Nick Setyan: Okay. Fair enough. And as we kind of look out to 2024 — how are you thinking about G&A in this environment versus 2023? I mean, could we actually see G&A be a little bit lower than 2023 and 2024?
Vance Chang: No. So as I mentioned earlier, our G&A is sort of — the increase reflects — increased improved franchisee support and our efforts in improving the guest experiences. And they do take a little bit of time, right? So what we’ve said before is that 2023 level is –is probably the run rate that we need to run the business and with these initiatives that we’re running, so that we’re still looking at sort of that bad level of G&A or for future years.
Nick Setyan: Okay. And then just last question for me. During Q3, a lot of your peers have cited seasonality as one major driver of some of the comp weakness in Q3. Did you — when looking at your comp at both IHOP and Applebee’s, I mean, do you see any of that seasonality impact? Or do you think your comps were a result of some other factors?
Vance Chang: Should I take this?
John Peyton: Yes. Vance, I thought you would take that, too. But..
Vance Chang: Yes. So our comps — there is certainly the sort of typical back-to-school trends that we see within the quarter. But — but a lot of it is really also driven by what campaigns we ran last year versus what campaigns we run this – we’re running – we ran this year. So they don’t always match and we mix it up with different campaigns. So there may be some noise with that, but that’s probably a bigger driver than traditional seasonality other than back-to-school, I would say.
John Peyton: Nick, we’ve said in the past that we don’t have a particular quarter that is stronger or weaker than the others. So from a seasonality perspective, we’re fairly consistent, which we attribute to the size of both brands and their distribution across the country. So we wouldn’t mean the seasonality, as Vance said, for this explanation.
Nick Setyan: Okay. Thank you very much.
Operator: Thank you. One moment for our next question. This question is from the line of Brian Vaccaro with Raymond James. Please proceed.
Brian Vaccaro: Hi, thanks. Good morning. I just wanted to follow-up on the healthier consumer. And I heard your comments earlier, but could you elaborate on any changes you’re seeing as it relates to frequency across different income levels and then understanding, it’s likely up, given your promotional strategy. Could you also comment on the percent of sales that are occurring on some sort of discount or value LTO and how that’s trended over the last couple of quarters?
John Peyton: Sure. Hey, Brian, it’s John. When it comes to the consumer, we didn’t see any significant change quarter-over-quarter in terms of income levels. Our core consumer household income for both brands is about $50,000 to $75,000, as we reported in the past. We didn’t see a significant change there. What we did see, based upon the multiple sources of data that we get about our consumer at large is we saw that they slightly decreased their spending QSR. And when they came to us, they maintained their average check. And so as we’ve said also in the past, consistent with the last quarter, since we’ve raised prices, they’re maintaining their average checks, they are finding some of the value items on our menu. But when they come out to dine, they still want a full service experience.
They want the expectations that they have from Applebee’s and IHOP to come together with family and friends, and they’re still spending when they’re with us. And your second question, could you just repeat the second question?
Brian Vaccaro: Yes. Just the percent of sales mix on some sort of value promotion or discount and how that’s trended over the past few quarters?
John Peyton: Brian, my belief is that we don’t disclose specifically, the mix of associated with the specific promotions.
Vance Chang: Right. And Brian, I think that what you will see is that we talked about our menu pricing increase. And the average check is fairly steady. So the makeup of that is a shift in fee mix [ph]. And the fee mix is what you’re referring to in terms of the consumers managing their check and dropping what they’re ordering from us, but sticking with a similar check size. So we are seeing that in our business.
Brian Vaccaro: Okay. And thank you for that, Vance. So just to clarify that, is that an Applebee’s specific comment where pricing is up 4%, but check is flattish and thus traffic is down around 2% year-on-year. Am I interpreting that correctly?
Vance Chang: Well, we didn’t comment on the traffic part, but traffic is down for both brands, but we didn’t quantify it. But directionally, 4% in menu pricing for Applebee’s and 8% for IHOP, that’s correct.
Brian Vaccaro: Okay. And then on the off-premise side, assuming I got my numbers correct and did my quick math correct. It seems like the year-on-year declines in off-premise may have accelerated a little bit, maybe more so at Applebee’s than IHOP. Is that accurate? And maybe just comment more broadly on what you’re seeing in off-premise, the channels of both brands?
Tony Moralejo: I can address that, John. So yes, that is correct. I think the off-premise volume is dropping a little bit for us. And most of that is really coming from the DSP business. So as consumers are managing their dining budget, the delivery fees are part of the decision factor. So that’s — that is driving some of the decision-making process for our guests.
Brian Vaccaro: Okay. Thank you. And then just last one for me. I appreciate the color you gave on menu pricing during the call in the third quarter. And I know it’s a franchisee decision. But I guess, to what degree do you expect menu pricing that year-on-year tailwind to moderate in the fourth quarter or even over the next few quarters as the inflation moderate, environment has moderated? Thank you.
John Peyton: Yes. Hey, Brian, it’s John. I’ll take that. I mean you’re correct. Thank you for saying it the franchisees make that decision, we don’t. What we’ve reported is that in the past is that typically franchisees rate their price is 2% to 3% a year. Obviously, the last couple of years has been an exception to that. As we see the cost of goods, in particular, declining as Vance described, we would anticipate the franchisees begin to feel less pressure to raise prices. So if there’s some cost of good environment flows into next year, then there is the potential for it.
Brian Vaccaro: All right. Thank you very much.
Operator: Thank you. Our next question comes from Brian Mullan with Piper Sandler. Please proceed with your question.
Unidentified Analyst: Hi. Good morning. This is actually Ashley [ph] on for Brian. My question is just an update on how the late-night daypart is doing at IHOP, if you’re seeing any material traffic changes there? And if you’re running any promotions to kind of drive traffic back in that daypart? Thanks.
John Peyton: Thanks, Ashley. Jay will take that.
Jay Johns: Hey, Ashley. Thanks for the question. Actually, we’re not seeing a tremendous amount of change in the late night business. It’s been pretty steady. We have added on — over the last couple of quarters, we’ve added on about 50 more restaurants that are doing some form of 24 hours, either what we call 24×2 or 24×7, and I think we’re back up to almost 800 restaurants. We’re still probably 100 or 200 restaurants below where we were pre-pandemic. But it does slowly keep adding back a little bit of restaurants to that time period. As far as the sales themselves, we typically have not done national advertising for overnight hours just because it is so localized on who participates and who doesn’t. So they may be doing some individual things to that themselves locally. But that’s more independent and less of an organized national promotion than we do for the late night business. But it’s pretty steady. It’s been running pretty consistent all year for us.
