Good morning, ladies and gentlemen, and welcome to the Brinker International Q2 FY 2021 earnings call. At this time, all participants have been placed on a listen-only mode, and the floor will be opened for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Mika Ware. Ma'am, the floor is yours. Thank you, Kate. Good morning, everyone. Welcome to the earnings call for Brinker International's second quarter of fiscal 2021. With me on today's call are Wyman Roberts, Chief Executive Officer and President, and Joe Taylor, our Chief Financial Officer. Results for the quarter were released earlier this morning and are available on our website at brinker.com. As usual, Wyman and Joe will first make prepared comments related to our operating performance and strategic initiatives. We will open the call for your questions. Before beginning our comments, it's my job to remind everyone of our Safe Harbor regarding forward-looking statements. During our call, management may discuss certain items 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. All such statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such risks and uncertainties include factors more completely described in this morning's press release and company's filings with the SEC. Of course, on the call, we may refer to certain non-GAAP financial measures that management uses in its review of the business and believes will provide insight into the company's ongoing operations. With that said, I will turn the call over to Wyman. Thanks, Mika, and thanks to everyone for joining us this morning. Q2 was a dynamic quarter, and Joe's going to walk you through the details. As we think about all the craziness 2020 brought across our industry and our world, we're also appreciative of the invaluable lessons we gained. We learned we have the right team in the field and here at the restaurant support center. Our operators are working tirelessly every day to deliver great experiences for our guests and team members as we aggressively pursue opportunities to grow our business organically. We learned that we can drive our business and increase market share despite the hurdles brought on by a global pandemic and widespread civil and political unrest. In the second quarter, Chili's increased its two-year trend of taking share and leading the category with an 18% beat in sales and a 25% beat in traffic, according to KNAPP-TRACK. We learned that our strategies work. The ways we leverage our scale and our ownership model and the investments we continue to make in technology and improving our operational systems, they were working well for us prior to the pandemic and continued to work even more effectively throughout the year. Leveraging those competitive advantages opened up opportunities for us to grow our business in unique and innovative ways, like elevating our digital guest experience at both brands and leaning into virtual brands. Those things are hard to execute and even harder to replicate. We're taking those lessons into 2021 as we prepare to accelerate organic growth in a post-vaccine environment. We believe, like most others, that a widespread vaccine will indeed release pent-up dining room demand, and our operators are excited to return to full capacity and deliver more great guest experiences in person. We don't expect a return to the old normal. 2020 fundamentally changed us as consumers. We were forced to use technology to enjoy our favorite restaurants in new ways, like third-party delivery, curbside takeout, QR code menus, and mobile payment. Now that we've experienced greater convenience and control over our experience, we're not likely to give it all back. The Brinker team knew that convenience was a big opportunity even before the pandemic. 2020 just accelerated our commitment to embrace consumers' gravitation toward digital interaction and meet them where they are. We believe digital sales and traffic will continue to be a strategic driver of our results in both the near and long- term. In preparation for fiscal 2022, we're dedicating even more time, effort, and capital to accelerating our competitive advantage as a digital leader in the category and aggressively pursuing opportunities to drive our top and bottom line. At Chili's, we're testing a fully integrated digital experience that gives our guests control over the pace of their experience and level of interaction with our team, whether they're dining in or off-premise. It's still early, but the team is making tremendous progress, and the guests in our test restaurants are responding really well. We anticipate a rollout beginning fourth quarter. We've also spent a great deal of time and effort systematizing what goes out the side door at both our brands. We got really good at takeout and delivery during the height of quarantine. While our dining rooms are still limited at limited capacity, we're ensuring we have strong systems in place to support our operators and execute a robust off-premise business, even as our dining rooms return to full capacity. Delivering a best-in-class off-premise experience also supports virtual brands, which is a key component of our growth strategy. Our scale and our ownership model, coupled with our ability to mine data and develop systems, is proving very effective in this new world of virtual brands. It's Just Wings is on track and performing well. We believe there's significant upside, so we're focused on building it into a strong, sustainable brand. Some of the biggest brands in the world right now are virtual. We know the model resonates with consumers as long as you deliver a great product. Right now, we have a one-channel solution. We're working to optimize that channel through incremental marketing opportunities and expanded consumer touchpoints. We're also going to grow the brand through additional channels like takeout. We're ensuring we have the right systems in place that will best support our operators' ability to execute at a high level, especially as dining rooms reopen. Once we know we're consistently delivering a great guest experience from our operators at full volumes, we'll move strategically to launch another virtual brand. I anticipate that by the end of this fiscal year, we'll have a clearer line of sight and be able to share more details with you. Listen, 2020 was a crazy year. Through it, we confirmed that our strategies are working and that we have an outstanding team in the field and at the restaurant support center. Every day, they demonstrate their ability to adapt, persevere, and win. As vaccines roll out and our country begins to leave their homes once again, I firmly believe we'll continue to win. With that, I'll turn the call over to Joe. Hey, thanks, Wyman, and good morning, everyone. Let me finish our prepared comments by providing some detail and context to our second quarter results, as well as offer a few insights for our January's period's sales performance. For the second quarter fiscal 2021, Brinker delivered adjusted diluted EPS of $0.35. Brinker's total revenues were $761 million, and consolidated reported net comp sales were - 12.1%. A couple of items to note for the quarter. First, let me highlight impacts to the consolidated quarter resulting from Maggiano's performance, which was highly constrained by COVID restrictions and appropriate consumer reactions to the pandemic. As a reminder, the second quarter is traditionally their highest performing quarter. However, this year, COVID eliminated most of their typically robust banquet and corporate catering channels, both of which tend to over-deliver to results for their second quarter. The brand's operating profit was $22 million below last year, constituting virtually all of the reduction in consolidated operating profit for Brinker. The impact on consolidated comp sales and restaurant operating margin were also outsized, with the brand reporting net comp sales of - 47% and a restaurant operating margin of 5.5%, down more than 11% from prior year. With the second quarter now behind us, we expect the impact from Maggiano's to the consolidated performance of Brinker to be more muted as we head into the rest of the fiscal year, particularly as the brand recovers from both an improved operating environment and the implementation of performance-driving initiatives. Now moving on to Chili's. The brand continued its relative strong performance, although also impacted by COVID restrictions during the latter half of the quarter. Operating income for the brand was relatively close to last year at only $1.6 million. Chili's reported net comp sales for the second quarter of - 6.3%. This result does contain a holiday flip, which benefited the brand by approximately 100 basis points as Christmas moved out of Q2 and into Q3. The brand continues to meaningfully outperform the casual dining sector, with our gaps strengthening in both sales and traffic through the second quarter. Traffic gaps in the KNAPP index exceeded 20% throughout the quarter. Performance relative to the competition was strong throughout the country, with double-digit sales gaps recorded in regions from East to West Coasts. Included in the consolidated adjusted net income for the quarter with a tax benefit of approximately $2.4 million, primarily driven by employment tax credits. Part of this benefit is a $1.8 million catch-up related to Q1, which was overaccrued relative to our current expectations for our annual tax liability. The consolidated restaurant operating margin for the second quarter was 10.7%. Most of the variance to prior year is the result of the lower than normal contribution from Maggiano's, which impacted the consolidated margin by 130 basis points. The leverage due to top-line softening in November and December was the secondary influence. Now, food and beverage expense was unfavorable year-over-year by 40 basis points, primarily a result of menu mix, some higher costs from items such as cheese and produce. Labor costs were favorable 10 basis points, with savings in hourly expenses offset by deleverage. Included in this performance is a consistent level of manager bonus compared to last year's second quarter. We remain committed to retaining our restaurant leadership teams as they are critical to our success, both in the short- term and as the operating environment returns to more normal conditions. Restaurant expense was unfavorable year over year by 170 basis points, driven by top-line deleverage, increased delivery and packaging, partially offset by lower advertising and restaurant maintenance expenses. Even with the volatile operating environment, Brinker has delivered solid cash flow, generating $130 million of operating cash flow year- to- date. After capital expenditures of $37 million, our free cash flow for the first six months totaled nearly $93 million. As I mentioned last quarter, I first use our cash to invest in the business. Unit expansion is progressing with six new or relocated restaurants opened year- to- date. We also continue to invest in restaurant reimages, technology, and equipment to further enhance our guest experience and allow for better execution as our sales volumes both on and off-premise grow. Our second priority is to pay down debt. During this fiscal year, we have retired over $66 million of revolving credit borrowings and plan for further meaningful reductions as we progress through the second half of the year. As I've indicated during prior earnings calls, we are strengthening our balance sheet by deleveraging to below 3.5x lease-adjusted debt, which we anticipate achieving next fiscal year. From a total liquidity perspective, we ended the quarter with $64 million of cash and total liquidity of just under $658 million. While we're not providing specific guidance for the third quarter due to the ongoing operational environment, I do want to offer some perspective on January. While the first week of January was negatively impacted by the holiday flip of Christmas moving to our third quarter, top line results for Chili's strengthened as we moved through the remaining four weeks of the period. Underlying this performance is improvement in the net comp sales to a range of -5% to -6% for the last four weeks combined. These results obviously include the impact of ongoing COVID related restrictions, particularly dining room closures in our number three and four markets of California and Illinois. Factoring out these two markets, the rest of the brand during the last four weeks of the January period should record net comp sales of approximately +2%. Again, clearly indicating the brand's ability to perform in a strong positive sales manner with dining rooms open. Also supporting the January results is the performance of It's Just Wings. As you might expect, the brand does well in conjunction with sports, and our ability to market on the delivery platform around major events allowed highly incremental sales and set a number of sales records during the period. Overall, we are hopeful for an improved operating environment as we move through the quarter with the opportunity to return to recovery level performance we delivered in the early fall. In March, we start the lap of the initial pandemic outbreak, which we anticipate will create meaningful year-over-year positive net comp sales comparisons. Looking beyond the short-term volatility caused by the waves of COVID restrictions to the solid long-term strategy being executed by our operators, I'm confident as to what this company can deliver for our shareholders. Our focus and execution will enable our continued performance as a leader for the casual dining sector for the rest of this fiscal year and in the years ahead. Now with our prepared comments complete, let's move to your questions. Kate, I'll turn it back over to you to moderate. Thank you. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star one on your phone at this time. We do ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold a moment while we poll for questions. Our first question today is coming from David Palmer. Please announce your affiliation, then pose your question. Thanks. Evercore ISI. A question on marketing to start. How do you think you'll end up spending money, growth spending broadly? It can be advertising, whether that's digital or TV or your email promotions. How do you think that'll settle out for you both as a percent of sales, but also the breakup between these? I have a quick follow-up. Hey, David, it's Wyman. I don't know if I can give you the percentage of sales number right now. Again, with higher sales that we anticipate, those numbers are going to move around. I will say just as we think about marketing, we are just thinking about it differently and not in the traditional sense as much. When you think about the significant reduction we've had in traditional media spending, but we've offset that with significant increases in digital direct and the support of our takeout and virtual brands through third party partnerships and promotions as well as fees. We kind of look at that whole bucket. In some cases, if we're going to leverage our database more, a lot of that shows up as comp expense, which nets out of sales. You wouldn't even see it in the P&L as you're looking at net sales. We are committed to a much more, what we think is forward-looking approach to marketing, much more direct and much more digital. Thanks. I have another sort of forward-looking one that hopefully you can give us some texture on. That's around your third party brands or your virtual brands. You were testing a few. There was a thought that perhaps one of those tests stopped happening. I think it was on Flatirons Pies. Perhaps you can talk about the pipeline of your virtual brands? Yeah and what the stages are and how you think you'll roll those out. It sounds like you're now going to maybe be unmasking It's Just Wings by having it go out of the Chili's itself as a growth thing. I wonder also those other brands in terms of the delivery side. Thanks. Well, first, David, let's just talk about the unmasking comment, because we've never thought it was important, and this is through the whole testing process, to keep these brands secretive, if you will. We want to be upfront with consumers about who these brands are sponsored by, who actually is producing this product, because we think that transparency is important. The process that we're going through is as we introduce a virtual brand in test, first understand how viable it is. From two primary aspects. How big is the potential from a sales and a consumer's perspective, and then how operationally executable is it in our restaurants? When we stop a test, it doesn't necessarily mean that test was unsuccessful. It just means we're done testing. We could very well have everything we then need to know to go. What we're doing is we're taking It's Just Wings, and we're going to develop it further. Again, we've got it into one channel. We're learning every day really how to maximize that channel. Joe mentioned we're in our first sports season, really, obviously, that brand resonates well during sports. We're pushing the marketing in and outside the channel, we're pushing to takeout. That takes an infrastructure build that requires technology and support a marketing effort behind that. We want to build that brand out at the same time get our operations lined up for full restaurant capabilities as well as full takeout, both Chili's and virtual brands. That's all happening now. As soon as we get that brand further built out, we'll go and look at the next brand and determine when to bring that into the mix. That's the process we're going through. Great. Thank you. Yep. Thanks, David. Good talking to you. Thank you. Our next question today is coming from James Rutherford. Please announce your affiliation, then pose your question. Yeah, it's Stephens Inc. Thanks for taking the question. I wanted to follow up on a comment that was made about the fully digital experience and test, I think it was at Chili's. Can you talk a bit more about how that would look in the restaurant and whether this is a direct response to the potential pressures on minimum wage? Finally on that topic, the potential impact to margins if this rolls out to the system at the store level. Thank you. Well, just to address the first question or the second question first, it's not a direct response to minimum wage. It's a direct response to what we talked about that consumers have been looking for and we've been embracing, and that's convenience and control over their experience more. What we've done is we've taken a lot of the technology that we already had in place, like our tabletop technology, and we've incorporated some of the new technology or the technology that we've built through the COVID experience, which has a lot more to do with how you talk to consumers at their home and in other places. We've linked that more together. Basically, if you're a family and if you have small children, I don't know if you have small children or not, James, but you know there's a window, right? You don't have an hour and a half. You have a limited time. Sometimes when you go to a casual dining restaurant, it's that front end that can take a little longer than you'd necessarily like. Well, if you've got your order ready on your tablet or on your phone and you walk into our restaurant, when you sit at the table, our tabletop device will allow you to interact with it before the server even gets there, as soon as you're sat, and your order then immediately goes into the kitchen. Your server sees that, brings out the food, starts the experience, and then you're off and running significantly faster. You can close out at the same time on that device, you eliminate some of the stretch points, if you will, that can come into an occasion if you're in a hurry. If you're not, we've got servers there that'll take your order and bring your experience to you at whatever pace you want, but allows you to control that more. We're very excited about the opportunity to offer this to guests. We think it'll pick up. We think the table turns will be there. It will allow servers to be a little more efficient. All those things are side benefits, but they actually have implications to the restaurant, especially on a busy Friday, Saturday night. Yeah, James, one of the things I would add just to the second part of that, while the specific digital connectivity we're talking here isn't designed from a labor model standpoint, what we have found as we deal in a lot of higher labor states is technology does matter and technology will be helpful. This and the other investments we've made in technology probably will have a role to play as you work your way through higher wage environments. I think we're well positioned and understand how that can be a piece of the equation. I'll just say that technology, it's one thing to map it out. It's another thing to make sure it's stable and running well and that everything is working because, again, on a busy Friday, Saturday night in a restaurant, if you're relying on that technology to be the backbone of your operations, it can't go down because you don't have a backup. That's why some of these things that sound fairly simple or easy, at the end of the day, you've got to make sure your technology and your infrastructure is solid because you're going to bank on it, and the guest experience is really determined by how good you are at delivering. That's what we're excited about, locking that down. Sounds very interesting. Thanks for the help. Thanks, James. Thank you. Our next question today is coming from Brett Levy. Please announce your affiliation, then pose your question. Great. Thank you. MKM Partners. Appreciate the call. We're in a time where obviously sales are going to be volatile and there's quite a shift in what's going on with the input costs. How are you thinking about not just the traditional but also the newer prototypical units? What kind of margin potential there is either where you can see savings on the labor front where the incremental costs can get pushed aside or they're just going to become overbearing? Do you think your new experience type units have the potential to actually expand margins and how greatly? Thank you. Yeah. Brett, let me make a few comments and we'll take it from there. Everything we're seeing today. Despite the volatility, it's not changing our view of how we can grow margins, and that's through top line. Our new restaurants are well-received as we open them. We're really pleased about the outperformance we've seen from the group that's come in so far this year. Again, it's a prototype that plays well in a variety of markets. I think it's going to work well to increase top line. It's all about really, how do you take that average AUV up from that $3 million-ish range into the mid-3s? When we target and think about $3.5 million AUV, that's where the big opportunity lies to be a more efficient operation at the restaurant level as we get towards that. As we grow the base business, as we connect digitally, as we layer in virtual brands, those are all going to be key pieces of the equation. Yeah, there are places that we will be more efficient in how we use technology to offset headwinds, how we make sure that our supply chain is effectively dealing with those markets. All comes to bear. It's a growth strategy to manage margins as opposed to how do I cut to the bare bones? One of the things we saw in the second quarter as we went into a little bit more volatile environment, was obviously a de-leveraging impact. We also didn't want to overreact. We wanted to maintain levels of spend that we thought were appropriate for what we thought was going to be a relatively short period of volatility. We're not through the woods yet, we are back into recovery. I think the comments I made about manager bonus are probably indicative of that and how we worked on making sure we were still, while being judicious, right levels of R&M spend and other spends that you could have quickly knee-jerked back very dramatically just to gain a couple of tenths of margin. We're trying to take a longer view. Yeah, the only thing I'd add, Brett, is it really is about systems, right? What we're doing and what we've taken the opportunity to do in a lot of restaurants where the capacity is down, is put in systems that will allow us, well, in all our restaurants, but in places where we're down, it's a little easier to put in these systems, especially around takeout and delivery, that will allow the restaurants when we're back up and running and growing the volumes that Joe talked about to execute at a high level. That's how we're going to grow the business. With that will come leverage and better margins. Thanks, Brett. Thank you. Our next question today is coming from Chris O'Cull. Please announce your affiliation and then pose your question. Stifel. Yeah, good morning, guys. I had just a follow-up question on the margin response you just gave. I'm trying to understand how Chili's segment restaurant margin moved quarter-over-quarter. I know it was, I think it was up 50 basis points to the prior year in the first quarter, but fell 80 basis points to the prior year on higher sales this quarter. I was hoping you could just explain what drove that sequential change in performance and how we should be thinking about recovery and especially the labor dynamics as sales start to recover. Yep. Chris, good to talk to you. We're real comfortable with the way Chili's is going to be managing margins going forward. Chili's actually continued early on in the quarter. When I look in the October timeframe, was expanding its margins. I think the delta that took place was simply the COVID restrictions and the volatility of those top-line sales that came into play as you saw those reductions and that deleverage. I think you've seen the weeklies we gave you back in December and kind of moving from pretty much a flat to slightly positive comp into a down in the teens. It was just the quickness of the deleverage and our choice, again, to maintain some of the cost dynamics that we thought were important to the business for it coming out of recovery. Again, manager bonus. Yeah, I think Chris, if you just think about, let's just say California. The magnitude of the hit there has been significant. It's well documented, right? We're paying those managers really solid bonuses, even though their performance level in a typical environment, that wouldn't happen. If we were doing this off our typical, Hey, sales and profit drive your bonus payment, they probably wouldn't be getting any bonus. We're recognizing the need to keep these operators motivated, to keep them in the shop with us because we know it's going to turn around. It's already starting to turn around, and we need them there. There's a little bit of that in the mix. Again, we're confident about where margins are going to play out. We've seen it as the business gets stronger. I think if you just look at Chili's in the quarter, even with all that volatility, the margins are relatively flat. It's not something we're overly concerned with at all. We're actually very excited about the growth potential and how margins will then react. Excellent. Thank you. Just one follow-up. How should we be thinking about the flow-through? The flow-through is obviously very high with these virtual brands. How should we be thinking about changes to the potential flow-through with these initiatives like takeout and some other things that you're introducing for It's Just Wings? One of the things we like about the virtual brands is the flow through and the ability to leverage the existing structures and operations and management teams we have in place. We're learning how to invest into those brands, that's going to be a big piece of the equation. As we make those decisions as to right level of brand-building spend, and again, these are younger brands, and they will need nurturing and investment, and we want to expand and build those brands in a number of different platforms and consumer access channels. We're going to start from a pretty high level of flow-through, we're very comfortable with the ability to invest back into those brands when I just look at the base level of flow-through that they develop. Yep. A little heavier on the front end and especially with To Go, very profitable on the back end as the brand gets established, and we build that. We're just in that process of understanding, okay, what's it going to take to get a little bit more brand awareness out there direct. I think that's a great point. As we move from one channel right now into some other channels, there's opportunities there because you don't have some of the delivery fees associated with the To Go. That's why we're very excited, not only about the growth potential of It's Just Wings To Go, but the flow-through potential too. Great. Thanks, guys. Good talking to you. Thank you. Our next question today is coming from Andrew Strelzik. Please announce your affiliation, then pose your question. Hi, BMO. Thank you. I actually wanted to follow up on some comments you just made. Can you share with us where the awareness is right now for It's Just Wings, and how that's been trending? When you think about brand building in virtual brands, just kind of holistically, you've talked a little bit about marketing, and some of the channels that you might move into, but just holistically, how do you think about building those virtual brands into brands with recognition and sustainability in the context of a category that obviously is getting more competitive, not less competitive over time? Just how you think about standing out in that context. All the data we have, again, we're primarily a one-channel brand right now, right? We're a DoorDash brand, everything that's been, primarily, there's some PR and some other things that have been out there, but most of it's either word of mouth or you're learning from it on DoorDash. The growth and all the acceptance and the repeat numbers are all real positive. We're excited about how the brand is building. It's a limited channel. It's a big channel in one aspect, but it's just one channel. As we look to grow this brand more broadly, we'll use the traditional marketing approaches that you use to build any brand. It'll obviously, as we've talked about, it'd be a more digital and more social approach. We will start to move people directly to an It's Just Wings website and get overall awareness. How we get them there will be typical marketing activity that we already have a lot of history with in terms of how to do that effectively. You have to have the infrastructure in place first, though. You have to have the technology and all of the ability for people to map and get to that location and understand what It's Just Wings is and how to get there. That's all kind of being built and has been built now. Now we can start to push that channel, and we'll see how quickly we can build the brand and where it goes. Just on some of the investments that you're talking about, and more capital being put behind the systems and some of those things in the digital side, are you assuming that you can do that in a way that's not going to impact the margin progression, or should we expect a little bit more choppiness? Sure kind of taking aside the sales volatility? Well, from a capital standpoint, these investments are very small. Relative to building restaurants and staffing them, and here we're talking about very small investments in technology, and sometimes it's in materials like shelving. It's important, but it's not expensive relative. Again, on the flip side, the expense necessary to build a brand, as Joe talked about, we're just going to have to see how that works, and how quickly and how effectively we can do that. We're confident that we have a lot of history and a lot of experience and some great marketers that can help grow this brand quickly and effectively. We'll have more on that probably next quarter. Great. Thank you very much. Thanks, Andrew. Thank you. Our next question today is coming from Greg Francfort. Please announce your affiliation, then pose your question. Hey, it's Bank of America. Wyman and Joe, my question is on the news recently around minimum wages and tip credits for minimum wages. You guys are in a lot of states where wages are already at $12, $13 an hour, headed to $15. Can you talk maybe about some of the experiences that you've had operating in those markets, either around price elasticity or kind of what you've done around labor controls or new equipment that may be an indication of how you would handle sort of a broader national minimum wage going up? Thanks. Yeah, Greg, I think it's a combination of all of those things, right? We are definitely leveraging technology, and we put it in states that were experiencing higher labor costs that allow us to be more efficient, also allow our servers and our team members to make more money because, again, the tip pool and the tip amount is then spread over fewer team members, so they make a lot of money, and that's great. We also then are looking at ways to be more efficient and effective around tip pooling sometimes, and that opens up sometimes as you get into some of these higher cost situations that allow us to mitigate some of the costs that we may have to pay by letting the tip pool help bring up the heart of the house wage rate, if you will. From a pricing standpoint, we do see that competitively, especially folks that can't do the things I've just talked about, they basically deal with this from a pricing perspective. Competitively, you have a little bit more room to price. Interestingly enough, though, in California, we have 3 For Me out there. It works fine. We've just built a model that's that efficient and that effective, and it drives that much traffic that the leverage helps us become competitive now. How long we can afford that price point in that market, I don't know. It's out there and it's been out there for a couple of years, even as the price and the wage rates have gone up. I think our scale really helps us in this environment. At the end of the day, these things that cross the industry are going to be much more difficult for restaurant operators. Again, in our case, that's half the category that don't have scale. The way you deal with this most effectively is through technology and through systems, and we have the ability to do that and have been doing that. We're excited about rolling some of this technology to other markets fairly soon. That's great perspective. I had one other question. Just on your thoughts on Chili's as potentially being Chili's really hasn't been a very strong unit growth chain for a little bit of time. Are you seeing the pandemic as an opportunity to accelerate that, and are you seeing the real estate market free up to kind of make that happen? That's it. Thank you. Yeah, Greg, I think, again, we do think we are reaching a point in the brand's evolution that we can increase our unit development. You got to remember, we have also done a couple acquisitions of franchise that have brought units back into the corporate ownership side. We have grown the base. Again, I think we've indicated we want to get up into that 1%-2% net growth on an annual basis. I'd like it to be, over time, towards the higher end of that. There's a pipeline and a process, and we've got great folks in our development teams already working that. Yeah, we are seeing some changes in the real estate market. I think we are seeing conversion opportunities at a much higher level, which are interesting because I'm seeing our ability to access certain markets now that you probably wouldn't have had the same level of access to pre-pandemic. I'm excited about that opportunity. We're positioning the company so we can grow at that level from both a capital perspective and a team perspective. Again, keeping and developing our leadership is a critical part of that equation. Yeah, I think as we move really into 2023 and 2024, you'll start to see that higher level of new restaurant development work its way into the system. That's one of the benefits of these acquisitions is we've brought back territories that haven't been built out as well or as effectively as Texas. We're now opening restaurants in these markets and having really great reception. We're confident that there is probably more green space out there than we had before for that reason as well. The strategy is also in place. Again, the ability to open a three and a half or $4 million restaurant gives you a lot more access to markets you want to be in. It's just a better model to have than if you're trying to open something at a significantly lower AUV. Thank you. Thanks, Greg. Thank you. Our next question today is coming from Robert Derrington. Please announce your affiliation, then pose your question. Thank you. Telsey Advisory. Joe and Wyman, I'm trying to think about It's Just Wings and kind of a transition from being just a brand that's available through the DoorDash app to being possibly available in other ways. One thing that certainly has benefited Chili's in many ways has been the leverage that you have on the information that's received if I place an order through the My Chili's app. You control that. You can use that within your rewards and your loyalty program. Is there some thought of as you add to go with It's Just Wings, does that give you more leverage? Does it get you better access to information by which you can communicate with your consumer? Absolutely, Bob. It fits the model we have, as you just spelled out. We have these infrastructures in place to do direct marketing very well. We'll deploy that against the It's Just Wings brand and create that. The beauty of the brand so far is that it's a fairly incremental guest to us in terms of it doesn't just overlay with the Chili's guest. It's a different occasion. It's a different user base, it helps us broaden our base of users. Leverage all the infrastructure and capital that we've already put in place. Including leveraging our marketing capabilities with regard to direct. It's absolutely a key to the strategy going forward. Quick follow-up, sorry. Is there the potential that you could add possibly a loyalty or rewards program to It's Just Wings? Sure What access do you have now of that consumer data that I guess goes through DoorDash first? DoorDash is a great partner. They share a lot of information in broad terms. They don't share individual guest contact information. We are working with them to be more aggressive and to partner at a higher level with regard to trading loyalty data or at least giving guests the opportunity to become Chili's loyalty guests through the DoorDash app. We're working that opportunity. Right now, it's more just general market information. How do I know that the DoorDash It's Just Wings guest isn't the same as the Chili's guest? Well, because DoorDash helps us understand the broader characteristics of those two segments. Terrific. Thanks so much. Thanks, Rob. Thank you. Our next question today is coming from Jeff Farmer. Please announce your affiliation, and then pose your question. Thank you. Gordon Haskett. You touched on a couple of questions I wanted to dive into, but I did want to approach it from a little bit of a different angle, if I could. With the potential minimum wage increase clearly an investor focus, I am curious, what is the hourly labor expense for, let's say, Chili's or just Brinker in its entirety as a percent of total labor expense? As a follow-up to that, what is the average hourly wage when including front of house workers that are potentially receiving tipped minimum wage in the states that allow them to do so? They're looking, Jeff, to see if we can give you a number on that first question. On the second question, the average tipped server is in the $20 range. Again, it varies. In California, it's significantly higher because there's no tip credit, and they're at $15. You can imagine in California, they're closer to $30, maybe a little bit lower than that in the $2.13 states, but not too far below $20. We average well into that low to mid-20s. Okay. Yeah. Go ahead. I'm sorry. Jeff, when you look at labor expense, roughly 2/3 of it is going to be on the hourly side of the equation. Okay. Again, in terms of, this is almost sort of your editorial thinking about this. The conversations with peers have been that $15 looks like a long shot, somewhat increasingly looking like a potential that it could happen, but that the tipped minimum wage was always sort of a bridge too far to the extent that the casual dining sector in particular is under a lot of pressure right now, and then that's probably something that is unlikely to happen. That's my comment, how are you guys thinking about it? Yeah. Again, Jeff, this will be a debate. I think it's going to be front and center for an extended period of time this year. I've been involved in a couple of minimum wage debates over the years. They do tend to be intense discussions. There's passion on both sides of the equation. They tend to extend over periods of time. I'm not going to get into the various sausage making of budget reconciliation versus regular order versus things like that and how the Congress works its magic. I think there's probably a decent down the road possibility of a wage increase. I think we have to be realistic in our thinking to that. I don't see that happening in the short run. We're going to focus our time and attention on the specifics underlying that. Because, again, there is a complexity of the way minimum wage works at the federal level, and we're going to focus very heavily from our sector's perspective on the tip side of the equation. It's been an effective methodology on how that legislation has worked in the past, and we're going to continue to advocate strongly that that methodology be maintained in some form or fashion as we go forward. That being said, we operate in a number of higher wage rate states that have their own approach to things. I think there's 20 or so that have opted outside, including our number two, three, and four markets. We're used to large numbers of restaurants in higher wage states. It will be a debate, and I think we can't just assume things are not going to change, and we'll engage, and we'll be prepared as we kind of move forward with that. I don't see it impacting this fiscal year, and frankly, maybe not even in the first part of next fiscal year. Okay. That's very helpful. Just a separate follow-up on California. Obviously, the mitigation efforts in that state have been one of the headwinds you face from a consolidated same-store sales standpoint for the Chili's concept. What I'm looking for is sort of an understanding or better understanding of the case study. Obviously, California in July went ahead and reinstituted indoor, some dining suspensions, and then removed those, I think, late August, September, depending on what part of the state it was. My question is, how quickly does that California consumer respond to the reopening? Immediate of indoor dining? Very quickly. Yeah, it's an immediate response. Again, California is a very When COVID's over and you do the case studies of why a state that closed restaurants still has some of the worst results? It's just interesting, right? It comes back to, it doesn't look like if you're running restaurants the right way, it's not the driver of COVID, and California has felt that. That's just some editorial from my perspective. That said, when we open up parking lots and put tents in them, people line up. They're just dying to come to a restaurant and eat, and get out of their house. You can do that safely. In California, they've, I think, overreacted. Listen, they've got a COVID problem, so I'm not dismissing that. I just think their solution, which is really heavy on the restaurant business, has been not as effective, obviously, because it hasn't really dealt with the COVID crisis that they needed to. We've already started to see it. As soon as they start to lighten up and open up even outdoor dining, which I think is usually the first step, and then they'll go to some indoor, we see the immediate response. California has been the biggest negative drag throughout the whole pandemic because it's never consistently, up and down the state, had a policy that has had dining rooms open at the same time throughout the state at any capacity level. All right. I appreciate that. Thank you. We're excited when they do, because I guarantee there's some pent-up demand in California. Thank you. Our next question today is coming from Brian Vaccaro. Please announce your affiliation, then pose your question. Thanks, Raymond James Good morning. Great to hear from you guys, and hope everyone's doing well. I wanted to circle back on It's Just Wings. In prior calls, you obviously mentioned the sales of around $3 million a week or an annual run rate of over $150 million. Could you provide a tighter update on the brand's more recent sales performance, either dollars or contribution to Chili's comps? What's the timeline on when you expect the takeout channel to be rolled out for the brand? Hey, Brian, let me talk to the first part of that. The $150 million annualized sales we're extremely comfortable with and confident that there's been no deviation from the way the brand has been performing that gives us any doubt there, and that's a number talking to the corporate side of the equation. The franchisees have now embraced it and are starting to perform nicely also in their own regard as it relates to wings. As I mentioned in my commentary, what we're seeing as we learn how to promote, particularly around sporting events, some nice incrementality off of that. There's a number of ways we are now learning how to grow the brand, how you market it, how you tie it to different sporting events, and now how we take it to other channels. I think from a timing standpoint. Well, if you're in DoorDash today, in some markets it's already turned on and you can have that option. Most people that go to the DoorDash app obviously are looking for delivery. We are experiencing. We have some guests today who are in the DoorDash world that choose to pick it up. We're already out there with a system, really testing the system, both external and internal, that allows us to deal with pickup It's Just Wings guests. We're in test markets and significant test markets with the infrastructure in place to allow the website to direct people to the right restaurant to pick it up, and that test is now technologically in place, and now we'll start the marketing aspect of it. I would think by the end of this year, we'll have this thing rolled out and moving, is our goal. All right. That's helpful color. One quick follow-up. Sorry if I missed it, but what was Chili's off-premise sales mix in the fiscal Q2 and the split between delivery and takeout? The split between delivery and takeout has remained relatively consistent, kind of at a two-thirds, one-third split. It's been interesting as the whole off-premise channel grew throughout the pandemic and has seen the ups and downs. That has stayed relatively consistent. I want to say the overall mix continues to be in that. High 40s. in the high 40s. Yeah, that 45%-47%-ish bouncing around. Okay. I would expect, as you get some of these larger markets opening, you'll probably start to see that again start to come back down again like we saw during the last wave. Kind of accelerated it. Yeah. All right. That's all for me. I'll pass it along. Thanks again. Thank you. Our next question today is coming from John Ivankoe. Please announce your affiliation, then pose your question. Hi, thank you. I'm with JP Morgan. A couple of questions, if I may. First, can we talk about the 2% comp excluding California and Illinois? How widely distributed is that number? In other words, can we talk about comp performance in some of the key southern markets like Florida, for example, maybe Texas, and as some of these markets have added 100% of seating capacity, more or less, back for customer usage, and customers, in fact, are, in many cases, using that capacity? How are trends in those kind of markets? As you've reopened the dine-in, as the dine-in have been open the longest in markets like that, what has been the overall trend in sales dollars of your off-premise business? I have some follow-ups, too. Hey, John. There are very few, to my knowledge, states of any geographical areas that are 100% dining room capacity. There may be some folks who are pushing that, but we're not. We're continuing to abide by the restrictions and the guidelines. First off, all these numbers are still, for the most part, a large part, we're probably closer to 50% capacity. The breadth of that sales result is broad. It is across our regions, both Southern and Midwest-. New England. New England. Yeah, it's not like Florida is up 20% and everyone else is down five. It's a fairly consistent pattern, with the typical geographical variances, but nothing dramatic, which has got us feeling pretty comfortable about, as Joe said, our ability to deliver positive comp sales. We're doing that with 50% dining room capacities. What we also see, John, just to add a little more color, is it's why do we feel comfortable? Well, we're definitely stretched on the weekends. Weekends are where we struggle the most from a sales perspective because we just don't have the capacity. Our comp numbers on the weekends are more challenged. Early week, where your capacity isn't as big an issue, very strong. Okay. Sorry, go ahead, Joe. I was going to say, it's been interesting to see in a number of these other markets that have gone to constraints and restrictions and then come off of them, how quickly the bounce back has happened. Again, you see when you look at some of the mountain regions that have moved in and then back out again, you get a return to what we were experiencing kind of in that September, October in relatively short order. Okay. Thank you. Secondly, one of the obviously overall driving themes or positive themes, and I think you've kind of touched on it in terms of conversion opportunities that are arising for you, is consolidation of supply. Certainly one of the hardest things for us is not just to look at it at a national or state level, but in individual trade areas like your own. Obviously you guys over the last 40 years, whatever it is now, 50, I guess 40, have done a great job of selecting real estate. In other words, I think you've generally chosen to locate Chili's in trade areas that have gone up in value, not gone down. How much effective supply, I can use I guess a specific term, do you think has come out in the marketplaces in which you compete? I guess on a trade area by trade area basis. I know, listen, I'm asking you for a number, but it's a qualitative comment. How big of a contraction do you think has actually happened at this point of where you say, Hey, listen, not just number of restaurants, but the effect of supply. In other words, sales dollars or customer occasions, whatever that may be, have actually come out of the market that you might be able to capture some long-term share from. Yeah, I think, again, it's difficult to pinpoint. You have to look at, particularly when you're thinking about conversion, is the why is that available? Is it just a bad location that eventually went away, or is it a franchisee, for instance, or something that the larger entity went away and had some good opportunities embedded within it. We've got to look very carefully at that. Again, we tend to have higher AUVs. We tend to penetrate into a market a little more effectively than some of the competition. I think there's some upside there. Again, we're probably more judicious about looking at conversions to make sure that we're understanding what the real opportunity is there. From a capacity standpoint, I think that question is still open. You see, for instance, the National Restaurant Association is, right now, their look at the world, and they look pretty extensively through their state restaurant association network down into the breadth of the market. They're talking about one in six restaurants being closed. Now, how many of those stay permanently closed, we'll see. I've seen distribution numbers a little bit below that. They tend to look more extensively into the higher end independent operator, which probably has a little bit more survivability to it. I think they'll be there. Again, it is site by site by site. You got to be careful about the broad brush national look at individual real estate markets. It's one out of. Sorry, I have a question. Very helpful. Go ahead. Sorry, Wyman. Go ahead. John, just to put some color, the one out of six closures, we know obviously independents have been hurt more significantly, and they tend to not run as a group as high a volume. I wouldn't translate necessarily that same percentage into sales opportunities. Right. It's definitely going to be a different landscape post-COVID. Thank you, guys. Yep. Thanks, John. Good talking to you. Thank you. Our next question today is coming from Jeffrey Bernstein. Please announce your affiliation, then pose your question. Great. Thank you. From Barclays. Couple of questions just from a sales trend perspective. I'm just wondering what you think drove the sequential uptick in January. I think you said down 5%-6% all in, versus what we think was like down 12% in December. I'm wondering whether you think the broader industry participated in that directional trend, and whether you think it's stimulus or less political noise, or how sustainable might that be? Just any thoughts on that? I had one follow-up. Yeah, John. Jeff, it's clear it's COVID. I mean, it's just COVID. The restrictions come in, we close dining rooms, so sales go down. We've been up the hill and down the hill, and now we're kind of going back up to positive sales. Up. Yeah. It's, I'd say 90% just restrictions and the reaction to the communities to the pandemic, appropriately, for the most part, I would say. There's probably some stimulus in this month. Obviously, those checks have been out and that couldn't hurt. It can't hurt when the government throws significant dollars into the economy. There's some of that in the mix, but we're seeing a pretty consistent trend, so we don't think it's the major driver. Yeah. The interesting thing about that, I do think there's some stimulus there, but again, one of the things COVID constrained pretty much across the sector, were gift card sales. Right. You probably don't have quite as much of a gift card impact that you would normally see in January. Offsetting factors there sitting outside of the whole COVID impact. Understood. Then as you think about the casual dining segment, from a promotional environment perspective, it seems like there's less discounting. Like you said, everyone has limited capacity to satisfy the customer, so why would you deep discount? I'm just wondering how you think that's going to play out as we move through and beyond COVID. It seems like it's safe to say it's more peers, because I know you guys have talked about easing up on your LTOs in recent quarters and years, but just wondering kind of impact the promotional side, if at all. For us, we just kind of got out of that game really into our third year now, Jeff, of chasing promotions at a casual dining level. Our belief is it's a lot more wasted energy and it's not very efficient. You're going to get pops. You're going to hit something every once in a while. All the energy and effort and the brand, what I'll call degradation to going through those cycles isn't worth the effort, is kind of where we're at. It's always a competitive category. It's always going to be. We just talked about the landscape will look different post-COVID, we'll see how that plays into the mix. We're going to go after with the strategy we've been employing especially the last few years, which is, hey, strong base value propositions, talking to consumers more directly and incenting them that way versus some broad thrown out message that doesn't necessarily work very well. Understood. Lastly, Joe, you mentioned how you didn't want to necessarily give fiscal third quarter guidance. I know entering the second quarter, you were more comfortable to do so. I'm just wondering directionally, whether you could offer any color on margin or earnings if the comps were to stay at this down mid-single digit level, or it's just not worth even attempting. Yeah. Jeff, I'm not going to go there. Again, as I indicated in my script, we do have some beliefs around recovery as we move through. As we demonstrated in the fall with some of the numbers you saw and we've talked about, that level of recovery has those positive directional impacts on things like margin. I'm looking forward to having some near time ability to talk about that kind of activity. Looking forward to that. Thank you. Thanks, Jeff. Thank you. Our final question today is coming from Jon Tower. Please announce your affiliation, then pose your question. Awesome. Great. Thanks for taking the call. Wells Fargo. Just a couple of questions. First, on the It's Just Wings, moving to a potential physical presence. Is this a push or pull, meaning are consumers asking for this today, or are you essentially getting ahead of any potential demand in the pickup channel, and especially with the knowledge that the economics are more favorable to you versus, say, a traditional delivery transaction? My follow-up question is just, I know there are a lot of moving pieces in the business right now, but I was hoping maybe you could help frame the long-term margin and profit opportunity for Brinker as a whole. Perhaps even referencing the margins relative to fiscal 2019 levels. Where do you think this business can move from where it's been in the past? Thank you. Let me take the back end of that first. Again, from a margin perspective, again, we're still very firmly of the belief, as we've talked about this in the past, that we can grow margins and grow them from that 2019 level over the course of the next couple of years. That's the opportunity of taking a $3 million AUV to $3.5 million AUV in that dynamic. That will grow margins. We're not pinpointing down a specific level, but it's definitely at a higher mid-teens kind of thought process is what we've talked about. As we move farther down this path and get better insights, we'll start to give you that down the road. It's definitely a nice upside opportunity at those level of AUV to leverage the system very nicely. Yeah, I think the push-pull, it's interesting. We're in a channel that doesn't really. Consumers don't expect when they're in the delivery channel to pick up. Really, that's the only segment that knows of It's Just Wings per se. We know based on the strength of the product and the acceptance in that channel, that there's broader possibilities and greater consumer acceptance of the product. I can't tell you that the people that are on DoorDash today are saying, Oh, why can't I pick it up? Because they don't want to pick it up. They're on DoorDash because they want someone to deliver it primarily. We know that the brand itself, and we know based on our history, if you look at the mix within Chili's world, takeout to delivery, takeout's two to one. Right? The takeout guest is a broader category than the delivery guest in our broader world. We know there is a segment out there that have no problem picking up. I just want to be too clear too, John, because you made a comment in there about as you move to physical locations. I just want to make sure there's no misrepresentation. We're talking about pickup at a Chili's. Not putting a separate physical location out there. Got it. Thank you. Just a follow-up on that, the magnitude of the difference between a delivery transaction and a to-go transaction, is there any way you could help frame it? I think today the incremental margins on an It's Just Wings transaction is somewhere in the 40s, say. If that was to flip to a physical pickup transaction, how much better can that be? Well, again, I think you benefit from, if I break it into specific channels as you're talking about there, you're going to benefit from not having to pay the delivery costs. Those aren't inconsequential. They're obviously what we think are very well-negotiated rates. Those don't exist. Now, how do you market into that channel and the cost that you put to make sure that there's awareness and understanding, building out a website, marketing through Google, doing things of that nature, is another cost. All in, it's definitely going to be a more favorable flow through for that particular channel. It's a lower cost to the consumer as well, right? Yes. Because they're not paying for those fees. Those things are all positive total price for the consumer and margin for us. The magnitude will TBD. Yep. Got it. Thank you and good luck. All right. Thanks, John. All right. Well, thank you everyone. We appreciate you joining us on the call today, and we look forward to updating you on our third quarter results in April. Have a wonderful day. Bye-bye. Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.