Ladies and gentlemen, welcome to Carrols Restaurant Group, Inc third quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions on how to ask a question will be given at that time. I'd like to remind everyone that this conference call is being recorded today, Wednesday, November 9, 2022 at 8:30 A.M. Eastern Time, and will be available for replay. I will now turn the conference over to Gretta Miles, Carrols Controller and Assistant Treasurer. Please go ahead. Thank you, operator, and good morning, everyone. By now, you should have access to our earnings announcement released earlier today and our earnings presentation that are both available on our website at www.carrols.com under the Investor Relations section. Before we begin our remarks, I would like to remind everyone that our discussion, including answers to questions posed to management, may include forward-looking statements or comments with respect to our strategies, intentions, or plans and the future direction of revenues, input costs, or other aspects pertaining to our business. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed on them. We also refer you to our filings with the SEC for more details, both with respect to forward-looking statements as well as risks that could impact our business and results. During today's call, we will discuss certain non-GAAP measures that we believe can be useful in evaluating our performance. The presentation of this in additional information should not be considered in isolation or as a substitute for results prepared in accordance with generally accepted accounting principles, and a reconciliation to comparable GAAP measures is available with our earnings release. With that, I will now turn the call over to our President and CEO, Paulo Pena. Paulo. Thank you, Gretta, and good morning, everyone. Having now spent two quarters at the helm of the Carrols team, I'm more convinced than ever of the upside potential of our company. We are making tangible progress on both sales growth and profitability, but we've only just begun, and we're all mindful that there is still work to be done to realize our full potential. We're pleased with our top-line momentum during the third quarter. Comparable sales grew 4.9% at our Burger King restaurants and 6.5% at our Popeyes restaurants. At the same time, strengthened restaurant operations drove sequential improvement in our restaurant-level profit margins. The progression of growth drivers and easing cost headwinds fuel our optimism for the coming quarters. Let's dig into some of the details. I'll start with restaurant operations. In a nutshell, we aim to have the right people providing fast and friendly service across all our restaurants. Our improved Burger King staffing levels have enabled us to increase hours of operation by 2% relative to last year. A vast majority of our restaurants are now operating at near optimal hours of operation. We are continuing to increase operating hours in stores where incremental sales volumes warrant it. At the same time, the efficiency of our team member staffing has improved. Operational efficiencies achieved over the past three years have allowed our staffing per store to remain below 2019 levels while still maintaining efficient, customer-friendly restaurant operations. Going forward, our focus will remain on managing labor costs and improving labor productivity through schedule optimization. We aim to provide great customer service at maximum labor efficiency. On service, we improved our total service time by 12 seconds versus last year and five seconds sequentially at our Burger King restaurants. In addition, we recently launched a new initiative incenting our teams to reduce total service time still further. This is especially important given that 75% of our Burger King customers now order through our drive-throughs. Our customer satisfaction scores improved 20% over last year. In fact, we achieved a record high last month. While we're pleased we achieved this milestone, we intend to keep raising the bar as customer satisfaction is something we aspire to improve continuously. Our managers and teams continue to focus on operational consistency in our restaurants to drive continuous improvement in both guest satisfaction and total service time. This is a priority as speed of service and customer satisfaction are key drivers of sustainable traffic growth. We made substantial progress in improving the performance of our stores across both brands and especially at our lower-performing stores. We are continuing to aggressively explore all avenues to improve returns across the Carrols system. Turning now to our growth drivers. Let me begin by discussing menu innovation. We're very pleased with the recent launch of the Royal Crispy Chicken sandwich. It's seeing solid adoption, and it's substantially less complex to prepare than its predecessor. We view this new sandwich as a high-quality product that our guests crave that can be prepared without strain to restaurant operations or speed of service. Next, I will address pricing and value. With almost 1,100 restaurants across 23 states, we are one of the largest franchisees in the U.S. Given the breadth and diversity of the markets we serve, we believe it is increasingly important that we move to a more targeted approach to pricing and value. Our Burger King restaurants have taken price increases of approximately 10% over the past year, including 2.8% in September. That said, we are becoming much more geographically refined with our pricing tiers, allowing us to better adjust to local market conditions. Additionally, we remain focused on finding the optimal mix of promotions and discounts across channels to balance the needs of our customers and profitability. Smarter pricing and discounting practices have contributed to our profitability in recent quarters with limited impact on traffic. In terms of value, we are working to ensure that our actions are designed around the unique needs of our local markets. We are using a disciplined approach that seeks to carefully balance sales, traffic, and margins in our restaurants. To that end, we are currently running a number of pilot programs in our markets focused on local value and marketing efforts. We're excited by the potential of these programs as they capitalize on our scale to unlock sales potential, particularly in the markets in which we have a majority presence. Preliminary results look promising. I look forward to sharing further details with you in the future. Now to store modernization. As a reminder, Carrols has remodeled 85% of our restaurants in the past 10 years. This allows us to be prudent, selective, and disciplined in deploying capital to maximize returns. Earlier this year, we conducted, together with Burger King Corporation, a study of our entire store base. We developed a unit-level plan to prioritize modernization projects to maximize our returns. We will remain prudent in our capital spending while continuing to ensure that our store base is on strong footing. Before turning the call over to Tony to walk you through the financials, I want to briefly touch on Burger King's Reclaim the Flame initiative. Over the past few quarters, Carrols has been part of a group of franchisees working hand in hand with our franchisor to help develop a comprehensive plan to drive traffic and improve franchisee economics. We thank Burger King for their collaboration in this process, and we believe the plan will strengthen the Burger King system for years to come. In terms of the benefits to Carrols, we believe there will be many. First, the increased marketing spend and menu innovation should serve to boost brand awareness, traffic, and sales. Second, refocusing the brand on customer and crew experience should have a positive impact on guest satisfaction, speed of service, and employee retention. Finally, we expect that a renewed focus on franchisee economics will help ensure that Burger King franchisees and our franchisor are aligned around restaurant profitability goals. This, we believe, should enhance franchisees' financial footing and allow the brand to grow from a position of strength. With that, I will now pass the call over to our Chief Financial Officer, Anthony Hull. Thank you, Paulo, and good morning, everyone. Before I dive into the details on the quarter, let's begin with some financial highlights. First, our continued focus on revenue drivers we control and cost management, combined with moderating inflationary pressures on commodities and labor, drove a 70 basis points improvement to restaurant-level EBITDA margins from Q2 of this year. Second, adjusted EBITDA grew 17% sequentially and reached 95% of the prior year's third quarter, despite the inflationary pressures we have faced this year. Finally, we repaid $17 million on our revolver, strengthening our capital position and liquidity. Now to provide more details on the quarter, restaurant sales increased 5.3% to $444 million compared to $421.7 million in the third quarter of 2021. Comparable sales at our Burger King restaurants increased 4.9%, comprised of an 11% increase in average check, partially offset by a 5.5% decline in traffic. Comparable sales at our Popeyes restaurants increased 6.5%, comprised of a 2.8% increase in average check and a 3.6% increase in traffic. Turning to some detail on expenses, cost of food, beverage, and packaging was steady year-over-year at 31.1% of restaurant sales as commodity inflation of approximately 15% was offset by pricing actions and reduced discounting. The most meaningful contributors to food inflation were higher potato and chicken costs during the quarter relative to last year. Beef averaged $2.71 per pound during the quarter, a 1% increase from the same period last year. We estimate that a $0.10 decrease in beef costs would increase EBITDA by approximately $4.5 million on an annual basis, all else remaining equal. Overall, commodity inflation has come down, though still remains elevated from a historical perspective. Restaurant labor expense was steady year-over-year at 33.5% of restaurant sales, with labor inflation offset by continued labor efficiencies and pricing actions. Average hourly wage rates for our team members before overtime increased by 7.7% during the quarter compared to the prior year period, down from the low teens in the first half of the year. We continue to expect wage inflation of mid to high single digits for the fourth quarter. Our restaurant operating expense was flat year-over-year at 15.8% of sales, as inflationary pressures on utility rates and repair and maintenance costs were offset by increased restaurant sales. Restaurant rent expense decreased 20 basis points year-over-year as a percentage of sales compared to the prior year period. Adjusted restaurant-level EBITDA totaled $37.9 million, an improvement of 6.9% compared to last year. Sequentially, from the second quarter to the third quarter of 2022, restaurant-level EBITDA margins improved 70 basis points due to leverage from cost of goods sold, labor, and other expense items. Although early, we think these improvements are just the beginning of a path to positive margin trend that we expect will unfold over the coming quarters. General and administrative expenses increased 50 basis points year-over-year as a percentage of sales, driven by an increase in certain executive transition litigation and other non-recurring professional fee costs that total approximately $1.4 million, along with the reversal of bonus accruals in the same period last year that reduced reported G&A expense. Excluding the non-recurring costs as well as stock compensation expense, G&A as a percentage of revenue was 4.5%, which we expect to be marginally lower than in the fourth quarter. Adjusted EBITDA was $17.7 million, or a 17% sequential improvement over the second quarter and within 5% of the third quarter 2021 amount. For the quarter, our net loss was $8.7 million, or $0.17 per diluted share, compared to net loss of $9.9 million, or $0.20 per diluted share in the prior year period. On an adjusted basis, third quarter net loss was $7.3 million, or $0.14 per diluted share. In the prior year period, adjusted net loss was $7.8 million or $0.16 per diluted share. Free cash flow for the third quarter was $14 million, similar to the amount generated in the prior year period, and an improvement compared to a cash use of $5.7 million in Q2 of this year. The absence of a bond interest payment, certain seasonally strong working capital attributes, and timing of capital spend all contributed to the strong cash flow generation in the quarter. Using the free cash flow generated along with cash, we repaid $17 million on a revolver during the third quarter of 2022, reducing the balance by approximately 60%. Cash and cash equivalents was $3.3 million at the end of the quarter, and long-term debt, including the current portion and finance lease liabilities, was $492.3 million. The overall interest rate on our debt this past quarter was 5.4%, as approximately 90% was fixed at the end of the quarter. Our $215 million credit facility provides us with significant ongoing liquidity. At the end of the quarter, there were only $10 million in revolver borrowings being used and $9.6 million of outstanding letters of credit. Other than that, our entire credit facility remains available to us, and we do not anticipate any changes to this in the foreseeable future. As of October 2nd, our senior secured net debt leverage ratio stood at 3.35 x compared to its limit when applicable of 5.75 x. We continue to forecast that net capital expenditures for 2022 will be approximately $40 million, which includes approximately $20 million for restaurant maintenance and new restaurant equipment purchases. The remainder primarily relates to new burger restaurants we have opened or expect to open this year, as well as the completion of remodels across both of our brands. Our total 2022 capital spend has been first half weighted, with Q3 down to $7 million. We anticipate our overall fourth quarter capital spend to be marginally higher than Q3's. As we enter 2023, we continue to evaluate the recently announced remodeling subsidies made available from our franchisor and will finalize our plans over the next several months, focusing on projects that we believe can achieve a return in the high teens. Overall, we expect to leverage our franchisor subsidies next year without a significant change to our overall spending level. Following our reinvestment in the business, our remaining capital priorities for the foreseeable future include making debt amortization payments of approximately $2 million per quarter, reducing our revolver balance, and building on our cash balances until we obtain a clearer view of the economic environment. This concludes our prepared remarks. We'd like to thank you again for your interest in Carrols, and we are now happy to answer any questions that you may have. Operator, please open the line for questions. Thank you. Ladies and gentlemen, at this time we will be conducting a question- and- answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions. Our first question comes from the line of Jake Bartlett from Truist Securities. Please go ahead. Great. Thanks for taking the question. You know, my first was on the new marketing campaign that Burger King rolled out, the You Rule tagline. I'm wondering if you could comment on, you know, what it's done to the business, whether you know, it's proving to drive some frequency and some awareness and interest in the brand. You know, in that context, if you could share, you know, how same-store sales have started the fourth quarter. I think it's something you typically have done in the past, so that would be helpful as we gauge you know, what impact it might be having. Hi, Jake. It's Paulo. Thanks for the question. You've seen obviously the campaign go live in early October. We've been pleased with its reception both in the restaurants and with customers. It's resonated very well with our team members as well as with customers. I think importantly, it's created an engagement opportunity between the two. You know, as I've been out in the field and visiting restaurants, there's a lot of enthusiasm around it. It's created an opportunity for the two to engage. I think in general terms, the new positioning with our team base has resonated well. You know, as we said in our prepared remarks, we're happy with the momentum that we have, that we had in Q3. That's continued as we've come out of Q3 into Q4. Got it. Okay. You know, my impression or my what I believe is supposed to be happening is kind of more of a brand relaunch in early 2023. In October, we kind of got the first stage. Is that the right way to think about it that, you know, there's kind of more change coming on the marketing side in early 2023? If that's the case, you know, maybe just if you could give us what kind of flavor that might look like, you know, whether it's menu innovation. Just trying to think about what might be coming down the pike, just really in broad terms. I think the important thing to note about Reclaim the Flame is that it's a long-term plan. You're starting to see the early components of it now, and certainly, one of those is the new campaign and the new positioning that's now live. The overall program has several elements that will build over time. As it relates to the marketing, I do think, you know, as we continue through the next month, the next few months, it will continue to build. There'll be elements that will be consumer-facing, other elements that are internally facing. For example, we will have rallies of our restaurant managers in Q1, which is something that we haven't done for a while, which will, I think, really energize the restaurants and the restaurant leaders behind the momentum that the brand is building. Okay. Last question, then I'll jump back to the queue. You know, it's around the inflation expectations, you know, both on labor and food costs. You know, we've heard from some others, you know, expectations for significant labor inflation, you know, into 2023. I'm seeing a deceleration, which is nice and that, you know, moving in the right direction. Any broad perspective on what you expect in 2023 for labor inflation? And then if you could, you know, help on the food cost side. We're seeing, you know, beef, I think, you know, if you could just kind of tell us what your expectations in the fourth quarter. I mean, on the spot, markets are down year over year. Chicken breast or, you know, prices are down really significantly year-over-year. You know, if you could help us on expectations for the fourth quarter and any thoughts into 2023 on commodity costs as well would be helpful. Sure. I'll take that one, Jake. So on labor, you know, we expect labor costs inflation has been coming down every quarter this year. It was in the low mid-teens in the first half of the year. It came down to the high single digits in the third quarter. We're expecting that to be sort of the mid to high single digits for labor. These are wage rates, by the way, 'cause there are some savings we have on efficiencies. In terms of the inflation question that you asked, we expect that will continue to come down. We still expect for next year that, you know, labor inflation will be north of sort of the historical kind of pre-COVID, you know, 2%-3% type level that we were living with. That's where we are on labor in terms of average hourly wage rates. You know, I think to your point, just to start with, you know, our inflation in Q3 on our commodity basket was about, you know, 15%, low to mid-teens type level. You know, beef, which is about 20% of our basket, was actually only up 1%. Where we saw increases, you know, if you look at another, the next sort of 35 points of our basket, they were up like over 20%, 20%-30% in the third quarter. A lot of pressure on things like, you know, potatoes, chicken for the chicken nuggets, buns, you know, tomatoes, produce, all that sort of thing. They were up pretty significantly in the third quarter. Many of those we see continuing. You know, beef is definitely coming down a bit. It's sort of, you know, it's down like 6% so far this quarter from the last quarter number of $2.71. It's coming down. For the foreseeable future, we expect an opportunity, not for, you know, at least for the next quarter. I think the important thing for next year is that, you know, we do think for the overall year, you know, commodity inflation will moderate, but that's not gonna happen until the back half of the year. We still you know, our food co-op still believes that there's gonna be sort of low teens type inflation even to the first half of next year. So it's not you know, it's still elevated. It hasn't really come down to pre-COVID type levels. That's you know, so I don't think it's gonna be sort of a lights on, lights off, you know, on January one next year, that commodity costs are gonna you know, all of a sudden be more you know, be more in line. They're still gonna be elevated for a good chunk of next year. Great. Thank you so much. Thank you. Our next question comes from the line of Jeremy Hamblin from Craig-Hallum Group. Please go ahead. Thanks, and congrats on some impressive execution in a pretty tough environment. I just wanted to make sure to understand where menu pricing stands for Q4. Then in terms of thinking about, you know, the pilot testing that you have going on, you know, the new campaign, how you're thinking about carrying menu pricing into 2023, you know, given that, you know, as you just said that you expect low-teens inflation into at least the first half of next year, you know, does that mean you're gonna likely sustain that kind of high single-digit menu pricing or, you know, how should we be thinking about that? Thanks, Jeremy. So in general terms, as it relates to pricing, the way we think about pricing is that we're very closely monitoring different data points. Obviously, we're tracking inflation closely. We're looking at what competitors are doing in local markets, and we're looking at, you know, other dynamics at a local level. An important thing to understand in the way that we've evolved our pricing and will continue to do so is that we're getting more and more refined in terms of our ability to execute pricing at a local market level. That's, you know, that's certainly something that we'll continue to do as we go into 2023. You know, as I mentioned, we took a 2.8% price increase in September. In the coming, you know, weeks and months, we'll continue to look at what's happening with the factors that I just mentioned. You know, we'll look to whether there's a need for additional pricing as we head into later in the quarter and into Q1. It's largely driven by what we consider to be those dynamics that I mentioned. In terms of pilot testing, the question around pilot testing, we're doing several pilots again that are much more local in nature. Given the breadth of our markets that we operate in, we think it makes sense to tailor our pricing, our value, and our marketing to the local market dynamics. We're working with both the Burger King and Popeyes teams to do that. As we do that, we are seeing, you know, what I'd categorize as promising results. That's something that I think we'll continue to do, you know, going into 2023. Okay. Just to clar— Jeremy? Yeah, go ahead, Tony. I was just gonna say, I just wanna make sure that, you know, the pricing, the menu pricing we've taken so far this year, I mean, in the third quarter added 10% to the average check. You notice the average check was up 11%. The reason for that difference is that our promos and discounts have come down significantly, i.e., the difference between gross sales and net sales has come down, you know, 500 basis points or so, versus last year. That's due to the effort from our franchisor in terms of, you know, sort of revaluing our sort of gross profit or our, you know, the discount we offer customers, sort of trimming that back a bit. You know, coupons obviously are still an important part of our business, but still the promos and discounts, you know, between the gross and the net sales have come down, you know, in a pretty meaningful way, which caused that extra sort of a 100 basis points increase in average check versus the menu price increases we've taken over the last 12 months. The other point I wanna make is that those are, you know, that is a cumulative. The 10% was a cumulative over the last 12 months of price increases we took on the menu. In Q4, we expect sort of the high single-digit rollover of those price increases to continue, and that should continue into next year as well. You know, we don't really see, you know, we have until basically March to evaluate, you know, you know. Other price increases we may take because that's when sort of a fairly large price increase we took this year rolls off. You know, I think we have a good sort of timeline to be able to recalibrate whether we you know what kind of price increases wanna take next year based on the factors Paulo you know mentioned. The point is that a ton of those are carrying into at least the first quarter of next year, the ones we've done in the last 12 months. Thanks. That's helpful, Tony. You guys are lapping some pretty tough compares actually here in Q4. I just, you know, I think that's when you really got more aggressive on menu pricing last year. In terms of thinking about, you know, it sounds like a promising start here in Q4, just wanted to see if we could get, you know, a little more clarity on, you know, whether or not you think that momentum continues. You know, you guys have also been, you know, solidly outperforming corporate performance for the system in the U.S. I just wanted to see, you know, if we get a sense on how you're expecting performance, you know, if you're carrying kind of that high single digit, you know, menu pricing, if you're seeing improvement at all on traffic? Your observations are correct on all fronts. You know, I think we saw continued momentum into October, as Paulo alluded to earlier. We do have very challenging comps, mostly on traffic, in November and December because we believe that sort of the reemergence of Omicron or whatever it's called last year, you know, caused sort of a reversion to our drive-thru a little bit, so in November, December. We do have some tough traffic comps coming up. You know, we're still cautiously optimistic on, you know, that we should see some modest momentum ahead of where we were in Q3. You know, and we also have the wind at our backs on everything that you know BK is doing, you know, on the Reclaim the Flame effort on marketing and, you know, store ACR improvement and that sort of thing that they're working on along with us on many of those topics. Feel cautiously optimistic, but not you know. I still think your point is important, that November, December are gonna be tough comps. Just to add that, just a minor comment related to that is that we're also, as we've come out of, you know, the prior year, and particularly on the labor challenges, you know, we're continuing to focus on executing operations at a high level that will help, we think, traffic and sales as well. Got it. That's helpful. Last one here from me is a little bit forward-looking in terms of, you know, thinking about next year, right? You guys are still, you know, facing some pretty difficult headwinds, right? It sounds like, you know, not gonna get tons of relief on, you know, commodity cost pressures. You know, labor's improving, but, you know, you're still looking at hourly wages up, you know, at least mid-single digits, maybe close to high single digits. You know, in terms of thinking about restaurant-level margins, you know, into next year, you know, outside of kind of getting that maybe explosive growth in same store sales, that would be, you know, high single digit or better. You know, you guys did a remarkable job here actually to just have, you know, restaurant-level margins up 10 basis points here in Q3. In terms of thinking about the opportunity for restaurant-level margins to expand, you know, meaningfully next year, you know, what type of opportunity do you see on that, you know, again, outside of, you know, comps really accelerating because that new campaign works? I mean, let me ask it a different way. If you were to see comps up, let's say, you know, 4% or 5%, you know, how much realistically could you drive restaurant-level margins on comps at that level for next year? I think if you know if you look at the momentum we began to build in Q3, I do think you know we see that continuing. If you pull together the various elements that you know we've been discussing, we think that momentum will continue and benefit our EBITDA margins next year. Just you know if you think about the top line, the brand initiatives have begun and will continue into 2023 and you know I think over time accelerate. That's gonna help the top line and traffic. Combined with that, like as I mentioned, we're executing. We continue to improve our operating and execution at the restaurant level. That helps to drive customer satisfaction, speed of service, you know, the key drivers of traffic at the restaurant level. I'll point back to my prepared remarks where we, you know, we had a record month in our customer satisfaction score. That, you know, that's a focus that we will continue to have. That, we think will help drive the top line. Then on, you know, as it relates to cost, you know, inflation's not going away anytime soon, but it has moderated, as well as, you know, both as it relates to commodities and labor. And again, you know, the work we're doing around operations will help, you know, ensure that we maintain disciplined cost control at the restaurant level. You know, when you combine those things, we think heading into 2023, we'll see some benefit from, you know, in EBITDA and EBITDA margins. I think, Jeremy, the point is that it's not gonna be. You know, as I said earlier, it's not gonna be lights on, lights off on January 1. You know, I think there are a lot of headwinds in the first half, inflation seeming to be the biggest one on the cost side. I don't think we're gonna see. You know, I think we'll see some improvement next year on those metrics that you know, on labor cost of sales, you know, labor as a percent of revenue and COGS as a percent of revenue. But I don't think it's gonna be, you know. Unless we have a complete, you know, grand slam home run on the traffic side, it's gonna be pretty mild, you know, improvement and, you know, over time and gradual. It's not. You know, it's just gonna take some time, but it's. We're on that side of the pendulum now. That's what we are kind of waiting to see. You know, I think to your point, the Q2 to Q3 kind of sequential stuff implied to us that we're on a good track on those things. Yeah, no doubt. It looks like there may be some expectations for like, you know, 250 basis points, you know, improvement in restaurant level margins, which seems like it might be a challenge given, you know, the labor and commodity, you know, headwinds still. But no question that you're doing a nice job on improving the operations and, you know, starting to see once we get some relief there that there's some pretty good opportunity for improvement. That's it for me. Thanks, guys, so much for taking all those questions. Thanks, Jeremy. Thank you. Thank you. Our next question comes from the line of Mary Gresla from Bank of America. Please go ahead. Hi. Thanks for taking my questions. First, can you just touch on how sales and traffic trended throughout the quarter? Sure. I mean, for us it was, you know, September was probably the best of the three months, but it was kind of flat in August and July. I'm trying to think what months were in that quarter. Yeah. Definitely September was the strongest of the three months. Got it. Can I just confirm that your leverage target is still 4x? If so, any sense for when you may be able to get there? It is continuing to be our total leverage coverage target. You know, I think, you know, mathematically, I don't know when this will happen, but I think it will happen, you know, on a long-term basis that, you know, we get our EBITDA back to, you know, $100+ million and our debt, our long-term debt to sort of $400-ish million. It's not gonna happen next year, but I think it could happen over several years, and it really depends on how some of these top-line drivers play out, how fast it goes. It's definitely still the board's objective to get to that number. You know, clearly, the inflation headwinds that we saw this year kind of set us back a few years on that, on that score. You know, it's still within our grasp. You know, we have a very long dated cap structure. We luckily are in a position where we can just sort of be patient for that to occur over the long term. Got it. That's all for me. Thank you. Thank you. Our next question comes from the line of Joseph Farricielli from Cantor Fitzgerald. Please go ahead. Good morning. Thanks for the question. Given your footprint is 85% remodeled and the new BK assistance program, could you tell us what it is you're looking to do with the balance, that 15%, and what other remodelings you may need that the franchisor is assisting with? Hi, Joseph. As you correctly stated, 85% of our portfolio was remodeled in the last 10 years, so we are in a good position to be selective and disciplined in terms of how we approach remodeling. You know, we continuously work on our plans and ensuring that we're spending our capital where we have the best returns. We'll continue to do that in the coming months together with the Burger King team in determining the projects that will make sense for us in 2023. We'll be working, you know, within Carrols capital plans and capacity for 2023, and you know, combine that with the funds and subsidies that are being made available by the Burger King plan. We'll finalize our 2023 capital plan in a structure that will make sense for Carrols, but obviously working together with the Burger King team to ensure that we're aligned with the plan. Okay. Thank you. Would that be to target the balance of the 15%, or is there anything that the 85% that you need to go back on? Because 10 years is, you know, obviously 10 years is an average. Yeah. Some, I'm sure, are shorter, but some are probably long in the tooth. Is that what you would look to target? The way that we look at it. We built earlier in the year, we did an extensive review of our entire portfolio, and we prioritize based on returns the projects that we think will generate the highest returns if within our portfolio, and that's the way that we're looking at it. That was regardless of how long, you know, it was just looking at the best opportunities on our whole portfolio. That's right. Even if they've been remodeled six years ago. Right. There may be some opportunity that we could really move the needle. Our approach is that. You know, we've categorized our portfolio based on the highest returns to the capital we deploy, and that's how we will prioritize our projects. That's a project we did together with the Burger King brand team. We are aligned in terms of which projects generate the highest returns. Okay, great. Thank you. Good luck. Thank you. Thank you. Our next question is from the line of Jake Bartlett from Truist Securities. Please go ahead. Great. Thanks for taking this follow-up question. I actually wanted to just build on that last question around about remodels and investing into the brand. I think what the message that you're saying is that the 2023, you know, CapEx should be similar to the $40 million that you're expecting in 2022. I just wanna make sure I heard that right. I'm just trying to understand, you know, what that means. I know you're not kind of giving us how many remodels you expect, but it doesn't sound like very many if the overall spend is the same. I also think about that, the refresh program, you know, if you did all your stores, I think it's somewhere in the range of $16 million-$17 million that would cost. If you could just give us any more, you know, a better understanding of kind of how you're keeping the CapEx flat, with what looks like some, you know, investments and co-investments, you know, into the system, you know, in 2023. You're right in saying that we are looking at similar levels in 2023 as we have in 2022 from a planning standpoint. You know, as it relates to the refresh program, it is important to note that we do diligently maintain our restaurants on an ongoing basis. That's something that isn't new to Carrols. We continually ensure that our restaurants from a repairs and maintenance standpoint are at the level that they need to be, and that's not gonna change. We'll be working with the Burger King plan in terms of the refresh program and making sure that we're utilizing any available funds as it relates to that program. That's something that we're working with them actively at the moment. You know just to go back to your you know to the refresh within the you know the total capital plan that we're looking at we will like as I mentioned prioritize the projects that we think will have the highest returns in the near term and with those projects take advantage of any subsidies that are available from Burger King. Anything to add, Tony? Okay. Yeah, I just wanna be, you know, make sure in terms of the restaurant refresh technology that they're willing to subsidize effectively, that really doesn't require any different spending pattern than we've had in the past 'cause we're just getting credit for repairs and maintenance work we're doing in the stores, and that sort of inures to what we can, you know, what we can take advantage of from them. That doesn't change the $40 million at all. We're within that $40 million bucket on the repairs and maintenance side, you know, as I said on the call, it's like $20 million of the $40 million is sort of repairs and maintenance and restaurant equipment. That doesn't, you know, we still hopefully will be able to take advantage of the one-for-one match on that spending. And then, you know, I just wanna make sure, you know, we're still being disciplined on, you know, our remodeling hurdle rates. Obviously, if we take subsidies from the franchisor, it results in higher royalties for that restaurant for the term of the franchise agreement. It's not free money. You know, it's not. We're looking at it on a hurdle rate post those extra costs and, you know, taking into account how much they're subsidizing versus the higher royalty rate that they're charging. It's something we're working with them to, you know, we wanna maximize what we do. I think having them out there is gonna be able to increase the number of projects we could do for the same dollar amount. And still get a good, you know, high teens type of return on those investments, even after the higher royalty rate on those restaurants. That's an important point, that the programs will allow us to do more with the same net spend— Right. On our side. Great. Great, that's helpful. Another, you know, my last question is on, you know, portfolio management. One of the effects I think that that's the plan from Burger King corporate is likely gonna be some turnover within the franchise base, you know, franchisees who don't wanna make these investments, you might be looking to sell. In years past, I would have viewed this as an opportunity for Carrols, because of your history as a successful consolidator of the system. It doesn't sound like you're certainly not in that position now. I'm wondering whether there's opportunity to kind of optimize your portfolio, you know, whether that's, you know, selling stores that maybe are a little far afield, not as efficient from a G&A perspective or something like that? Maybe there's, you know, opportunity just to optimize the portfolio you have? You know, also, you know, you're not, you know, in a position now to kind of aggressively grow the Popeyes brand, which is kind of one reason for getting involved in the brand. You haven't, you know, added stores in a number of years. Is there any thought to you selling that brand and maybe just kind of, you know, helping to optimize the company around just focusing on on Burger King? In terms of how we're thinking about that, you know, as we've said in the near term, our focus is, you know, growing the EBITDA of the existing portfolio, reducing debt. As we mentioned, we continue to have a target for 4x leverage. That will be something that, you know, we stay focused on, and I'm confident we'll make progress on. Having said that, you know, we will look at any opportunistic opportunities. It's not something that, you know, we're actively working on today. That is, that's something that we will always look at, any, you know, any opportunities that come by that make sense for us, and, you know, opportunistically, you know, would make sense for us to pursue. That's something you know, clearly that we would look at. In terms of portfolio management, this is something that we actively do. You know, we look at very carefully the results of our portfolio across geographies, across performance levels, and we are consistently looking at, you know, which restaurants we need to either invest in or potentially close if that makes sense. That is something that we do and will continue to do. As you know, again, as opportunities come by in markets that we already operate, where there's a team in place that's operating at a high level, you know, we'll take a look at any opportunities that come by. As it relates to the Popeyes brand, we've been very focused on the Popeyes brand and improving its performance. We are having success with that. We have a new leader in place that's overseeing that portfolio. And a strong renewed energy and improved execution and operations on that brand. And we're seeing success. That's our focus right now is to, you know, improve the performance of the existing restaurants we have, and we're pleased with the progress we're making there. Great. Thanks a lot. I appreciate it. Thank you. Ladies and gentlemen, we have reached the end of the question- and- answer session. Now I would like to turn the conference over to Paulo Pena, President and CEO, for closing comments. Well, thank you again for joining us this morning. As always, you're interested in Carrols. We appreciate your time, and we look forward to speaking with you next quarter. Thank you. The conference of Carrols Restaurant Group has now concluded. Thank you for your participation. You may now disconnect your lines.