Good day, and thank you for standing by. Welcome to the Dine Brands Global First Quarter 2023 Conference Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to the speakers today. Please go ahead.

Good morning, and welcome to Dine Brands Global's first quarter 2023 conference call. I'm Brett Levy, Dine's Vice President of Investor Relations and Treasury. This morning's call will include remarks from John Peyton, CEO; and Vance Chang, CFO. And as discussed last call, Tony Moralejo, President of Applebee's; and Jay Johns, President of IHOP will be available following those remarks to address questions from the investment community in the Q&A portion of the call. Please remember our safe harbor regarding forward-looking information. During the call, management may discuss information that is forward-looking and involves known and unknown risks, uncertainties and other factors, which may cause the actual results to be different than those expressed or implied. Please evaluate the forward-looking information in the context of these factors, which are detailed in today's press release and 10-Q filing. The forward-looking statements are as of today, and we assume no obligation to update or supplement these statements. We may also refer to certain non-GAAP financial measures, which are described in our press release and also available on Dine Brands' Investor Relations website. For calendar planning purposes, we are tentatively scheduling the release of our second quarter 2023 earnings after the market close on Wednesday, August 2, 2023, with a call the following day before the market opens. With that, it is my pleasure to turn the call over to Dine's CEO, John Peyton.

Thanks, Brett, and good morning, everyone. Thank you for joining us for our first quarter earnings call. In Q1, we delivered a solid financial performance despite the challenging and dynamic economic environment. This is thanks to the focus and execution of our outstanding team members at Dine, our terrific franchisees and the restaurant teams. This morning's discussion focuses on our financial results, our strategy and expectations. I'll provide perspective on our business performance and highlights for Applebee's and IHOP, followed by some color on Fuzzy's and our international operations, and Vance will provide a more detailed analysis of the macro environment and our financial results. And now Q1. Our performance during the quarter demonstrated the stability of our asset-light model. Q1 marked Applebee's ninth and IHOP's eighth consecutive quarter of positive comp sales, increasing 6.1% and 8.7%, respectively. Q1 consolidated adjusted EBITDA was $66.3 million compared to $65.2 million for the same quarter in 2022, and we opened 21 gross new restaurants globally, demonstrating our franchisees' belief in our brands and their appetite for development. Following the quarter, we completed a $500 million refinancing of our senior secured notes that were due in June 2024, and we reduced our debt by approximately $200 million. There was a significant level of bond investor demand, which is a great endorsement of our strategy and the positive outlook for our business. You'll hear more about this from Vance. Within the sector, there are some signs that pre-COVID dining patterns are beginning to return. However, the situation remains somewhat unpredictable. And accordingly, we're keeping a close eye on three key areas: guest behavior, commodities and labor. And let me share a little bit more on each of these. First, the guest. Like others in the industry, in late Q1, we started to see signs…

Thank you, John. As you just heard, our brands are performing well, and our comp sales continue to grow year-over-year. I want to begin with an update on our fundamentals before I provide a little color on the successfully completed refinancing of our A-2-1 debt. On the top line, consolidated total revenues, excluding the refranchised Applebee's restaurants, increased 11% in Q1 versus the prior year to $211 million. Total revenues reflected solid franchise revenues, which grew 12% to $180 million compared to $161 million for the same quarter of 2022. The improvement was due to a strong comp sales growth at both brands and the inclusion of the first full quarter of Fuzzy's Taco Shop excluding advertising revenues, franchise revenues increased 14%. Rental segment revenues for the first quarter of 2023 improved by 11% to $32 million compared to nearly $29 million for the same quarter of 2022. The rental segment margin increased from the prior year primarily due to lease buyouts and operating lease renewals and extensions. For our company restaurant operations, sales decreased approximately 97% to $1 million for the first quarter compared to $39 million for the same period of last year. This was mainly due to the refranchising of our Applebee's company-operated restaurants last October, offset by our three Fuzzy's company operated restaurants. General and administrative expenses increased nearly $10 million or 23% to $51 million in Q1 of 2023 from $41.5 million in Q1 of 2022. Excluding onetime items, G&A was $49 million in this quarter. The increase was primarily due to our active investments in personnel costs, professional services, occupancy and system maintenance costs. Adjusted EBITDA for Q1 of 2023 increased to $66.4 million from $65.2 million in Q1 of 2022, resulting from an increase in gross profit, offset by an increase in G&A…

Thanks, Vance. As we look ahead, we will continue to actively support our franchisees to mitigate the impact of an increasingly uncertain environment. We'll make ongoing investments in our brands and ensure, they remain visible and relevant for guests seeking assurances of quality and value. Our system is focused, nimble and steadfast in the execution of our plans to accelerate growth and profitability for the benefit of our shareholders and franchisees as we work to deliver on our 2023 guidance. And so now I'll hand the call back to the operator. As a reminder, Jay and Tony are both on the line along with me and Vance, and we're all here to answer your questions. So operator, please open the queue and we'll begin Q&A.

Thank you. [Operator Instructions] Our first question comes from Eric Gonzalez of KeyBanc. Your line is open.

Hi, thanks, good morning. You said in the prepared remarks that you're seeing signs of economic concerns that are impacting the guests. I'm wondering if you give us some more specifics on what you're seeing to warrant that comment. And perhaps you can comment on how comps trended in the first quarter, what you saw as you exited the first quarter and how trends - how the brands performed in April?

Yes sorry hi Eric, it's John, good morning. What we're seeing from our guests the last couple of quarters, we would describe as steady state and that the guest has been resilient, during the past two quarters as well as they were last year. At the same time, our comments allude to the fact that we see what's happening in the economy overall. We see the increased reporting over recession, and we see the increased reporting over consumer sentiment. And we look at the industry in general. But in that context, we have reiterated our guidance for the full year based upon what we're seeing in our business and what's being reported by our franchisees.

Okay. Fair enough. My second question is just congrats on the securitization transaction. I mean I'm wondering if you can give more details on the financial impact - and maybe if you're able to provide a guidance range for interest expense to perhaps speak to what the EPS drag will be on an annual basis?

Sure that's a great question for Vance.

Sure. Yes, so Eric, so the refi as we announced is - it's $500 million of debt and the group on the 7.8%. So if you're doing the math in terms of what it was before to what it is now, it's roughly sort of after tax is roughly like a $7-ish million net income impact a year.

Got it. And then maybe just one last one real quick, on the rental income, it was a little bit higher than it's been in the past. I think you said there's some lease stuff going on there. Maybe if you can talk about what the run rate might be going forward? Should we expect that sort of $10 million rental income or - is it closer to 7% to 8% where it's been in the past going forward?

Yes. I think that the rent - we don't provide specific guidance on rental income line separately. But the things that impact rental income is obviously, as sales improve there is percent rent that bumped that up. And also, once in a while, we have lease buyouts, et cetera, that would introduce some variability in rental income numbers. But for the most part, it's not a line that drives a lot of volatility in our P&L.

Okay, thanks.

And thank you standby for our next question. The next question comes from Jake Bartlett of Truist Securities. Your line is open.

Great, thanks for taking the questions. My first is on kind of dynamics within the industry and what you're seeing at your two brands in terms of trade down. We've seen very strong results from limited service and fast food, suggest maybe there's some trade downs from casual dining? One of your large competitors yesterday in family dining said that they thought they were getting trade downs from casual dining into the family dining space. So - to the extent you can measure it, what are you seeing in terms of trading out or in of each brand?

Hi Jake, it's John. I'll take that sort of thematically and then we'll ask Jay and Tony to talk about it as well. There's, a couple of things that are important to keep in mind. One is the context of we've got, as we've mentioned, several consecutive quarters of comp sales growth, including the last one. And so we appeal to multiple demographics, including financial demographics. And our brands have always been positioned to value brands and they performed well during tough times. All three of them do. We look back to the 2008, 2009 recession and Applebee's and IHOP over-performed back then as well. And so that is in our favor from where we sit in this category. It helps explain our results. We know that people, particularly our guests continue to value experiences over goods right now, and we're benefiting from that. And we recently just completed some new Applebee's research that was some of the more expensive research we've done in a while. And we learned, for example, that our share of guests with household income over $100,000 has increased versus where we were in 2019. So while - during tough times like this certainly, some of our guests may look elsewhere for less expensive options. We also know that we are - we're gaining guests as well. And overall, we're pleased with the performance. Jay, do you want to talk about IHOP specifically? And then Tony will follow on.

Yes, John. Hi Jake good morning or afternoon wherever you may be. I think that on the IHOP side, we just haven't seen that much of that, that we can attribute to people moving around. One of the things we try to do from a strategy standpoint is to always have value opportunities for our guests, not only in price point, but abundant value. And obviously, with our loyalty program, we can give very unique values to people as part of that program. But we need to have great innovation, new products, new reasons to come to see us and give a great experience. And when you balance all those things, we think that is really what keeps the broad swath of Americas that loves IHOP coming back. We have a lot of people that are in lower income level. A lot of people on the high income level, a tremendous amount of people of IHOP, and we've got a little something for everybody, and we try to maintain that at all times. And I think that helps us stay a little more stable, because we're not just one thing to one set of people.

Great, that's really helpful. And Jay, if you could maybe give us a little more detail on the menu launch that you mentioned, trying to understand how much of a driver you think this could be? What are the significant changes? And what you get us excited that this could be really impactful?

Well, I think one of the things we've been working on is to make sure we maintain relevance with our guests, and menu is one of the biggest things that you can do to be relevant, modern times and what modern eating is, et cetera. And the menu we actually rolled out at the beginning of Q2, but we did preview some of those things earlier. For example, we rolled out our new crepes, which are both breakfast crepes and dinner crepes. We rolled those out with a buy-one-get-one offer. So this is a way that we could actually do value to make it a big launch, get people to try it and oh, by the way, with a buy-one-get-one we get two people to try it at once typically. So you get even more trial of the products. These are new signature crepes that are very well received. Soon after that, we rolled out brand new eggs Benedicts that have been in promotion right now since the beginning of April. So really trying to be the absolute best in all the breakfast categories, we're known for our pancakes. We've got great pancakes, but we should own crepes. We should own Benedicts, we should own waffles. We should own everything about breakfast, and we've really been upgrading those products over the last two many cycles.

Great. And then last question, Vance, I had a - I wanted to dig into what the balance sheet looks like post refinancing here. And I think the biggest unknown from me is what the revolver balance has done that went up for a couple of quarters and I guess that would speak to your approach to cash. And so what is the - did you pay down the revolver? Did you use some of it or are you conserving cash? And then also as part of that question is your approach to buybacks going forward. So I think you're going to have a lot of available cash to buy back shares. Maybe if you could just talk about your level of focus on share buybacks as well? Thank you.

Sure, Jake. So the revolver availability is still north of $220-ish million we've drawn 100 of it back late last year. And so, we didn't pay that down, but we didn't draw on it anymore. We use our cash to reduce our debt and with bond buybacks, as you saw in our filings. And so, we have plenty of liquidity. And it's important to keep a prudent approach to balance sheet management in this environment. Now to your second question on stock buybacks, I think the approach is still the same, right? So if you think about our capital allocation strategy, the three priorities that we've talked about is always investing in the company, returning capital to shareholders and then managing our balance sheet. So over the - if you count since the beginning of 2022, of course, we spent $80 million on Fuzzy’s, right? And we've spent - we've returned - $160 million back to shareholders through dividends and buybacks, and then we used $200 million of it to reduce our balance sheet. So that approach won't change. And it just depends on where the stock is trading and how much margin of safety we have in terms of the stock price versus intrinsic value of the stock, and we will continue down that approach.

Great, thank you very much.

One moment for our next question, the next question comes from Nick Setyan of Wedbush. Your line is open.

Thank you. I just wanted to ask about Fuzzy's country contribution in Q1. Would you be willing to tell us what the royalty contribution from Fuzzy was? And also what the margin on the company sales was?

Hi Nick, it's John. We're still in the integration process for Fuzzy's and making sure that we are 100% buttoned up in terms of financial reporting and that their definitions and their systems and their data constructs are the same as ours - I mean because they didn't have to publicly report in the past, particularly when we do quarter-over-quarter and year-over-year comps. So we're sticking with at the moment, beginning to talk about Fuzzy's in a more qualitative way. And I would say we're probably a quarter or two away from starting to reveal some more specific quantitative and financial measures, but we're certainly on our way to getting there.

Fair enough. And then just I want to visit pricing a little bit for both brands and what thoughts on pricing as the year progresses are?

Sure. I'll start off with a bit of an overview that applies to all three brands, and then we can go to Tony and Jay as well for what they know from their franchisees. The good news is that the pressure to raise prices that our franchisees across the brands felt last year is easing a bit, right because the rate of inflation increase peaked at mid to late last year in terms of our cost of goods in the restaurants. And it's been easing the last couple of quarters, and we expect it to continue to ease, if not become favorable by year-end. And at the same time, I think Vance mentioned in his remarks that for the first time since before the pandemic on average across the system, this is true for all restaurants, but on average in our portfolio, the sales rose at a rate that was offsetting increases in labor for the first time. So the pressure on their bottom line is certainly not going away, but it's not as intense as it was last year. And that's encouraging for price taking to moderate somewhat versus what we saw last year. Tony, do you want to add anything specific that you're hearing from the Applebee's franchisees?

Yes, thanks, John. If you look at Q1 '23 versus Q1 '22, we saw Applebee's franchisees take about just under 6%, about 5.6% in price to protect their margins. It's an increase that's lower than our direct peers. And I think our performance in Q1 demonstrates that our franchisees are not pricing out of our guest comfort zone, right? And we're seeing guests continue to spend on experiences, and I think that bodes well for us. And I think, ultimately, I think what gives me a lot of comfort is that our franchisees know better than anyone, what the Applebee's brand stands for. And that affordability is an incredibly important driver along with the great experience in the restaurant.

Thanks I mean your thoughts?

Yes, I think on the IHOP side, very similar. Just like the inflation rates decelerating so is the price taking that we're seeing. And I think in the first quarter, we were at about an 8% price that was cooked into the menu. We've already printed our menu for the first part of the year. So that's baked in now. We will have another menu print later in the year that franchises will have an opportunity. On the IHOP side, we actually have a third-party vendor that we use to help the franchisees think about how they're taking price so that they're doing this very strategically. They're not just randomly comparing what the competitor down the street does and take even more or less in what they're doing, much more scientific within our own restaurants as far as how people do trade and what's too much of an increase that's going to cause either a traffic decline or people have moved down to cheaper items, et cetera. So we try to do this in a pretty sophisticated way. And the franchisees are very careful about what they're doing to try to make sure that they're maintaining the traffic and maintaining the business, because that's the most important thing that we've got to do long-term.

Got it. And just final question, would you be willing to maybe bracket operating cash flow for the year?

Vance, do you want to address that?

Sure. So, I think I mentioned this in the past, right? So we had a weird sort of working capital flow for the past few years. This is the first year where we're back to should do - like sort of normalize working capital trends. And so, if you have your model with your EBITDA assumption, you can assume just sort of pre-COVID working capital level, and that's how you should model the operating cash flow. Now I will also mention, as a reminder, we talked about this last quarter that we are expecting about $10 million of TI reimbursements through our operating cash flow this year. So, you see our CapEx, like traditional CapEx in the CapEx section. And then the effective CapEx is really sort of net of this $10 million operating cash flow reimbursement. So that's an incremental piece that you should build into the operating cash flow for the year.

Thank you very much.

One moment for our next question, our next question comes from Jeffrey Bernstein of Barclays. Please go ahead.

Thank you very much. Two questions first, just following up on the prepared remarks when you referred to the late first quarter slowdown. I just wanted to clarify, John are you saying that that's a broader industry comment in terms of just macro factors and headlines that all consumers are seeing, that your brands have not seen any change in behavior in recent weeks or months? Just trying to clarify whether there's any reference to your portfolio rather than just the industry? And if you were to see a slowdown, how would you respond? And then I had one follow-up?

Sure. So my comment is about - so you know we don't comment on - Q2 on this call. So my comment is about the industry in general and that we're watching it, and we are - and we'll react to it if and when we need to. And in terms of what we would do if we see a significant slowdown, obviously, we would work with our franchisees and our marketing teams and really focus and make sure we've got the right marketing and promotions in place at that time. I think it would be helpful, if I ask Tony and then Jay, to just share with you the philosophy each brand has right now about the way in which they're communicating with their guests at this point in time based upon what we're seeing in the economy. So Tony, you want to talk about the promotional philosophy that Applebee's is looking at right now?

Yes, happy to do so, John. With the Applebee's, it's essentially a brand that's built on abundant value for our guests, right? So it's one of our core tenants. It's part of our DNA. So when the economy struggles or there's uncertainty, we doubled down on what our guests need to make sure that our relationship is front and center. If you look at Q1, we delivered value through targeted campaigns such as our all-you-can-eat promotion that we ran in January and February at $14.99 and we had tremendous results. It's an excellent example of combining terrific food with, I think, generous abundant portions at a reasonable price. It's compelling, and it provides that value that guests are seeking in this environment. It's one of the reasons why we continue to outpace many of our direct competitors from a value attribute perspective. Jay, do you want to comment on IHOP?

Yes. On the IHOP side, I mentioned a little bit before, but there's different ways that we do value, and we do this all the time. If you think about our overall strategy always working on having value offerings for guests, sometimes its price, sometimes that's abundant value. Sometimes it may be a disruptive value like a buy one, get one crepes offer that I mentioned before. Sometimes it's unique with loyalty members getting unique value, but you also have innovation to drive traffic and that's ever ongoing. And I think what happens in tougher economic times, you morph a little from the value messages to the innovation messages and back and forth. In good times, you try to do more innovative messages that are full price. In times are a little tougher, you may do more value messaging. And by having those kind of abilities in our toolbox at all times, it's easy to kind of morph and change and make adjustments to your basic strategy instead of having to scramble with how you're going to respond in a bad time. You've got things on the shelf, you can pull down and do pretty quickly and you work with your franchisees on that when the time comes.

Hi Jeff, it's John. Just for one more comment and Jay and Tony thank you. One thing that all three of our brands learned during the pandemic is how - to become much more agile. And their marketing engines are much more responsive to changes in the marketplace today than they were before. So that certainly benefits us during a year like this. It has some uncertainty left. And so, the summary of what Tony and Jay said and its true for Fuzzy’s as well is that whether it's an uptime or a downtime, we're always focused on value, menu innovation and the on-premise experience, now also the off-premise experience. And that remains our focus, and we will dial up value a little bit perhaps this year, but it's always a combination of those three. And so with that we can go to the next question.

Understood, just the follow-up --

Yes, Jeff.

No, no you mentioned, I think, at the end of your prepared remarks that you actively support or maybe it would actively support franchisees. Just wondering if you can provide some color in terms of what form maybe you're referring to, perhaps what's the number one ask from franchisees when you're having discussions most recently? I assume that's more of an IHOP reference rather than Applebee's considering Applebee's has very few franchisees, and they're all typically large corporate, well capitalized, but any kind of background in terms of what potential active support could mean or has meant already? Thank you.

Yes, Jeff, so we support our franchisees in many ways. In my prepared remarks, I mentioned and I think you may be referring to that all three brands have a financial incentive in place to encourage and support franchisees to continue to open restaurants over the short-term, and we should see those openings that are supported by these incentives in 2024. So that was that - what I was referring to as support. As you mentioned, with a portfolio as large as ours with 300 franchisees, it's not unusual at any given time to have a handful that need some assistance from us based upon their core business. We're always helping there in terms of different ways we can provide financial relief, and we support them more broadly with our training, our operations, our data and analytics. But that was my specific comment in the opening remarks.

Understood.

Thank you. One moment for our next question, this next question comes from Brian Vaccaro of Raymond James. Your line is open.

Hi thanks and good morning. Just following up on the health of your consumer, I was curious, could you comment on what percent of sales at each brand fall under what you would consider some sort of value construct? And has that changed versus the last few quarters?

So I'll attempt to answer it for both brands and invite Vance, Jay or Tony to correct me. But for both brands, the majority of their guests are below $100,000 in household income. And for both brands, about half their guests are at the 50,000-ish household income. And that has been generally stable over time. Although, as I mentioned, we are seeing now that the $100,000-plus segment for Applebee's seems to have grown since 2019. Would anybody on our line care to in fact check me on that?

Hi Brian, it's Jay, the only thing I would say just from an IHOP standpoint is we haven't seen any radical change in any of that. I think what John said is true. And you just look at the value platforms we have, like our IHOP our platform, the sales of that has been pretty consistent for two or three years now. There's, a percentage of guests that appreciate that and need that and use that and that's been pretty stable. It's not like it spiked in the last six months or a year, because of economic turmoil. More than anything, a lot of it just morphs and moves based on what we're promoting at that time. If you're doing a buy-one-get-one offer, then you get more people taking the deal. If you're doing a full price ex Benedict offer, then you sell in more ex Benedict at full price. So it's usually more about what we're marketing and promoting than it is that they're just shifting on their own.

This is Tony. On the Applebee's side, I'll just add that - John was directionally accurate. Yes most of our guests are lower income, which means affordability is more important now than ever. I'll share a little bit more insight into some of the income cohorts. We didn't see last quarter. Any change to guest with household income over $75,000, which is now increasingly becoming more and more part of our guest profile. We did see a little softening in visit intent among the 35 to 54 year old cohort, but that's pretty consistent with the industry trends.

Hi Brian, go ahead, Vance, sorry, go ahead.

Right, so this is Vance. So the other thing I would add is our three brands, the way they approach value is slightly different, right? So Applebee's, for example, has all we can eat than two for 25 different campaigns that they've run. IHOP yes, which is a consistent with value the way to offer value and then Fuzzy's for example, has the $3 tacos, right? So that's different ways to drive traffic, different ways to communicate the concept of value to our guests. And that strategy hasn't changed and the mix hasn't changed from that perspective.

Okay, thank you. And then I had a question about Applebee's franchise income. What we sometimes monitor that sort of franchise revenue as a percentage of the system-wide sales that you disclosed at least the domestic that you disclosed. And we noticed that it dipped a little bit below 4% for the second quarter in a row. And could you just comment on what's driving that as it relates to royalty collections? Are there any increases in deferrals that are worth noting or any other dynamics within that line?

Vance, can you address that?

Yes, I think there's always going to be some noise with - as John mentioned, we always have it - or as Tony mentioned, we haven’t had - franchisees that we're working through. So what you're noticing is, I think there's, some details that we worked out with the company-owned restaurant that we franchising that's flowing through. So that's not a permanent change. It's more of a temporary change in terms of the effective rate that we're collecting.

Okay, thank you Vance. And then just last one from me, just clarifying the refi that you completed in April. I was just trying to square the cash and you refi so the new debt is - you refied $585 million and the new notes are $500 million, I believe? And so, there's a gap of like $85 million there. Can you just - I know you have unrestricted cash, but then some of that unrestricted cash is IHOP gift card cash. So could you level set kind of where your pro forma balance sheet is or where unrestricted cash is or maybe just help me sort through that? Thanks again.

Yes, yes so no problem. And so, you're exactly right. I think we - the bridge the gap between the two numbers is really just cash on the balance sheet. So even after if you pro forma for the transaction, we still have gift cards and IHOP math and all that stuff is intact. So we had enough liquidity to reduce the absolute debt level. And so the math we did was just trying to minimize sort of the net income impact - of interest expense, and that's what we did - was that helpful, Brian?

Yes, that's great. I'll pass it along. Thanks again.

Thank you. One moment for our next question. [Operator Instructions] Our next question comes from Todd Brooks of the Benchmark Company. Your line is open.

Hi thanks for taking my questions and good morning everyone. Two quick questions, one is more of a - just a forward modeling question. We talked about the inflation environment waning a bit, not having to be as aggressive on price. Jay, I think you said the menu set for the first half for IHOP? I was just wondering, I know in answering Nick's question, we talked about what pricing for the system for both brands was in Q1. Can we talk about if we look at Q2, what the anticipated pricing would be on the menu side?

Yes, this is Jay. Hi Todd, the IHOP franchisees on their most recent menu trends, they took about a 4% price increase, but they also had previous years that rolled off. So I think we'll still be right around that 8% mark until we get into the fall.

Yes and on the Applebee's side, as I said earlier, they took about just under 6%, 5.6% from the quarter. One thing to keep in mind is from a procurement standpoint, we leverage our supply chain incredibly well in the Applebee's system. And so, I think you'll see we've seen modest price increases relative to inflation, especially when you compare us to our peers. And I think you'll continue to see that for the balance of the year. We do expect inflation to - it's easing, and we expect it to continue to moderate for the balance of the year. So I think our franchisees are likely to be very strategic in their pricing decisions to minimize any impact on traffic for the balance of the year.

Tony, if we look at Q2 of last year, just what we're rolling over, would you expect that 5.6% decline for the Applebee's system in Q2 or stay relatively steady?

When it comes to pricing, it's important to keep in mind that these decisions are the decisions of the franchisees and not the franchisor. So with that said, they are highly strategic. They understand that in this environment, value and especially affordability are levers that we need to continue to pull on to remain competitive. And so again, I'd expect them to be incredibly reasonable and strategic in their pricing so that we can maintain our leadership position in the category.

Okay. Great thanks. And then a bigger picture question maybe for John. Early on, coming out of pandemic, John, you always focused on the advantages of scale from a market share standpoint, what you can do from investing in the business standpoint. Just your, thoughts and maybe a choppier environment on scale advantages for Dine and what it allows you to do maybe relative to what some smaller competitors may not be able to attack in a tightening environment?

Sure yes. The advantages of scale that I talked about two years ago are just as, if not more important today. And I think it's less around the pandemic or uncertain times and more about the future, right? And that scale matters, both in terms of the number of brands the company has as well as the platforms they build to accommodate those brands, which is our strategy. And so two years ago, we said we were looking at or considering an acquisition, right? And last quarter, we did one, and that's an example of us following through Todd on our point about scale, and we're able to do it and Fuzzy's for example, is able to benefit from that scale already in a couple of ways, right? There are national contracts with providers and either services or goods are beginning to benefit them. They are plugging into our technology stack, our help desk, our customer service desk in ways that are more efficient for them. And so, we're going to continue to build common platforms that benefit all three brands, all 300 franchisees and are open, flexible, scalable platforms that could accommodate potentially a fourth brand in the future once we prove that – Fuzzy's better off with us than without us.

And just a quick follow-up there John. So if the scale positioning is stronger than ever and more important than ever, do you look at kind of relative investment to cement scale with other large peers in the space. And I'm just thinking - in a tightening environment, I know that the G&A investment comes from a place of playing offense and investing in the business? But how do we think about - are we out investing our peers? And do we have some flexibility there if others are pulling back that Dine would pull back as well or just the returns on what you see are so compelling in the future that you don't see a reason to slow that spend at all? Thank you.

Our benchmark for deciding if we're going to invest or not invest is not about peers, Todd. So if our peers are pulling back or a peer is pulling back, I don't know that, that would be motivating to us the same way. We're focused on the ROI of the investments we make across our ecosystem. And if we think there's an ROI that's compelling and it's responsible in the economic environment that we're in at any moment, then that's our benchmark. And if an initiative is not working, then we also will unwind it. We're not going to throw good money after bad. So our lens is much more about our internal ROI and less about what others are necessarily doing.

Right go ahead. I didn't cut you off.

Hi Todd, this is Vance. So another thing I would add is that. I'll give you an example, right, the type of things we're investing in. And then as we said in the past, our investments are really designed to drive and support long-term growth. And we are happy. We're pleased with the progress we're seeing so far. But a very specific example I can share with you is, for example, loyalty right, in order for that program to work, right? It's not just one single platform. We didn't overhaul the entire tech stack and that includes new website, new apps and payment function. And they get loyalty data platform, POS, cloud storage, CRM, it's the entire critical stack. And so some costs are implementation related, which are one-time i.e., one-time, right, that will be rolled off over time. A lot of our maintenance and software licensing costs going forward. Look, it's still related to the clear complete picture on loyalty. But as John mentioned great progress thus far with 5.5 million members and 5% of sales, right? So - but to your other question in terms of the levers we have to pullback. Look, the short answer is, of course, we have the levers to pullback with both G&A and CapEx. We've been through the worst during 2020, right? We know we've proven that we can protect our liquidity or fundamentals of the business playing the long game. So - also, as John mentioned, the key strategic advantage we have with our asset-light models that we could play the offense when everyone else is playing defense. But the levers are certainly there.

Thank you both.

Thank you. That concludes our Q&A segment. I'll now turn it back over to John Peyton for closing remarks.

Hi Chris, thank you. You’re the operator of the year. You were fantastic, and thank you for your support on this call. And I'll just wrap up by reiterating where we started, which is nine consecutive, quarters of comp sales growth for Applebee's and for IHOP don't happen by accident. Our brands really are operating on all cylinders right now. We talked about Applebee's having a higher income mix guest. We also know from our new research that our guest is younger, more diverse and more likely to dine as a family than our guests who were pre-pandemic. IHOP, we talked about has launched its most significant menu refresh in a decade. And Fuzzy's that we've just begun to talk about, its loyalty program as we dig into it, it's got 500,000 active members and growing, and they spend more and they visit more than the non-loyalty members. And that's just one example from each brand about why we have had a string of good quarters and why we're committed to our guidance for the rest of the year. So thank you all for your questions. We appreciate the hour you spent with us, and we will talk to you all soon.

And thank you all for participating in today's conference. This does conclude the program, and you may now disconnect.