And we’re really encouraged by the efforts around our cost savings initiatives. That’s reflected in our guidance. But for us to find $4 million of savings this year is really encouraging, and we’re not going to stop there. We’re going to keep looking, and that’s going to be spread across the P&L, the $4 million of savings. About half of that is in G&A with the balance spread amongst COGS, labor and other operating costs.
Jake Bartlett: Great. And then new price, is that going to stay at 1.5% or so? Or is that going to go to zero over the next few quarters?
Mike Hynes: Yes. As of any new pricing decisions, it will be around 1% Q2 and Q3 and then fall off a small amount in Q4. Okay. We’re testing a small amount, a modest amount of pricing for the back half of ’24. And we’ll have some more news on that in the next update talk.
Drew Madsen: Yes. I mean on the pricing, we’re being very disciplined to take the amount of pricing we need to cover inflation and to do it in a very tactical surgical way where we implement pricing in areas that have the least amount of elasticity and as a result, have the least amount of impact on traffic or menu shifting within the menu.
Jake Bartlett: Great. And the last question is on the refranchising. And back when you sold the stores in California, there was a– it was expected to be EBITDA neutral. There is also, I think, maybe a different way of accounting for the adjustments back then. But is this expected to be EBITDA neutral on the six stores that you sold? And then also, is this something that we could expect going forward as part of the efforts to simplify the business is to kind of shed some of these outlying markets. Anything more we should take from the refranchising transactions.
Mike Hynes: Yes. So for the six restaurants in Oregon, they represented just under $10 million of sales for us, and they will create initially a small EBITDA headwind. But you’ll also see that we have a 10-unit development agreement with this franchise partner through 2030 and as we progress through that development agreement, it will be incremental to EBITDA as our expectation. And then looking forward, I would say, we’re going to be opportunistic with refranchising. Our focus is on improving unit economics, including the cost to build new units. And so when we get that right, we think there’ll be more opportunities down the road to refranchise.
Jake Bartlett: Great. Thank you. so much.
Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Andy Barish of Jefferies. Your line is now open.
Andy Barish: Thanks. Hi guys. I don’t remember exactly, but was Alfredo previous menu item that’s being brought back at Noodles? Or was this from some thoughts in a past life Drew?
Drew Madsen: Yes, thoughts from Olive Garden. No, this is playing off the strength of our first big dish Chicken Parmesan, and Baked Alfredo with Chicken is a new item for us. And we’re very excited about it conceptually tested, strong, very popular by our operations teams, very popular in restaurants that we tried it in, but it’s a new dish.
Andy Barish: Okay. Understood. And then what’s been your kind of view in terms of the time frame as you discuss some of these operational improvements, how quickly does that translate the traffic. You kind of put it another way, I mean, these are, I guess, leading indicators, but then when do you actually see the results in your viewpoint.
Drew Madsen: Yes. Well, we saw a trend improvement in dinner traffic versus year ago every month in the quarter through April, where it was positive and the same thing for lunch, but dinner did better than lunch every month during the quarter. And we think that’s directly attributable to continued improvement in operations excellence and improvement in guest satisfaction. Now with our purchase frequency, we’re not going to see maybe an immediate impact on it, but we should continue to see improvements in guest satisfaction that do translate into improved traffic and stay with us that we can build on as we introduce new menu items to create more guest desire for it. So it’s– I think it’s essential, and I think the progress was meaningful so far, and it should continue.
Andy Barish: Okay. Thank you very much.
Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Jake Bartlett of Truist Securities. Your line is now open.
Jake Bartlett: Great. Mine was on the balance sheet. And I know with your amendment to your credit agreement last December, you had changed the target or the covenant on your leverage. And you’re using an adjusted– a lease adjusted leverage ratio. I think it’s 4.5% is the covenant there. My question is where you stand as of the end of the first quarter, just so we can kind of get a sense of– I know you have a ton of liquidity available. I just want to get a sense as to how healthy the balance sheet is at this point.
Mike Hynes: Sure. We are in compliance with our credit agreement and all the covenants associated with it, including the leverage ratio. And we feel good about where we are with our credit agreement. We feel good about the liquidity it provides and meeting our needs over the next few years. And more importantly, we feel good about the way we set up CapEx this year to where in the back half of the year it tapers and we’re going to have an opportunity to pay down debt later this year and really carry that with the goal of carrying that forward into 2025 and be able to be free cash flow positive and have opportunities to pay down debt on a regular basis.
