Good day, everyone, and welcome to the Jack in the Box Incorporated's Fourth Quarter Fiscal 2018 Earnings Conference Call. Today's call is being broadcast live over the Internet. A replay of the call will be available on the Jack in the Box corporate website starting today. [Operator Instructions] At this time, for opening remarks and introductions, I would like to turn the call over to Carol DiRaimo, Chief Investor Relations and Corporate Communications Officer for Jack in the Box. Please go ahead.

Thank you, Amber, and good morning, everyone. Joining me on the call today are Chairman and CEO, Lenny Comma; and Executive Vice President and CFO, Lance Tucker. In our comments this morning, per share amounts refer to diluted earnings per share and operating earnings per share is defined as diluted earnings per share from continuing operations on a GAAP basis, excluding gains or losses on the sale of company-operated restaurants, restructuring charges and the impact of tax reform on the company's deferred tax assets, as well as the excess tax benefits from share-based compensation arrangements, which are now recorded as a component of income tax expense versus equity previously. Adjusted EBITDA represents net earnings on a GAAP basis, excluding discontinued operations, income taxes, interest expense, gains or losses from the sale of company-operated restaurants, impairment and other charges, depreciation and amortization, and the amortization of franchise tenant improvement allowances. Free cash flow is defined as cash flow from operations, including tenant improvement allowances less capital expenditures. Our comments may include other non-GAAP measures such as restaurant operating margin, restaurant-level EBITDA, franchise margin and franchise EBITDA. Please refer to the non-GAAP reconciliations included in the earnings release. Following today's presentation, we'll take questions from the financial community. Please be advised that during the course of our presentation and our question-and-answer session today, we may make forward-looking statements that reflect management's expectations for the future, which are based on current information. Actual results may differ materially from these expectations based on risks to the business. The Safe Harbor statement in yesterday's news release and the cautionary statement in the company's most recent Form 10-K are considered a part of this conference call. Material risk factors, as well as information related to company operations, are detailed in our most recent 10-K, 10-Q and other public documents filed with the SEC. These documents are available on the Investors section of our website at www.JackintheBox.com. A few calendar items to note this morning, our first quarter of fiscal 2019 ends on January 20, and we tentatively plan to announce results on Wednesday, February 20, after market close. Our conference call is tentatively scheduled to be held at 8:30 AM Pacific time on Thursday, February 21. And with that, I'll turn the call over to Lenny.

Thank you, Carol, and good morning. Before Lance recap some of our fourth quarter highlights and reviews guidance for the coming year, I'd like to provide some perspective on how we've evolved as a company and as a brand. It was very different than we did just a few years ago on understanding how we've evolved and help you better understand how we plan to achieve continued success. It is 15 years since we launched our refranchising initiative, we sold hundreds of Jack in the Box restaurant franchises, and our system has gone from being more than 80% company-operated to 94% franchise. This has resulted in higher and more predictable levels of franchise revenues in the form of royalties and rental income while lowering our cost structure. We grew Qdoba from 85 locations when we bought it in 2003 to over 700 locations at the time we sold it for $305 million in March. Our sales performance has been very consistent, fiscal 2018 marking the eight straight year of the system same-store sales growth at Jack in the Box. We’re in the final stages of transforming our business model to an asset-light single brand entity. We'll be completing this process this year when we roll out the last of the transition services agreements we have at Qdoba, and adjust our G&A accordingly. As part of this transformation of the business model, we expect our G&A expenses will continue to decline. In fiscal 2018, we lowered our G&A expenses by 20 basis points to 2.2% of sales. In addition, our model will be less capital intensive, leading to higher free cash flows. We've been committed to enhancing shareholder value, and 2018 was our fifth consecutive year of returning more than $300 million to the shareholders via stock buybacks and dividends which…

Thank you, Lenny, and good morning, everyone. I'll hit a few high points from the fourth quarter, and the fiscal year 2018 and then move into guidance for fiscal year 2019. Operating EPS for the fourth quarter were $0.77 as compared to $0.73 last year. The increase was driven primarily by lower G&A costs, the impact of tax reform and share repurchases, which selectively more than offset dilution from refranchising. Our system-wide comparable sales increased 50 basis points from the fourth quarter. Company comparable sales increased 80 basis points comprised of pricing of approximately 2%. Mix increased 80 basis points and transactions declined 2%. Franchise comparable sales increased 40 basis points for the quarter. Company restaurant-level EBITDA margin increased by 300 basis points to 26.1%, restaurant-level EBITDA margin for the 137 stores we were now keeping upon the completion of the refranchising initiative was 26.4% in the quarter, down from 28.2% last year due mainly to higher labor costs, utilities, and repairs and maintenance. Average unit volumes for these stores were 2.42 million in fiscal year 2018. Franchise EBITDA increased about $3 million to $58.9 million in the fourth quarter due primarily to refranchising. Rent and royalties were both higher offsetting the lower franchise fees in the prior year due to a lesser number of stores being refranchised. G&A in the fourth quarter decreased to approximately 2.3% of system-wide sales as compared to 2.4% last year. The decrease was partially due to $3.2 million in transition services income related to the sale of Qdoba, which is reflected as a reduction to G&A. In addition, G&A benefited from lower share-based compensation, workforce reductions related to refranchising, and a decrease in pension costs. These decreases were partially offset by higher bonuses from last year and mark-to-market adjustments. Advertising costs which are included…

[Operator Instructions] Our first question is for John Glass of Morgan Stanley.

I guess if you could just first maybe talk about current sales trends, and what's changed; is this an industry slowdown you're responding to that or do you think maybe you just missed the mark on a promotion, any color around that? What have you done to -- what are the tactics you're using now that are different maybe than you've used in the past or they just sharper discounts or greater or maybe more direct offers? And can you talk about franchisee alignment with those offers? Is this something that they're embracing, that they're recommending that you do or how consistent is value across your franchise system?

So let me handle that in a couple of different pieces; the first is, what we changed here in Q1. And I'll talk a little bit about how we see value throughout the remainder of the year, and then finally, how our franchisees see value. So first, we went into Q1 with a combination of value below $5 in the form of bundle, and also premium item in the form of Ribeye hamburger, that's typically a strong combination of value and premium for us but what we didn't see was the take rate on the hamburger that we would traditionally see, typical of something like a Buttery Jack hamburger. And so we pivoted from that premium item to a burger-related value bundle which is the BLT bundle, and we feel that has worked well for us. The Ribeye was not price pointed in 70% -- 75% of the system actually switched to the new BLT which is more than we actually anticipated would make the switch that quickly, but nonetheless, our franchisees were very aligned with the need to make that change and then put more value into the marketplace. What really drove or was a catalyst for this change was really what was happening with competition; so you look into the marketplace during this timeframe and even through today you're seeing everything from $1 French fries at some of the more quality oriented fast food players to premium items that show up once a year that are now priced at 2 for 5 [ph], you also can get yourself 10 chicken nuggets for $1; and when you move into casual dining, we've even seen entrée for as low as $3. So across the entire industry there seems to be almost a desperation for same-store sales and transaction to the…

Our next question will be from Brian Bittner of Oppenheimer.

First off, just candidly, why not put the same-store sales guidance for the year, more kind of in line with where you're trending, why put yourselves in a position where you do have to pretty meaningfully improve the comps moving forward to hit the guidance? And can you talk about, if you do fall short of your same-store sales guidance are there any levers in your EBITDA model to offset that? And then I have a follow-up.

Yes, I think what I spoke about -- Brian, this is Lenny by the way. When I spoke about just a moment ago it's part of the reason why we put guidance out there from last two for the year. When you look at the lineup for the remainder of the year, it is a pretty aggressive a lineup from a value perspective and it is significantly more aggressive than what we did last year; and so that's the first piece of it, we feel comfortable that what we're going to present to the consumer is more compelling but also if you look at multi-year roll overs since the first part of the year as compared to the remainder of the year, it does get a little softer rollovers throughout the remainder of year. So we feel like that's the right place for us to be. And then from an EBITDA standpoint we do think there are some levers, we can pull off -- Lance, you want to jump in on that one?

I'll jump in. Obviously I gave what the EBITDA sensitivities were in my prepared remarks; so if you missed by comp, then [indiscernible] all in between corporate and enfranchise, roughly $6 million, the biggest single lever that I have there is incentive compensation; obviously, if we were to significantly miss our EBITDA [brand] [ph], the incentive compensation is going to come down rather significantly and then there are some smaller levers that we can pull mainly around spending that we're doing. But by and large, I think the biggest one is the incentive comp.

And just follow-up on your potential recapitalization, the 5x EBITDA; have your thoughts on this evolved or perhaps changed at all just given A) the higher interest rate environment, and B) just the fact that you now have two large shareholders that may have an opinion on that? And how do you want us thinking about the $1 billion you expect to return over the next several years? I would think ideally you'd want to frontload the repurchases -- the current stock price levels if you truly believe in your long-term target. So any color on both of those dynamics will be helpful. Thanks.

Brian, I'll start with that and I'll let Lenny jump in. First of all, to address the first part of your question, haven't changed our thinking significantly given where interest rates are; it is still historically low interest rates, and one of the reasons we chose 5x leverage as opposed to what you'll see from some of our competitors and some other brands that are significantly above that even up between 6x and 6.5x is we feel like we can comfortably service debt at 5x despite the interest [indiscernible]. We will very likely frontload somewhat -- some of the share repurchases, I don't want to go into a whole lot of detail, what I can say is we won't sit with a lot of cash on the balance sheet; so we'll be opportunistic while we can and when we can but beyond that I don't want to go into a lot more detail.

Particularly on the last statement you made about active shareholders; first thing I'd say is, our engagement with these particular shareholders has actually been quite valuable and productive, so we don't feel like we're in a bad place there. And although I won't comment on any of specifics that we've discussed with them, we are in a place where we do have common goals of driving value for the Jack in the Box shareholders, and we've discussed enough to know that the things we're working on -- that would drive that value were things that they are very comfortable with and aligned to, so overall, we feel very good about that engagement.

Our next question will be coming from David Tarantino of Robert W. Baird.

Lenny, there has been some very well publicized complaints and concerns coming out of your franchisees and representatives of the NFA [ph], and I was just wondering if you could perhaps summarize what some of the biggest points of contention are? And what you're doing specifically to resolve some of that tension that might be in the system?

I think the first thing is the most obvious which is that the rising cost of labor has put pressure on franchise P&Ls and they really need to see stronger topline sales in order to cover those costs, and potentially even driving some efficiency on the bottom half of the P&L as well so that they can have a high degree of confidence in their model going forward. So I think there is some anxiety about that and I think we're all aligned that, that's something we need to rectify and so we're actively working with our franchisees to do that. Some of their concerns around having a CMO in place; I'll grab that one first, I think those are concerns that are largely based on where we're currently performing in sales, I think they're just connecting dots and saying, '"if we had a CMO in place today, that would contribute greatly to driving up our top line sales. I don't necessarily disagree that the CMO can be valuable to our team, and I look forward to continuing that process and identifying the right person but I will say that I have a significant amount of confidence in the two VPs that are currently running marketing, and I do believe that their level of expertise in the way they are leading this brand, and give us some patience to find, someone who we believe is going to bring a skillset to our team that we don't currently have versus just a title to the team that our franchisees are looking for. So I'm going to do what's right for the brand over the long-term and round out our team versus rushing to a decision there. And like I said, I think I'm afforded the opportunity based on the talent of…

One follow-up, I guess one issue or topic that's popped up recently is this real estate structure and question and I was wondering I guess why you made the move that you're making to create a new structure and whether that creates the possibility of potentially spinning out that structure or selling that structure as a separate company?

So as I noted in my prepared remarks, we have 100% decided on going the securitization route but it is a very attractive option, and we're currently doing some of the structuring work that we need to do should we elect to go that route. You know with that said, the structure changes will not have any negative impact on our franchisees, certainly don't have any impact on their right whether say the franchise agreements, the development agreement, or their leases, which is the way that we interact contractually with our franchisees. So this is work that needs to be done in order for -- to prepare, should we decide to go with the securitization that does not impact franchisees rights one bit. Their concern is perhaps fair but unfounded and we're really just moving leases from one wholly owned subsidiary to another. So relative to spinning things out, I don't think that's a road we're prepared to go down right now or discuss and that would not be the intent.

The next question will be coming from Chris O'Cull of Stifel.

Lenny, the company provides franchisees with incentives to open stores, remodel restaurants, but has the company ever considered providing financial incentives to franchisees either to meet maybe a higher level of operational standards or to be more competitive with menu pricing?

No, we have not considered that. I think that ultimately when you look at brand standards which is associated with how restaurant operators serves the guests and also handles things like food safety and image-related standards. I think that's sort of what you sign-up for when you buy our flag, and so if we need to improve the performance in company operations or franchise operations, I think that's something that just requires the hard work and dedication, and commitment to the consumer, and so we wouldn't incentivize that. And when it -- as it pertains to value-oriented things or pricing, I think ultimately the franchisees have to make independent decisions about how they price and we're not prepared to go down the road of incentivizing their behavior. What we are prepared to do is present a menu and a business case that would essentially say that if a franchisee would move in a certain direction, it would be good for their business, and we would expect that they would make business decisions commensurate with what's best for their bottom line versus us having to incentivize that behavior.

And then I was hoping you could elaborate on the changes at the 150 stores. I think you said you had a simplified menu testing going on maybe how the menus different, whether there is any capital investments and maybe how disruptive it has been for the stores?

I will answer the last part first. It's not been disruptive for the stores that actually makes what happens in the kitchen much easier. This is what we've done as we've looked at multiple SKUs that we have for things like sauces, cheeses, spreads and we have reduced some of these SKUs so that there is an easier production line in the back of the house, and then we've also standardized some of the builds, we tend to kind of look at things -- and historically have looked at things through very much of a culinary lens where specific builds on a sandwich might be very different than other like products because we felt like the sandwich was essentially or the product would essentially serve better that way, but it does make it very difficult for the operation when sauces are in different places and or there is a different place for the protein cheese produced to be ordered on the sandwich, so we standardized some of that in the test as well. We've reduced some of the breads, we have a lot of different bread carriers and some of them seem to be redundant and it requires multiple toasters and procedures in the moment, and these are the types of things that can slow down and inhibit a faster speed of service and also make it very difficult from a training and execution standpoint for our employees. So we are into this test for just about a month, we don't have any complaints from our operators or our customers; so it does seem to be going well. We continue to evolve the test and even expand some of the things that we're working on to make it easier on our crews and more consistent for our guests and we'll take those learning's and be ready to apply them later in this year. But so far so good, we have pretty simple things that aren't disruptive but actually make it a little bit easier.

Next question will be from Jeffrey Bernstein of Barclays.

Two questions as well. First one, just following up, obviously, you've mentioned a lot in terms of the franchisees and their profitability. I'm just wondering, if you can provide any color or maybe just share with us how much color you get on the franchise profitability and maybe with what frequency you're seeing there, their P&Ls, any kind of directional trends you can offer whether not you think they have the ability and the inclination to either reinvest in the remodels or to more aggressively open up new stores? And then I had one follow-up.

First of all, we get pretty solid financial data in the form of P&Ls and balance sheets. We hit the P&Ls quarterly from our franchisees and so we do have a pretty good look into how they're performing and of course we give sales trends continuously perhaps more continuously than any of us could ever manage to honestly. But we give very good data from a franchise health standpoint, like any big system you've got some that do better than others, but generally speaking, if the health of the franchisees overall is strong. We do have to deal with labor here with a lot of our stores along the West Coast and the competitive environment but with that said, overall feel like the franchise health is strong and able to make the investments in the remodels, particularly given that we haven't asked for a lot of those in the past.

And then, as we think about unit growth going forward, obviously comps are hard to predict, but to achieve your $4 billion of system sales number in fiscal 2022, so it seemed like unit growth is critical. Just looking back over the past, I mean, close to a decade, you guys have sat pretty consistently at 2200 units. Just wondering, what your confidence is in -- one, that unit growth in fiscal 2019 and more importantly in future years, maybe have a target number of stores you expect to have by 2022 or I know you have some commitments to open new stores, but what confidence do you have in acceleration of the net number of units in your system over the next two years?

Let me first, just mention and I tried to sort of lead into this with some of my opening remarks. But if you look at the strategic choices that we've made as we sort of remained around 2200 stores for Jack in the Box over, I'll call it the last 10 years. There were essentially two critical decisions that were made that led to that outcome. One was that we invest our time, our resources and our capital in growing the Qdoba brand which we grew from 85 units to over 700 units. And the second was that we would refranchise our Company operations from Jack in the Box, and as a result, the capital that our franchisees would have available to them would be going toward buying stores versus building. So I think that the sort of plateauing of that brand somewhat by design. And so as we look forward and think about our ability to grow new units, I think, one, our franchisees although they are feeling the pressures of labor today, in large parts, they're well-capitalized group that have some of the highest margins in the industry. And so, as they roll off of some of the recent refranchising, we would expect that they would be able to redirect their capital into growing the Jack in the Box brand. We will continue also to have one of the best new restaurant incentives in place which we think our franchisees want to take advantage of. And so keep in mind that our franchisees -- the existing franchisees are the ones that brought the majority of our stores in the refranchising effort. So there is a pretty strong demand not only for our existing stores, but also to continue to grow the Jack in the Box brand itself and when we look at the unit growth although we don't need to see it ramp up to meet our long-term goals. It doesn't need to ramp up all that significantly for us to get there, so we think that the targets are well within reach.

Our next question is from Gregory Francfort of Bank of America.

I have two questions; one, maybe -- the first one for Lance, just following upon, I think it was David's question on the real estate. Maybe a separate question, I think you have 220 properties where you fully own them today. Have you thought about monetizing those or looking at that and sort of what goes into the analysis -- how are you thinking about that?

So it's something that we talk a little bit about internally. We don't have any of that built into our guidance and a lot of it just becomes how we want to use our cash and whether we think that ultimately makes sense to drive value. So for now, I would say that's not something that's necessarily on the drawing board but we'll certainly update you if that changes.

I know you've been sort of adding supplemental advertising this year to the sort of overall dollar based that you use for the brand. Do you expect that to continue where you kind of provide an outsized share of sort of your normal expected spend based on your company store base to the ad fund or is that something that was specific to this year?

So as you saw, we did spend about $6 million in 2018 doing that, if you look at the guidance, we provided for 2019. At this time, it does not contemplate significant incremental contributions in the marketing but what I would tell you is, if -- we will reserve the rights to pulls the levers that we feel like we need to pull in the event that we think that does become the right answer. But as of right now, you can tell from our guidance that we may do some, but it's not going to be as incremental as what we did in '18.

Your next question will be from Dennis Geiger of UBS.

Lenny, thanks for the color on menu and the marketing strategy. But just wondering if you could touch a bit more on some of the initiatives to drive the comp. And what should be the most impactful as you look to accelerate that comp through 2019. I'm assuming a good balance of value and premium is going to be the most critical, but as you think about digital end delivery, your focus on ops and even the enhancements and improvements to the drive-thru experience. Just wondering how meaningful all that can be as soon as this year. Just last related to that perhaps you could just say, what kind of QSR or I guess specifically QSR burger environment is embedded in your guidance, is that a healthy improvement from what we've seen in recent months? Just wondering if you could give some color around that. Thank you.

Yes. The easiest way to do this is to sort of make an attempt that rank ordering, what I think are the most important focused areas. I think the number one area of focus is got to be value. We've lost the vast majority of our transactions at the below $5 price point, and so I think that providing that value to the consumer is ultra important right now particularly because our competitors are extremely aggressive. I think that the second area of focus has got to be improving the consistency in our guest service. I think that when we look throughout our chain, there are operations that are very inconsistent and poor performing and those outliers have us -- or create a significant drag on our overall comp and that drag is associated primarily with operating inconsistencies more so than anything else. And then if I look at some of the other initiatives like digital and delivery, although I think they can complement what we're trying to do. I do not see those as big drivers of our overall comp this year. I think that those are important things but I think they are more in keeping with how the consumer has redefined convenience. If you don't play in that space, you're likely to get the no vote. I just don't know that playing in that space is necessarily going to aggressively grow your sales. So it's sort of necessary to keep the guess that we have, but I don't know that's necessarily going to grow our guest counts significantly.

Next question will be from Karen Holthouse of Goldman Sachs.

On the company side of things, it looks like price ticked down a little bit this quarter from running more and then mid-2% to 2%. Should we think about a lower level of price carrying forward into next year is sort of part of the things you're thinking about as it relates to driving traffic or is there that more reflective of sort of a timing shift in terms of end-user price or something like that?

Yes, we don't typically guide, we're looking pricing plans. But what I would say is this, obviously in a super competitive market, we're going to be very conscious a couple of things, one, what's the inflation for food away from home versus food at home because when we get sales side of alignment with food at home, we find that that has a significant impact on our business. And the second thing is what's going on in the competitive space, and if we see aggressive offers like we're seeing right now continue, we'll be even more cautious. So we typically plan for some price, but we also are going to work that in unison with some of the other plant value that we have in place. Our goal will be really around driving overall sales and transactions, if we can change the trend on transactions and that can allow us to be able to more aggressive on price, that's not a bad outcome for us.

And then on the unit growth side of things, if the guidance for 2019 does imply a pickup in unit opens versus what we saw this year against what still been some sales challenges. How much visibility do you have into the 2019 plans in terms of sort of pick sites if that signed leases on those sites.

I would say a couple of things. We have a pretty good actually visibility into this, there were some units that shifted out of 2018 and into 2019. So we feel solid about those units. You also have the ability to look at leases and where we are in permitting processes and whatnot, so it feels pretty comfortable with the color we have and I think the third piece as you would expect probably now that we've moved out of refranchising, kind of on the other side of the coin, a few less closures. So feel pretty good about our overall unit numbers, and a pretty decent amount of visibility there.

Next question will be from Andrew Charles of Cowen.

For 2019 you talked about intentions to offer $2 to $4 single items and $4 to $6 value bundles. And then, just curious how that's changed versus the 2018 strategy that seems pretty broadly similar?

It's really about the quantity and frequency of those items, more so than it is that we haven't ever done those things before. If you look at value last year we did Munchie Mash-Up and Sauced & Loaded which were right in line with what you'll see us do in 2019 fiscal year, but we did far less of it and we did other items that were either lower price bundles and/or breakfast items that we're at that sweet spot of lower price points. But you'll see us do today is really think about this as not only a value placed below $5 but also as an add-on sale because when you look at how the consumers have responded to some of those products like the Sauced & Loaded, they primarily used it as an add-on, and that's a space that our franchisees can feel very confident playing in because it on the one hand can drive some average check for those consumers who take it as an add-on, and at the same time, it can provide value for the consumer who have less dollars in their pocket and is looking to construct an overall meal below $5.

And then I know you're still in the process of filling the CMO role, can you talk about what the marketing priorities are in the meantime and efforts to protect traffic?

Can you repeat that?

Yes. Just, I know you're still looking to fill the CMO role, you're still looking for candidates, but just in the meantime, what are you doing just in terms of the priorities to help protect traffic from a content perspective and policy-on-air [ph] perspective?

I guess I would say that the two are unrelated. On the one hand, we're looking for a new CMO because the industry is going through a significant amount of changes, we're looking at essentially a redefinition of convenience in our industry. Some of that convenience is sort of digitally enabled convenience, and you're also seeing sort of this rise at completely different positions within the marketing space. For example, there are positions that are really about the entire guest experience, so you're seeing sort of this Chief Guest Experience Officer type positions that are on the rise, as well as Chief Digital Officer positions that are on the rise. I guess at the end of the day, I can bring a CMO in who is a traditional CMO but I think that the industry is anything but traditional today, and going forward and I'd much rather bring someone in who is additive to the mix and thinking that I have on my team. So I think that's sort of an unrelated thing, I'm really thinking more about the future as we hire our CMO and hopefully they will bring in some skill set that come more about where the industry is going versus where it has been. As far as what we're doing to drive sales -- to drive transactions, I think I've pretty well covered that and also have covered that the two VPs that we have in place, not only have I think but a well vetted plan in front of our operators and the team going forward, but I think they've also proven to be quite agile when they needed to be.

Next question will be from Jeff Farmer of Gordon [ph].

Just following up on Andrew's value question, what gives you guy's confidence in the shift in value strategy? I'm just -- because I'm just curious that there is a history of your customers consistently responding to these value offers across the two pricing tiers.

I guess what I would use is just a quick example. We started off this quarter pretty slow, and we shifted to BLT -- that's 75% of the system opted into. We saw an immediate response from the consumer and essentially what we're seeing in the consumers' behavior is that when you're not playing aggressively below the $5 price point, those consumers simply don't go to you they go to someone else who is providing that value. So we have consistently seen time and time again that when we invest marketing dollars and innovation dollars in this space, the consumer starts to choose Jack in the Box and we get a greater share of that wallet. I think where our operators have historically been concerned is that they're going to get trade downs, and what we're seeing in the data is that that's not what's actually happening. What's happening is, the consumer is either trading into your brand or trading out of your brand although the $5 price point based on what you're presenting, or not presenting, that's what the data shows.

And just one sort of unrelated follow-up, you touched on this, but just again, in terms of the California consumers and I'm focused on the fact that you guys have I think 80% of your Company-owned restaurants there. You were asked about it, but just in terms of that California consumers' tolerance for lack of a better word of just ongoing menu pricing knowing what's coming over the next couple of years. Do you think that not only Jack in the Box, but there are other quick service concepts are going to be able to push menu pricing ahead at levels that we haven't above historically not seen before, just given what's going on, that's in the labor backdrop?

I guess, what I'd say is that California has been in recent years and continues to be today the strongest performing market that we have. And although competitors -- we're all trying to figure out how to balance the rising cost of labor with the need to be aggressive in the marketplace with value. That balance seems to have been struck in California maybe better than in a lot of other markets. So we remain confident that California is a place where we can be very strong. I'd say that the things that we'll need to look out or more so than this being a California phenomenon, it's that when you look at the everyday pricing associated with things like hamburgers and chicken sandwiches and combos. What we see is that the operators that are priced within the marketplace where they can take like items or comparative items and look across the marketplace and know that they are within a range of pricing that the consumer considers to be competitive. There is a much higher take rate for those operators and the operators who have chosen price significantly above those levels have a much lower take rate. And I think that'll -- that everyday pricing understanding, and sensitivity will likely be very important beyond just the California analysis.

Operator, I think we time for one more question.

Last question will be coming from Matthew DiFrisco.

I had a question, but just also wanted to clarify, did you guys refer to the comparable sales from the BLT bundle as sort of reversing the negative trends through the first seven weeks or not. I just want to clearly understand that. And then with respect to raising and increasing your leverage and raising capital, what is your view on sort of investing alongside. I know share repurchase is obviously attractive, but investing alongside some of the franchisees perhaps too accelerate some of the remodel campaigns, like some of your peers may have done already?

I'll start with the second part of that. So first of all, as it relates to investing alongside our franchisees, we're actually doing so, we're contributing on the major remodels, 40%, which is one of the highest percentages in the industry. So we feel like we're doing the thing that we need to do there. As it relates to the sales trends, what I would tell you is, we've seen the trends improve. I don't think we go so far as to say, we've seen a complete reversal.

So I guess just as a follow-up there that you're investing alongside that would continue or potentially even up the potential to accelerate if you were to have more capital at hand?

Yes. We haven't made any -- certainly we haven't made any -- that's what's the word I am looking for; we have not said we're going to do that, I don't think we would make that decision here on this call today. So we'll let you know if we were decided to do that. But as we articulated in August with our long-term guidance, with kind of quick numbers out there, relative to free cash flow and within those free cash flow numbers are assumed a certain number of contributions and we have not said we're going to do any more than that at this time.

Great. Thanks everyone for joining us today. Have a safe and happy Thanksgiving. And we look forward to speaking to you soon.

Thank you, speakers. This does conclude today's conference. All parties may disconnect.