Andy Barish: Good evening, guys. Wondering if — understand the dynamics on labor for this year, wondering if the Profitality stuff that you’re working on in ’23 is expected to drive some benefits in ’24 and any early learnings on any of that would be helpful?
Dave Boennighausen: Yes, to give us perspective on those on the calls, and maybe you’re not familiar with Profitality work. If you go back several years, we instituted a kitchen the future initiative using a third party called Profitality, which came into our restaurants and looked at every task that’s done 500 tasks throughout the day, and identify time motion aspects of it, to understand where were there pinch points, where were there opportunities for us to be more efficient. The result of that project was ultimately the taking out of over 10% of our crude labor hours that were necessary inside the restaurant while that happened, we actually improve taste of food scores, we improve temperature, we improved cook times. So it was a win across the organization.
Starting late last year, we reengaged with Profitality, recognizing that versus pre-COVID the move has been even more at off premise. There is a different type of opportunity that we see in terms of what is the kitchen of the future. Where we’re at in that process, Andy? Still too early to quantify what we have seen is that they have been able to identify the guess the work we had done to get rid of certain bottlenecks, particularly like the saute line that has been solved. Where there are still potential opportunities involved certain areas around Expo where we garnish the food and then deliver it, as well as in the protein manufacturing, where we’re at in the process, as we will, in the next few weeks actually received the layouts, the design the equipment recommendations on how we can then activate that both for existing restaurants, as well as for new units to even reduce the square footage even further and reduce costs out of the build out.
So too early to quantify how many labor hours do we expect out of this, but it is important to know that embedded in the guidance, we wanted to ensure that that guidance incorporated things that we knew we had great visibility on, such as the cogs expansion from those fixed contracts. We believe that as we go forward with labor, there could potentially be upside, but at the moment our intent is to execute on what we already know. And then ensure that as we enter into 2024 and look at the long-term potential of the brand that we’ll be able to capitalize on opportunities such as what Profitality presents.
Andy Barish: Excellent. And then just to follow up on the occupancy line, which, you know, is also a driver to the margin expansion this year. I guess it’s a little bit difficult to quantify, but how much of what you’re expecting is just leverage from sales versus the mix of these smaller units maybe coming in with lower occupancy costs versus the existing fleet?
Dave Boennighausen: Yes. From a pure math perspective, the number of new units is such that the leverage you’re seeing is almost entirely on the existing fleet. What we saw in Q4, we expect to see a continuation throughout 2023. Where I think it’s exciting is that what we’re seeing is that even with that smaller square footage on a rent per square foot, you’re not really paying much of a premium. So as you look at that class of €˜19 and €˜20 that was able to hit company average and just barely and beat it from an AUV perspective, but actually surpass margin, a big part of that is the fact that they’re able to get that occupancy leverage. Because that gives us even just increased confidence in the overall unit growth opportunity for us, that even in an elevated cost environment, we’re able to still meet those cash on cash return objectives.
Jake Bartlett: Thank you very much
Operator: And thank you. One moment for our next question. And our next question comes from Todd Brooks, the Benchmark Company, your line is now open.
Todd Brooks: Hey, great. Thanks for taking my questions. Carl, I want to start out, you gave us some G&A guidance for the first quarter in that $13 million range. I look at the other items of annual guidance and they’re all kind of as expected, but where do you think the G&A number annualizes to and can you give us some detail on how much of that is the full accrual of bonuses in your thinking?
Carl Lukach: Sure. So, Todd, I think that the first quarter is a good indication of a quarterly cadence to the rest of the year, when I think about G&A. The largest driver which I mentioned on the call is the accrued bonus at target, following the reduced bonus expense in 2022. To a much lesser extent, there is some G&A that is expected do the increase in our investment in the CDP platform, the customer data platform, and overall increased technology costs with some of our existing vendors.
Todd Brooks: Okay, great. That’s helpful. Thanks. And then, giving to franchisees, two questions on this front. One looks like a pretty big spread between corporate store performance and franchisee, same-store sales performance in the quarter. Thoughts on what that driver of that spread might be? And then if we can talk prospectively about the franchising pipeline. Obviously the environment’s gotten tougher to get deals across the finish line, but as you’re thinking about being the growth going forward over the next few years, how does accelerated franchisee growth figure into that?
Dave Boennighausen: Yes, so let’s start with the same-store sales spread that you saw in Q4. From a two-year stack basis, actually the franchise group, which was going against an extremely strong Q4 of 2021, they actually were still very high up north of 20% on a two-year basis, even above the company. I think when you look at the overall health of the system what’s important to us, even as we look at quarter to-date, every single market we have is positive same-store sales, whether it’s company or franchise. And this is an organization that we’re in €˜20 United States as it is. So, the spread of success and the momentum we’re seeing is very widespread. From the second part of your question, in terms of the franchise pipeline.
We’re actually seeing some improvement. Now, it has been a challenging environment, versus what we first expected when we launched kind of a franchise sales. I expect the first restaurants to open it later on this year, very early in 2024. For the California franchisee that we signed as well as for the El Paso, Southeast New Mexico franchisee. We’re seeing there’s been an increase in leads, as the environment has stabilized for certain aspects of the economy. And then particularly for us, in regards to inflation. The visibility we have that our cost of goods sold is actually going to deflate has led to an increase in increase in overall franchise interest. And we expect that to even further as we continue to progress and hit the metrics we expect, and that we’re seeing the visibility and throughout 2023.
So, we are seeing some improvement in that environment overall.
