Robert Verostek: Yeah. So Todd, it’s Robert again. With regard to that, it’s not like we’re doling them out. This is kind of real time. We’re telling you. The development team has really been working hard, partnering with the Keke’s leadership team to bring this first tranche. As Kelli remarked East Coast. We — as we noted already into Tennessee and Texas and California, but as you guys are aware, we are in all 50 states right now. So again, these were the first ones we’ve signed and this — as Kelli alluded to this small but mighty team will keep working. And as soon as we get the next tranche all lined up and ready to go, we’ll be talking about that also.
Todd Brooks: And then finally, Robert, who funds the loan pool, just so I’m straight on that.
Robert Verostek: It’s a third-party loan pool. Not our cash. We only provide a minor backstop to the cash from the third-party lender.
Todd Brooks: Great. Thank you all very much.
Robert Verostek: Thanks Todd.
Operator: Thank you. Next question comes from the line of Eric Gonzalez with KeyBanc Capital Markets. Please go ahead.
Eric Gonzalez: Hi, thanks. Good evening. Can you just clarify, I think you said 3% pricing to offset the FAST Act. Was that 3% effective for the system, or was that just 3% in the stores in California? And then I have a — my regular question after maybe you answer that.
Robert Verostek: Yeah, Eric. So this is Robert. So the 3% is really my kind of the back of the envelope math that we are doing for the company restaurants alone in California. So it wasn’t — depending upon volume that could be different. And again, we will be very strategic with regard to that and we will partner with our franchisees that. As you might expect, we see our performances improved with value that’s the nature of our brand. So we’d look to limit pricing as much as we can, but understand what the margin implications are of something like the FAST Act. So we will partner with our franchisees to get that right level along with the other pieces that we talked about off-premises, Band of Burrito, Franklin Junction tests, automation, all of that’ll come into play. My 3% reference specifically was with regard to company restaurants in California.
Eric Gonzalez: Got it. And then maybe a question on the development outlook. It looks like you expect to close fewer units across both brands despite opening half as many Keke. So you maybe comment on what’s driving the fewer closures this year?
Robert Verostek: Yeah. So across the year, Eric, we’ve seen, and we measure this through our Lumen tool that we have in, 40% of the restaurants we’re really going to look to ramp that up to get additional insight over the course of the year. But margins have been improving over the course of the year. You’ve seen that in our company portfolio. And again, you’ve seen things like commodity inflation, clearly moderate over the course of this year. Labor has been steady in this 3% to 4% range. So again, the improvement that you’ve seen year-to-year in the company P&Ls and margins, really have moved forward into the franchise. And again, improving margins, improving profitability will reduce the number of closures. So we’re really excited to see that and the further we can get into next year and continue to drive sales and profitability, that is truly the catalyst of bringing down additional closures.
Eric Gonzalez: Got it. And then just with the new menu and that new pricing model that you mentioned, can you maybe expand on that a bit? Is the goal to be more thoughtful about the parts of the menu that you take price, and that’s sort of just the overall menu architecture that you’re looking to? Is that the goal of the new menu and this new menu architecture?
Kelli Valade: Yeah, Eric. Yeah, absolutely. That’s exactly what it is, right? So we’ve — look, we had a good process in the past, but we really doubled down on sensitivity by category, by item, as well as then being really myopic around all of the cost infrastructure across the country, right? So different by DMA, different by state. And that is really helping us to kind of stay aligned with our franchisees as we take price going forward. So it’s definitely a more strategic approach. And just again, doubling down on the insights that we have by item, by category where we have the most elasticity, where we’ve got the most opportunity while not kind of hurting that value proposition. So we feel really good about what we’re doing there and think it will absolutely benefit us as we stay aligned with our franchisees on, yes, at times there are things we’ll have to do, but we also — we know, right, if we can hold, and we can keep providing that great value and that perception of value is there, then we do well and we know that.
So that’s all part of this new design and our architecture going forward as you actually just said. So appreciate that question.
Eric Gonzalez: Got it. Thanks. That’s all I have.
Robert Verostek: Thanks Eric.
Kelli Valade: Great. Thank you, Eric.
Operator: Thank you. Next question comes on the line of Brian Mullan with Piper Sandler. Please go ahead.
Unidentified Analyst: Hi, this is Ashley [ph] on for Brian. I believe I heard you say in the prepared remarks that you plan to do some company owned development with Keke’s next year. Could you elaborate on those plans? Specifically how many do you anticipate opening, and how we should think about the cost to build from a CapEx perspective? Thanks.
Robert Verostek: Yeah, Ashley, this is Robert. So the reality is with the Keke’s brand, and we’ve talked about this for a little while now, is we wanted to utilize company capital, Denny’s corporate capital to get outside of the state of Florida. So we’re doing that in Tennessee right now. Nashville, we have cafes under construction at the moment in Tennessee. We also talked about needing to buildout some oversight efficiency within some of the markets where we took over company cafes down in Florida, there’s not one market. Typically for us, oversight efficiency comes in somewhere around six to eight cafes or restaurants. That’s what we know from the Denny’s world. So we will buildout places such as Jacksonville, likely, put in some capital into Orlando.
So at this point, that’s where the capital will be going. I would expect through time and as the years progress, once we buildout our markets to become oversight efficient, then we will trend back to this highly franchised model in the — a good bulk of the capital will be franchisees — still the case next year, but on a relative position to what you would’ve seen in the Denny’s world, it will be going in a little bit deeper with regard to opening up Keke’s cafes using corporate capital next year. With regard to what it will cost to build one of these things, we’re still right sizing that frankly. Kind of that million to million two range, was what we were talking about when we first took this over. But we did some exciting work with regard to, and Kelli alluded to it, a group called Other Tomorrows did some work for us.
