Good day, and thank you for standing by. Welcome to the Dine Brands Global Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a Question and Answer Session. To ask a question during your session, you will need to press star 11 on your telephone, and then you will hear an automated message advising you your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today. Good morning, and welcome to Dine Brands Global's Second Quarter 2023 Conference Call. I'm Brett Levy, Dine's Vice President of Investor Relations and Treasury. This morning's call will include prepared remarks from John Peyton, CEO, and Vance Chang, CFO. Following those prepared remarks, Tony Moralejo, President of Applebee's, and Jay Johns, President of IHOP, will also be available to address questions from the investment community during the Q&A portion of the call. Please remember our safe harbor regarding forward-looking information. During the call, management will 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. We assume no obligation to update or supplement these statements. We will 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 scheduled to release our Q3 2023 earnings before the market open on November 1, 2023. With that, it is my pleasure to turn the call over to Dine Brands CEO, John Peyton. Thanks, Brett. Good morning, everyone, and thanks for joining us. Today, we'll provide updates on Dine's Q2 results, our investment initiatives, and progress on new unit development. Vance will provide a more detailed financial update, including balance sheet progress, and Tony and Jay will join us for Q&A on the back half of our call. I'll begin today with a few comments about the mindset and behavior of our consumer. We've spoken at length about the remarkable resilience of our target guest in 2022 and early 2023. In late Q1, we began to see some hints that our guests were growing a bit more cautious in their spending. This continued into the second quarter as the percentage of guests selecting from limited time offerings and the value offerings on our Applebee's menu grew from approximately 15% to 19% quarter-over-quarter. Across the industry, we noticed our competition leaning heavily into promotions, which also contributed to the headwinds this quarter. Yet, while we saw a slight decline in traffic, average check remained consistent year to date. This suggests that consumers are more likely to cut back on restaurant visits than trade down to a less expensive alternative to fight inflation. Finally, while our off-premise sales volume remained strong, we saw a shift in mix from delivery to pickup, a deliberate decision to avoid extra costs associated with delivery and fees. All of this indicates that the pandemic reopening boom of 2022 may now be returning to historically normal and more sustainable levels. Turning to our results, our Q2 performance reflected a modest slowdown when looking at comparable year-over-year same-store sales, driven primarily by traffic, and this relates in particular to Applebee's. You may recall Applebee's Q2 2022 results were heavily influenced by pent-up demand from Omicron, which fueled Q2 sales growth. However, it's worth noting that our current quarter's average weekly sales remain stable and are roughly 12% above pre-pandemic levels. That said, here are the highlights from the quarter, which Vance will provide more details on in a moment. Q2 revenue, excluding the refranchised Applebee's restaurants, grew to $206 million from $198 million, and adjusted EBITDA grew 2% to over $67 million. IHOP posted its ninth consecutive quarter of comp sales growth, a 2.1% increase year-over-year. Applebee's same-store sales declined 1% in Q2, influenced, as I mentioned, by strong sales volumes last year. Importantly, though, average weekly sales for Applebee's was over $54,000, and average weekly sales for IHOP was approximately $39,000. We're encouraged to see that average weekly sales for both Applebee's and IHOP were above 2019 levels. Now, we continue to advance our strategic growth agenda, which includes investments across enhanced technology, marketing and training tools, all needed to provide the overall guest experience and our loyalty programs. This includes a robust technology agenda that introduces a new POS for IHOP and Applebee's, server handhelds, Flybuy, and functionality for our apps, with enhanced capabilities for dine-in order in advance, joining wait lists for seating, and different payment options and reviews. Second, we are investing in engaging and relevant menu and marketing innovations to drive comp sales growth. For example, we'll continue to build IHOP's portfolio of virtual brands and leverage IHOP's brand equity into national consumer packaged goods partnerships. Finally, continued investments in new development initiatives, such as new brick-and-mortar concepts like dual-branded restaurants, conversions, and new restaurant prototypes, as well as offering compelling financial incentives for franchisees to accelerate the construction of new restaurants. Now turning to Applebee's. As I mentioned at the start, comp sales were down 1% due to traffic trends, difficult comps, and a slightly more hesitant consumer. Nevertheless, Applebee's continues to focus on quality food and a better guest experience, allowing them to maintain sustained sales volume. Despite the increasingly competitive and promotional environment, Applebee's system-wide AUVs are approaching $3 million this quarter. Agility was the key to the quarter and will continue to be important going forward. For example, the brand responded to initial signs of consumer softness by elevating its everyday value platform of 2 for $25 to include a premium offer with steak, which helped drive improvements to both sales and traffic. Applebee's summer partnership with Disney, Lucasfilm, and Fandango to promote the latest installment of the Indiana Jones franchise, is a great example of the brand's excellence in non-traditional marketing. Now, an update on Applebee's development. Under Tony's leadership, we are executing a 3-part plan. First, we've taken a fresh look at underperforming restaurants and ways in which we can improve profitability, leading to some additional closures. These closures were based on a number of factors, including some older restaurants or areas becoming unsustainable due to changes across trading area dynamics in a post-COVID world. However, we're still looking into opportunities to relocate some of these underperforming restaurants. Second, the brand is finding success in conversions and recent new builds. Average unit volumes for the class of 2022 restaurant openings are annualizing at nearly $4 million, well above the brand's average of nearly $3 million, reflecting the compelling relevance of the brand when it competes in the right market. Finally, and most importantly, we continue to work on a smarter, more efficient design that we plan to unveil next year. This prototype will incorporate the post-pandemic business model and operations efficiencies and will address the inflation and the cost to build a new restaurant. In the meantime, we continue to work on improving store-level margins, which is of keen interest to developers. Working together, Applebee's, our franchisees, and CSCS, our brand's purchasing cooperative, have made progress toward our restaurant profitability initiative, and during the quarter, we implemented 50 basis points of annualized savings, and the work continues. Applebee's competes in an increasingly competitive segment of the restaurant space, and it continues to lead in value, affordability, and brand awareness. These are attributes that have been built and nurtured over the past decade and underpin the brand's resilience and ongoing appeal to its loyal guests. Moving on to IHOP. It continued its momentum in Q2, reporting its ninth consecutive quarter of same-store sales growth. IHOP is delivering on its renewed focus on innovation, particularly around its menu, consumer products, and technology. First, starting with menu innovation. In Q2, IHOP launched its largest menu refresh in many years, which includes eggs benedict, sweet and savory crepes, and other items. All the changes were driven by extensive customer research, in which guests told us they want more breakfast favorites, fresh ingredients, and great value. Our new menu leans into our expertise in breakfast and introduces new items and flavors that guests and families crave at any time of the day. Since our launch in April and initial promotional activities, these new items have maintained sales volumes, which siG&Als sustained demand. This innovation continued into Q3 with IHOP's latest LTO, Pancake Tacos, which is a testament to the brand's creativity. We've just begun to celebrate IHOP's 65th anniversary, featuring all-you-can-eat pancakes for $5 and kids eat free. As we look to the back half of the year, we have a full pipeline of marketing and menu activations to roll out, including a mix of new menu innovations and value offerings. IHOP remains bullish on virtual brands, which allow us to leverage our scale and kitchen space to add incremental sales. Our target windows are dinner and late night hours, and we have several exciting brands coming very soon. During the quarter, we launched IHOP-branded coffee at grocery and online retailers. In partnership with Kraft Heinz, IHOP Coffee achieved national distribution across more than 25,000 retail locations. We are pleased with the initial sales performance, and Kraft Heinz will continue to invest in comprehensive media support and retailer campaigns through year-end. IHOP's loyalty program, the International Bank of Pancakes, continues to be an important channel to connect with guests and now has almost 6.5 million members, which accounts for approximately 6% of sales. IHOP continued with its restaurant profitability initiative and, during the quarter, identified 35 basis points of annualized savings, and the work to identify additional savings continues. Finally, as we've discussed in previous quarters, development is an important growth engine for the IHOP brand. At the end of Q2, roughly three-quarters of our 2023 domestic openings are conversions, in-line, or end caps, and our openings have spanned across more than a dozen states and franchisees. While we're not reporting on Fuzzy's financial results quite yet, I'd like to share a few highlights about Fuzzy's from the quarter. First, one of the most compelling reasons for acquiring Fuzzy's is that we believed it would appeal to our existing franchisees and that their interest would accelerate development. To that end, last month, the Fuzzy's team executed a 20 restaurant development deal with one of our largest IHOP franchisees. In addition, one of our Fuzzy's franchisees purchased an existing Applebee's portfolio. Since our acquisition in December, the Fuzzy's pipeline continues to grow, fueled by both our existing franchisees and the recruitment of new developers. Second, we continue to be impressed by the team's marketing and menu innovation prowess. For example, Fuzzy's Cinco de Mayo celebration, an important holiday for the brand, posted a 19% increase in year-over-year sales. We're very pleased with the progress Fuzzy's has achieved in seamlessly integrating into the Dine system. Finally, moving on to our international business. We continue to focus on opportunities in our core international markets, Puerto Rico and the Caribbean, Latin America, the Middle East, and Canada. During the quarter, we signed a multi-unit IHOP development deal in Central America. Last quarter, we shared that we opened our first-ever dual-branded Applebee's IHOP location in the Middle East in Dubai, and this model is proving to be a success in its first few months of operation. Since then, we've added three more dual-branded units in the Middle East, and we expect to have approximately 6-8 open by the end of the year. We're proving that dual-branded restaurants present compelling benefits, like having a shared kitchen that allows for more efficient staffing, and most importantly, consistent sales across all four day parts due to the complementary business periods of the two brands. We're also making progress with our ghost kitchen development plans. Ghost kitchens are an efficient, innovative, and low-capital way for our brands and licensed partners to enter new markets. We expect to open approximately 30 new distribution points by end of year, bringing our global ghost kitchen total to over 80. We've recently signed agreements to bring our brands to new markets, including Spain, Colombia, and Japan, which we expect all to be active by year-end. To wrap up, while we saw a somewhat more hesitant guest during the quarter, our brands and our asset-light model proved to be resilient. We're encouraged by the progress we've made over the last three years. We're ready to adapt to the changing climate with new menus, updated technology, clever and compelling marketing, and new sources of revenue. Now we'll turn it over to Vance. Thank you, John. As you have all just heard, we had a mixed quarter in terms of comp sales. Despite this, our restaurants are generating consistent average weekly sales volume above our pre-pandemic levels. On the top line, consolidated total revenues, excluding the refranchised Applebee's restaurants, increased to over $206 million in Q2 versus $198 million in the prior year. Our total revenues reflected strong franchise revenues, which grew 5.7% to $177.9 million, compared to $168.3 million for the same quarter of 2022. The improvement was due to comp sales growth at IHOP and the inclusion of Fuzzy's Taco Shop results. If we exclude advertising revenues, franchise revenues actually increased 8.3%. Rental segment revenues for the second quarter of 2023 improved by 1.3% to $29.4 million, compared to $29.1 million for the same quarter of 2022. The rental segment margin remained flat. Our company restaurant operations sales were approximately $0.5 million for the second quarter, compared to $39.5 million for the same period of last year. This decrease was mainly due to the refranchising of our Applebee's company-operated restaurants in October of 2022, offset by contributions from 3 Fuzzy's company-operated restaurants, 2 of which we also refranchised during the quarter. G&A expenses increased nearly 9% to $47.9 million in Q2 of 2023, up from $44.1 million in the same period last year, mostly due to one-time costs associated with IHOP's Flip initiative. Excluding IHOP Flip's cost of $3.3 million, G&A was consistent with the prior year period. Adjusted EBITDA for Q2 of 2023 increased to $67.3 million from $66.1 million in Q2 of 2022, which also was consistent with the prior year period. Adjusted diluted EPS for the second quarter of 2023 was $1.82, compared to adjusted diluted EPS of $1.65 for the same period of 2022. Turning to the statement of cash flows. We had adjusted free cash flow of $24 million for the first half of 2023, compared to $23 million for the same period of last year. Cash provided by operations for the first half of 2023 was $43 million, compared to cash provided from operations of roughly $30 million for the same period of 2022. The variance in operations cash flow was primarily due to a favorable change in working capital, resulting from changes to bonus payments and the timing of disbursements. CapEx for the first half of 2023 was $23 million, compared to nearly $13 million for the same period of 2022. We finished the second quarter with total unrestricted cash of $98 million, compared with unrestricted cash of $182 million at the end of the first quarter, as we utilized our balance sheet to lower our outstanding debt balance with the issuance of our $500 million 2023 A-2 securitization. Additionally, we continued to return capital to equity and bond investors through dividends and share repurchases, as well as debt paydown. Altogether, we returned over $180 million of capital back to equity and bond investors in the first half of 2023. This demonstrates Dine's prudent capital allocation strategy with high cash flow generation ability. Turning to Applebee's performance, Q2 was a more volatile quarter in terms of comp sales, as we compared against strong pent-up demand after Omicron in Q1 of 2022. However, as John mentioned earlier, Applebee's sales results have remained steady, and our average weekly sales were above pre-pandemic levels at over $54,000, including over $12,000 from off-premise. That's roughly 23% of total sales, of which 11% is from to-go and 12% is from delivery. IHOP sales results were also consistent throughout the quarter. Average weekly sales were roughly $39,000, around 6% above 2019 levels, including over $8,000 from off-premise sales. That's over 20% of total sales, of which 7% is from to-go and 13% is from delivery. Along with the sales results, our franchisees are reporting that the labor situation has improved as workers return to the restaurants and labor shortages are reduced. Continued improvement is expected by our franchisees, and this gives us confidence in the overall improvement of their operating conditions. Franchisees should also see benefits to their food costs. The second half of 2023 is expected to turn deflationary for both brands. Applebee's commodity basket is estimated to be over 1.5% cheaper versus last year, and IHOP's basket is expected to be over 3% cheaper in cost year-over-year. With the overall commodity outlook turning favorable for both brands, our supply chain co-op is now expecting a full year commodity outlook in the flat-low single digits range, further reduced from a low-mid single digits range previously expected. Along with these macro-level improvements, our system is working on other ways to drive productivity and profitability for our franchisees, as mentioned by John earlier. These initiatives are not limited to better pricing, but include the potential to reduce waste, improve packaging, and help our system optimize labor. We're confident in our ability to deliver on our long-term priorities, but a still challenged backdrop will continue to impact our operations in the near term and has led us to make an adjustment in Applebee's development guidance for 2023. As John mentioned earlier, we've taken a closer look at underperforming Applebee's restaurants as the new Applebee's development and leadership team continues to refine its prototype and work on relocating the remaining restaurants impacted by local market changes. As a result, we're now expecting 25-35 net fewer Applebee's locations in 2023, down from 10-20 net fewer locations previously expected. The rest of our guidance stays unchanged. We remain focused on driving and supporting long-term growth in our franchise community, while optimizing our balance sheet and returning capital to our shareholders. Now I'll hand the call back to John for some closing remarks before we open it up for Q&A. John? Thanks so much, Vance. We'll now hand the call over to the operator, and as a reminder, Jay and Tony are both on the line, and along with me and Vance, they're here to answer your questions. Operator, please open up the queue, and we can begin the Q&A session now. Thank you. We will now conduct a Question and Answer Session. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile our Q&A roster. Our first question comes from the line of Eric Gonzalez with Key Bank. Please proceed. Hey, thanks. Thanks. Good, good morning. John, in the prepared remarks, you touched on some of the macro challenges you faced at the end of the first quarter and to start the second quarter. You know, from an industry perspective, it seemed like some of those headwinds may have abated as the quarter progressed, and I'm guessing you saw a similar improvement in your business in May and June versus April. Maybe you could speak to where we are today. You know, has the operating environment changed at all, or was the improvement mostly due to easier comparisons, such that as we get into the fall, it might become more of a challenge? Thanks. Hey, Eric. Good, good, good morning. Thanks, thanks to everyone for joining, and thanks to Gerald, our operator, for taking care of us so well. Yeah, I mean, as, as you know, Eric, we don't typically give month-to-month guidance, but what we, what we, you know, within the quarter. What I can tell you is that, you know, Applebee's in particular, you know, was nimble, and quickly reacted to what it saw in terms of a little bit of the soft traffic. We mentioned how they doubled down on their promotion activity, like adding steak to the 2 for 25. We did see that that, you know, made positive effect on traffic, as the quarter progressed. What about in terms of pricing? You know, do you think maybe some of the traffic declines are related to some price increases, or where do we stand on, in terms of pricing, and do you think that there's an opportunity to lean more heavily into value, or, or it's necessarily lean more heavily into value just because some of the pricing may have gotten out of whack with the consumer? Yeah. Yeah, I'll, I'll take that at a headline level, Eric, and then, you know, pass it on to Tony and Jay for comments on the brand's approaches to that. You know, at a time like this, when we see the consumer becoming more cautious, right? We, we are more focused than ever on traffic, and we do that by leaning into our reputation for value in both brands, as well as the brands' expertise in delivering, you know, value-oriented LTOs and promotions. You know, so I'll ask, you know, Tony, if you wanna talk a little bit about Applebee's strategy going forward, and Jay, if you have anything to add, you can do the same. ... Yeah, happy to, John. Hi, Eric. You know, as John said, we don't traditionally talk in detail about traffic, but, you know, it's obviously something, you know, we monitor closely. What I will say about traffic and the decline in Q2 is that, you know, it stemmed primarily from, you know, the macroeconomic environment. When I look back at, you know, 2022, and then the first two quarters of this year, our franchisees, in terms of pricing, they've, they've been very modest, especially relative to the, to the category, to mitigate the traffic pressure while at the same time protecting and recovering their margins. You know, they've been very prudent. As, as inflation moderates, right, as we expect some favorability in our basket and the, and the balance of the year, as, as disposable income improves and guest sentiment improves, you'll find that we'll be very well positioned to capture more share. Hey, Eric, this is Jay. Hey. Just to add to that, you know, we have a strategy at IHOP really to make sure that it includes value and innovation. We just rolled out a new core menu. We've had full price Eggs Benedict, for example, as we rolled that out, so that's a more of an innovation item. Right now, currently, though, we're doing All You Can Eat pancakes and Kids Eat Free. We, we pulse those things throughout the year to make sure we're highlighting the great new items on our core menu and the innovation that we have, and also being mindful of value. We think that that helps us overcome whatever headwinds we might get from any kind of pricing the franchisees may have done. Yeah, and Eric, the last thing, it's John again, I'd mention is that, you know, stay tuned for Monday. Applebee's is launching, you know, a return of a fan favorite value offer, significant media behind it, you know, and that's, that's an example of the brand reacting to, you know, market conditions in a very real time. Sounds good. Thanks. Thank you. One moment, please, as I prepare the queue. Our next question comes from the line of Jake Bartlett from Truist Securities. Please proceed. Hi, thanks for taking the question. You know, mine is really about the, the approach to value, and I, I think there's a general concern, you know, among, among the investing community, that, that the industry might kind of slip back into deep discounting. So, you know, I'm wondering, how would you characterize the level of value now? I think the 2 for $25 with, with the steak, whatever's coming on Monday, you know, it smells a bit like, like deep discounting. I'm just wondering how you'd characterize, you know, you know, the level of discounting now, what you expect versus kind of some of the pre-COVID levels, which were so, you know, margin destructive, I think, just industry wide. Just any would be helpful to start? Yeah, Jake, it's John again. I'll, I'll, I'll take it at the top and then, and then ask again, if, if, if Tony and Jay have anything to add. You know, when it, when it comes to value, I think an important thing to keep in mind is that both of our brands work very closely with our franchisees to determine what these value promotions look like or what an LTO looks like. That includes not only, not only the marketing behind it, but the, the margins behind it, as well as the data we know that when we, when we invite a guest in for our LTO, they typically, you know, spend more in addition to, you know, what they are there for the LTO. You know, it's obviously a traffic driver, but it's also driving incremental check. You know, 1 of our stats from the last quarter is, while we did see, you know, a modest slowdown in traffic, you know, at both brands, you know, average check for the quarter at both brands remained steady compared to the prior 2 quarters. So when our guests are, are with us, they continue to enjoy the full offerings of, of both brands, Applebee's and IHOP, when, when they're in the restaurants. You know, so that's, that's a, a great data point for us that demonstrates that it's not, it's not discounting, but we're using the value offers to bring in guests in a way that resonates with them, so they, they maintain that average check. And, and Tony, only if you've got something to add, chime in, and then, and then Jay. Yeah, yeah, happy to. Thanks for the question, Jake. You know, value, value remains incredibly important right now, but honestly, it's it remains the same across all economic cycles. Applebee's is built for the average American. You know, eating good in the neighborhood is more than just a tagline. It means we're providing good food at an affordable price in an environment where, you know, everybody can come and be themselves. That's value. That's the value that the American consumer is, is seeking and expects from Applebee's. You know, an example that, you know, you mentioned in Q2, we delivered value through affordability, through campaigns such as our 2 for $25 with steak promotion, which we ran in June with strong results. It's compelling, and it provides the values, again, that the guests are seeking in this environment, which is why, you know, we, we have outpaced our direct competitors from a value attribute perspective for many years. Hey, Jake, this is Jay. The only thing I would add is just on top of what I said with my last answer. I'll give you an example. We rolled out, brand-new crepes, both, savory PM crepes and typical breakfast style type crepes. When we rolled those out, we did those with a buy 1, get 1 promotion. While that may seem like a deep discounting, the purpose of that really was to get trial by, 2 people at a time when they came in to try our new menu and try the new crepes, and it worked to perfection. It not only provided great value for guests coming in, but when the buy-1-get-1 promotion went off, crepe sales actually went up compared to what the level was when they were coming in and people were getting 1 for free also. It did exactly what we expected. We launched the product, we were able to give a nice value. There's a prime example of how you can almost marry your new innovation with a value as part of your program to build your overall core business. Great. I, I appreciate all of that. You know, my, my next and last question is about G&A. Maybe if you can confirm kind of what the recurring G&A as, as you calculate, I just wanna make sure I'm kind of backing out the right numbers in terms of the one time. It does look like in G&A, the implied back half G&A is a step up from what you, what you, you spent in the, in the second quarter. The question is, you know, what is driving, if that's right, but what is driving the increase in, you know, I think, significant increase in G&A spend per quarter versus the second quarter? Then also, you, you've talked in the past about having your G&A spend being, you know, can be flexible. you know, in a, if, if the macro kind of slows down, you can, you can pivot and, and, and, you know, maybe delay some projects or, or what have you, and, you know, be flexible with your G&A. So the question is, you know, when do you choose to do that? You, you maintained your, the G&A guidance this quarter, but, you know, at what point, and, and maybe if you can confirm that you do have that flexibility, you know, do you kind of pull that lever to sustain, you know, EBITDA growth? Sure, Vance, why don't you take that question? Hey, Jay. Sure. Jay, good to see you. You know, as, as, as I said, if we take out the, the one-time items, which is primarily related to flip costs, G&A is about $44 million. That's down from Q1 of twenty twenty-three and flattish to Q2 of twenty twenty-two. You know, we have some normal sort of seasonality within our quarterly G&A. If you go back to a few years, you'll see that Q4 is normally traditionally a little higher than the rest of the year. Which is the reason why we're maintaining our, our full year G&A guidance. Now, you know, the, the places that we're investing in, right? It's, it's, it's, it's people or systems related to building up franchisee support, you know, building up our development capabilities and improving, you know, the guest experiences. These are projects that, that take time, but they're building blocks to any successful franchisor, right? I also just remind everyone that, you know, we, we did this in conjunction with $200 million of capital returned to shareholders, as well as $200 million of debt reduction since 2022. All of this is possible only because of our high cash flow conversion business model. You, you talked about the second part of your question was about levers that we can pull. You know, another reminder there is that we've been through 2020, right? We've been through the worst. We know that we have the exact playbook to, to protect our liquidity, protect the, the long-term fundamentals of, of the business, and we. We know what to do. For the time being, we're seeing progress with, with investments that we're doing, and, and, you know, that's why things, you know, we're not lowering our, our G&A guidance just yet, but things are tracking according to expectation. I hope that answers your question. Yep, that's very helpful. Thanks a lot. Thank you. One moment, please. Our next question comes from the line of Todd Brooks of the Benchmark Company. You may proceed. Hey, thanks for taking my questions. First, on Applebee's and the updated, net unit closure guidance. Tony, can you talk through the portfolio review, and where you found the additional weaknesses that maybe, led you to identify the additional closures? Is it concentrated within 1 or 2 franchisees' portfolios or concentrated regionally? Is there anything, anything consistent about the incremental units, and is there a chance that, the need for more closures leaks over into 2024 and threatens that move back towards kind of net unit neutrality for the Applebee's brand? Yeah, absolutely. Happy to add a little bit more context and color. I'll try to unpack that, but there may have been five different questions there. So, you know, we're now two years post-pandemic and, you know, shortly after taking over this role, we decided to take a strategic look at our portfolio and identify additional restaurant locations that are, you know, are no longer in strong markets, and that's due for, you know, multiple reasons. Some of those reasons are, you know, post-COVID consumer behavior changes that, you know, John mentioned earlier. Closing these underperforming restaurants, you know, opens up new trade areas. It opens up opportunities for growth, especially when you consider our broader development strategy. Our new, you know, vice president of development is working closely with franchisees to take advantage of these opportunities. In terms of how this impacts beyond 2023, you know, we're not giving guidance today beyond 2023, but I'll, I'll say that we're gonna work closely with our franchisees to help identify closures and make sure that we always leverage our collective expertise and, and our knowledge to set them up for, for long-term financial success. In terms of the, of the, the different reasons, I, I, I'm not gonna go into the exact reason for every 1 of the closures, but it's a mix of those post-COVID changing consumer patterns. Sometimes it's loss of property control, where the franchisee is unable to renew a lease with the, with the landlord. I, and I think you, you also have to keep in mind that, you know, this is, this is a function of opening up many, many restaurants 20 years ago, and there's cycles, right? Every year is a little bit different. In some years, you have more renewals that come up than you did in the previous year, so you may have some more non-renewals than you did in the previous year, et cetera. It can be a little cyclical as well. Hopefully, I think that, that answers your questions. Yeah, that was great, Tony. Thanks. One more, and I'll jump back in the queue. If we can talk about CapEx, $33 million-$38 million guidance maintained. It looks like the spending was front-end loaded, I think $23 million year to date. I guess, what's maybe rolled off out of the CapEx program? Can you give us some color in what makes up your CapEx, kind of the mix of maybe maintenance CapEx, which you shouldn't really have much other than kind of your corporate-related facilities, but between tech and other areas, just trying to get a handle about around the size of the CapEx for a fully franchised operation. Thanks. Sure. Todd Vance will take that. Hey, Todd. You know, the CapEx number, as, as, as we kind of mentioned last quarter, it actually doesn't reflect about $8 million of TI reimbursement that we've received year to date. That piece of it is actually flowing through our working capital. If you net that $8 million against the 2023, it's, it's actually quite a bit lower than, than Q1 and also than 2022 already. You know, the, the nature of CapEx, a lot of it is sort of the, the implementation, the installation of the technology. Things should roll off over time, and we're already seeing that. The full year guidance of CapEx, again, that does not reflect the TI reimbursement, right? On a net basis, you know, we're getting a lot closer to our pre-COVID level already at this point. Does that answer your question? Great. Yeah, it does. Thanks, Vance. Great. Thank you. One moment, please. Our next question comes from the line of Nick Setyan from Wedbush. Please proceed. Thank you. The IHOP, the add back, I think you said it was about $3.5 million within G&A, but I think the add back is over $5 million. What's the difference there? John, I'll take it. The difference there is still flip related. It just sits in franchise operations. It's not part of G&A. Got it. Just so I can reconcile sort of the reiterated guidance with the, you know, softer top line. The G&A guidance and the EBITDA guidance you guys gave in Q1, it already incorporated the, the flip closure or the flip charge? No, it did not. Okay. The guidance did not reflect that, no. Okay, okay. The other question is, around, you know, the, the IHOP, gross margin. Seems like bad that, up in Q2 versus Q1, I think it's... Is that sort of the, the new run rates, or, or is there anything special in Q2, that we should be aware of and should think about, I think gross margin going back up again to above 80% for the rest of the year on the IHOP side? The IHOP gross margin is impacted by, for this quarter, it's primarily by sort of the dry mix costs. The cost of goods sold for that, that's flowing through our franchise expenses. That's really driving the gross margin for this quarter. Another, you mentioned bad debt. This applies to both brands. You know, the bad debt for last year, this quarter, were lower than normal because we had some recovery of bad debt. This quarter is more reflective of normal run rate margin level. Is that helpful? Yeah, yeah. So, so it is more reflective of sort of a go-forward margin level? Yeah. put aside the, the drive mix piece, which is, which is, a little bit volatile, given, given Russia and, et cetera. Otherwise, it's, it's a fairly normal quarter. Yes. Okay. Thank you very much. Thank you. One moment, please. Our next question comes from the line of Brian Mullan from Piper Sandler. Please proceed. Hey, thank you. Just a question on IHOP. You know, net new opening guidance was reiterated at 45 to 60 units. It was good to see. Can you just speak to your degree of confidence you'll be able to achieve that this year on a, on a net basis? Related to that, maybe could you just talk about how much construction cost inflation is taking place, and how you're getting the franchisees to overcome that and go ahead and, and keep developing, at least in the U.S.? Yeah. Thank you, Brian. Yeah. Yeah, I was going to say, this is Jay. Thanks, Brian. Look, on the, on the net development number, obviously, we reiterated guidance. We're, we're still confident we're going to be able to hit within that range. Obviously, you look at the numbers, you may question how you're going to get there, et cetera. The, as in many years, a lot of the openings are backloaded into the, into the year, and it tends to pick up as the year goes on. We are reiterating the guidance, and we think that we will still get there. To the second question, I think the key for us is we have. It is an expensive time to do new construction out there, and the ways we have worked with our franchisees to try to help them with that is, number 1 is we have multiple ways they can develop. It's not just a full-size traditional restaurant. We have nontraditional opportunities for them. We've developed a small prototype that they can develop, which cuts down on costs. Most importantly, we've really unlocked this ability to do conversions pretty quickly. That's the other thing that actually helps you speed up, and, you know, you can find a property, and within the same year, you can open that restaurant instead of trying to source new ground and do a complete build-up, et cetera. Conversions are a much better speed to market way to get your development, and they're also much more economical. As you heard, John say at the beginning, we've had about 75% of our, our new openings in our pipeline that are these conversions that are reusing a previously existing, property of some sort. Okay, thanks a lot. Thank you. One moment, please. Our next question comes from the line of Andrew Wolf of CL King. Please proceed. Thanks. Good morning. Wanted to ask about kind of franchise behavior and how you work with them, you know, with a deflationary background. You know, as I, as I view things, you know, I'm sure their cumulative costs to run their restaurants, including, you know, ingredients and labor and so on, have been up more than the AUV since 2019. You know, like most other restaurants, their, their margins are down, their profit margins. You know, how do you work with them, to kind of balance, you know, them wanting to maybe be made a little more whole, keeping some of these lower costs, and maybe even their price increases, even in a deflationary environment, you know, to widen their profit margins versus, you know, at least in the short run, it's probably more in the interest of, of a franchisor, which is to promote and, you know, get the sales up. Could you just tell us about, you know, what is sort of the current state of the franchisees, kind of their mindset, and how you, how you work with them on that? Andrew, it's John. I'm going to suggest this. Vance, why don't you address the franchisee margin specifically? Then, you know, I think it's helpful for Jay and Tony to talk about, you know, the committee structure and the way we collaborate with franchisees in around our programming decisions. We'll start with Vance. Sure, John. Hey, Andrew. With franchisees, we're constantly having a conversation of margin dollars versus margin percent, right? You pay rent, you pay labor with dollars, not percentages. These are longer term conversations, and we're focused on long-term franchisee health. On average, both systems are in great shape, based on the, you know, the non-audited financials that our franchisees have shared with us. You know, of course, we do have normal course of business type of requests from our franchisees as a system of our size would have. Generally speaking, you know, you see in our reported numbers, franchisees are seeing strong AUV growth, and with the second half commodity inflation easing, with the labor availability improving, you know, those are positive trends. On top of that, we're also working with our franchisees on, on cost-saving initiatives at the restaurant level. These include packaging and distribution and waste energy reduction, front and back of the house efficiency, et cetera. These are all incremental things that, that, you know, we're working on together collectively to, to make sure that their margins are protected and, and their, their franchisee health is maintained and, and improved over time. Tony or, or Jay, anything to add there? Why don't we just have Jay speak on behalf of both brands in terms of how we work with our franchisees, you know, through the committee structure, et cetera, Jay? Yeah. Hi, Andrew. You know, we, we have various committees. We have an operations committee that looks at how we execute, how we operate. They deal with a lot of this on cost of doing business, food costs, ways to improve efficiencies on execution, on labor, et cetera. We work very closely with them, and there's almost different buckets that this falls in. You, you heard John Peyton talk before about our restaurant profitability initiatives that both our brands do. For example, at IHOP, you know, it's 35 basis points that we've been able to save on that initiative alone. Obviously, the commodity, commodity reductions are going to be coming in the second half of the year will help franchisees as well. I want to go back to your question, though, about sales and how sales tend to help the franchisor or, at least perception-wise. One of the things that we also make sure, talking about penny profit is, sales actually help franchisees way more than they help the franchisor. We get a percentage, obviously, of the top line, but the flow-through of an incremental sale is kept by the franchisee, mainly, and that's where, you know, they understand that we need to cut costs, but we also need to raise revenues, and that's their sales, and that's their traffic. That's really one of the biggest focuses. You think about all the work we do with marketing and initiatives, value, and pricing. All of that is about how do you get more guests to come in and have a great time in your restaurant, experience a fantastic experience, which adds more to the value equation, and then come back again. The franchisees work on all of those things. We're ready for the next question, Gerald. Thank you. Again, at this time, as a reminder, if you'd like to ask a question, you will need to press star 11 on your telephone. One moment, please. Our next question comes from Jeffrey Bernstein of Barclays. You may proceed. Great. Thank you very much. couple of questions. The first one, just following up on the Applebee's comp trends. I think you mentioned that, it started soft, but then you introduced the steak promotion within the 2 for $25, and I thought you mentioned that traffic improved. I'm just trying to get the sense for, I know you don't give monthly trends, but just want to confirm that directionally, you were saying trends got better through the second quarter and into July. Within that, if you can maybe just share the components of the comp, including price and whatnot, for the second quarter result for both brands. Yeah. Jeff, it's John. I'll clarify the comment I made about the Applebee's comps, and then we can ask Vance to address the traffic and price split. You know, what we're not commenting on July because that's obviously the third quarter. And what I did say is that we saw, you know, stabilization and then improvement of traffic as the quarter progressed. Vance, do you want to talk about the mix? Yes. Hey, Jeff, for Q2, on a year-over-year basis, I think Applebee's was close to 5% menu, saw menu pricing increase, and IHOP saw about close to 8%, a little bit under 8% menu pricing increase. Then there's the rest of that ticket change was in mix, and then traffic was negative. Okay. The G&A, just to clarify, you know, on the P&L in your press release, you know, you show the $47.8 million. I'm just trying to figure out what the correct number to use for the adjusted 2Q G&A, so it's apples to apples with the guidance for $200 million-$210 million. I was under the impression we should back out the full $5.8 million, but it sounds like you're saying something different. What's the adjusted 2Q G&A that is apples to apples with the $200 million-$210 million that we should be thinking about for the full year? It's, it's 40, about $44 million. That, that incremental $2 million-ish of, of the add back sits in franchise operations. Collectively, that's the 5, that makes up the $5 million that we added back on, on EBITDA. Got it. The $47.8 million gets reduced to the $44 million, that's on top of, I believe, the $49 million or so in the first quarter, those are the apples to apples that we use to get to the $200 million-$210 million. That's right. Understood. Lastly, just trying to clarify on the promotional activity. Again, I think it was more commentary related to Applebee's, but you talked about the peers' activity has been increasing. You know, we talked to some of your large national peers, and they were saying it seems like people are being more prudent and not being overly aggressive on promotional activities. I'm just trying to assess whether it's big chains or maybe independents, or how you kind of think about that promotional activity and how you potentially respond to that. Thank you. Tony, why don't you address that since it was an Applebee's question? Happy to. You know, we, we monitor competitor activity, but, you know, it really doesn't impact our overall strategy. We've been regarded as an industry leader, you know, a value-based player in this segment for many, many years. You know, there are others, they're trying to figure out their discounting campaigns, but we have a proven track record, right? We have a playbook that's produced strong results. Our focus in this environment is really on, in 4 areas, where we're working on creating new value offerings, we're extremely focused on culinary innovation, we're gonna continue to drive operational excellence, and we're gonna improve our, our dining environment and experience. You know, these, these focus areas are what our guests are telling us. You'll always see us react to what our guests are telling us and not because what our competitors are necessarily doing. It's why we continue to maintain our leadership position in affordability and visit intent, in brand and ad awareness, and in convenience. You can expect a continued focus on these areas, for the balance of the year. Understood. Thank you. Thank you. One moment for our next question. Our next question comes from the line of Brian Vaccaro from Raymond James. Please proceed. Hi, this is Maggie Juarez on for Brian Vaccaro. Thanks for the question. We just wanted to follow up on the health of your consumer. Could you elaborate on any recent changes you might be seeing as it relates to frequency within specific income cohorts, any changes in sales mix or attach rates on appetizers, alcohol? Any color there would be helpful. Sure. It's John. I'll, I'll take that. We've said a couple things about the consumer and, and, you know, there's the behavior and then as well as the profile. You know what? We, we can, you know, confirm again, as we mentioned last quarter, that, that we continue to grow our share of younger guests, you know, among our target income. You know, that's been an improvement the last several quarters based upon where we were pre-COVID, for example. You know, we think that's a reflection of many things, including that both brands have gotten even better at targeting younger guests, you know, on social channels and, and, and meeting them where, where they are. That's particularly fantastic, you know, in my, in my opinion, because, you know, our-- we have, we have two mature brands in Applebee's and IHOP. By the way, Fuzzy's also has a, a young guest. For, for, for mature brands like that to continue to appeal to younger guests, and grow that space is terrific. In terms of their mindset, you know, I, I mentioned early on that, we, we are seeing that average check is about the same. We're also seeing, for example, that at Applebee's, the, the LTOs and the value-oriented menu, that section grew from 15% to 19% last quarter. We're, we're beginning to see, you know, a modest change in behavior toward of our consumers becoming a little bit more cost conscious. We also saw them shifting a bit from delivery to pickup to save, you know, the delivery fees on, on off-prem. It's items like that that suggest to us that the guest is becoming, you know, a bit more, a bit more cost conscious, a bit more cautious, in the last quarter. You know, I'll leave it at that. Thank you. If that is all, we will now turn it over to John Peyton for closing remarks. All right, great. Gerald, thank you for taking care of us this morning. Thank you to all of you who dialed in and asked the questions. We, we appreciate it, and we, we appreciate the time you took to hear about our, our quarter and our plans for the future. Everyone, have a great day. Thank you. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.