All right. Good morning, everyone. I want to welcome you to Brinker International's 2021 Investor Day. I want to say a special thanks to everyone in the room that traveled all the way to Dallas to join us live, and I want to welcome all the people joining us virtually. Just in case, I think I know almost everyone, but my name is Mika Ware. I am the Vice President of Finance and Investor Relations, and I think we have a really good day set up for you today. As you know, we released our Q1 numbers yesterday afternoon. We're going to start the day discussing those results, and then we're going to jump quickly into the long-term and talk about the long-term strategy and share some of our insights and expectations moving forward. Let's see. We're also going to have a lot of time for Q&A, so I know that's very important. To do that, I have some key Brinker leaders in the room that I'd like to introduce you to. We're going to start right here with Wyman Roberts. He is our Chief Executive Officer and President of Brinker. I got to get my glasses here to read so I don't forget anyone. We have Joe Taylor. Everyone, I think knows Joe, our Chief Financial Officer. We have Wade Allen. He's joining us. He is our Senior Vice President of Innovation. He's going to talk to us today about our virtual brands. We have Doug Comings in the room. He is our Co-Chief Operating Officer of Chili's, along with Aaron White. She is our other Co-Chief Operating Officer of Chili's. We have Steve Provost in the room. He is our President of Maggiano's. We have Larry Konecny in the room. He is our Chief Operating Officer of Maggiano's. We have Rick Badgley in the room. Rick is our Chief People Officer. We have Charlie Lousignont. He is our Chief Supply Chain Officer. Finally, we have Dan Fuller. He is our General Counsel and Secretary. Thank you, Dan, for joining us. Since this is a hybrid meeting, we're going to have a mix of obviously virtual and live people here. We're going to have some live speakers along with some videos in the restaurant, so we can take you there, if not live, virtually. Not to make our virtual guests jealous, but at the end, we are going to have some delicious food. We're going to serve you lunch. We'll have It's Just Wings and Maggiano's Italian Classics. Okay. The last thing that I need to do, which is always my job, you guys hear me do it every quarter, is remind you of the safe harbor statement. Dan is not going to make me read the whole thing, but I do have to read the beginning. Again, I need my glasses to do that. During these presentations and in response to your questions, certain items may be discussed which are not based entirely on historical facts. Any such items should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Please take some time to read the rest of the statement on the screen. Okay. With that, let's get started and let's welcome Joe. There you go, Joe. Thank you. Thank you, Mika, and good morning, everybody. It's nice to see people back in the office, and thank you for joining us here in person at the RSC. Also good morning to the folks that are watching virtually. We do like the fact that we're able to have live meetings again, and we look forward to continuing that as we go forward. I want to start the day before we get into the longer term and the strategic thought processes, talking a little bit about the Q1 results that we reported yesterday evening. In conjunction with this, we put out certain operational aspects of the Q1 for your review. I'm going to make a few comments, give you some perspective on that, and then we're going to get quickly into Q&A as it relates to the Q1. We'll have opportunity to Q&A on the longer term as we get farther into that. The basic perspective, again, it was a quarter with mixed sentiment from our side of the page. A very strong top-line. We're very pleased with the continuation of the recovery curve on the top-line. We had $136 million increase in total revenues, $90 million over the comparable pre-COVID quarter of FY 2020. Continuing to do a good job on the top-line. Lots of consumer demand out there. Obviously, the issue was in the middle of the P&L with a compressed restaurant operating margin as we worked our way down the P&L. Eventually getting to a $0.34 EPS versus the $0.28 the last year. We're comfortable and confident in our ability to drive the top-line. We're disappointed for this quarter in the ability to flow as much of that through as we anticipated. We're working diligently, and we have a good line of sight on how to continue to improve that as we work our way through, really, the turbulence that is going on right now. Lots of discussion out there about labor and supply chain. We are experiencing that, we're also coming at it from a perspective of strong top-line, which is really when you think about working your way through this environment and getting back into a more normalized situation, the strength of that top-line is going to be important to make it an effective move as we go forward. From a top-line perspective, again. We have focused significant time and attention on driving traffic, and we continue to perform well on the traffic side of the equation. We think that is a linchpin for long-term success for the company. A 9% gap to the industry, again, in that Q1. That's a continuation of a theme you've heard us talk about now for really a couple of years. It does resonate, I think well with our operators in how we continue to see more foot traffic into the restaurants and continuing to build that base of folks that are coming into the Chili's and the Maggiano's side of the equation. Chili's, as you can see, the entire quarter, working above pre-COVID levels. Again, once they moved out of that last winter's pandemic phase, you saw a nice move above pre-COVID levels and continuing to maintain that. It's great to see their improvement and the recovery that Maggiano's is making on the top-line too, working their way back. Obviously, a little dip in August through the COVID surge piece of the equation, but getting back by the end of the quarter to parity with what they were doing pre-COVID. That's a nice move in recovery on the Maggiano's side. You'll hear Steve talk a lot later about the improvements they've made in the business and the advancements they're making from a recovery standpoint. We're real pleased to see the direction of that brand. I want to show you the average weekly sale so you understand what some of the nuances that went on within the quarter itself. You remember us talking in August that we had had a really solid, nice July top to bottom. That environment was working well. Then we got to really mid-August through September, and you saw a little difference in the top-line that worked its way down through the P&L, also with some other headwinds coming in from other aspects of the cost side of the equation. When you look at the gold bars, that's the FY 2019, well, let's say calendar 2019, monthly average weekly sales. The blue is the FY 2021, the current. You can kind of see, again, how we outperformed pre-COVID all the way up through really getting into those summer months. One thing to point out, when you typically look at July and August, those are typically parity months from an average weekly sale standpoint, running roughly the same throughout those two summer periods. As you can see with the COVID surge that started really impacting in August, a marked decrease in average weekly sales July to August. That would typically be an anomaly for how our sales flow throughout the year. An incremental step down into September. From $58,000 down to $54,000 in September. That's an opportunity for us because, again, as pleased as we are with our ability to drive top-line, we're still leaving sales on the table. We still have restaurants that have not been able to fully open. Staffing issues are forcing some restaurants into limited hours, inability to open fully, particularly when you think about Fridays and Saturdays, where you really get those volumes running through the system and still constrained. Looking at the numbers, we think we left somewhere in the 3%-4% comp range on the table through these short-term constraints that are still working their way through the system. Particularly when I look at markets like the Midwest, California as it started its recovery curve in that July, August timeframe, more constraints going through those systems that frankly, we look at as opportunity. Again, we're going to continue to drive the top-line as we get those restaurants fully open and back online. We think there's another step up from a top-line perspective that we can gain as we go forward. The good news is we're starting to see that as we move into October. The first two weeks of October, we have now started to see that step up again in average weekly sales coming up now to $55,000 per restaurant per week. It's good to start to see traction coming back into the system. Our intent, obviously, is to continue to grow that number as we move forward, both from a recovery standpoint and also from the initiatives we're going to be talking about as we move forward today. Let's get to the middle of the P&L, because I know there's probably a lot of questions and comments you want to hear from us on that. Clearly, a compressed restaurant operating margin of 10.4%, and it led by labor. Labor had 150 basis points delta between the current fiscal year and the prior fiscal year. We had impacts across all three of the major components of restaurant operating margin. Let me unpack that a little bit for you. From a food cost perspective, it was critical in this environment to maintain access to product and getting that product in a timely manner to the restaurants to meet the demand. Again, part of this is being driven by great consumer demand that we're seeing out in the restaurants. Yeoman work done by our supply chain team in making that happen, working pretty much around the clock with our distributors and our vendor partners to make sure that that access was maintained, and they did a great job of that. It did come at a price. In the quarter, we saw about 100 basis points of commodity inflation work its way into the system. We did have to go outside of some contracts to source a product in the short run, and we had to restructure a couple contracts to make them realistic to where the markets were going to assure that we had that product access. There's also some impact from the turnover that you're going to hear us talk a lot about, and a more inexperienced staffing levels that we are working our way through. Because again, embedded in that 100 basis points is probably 10, 15 basis points of increased AvT beyond what we would typically see. That's a matter of getting new team members up to speed on how to run the systems and making sure that we're managing effectively things like waste, because that does impact these numbers as we move forward. We'll work through that issue, but the key is ability to continue to maintain supply and meet the demand as it's coming into the restaurants. Labor. Again, the heart of the issue here was the outsized year-over-year impact in this quarter from a labor perspective. I want to break that into two categories. There's both transitory, from our perspective, and structural changes going on in the labor market, and I've laid those out for you in this bridge. 130 basis points of that impact in that quarter we feel is very much in the transitory category, and we will deal with that as we go forward. 50 basis points of training, 40 basis points of less productivity, again, a new workforce coming through the restaurants that need training, need to become more adept and get that muscle memory going of the systems and how we approach things. We'll accomplish that, and get those costs out of the system as we move forward in this year. Some structural changes. Wage rates did increase in that 5%- 6% range that we had talked about before, so they are behaving kind of as anticipated. Some leverage working its way in as we continue to drive the top-line side of the equation. Where do we go from here on a labor market standpoint? As we work our way through the rest of the fiscal year, as we move pricing actions, we took a price action yesterday, as a matter of fact. We have a line of sight of the incremental pricing as we move forward. As we take advantage of seasonal revenue flows that we will start to see in our higher quarters as we move through the rest of the fiscal year. As you see these initiatives we're going to talk about today continue to build the top-line, we will impact favorably that number that you saw for this quarter. I would anticipate that as we move farther into the fiscal year, you'll see this number down in the mid 34s. We will make headway as it relates to improving the labor side of the equation. Restaurant expense. Obviously, this is the area you would anticipate we would make sales leverage. As you add that top-line in, you're going to see most of the sales leverage hit in this area, since a lot of fixed costs. Now, there are costs in this quarter that are associated with having restaurants open at a much higher rate than we did a year ago. When you see the R&M and utilities and some of those expenses, that's bringing restaurants back online. Again, I think as we unlock the incremental sales opportunities that we can see, the leverage opportunities here within restaurant expense should flow through. Where we are right now is, yes, from a bottom-line standpoint, flow-through standpoint, disappointing quarter for us. We have really good line of sight from our perspective on driving top-line and margin recovery as we move through the rest of the fiscal year. There are expenses in here that are not going to remain and not become structural as we move forward. We will get those out of the systems as we continue to work to normalize the staffing levels, get the training where it needs to be, and get that muscle memory moving on utilizing our systems that we know are very effective in driving restaurants. We're stepping up to the plate to take more pricing actions, as well as obviously driving top-line growth through the initiatives we've laid out. That gives you a little bit of an overview, our perspective on the quarter. We obviously have a quarterly call also scheduled for November 3rd, which will have even more discussion and opportunity around these numbers. Wanted to make sure that we had an opportunity to at least dig into it in the short-term and answer some questions. Wyman, why don't you join me up here, and we'll do about a 15-minute Q&A for the Q1 side of the equation. I'm going to look to the audience here to be the proxy. Mika is also going to be monitoring online questions coming in, and we'll just go back and forth between the two. Nick. I'm going to ask you so that if people on the virtual can hear, we have mics that'll be roaming around, and that'll allow them. I guess, is there a way to go back and say, if we had taken the pricing that we're taking now, and that gets you to sort of 3%- 3.5% for the year. If that pricing was flowing through in Q1, what would the margin have been? Is there a way to quantify that? Well, in the Q1, we're only recognizing about, what, 0.6% of price in the Q1. If you think about another 150 or 200 basis points of price on that, it would add a significant impact on the margin hit. I don't know exactly what that would've been. Yeah, our expectations for the quarter would have been for margins to be in that mid 11% range. When we're looking at our plan, that was our thought process, and it did not include 3% pricing in those numbers. Again, pricing is one action, but also improving the utilization of the systems, getting those transitory costs is probably going to be as big of an opportunity as we move forward. We underperformed by about 1% in the quarter when I think about the ROM side of the equation. Let me just ask the second question, if I may. The volatility month-to-month in terms of sales, is there a way to quantify how much that impacted labor productivity efficiencies? You couldn't maybe staff effectively because you didn't have the visibility month-to-month. What kind of an effect was that? Thank you. I think the volatility, obviously, when we run higher volumes, we're more efficient. when you think about that July to August drop, that was really primarily COVID-related. We lose some efficiency there. in the midst of all that, you've got this turnover. The good news is the spike in turnover is kind of past us now. we saw a dramatic increase in turnover, both hourly labor and management labor, early summer. April, really May, June, July. We were dealing with that when we talked to you in August, and it looked like then the impact of that into the restaurant through the P&L was kind of what happened, especially once you started to lose some leverage with sales. That combination of what was going on in the restaurant with regard to staffing and being able to staff and have restaurants open, whether it was because of just not finding bodies or whether it was because of COVID exclusions, coupled with a deceleration of sales due to the COVID restrictions, kind of brought more pressure to the P&L than we had anticipated. A lot of that stuff now, turnover is now moving in the right direction. It's stabilizing. It's getting much closer. We're moving back towards the trends we're used to seeing. These aren't even restaurant industry trends, right? 20 million people left their jobs between April and August of this year across the country. A record 60% more than last year at this time. There's a Wall Street Journal article that was just written this weekend. Obviously in our industry, those numbers are probably bigger because we have a more transient industry well above the pre-pandemic levels. You had a lot of people moving in this environment, jobs. You could speculate why, but that was just happening out there. It made us less efficient, frankly. We're all about running systems, whether it's with our hourly team members or our management staff. You have to know those systems. You have to be trained on them to become proficient at them, and that takes time and takes some experience. With all of that going on and a deceleration, we just became less efficient. Brinker is known for efficiency. That's one of the things we pride ourselves on across the P&L. You'll rarely find somebody that runs restaurants as well as we do from an efficiency perspective, and it's just got a little bit tougher to do in that environment. Good news is staffing levels are moving back to where they need to be. We're seeing a significant slowdown in turnover and getting back to those kind of levels. We're confident that we'll get back to running kind of restaurant systems that we need to deliver margins. David. He's right there. All right. Thank you. Question on delivery and pricing strategy there. Basically, big picture thing, because obviously you're going to keep on pushing on the off-premise as a growth lever. We want to know what we're getting into. If you look at fiscal 2021, it looks like your delivery fees and paper would be somewhere up in the low 200s as a% of sales versus 2019. sort of this journey is costing you that. if you think about your incremental off-premise business, it feels like back of the envelope, that this is an incremental margin that's not as good as we probably would like it long-term for that off-premise business. Obviously, some of your major competitors aren't really even doing delivery. Sure. Your competition is less. You're seeing Chipotle taking up pricing 17% on delivery. I guess I wanted to get your sense about what you're thinking about pricing power on the off-premise business and how you're thinking about you're going to be taking other steps here. Well, I think first let's just talk about our overall strategy with regard to price. We're probably going to be a little more conservative and a little more deliberate than most, especially with the Chili's brand. This is a brand that's got a foot, and I'll share some of this with you when we talk strategy. It's got a foothold in affordability. It's got a broad-based consumer demographic, a lot of family, a lot of kind of budget eaters. It's why we have the footprint we have and the demographics we have coming to us. We price very thoughtfully. That's why we're a little late, frankly, in this quarter. We wanted to understand structural versus transitory. Structural, we kind of got. Transitory is a little ahead of us. We'll get the pricing right for the structural piece. We're committed to running a great business model, but we don't want to get ahead of ourselves and start to chase consumers off in the long run. That's why we're focused on traffic as well. What is that? How does that relate to the takeout and delivery side of the business? Similar, but we feel there's more elasticity there. We've already priced more aggressively in those channels, and we'll continue to kind of push that model till we start to feel some negative trade-offs. Again, we're all about trying to keep traffic into the restaurants. The strength of a brand, I think, is how many bodies you have coming in. Long-term strength. You can buy a quarter with a big price increase, but are you going to be around for another 47 years? That's the question, and that's why we really take pricing very seriously, and we may get behind in a quarter or two, but we'll be there in the long run, and we'll push that channel a little further because it does have elasticity. Now, are we going to go 17%? I'm not sure. I doubt we'll go all that way, but we know there's room there. Those consumers tend to be a little less elastic and willing to pay a little more, so we'll continue to push. Yeah. you'll see later today, Wade's going to walk you through some of the virtual brand what that model and P&L looks like. there's, one, it is good margins for the incremental business that it's generating, and it has flexibility in it. how we think about pricing, how we think about advertising, things of those natures within the context of those virtual brands, we have good optionality there. they're also new brands, so we want to make sure that we continue to build the awareness and the receptivity from a consumer standpoint as we move forward. how you think about price for that generation of brands versus 47 years or whatever years from some of the other competition is a little bit different. Hi. It's John Ivankoe. Two questions, I guess, on the transitory side, if I can. Firstly, can you elaborate on the 140 basis points increase in repair and maintenance? I think that's versus calendar 2019, correct? That's a very big increase relative to what I think a normal R&M budget is t alk about fiscal 2020, in terms of what was the level of R&M spending? Were you underspending for that given quarter that we missed? Was there some type of a difference in allocation between CapEx and OpEx, that either will continue going forward or won't continue going forward? Yeah, I think you're seeing a high water mark there. Again, there was an ongoing level of R&M spend, if you look back over the last year. Now, again, from a quarter-to-quarter, Q1 to Q1 last year, where you had significantly lower number of reopened restaurants, you're going to see a bigger delta, I think, in these quarters. That's going to normalize as you move forward and we get into Q2, Q3, and Q4s, where the operating perspective of the brand starts to be same over. I think that's the high water mark. We need to make sure we have the right disciplines and governance in place, which I think we do. I don't anticipate seeing that kind of delta going forward anymore. I may have missed that and I apologize. There was. It was 2020 to 2021. Okay. that was the September 2020 quarter to the September 2021 quarter? Correct. Yeah, exactly. Okay. Do you remember what that was versus Excuse me for embarrassing myself. Can you remember what that was versus 2019? Was that a normal R&M spend versus 2019? At least that's, I think it was. It's a little elevated. It's a little higher than that [crosstalk] on a per restaurant basis, but not terribly. You can imagine, that's the Q1, really the first big quarter after the pandemic. Everybody. This was when everybody was saying, "We found all these margin savings." we were sitting there going, "No, you haven't." You've got nobody in your restaurant. Of course, you're not having to repair a lot of stuff. There's nobody in your restaurant. we knew that was going to come back. Now, has it come back a little heavier than we thought? Yeah. Probably a little delay there and some pickup. There's also some issues happening with regard to supply chain. we have equipment now that we would like to replace because its life's over. We can't get it. we're having to repair it. our R&M expense is going up a little bit. Without trying to complicate the story and keep it focused, there are things happening every day in the restaurant still around supply chain and distribution especially, that aren't a surprise, right? All those boats sitting out in Long Beach, they impact us as well. There's stuff on those boats, there's stuff in other countries that we need to get here that will eventually start to move through, that doesn't get the same kind of exposure as your Christmas present, but it impacts our restaurants, and one of them is just getting refrigeration units, getting air conditioning units so that we can open our buildings. getting these restaurants, we've got a great pipeline of new restaurant openings, and just making sure we have all the parts necessary to open the restaurant now is a little bit of a challenge. We're getting through it, and we're going to work through it, and we're committing to it, but it's not easy. It's not as easy as it used to be, as you would expect in these kind of times. That's probably a smaller piece of it, but it's in the mix. On the margin. Yeah. I think historically, there are two leading indicators of turnover, especially as it relates to retaining employees and also running good restaurants. One is general manager turnover. Yeah. Comment what we're seeing in that. I don't know if you look at 60-day or 90-day turnover of new employees. Can you comment in a very real time in terms of what's happening in both of those important factors? As I mentioned, they're getting better. We saw a significant increase in both hourly and management turnover. Primarily, the turnover number was driven by early tenured managers, right? As GM, the newest employee. whether you [crosstalk] GM has always been a key number, low turnover number for us. It jumped from where its base has been. We've always had, and I'll show you some numbers here in my presentation later. We have a very tenured GM staff. The average GM is over 10 years with us. We have a very tenured GM staff. We did lose some, and that's important, but we have even a better metric. We ask our team members twice a year, "How you feel?" we asked them that in March, and the number wasn't great. We didn't expect it to be great. Nobody was feeling great in March. That's the better indicator of are they going to stay or are they going to leave? We were asking them that same question, the survey's out there today, and we'll have a better insight. We keep track by restaurant of how do our team members feel, both managers and hourly, on an ongoing basis. Twice a year, we take a pulse of, "Hey, how's it going?" That's actually the better indicator. In March, we got an indication that, hey, we could see some turnover, and it wasn't so much about what was going on in our restaurants, about the overall environment and having to work in a restaurant through a COVID experience for the last year was weighing on people. The number one reason we're seeing for turnover is really about quality of life. It's like, hey, this has been a very difficult time period for the industry, and some people are kind of making decisions. The good news is most of those decisions are behind us, and we're starting to see people kind of normalize back into the organization. We're dealing with these issues that make it easier to work in this business. I think as of today, too, we're feeling pretty confident and comfortable with where we are from a GM perspective. The normal turnover rates that we would expect to see there. We've seen improvement on the manager side of the equation and a lot more stability as we work through both the heart of the house and the front of the house. Again, Midwest is probably our most challenged area right now, and a lot of time and effort going in to improving that. California is probably the second piece of the equation there. When I talk about the constraints that we are seeing on revenues from a labor kind of standpoint, those are the two hotspots that we're looking at very closely. That probably represents 1/3 of what we thought we left on the table. The great news there, if you want to say great news, but the news there is we have good line of sight, and it's not system-wide. It is very defined into certain markets. It's that 80/20 rule is very much in play, and we can move the ball on that. Yeah. Which again gives us a lot of comfort that, hey, we know once we put out some of these fires, that there's a lot of restaurants running very well right now and delivering great results. Yep. I think, Jared, you had. Jared Garber from Goldman. I had two questions, one on the top-line and then one on margins. On the top-line, you gave some nice color on the outperformance versus the industry. It looks like that shrank in August. Obviously, we all know the industry shrank as well in August. Anything that you think drove that deceleration from sort of a low single digit outperformance to, I think it was 20 basis points or so in August there. Is that geographically driven? Is there something there that you think drove that? Yeah. I think the geography played a lot into that. When you really saw the greater impact of a surge, you were seeing a lot of the southern tier markets. We over-index in those markets relative to the industry. I think that's about Delta. The other big thing, though, is if you look at the traffic, it didn't drop. It's really pricing. Again, other folks priced more aggressively early on. The gap between those two is really differential in price mix, right? We're almost double- digits or high single digits in traffic, and now we're running kind of low single digits on sales. There's that price gap that we're, again, being more deliberate about crossing. We'll take traffic and a line of sight to a great P&L and future business than just going full throttle right now on pricing. Cool. That's definitely helpful. then my second question is just on both COGS and labor. Inflation expectations for the rest of the year on COGS, how are you thinking about that? in terms of labor costs, obviously, you gave some good color on what we think are transitory headwinds. as it relates to sort of average weekly cost in the labor line, how should we think about the pace of that going forward? Are we at a place now where that number is generally going to be stable going forward? There's probably some puts and takes to the number here. Is that how we should be thinking about it for the balance of the year? Yeah. Again, taking major environmental changes out of the equation, because that can obviously have an impact. We think there'd be definitely much more stability in the equation. From a COG standpoint, again, that range we had given you, I think, is still applicable, that mid-single digits. It's probably ticked up a little bit. Before, we talked about the lower end of the mid-single digits. It's probably a little bit more centered to that piece of the equation. From a wage standpoint, very similar. I think it's going to be, again, that mid-single digits at the higher end of that range as we kind of continue to work our way through. I think more stability. Again, we'll take those transitory costs off the table as we move forward, too. Mika, do we have anything online? We do. They are a lot of the same questions, a lot about pricing, about commodities and labors, what the inflation numbers are, how they're going to work through the P&L. I think we're covering them. You may want to throw in a little bit about staffing levels, where we are today. Sure. Do you want to talk about staffing? Yeah. Let me hit staffing. Again, trends are much better. We're basically staffed to pre-COVID levels on average. When you look at a typical Chili's, the number of front of the house servers and heart of the house cooks and prep people, we're about almost exactly where we were pre-COVID on a per restaurant basis. That's good. As Joe mentioned, we've got some spots, some hotspots. Regionally, it's probably the Midwest is the biggest regional, and then every town. We've got dozens of restaurants in Dallas. There are a couple here that are struggling to fill a position or two. I remind our operators, pre-pandemic, our biggest issue was staffing. There's always a staffing issue in the casual dining restaurant industry. We're always kind of dealing with that. We're, I'd say, past, as a company, what we call it 911. Hey, this is something we got to really get focused on. It's more of an emergency." We're past that as a system, but we're still dealing with it from regional standpoint, probably the Midwest is the only region I'd say, hey, it's big enough there. We still need to support them, and it's mostly front of the house there, interestingly enough. It's spots. I think you hear that from most operators nowadays. We feel good about where we're at. The turnover, as I've mentioned, I think this is the third or fourth time, is coming down, starting to move itself back towards that direction. Management turnover, especially at the GM level, back way off from what we saw, that little spike earlier in the summer, back down to more traditional levels. We love the trend. We love the trajectory. The issue that we're dealing with, and we're getting through it, is when you lose a manager, it's a 10-week training period. It takes us a while to get a manager ready to go. We always have an inventory of managers available, but we just didn't anticipate having this many needs. We're getting that pipeline filled, and while you're doing that, you see things like the transitory costs around training. Even those are team members. The transitory costs around training managers is, oh, well, they may not know how to run A versus T and waste in the production system as well. They may not understand how to schedule quite as well, so they're not as efficient on running the labor model. Again, our history is we run a pretty tight ship. We just have to have everybody trained and ready to go before we can hold them accountable. We owe them this whole idea of, hey, you got to invest in them to help them understand how to run these systems that are world-class, best-in-class, and then you get to hold them accountable to running them. We're in that process and moving towards that accountability phase. It's taken a little bit longer and had a little bit more impact than we would ever have expected. Thanks. Alec Estrada, Stifel. You talked about some of these issues that make working in the restaurant more challenging. Obviously, there's some elements that you can't change, but what have you been doing to take some of the stress out of the job for employees? It's a great question. The question is, there are a lot of things that we're having to deal with. We'll talk about this strategically, too. This is where scale really helps. This issue of training. Typically, we have virtual training and modules, and it's really part of the manager's job to make sure everybody's trained and to train other managers. One of the things we're kicking off now, Rick's put a great program in place, we'll start it here soon, is in this building, we will now offer classes live, that we will live train different managers across different aspects of the business, labor model, the production model, Actual versus Theoretical, your own well-being. We'll have experts in this building doing this exact same thing we're doing with you to our managers. What that does is, first, it gets them trained from the experts firsthand better than just going to a model or a module. It takes that burden off the managers in the restaurants. They don't have to worry about training. They just have to give them the hour and tell them to go sign up, and the classes are available at convenient times, multiple times a week. Those are things where we've accelerated, and we're testing, and I think, again, kind of industry leading in terms of how we're embracing how do we make the managers' jobs easier and make that team more effective. Get these systems that we've kind of taken for granted because we haven't seen this kind of a spike in turnover that everybody knows. What are we doing to own making sure they understand it so we can get back to running restaurants as efficiently and as effectively as we have in the past? That's one example. There are a lot of others. I will tell you, not too long ago, we had an issue with a distributor here locally who just basically came to us and said, "Hey, well, we're going to cut your case rate. We don't have drivers." We're in Dallas. You get 80% or 90% of your cases delivered. You have two choices: do 10% less business or figure it out. We had trucks coming into the parking lot here. We rented U-Haul trucks. This team broke them down, broke the semis down, loaded the U-Hauls, and drove to restaurants for a couple of weeks until the supply chain team found an alternative distribution method. That's what we did to make sure that the managers are supplied and supported, and we got restaurants done. Now, is there a cost to that? Is that an efficient way to be doing it? No. Is that what scale allows you to do when you have teams and the ingenuity while the supply chain team then figures out how to use a different distribution method to get some products to the restaurant so we don't have to say, "Okay, now we're cutting sales because we can't get product." We're disappointing guests because they don't have their favorite item. I think one of the things in late August that I think really started to move the ball forward, too, on improvement is we were able to host a GM conference here in Dallas. We brought all of our GMs, fully vaccinated, into Dallas for a 2.5 day conference. where those conferences are often focused on systems and training and things of that nature, it was focused on wellness. Again, so we recognize the issue. We lean into the issue from a support team, and we brought them, I think, very effective programming. It was great to have them. We hadn't had them in one place in a while. just the act of getting together, again, as a team and recognizing the issues that are going on there and dealing with it and helping to provide them tools and methodologies, I think was a big step forward. The feedback, I think, coming out of that, very favorable from how the GMs were feeling. Yeah. Again, we're getting a little bit ahead into the presentation, but well-being and the importance of our managers' and our team members' well-being is, we think, critical to retention. That's a great example that Joe just shared in terms of what we did at our conference. We didn't train them on any new systems. We basically embraced them, thanked them, recognized them, and talked about how they could be better supported financially, emotionally, physically. What can we do to make their lives better so that they feel good about working for us? I think those things pay off, and that's part of the cultural stuff we're doing to help. Yeah. We actually need to keep the schedule going. If there's anything [crosstalk] We'll have another Q&A. We'll have another Q&A. We can always pick it back up, and obviously, Mika, Clark, myself are available if you get a chance to dig through the numbers. Here's the clicker. All right. I'm going to turn it over to you for the beginning of the presentations. All right. I know it's hard to separate kind of the short-term, kind of what we just announced, and especially with questions as to what the implications are with the longer term strategies. We really want to spend time talking about the longer term strategies. We're very optimistic about where we're going as a company. I'm going to spend a little bit of time talking to you about some of the strategies. You'll see some videos as well. Wade Allen is going to follow and really dig deeper into virtual brands, an important part of our strategy. Joe will come back up at the end and kind of tie it all together with what's that mean from a business model perspective. How do we see capital? What do we think about margins as we think forward the next three to five years? Again, some of this is going to be very familiar for some of you. Some of you are relatively new, so I'm not going to dwell on it, but I do think it's important to talk to. At the foundation of our strategy and our business is some amazingly strong brands. When we talk about strength of brands, when you think about the bar and grill category and all the turmoil that's gone through bar and grill over How many of you were born in 1975? Yeah, unfortunately, just a few of us, but most of you not. Some of these, John, and yeah. That's what I mean. You, John, and I, and this side of the room, mostly not. Chili's is a 47-year-old brand. It's got an amazing 100% basically brand awareness. If you don't know Chili's, you've been living under a rock. It's survived and thrived in a category that's seen a lot of turmoil over that time period. When you think about bar and grill 50 years ago, who was leading it and where they're at today, and how Chili's has navigated and continues to lead the category and be an amazingly strong brand, it's very impressive. Maggiano's a similar story, 30-year-old brand, that really almost any time you ask a consumer that experiences that brand, obviously not quite the breadth of awareness and experiences with 54 restaurants as a Chili's, but boy, does it have an affinity with its guests. It almost wins every guest-based contest with regard to best brand in the class or favorite restaurant. Two really powerful brands that have got a lot of history and connectivity with their guests. We just added to what's now kind of turning into a little bit of a portfolio to virtual brands that we're very, very excited about their future. Obviously, the wings, we'll talk about the positioning of that more in the future here. You've got a Maggiano's kind of hybrid brand that leverages a lot of the attributes that Maggiano's brings to the table across a very compelling segment. When we think about our desire and our commitment to run restaurants, we're committed to that. We think ownership is important in the casual dining space. You could debate that, but that's our belief and that's our business model and our strategy is that if you run casual dining restaurants, you get a scale and a familiarity with the P&L up and down, that you are able to do the things necessary to keep brands around and healthy for a long period of time. Again, we could just look back in history and see casual dining brands that have struggled as they've not been run well. We like owning restaurants and running them well. We're 90% owned in the domestic market here in the U.S. That's the model we will lean into. We'll always have a few franchisees in the U.S. because we like being in airports and places we won't be able to own a restaurant, but for the most part, we have a high preference to owning. We do like to be international, and we're in 29 countries and two territories with the Chili's brand. All of those 362 restaurants are run by really strong local franchisees in those markets. They continue to look to grow the brand and the business. We've opened a restaurant in China. Rick's heading up the international piece for us now, and it's done extremely well in Shanghai. We're looking to open another one here in the not too distant future. We're consistently out there looking for partners and supporting our partners in ways that they appreciate. That's kind of the foundation. We've talked a lot about COVID over the last 18 months, but I just want to remind you the kind of how we performed during COVID, and I think it's best-in-class. When you think about our ability to shift to an all-takeout strategy, really almost instantaneously, we were able to do that because we had invested. First, we'd believed in the consumer proposition that convenience was going to be a driver, so we were ahead of the curve there. We invested in technology really better than anyone else in our class, and so when it became necessary, it wasn't that hard. We just shifted over, and then as we were able to open restaurants back up, we just were able to migrate through and navigate that and manage the cost and significantly outperform the category and take a significant amount of share. Oh, by the way, in the middle of that, we introduced a virtual brand to over 1,000 restaurants overnight. All of that happens because of the commitment in and the strategic development that was done prior to that. That didn't happen. We didn't think up It's Just Wings or all the technology necessary to do that in March or April. It had been done years before on technology front, and we've been talking about virtual brands for months and testing them prior to that. All these things were already in place when the pandemic happened, and really through the pandemic, we actually strengthened our financial position. Last 18 months have been challenging but also rewarding for this team because they really outperformed. Let's talk about the future. We continue to think our strategies are aligned. You'll see a couple of tweaks for those of you that have seen our strategic presentations in the past. They don't change dramatically, I think our strategies have proven to be kind of successful. We're modifying them slightly but moving forward. Big part of that is virtual brands. They're here to stay. We're committed to them. These are not transitory, nor do we take them lightly. We invest in these brands, we think they have a long-term track, we're looking to continue to grow that. We do expect more normalcy back into the business. The things that we've been known for in the past, we will continue to be known for, and that's really running great restaurant operations and a tight P&L and delivering great guest experiences. Joe showed you the one-year Chili's and Maggiano's sales and traffic charts, but the story really goes further than that. This is a two-year trend, and you can see the big differences that we experienced when COVID hit. If you took this back, Chili's is on its 15th quarter of comp sales or comp traffic outperformance of the category and 13th quarter of sales outperformance of the category. This is a multi-year. We're into our fourth year of outperforming the category at Chili's. Strategically, it's been working. This is not something that just happened because we came up with a virtual brand strategy in the middle of the night last June. This has been something that the foundation of Chili's is strong, it's been working, and now we're augmenting it with some additional strategies that will continue to help us grow. The strategies have been working. Again, where they've really been working is on traffic. That we're running significantly higher traffic and positive traffic to the pre-COVID levels is important to us. What are we leveraging to kind of make that stuff happen? We'll talk about these four things. First, it goes back to it always starts and ends with the brands. With Chili's, you've got those 47 years in the casual dining, probably the toughest category in casual dining that we've been able to navigate. Got a strong value proposition. Maggiano's, again, very much ingrained in its consumer positioning around authentic Italian-American cuisine, quality product, and affordable prices. These new virtual brands that are just establishing themselves, but we're very excited, and we're going to walk you through a little bit more of the details on how they're positioned and what they're doing to get us excited about their future opportunities and how we can grow them going forward. You'll hear us talk a lot about scale. It comes across. It's critical to some of the other things that we think are important. With scale, we're able to invest more in technology. Technology is going to be talked about a lot today in terms of how we see ourselves not only navigating to a better consumer proposition, but becoming more efficient. If we're going to become more productive, how do we do that in a way that still delivers a great guest experience but also works for us from a business perspective? Scale allows us to do that. Anyone want to take a tour of our fourth floor? I'll take you up to our data center. It's world-class. It's got one of the best views in the country for a data center. Not sure why we put it on the fourth floor overlooking the lake, but our computer guys appreciate it a lot. We've just made that investment. We continue to put capital into the technology side of the business and supporting our operators and our team members. We've talked about some examples of how scale helps us from a supply chain standpoint and the quality of that team and how they bring to market. For the first time in my history, we've actually had to go outside contracts. We negotiate some of the best deals in the industry because of our scale. In this weird environment, we've actually had suppliers come to us and say, "Hey, we just can't meet that number now. I mean, it's just not possible." We've said, "Hey, we're in this for the long haul. We'll adjust. We'll have to pay you a little more. We get it." Overall, the supply chain and our scale just comes to bear on the cost of sales part of the equation in spades. Things like development. Having the capital available and the resources to go out and find these sites that are more abundant for us now because we've opened up bigger trade areas and because the P&L is working harder for us. That's where scale kind of comes in. I talked about it really playing a role in technology. The scale allows us to then unlock our strategic point of differentiation around embracing technology. This is just an example of where all these systems on the left are things we've implemented, systems we've implemented that are technology-driven, that have done things like take our digital sales footprint from really nothing six years ago at 2.9% to over 34%. Some of that is driven obviously by the pandemic and more people not coming into restaurants, but it's going to stay in that mid to high 30% range in the future. We don't anticipate this is going to come down. That's what technology's allowed us to do, and that's why, again, especially during the pandemic, we were so much quicker and more able to address and interact with consumers. It's positioning. Having a brand that's got great awareness is one thing, but having a strong positioning, especially around understanding your value proposition. Again, these are things all tied to why we're a little more deliberate with price and understanding it, because we understand the importance of having an affordable concept, or affordability and a strong value proposition for a brand like Chili's. This is just some consumer research we do, and we track on an ongoing basis to understand, hey, how is our affordability rating? What's happening? How does it relate to some other key competitors that we're looking at? We just threw on the other axes this whole idea of, okay, well, if you say technology is a strategic advantage for you and you want to be consumer-facing, how does the consumer tell you? How do they feel about your technology, and do they like it? You can see on both affordability and the use of technology enable the consumer experience to be better, we're best-in-class with the Chili's brand. We monitor these strategies to make sure that the consumer is playing back for us what we would expect them to if we say this is how we're going to win in the marketplace. Let's talk about the strategy itself, and I'll focus on Chili's. We've got Steve going to share some video in-restaurant. We really wish more people were here, and we would have taken you to a restaurant. For those over the years that have been with us in restaurants, we know that's really the best way to talk about this business. Unfortunately, we'll have to do it a little more virtually this year. These are our strategic pillars. These are the six pillars that we use to drive initiatives, to frame initiatives that are going to drive our business going forward. I'll walk you through those fairly quickly here. The first is best-in-class operations, and we've talked about this through the Q&A, so all this stuff should be tying. It really is about a systems-driven model. Our whole idea is scale and systems to support operators to be able to run a fairly complex casual dining model, not overly complex, but fairly complex because we're offering consumers variety and choice, in a way that allows them to be successful, both with their guests, their team members, and the P&L. Those systems are what we lean into, and that's why when they're not trained on those systems, it can get a little wobbly. We got to tighten that up and get those systems back in place. I could spend all day talking to you about each one of these, the Managers On Line, Kitchen Sync, Quality On Tech, all of these systems. We won't do that to you. We'll focus more on where we're headed, and where we've been focusing a little more recently. Obviously, with the increase in takeout and delivery, a lot of emphasis on our out the side door, we call it, system. Curbside to go. Aaron's going to talk to you a little bit about that in the future in a few minutes. What we're in the middle of right now today is rolling out TSE, Team Service Evolution. John's heard me talk about this for as long as he's been tracking it. We implemented a Team Service Evolution model three or four years ago in California. The model works great. The technology didn't. What I mean by that was it would break on a Saturday night in the middle of volume. It just couldn't handle capacity. We've had to, over the years, basically build it ourselves. We were using third-party. We used our guys upstairs to rewrite the program to integrate it with different hardware. Now we've got it, and we're in the process. Rather than me walk you through it, Doug's done a nice job in restaurant. Let's go to that video and have him walk you through TSE. Team Service Evolution, or TSE as we call it here at Chili's, is currently rolling out to all of our restaurants. The journey has been a long time coming, and we want to make sure that we got this right for our team members and our guests. We've spent three years testing this new handheld system and have implemented proprietary processes around software to make sure TSE runs smoothly in our restaurants. At the end of the day, we needed to make sure that the system does not go down on a busy Friday night, enabling us to take great care of our guests. By having technology and the new labor model in the restaurant, this allows us to create a much better guest experience. Let's see how this works. [Presentation] [Presentation] [Presentation] I hope you have a better understanding of how TSE works. In summary, with this new system, we have seen improved guest satisfaction scores, experienced better productivity from our team members, and made their jobs easier. This is definitely a win-win situation. We believe TSE is a competitive advantage for the brand. We're excited about the benefits for years to come. All right, TSE. It's out. It's about half the system has it actually running today. It'll be done by December. By the end of this calendar year, everyone will be on this system. As Doug's mentioned, because the servers stay out on the floor, they can take a bigger section. That means they make more money. That also means we need less of them. That means we get to keep the best of them. On a Friday night, oftentimes in a restaurant on a Friday night where you need more bodies, you're oftentimes going to somebody to come work in the restaurant who's not that skilled, that's only working maybe one or two shifts a week, and that's the last place you want somebody who's not very skilled is in your restaurant messing with your kitchen and your POS when you're very busy. It does a lot of things to simplify and make the job of the manager a lot easier. You get your best people working. They make more money, so they stay longer, and they run the system smoother. It gives that career progression. You actually go from server to bartender to Certified Shift Leader to manager to GM. The whole cycle of a career progression that can have you entering a Chili's and becoming a $100,000 a year plus GM is very clear and evident to somebody. We're excited about what that does, too, because the next one is really about engaging team members and building a tenured workforce, which is critical if you're going to be a best-in-class operator, right? We've talked a little bit about this in the Q&A, so I won't dwell on it much more to just say we're focused. This is a new pillar. When I talk about the strategy has changed a little bit, this is a strategy improvement or a change from the last time, because based on what we see in the environment now and looking forward, we know this is going to be more critical than ever. It's always been important to us, but now we've said, "Hey, it's a strategic pillar." We have to become an employer of choice. We have to make sure that we have the best GMs in the business, and we have to make sure that we're focused on not just how they perform their job in the restaurant, but their overall well-being, that we commit and connect to them on aspects of their life that are outside the four walls of our restaurant, and we're doing that, and we talked about the manager meeting being a good example of how that works. When you look at our tenure, it's impressive. The average GM at Chili's is almost 12 years. The above restaurant director of operations is 19, and the VPs are 18. We have a very tenured organization. Doug Comings, 27 years with Chili's. Aaron, 20 years, and a prior GM of the year for this business. We have this amazingly powerful, tenured, and really excellent operations team, and we want to continue that. I share this, the last data point here is just to give you a little bit of insight into what has always been the case is there's always people that leave the organization, and then they come back. In the past, it's been about 4% of our management hires are people that have worked for us before, whether as an hourly or as a manager, and they left, and they're coming back. A little higher on the hourly. Some of that's students. They worked in the summer, they left, they come back, we rehire them. You can see what's happened more recently. Those numbers have doubled. A lot of this transient stuff we're talking about and a lot of this turnover we've seen, a lot of those people are coming back, and we're seeing them again. I think there's a lot of testing the waters, I'll say, for people of all industries to say, "Hey, listen, I'm going to try something new." There are more opportunities out there than ever before, but we're seeing a lot of those folks coming back home to Chili's and to Maggiano's to say, "Hey, I tried that. Didn't work out so well. I want to come back to the restaurant business. I know what you're about, and I know what this job's about." That's encouraging to us that we're seeing that uptake. As we've seen the turnover go up, we're seeing the repeat come back. Engaging team members and a tenured workforce is a critical strategic initiative for us and a lot of initiatives around that. This is really about a powerful menu, but it's really about having a concept that's, especially with Chili's, that's broad and diverse. Again, we appeal to a lot of people, and that's one of the strengths of this brand. If you look at it from a psychographic perspective, we lead with experience seekers, and we pretty much run the gamut. This is a segmentation done by an outside consulting firm that segments the whole industry this way. This isn't just us. This is how they've looked at multiple concepts that they've consulted with, and they've consulted with almost all of us. This is how they break out, and we basically mirror the industry. The beauty of Chili's is we're represented equally almost as the industry. Even though you see, hey, there's 4% of the healthy eaters at Chili's, which you go, "Wow, what healthy eater walked into a Chili's?" Well, maybe they got dragged in, but the thing you need to know is in the category, it's only 5%. All of casual dining, only 5%. It's still the smallest segment, but it's starting to become a big enough segment. We got 80% of it coming into a Chili's brand. Again, how they come and how they use us, we have to be available or make ourselves available for Chili's, and so variety is important. When you think about a demographic mix, more than 80% of the Chili's guest base is less than 55. Again, a large skew of families, younger kids, really a good generational mix. The brand is moving through its 40s and into its 50s with a lot of folks that are just coming in and still appreciating it. It has to do a lot with the menu. Again, affordability, a strong affordability proposition that gives people an ease and a comfort with that brand, variety that allows people to eat regardless of whether you're healthy or whether you're more an indulgent eater or you're a basic budget family. We leverage these iconic menu offerings. It starts with things like our Presidente Margarita, our Big Mouth Burgers, and the Molten Chocolate Cake. Most of our guests are putting a chip in their mouth, and it's a fresh chip made every day with fresh salsa. Those are the kind of iconic offerings that make Chili's not only broad-based but also compelling to individuals. Really staying on top of this menu and our commitment to the Chili's base brand. I know we'll talk a lot about virtual brands, but at the end of the day, the base business is number one. We're not neglecting it. We're all over making sure that this brand continues to be unbelievably powerful. Again, you'll hear technology a lot today. We've just talked about TSE. We've talked about handhelds. When we shifted to an environment where people weren't sure they wanted to touch menus, we were quickly able to go to a QR code because we had all that technology in place. We didn't just go to a PDF, but we had a virtual menu on your device, on your phone, so that we could continue to sell you category and push items to you and have you sign up for the rewards program, and all the things that we need to do to be successful because we have that technology, and we were able to turn that on quickly. I mentioned previously that we've been focusing on how to make our off-premise experience better, both from a guest standpoint but also from an operator standpoint. We've pushed a lot more food out that side door. We didn't build these restaurants with the expectation that the mix would be what it is today. How do we support them? Technology is a way we can help make sure that even though the geography and the restaurant may not have been perfectly built to do this, technology helps us overcome that and make it work for them. Aaron's going to walk us through on this video what we've done with our off-premise convenience system. Welcome to Chili's To Go. This has always been a big focus for us at Chili's and has become even more important in the last few years as we've seen a huge increase in our off-premise business. Convenience is an emerging trend, having multiple ways to access our food with a frictionless experience is paying off. We've been working hard to improve our efficiencies in our to-go systems. We recognize that our guests are wanting a differentiated curbside experience, just like in the dining room. With our new Curbside for All system, we have created a more efficient guest and team member experience by leveraging handheld technology, custom software, and processes for our to-go team members. We focus on all aspects of the guest experience. Let's take a look how the new Curbside for All works. [Presentation] By leveraging custom technology, processes, and procedures, our curbside to-go system creates a seamless experience from order to delivery. You place the order. We tell you when it's ready. You tell us when you're here, although we're getting to the point with near-field communication, we'll know when you pulled in. We can actually say, "Oh, you're here. Just tell us what slot you're in." This conversation with the guests and these promises of, "Hey, now you don't have to get out of your car," especially as we start to get into some more inclement weather it's nice to know, hey, first they know I'm here, I know my food's ready because they've already told me my food's ready, and it's going to be coming out. I don't have to worry about getting in and out. It also simplifies our operations because now we don't have people in that section of the restaurant piled in and backed up. It's not a very big area. We didn't build it for 20%, 30% of our mix. Now it all happens outside, and we've just moved that whole transaction outside. It's a great example of how we're continuing to leverage technology to run a better, more efficient restaurant and deliver a better guest experience. The next pillar I'm going to just hit lightly because you're going to hear Wade in a second here talk about it in a lot more detail. We think virtual brands and delivery are key to our growth going forward. It really is about unlocking. There was always a knock on the industry that it was overbuilt. Casual dining is overbuilt. Our premise was, hey, maybe we're not overbuilt, maybe we're just underutilized. How do we better utilize the capacity that's out there or create additional capacity without expending a lot of capital? That's what we're doing to bring virtual brands in, and we're very excited about what they can do for us and what they're doing for us today. Finally, there's just additional growth vehicles. Some of these are more traditional. We have the opportunity to accelerate new restaurant openings. We are looking, and Joe will walk you through some more details specifically, but franchise acquisitions to lean into this ownership model and open up bigger areas and trade areas to grow in where we haven't seen as much development. We're going to continue to reinvest back into these brands with reimage programs and other things like technology to keep them fresh, to keep us around, to make sure that these iconic brands are here for a long time. Just to summarize it is about strong brands and keeping these brands strong with Maggiano's and Chili's at the foundation, but our new virtual brands, very exciting, and they will continue to be very strong brands. It's about having them positioned in a way that make them strong, but also that deliver a business model that we think is solid and that our operational expertise allows us to lean into and deliver the kind of results that we know we need for our shareholders. Finding these growth opportunities, both organic within the brands and with virtual brands and other ways to grow the business. Al l of that is foundationally built around technology. Frankly, it's a pillar, but it's a foundational building block as well because, at the end of the day, there's rarely an initiative we think of that doesn't require technology now and doesn't incorporate our technology and our infrastructure to make it happen in a positive way. Those are things that are barriers to entry, not just to the small mom and pops that make up a lot of our category, but to even some of the larger concepts that have a hard time, especially in a franchise model, getting all the franchisees to align on a technology solution and execute it. Those are the reasons we're excited about the growth. We're excited about the future within Brinker. Now I'd like to bring Wade Allen up to talk about virtual brands. Wade joined us eight years ago. He came in as a marketer. He's got a background in Technology. He ran our Technology group. He was VP of Technology for years, and more recently, we've moved him over to Innovation, and he's running virtual brands as well as doing a lot of other very cool things. Wade. Awesome. Thanks, Wyman. Wyman said I run innovation. Part of my day is doing crazy stuff like thinking about last mile delivery, autonomous vehicle, drones, robotics. The lion's share of my day is spending on virtual brands and thinking about how this world's changing around virtual brands. I'm going to walk you through our strategy and talk about growth opportunities in virtual brands. We're going to first dive into market opportunity around these virtual brands and give you a perspective of how we see it. We'll dive into virtual brands themselves, why we're winning in this space, why we are the market leader with our virtual brands, and then we'll finish on plans for growth, and lay out how we are going to get a path to a sizable amount of revenue in the future around virtual brands. to start with the market opportunity, you first have to understand just off-premise. This is what fuels virtual brands. A lot of questions around off-premise in the past, but we believe and we see the data that it is here to stay. There is a demand, and Wyman talked a lot about it, to have food where I am. Whether that's outside of a restaurant or at a soccer game or where that may be. That trend, you see it here in the off-premise. Our data prior to the pandemic, in and around that 17% of a mix of off-premise. Now into this pandemic and where we are in this process, hovering in that mid-30s range. We knew this was growing before. We had made investments prior to. We were industry leading prior to the pandemic. We knew there was a tipping point. We didn't know it was going to be a pandemic that was going to tip this, but we knew there was a demand for guests to get this food off-premise. We continue to see that growing. Another trend that's interesting to watch, you can't talk about off-premise unless you're also talking about delivery. We see delivery continuing to grow. The most recent data that I've seen said that in the last year, meal delivery growth is up 20% year-over-year. Along in that same study, it indicated that roughly 50% of the U.S. consumer base had purchased at least 1 meal from the big delivery companies out there. Further indicating that this is continuing to grow and continuing to fuel this demand at home. Interesting on this slide, if you take note, you can see the market share breakout from the different delivery partners. I'm going to talk later in the presentation about a growth opportunity. A little bit of a foreshadow around that market share. Let's talk about ghost kitchens for a minute, because this is another one that's if you're out in the industry and you're talking in the industry and you're aware in the industry, you hear this a lot, ghost kitchens. Ghost kitchens is another one that's fueling this idea of virtual brands, an opportunity outside and away from the restaurant with food. In 2019, an analysis was done that said by 2027, $42 billion of restaurant sales would be recouped in 2027 from this analysis. They restated that. Just recently, a couple of months ago, that metric changed, and the restatement was now $71 billion in restaurant sales by 2027. That's a massive change through this COVID experience we're having and continues to convey this demand for food at home. It doesn't mean restaurants are going away. It just means there is a new demand that's being met today in this space. What that allows us to do is shape up what the market share looks like or the market opportunity looks like for the two different virtual brands that we have today. Specifically around wings, when you look at everything that we've talked about and you look at some of the industry data, we think that's a $6.5 billion total addressable market for wings. On the Italian side, I've seen metrics and I've seen analysis done that says this is much larger, $20 billion. when you pare it back to just think casual dining, and you take pizza out of that equation, it's still a sizable opportunity at $7 billion. Significant for us and our brands. If you then move in and start to talk about, hey, let's look at the virtual brands and the performance we've done today. There are three things that have driven our success in our virtual brand space and made us market leaders, and it really comes down to being very methodical and specific about our brands and the target that we appeal to. The second piece is the operational systems. You hear Wyman talk a lot about the importance of systems, and we're going to dive into that a little bit and show you what we mean by making sure that we have powerful operational systems in place that don't disrupt our Chili's brand and still allow us to deliver a high quality and great product through that kitchen where at times it can be chaotic. Third, we talk about distribution. To be a winner in virtual brands, you have to have distribution, right? It's all about reaching the guest. Let's talk about our superior brands for just a minute and the work that we've done around this. On the left, you'll notice It's Just Wings. You know this brand well. I'll talk just for a second of the target. When we started this back in June and all the testing prior to that, we knew very specifically what the target was. It was focused on young males that were all about sports. It was a value brand. It was killer wings, stupid prices, free fries, and it was value then, and it's value today, and that's where we're focused. Interesting thing about this is our best restaurants for It's Just Wings tend to be around college campuses. It's pretty interesting, right? The target for Maggiano's Italian Classics is very different. It skews more female. It's family oriented. It's meal around the table. It's affordability, but it's more about abundance and quality. It is really bringing authentic Italian American food home with this brand. With those targets in mind, let's dive into some of the success that we've seen with It's Just Wings. I can brag about this brand all day long. I tell my team that we've accomplished more in 18 months with this brand than many brands accomplish in their lifetime. Some key metrics to pull out here. We are the largest virtual brand in the world today with over 1,300 locations worldwide. We did $170 million in system sales in the U.S. last year. There is rarely an article, a podcast, a white paper that's written that doesn't include the success that we've had with It's Just Wings in our first year. In fact, just recently, we were awarded the Innovation of the Year award by Nation's Restaurant News in Colorado. My team and I had a chance to go up and accept that. I tell you these results, again, there's a little bit of bragging here of the power of this brand, but what really matters is the guest metrics, right? The guest metrics are super strong. When you look at the strong repeat rates and frequency rates, it tells you the power of this brand. 60% of our guests will come back and purchase for a second time with our brand. We see that consistently, period after period, quarter after quarter. This is over a 90-day time frame. The frequency transaction cycle, I always call it recency. When was the last time they came back and purchased? For our loyal guests, it's on average about 25 days. That leads this category. It bests those other wings players as well as our own brand here at Chili's. A powerful brand. I call it sticky, right? When people come and they try the brand, they come back. They love this brand. Another interesting dynamic with wings is, it is no surprise, it follows the traditional sports cycle, right? If our target is male, loves sports, and that's what they're focused on, then obviously this is going to follow that seasonality. we see lower sales in the summer and the springtime and a build that happens in the fall with a culmination in the winter. you can imagine as football season kicks up, as we see the NFL season turn on, as we see Major League Baseball playoffs happen, a lot more interest around getting people together, having wings, having the fries, and enjoying that experience. In the wintertime, with college football playoffs, with the NFL Super Bowl, with the NCAA basketball tournament season, and specifically March Madness, you see this really flourish and grow at a high point. There is a wrinkle here, and that wrinkle is this also appeals to an audience that loves gaming. We're investigating this now. We've kind of uncovered this. There's this gaming element that exists here, online gaming element, that is not seasonal, that is consistent. As we focus on that target and exploit that wrinkle a little bit, this can help us smooth some of those seasonal low points and being consistent as we work with different platforms and providers to market to those gamers that love wings and our product. All right, I'm going to turn back just for a minute for Maggiano's because I've talked a lot about wings. Maggiano's Italian Classics we haven't spent a lot of time on. We are 450 restaurants deep in our rollout with a plan to be at about 900 by the end of our fiscal year. This target is very different. We talked about it, female, family, quality, and abundance, but that also implies that the check averages are larger for this type of meal at home. That check average, along with the market share and the opportunity that we see in front of us, believe this is scalable beyond $100 million annually. We get really excited about this opportunity. Now we've talked about our brands. We've talked about Maggiano's Classics. We'll take some questions later about these brands, but I want to jump into operational systems. There's been a lot of conversation. I've spent some time at different conferences and different events to talk about virtual brands and ghost kitchens, and there's this thought at times that you can just launch a ghost kitchen and put 10 brands into a kitchen. That couldn't be further from the truth, in my opinion, and from our opinion. When we look at the operational element of this, there is a strategy and a methodology that is very important. To kind of talk through this and convey this a little bit better, I wanted to show you a Chili's kitchen. What you see on the screen is a flow, a basic design of a standard Chili's kitchen. It's kind of in a U format. You'll see three different zones, zone one, zone two, and zone three. When we bring our virtual brands into a kitchen, we're very specific about where they reside in order not to disrupt the flow of that kitchen because as the food is cooked in these different zones, it then moves forward through zone two into the quality assurance area and then out to our guests in the parking lot or in the case of Chili's, out to the dining room as well. When we built It's Just Wings, we worked closely with Doug and Aaron to make sure that we built the right systems. There's a lot of fried food that comes out of our menu for It's Just Wings, and so the natural place for this was right next to the fryer. We built a system, the appropriate kitchen equipment and technology, to allow somebody to work in a small space to have that kitchen flow seamlessly, just like it would if it was coming from zone one up through the kitchen. Similarly, on the other side, we did the same thing with Maggiano's Italian Classics. We were very focused on how this works so not to disrupt the flow. Kitchen equipment, technology, everything needed right there for an individual to work that station, and then again, using that methodology of running up through zone three and then out to the QA area without disrupting the flow of the kitchen. I can talk a long time on this picture, but it's probably better to show you. Doug and Aaron were nice enough to do or produce a video for us to actually get in the restaurant and see what it looks like. I'm going to have them run that video now. Hi, it's Doug, and I'm here in our Chili's kitchen to show how we execute our virtual brands. Virtual brands are a big part of our strategy, and they're here to stay. As an operator, it was important to me that we design our brands to complement our base business at Chili's and Maggiano's and not complicate execution. How did we do that? We designed each virtual brand to be an extension of our current kitchen setup and designed it in a way that would allow us to use our cooks in different zones without negatively impacting our Chili's guests. Each kitchen at Chili's here has a U-shaped setup, and at the end is where we put our virtual brands. I'm standing in front of our entire It's Just Wings setup. Each restaurant is equipped with a KDS screen for viewing our orders, coolers that hold our wings and our french fries, tower for our sauces, and our containers for sauce and our wings. We want to ensure that team members are efficient in the kitchen and have exactly what they need in their space. It's amazing that the whole brand can be executed in this little three-by-three space. We also leverage our existing SKUs for wings and boneless wings and many of our sauces to minimize the new items we had to bring in for the brand, thus simplifying prep, ordering, and execution processes for the Heart of the House team members. Once prepared, we place the items into special packaging that's visibly different to allow our team members to identify the It's Just Wings food when preparing to-go orders. Finally, our food is placed in a special location for our to-go team members. That way, they're able to help our DoorDash drivers get the orders selected properly and quickly and get them out the door hot for our guests. Now I'll turn it over to Aaron to talk about the Maggiano's Italian Classics. Hi, it's Aaron, and I'm at the other end of the U-shaped kitchen where we execute Maggiano's Italian Classics. We have created a full equipment package that includes technology, coolers, hot wells, and a smallwares package. Just like It's Just Wings, we are able to execute the whole brand in a very small space at the other end of the kitchen. When we are busy, one team member can take care of all the Maggiano's Italian Classics orders, and when we're not as busy, it's just like It's Just Wings, we are able to leverage the Heart of the House team members to execute Chili's and the virtual brands. We are proud of our Maggiano's brand and wanted to make sure that we continue to maintain the same high-quality food standards that our guests expect. We work closely with our chefs at Maggiano's to ensure that our pastas and sauces are meeting our quality promise. We worked hard to design a menu that provides easy execution for our team members and that same fresh taste for our guests. With our virtual brands, we cross-utilize our delicious hand pies in both Maggiano's Italian Classics and It's Just Wings to increase our usage as well as expand our footprint in the dessert category Once the order is placed, our team members make the items, place them in special packaging to indicate a Maggiano's Italian Classics order, and then sends it to the window to be packaged for delivery pickup. Just like that, we have three amazing brands in one Chili's kitchen. All right. I hope that brought some clarity and some color around how we actually execute those virtual brands inside of a Chili's kitchen. The last piece of our success, again, we talked about this earlier, was broad distribution, and I don't want this to get brushed aside because I think this is an important point. To win in a virtual brand space really requires scale. You'll hear a lot of people talk in the industry about, "Hey, we launched a virtual brand," or, "We've rolled it to five locations," or 10 locations or even 50 locations. That's great, but you're not going to ever lead the industry and be the major player in the space without the scale that we bring, like that Brinker brings with 1,000+, 1,100+ kitchens. That's given us an enormous amount of strength in this space to launch not only the wings brand, but then to bring on 900 Maggiano's Italian Classics brands. if we then move to plans for growth, this is the section that I have a lot of passion around. if I get animated or excited, you'll know why. this is the future, and this is where I think as an organization, we're going to make some big changes that happen in the industry. Before we jump into the layout of this, and you can see the slide in front of you as we talk about it, I want to give you some context. All of the success that we've had to date has been primarily through one marketing channel and one distribution channel. Right? Our partners, and they've been a great partner at DoorDash. The opportunity in front of us is about diversifying. We have to be broader in our branding and reach more customers with our branding and that awareness, and that means we have to evolve that marketing model, and we have to diversify our distribution channels and expand that to reach more and more guests. third, it's about growing our footprint beyond the existing asset we just talked about. How do you grow beyond that? Using a combination of ghost kitchens and new kitchen formats that are specifically to delivery and to go. let's jump in and talk about these different areas. First is about building brand awareness. What's a great presentation without the marketing slide? This is the marketing slide, and this is how we're going to extend our voice and our advertising to guests who have not been able to hear about our virtual brands today. A couple of key points on this slide. The first is direct marketing. I will make the bold statement that I don't believe there's anybody else in the industry that has as much muscle and as much expertise in the direct marketing space than Brinker and Chili's. We have a state-of-the-art loyalty program. We know direct marketing, and we know customer retention marketing better than anyone. I led that initiative when I was in the marketing department. I'm proud of the effort that's been done there. We're going to bring that expertise and muscle here and implement it to grow these brands. We're going to lean into this new and evolving medium model that we've created that's really focused on digital, mobile first, SEO, SEM, keyword search, and winning the local search battle because that matters. We're going to do some great social work and establish our personality online, and then we're going to lean into brand activations. Brand activations I get animated and excited about because it is something that is really interesting and evolving, and I want to kind of show you what this looks like for It's Just Wings. As you know, the NCAA recently changed the rules around working with college athletes to promote brands and other aspects. We've been working with a company that's given us access to over 100 athletes across the United States from these different universities, and it's allowed us to turn them into brand ambassadors. As you see on the screen, these are athletes from colleges like Notre Dame, Arkansas, North Carolina. We've been working with Florida State, Brigham Young University, these different athletes that now embody our brand. They get the wings. They enjoy the product. We give them the swag. They get to talk about it online. They're also involved in a gaming platform that kind of brings together wings, our target, and sports. It's a really powerful brand activation that we're working on. it's through that mechanism that we're going to actually change the dialogue around our marketing and move away from just a single channel of marketing today and diversify. Along with that conversation comes about diversifying our distribution points. As we talked about earlier, our success today has been in one channel, a good channel, a strong channel. DoorDash is our great partner. it's about moving beyond that one channel. immediately, we've already started to move to grow and strengthen our.com. We have itsjustwings.com. We're currently building out maggianositalianclassics.com. This will allow guests to access that, quickly order, select if they want to have that delivered or if they want to pick it up in the restaurant for further value. Another part of this is Google Food Ordering. It's a little bit of a complex offering, but if you understand it makes total sense. We've gone and tagged all of our Chili's across the country as It's Just Wings locations, for example. now when you search in Google in the mapping section, you find physical locations for It's Just Wings, which helps us win in the search engine optimization area. With that allows a click to purchase, and using a transaction widget that we've built in concert with Google allows a one or two-click transaction to happen for It's Just Wings. It's one more mechanism to reach the guest in a quick and efficient fashion through digital media. The biggest opportunity and the closest in opportunity really resides in diversifying into other third-party delivery partners. If you'll think back to that slide at the beginning of the presentation that I said it would be a foreshadow to the growth part of this conversation, and you think about the market share. Our exclusive provider today provides the lion's share of that market share. There is a sizable amount left to work with, and that's what we're now starting to test. We think that is a big opportunity for us. We're going to continue to evaluate that, test it, and look to move in that direction in the not-too-distant future. All right. Last on the list from the growth perspective is about growing our own footprint. We have this asset base, but we have to go beyond the existing asset base that we have today. That comes through, again, two mechanisms, ghost kitchens, smaller formatted kitchens, and overall, our own small format kitchens, think 1200 - 1500 sq ft, 1200- 1600 sq ft that are delivery and to-go only. That will afford us the opportunity to get to places where our Chili's brand has not been able to get to before. Dense urban and college towns. Next month, we are going to launch our first ghost kitchen test in New York City, in Manhattan, and it's going to be both Chili's and It's Just Wings available in Midtown. We think that is a huge opportunity to unlocking future growth in growing our footprint. Along with those, we have multiple sites identified today in and around college towns, close proximity, to grow these smaller footprints to meet that captive audience that we already know loves our product in both It's Just Wings, Maggiano's Classics, and Chili's. All right. That is the growth strategy. I'm going to turn the page a little bit and talk a little around margin and flow-through. Wanted you to see the P&L lines for our virtual brands. This is a good representation. We see this period to period, quarter-to-quarter. As you can see, those profit margins are very strong, in and around that mid 30%. The one line on there that may have some of you kind of turning your head a little bit is the marketing line. Why haven't talked about this? We have that in at 9%, but I will tell you, we can throttle that number up and down depending on if we're in a growth mode. When you're growing small brands for the first time, you're going to lean into marketing pretty heavily. That's why you see that in that 9% and sometimes 10% range. Again, we have that as a throttle to pull back if needed. All of this, when you put it all together on the growth and the opportunity, we're very confident that we're set to deliver significant revenue in the next three years between $300 million-$400 million annually. This is something we think is very achievable. Again, confident that these numbers are realistic and attainable. Just in summary, strong brands. We've been doing this a long time. In a short amount of time, we are the market leaders. We know these brands well. They are incremental to our business. We have strong flow-through, and there's a lot of growth to be had with some diversification of our marketing, our distribution, and growth of our footprint. With that, I'm going to conclude my section of the presentation. We're going to take a 15-minute break. I think we're still on track to do 15 minutes? It'd probably be better because we are running a little behind, and we started 10 minutes late so. Okay. We're going to run 10 minutes. Everyone hurry. When you get back, we're going to keep going. All right. We'll break. Thank you guys very much. Somebody give me a thumbs up. Yes? All right, we're back online. We're going to actually finish the day with a video from Steve. Again, we really wish we could have had some opportunity to take you into restaurants, and so without being able to do that, we wanted to get some videos of the restaurants so you get a sense for exactly what we're talking about in the real space. Steve Provost, who's a 12-year Brinker head, ran Maggiano's. Well, Steve and I ran Maggiano's for a few years together. He was heading up marketing for me and then took over Maggiano's, did an amazing job there for years, and then came over to the Chili's brand and worked on marketing for Chili's as we were working through some transitions, and really started the innovation group, and was the leader that got virtual brands up and running. Steve's had a huge impact throughout his career here with us. He went back to the Maggiano's brand with all the changes from COVID, because we really needed that stability and leadership, and he and Larry have done an amazing job setting Maggiano's up for the success they're seeing now. I think what you'll see and what you should know about Maggiano's is they struggled during COVID, because it's a brand that's built on getting groups of people together in big numbers in a space. The first year of COVID was more challenging. They did some amazing things to modify their business that Steve will walk you through, but that's a brand we weren't as concerned about. Their value proposition is strong. Plus, we needed to take a little bit more risk because of everything that was going on. Steve and Larry, they made some bigger bets, and their margin situation is strong. When you think about what we're experiencing in the Q1, it happened to be impacting Chili's much more so than Maggiano's. I share that with you because it's not like we don't understand how we deliver a business model and the kind of profitability. We're just a little bit behind at Chili's because of our desire to really understand the cost structure. Maggiano's, they're ahead of the curve and doing a great job delivering that and sales. Let's watch this video from Maggiano's. Welcome to Maggiano's. Our purpose in life is to bring together family and friends in celebration, but the root of that celebrations begin here every morning in our scratch kitchens. With 25% of our sales prior to the pandemic in either banquets or corporate catering, and with 20% of our restaurants in downtown locations or tourist destinations, we're not exactly a cruise ship, but 19 months of social distancing has posed some very hard challenges. Guided by the Maggiano's way, we've used that time to strengthen our business model, to remove barriers to guest frequency, and to really blow out our off-premise business, and you're going to see those results in FY 2022. Let me start in here, the prep kitchen. We used this time to consolidate some of our prep labor. Our chefs found 40 recipes representing about 15% of sales and 40 ingredients, everything from a Vesuvio potato to a crouton to a finished recipe like our delicious Italian dressing, and they found a way to make them outside the restaurant. We put them in our restaurants on the East Coast. We measured guest feedback for more than six months, and we only kept those items that were rated equal to or better than a scratch-made product. We cut our menu. We cut our menu by 20%. Prior to the pandemic, our top 10 best-selling items represented 23% of sales. Today, they represent 43% of sales. We had 35 or more entrees that were mixing at less than 1% preference. Now we just have eight entrees that mix at 1% or less. Why is that less and more so critical? Because our average restaurant is hiring back 15 or more cooks who need to execute as good as our veterans coming out of this pandemic. We also asked our managers in shifts to rewrite every labor schedule in our restaurant, preserving some of the efficiencies we all learned about in the last 18 months when we were running restaurants down 10%, 30% and 50% in sales. This is jobs from host to prep cook to banquet servers. As a result, we have operator buy-in, but our restaurants are much more efficient. We changed the way we do classic pastas. For 10 years prior to the pandemic, if you came in and ordered a delicious lasagna or ravioli, you walked out with another lasagna or ravioli for free. Guests loved it. A year ago, we raised the price on the second pasta to $5. Today, almost one out of every five guests are taking advantage of it, and we've had no pushback on the $5, as this TikTok video from last week illustrates. Dad and I are at Maggiano's, and he's very excited because we just found out we can order five take-home entrees per guest for $5. Yeah. we can order 10 lasagnas. Okay, we don't need 10 lasagnas. What? They're $5 each. Look at that. I don't have room in my freezer for 10 lasagnas. Bazon, they're five bucks, so we could get five Mom's lasagnas, four four cheese raviolis, and a fettuccine Alfredo. Do you want to do that? That's $50 worth of pasta. It's actually $300 worth of pasta at retail. What are you doing? Look at our loot [inaudible] That was worth it. Add these changes all up. That's 250 basis points in margin improvement that we've generated during the pandemic. Now we're going to add back a little bit in teammate wages and in paying our managers more in this inflationary environment post-pandemic, but we have lots of room to maneuver on our P&L. This is the Maggiano's banquet room, home to the most differentiated and profitable part of a Maggiano's restaurant. Now, when COVID hit and banquets disappeared, we used this opportunity to transform two parts of our banquet experience. The first is how we sell banquets. With the pandemic, we introduced new software, so our banquet saleswomen can work from home and sell multiple Maggiano's. This software allows guests to actually place their orders online for a menu, to actually pay online, and our banquet saleswomen come to work every day and find a digital follow-up list based on any guests who might have reached out the day before. As a result, we have a headcount two-thirds smaller than we used to, and we're actually responding more quickly to the calls and the emails that come in. The second thing we're doing is we're transforming the look and feel of our banquet rooms. If you've ever had a banquet at Maggiano's, think old school, dark wood, The Sopranos vibe. That's gone now. In these new banquet rooms, we have new classier floors. We have modern chandeliers, and on the walls is a much lighter texture and look. This is banquets for today's millennial and Gen Z guest because she is a meeting planner or wedding planner, wants to put her imprint on a more neutral palette so that she can then spread the pictures of her event on Instagram and cause her friends to have a massive case of fear of missing out. This is banquets for the new generation, and we'll have two complete before Thanksgiving, one in Dallas and one in Chicago, to see how guests react. Here's a question. Can the very same restaurant be the special place you celebrate your birthday or anniversary, and the solution to the problem of Thursday night, "I don't feel like cooking. What am I going to feed my family?" At Maggiano's, we believe the answer is yes. During the pandemic, like Chili's, we launched curbside for carryout and DoorDash. Unlike our polished casual competitors who raised prices in those channels, we actually lowered prices in the carryout channel, offering some of our most popular items for $12, a price competitive with fast casual restaurants. We also price at parity in DoorDash. Through both channels now, you can order one delicious entree and get a second one at a reduced price. We also take great care with how we execute, just like in our dining room. Our packaging is first class. We wrap every entree in plastic. We go the extra mile and include for free Alfredo sauce and bread and even your utensils. We separate hot and cold food for you. All that's why we're attracting new guests and having our existing guests use us two times more often than they were prior to the pandemic. Don't take my word for it. Right now, the average Maggiano's is on track to deliver $2 million in off-premise sales this year, and we think that will only keep building because of the differentiation of what we offer. Here's the lasagna you ordered. I included the second lasagna for $5. I threw in some fresh bread, your extra marinara sauce, and your utensils, so you don't have to wash any dishes at home. Have a great night. No one knows what's going to happen in the holiday. We do a lot of corporate catering, and we do a lot of corporate banquets historically. Most likely, they won't come back this year. Here's what you should know. That in the Q1, Maggiano's, even with banquets not recovered, was able to match our pre-pandemic sales. When you take out banquets, our traffic outperformed Black Box polished casual, and our profits are looking really good because of the margin business that we get. Don't think of us as Brinker's poor cruise line business. Think of us as a business that will surprise on the upside this year and every year going forward. Great. Thank you. The real Steve is here joining us too, and he'll join us for Q&A in a few minutes so that you can dig into any questions you might have on that presentation. Great work, again, being done on the Maggiano's team. We knew their recovery curve would be a little bit slower, and they've exceeded expectations. Came very close to a record Q1 profit, a whisker away this last year. We're looking forward to the holiday season and really seeing the initiatives pay off as we move through that critical quarter for them. I want to end our formal presentations by bringing all these initiatives together and give you a feel for what we believe this is going to look like over the course of the next three, four, five years, as we continue to implement against a strategy that frankly has been working for us despite the pandemic, despite the headwinds over the course of the last couple of years. As I do that, I want to really start with where we're at right now, because again, our journey for the next several years has to begin, and we're at a really strong beginning place to implement against the next three to five years. Strong base businesses. One thing that I think is important to understand is not only the recovery that I just talked about with Maggiano's, but Chili's continues to operate above that COVID level, even without wings. We get some questions that, "Is the Chili's base business performing because of wings?" The answer is, Chili's base business is performing because Chili's base business is doing a good job almost every week with the exception of maybe a couple during the height of the August surge. We saw Chili's performing above pre-pandemic levels. We also have, obviously, the virtual brands, and now the ability to invest back into new restaurant development at a much greater pace. As I indicated before, again, the curves of these businesses have been very steady and very up and to the right as we've moved through the recovery periods. Again, not fully recovered quite yet. We'll continue to unlock that capacity as we go forward. Run those businesses at levels higher than we were doing going into the pandemic. We've talked a lot today about the shift to off-premise. We have been in the sweet spot of being able to run our businesses well from the to-go side of the equation, from the delivery side of the equation. Chili's was at a little below 20% going into the pandemic, and now seems to be landing into that nice mid-30s there. You see in the Q1 at just under 35%. Maggiano's is also taking advantage of that. As Steve went through in his video, they're now into the mid-20s, up again from the 16-ish, mid-teens, and now into the mid-20s, and done a great job of really reintroducing, and in some cases, introducing the Maggiano's availability from a to-go standpoint, and the fact that you can get such high-quality Italian food at great prices with the convenience that you want. I think a great opportunity to elevate that business on the carryout side of the equation. The other position that we start from that is essential to really driving the business forward is strong cash flows. As we bring our cash flows back, you see where we dipped on EBITDA during the pandemic, back up into the mid-$300s in FY 2021, and we're heading above $400 million as we move through this fiscal year, expecting EBITDA for FY 2022 to be north of $400 million. That allows us, again, to execute against our capital allocation strategy that has been in place but is going to be consistent as we move forward. Generating that cash flow, investing more aggressively back into the business, doing it from a stronger balance sheet than you've seen in the last several years. We will continue to reduce debt and take advantage of better leverage positions as we grow the cash flow side of the equation. After all of that has been done, take excess cash and return it to shareholders. We've reinitiated the share repurchase program, which we talked about on the last call, and we've reinitiated some of those share repurchases as we move through this quarter. We will continue to do that as warranted as we move forward. Let's talk about how we invest back into the business. From a capital expenditure standpoint, we're going to up the game a little bit. This is not a radical change, but it's definitely a step up, a little bit above where we were pre-pandemic. We were running in that $150 range for several years heading into the pandemic years. Now we're looking at $160-$ 180 as we move out over the next three, four, five years, because we have the opportunity to invest across a number of initiatives that we've talked about here. We have the financial wherewithal, the financial positioning from a balance sheet to do this very effectively to drive incremental cash and incremental bottom-line returns. Unit growth. We're upping our pipeline of unit growth into the 20 to 30 units a year, and we've already taken the steps to put those teams in place, continuing to bolster that side of the equation and have a pipeline that has now moved north of 20. Those openings will start to pick up pace as we get into calendar 2022. Obviously, there's a time frame that takes to get development up and rolling, but we're at that place now and excited about where we're going with new unit development. What really is an opportunity there is where we see new restaurants opening in this past really 18 months, opening at really nice volumes and being able to take this new prototype that is contemporary in look. It's very appealing from a curbside perspective and works extremely well from a guest satisfaction and efficiency standpoint on the inside. We've been able to take it into some markets that we haven't penetrated more recently and seeing it done small market and large suburban market at higher volume. A lot of opportunities as we continue that development pace going forward. Franchise acquisitions. We're very forward in our belief that corporate ownership is the best way over time to drive returns in this segment, and we're continuing to bring franchise operations back onto the corporate side of the equation. Going back a number of years, again, the Northeast, that bluer color, it was done several years ago. We more recently announced the Mid-Atlantic, that lighter blue, we closed on at the earlier part of last month. Obviously, the Midwest was an acquisition we did roughly two years ago, that green color. A lot of work going into those restaurants right now. We're now moving towards a close of another franchise operation that I would expect to get done in the next couple of weeks, that is that red 37 restaurants kind of in the Great Lakes area, working over towards the Mid-Atlantic, Philadelphia area. Another good long-term partnership, but a great opportunity to bring those restaurants back into the Chili's corporate fold. The opportunity still exists for several other operations that are out there. Once the Great Lakes acquisition is complete, we'll be running north of 90% of our restaurants in the U.S. being corporate-owned. I would expect over time to see that number kind of move a little bit north of there. We've been re-imaging restaurants on an ongoing basis, and we'll continue to invest back into our existing fleet. Chili's has a program underway. We're doing roughly 12-1 5 restaurants a month. We'll continue that pace for the foreseeable future, focusing very much right now on high volume markets. If you think about the Miamis, Utahs, places of that nature, plus these restaurants that we are acquiring back in. In many cases, while the restaurants are decently maintained, probably not re-imaged at the same level that we would re-image those restaurants. Focusing on newly acquired restaurants, but also restaurants that have the ability to drive incremental volumes when you give them a new look and feel. Focusing on areas within the restaurant that have the largest opportunity. What do you do around the bar spaces to make that a more appealing opportunity for guests when they're using the restaurant, things of that nature, that tend to have a greater and quicker return to us from the amount we're investing in. As Steve mentioned, we're excited about the opportunity to start the re-image program on Maggiano's. That's a little over 30 year+ brand. This will be the first time that it has a significant re-image as we move forward. Two of them are works in process that should be done here in the not too distant future, prior to the holiday season, and then we'll start a disciplined approach to doing a handful of those as we move forward each year and get a new, fresh, and updated look back into that brand to go along with the quality service and the excellent Italian food you can get. Technology. Of course, we talk and believe technology continues to be a significant differentiating factor for us, and we will continue to invest at pretty decent levels as we go forward. Technology has a lot of opportunity for us. It's also the gift that keeps on giving and needs the feeding and investment that goes with it. We have typically invested in that $50 million+, probably taking it up a notch this year as we roll out TSE in particular, which Wyman spoke about earlier, is a great opportunity in how we improve the operations within the Chili's restaurants. Those numbers are combined both capital and G&A that are related to the technology investment. I want you to see both numbers to understand that this is a very meaningful amount of spend that we take seriously from helping drive the business going forward. As we make those investments and we implement the strategic initiatives that we've talked about, there's some long-term growth targets that I want to review with you. Based on those four items that we talked about from an investment standpoint, over the next, I'm going to say three to four years, I would expect to add $1 billion to the top-line of Brinker International. We will also do it by expanding margins. Again, I think despite the headwinds that we've talked about today in the short run and what's going on in some of our labor markets, there is opportunity to leverage the P&L as we move forward. We're very strong believers in our ability to drive top-line growth and the opportunity it presents to expand margins. We can see a minimum of 50-100 basis point improvement in margins off of our pre-COVID. I've given you a pre-COVID 13.2 number there to kind of represent a little more normalized opportunity and grow the margins as we move forward from that point. Have targets established for protecting the balance sheet and improving the leverage position there. We're continuing to move down. We moved obviously well down from that COVID impact into 2.5x, close to 2.5x at the end of the fiscal year. I expect that to continue to tick down this fiscal year and then move in out years down below two times on a funded debt to EBITDA and below three times on a lease-adjusted debt to EBITDA. Again, wanting to make sure that our balance sheet is strong, giving us the flexibility and optionality on how we maneuver the business around it. When I bring it all together from a multiple. We think we are laying out a strategy that allows for multiple expansion. If we can deliver on these numbers on a consistent basis, we strongly believe there's an opportunity to grow the multiple related to the stock. Total revenue growth should average 6%-8%. I would caveat that with a deal that'll be very high the next year or two. Again, when you think about what we're doing from a franchise acquisition standpoint, from a rollout of a virtual brand standpoint this fiscal year, you can expect to see revenue growth is really more in the mid-teens in this fiscal year, then probably stair stepping down as we move through those two, three, four years out. You get some benefit of the lap of that as you move into year two, and then you probably normalize down in the lower single -digits as you get out later on in that forecast period of time. Averaging out to that 6%-8% over the time. We talked about the margin expansion and the opportunities, particularly that top-line growth brings to margins. When I bring that together, I expect to see EBITDA grow in the 8%-10% range over the next three, four, five years, and I expect to see our EPS growth both from a combination of organic improvement in the business and our capital allocation policy to be north of 15% year-over-year. Those are the targets we're committed to, and that we strongly believe this strategy has the ability to deliver on a consistent basis. Short-term turbulence that's going on, we all are aware of that. That's nothing new. We're working our way through that very effectively and I'm comfortable that once we clear that turbulence, we have a lot of incremental upside as we move forward. In a great place. As we wrap it up, I think I'm going to ask Wyman, Wade, and Steve to come on up, and we're going to open it up for as long a Q&A session as you guys want to have. Why don't we take some seats over here? Because I think we got some talking to do. All right. John, Nick. Start with John has the mic first, and then we'll go to Dennis right after that, okay? When was that $1 billion of revenue? Was there a year that you gave on that [inaudible] Yeah, I gave you a three to four or five-ish kind of timeframe. You can take the midpoint of that, John, and say four years, okay? This seems to be one of the first few times in a while that you're not expecting G&A leverage. It seems like EBITDA growth barely in line with operating income after factoring in the store level margin improvement, maybe even a little bit less. There might actually be some G&A deleverage in your forecast. Can you talk about G&A as a part of that piece in terms of how you expect that to grow relative to your revenue? Yeah, I think, again, we'll continue to invest. A portion of that technology investment I talk about goes through the G&A accounts. We want to make sure we're providing a strong support system and team here. As you look at the organic growth dynamics, when you think about development, we have to have that development, construction, design teams all in place. We're investing appropriately there. I do think you will see G&A leverage as you move through that opportunity. We like to target 4% in that range. I think there's some opportunities there. I'm not looking for a big delta one way or the other, but I don't see a delevering at all. We'll invest G&A as long as it's appropriate on how to drive the business going forward. The final question. It's John Ivankoe. I guess I wasn't on the microphone before. $64 million of technology spent in fiscal 2022. It's interesting to see some of these next generation point-of-sale systems that have come out. Toast is one that really does come to mind. It's a step function change for what the industry, especially the independent industry, had three to five years ago. How does that make you, or does that make you in any way think about what you do in-house, the money that you spend in-house, your own development engine versus using some technologies off the shelf by others that would probably be pretty hard for you to develop yourself or at least maintain at the level of some of these other, which are now quite large companies, at least from a market cap perspective? Yeah. From a market cap perspective, they're amazingly large. We just go to experiences, right, John? The reality is we don't want to be developing software and we'd prefer to use outside sources and be more of an integrator and a modifier. With the case of TSE, they don't hold up, frankly. If you go right to it, some of these products that are out there now that are getting a lot of buzz, they just can't handle the kind of volume and the kind of pressure that a high volume restaurant like a Chili's and a Maggiano's put them through. It's interesting. If you're a mom and pop café and you've got a handful of people and you're doing whatever, they seem to be fine. We'll see how the equipment holds up in two or three years, too, to some abuse. Those are the things that are important. To answer your question, right now, we're doing what we have to do from a technology standpoint to be leading, if we find a partner that can help us w ith that, we'll engage them. Right now, we're finding that we're having to carry a little more of that weight ourselves, for multiple reasons. At the end of the day, it's so that we can guarantee our operators that the system we provide them works, and it works day in, day out, under volume, and that we're not dealing with R&M issues down the road, because those are very difficult to deal with. The only thing, just on the G&A, I would just add, obviously, with acquisition and with virtual brands, extremely good leverage from a G&A perspective. We don't add a lot of resources at all at the restaurant support center when we're doing these acquisitions. With the case of virtual brands, this team's able to scale up with what we've got. Yeah. Dennis. Dennis Geiger, UBS, thanks to the team for putting this event together for us. First question, Wyman, just going back to the beginning of the presentation, you talked about staffing being basically at pre-COVID levels, I think. Just want to marry that up relative to the three to four point headwind I think you mentioned as it related to comps. Similar staffing levels, I guess your volumes are higher. Is there a percentage that you're understaffed right now where you want to get to to close that operational gap sales impact? Absolutely. We're still dealing with some understaffing issues. Again, I think I mentioned whether you want to call it a 911 restaurant in terms of, hey, they just don't have enough bodies to run a full shift or the full operating hours that we. The percentages are, again, regionally, it's probably the Midwest is the only region I would say, Hey, that's a fairly large part of the country that's got more than its fair share of challenges. Beyond that, it's more just restaurant by restaurant within the individual markets and trader to trader. They're a small number of restaurants relative to the system, but they're disproportionately impacting the system. Their impact, for a bunch of reasons. The de-leverage issue is the biggest one, right? We talk about how much we know we can leverage the business when we get it up and running and sales are there, and it works the opposite when we're not open and we're still running a lot of the same cost structure. 100% focused on really supporting those restaurants so that they can run well and the management teams can rest easier. That's our number 1 priority, but also has obviously great business implications going forward. We're making progress. That number gets lower every day. We're starting to see these turnover trends recede and move more towards normalcy. Still elevated, but nowhere near where they were two months ago. All of that says, yeah, we're still seeing some of that headwind, and that's kind of why that number is there. We didn't mention it, one of the ways we give operators an option, too, is like, "Listen, if you're getting slammed and you're understaffed, you have to turn off Olo. Well, we'd rather have you turn it off than disappoint guests." When we say, "Oh," they'll turn off the takeout and delivery mechanism. That happens more than it needs to happen when we're fully staffed. Those are some of the things that are taking place today that we know. We know exactly where that's happening and what restaurants and what times of day and week, and we're focused on getting them so they won't have to do that going forward. Just one other one. Joe, just as it relates to the greater than $400 million EBITDA target for the year, just wondering if anything, you gave a lot of color earlier, anything more on the considerations or the assumptions that go into that? Areas of sort of upside risk, downside risk. Obviously, a lot of volatility, a tough year, from everything going on. Anything more that you could speak to that feeds into that number for 2022? Thank you. Yeah, I think the greatest risk, I think, is going to be operational environment. Again, It's interesting, if you go back to the Q2 last year, you saw a COVID wave hit the country. You saw our margins decrease about 10.7 ROM, similar to this last quarter. Then you saw meaningful recovery and improvement coming out of that. We're anticipating kind of a similar recovery cycle as we come through that. Again, I think there's risk, but great opportunity as you work through the Q2 as it relates to the recovery curve of where Maggiano's is at. Again, I'm feeling more and more comfortable about that as we kind of get closer into that taking place and the pipeline they see from a banquet standpoint and things of that nature. That's an unknown that we'll work our way through. Our ability to effectively, in a timely manner, get the transitory costs out of the system is a key driver to that success. I'm comfortable the seasonality will be there. We will have higher volume quarters as we work our way through the rest of the year, and that will be beneficial and impactful to us, too, as we go forward. There's the big ones, I think. Yeah. We've got a call in. Two weeks. Two weeks. Maybe at that point, maybe we'll be able to provide a little bit more color on some of the details. I know you're all anxious to model. Right now, I think we'd leave it at that. Sean, go ahead. Sean, Yeah. I was wondering if you guys can dig in a little bit more on just kind of what you're seeing as far as activation or deactivation of Olo. You mentioned that, and I might have misheard this, that when you're fully staffed, you're still seeing people turn it off. I'd just be curious to hear how you're seeing that trend the last couple of months. Again, fully staffed in the system, but hotspots in areas, right? Again, when we look at the totality of the restaurants, on average, we're in pretty good shape. We still have challenged restaurants. In those restaurants, on a given shift on a Friday or Saturday night when they don't have enough cooks to handle the dining room and all the takeout, they can turn it off. They can turn it off so we don't disappoint guests. The number, without giving you the exact number, it's meaningful. As Joe talked about, we feel like we're giving somewhere two, three points of sales up right now because we're not running full capacity in all restaurants at all day parts. That would be a component of that. We're all focused, and the operators are all focused on, Okay, well, let's get ourselves staffed, trained, and ready to run restaurants the way we typically run them, and the way we're running them in a lot of places. Again, a lot of restaurants are up, and we're seeing double-digit growth in a lot of markets around the country. The 7% average is made up of a fairly broad range of restaurants doing double-digit growth, and some regional areas pulling that down. We also know that on the weekend, our pre-COVID to current results are much stronger weekday because we don't have capacity constraints. Again, we're not putting as much pressure. It's on the weekends where we're starting to level off more, where we're bumping into these capacity constraints, some of them driven by staffing issues. Got you. Would it be fair to say that they're slightly weakening, just given that you see Chipotle saying mid-single digits offline for their Olo. I guess, how is it trending? Yeah, we're getting better. We're not turning it off as much. The operators have got better systems, first off, to identify when and where we need to turn it off. It's just culturally now, people are better understanding. This pandemic has come in different waves. You had the initial wave of, "What the heck?" Close your doors. You've had all these subsequent waves. This last wave, which started in March, where the economy heated up, and it became a labor and a staffing challenge more so than anything else. You start to see the inflationary pressures. That's been a different operating environment. COVID hasn't been the same over the last 19 months. It's come in these different waves, and Maggiano's a great example. Maggiano's now, in this last wave, is doing significantly better above prior pre-COVID levels, where they were running 30%, 40% below. Banquet business has come back. now it's a staffing, it's a supply chain, it's those kind of issues. in the middle of that, you have a restaurant operator who is working, and has been working through all of this COVID, in a very difficult environment. we have to be very sensitive to put our arms around those people, embrace them, give them the systems that they need, let them know how much we care about them. We've raised pay, we've changed bonuses. We paid out. In this quarter that we just ended that we're disappointed with, we increased the bonus payout significantly because these people are working hard. They're dealing with supply chain issues, they're dealing with staffing issues, and they're dealing with training issues, and we embrace and appreciate everything they're doing for us, even though we're not happy with the result. They know that either. They're not happy with the financial result either. That's what I'd like you to understand. We know this is transitory, though. This will go past, as we've been around for decades. We know how to run restaurants. We'll get back to running them the way we are. All we just need to do is get the bodies in place and train them up, and away we'll go. Got you. Super helpful. Thanks, guys. Thanks. Thanks, Sean. It's Alex from Jefferies. I just wanted to follow up on some of the margin outlook and, Joe, maybe just the multi-year restaurant level margin view, what you're baking in in terms of commodity inflation, labor inflation, pricing. Are you being excessively conservative there, or just how you're looking at that at this point? Yeah, I don't think we're being excess conservative, but I think we're being realistic to what the current environment is telling us. Again, a lot of what commodity side of the equation is cyclical, and we expect to see cyclicality kind of through that period of time. You have seen, obviously, commodity price increases of a fairly substantive nature working their way through the systems. I don't think that is sustainable over the course of that three to five years. We expect to see a level of inflation, but probably back more in that normal low single-digit rates. You'll have cyclicality of that as you kind of move. Again, we feel we can maintain pricing power as we go through that period of time. We won't model in as aggressive of pricing as you might see us do here in the short run. Again, I think that 2% range of pricing optionality is still going to be there as we go forward. Again, I think that the incrementality from a wage rate, I think that those inflationary pressures that we've seen are at the high end right now. I don't expect those to continue to maintain themselves as you go through the next several years. Labor will continue to have an inflationary factor. I think it's going to be running at a level somewhat below what we have kind of experienced this last year, but it'll be real. We're factoring all of that in. Again, that billion-dollar top-line growth helps us deal with a lot of those factors as we move forward. We're definitely cooking increased costs into those thought processes. For the most part, Joe, would you say the structural cost with cost of sales and labor, we think our pricing strategy covers? The improvement in margin really comes from higher volumes and leverage. It's not like we're saying, "Oh, we're going to get a lot of that margin improvement by becoming even more efficient. Efficient, no. The efficiencies we will bring to bear, like with TSE, will help mitigate some of the labor pressure that you're going to see in the system and help us outperform others that may not have those kind of technology solutions. The TSE model and the handhelds, what do you think that amounts to in terms of efficiency for staffing? Is that fully baked into that guidance? I think the jury's still out. We'd see where the optionality may come there. I'm not going to pinpoint a number quite yet till we get it rolled out, and we get the muscle memory around it. I think we like what we see from a labor improvement standpoint as you get more proficient with that system. It's there, and as we get farther down that rollout and understand it a little bit better, I think we'll give you some more insights as we go. I'm going to deflect you on that one for right now. It's going to help manage the overall labor system. I would just add that it eliminates pricing. Again, we're very cautious about the affordability position of Chili's. If we can maintain our margins and deliver a good business model, and these technology solutions help us compete more effectively and not have to price more aggressively, then we'll take it that way versus ensuring that everything flows through. We know with TSE, we need 20% less servers now. We add some runners. We add some additional bodies in, but they're at a little lower rate. Again, back to a management model, that's just fewer bodies you have in a critical position. Who's interacting with your guests, and how are they interacting with your kitchen in terms of communication and data? That's a huge win there. It lowers that number. In an environment where it's harder to find servers right now, we don't have to find as many. This year, we'll hire less servers than last year for the same amount of sales by a significant number. We've got to go find some runners, but finding somebody that can run food out of the kitchen is a lot lower hurdle than finding a server who's got the hospitality, personality, and the skill set, and is able to walk in at a very quick time and understand a fairly complicated POS system. We bypass a lot of that now and simplify the life for our managers. In the meantime, we get these new team members in who are now evaluating them as runners to say, "Oh, okay, well, that's somebody that can step up and become a server." We'll start training them in-house. It just makes the whole employee life cycle, if you will, much easier to staff. The same thing happened when we went to a Certified Shift Leader program as the feeder to our management system. We used to do 70% of our management recruitment was external. Now 70% comes from internal. That ability to know, "Hey, I know you. You've worked for me as a server or as a cook. You make a great manager. Are you interested?" "Yeah. They'll let me get you up to speed." It changes the model from a lot of perspectives, that's what TSE does as well. Flipping there. Why don't you guys get microphones for folks so they can just speak? Yeah. [crosstalk] Back and forth. Yeah. [crosstalk] Back and forth. Yeah. I think Nick was next. Go you, Nick. Nick, go ahead. Nick Setyan from Wedbush. A question on the incrementality of It's Just Wings. I think we talked about 30%, including 28% food costs. I think your nearest peer, even in the most deflationary year, had 33% or so in terms of food costs back in 2018. I guess, can you just compare and contrast the differences there? Then second, in terms of just the timeframe around the margin recovery here that we're talking about in terms of the longer-term margin guidance, are you thinking that 2023 may be at the lower end of that range in terms of the range that you provided, 13.7%-14.2%, then we build from there? Could we actually see a jump into the midpoint of that range in 2023, then maybe stay there? I guess, how are we thinking about that build over time? Thank you. The question was specifically around the food cost, 28% and the comparative to our competition in and around the 30%? Incrementality. The brand itself, clearly we see the incrementality. Different customer growth that continues to grow from a sales perspective. From the cost perspective on the food cost, I'm not sure how to answer that other than that I know consistently that's what we see. Did you break out packaging? Yeah. We have. It's packaging and food. We don't add packaging, but I think a lot of competitors. Yeah. We don't add it in. Yeah. We don't add it in. [crosstalk] have packaging in that cost number. Yeah. What you're probably comparing are two different numbers, right? Ours was just straight food, and I think the number you're referencing has to have packaging. Has to have packaging. With our pricing and our portions, we're putting more on the plate in that brand than anyone that we know of scale. You know the big wings players. They're all, i t's Killer Wings, stupid prices. We're a value play in that brand, and we put more on the plate from a product standpoint. There's not a whole lot. It's the plate. That's all you get. You get that and the sauce, and that's how that brand's positioned. I think our margin on cost of sales, product, protein, is probably high. On a lot of the other stuff, we probably are lower. There's nothing else to it. You saw the space, right? That's it. It's three by three, as Doug said. We just basically bang out wings and fries there, put them in a box and send them out the door, that's why it works so well. Key point is, I think the competition buys on the spot market all the time where we're able to contract a little bit more. Yeah. Volumes allow us to put product away, and hopefully take advantage of price cycles, where they're typically buying in the spot. We've had to buy in the spot a little bit more [crosstalk] in recency to ensure product. Then again, we're also talking with a lot of suppliers across the whole bird. Not the whole bird, but a broader array of the bird than some other folks might be doing. You're just kind of seeing some moves that direction. No beaks or claws. Yeah, no beaks or claws over here. Tyler always reminds me it's not the whole bird. Yeah. A greater portion of the bird, which gives us a little more, I think, negotiating power as we move through that. Hit a mic here, Jared. Yeah, I got the mic. Jared from Goldman. Joe, I wanted to dig in on the margin guidance a little bit further. If we think about that 30% margins or so on the virtual brands, and let's call that $350 million vis-à-vis your billion-dollar opportunity. If we hold the base business margins flat, it would imply something in the 30-4 0 basis points higher than the margin guidance you provided in terms of incrementality there. I wanted to get an understanding of how you're thinking about the base business margins going forward and headwinds, tailwinds within that business and what you're projecting out over the next three or four years on that front. Yeah, not going to argue with the math and where you arrived very quickly at. Again, I think we probably would expect to see a little bit more margin pressure in the base business, depending on how you allocate those cost structures. Again, more management side of the equation on the base business is a little bit more labor going in as you build those businesses out. I think they will have, again, it's that leverage ability of how we produce the virtual brands and really take the advantage of the production within the Chili's and Maggiano's side of the equation, so they don't carry quite as much of that labor exposure. They get it on high volumes, and that takes care of itself. If you have an Ann Arbor, Michigan, putting ungodly numbers of wings out the door on a weekend. The first part of the incrementality of labor really is going to probably reside more in the base businesses than it would on the virtual brand side of the equation. Again, any forecast I give you, I'm going to give myself a little bit of headwind when I put the numbers out there. Fair enough. I just had one other follow-up on some of the EBITDA growth metrics that you put up. I think there was a discrepancy in two of the slides. One called for a 10%-12% growth, one showed an 8%-10% growth. I just wanted to make sure if there was- It's a 10.% [crosstalk] 8%- 10% is the correct number. Okay. I just wanted to make sure that was not something that we should be thinking about in terms of timing. Sorry about that. Thank you for pointing that out to everybody. Thanks for pointing that out, Jared. I appreciate that. It is 8%-10% on the EBITDA side of the equation. Alec. Alec from Stifel. You showed how the virtual brands kind of exist within the kitchen. I'm curious, how much an annual sales capacity can you have in that little three-by-three space without needing to expand that region? Are you hitting any ceiling in high volume restaurants there today? I don't know what the upward is. I can tell you that in that space, they're able to deliver in the sales churn that we're seeing today. They're pumping out food, they're working that. Especially when you have on a busy Friday and Saturday night, and you have two individuals there, one just working that station. You can do a high volume of orders that run through there. We see that happening in, like Joe mentioned, Ann Arbor, Michigan, on a weekend or Salt Lake City, Utah, on a weekend. Your second part of your question, I think I missed it. You talked about the volume and then Yeah. Are you hitting any ceiling in any high volume restaurants? There is a ceiling, for sure. It tends to be product that we've run into in this environment where we'll see them shut down because it's 8:30 at night and they don't have the wings. We've got a drop off, or we've lost fries that goes on every plate. We're really seeing where that's going to take us as we go through this restaurant. I'll tell you, by putting that system in, it allows us a lot more headroom for success. I don't think we've tapped that yet. I think we're going to see that in the near future probably, as we really run a sizable amount of volume through these restaurants. Yet to see that with that new system station individuals working there. We have four dense urban, downtown Boston, downtown Chicago, downtown Philly. They did $500,000 in wing sales last year on Super Bowl Sunday. We sold more wings than we sold Maggiano's in those restaurants. There's a lot of upside for the 96% of restaurants. Correct. That's the case. [crosstalk] One fryer, one station. Yeah. The ceilings are going to be the anomaly, and they're going to be typically a very event driven, a Super Bowl kind of deal. If you benchmark on Super Bowl. Yeah It's like what we tell our operators. Sometimes you only know what you see. As an operator, if you've run a $3 million restaurant, if you go to $3.5 million, you think you're like, "Whoa, I'm at capacity." Then you have to remind them, "Well, we've got a restaurant in Miami that does $5 million in the same box and the same footprint." It's opening their eyes up more than anything. Again, Mother's Day and Valentine's Day are the days you go, "Hey, listen, these boxes will do some big volume." Now we know on wings, it's Super Bowl. Believe me, if we did Super Bowl every day, which we can. We know we can do the number. the wings business would be well over the number we just gave you, right? We know we have capacity. Now it's just how do you get those points of distribution and the better marketing? That's really it. We'd love to start, again, capacity and I love to deal with capacity issues. Those are fun. Yeah, exactly. Capacity and staffing are actually fun. Low sales and no guests, those are the worst problems to be dealing with, and those aren't what we're dealing with right now. As much as this headwind is a little bit annoying and troublesome, these are not the kind of headwinds that keep me up at night after a long career in this industry. It's when people don't show up, that's when it's a problem. That's when you really start to have to wonder, "Okay, what am I going to do to drive traffic? David, do you have it? Dave? David Palmer, Evercore ISI. I do want to get back to the incremental margins question, because there are companies out there that have had their AUVs, they're not even going to get back to their past levels, and their margins are going to be higher, just structurally. You will be higher in AUVs this next year, but your margins will be lower. I know there's a lot of funky stuff going on this very moment, but if you could help us walk past some of the more acute stuff, maybe even help us think about what post-recovery in dining room would look like in terms of your restaurant level margins. You've been at 15% before. Could we be looking at north of there, or perhaps even significantly north of there, if we just have a normalized cost environment and normalized dining room traffic environment? I have a quick follow-up. Again, I think that's probably getting on the aggressive end. Yes, we've been at 15%, 16% before. Obviously, there's been some structural changes from a rent structure that impacted that from sale leaseback. I guess the question is, what's normalized look like? Again, if I was dealing with a normalized environment of pre-COVID, that didn't have quite the same near term line of sight on inflationary costs, I might be a little more comfortable there. Can I move back in that direction? Yes. Again, we've always talked about the margin as being a directional play, as opposed to a definitive, "I'm going to get to X margin." "Can I increase my margins?" is a high degree of confidence. You're asking for what's a normalized margin structure on cost of goods and labor in three years. I think we're comfortable with what we're forecasting in there, but that's an unknown. Can I get the margins higher? Yes. I don't think that is a question. To your point, David, it's interesting times that people are growing margins on lower volumes. Do you think that's sustainable? What are the two variables that they're pulling to make that happen? Pricing and marketing and promotional mix. Okay. Where do those usually come back to haunt you? The thing I told you that makes me lose sleep. Where'd my traffic go? Again, these things have to play themselves out. The history would tell you that that's how it works. Unless the whole marketing scenario has changed dramatically, and what we've done is rethought our marketing spend and reinvested it back into growth channels, not pocketed it. We could have pocketed it all, and we haven't. There are people out there pocketing it, and then the question is, and you've asked these questions of these players, is that sustainable? You get a relatively, at least what I've heard, uncertain answer, because nobody knows. We're not banking on that. We could have banked that money. We could have said, "Hey, listen, let's just pocket the marketing and not invest in things that grow the business," like these virtual brands and like delivery and takeout that have a cost structure that you talked about, that we may have to price more aggressively for in the future. That's why some of our margins are, I think, a little less, or under a little more pressure than others, because that's how we see the industry kind of dealing with some of these things. Just a quick follow-up on Maggiano's Classics. At some level, it feels like you mentioned the two stations. It feels like that's a pretty full kitchen. In other words, another brand, you start really thinking virtual kitchens much more. How do you think about that? Even about the incremental margins of this, even the second one being a little bit more complexity that's brought on and perhaps margin dilutive or perhaps hurting the core margins a little bit because you're not leveraging labor as well. Thank you. Yeah. I'll tell you're right. I don't think there's an unlimited number of brands. We're very focused on the two brands that we have in the restaurant today. You saw the system. There is complexity in the kitchen. On a busy Friday night, disrupting that complexity comes at the detriment of the core brand and the other brands. We're very focused on the two that we have today. What does the future look like in a new footprint? We haven't really untapped that yet and looked at that. Today, we're just super focused on the brands that we have in the kitchen. Around the margin conversation, we didn't show the P&L for Maggiano's Classics. We're still rolling that out. We're working on it. I will tell you, its skews a little bit lower. You said there's some extra cost in there, yes. It's still in a blended range of right in and around when you bring both of those virtual brands together in and around that 30%. There is a little bit more prep work on the Maggiano's Italian Classics side. Not necessarily on the line in the moment, right? That's pasta sauce, cheese, out the door kind of thing. It's a little bit more effort around the prep side, and so we've been very deliberate in that P&L to assume for any additional costs around labor to make sure that prep work is done prior to. That's where that extra cost comes when you look at that P&L. Much higher check average. [crosstalk] Average, yeah. So much less labor on a per order basis too. Doing the same $100 million in sales of wings relative to Maggiano's taps less labor in the kitchen per order. Yeah, it's a little more complex, you're getting a lot less orders to get to the same sales volume. It's less cumbersome that way. The key is making sure, as Wade just articulated, everything's, first, high quality, that we're doing justice to the brand. Secondly, it's easily executed at the point where it's most important, which is 7:00 at night on a busy Friday night. Anything online? Anything we haven't touched on here? Right. Actually, you've touched on a lot of them. Do we have a Maggiano's question for Steve? Yeah. There is a Maggiano's question. I'm going to go ahead and ask it because we haven't addressed it. They want to know, with all the changes at Maggiano's, does this mean that there could be a growth opportunity at Maggiano's? I'm not allowed to answer that question. Oh, yeah, I know. You can answer it. No, I think the great thing about Maggiano's is it's a beloved brand. Remember, we have seven of the 54 that were built without banquets, and they're a much smaller footprint, 7,500 sq ft. From a real estate standpoint, they're much more doable, and you can do a lot of them. Right now, when you add that, in their circumstance, a million and a half of that off-premise volume, your sales efficiency has climbed to one of the best in the entire industry. We're looking closely at that. We'll get through the holidays, see if it holds, and then we'll be back to you. Yeah. I think it's very encouraging what we're seeing with this shift in business and with the takeout business and the virtual brands, what it has allowed us to do. We didn't just up the new restaurant openings from the teens to the 20s and 30s because we felt like it. It's like, no, the business model is much stronger. The real estate availability is more accessible to us now with some of these acquisitions we've done, and that's the same thing with Maggiano's. We're seeing with this revised model, let's let the world kind of settle back into a more normal environment. It doesn't look like it's going anywhere near to where it was, which is actually a good thing from a Maggiano's growth perspective for that smaller prototype without the big banquet space. We're very encouraged. Even in October, we're actually growing off-premise over last year. Not two years ago, we're growing over last year in a pandemic. I think I know of only two brands that can say that. It's sticking and going upward. That's encouraging. Again, we're very optimistic about what's going to happen at Maggiano's. Steve's a little conservative on when business groups will show back up because that banquet business is real critical. The holidays are really when Maggiano's is at its best and when it really makes a lot of money. It's a very profitable brand, especially in November and December. By the end of the Q2, we'll have a much better sense. It's going to be a much better year than last year, obviously, for this brand. It could be a record-setting year if we get some of the kind of tailwinds from the corporate banquets, when you kind of align that with what they've done to the margin story. Better labor, better value proposition from a flow-through standpoint that consumers so far are not pushing back on. Really some nice work. A marketing question too about the virtual brand. Wade, this could be for you, listen up. You mentioned building brand awareness using direct marketing with email and text. That implies you're cross-marketing the virtual brands to your existing base of Chili's customers. How successful has that been? Are the virtual brand customers mostly different from the core Chili's customer? The assumption that we are cross-pollinating, here's what I would say. There is an affinity across some of these brands. We have reached out to a few of our Chili's guests in a few promotional activities to see if they would engage with the wings. We've seen some of that. We're getting sources of those customers from other places as well. We are partnered with DoorDash in helping build that kind of capability. We're working with other third parties to help us kind of source those names and those opportunities for growth. In that question, there was an assumption that this is the case. That's part of the story, right? There's a broader story of where those names and opportunities come from. There was one more part of that, Mika, that at the end of the question they asked that I wanted to add a little bit more detail. Yeah, they said, are your virtual customers different from your Chili's customers? Yes. That's what I would tell you. Very different consumer, right? Chili's has always had a great wing product and a great opportunity, but never had, lack of a better term, the credibility to be a wing shop. What we've done with It's Just Wings is positioned it right there, that's allowed a very different consumer that otherwise would have selected a Chili's now to come to wings. That's that young gamer, sports lover that now has embraced that brand. Two very different consumers. To be clear, though, we're not using the Chili's database full force to market wings. We're being very sensitive to that consumer and that Chili's loyalist and members of our loyalty program. We sample e lements to try and understand the cross. We've used some consumer names that may have been not as frequent to Chili's to say, "Oh, well, maybe." We're very good at culling our database. When we talk about 9 million names in the Chili's database, and you go, "Wow, that's just 9 million." You've heard bigger numbers, much bigger numbers from other people. It's because we cull out names at a very aggressive rate, much more than if I were to tell you how many millions of people have signed up. It's. Very different. It might be, yeah. It's a significantly higher number than 9 million. We have these names that we can then say, "Oh, well, maybe they'd be interested in a different message," because they're not really engaging in this brand as much as they used to or they maybe never did. Dennis. Thank you. Just on It's Just Wings, wondering if you could talk a little bit about the pickup opportunity or what you've seen thus far from that opportunity and maybe where it goes from here. I guess just the second part is you talk about working with other 3P delivery providers. Are there any offsets or benefits that you lose that you are able to speak to by going in and working with some other partners? On the pickup side of it's still in its infancy. We're still working. We've launched it. We're working through it. We've had pickup available on DoorDash, the marketplace today, very, very small number there. Most people don't go to DoorDash to have something picked up, right? They're having it delivered. There is a small piece of that. We're using the Google Food Ordering piece as well, which we're seeing a little bit more traction there. Then we have our direct itsjustwings.com growth. Overall, you're seeing small single digits today per restaurant per day on that usage. That's where the opportunity lies for us, and you saw that in the chart that I explained earlier of a momentum shift and a focus on that opportunity. That also goes back to the marketing question of direct-to-consumer marketing. It's that flywheel that we'll get moving here in the next short-term. We have the infrastructure in play to start to build those from low single digits to mid to hopefully double- digits over time. The second part of your question specifically around [crosstalk] third-party. Yeah, I can handle that. Oh, this is the d istribution, yeah. We've had this relationship with DoorDash exclusivity for years now. They've been a great partner. We continue to partner with them. They'll be a preferred partner for ours in the future. We do see an opportunity to open up additional lines of distribution. Obviously, there are implications to that for both of us, but we're well underway in terms of understanding what that means, and we're excited about that, both from our relationship with DoorDash to continue to be strong and to then open up channels. Again, our issue isn't sales. There's no need to rush into this right now because we're probably, right now, we've got almost more sales in a lot of restaurants than we can handle. We're working on the foundational structural piece, and the good news is we got growth vehicles to turn on at a fairly easy rate in the not too distant future. From day one, it was very apparent that Chili's is very valuable to third-party providers because of check. They almost took down a couple of the third-party providers because if you're delivering three tacos in Ames, Iowa, there's not enough money for the driver and the company. When you bring a brand that has a $20, $24, and then $30 check in Maggiano's case, it is possible to structure productive partnerships on both sides. I think when you talk about implications of this, it's not a negative situation. It's across really all of the players, those are positive implications as you kind of move forward. Maybe just a point of clarification, but I wanted to just make sure I had this right. The college/urban environment opportunity that you talked about, is that really just a virtual or a ghost kitchen opportunity or are you thinking about small format stores and then leveraging those small formats to also execute this digital brand opportunity? I just want to make sure I was clear on that. It's the combination. Okay. How are you thinking about potential margins in that business relative to. We're not really talking about dining rooms, though. Yeah. In Wade's presentation those were non-dining rooms. Those are. To-go, delivery. To-go [crosstalk] Smaller format. [crosstalk] pickup, but not dining. That's a really helpful color. Then how are you thinking about the margins of those units versus a base business in a Chili's, a traditional Chili's location? Yeah, I think the margins need to be representative of the business of a whole. That's one of the things we're working on, figuring out what those volume levels would look like coming out of those units. Again, if we're going to do a multi-brand, small footprint, for instance, looking at Chili's wings and Maggiano's Classics coming out of, can we drive the volumes necessary? Your labor structures are going to be different. They're going to be more shift leader kind of oriented structures with fewer numbers of cooks. You obviously don't have the front of the house staffing issues to deal with. Again, we have to balance all of those pieces of the equation. Until we fully understand, I think, the sales opportunity, I can't give you a real focus of what the margins would be. I would anticipate if we would move forward with it, you're going to see something that is at or additive to the equation. Got to get a good return. Yeah. Just to jump back on third-party. It's interesting, we talked about the traditional third parties. Wade has been working on. He's head of innovation, right? I want you to understand, I'm sharing this story with you because there's a lot of stuff we're doing that we're not sharing with you because it's infancy, and we may or may not go anywhere, or we like it, and we just don't want to get it out there too publicly. Today, we have a restaurant in a market that's having It's Just Wings delivered via drone. We now have a third-party delivery system that really is unique, where you go online, you order your wings, and it shows up, what, 100 ft above your backyard? You were with a consumer getting it, weren't you? [crosstalk] It drops into your backyard or your front yard. Drops into your backyard and away it goes. It's more efficient than the third-party systems that are out there today from a consumer and a brand standpoint. There's some very exciting stuff going on in this space. You've obviously seen Domino's and Nuro. Everybody knows about driverless technology, this drone stuff is very interesting, and it's getting commercialized. We're at the front end of it, and we'll see. Again, points of access. Look for a drone near you with an It's Just Wings banner on it. Well, good. Mika, John, I think we have time. John, let's do one more, then I think we are running out of time, and you guys should be getting hungry. Okay. I don't know if this is necessarily a conclusion worry, but anyway, these are my questions. I'll just ask it anyway. As we think about calendar 2022, first half of your fiscal 2023, how are we looking at some of the bigger commodities, where you've had contracts at this point in terms of some significant rollovers, whether it is on pork ribs or it is on some of the beef side or how you're looking in terms of rolling over some of those chicken contracts is kind of the first question. Secondly, you're acquiring enough franchise restaurants for it to matter to us how those restaurants are actually doing from an Average Unit Volume and margin perspective relative to your company. Are those additive or dilutive to your company store AUVs and company store margins? Thanks. Yeah. Several different pieces there. From a COG standpoint, I think when we talked about the year in whole, we viewed the larger exposures probably coming in the second half of the year, depending on where markets are going, because that's reflective of how the contracting is there. Chicken would be the biggest question mark I have right now as we start the process. That's an April timeframe. I think that's correct, John, right? April kind of timeframe. We're starting to work through that process, and we'll see where that goes. Ribs, we've started to see some improvement in the rib market, which is good when you look at where that market's going. Hopefully we can take advantage of that as we move through the second half of the year. Those are big exposures that are sitting out there. Obviously, you always are dealing with the spot markets around ground beef from our perspective and watching that closely. I think the big one rolling in the second half of the year will be the chicken side of the equation. The second part of your [comment] was the franchise. It is more [crosstalk] yeah, it's more 2023 tail end of 2022. Acquisitions, generally speaking, they are lower AUVs than our average right now. A couple 100,000 coming in is probably a good benchmark for that. I think once we've acquired and are running the systems, we definitely find opportunities to improve their margins. We've seen that, I think, in the prior acquisitions, particularly in the Midwest, as we get in and kind of systematize the operations of those performance. Obviously, the Midwest has been functioning pretty much in a COVID environment acquisition. A lot of opportunity there. I would expect to see some margin improvements come in and get them aligned pretty quickly. We can typically do that. To the lower volume levels. Again, volumes matter to margins, and they'll be on the lower. They will deliver a lower margin than one that's running $700,000 more typically. Now again, where you buy them matters too. What the rent structures are like. There's all kinds of things. We're not buying them in California, so we already own those. We own the highest cost structure and the lowest margin markets already. These are all average or better, I think, for the most part. Well, great. Anything else, Mika, you wanted to cover in the field? What's next, Mika? Well, we could keep [crosstalk] Again, I think we need to sign off on the online side of the equation. Appreciate everybody watching online. I think that you can maybe end on one different one. We've covered a lot of these are pricing labor questions, which we've covered in the room. Just making sure that development's still on track, even with the given labor market and all the equipment things we issued. Maybe just talk about that. Yeah, development definitely is on track. You have to stay out ahead of it, maybe again, from a scheduling standpoint, making sure we're not running into issues from a product sourcing standpoint on a construction side of the equation. We're making sure we're developing lead times around equipment packages and things of that nature. It takes a little bit more foresight and planning and scheduling out ahead of things as we go through there. Again, I don't see any slowdowns in the development side coming out of any of those dislocations right now. Next is we actually have It's Just Wings and Maggiano's Italian Classics right outside the doors for everyone [crosstalk] who's here to try. For the virtual folks, we appreciate your listening in and time, and obviously, we're available for questions. With that, we can sign off online.