1 2023 Conference Call. I'm Brett Levy, Dine's Vice President of Investor Relations and Treasury. This morning's call will include remarks from John Peyton, CEO, and Vance Chang, CFO. As discussed last call, Tony Moralejo, President of Applebee's, and Jay Johns, President of IHOP, will be available following those remarks to address questions from the investment community in the Q&A portion of the call. Please remember our safe harbor regarding forward-looking information. During the call, management may discuss information that is forward-looking and involves known and unknown risks, uncertainties, and other factors which may cause the actual results to be different than those expressed or implied. Please evaluate the forward-looking information in the context of these factors, which are detailed in today's press release and 10-Q filing. The forward-looking statements are as of today, and we assume no obligation to update or supplement these statements. We may also refer to certain non-GAAP financial measures, which are described in our press release and also available on Dine Brands' investor relations website. For calendar planning purposes, we are tentatively scheduling the release of our Q2 2023 earnings after the market close on Wednesday, August 2, 2023, with a call the following day before the market opens. With that, it is my pleasure to turn the call over to Dine CEO, John Peyton. Thanks, Brett. Good morning, everyone. Thank you for joining us for our Q1 earnings call. In Q1, we delivered a solid financial performance despite the challenging and dynamic economic environment. This is thanks to the focus and execution of our outstanding team members at Dine, our terrific franchisees, and their restaurant teams. This morning's discussion focuses on our financial results, our strategy, and expectations. I'll provide perspective on our business performance and highlights for Applebee's and IHOP, followed by some color on Fuzzy's and our international operations. Vance will provide a more detailed analysis of the macro environment and our financial results. Now Q1. Our performance during the quarter demonstrated the stability of our asset-light model. Q1 marked Applebee's ninth and IHOP's eighth consecutive quarter of positive comp sales, increasing 6.1% and 8.7%, respectively. Q1 consolidated adjusted EBITDA was $66.3 million compared to $65.2 million for the same quarter in 2022. We opened 21 gross new restaurants globally, demonstrating our franchisees belief in our brands and their appetite for development. Following the quarter, we completed a $500 million refinancing of our senior secured notes that were due in June 2024, and we reduced our debt by approximately $200 million. There was a significant level of bond investor demand, which is a great endorsement of our strategy and the positive outlook for our business. You'll hear more about this from Vance. Within the sector, there are some signs that pre-COVID dining patterns are beginning to return. However, the situation remains somewhat unpredictable, and accordingly, we're keeping a close eye on three key areas: guest behavior, commodities, and labor. Let me share a little bit more on each of these. First, the guest. Like others in the industry, in late Q1, we started to see signs that economic concerns may be impacting what has been a very resilient guest, and therefore, we're closely monitoring traffic and price sensitivity patterns. One trend that we have noticed is that American consumers are becoming more discerning about the value they expect, not just in terms of price, but also in terms of factors like cleanliness, speed of service, and convenience. The key to success now, more than ever, is the on-premise guest experience, and our franchisees and their teams are focused on delivering outstanding experiences, which helps us to earn and keep guest loyalty and trust. Next is commodities. We expect to see cost of goods prices continue to moderate as the year progresses. Q1 improvement was driven by easing in cost of coffee, eggs, and poultry, although wheat and beef remain elevated. We expect cost easing to be more prominent in the second half of the year based upon our proprietary data and analysis. Dine's scale and relationships with our suppliers continue to serve as a tool to help our franchisees address these cost pressures and find the best possible prices. Third is labor. Based upon information from our franchisees, Q1 staffing levels continue to improve while filling late-night hours remains challenged. For the first time since 2019, however, franchisees on average, are seeing revenue rise at a rate that offsets increases in labor costs. At the same time that we are addressing near-term challenges, we continue to invest in three key initiatives to drive long-term growth. These include providing superior guest experiences through menu and technology innovation, attracting new and returning guests through engaging in relevant marketing and loyalty strategies, and third, investing in our future by expanding the global footprint of our brands. With that, I'll speak specifically about Applebee's. Applebee's results were driven by the brand's Q1 success in offering innovative promotions and abundant value programs for our guests. This is helping the brand sustain sales and our overall consumer guest appeal. We recently completed an extensive research effort to update our understanding of our Applebee's guest profile, we learned that we are now serving more of the coveted 18-34-year-old guests versus pre-pandemic, as well as more guests with children. We're seeing more higher income guests than in 2019 in the $100,000-plus household income category. Our guests are increasingly diverse compared to 2019, and our deal-based dining is highly motivating to our target guests and drives both acquisition and retention. That last data point, in particular, influences Applebee's strategy in marketing. The brand kicked off 2023 with value platforms and guest favorites, including two for $25 offers of two entrees and a full-size appetizer, All You Can Eat boneless wings, riblets, and shrimp, a great example of our ability to showcase abundant value that drives traffic. Finally, our guest favorite beverages, the Muchos, like Tipsy Cupid and Date Night Daiquiri, and our popular appetizer menu, also All You Can Eat. Stay tuned for new menu innovations still to come later in 2023. The impact of relevant promotions, menu innovation, and affordable dining options drives Applebee's continued number one ranking across key industry consumer metrics, such as convenience and variety, according to our proprietary third-party tracker. Brand awareness also remains at an all-time high. This is marked by our leadership against peers in such categories as affordability and menu variety. Shifting to development, Tony brings tremendous expertise to the Applebee's brand. In this regard, he knows what it takes to entice franchisees to invest in new or converted restaurants. Under Tony's leadership in Q1, Applebee's launched a financial development initiative for franchisees that's intended to drive openings in 2024 and beyond. At the same time, the Applebee's team is hard at work creating an ROI-driven next-gen prototype that reflects the way in which our guests interact with us now. Shifting to IHOP. We're proud to be celebrating the brand's 65th year. On February 28th, we also celebrated IHOP's National Pancake Day, a day we embrace every year. On that one day, IHOP restaurants served nearly 1 million pancakes in addition to providing guests with the opportunity to earn loyalty rewards through our International Bank of Pancakes program. In March, the brand previewed its new sweet and savory crepes. This menu innovation leveraged an IHOP breakfast favorite, freshly made crepes in new flavors for breakfast, as well as lunch and dinner. Crepes were the first of several menu items that continued to launch during Q2. Once the new core menu is rolled out in its entirety, it will be IHOP's largest menu innovation in a decade. We'll share more details about the complete menu program next quarter. IHOP's development plans are also progressing. We added 19 new IHOP restaurants globally during the Q1. As was noted last quarter, some of those openings are rolling over from 2022 into Q1, which is why the development number is higher than usual for the Q1. Like Applebee's, IHOP also introduced a financial incentive to accelerate development in 2024 and beyond. I'll provide an update on four key IHOP innovations that are intended to drive growth. First, the loyalty program, which is a key engagement opportunity for us, and we're pleased with its evolution so far. Sign-ups continue to grow. We've enrolled 5.5 million members in the first year. Those members represent roughly 5% of sales. We're also seeing more than 8,000 downloads of our app per day. This is a 3x increase following the launch of the app and the loyalty program. Loyalty allows us to unlock more opportunities to engage with and better understand our guests through targeted promotions that highlight value and elevated in-restaurant experiences. Ultimately, the program drives frequency, share of wallet, and average check. Second, as reported last quarter, IHOP entered into licensing agreements to create IHOP-branded breakfast cereal and IHOP-branded coffee. These products are now available in literally thousands of stores nationwide. These retail products increase brand exposure outside the four walls of the restaurant. They help drive organic traffic and deepen loyalty for IHOP. Importantly, a percentage of all revenues will be designated for national advertising via the National Advertising Fund. Third, during the quarter, IHOP introduced two more virtual brands. The first is TenderFix by actor Noah Schnapp, a chicken tender concept with meat and plant-based options. The second is Pardon My Cheesesteak, a partnership with the sports podcast Pardon My Take, and is, as its name suggests, a cheesesteak concept. These two new virtual brands are already in over 500 IHOP restaurants and quickly became among our virtual brand top performers. Finally, we continue to invest in new technology that drives efficiency for our franchisees and a more seamless experience for our guests. For example, IHOP's new point-of-sale system is now in over 50% of its restaurants, representing 800 locations. We expect the rollout to be largely completed by the end of Q2, and the next phase for franchisees is the introduction of our server tablets and enhanced operating procedures. I'd like to provide some color on Fuzzy's and our international operations. Our Fuzzy's brand is progressing smoothly through integration activities across HR, finance, tech, QA, marketing, and operations. In addition to the 125 new unit pipeline that we inherited, we're now leveraging Dine's scale to support the brand's expansion. We're seeing interest from existing IHOP and Applebee's franchisees and have already set up a number of exploratory meetings. Fuzzy's is leaning into its roots. It just kicked off its Baja branding initiative, which serves as a point of differentiation from other fast casual taco brands and will activate all elements of the guest experience, such as store design, menu, and other branded touch points. We're also encouraged by the metrics we're seeing from the Fuzzy's loyalty program. With over 500,000 active members, Fuzzy's loyalty guests visit more often and have a higher check than non-loyalty guests. As we continue to integrate Fuzzy's, we look forward to sharing more on its plans and progress in coming quarters. Finally, international continues to be a growth engine for Dine as we work with franchisees to strengthen and grow the Applebee's and IHOP brands in four key regions: Puerto Rico and the Caribbean, Mexico, the Middle East, and Canada. At the end of the Q1, we had 217 IHOP and Applebee's restaurants and 56 Ghost Kitchen locations in 16 countries and two U.S. territories. An example of recent successes internationally include a fantastic grand opening in Dubai of the first dual brand Applebee's IHOP location in the Middle East. Our most recent IHOP opening in Nassau, The Bahamas, in early April, resulting in our highest sales opening on record, reaching $135,000 in sales in its first week. Before I turn the call over to Vance, I want to touch on our commitment to Do Good. Our upcoming 2022 ESG report reiterates our commitment to four critical areas of our business: people, planet, food, and governance. The report will highlight the progress we're making and what lies ahead, especially to the ways in which we affect the communities and neighborhoods we serve, including economic opportunity, climate change, and nutrition. Additional updates and progress can be found in our ESG report, which is scheduled to be released later this week. Now Vance will join us to talk about our financial performance in more detail. Thank you, John. As you just heard, our brands are performing well and our comp sales continue to grow year-over-year. I want to begin with an update on our fundamentals before I provide a little color on the successfully completed refinancing of our A-1 debt. On the top line, consolidated total revenues, excluding the refranchised Applebee's restaurants, increased 11% in Q1 versus the prior year to $211 million. Total revenues reflected solid franchise revenues, which grew 12% to $180 million compared to $161 million for the same quarter of 2022. The improvement was due to a strong comp sales growth at both brands and the inclusion of the first full quarter of Fuzzy's Taco Shop. Excluding advertising revenues, franchise revenues increased 14%. Rental segment revenues for the Q1 of 2023 improved by 11% to $32 million compared to nearly $29 million for the same quarter of 2022. The rental segment margin increased from the prior year, primarily due to lease buyouts and operating lease renewals and extensions. For our company restaurant operations, sales decreased approximately 97% to $1 million for the Q1, compared to $39 million for the same period of last year. This was mainly due to the refranchising of our Applebee's company-operated restaurant last October, offset by our three Fuzzy's company-operated restaurants. General and administrative expenses increased nearly $10 million or 23% to $51 million in Q1 of 2023 from $41.5 million in Q1 of 2022. Excluding one-time items, G&A was $49 million in this quarter. The increase was primarily due to our active investments in personnel costs, professional services, occupancy, and system maintenance costs. Adjusted EBITDA for Q1 of 2023 increased to $66.4 million from $65.2 million in Q1 of 2022, resulting from an increase in gross profit, offset by an increase in G&A expenses. Adjusted diluted EPS for the Q1 of 2023 was $1.97 compared to adjusted EPS of $1.54 for the same period of 2022. Turning to the statement of cash flows. We had adjusted free cash flow of $2.3 million for the Q1 of 2023 compared to outflow of $10 million for the same quarter of last year, driven primarily by cash from operations, partially offset by an increase in CapEx. Cash provided from operations for the Q1 of 2023 was $16 million compared to cash used in operations of nearly $8 million for the same period of 2022. The variance in operating cash flow was primarily due to a favorable change in working capital, resulting from a decrease in bonus payments and the timing of disbursements. CapEx for the Q1 of 2023 was $16 million compared to roughly $5 million for the same quarter of 2022. We finished the Q1 with total unrestricted cash of $182 million. This compares to unrestricted cash of $270 million at the end of the Q4. Our current cash balances reflect a busy last 12 months of capital usage. We utilize our balance sheet and the borrowing capacity available under our credit facility to invest for the future and complete our Fuzzy's acquisition in Q4. We returned $21 million of capital to shareholders through dividends and share repurchases in the quarter while concurrently lowering our debt balance. This is a testament to Dine's cash generation ability and our disciplined approach in capital allocation to generate value for shareholders. We also utilized our liquidity in the quarter and opportunistically repurchased nearly $70 million of debt at a discount, which was on top of the $40 million from Q4 that we bought back. We were very pleased with our refinancing transaction based on strong demand interest from our bond investors. This speaks to the strength of our steady and strong cash flow generation franchisor model in today's environment. Turning to Applebee's performance. Q1 represented Applebee's ninth consecutive quarter of positive comp sales growth. The continued improvement resulted in Q1 average weekly sales of approximately $56,800 per restaurant, with a volume split of 23% by off-premise sales, of which 11% from to-go and 12% from delivery. For IHOP, this marked the eighth consecutive quarter of positive comp sales growth, with average weekly sales of approximately $38,200 per restaurant. Our off-premise business was 22% of sales, with 14% mixed for delivery and 8% from to-go. Our franchisees continue to deal with commodity inflationary pressures. These cost tensions remain more prevalent in items like beef and grain prices, as John mentioned. Applebee's experienced roughly 3% unfavorable pricing in Q1, compared with 11% in Q4, while IHOP costs were 11% higher year-over-year, down from 20% in Q4. Pricing increases on certain essential commodities such as coffee, eggs, and poultry have dropped significantly. Our brands are currently price contracted at similar levels of last year, helping to meet our current needs, but with the flexibility to benefit if inflationary pressures continue to recede. We are holding our commodity pricing outlook for the rest of the year in the low to mid-single digits, with most inflationary costs easing to occur in the second half of the year. We're encouraged by our performance in the Q1 and remain confident in our ability to deliver on our 2023 financial guidance. With the current macro uncertainty, we're taking the more prudent approach and are leaving our outlook unchanged across all metrics despite the strong Q1 performance. Along with executing on our strategies to deliver results and investing in our business, we're equally focused on managing our balance sheet and returning cash to our shareholders. We believe we are well positioned to leverage our cash flow generation ability to drive long-term growth. Now I will hand the call back to John for some quick remarks before we open it up for Q&A. John? Thanks, Vance. As we look ahead, we will continue to actively support our franchisees to mitigate the impact of an increasingly uncertain environment. We'll make ongoing investments in our brands and ensure they remain visible and relevant for guests seeking assurances of quality and value. Our system is focused, nimble, and steadfast in the execution of our plans to accelerate growth and profitability for the benefit of our shareholders and franchisees as we work to deliver on our 2023 guidance. Now I'll hand the call back to the operator. As a reminder, Jay and Tony are both on the line along with me and Vance, and we're all here to answer your questions. Operator, please open the queue and we'll begin Q&A. Thank you. At this time, we'll conduct a question and answer session. As a reminder, to ask a question, you need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from Eric Gonzalez of Key Bank. Your line is open. Hey, thanks. Good morning. You said in the prepared remarks that you're seeing signs of economic concerns that are impacting the guests. I'm wondering if you could give us some more specifics on what you're seeing to warrant that comment. Perhaps you can comment on how comps trended in the Q1, what you saw as you exited the Q1, and how trends, how the brands performed in April. Sure. Hey, Eric, it's John. Good morning. You know, what we're seeing from our guests the last couple of quarters, you know, we would describe as, you know, steady-state, and that the guest has been, you know, resilient during the past two quarters as well as they were last year. You know, at the same time, you know, our comments allude to the fact that we see what's happening in the economy overall. We see the increased reporting over recession, and we see the increased reporting over, you know, consumer sentiment, and we look at the industry in general. In that context, we have reiterated our guidance for the full year based upon, you know, what we're seeing in our business and what's being reported by our franchisees. Fair enough. My second question is just, you know, congrats on the securitization transaction. I mean, I'm wondering if you can give more details on the financial impact and maybe if you're able to provide a guidance range for interest expense, perhaps speak to what the EPS drive will be on an annual basis. Sure. That's a great question for Vance. Yeah. So yeah. You know, the refi, as we announced, is, you know, it's $500 million of debt and, the coupon is 7.8%. If you, if you're doing the math in terms of, you know, what it was before to what it is now, it's roughly sort of after tax is roughly like a $7-ish million net income impact a year. Got it. Maybe just one last one real quick. On the rental income, it was a little bit higher than it's been in the past. I think you said there's some lease stuff going on there. Maybe if you can talk about what the run rate might be going forward. Should we expect that sort of $10 million rental income, or is it closer to $7 million, $8 million where it's been in the past going forward? Yeah, I think that. You know, we don't provide specific guidance on rental income line separately. The things that impact rental income is, you know, obviously, as sales improve, there's% rent that bump that up. Once in a while, we have lease buyouts, et cetera, that would introduce some variability in rental income numbers. For the most part, it's not a line that drives a lot of volatility in our P&L. Okay, thanks. Thank you. Stand by for our next question. This next question comes from Jake Bartlett of Truist Securities. Your line is open. Great. Thanks for taking the questions. You know, my first is on kind of dynamics with the industry and what you're seeing at your two brands in terms of trade down. We've seen very strong results from, you know, from limited service and fast food, suggest maybe there's some trade down from casual dining. One of your large competitors yesterday, you know, in family dining said that they thought they were getting trade down from casual dining into the family dining space. You know, and to the extent you can measure, what are you seeing in terms of trade out or in of each brand? Yeah. Hey, Jake, it's John. I'll take that sort of thematically, then we'll ask Jay and Tony to talk about it as well. You know, there's a couple things that are important to keep in mind. You know, one is the context of we've got, as we've mentioned, several consecutive quarters of comp sales growth, including the last one. You know, we appeal to multiple demographics, including financial demographics. Our brands have always been positioned as value brands, and they perform well during tough times. All three of them do. You know, we look back to the 2008, 2009 recession, you know, Applebee's and IHOP overperformed, you know, back then as well. You know, that is in our favor from where we sit in this category. It helps explain our results. We know that people, particularly our guests, continue to value, you know, experiences over goods right now, you know, and we're benefiting from that. You know, we recently just completed some new Applebee's research that was some of the more extensive research we've done in a while, you know. We learned, for example, that our share of guests with household income over $100,000 has increased versus where we were in 2019. You know, while, you know, during tough times like this, certainly, you know, some of our guests may look elsewhere for less expensive options. We also know that we are, you know, we're gaining guests as well. You know, overall, we're pleased with the performance. Jay, would you wanna talk about IHOP specifically, and then Tony will follow on? Yeah, John. Hey, Jay. Good morning or afternoon, wherever you may be. I think that on the IHOP side, we just haven't seen that much of that we can attribute to people moving around. One of the things we try to do from a strategy standpoint is to always have value opportunities for our guests, not only in price point, but abundant value. You know, obviously, with our loyalty program, we can give very unique values to people as part of that program. We need to have great innovation, new products, new reasons to come to see us, and give a great experience. When you balance all those things, we think that is really what keeps the broad swath of America that loves IHOP coming back. We have a lot of people that are in lower income level, a lot of people on the high income level. You know, a tremendous amount of people love IHOP. We've got a little something for everybody, and we try to maintain that at all times. I think that helps us stay a little more stable because we're not just one thing to one set of people. Great. That's really helpful. Jay, if you could maybe give us a little more detail on the menu launch that you mentioned. Trying to understand how much of a, you know, driver you think this could be. You know, what are the significant changes and what should get us excited that this could be really impactful? Well, I think one of the things we've been working on is to make sure we maintain relevance with our guests. Menu is one of the biggest things that you can do to be relevant in modern times and what modern eating is, et cetera. You know, the menu we actually rolled out at the beginning of Q2, but we did preview some of those things earlier. For example, we rolled out our new crepes, which are both breakfast crepes and dinner crepes. We rolled those out with a buy one get one offer. This is a way that we could actually do value to make it a big launch, get people to try it. Oh, by the way, with a buy one get one, you get two people to try it at once, typically. You get even more trial of the products. These are new signature crepes that are very well received. Soon after that, we rolled out brand new Eggs Benedict that have been in promotion right now since the beginning of April. Really trying to be the absolute best in all the breakfast categories. We're known for our pancakes. We've got great pancakes, but, you know, we should own crepes, we should own Benedict, we should own waffles, we should own everything about breakfast, and we've really been upgrading those products over the last two menu cycles. Great. Then last question, Vance. I wanted to dig into what the balance sheet looks like post refinancing here. I think the biggest unknown for me is what the revolver balance has done. That went up for a couple of quarters, you know. I guess that would speak to your approach to cash. What is the, you know, Did you pay down the revolver? Did you use some of it? Or, you know, are you conserving, you know, cash? Also as part of that question is your approach to buybacks going forward. You know, I think you're gonna have a lot of available cash, you know, to buy back shares. Maybe if you could just talk about, you know, your level of focus on share buybacks as well. Thank you. Sure, Jake. Hey, the revolver availability is still north of $220-ish million. Withdrawn $100 of it, you know, back late last year. We didn't pay that down, but we didn't draw on it anymore. We used our cash to reduce our debt and with bond buybacks, as you saw in our filings. We have plenty of liquidity, and it's important to keep a prudent approach to balance sheet management in this environment. To your second question on stock buybacks, I think the approach is still the same, right? If you think about our capital allocation strategies, the three priorities that we've talked about is always investing in the company, returning capital to shareholders, then managing our balance sheet. You know, over the, you know, if you count since the beginning of 2022, you know, of course we spent $80 million on Fuzzy's, right? We've spent, we've returned $160 million back to shareholders through dividends and buybacks, then we used $200 million of it to reduce our balance sheet. That approach won't change. It just depends on where the stock is trading and how much margin of safety we have, you know, in terms of the stock price versus the intrinsic value of the stock. We will continue down that approach. Great. Thank you very much. One moment for our next question. This next question comes from Nick Setyan of Wedbush. Your line is open. Thank you. I just wanted to ask about Fuzzy's contribution in Q1. Would you be willing to tell us what the royalty contribution from Fuzzy's was, and also what the margin on the company sales was? Hey, hey Nick, it's John. You know, we're still in the integration process for Fuzzy's and making sure that we are, you know, 100% buttoned up in terms of financial reporting, and that, and that their definitions and their systems and their data constructs are the same as ours. You know, because they didn't have to publicly report in the past, particularly when we do, quarter-over-quarter and year-over-year comps. You know, we're sticking with at the moment, you know, beginning to talk about Fuzzy's in a more qualitative way. You know, I would say we're probably a quarter or two away from starting to reveal some more specific, quantitative and financial measures, but we're certainly on our way to getting there. Fair enough. Then just I want to revisit pricing a little bit for both brands and what, you know, the thoughts on pricing as the year progresses are. Sure. You know, I'll start off with a, you know, a bit of an overview that applies to all three brands, and then, we can go to Tony and Jay as well for what they know from their franchisees. You know, the good news is that the pressure to raise prices that our franchisees across the brands felt last year is easing a bit, right? Because the rate of inflation increase peaked, you know, at mid to late last year in terms of our cost of goods in the restaurants, and it's been easing the last couple of quarters, and we expect it to continue to ease, if not become favorable by year-end. You know, at the same time, I think Vance mentioned in his remarks that, you know, for the first time since before the pandemic, on average across the system, this isn't true for all restaurants, but on average in our portfolio, the sales rose at a rate that was offsetting increases in labor for the first time. You know, the pressure on their bottom line is certainly not going away, but it's not as intense as it was last year, you know, and that's encouraging for price taking to moderate somewhat versus what we saw last year. Tony, do you want to add anything specific that you're hearing from the Applebee's franchisees? Yes. Thanks, John. You know, if you look at Q1 '23 versus Q1 '22, we saw Applebee's franchisees take about just under 6%, about 5.6% in price to protect their margins. It's an increase that's lower than our direct peers. I think our performance in Q1 demonstrates that, you know, our franchisees are not pricing out of our guest comfort zone, right? We're seeing guests continue to spend on experiences, and I think that bodes well for us. I think ultimately, I think what gives me a lot of comfort is that our franchisees know better than anyone, you know, what the Applebee's brand stands for. That affordability is an incredibly important driver along with the great experience in the restaurant. Thanks, Tony. Jay, your thoughts? Okay. Yeah. I think on the IHOP side, very similar. Just like the inflation is, the inflation rate's decelerating, so is the price taking that we're seeing. I think in the Q1 we were at about an 8% price that was cooked into the menu. We've already printed our menu for the first part of the year, so that's baked in now. We will have another menu print later in the year that franchisees will have an opportunity. On the IHOP side, you know, we actually have a third-party vendor that we use to help the franchisees think about how they're taking price so that they're doing this very strategically. They're not, you know, just randomly comparing what the competitor down the street does and take either more or less than what they're doing. Much more scientific within our own restaurants as far as how people do trade and what's too much of an increase that's gonna cause either a traffic decline or people to move down to cheaper items, et cetera. We try to do this in a pretty sophisticated way, the franchisees are very careful about what they're doing to try to make sure that they're maintaining the traffic and maintaining the business. 'Cause that's the most important thing that we've gotta do long term. Got it. Just final question, would you be willing to maybe bracket operating cash flow for the year? Vance, you want to address that? Sure. You know, I think I mentioned this in the, in the past, right? We had a weird sort of working capital flow for the past few years. This is the first year where we're back to like sort of normalized working capital trends. If you have your model, with your, with your EBITDA assumption, you can assume, you know, just sort of pre-COVID working capital level, and that's how you should model the operating cash flow. I will also mention, as a reminder, we talked about this last quarter, that we are expecting about $10 million of IP reimbursements, you know, through our operating cash flow this year. You'll see our CapEx, like traditional CapEx in the CapEx section. The effective CapEx is really sort of net of this $10 million operating cash flow reimbursement. That's an incremental piece that you should build into your operating cash flow for the year. Thank you very much. One moment for our next question. Our next question comes from Jeffrey Bernstein of Barclays. Please go ahead. Thank you very much. Two questions. First, just following up on the prepared remarks when you referred to the late Q1 slowdown. Just wanted to clarify, John, are you saying that that's a broader industry comment in terms of just macro factors and headlines that all consumers are seeing, but your brands have not seen any change in behavior in recent weeks or months? Just trying to clarify whether there's any reference to your portfolio rather than just the industry. If you were to see a slowdown, you know, how would you respond? Then I have one follow-up. Sure. Jeff, my comment is about... You know we don't comment on Q2 on this call. My comment is about the industry in general and that, you know, we're watching it, and we are... We'll react to it, you know, if and when we need to. You know, in terms of what we would do if we see a significant slowdown, you know, obviously we would work with our franchisees and our marketing teams, and really focus and make sure we've got the right marketing and promotions in place, at that time. I think it would be helpful, if I ask Tony and then Jay to just share with you know, the philosophy each brand has right now about the way in which they're communicating with their guests, you know, at this point in time, based upon what we're seeing in the economy. Tony, you wanna talk about the, you know, the promotional philosophy that Applebee's is looking at right now? Yeah, happy to do so, John. With Applebee's, it's essentially a brand that's built on abundant value for our guests, right? It's one of our core tenets. It's part of our DNA. When the economy struggles or there's uncertainty, you know, we double down on what our guests need to make sure that our relationship is front and center. If you look at Q1, we delivered value through, you know, targeted campaigns such as, you know, our All You Can Eat promotion that we ran in January and February at $14.99, we had tremendous results. It's an excellent example of combining terrific food with, you know, I think generous, abundant portions at a reasonable price. It's compelling, and it provides that value that guests are seeking in this environment. It's one of the reasons why we continue to outpace, many of our direct competitors, from a value attribute, perspective. Jay, do you wanna comment on IHOP? On the IHOP side, I mentioned a little bit before, you know, there's different ways that we do value, and we do this all the time. If you think about our overall strategy, we're always working on having value offerings for guests. Sometimes that's price, sometimes that's abundant value. Sometimes it may be a disruptive value, like a buy one, get one crepe offer that I mentioned before. Sometimes it's unique with loyalty members getting a unique value. You also have innovation to drive traffic, and that's ever ongoing. I think what happens in tougher economic times, you know, you morph a little from the value messages to the innovation messages and back and forth. In good times, you try to do more innovative messages that are full price. In times that are a little tougher, you may do value messaging. By having those kind of abilities in our toolbox at all times, you know, it's easy to kind of morph and change and make adjustments to your basic strategy instead of having to scramble how you're gonna respond in a bad time. You've got things on the shelf you can pull down and do pretty quickly, and you work with your franchisees on that when the time comes. Hey, Jeffrey Bernstein, it's John Peyton, just for one more comment. Jay Johns and Tony Moralejo, thank you. You know, one thing that all three of our brands learned during the pandemic is to become much more agile, and their marketing engines are much more responsive to changes in the marketplace today, you know, than they, than they were before. That certainly benefits us during a year like this that has some uncertainty, some uncertainty left. You know, the summary of what, you know, what Tony Moralejo and Jay Johns said, and it's true of Fuzzy's as well, is that whether it's an uptime or a downtime, we're always focused on value, you know, menu innovation and the on-premise experience, now also the off-premise experience. You know, that remains our focus, and we, you know, will dial up value a little bit, perhaps this year, but it's always a combination of those three. With that, we can go to the next question. Understood. Just the follow-up. Oh, sorry. Go ahead. No, no. You mentioned, I think, near the end of your prepared remarks that you actively support or maybe it's would actively support franchisees. Just wondering if you can provide some color in terms of what form maybe you're referring to. Perhaps what's the number one ask from franchisees when you're having discussions most recently? I assume that's more of an IHOP reference rather than Applebee's, considering Applebee's has very few franchisees, and they're all typically large corporate, well capitalized. Any kind of background in terms of what potential active support could mean, or has meant already? Thank you. Yeah, Jeff, we support our franchisees in many ways. In my prepared remarks, I mentioned, I think you may be referring to that, all three brands have a financial incentive in place to encourage and support franchisees to continue to open restaurants, you know, over the short term. You know, we should see those openings that are supported by these incentives in 2024. That was the, what I was referring to as support. You know, as you mentioned, with a portfolio as large as ours, with 300 franchisees, it's not unusual at any given time to have, you know, a handful that need some assistance from us based upon their core business. We're always helping there in terms of different ways we can provide financial relief. We support them more broadly with our, you know, our training, our operations, our data and analytics. That was my specific comment in the opening remarks. Understood. Thank you. One moment for our next question. This next question comes from Brian Vaccaro of Raymond James. Your line is open. Hi. Thanks, and good morning. Just following up on the health of your consumer, I was curious, could you comment on what% of sales at each brand fall under what you would consider some sort of value construct? Has that changed versus the last few quarters? I will attempt to answer it for both brands and invite Vance, Jay, or Tony to correct me. For both brands, the majority of their guests are below $100,000 in household income. For both brands, about half their guests are at the $50,000-ish household income. That has been, you know, generally stable, you know, over time. Although, as I mentioned, we are seeing now that the $100,000 plus segment for Applebee's seems to have grown since 2019. Would anybody on our line care to fact check me on that? Hey, Brian. It's Jay. The only thing I would say, just from an IHOP standpoint is, you know, we haven't seen any radical change in any of that. I think what John said is true. You know, you just look at the value platforms we have, like, our IHOPPY Hour platform. The sales of that has been pretty consistent for two or three years now. There's a percentage of guests that appreciate that and need that and use that, and, that's been pretty stable. It's not like it's spiked in the last six months or year because of economic turmoil. You know, more than anything, a lot of it just morphs and moves based on what we're promoting at that time. If you're doing a buy one get one offer, you get more people taking the deal. If you're doing a full price Eggs Benedict offer, then you're selling more Eggs Benedict at full price. It's usually more about what we're marketing and promoting than it is that they're just shifting on their own. Yeah, This is Tony. On the Applebee's side, I'll just, you know, add that, you know, John was directionally accurate. You know, most of our guests are lower income, which, you know, means affordability is more important now than ever. I'll share a little bit more insight into, you know, some of the income cohorts. We didn't see last quarter any change to, you know, guests with household income over $75,000, which is now increasingly becoming more and more part of our guest profile. We did see a little softening in visit intent among the 35- to 54-year-old cohort, but that's pretty consistent with industry trends. Hey, Brian. Go ahead, Vance. Sorry, go ahead. Brian, this is Vance. The other thing I would add is, you know, our three brands, the way they approach value is slightly different, right? Applebee's, for example, has All You Can Eat and two for $25, different campaigns that they run. IHOP has IHOPPY Hour, which is a consistent sort of value, way to offer value. Then Fuzzy's, for example, has the $3 tacos, right? That's different ways to drive traffic, different ways to communicate the concept of value to our guests. That strategy hasn't changed, and the, you know, the mix hasn't changed from that perspective. Okay. Thank you. I had a question about Applebee's franchise income. We sometimes monitor that sort of franchise revenue as a% of the system-wide sales that you disclose, at least the domestic that you disclose. We noticed that it dipped a little bit below 4%, for the Q2 in a row. Could you just comment on what's driving that as it relates to royalty collections? Are there any increases in deferrals that are worth noting or any other dynamics within that line? Vance, can you address that? Yeah. I think there's always gonna be some noise with, you know, as John mentioned, we always have it, or as Tony mentioned, we have a handful franchisees that we're working through. What you're noticing is I think there's some details that we worked out with the company-owned restaurant refranchising that's flowing through, you know. That's not a permanent change. It's more of a temporary change in terms of the effective rate that we're collecting. Okay. Thank you, Vance. Just last one from me, just clarifying the refi that you completed in April. I was just trying to square, you know, the cash and. You refied the so the new debt is you refied $585 million, and the new notes are $500 million, I believe. There's a gap of, like, $85 million there. Can you just, I know you have unrestricted cash, but then some of that unrestricted cash is IHOP gift card cash. Could you level set kind of where your pro forma balance sheet is or where unrestricted cash is or maybe just help me sort through that. Thanks again. Yeah. No problem. You're exactly right. I think we, the bridge, the gap between the two numbers is really just cash on the balance sheet. Even after, you know, if you pro forma for the transactions, we still have, we still have, you know, gift cards and IHOP math, and all that stuff is intact. We had enough liquidity to reduce the absolute debt level. You know, the math we did was just trying to minimize what are the net income impact to the interest expense, and that's what we did. Was that helpful, Brian? Yeah, that's great. I'll pass it along. Thanks again. Thank you. One moment for our next question. As a reminder, if you wish to ask a question, please press star one one on your phone and wait until your name is announced. Our next question comes from Todd Brooks of The Benchmark Company. Your line is open. Hey, thanks for taking my questions, and good morning, everyone. Two quick questions. One's more of a, just a forward modeling question. We talked about the inflation environment waning a bit, not having to be as aggressive on price. Jay, I think you said the menu set for the first half for IHOP. I was just wondering, I know in answering Nick's question, we talked about what pricing for the system for both brands was in Q1. Can we talk about if we look at Q2, what the anticipated pricing would be on the menu side? This is Jay. Hi, Todd. The IHOP franchisees on their most recent menu print, they took about a 4% price increase, but they also had previous years that rolled off. I think we'll still be right around that 8% mark until we get into the fall. Yeah, on the Applebee's side, you know, as I said earlier, they, you know, took about, you know, just under 6%, 5.6% from the quarter. One thing to keep in mind is, you know, from a procurement standpoint, you know, we leverage our supply chain incredibly well in the Applebee's system, I think you'll see, you know, we've seen modest price increases relative to inflation, especially when you compare us to our peers, I think you'll continue to see that for the balance of the year. You know, we do expect inflation to ease, we expect it to continue to moderate for the balance of the year. I think our franchisees are likely to be very strategic in their pricing decisions, to minimize any impact on traffic for the balance of the year. Tony, if we look at, Q2 of last year, just what we're rolling over, would you expect that 5.6% to decline for the Applebee's system in Q2 or stay relatively steady? When it comes to pricing, it's important to keep in mind that, you know, these decisions are the decisions of the franchisees and not the franchisor. With that said, you know, they are highly strategic. They understand that in this environment, value and especially affordability are levers that we need to continue to pull on to remain competitive. You know, again, I'd expect them to be incredibly reasonable and strategic in their pricing so that we can maintain our leadership position in the category. Okay. Great. Thanks. Then a bigger picture question maybe for John. Early on coming out of the pandemic, John, you always focused on the advantages of scale, from a, from a market share standpoint, what you can do from a, an investing in the business standpoint. Just your thoughts in maybe a choppier environment on scale advantages for Dine and what it allows you to do maybe relative to what some smaller competitors may not be able to attack in a, in a tightening environment? Sure. Yeah. The advantage of the scale that I talked about two years ago are just as, if not more important today, and I think it's less around the pandemic or uncertain times and more about the future, right? That scale matters both in terms of the number of brands a company has, as well as the platforms they build to accommodate those brands, which is our strategy. You know, two years ago we said we were looking at or considering an acquisition, right? In the last quarter we did one, and that's an example of us, you know, following through, Todd, on our point about scale. We're able to do it and Fuzzy's, for example, is able to benefit from that scale already in a couple of ways, right? There are national contracts with providers and of either services or goods, you know, are beginning to benefit them. They are plugging into our technology stack, our help desk, our customer service desk in ways that are more efficient for them. We're gonna continue to build common platforms that benefit all three brands, all 300 franchisees and are, you know, open, you know, open, flexible, scalable platforms that could accommodate, you know, potentially a fourth brand in the future, once we prove that we're that Fuzzy's is better off with us than without us. Just a quick follow-up there, John. If the scale positioning is stronger than ever and more important than ever, do you look at kind of relative investment to cement scale with other large peers in the space? I'm just thinking in a tightening environment. I know that the G&A investment comes from a place of playing offense and investing in the business, but how do we think about are we outinvesting our peers and do we have some flexibility there if others are pulling back that Dine would pull back as well? Just the returns on what you see are so compelling in the future that you don't see a reason to slow that spend at all? Thank you. Our benchmark for deciding if we're going to invest or not invest, you know, is not about peers, Todd. You know, if our peers are pulling back or a peer is pulling back, I don't know that that would be motivating to us the same way. You know, we're focused on the ROI of the investments we make, you know, across our ecosystem. If we think there's an ROI that's compelling and it's responsible in the economic environment that we're in at any moment, you know, that's our benchmark. If an initiative is not working, then we also will unwind it. You know, we're not gonna throw good money after bad. Y ou know, our lens is much more about our internal ROI and less about what others are necessarily doing. Great. Thanks, John. Hey, Todd. Go ahead, Vance. Sorry, go ahead. I didn't mean to cut you off. Hey, Todd, this is Vance. Another thing I would add is that I'll give you an example, right? The type of things we're investing in and, you know, as we said in the past, our investments are really designed to drive and support long-term growth. We are happy, we're pleased with the progress we're seeing so far. A very specific example I can share with you is, you know, for example, loyalty program, right? In order for that program to work, right, it's not just one single, you know, platform. We need to overhaul the entire tech stack, and that includes new website, new apps and payment function and, you know, the guest loyalty data platform, POS, cloud storage, CRM, you know, it's the entire vertical stack. Some costs are implementation related, which are one time, i.e., one time, right, that will be rolled off over time. A lot of our maintenance and software licensing costs going forward, you know, look, it's still early to declare complete victory on loyalty, but you know, as John mentioned, great progress thus far with, you know, 5.5 million members and 5% of sales, right? But to your other question in terms of the levers we have to pull back. Look, the short answer is, of course, we have levers to pull back with both G&A and CapEx. You know, we've been through the worst during 2020. We know we've proven that we can protect our liquidity, our fundamentals of the business playing the long game. You know, also as John mentioned, the key strategic advantage we have with our asset-light model is that we could play offense when everyone else is playing defense. The levers are certainly there. Thank you both. Thank you. That concludes our Q&A segment. I'll now turn it back over to John Peyton for closing remarks. Hey, Chris. Thank you. We vote you operator of the year. You were fantastic, and thank you for your support on this call. You know, I'll just wrap up by reiterating where we started, which is, you know, nine consecutive quarters of comp sales growth for Applebee's and for IHOP, you know, don't happen by accident. You know, our brands really are operating on all cylinders right now. We talked about Applebee's having a higher income mixed guest. We also know from our new research that our guest is younger, you know, more diverse and more likely to dine as a family than our guests were pre-pandemic. IHOP, we know we talked about, has launched its most significant menu refresh in a decade. Fuzzy's, that we've just begun to talk about, you know, its loyalty program as we dig into it's got 500,000 active members and growing and they spend more and they visit more than their non-loyalty members, you know. That's just, you know, one example from each brand about, you know, why we have had a string of good quarters and why we're, you know, committed to our guidance the rest of the year. Thank you all for your questions. We appreciate the hour you spent with us, and we will talk to you all soon. Thank you all for participating in today's conference. This does conclude the program, and you may now disconnect.