FWRG - NASDAQ

Thank you for standing by, and welcome to the First Watch Restaurant Group, Inc. Second Quarter 2023 Earnings Conference Call. At this time all participants are in a listen-only mode. Following the presentation the conference call will be opened for analyst question. And instructions on how to ask a question will be given at that time. This call is being recorded today, August 1, 2023 at 8 A.M. Eastern Time and will be archived and available for replay at investors.firstwatch.com under the News and Events section. I would now like to turn the conference over to Steve Marotta, Vice President of Investor Relations at First Watch to begin.

Good morning, and welcome. I'm joined here today by First Watch's Chief Executive Officer and President, Chris Tomasso; and Chief Financial Officer, Mel Hope. This morning, First Watch issued its earnings release for the second quarter of 2023 on Globe Newswire and filed its quarterly report on Form 10-Q with the SEC. These documents can be found at investor.firstwatch.com. Let me cover a few housekeeping matters before introducing Chris. This conference call will include forward-looking statements that are subject to various risks and uncertainties that could cause the company's actual results to differ materially from these statements. Such statements include, without limitation, statements concerning the condition of the company's industry and its operations, performance and financial condition, growth strategies and future expenses. Any such statements should be considered in conjunction with cautionary statements in the company's earnings release and Risk Factors disclosure and our filings with the SEC, including quarterly report on Form 10-Q. First Watch assumes no obligation to update these forward-looking statements, whether as a result of new information, future developments or otherwise, except as may be required by law. Lastly, management's remarks today will include references to various non-GAAP measures, including restaurant-level operating profit, restaurant-level operating profit margin, adjusted EBITDA and adjusted EBITDA margin. Investors should review the reconciliation of these non-GAAP measures to the comparable GAAP results contained in the company's earnings release filed this morning. And with that, I'd like to turn the call over to Chris.

Thanks, Steve. Good morning. First Watch showed continued growth and success during the second quarter. Our top line results were driven by healthy 7.8% same-restaurant sales growth and the outside performance from the significant number of new and noncomp restaurants we opened. Bottom line growth was bolstered by easing food and beverage inflation. Our traffic trend improved sequentially throughout the quarter, principally due to more favorable comparisons as we move past the post-Omicron recovery benefit that we experienced over the prior year. In restaurant traffic was up low single digits, offset by fewer off-prem occasions, which resulted in an overall traffic decline of 1.2% for the quarter, although we continue to outperform casual dining overall by 510 basis points according to Black Box Intelligence, highlighting our ability to grow market share in any environment. Encouragingly, when our customers do visit us in the restaurants and more of them did, they're opting for the full experience. This shift by the consumer back to in-person experiences and social occasions is a really good thing for us. During the time of necessity, we were pleased to accommodate the consumer for their off-prem occasion, and we will continue to do so, but we are even more pleased with the ongoing pivot back to our dining rooms. Simply put, the totality of our in-restaurant service touch points generates a significantly better customer impression compared with that of off-prem. We often field questions regarding the current state of our customers. We have seen no indications of check management. In fact, in Q2, we realized positive year-over-year trends in beverage attachment and guest elected pricing or mix driven by the introduction of new menu items, such as specialty iced coffees and our Bacon Cheddar cornbread shareable. Seemingly, the single indication of price sensitivity we've seen has been in the third-party delivery channels where, like many in the industry, we're experiencing fewer occasions. The first and second quarters are typically our highest average weekly traffic quarters, and contain several special occasions that people choose to celebrate at First Watch. Mother's Day is our busiest day of the year and this year, as they have in years past, our teams delivered. As a testament to our progress on increasing throughput, we were pleased to see a 400 basis point increase in Mother's Day same-restaurant traffic and an 800 basis point increase when we consider dine-in traffic exclusively. Even more, we manage those record traffic levels while improving our customer satisfaction scores year-over-year. In short, it was the highest sales day in company history reaffirming that our evolving operating model positions us well to capture more demand and improve the customer experience. As this has been the case for many years, we continue to experience success with our new restaurant openings. This is in part due to strategic enhancements we've made, which is resulting in higher profile locations with increased seating capacity, larger and more attractive patios and indoor outdoor bars, just to name a few. These initiatives have driven average unit volumes that we had not seen previously. And as a result, our new restaurant AUVs continue to exceed the comp group. We continue to innovate with far more room to optimize over the long term and we're encouraged by the impact we're already seeing. In the second quarter, we opened nine system-wide restaurants, including six company-owned locations. When you consider the number of restaurants we will open this year, and our clearly defined path to 2,200 domestic locations, we expect the long-term growth associated with new restaurant openings and franchise acquisitions to continue to fuel our value creation. Our teams are very proud as they should be, and I'm excited to see us continue to raise the bar. We remain confident in the opportunity and the growth algorithm that underpins our long-term guidance. We focus on two pipelines to drive our growth: people and restaurants. As we sit here today, we have more than 100 new restaurants in various stages of development and in excess of 120 promotion ready managers teed up to lead them. The powerful combination of First Watch's proven portability and vast landscape of untapped markets represents a long runway for future growth. And when you couple that with our impressive historical cash-on-cash returns, the potential becomes clear. Finally, we've continued to execute against our strategy to drive long-term value through the acquisition of franchise-owned restaurants and related territories. In the second quarter, as we shared on our last call, we acquired six franchise restaurants in the Omaha market. Most recently, we acquired five additional franchise restaurants in the Milwaukee Area and we expect to close on an additional seven, including one under construction in South Carolina and Georgia within the next 30 days. Following these acquisitions, we will have 12 franchisees who operate 100 restaurants and of those 51 are subject to purchase options. As a reminder, our franchise-operated restaurants performed similarly to our company-owned restaurants. So for us, converting franchises to company-owned restaurants is compelling for both the financial and strategic perspective and represents a significant growth opportunity for our entire enterprise. Our impressive second quarter results exemplify our consistent long-term track record of operational excellence. First Watch was built over four decades by keeping our eyes on the horizon while simultaneously focusing on exceptional execution, consistency, delivering value and driving traffic. I believe we are well positioned to thrive in virtually any economic environment. We are, as always, looking forward to creating and serving more demand. Before I turn it over to Mel, I want to welcome our newest Board member, Irene Chang Britt. Irene's deep experience in both operations and corporate governance with food and beverage brands, in particular, will be a terrific asset to First Watch, and we're thrilled with her addition. Mel?

Thanks, Chris. Good morning, everybody. As Chris mentioned, our second quarter was strong. Same-restaurant sales growth was 7.8%, driven by our price increase and favorable mix, partially offset by an expected traffic decline of 1.2%. Overall, the sales growth exceeded our expectations. Our traffic was softer early in the quarter given the difficult comparisons, and it improved each month. Moreover, as Chris mentioned, our dining room traffic continues to comp positively. Customers responded to our seasonal menus and pricing, and we saw a favorable seasonal menu mix and beverage attachment versus the same period last year. We continue to drive profitability as well, and I'm going to expand on that in just a minute. Total revenues were $216.3 million, a 17.3% increase over the second quarter of 2022. Our food and beverage costs were 22.4% of sales in the second quarter compared to 24.9% in the same period last year. Costs benefited from deflation of 470 basis points across our market basket, which was significantly more favorable than we had anticipated. The biggest movers were decreases in our pork and avocado costs. Labor and other related expenses were 33.2% of sales in the second quarter. That's up from 32.3% in the second quarter of 2022 and driven mostly by increased staffing levels needed to serve our growing dining room traffic. Restaurant level operating profit was $44.4 million for the quarter with a margin of 20.9%, an improvement versus the 18.2% restaurant-level operating profit in the same period last year. The margin improvement reflects increasing sales leverage, the 250 basis point improvement in food and beverage costs and favorability in other restaurant operating expenses primarily are to-go packaging. General and administrative expenses were $25.3 million, approximately $3.3 million higher than in the prior year, primarily due to compensation increases, and new headcount to support our rapid growth. Adjusted EBITDA was $25.8 million with a margin of 11.9%, an improvement versus the 9.6% margin we realized in the second quarter of 2022. We opened nine system-wide restaurants during the quarter, of which, six were company-owned and three were open to buy our franchisees. Recall that our company-owned restaurant development schedule still remains heavily weighted toward the end of this year, the fourth quarter in particular. At the beginning of the third quarter, we modestly increased our menu prices primarily in markets affected by statutory increases in minimum wage. The average of this increase across all company restaurants was 1%. As a result, in the back half of the year, we carry price of 6% compared to the prior year. Now I'd like to update our full year guidance as follows. We are reiterating same-restaurant sales growth of 6% to 8% in 2023, but now with marginally positive traffic growth for the full year based on our recent trends. We're reiterating our expectations of opening between 38 and 42 company-owned restaurants and 10 to 12 franchise-owned restaurants and we may close up to three company-owned restaurants, resulting in a total of 45 to 51 net new system-wide restaurants. We now expect commodity inflation to be in the range of flat to up 2%, which is lower than our previous expectation of 2% to 4%. We expect net deflation in commodity costs for the balance of the year though not nearly as steep as we experienced in the second quarter as the rollover of costs last year will abate as the year progresses. We continue to expect hourly labor inflation to remain in the range of 9% to 11% with an overall restaurant level labor inflation in the range of 8% to 10%. We now expect a blended tax rate in the range of 28% to 31%. We continue to estimate capital expenditures totaling between $100 million and $110 million, not including the capital allocated to acquisitions of franchise-owned restaurants. At this point, given our first half performance and the acquisition of 18 franchise-owned restaurants this year, we're increasing certain elements of our full year outlook as follows. We now expect total revenue growth in the range of 18% to 21%, up from 16% to 20% previously and we expect adjusted EBITDA in the range of $89 million to $92 million, which is also up from our previous range of $80 million to $85 million. As a reminder, our fiscal 2023 is a 53-week year and our guidance includes the extra week's contribution, which we estimate to be $10.5 million in total revenues and $2.5 million in adjusted EBITDA. I'm going to hover over that for just a minute, because we understand that the contributions of our acquisitions can create some challenges in modeling our growth, which we think is a nice problem to have. To be clear, before giving effect to the acquisitions, our projected fiscal year 2023 total revenue growth would be in the range of 15.5% to 18.5%, and our adjusted EBITDA would range between $86 million and $89 million. Given the typical seasonality of our business, the incremental G&A investments and the timing of preopening expenses associated with the accelerated pace of our openings. We expect third quarter adjusted EBITDA to be flat to slightly above our year ago results, including the acquisitions. For further details on the second quarter, please review our supplemental materials deck on our Investor Relations website beneath the webcast. And with that, operator, we'd like to open the line for the questions.

Thank you, sir. [Operator Instructions] Today's first question comes from Jon Tower at Citi. Please go ahead.

Good morning. Thanks for taking for taking the question. I appreciate you taking the time.

Good morning, Jon.

Good morning. So I'm curious the thinking around taking the pricing in the back half of the year, can you talk about what motivated you to go in that direction, given that you are seeing a little bit more by way of deflation on the food cost basket. I know labor inflation is running relatively high, but curious to get your thinking around why the incremental price going into the third quarter here.

Yes. Our philosophy has always been to take price to offset inflation. We took it generally in the states where the statutory minimum wage will be increasing during the back half of the year.

Okay. So it's purely the labor piece of the equation and not...

That was what we targeted, yes.

Okay. Great. And then in terms of -- the franchise acquisition is great that you guys are rolling it up and seeing opportunities. I know you had mentioned on the call, there's another 51 subject to purchase options. How can we think about timing around that? Is it something where you could do it tomorrow? Or is it something where it's more of a multiyear type of outlook?

It's not going to be tomorrow. And we -- it will be paced when it's appropriate for the restaurants. We really don't have an indicated timing just yet, but we'll make sure that we make it clear when we do and that you can -- that people can understand it. But the options to purchase are evergreen. So we do it when it's helpful to them and helpful for us.

Great. And then just last one from me. I know part of the strategy is kind of building out and/or bumping out existing stores with some capacity expansion, larger patios, et cetera. Can you talk about perhaps the opportunity that exists in the system today for that? And any potential CapEx requirements and/or sales lifts you're seeing from these remodels?

Hi, Jon, it's Chris. I'll take that one by saying that we're constantly looking at our legacy fleet and taking that kit parts that we've built with all these enhancements and seeing which ones can take which of those elements. But honestly, our focus is on the next 1,500 restaurants. That's where we see the greatest opportunity and employing a lot of the tactics that we've developed. So we have a regular market refresh strategy that's in place for the legacy restaurants and markets and sometimes it means moving restaurants in the trade area where we've been for 25, 30 years, which a lot of times when we talk about potentially closing three restaurants, it's really a lease is up, and we're going to move to a better spot in the trade area. So it's -- all of those things are part of our fleet review, if you will. And so, where we can put some of the new elements that we're seeing great impact on, we will. But to be honest with you, a lot of them are constrained by square footage and other things where we can't do those. But we do look at where we can do that. Alcohol was a great example where we went back and put that in as many restaurants as we could. And we're -- we've got that built out now to where we think it's fully penetrated as far as where we can be, where it makes sense.

Got it. Thanks for taking the question.

Thank you. And our next question comes from Andy Barish with Jefferies. Please go ahead.

Hi. Good morning, guys. Just firstly, I wanted to circle back on Jon's question there. Just -- can you give us your thoughts on kind of balancing these franchise acquisitions and new restaurant openings just from a [preplanned] (ph) infrastructure perspective, what changes, what hasn't? Just trying to get comfortable with that increased pace of acquisition.

Sure. And you've been following us long enough to have been with us when we acquired and converted all the Egg & I's. And what I can tell you is we talked about fueling the jet in mid-air back then when we were converting all those restaurants plus doing a respectable amount of our own organic openings. This is much easier than that because these are already First Watch branded restaurants. They performed similarly to our fleet, as I've said, and it's a much easier transition. So we see it as a nice complement to our organic growth. And -- but I will tell you that the transition operationally is what we spend the most time on because we want to ensure that there is no disruption to the customer experience when we do these acquisitions. So, we do it in constant communication with the franchisees and like Mel said, at a timing that makes sense for both of us.

And just following up on that, I assume a lot of the team in staffing is -- there's continuity there just given the performance of the restaurant sounds like they're in line with company-owned stores.

There is, and we also carry sufficient staff in advance of the acquisitions, so that we're in a position to take over the management and the territory and the restaurants as seamlessly as possible.

Understood. And then just finally on the deflation outlook still in the second half but not as favorable, how much are you baking in some moves here and avocado costs are off and pork costs and things like that?

When you say how much we're baking in, I mean what we've guided to is that, we're going to be flat to up 2%. So it's built into that equation if that's what that is.

Okay. Much appreciated. Thanks guys.

Thank you, Andy.

Thank you, Andy.

Thank you. And our next question today comes from Jeff Bernstein with Barclays. Please go ahead.

Hi. Thanks. Good morning. This is [indiscernible] on for Jeff. Thanks for taking the question. You alluded to off-premise decline during the quarter. Just kind of can you peel some of that best for us and explain some of the drivers of that and where you are in terms of the current mix versus pre-COVID level?

Sure. So I think it's pretty well known that the -- that we don't get a lot of data, we meaning the restaurant industry. We don't get a lot of data from the third-party providers. So I can tell you what our take on it is, is that I talked about it a few months ago where that might be the indicator of check management now. And I think that's what you're seeing across the board, and that's what we're seeing. So it is the most expensive dining occasion for I'm pretty sure every concept. So it doesn't surprise us that there's some pressure there. Although off-prem still represents about 18% of our overall sales, and just to remind you, it was about 5% pre-COVID. So, significant growth in that area for us. And I think we've done a great job of accommodating and excelling in that area. But our focus remains on the in-restaurant dining. And I think we're seeing those results in the traffic in restaurants continuing to grow.

Got it. That makes sense. And then if we could pivot to your in-restaurant occasions, some of your peers have alluded to some check management there as well, maybe not necessarily trade down, but not getting that second beverage or maybe not getting as many side orders. Can you just talk about what's happening in your restaurants?

Well, that's exactly what Chris spoke to in his prepared comments that we look for check management, exactly the things you're talking about, the attachment of beverages, maybe the shareable items. We haven't experienced it. We -- our attachment of beverages is up. Our customer doesn't appear to be managing the check in the dining room.

I also want to add that, I think our seasonal menu strategy, specifically the innovation around that is a big driver of that. As we have menu news five to six times per year. We're introducing new platforms like we did with the specialty cold caffeinated beverages. So there's some excitement around our menu constantly throughout the year, and we've seen that show up in positive mix.

Understood. Appreciate the color guys. Thanks.

Let me see how many did open the last year. Yes, it's probably going to be a little bit ahead of that, but that's a similar kind of weighting. I think that's probably fair.

Okay. Great. Thanks, guys.

Yes. We deserve it to you, Chris.

Thank you. And our next question today comes from Gregory Francfort with Guggenheim Securities.

Hi. Thanks for the question. I had a couple. Just first one, maybe can you talk a little bit about the labor market outside of statutory inflation? Just what you're seeing either in turnover or anything like that would be helpful.

Our turnover has -- first of all, we don't have any shortages of labor and frankly, have not experienced the kind of, I guess, labor challenges that others experienced and may still be experiencing in some markets. We just haven't had that kind of access to labor issue that I think others have had. So access is good. We've been at -- we look at the number of applications for open positions, and I know the applicants for positions returned to kind of pre-COVID levels for us, well more than a year ago now. Now turnover elevated during the worst of the pandemic and the recovery of the pandemic, it's now kind of returning to earth. We've typically -- our history is that we've had better turnover statistics than our industry for both the hourly as well as managers by maybe 20% or so, running maybe 20% lower. We haven't quite returned to that kind of favorability yet, but we're moving in that direction.

I will say that our turnover in Q2 versus Q1 improved by 500 basis points. So we're definitely seeing some positive momentum there.

Awesome. Thanks. And then maybe just on the new sites you guys have been opening up the last maybe year or two at higher volumes. Can you just remind us how much bigger either in square footage or capacity those are? And it seems like that's been successful. Do you have a thought of maybe continuing to either expand the footprint? Or is that something that might be something you can actually keep doing where maybe you can do 2.4 or 2.5 on a larger footprint or larger seating capacity?

Yes, that's a conversation we have frequently here. Our footprint has increased over -- again, we've been around 40 years. So our early restaurants were 3,000 square feet, and we're probably -- our average is closer to four now with what we've been building over the past five years. But it's a delicate balance between the kitchen throughput potential and servicing the customer the way we want to. So -- and also, frankly, in our ability to penetrate markets. So we've learned over the last five years or so that we can more densely populate markets with larger footprints and so that's what we're looking at now. I mean as I said, we're seeing volumes we had never seen before. And we know that it's because of a lot of the work that we've put into our real estate site selection model and the elements that I've talked about that we've added on to the prototype.

Great. And maybe one last one. Now there's been a lot of concern, I guess, out there in the market about just the consumer potentially slowing into the end of this year or 2024 but there's also a lot of kind of tailwinds. I'm curious your overall take and thoughts on kind of that backdrop and consumer health into the end of the year, early next year.

Well, as we shared earlier, we haven't seen any check management from our customers in our dining rooms. Obviously, there's something going on with regard to the expensive off-premises occasions. But built into our guidance is certainly some caution about the choppiness of the economy and sustained concern about recession being around the corner, but having not yet experienced what we would call the worst of it.

Thank you.

Thank you. And our next question today comes from Sara Senatore with Bank of America. Please go ahead.

Hi. Thank you. This is Katherine Griffin on for Sara. Thanks for the question. I wanted to ask Chris, just a follow-up on your comments on the guest selected pricing, that seeming to hold up well. I just wondered if there's anything notable to call out in terms of customer demographics, whether it's by age cohort income cohort or geographically, just anywhere, maybe you've seen relative strength in terms of seeing that guest selected pricing hold up?

No, nothing specifically. I think it's been across the board for us. Even when I look at our growth by dayparts, pre 11:30 and post 11:30 are pretty similar. I think we're just getting more folks in the dining room across all of our demographic groups and psychographic groups. And what we're seeing is the -- as I said, they're opting for the full experience. So when I talked about the specialty cold caffeinated, that's really helping to drive our beverage attachment and the Bacon Cheddar cornbread shareable, for example, is driving check, and it's also contributing to an occasion. And that's what we're seeing is I think the same phenomenon you're seeing in travel where people are wanting experiences, you're starting to see it in dining out occasions too. So, dining out as groups, enjoying a shareable together, at least is what we're seeing indulging in an extra beverage, for example. And frankly, opting into our seasonal menus, which, for the most part, are higher-priced items than what's on our core menu. But everyone knows they're for a limited time, and they're also pretty special with some special proteins or like our Strawberry Tres Leches French Toast that's pretty decant. So we're seeing that, and I think that's what's contributing to our overall contribution.

Great. Thanks for the color. And then just as a follow-up, I wanted to also just touch on your comments on sort of where you see additional room for optimization. If you could just speak to sort of if it's part of -- if it's menu innovation or just other areas of the operations model that would be helpful to get some color on. Thank you.

You’re welcome. I'll say that it's across the board. Every opportunity that we have within our four walls or outside our four walls to innovate and improve the customer experiences on the table. So we've been doing that for a long time. We'll continue to do it. We were one of the first to have waitlist management systems for our customers. We're still looking at back-of-the-house improvements. We've talked about our dining room table optimization. The indoor/outdoor bars, all those things that will either create more demand or help us serve more demand. Those are our two focus areas. So when we talk about innovation around the menu, it's to create more demand. When we talk about dining room optimization and KDS systems and things like that, that's to serve more demand that we know we have sitting outside our front door. So we've got them in those two buckets and everything is on the table.

Great. Thanks, guys.

Thank you. And our next question today comes from Andrew Charles of TD Cowen. Please go ahead.

Great. Thanks. With KDS implementation complete, and now the teams are getting the feel for them in the back of the house, have you seen the benefit from faster throughput that you forecasted? And I'm curious as well if you can help quantify the impact of 2Q traffic from faster table turns.

Quick answer is, no, we haven't quantified the traffic from faster table terms. We -- but the KDS system, I think, what Chris was trying to illustrate, not only for the KDS system but other operational efficiencies that we're applying in the restaurants, particularly as we've learned to operate better in these higher-volume restaurants, which is over the course of the last few years has been something that we've been excited about, but we've also -- we're also learning about our own system as we've opened these big volume restaurants. Chris called out Mother's Day, which was a historically busy day for us. And it was enabled by the cocktail of different things, KDS as well as servers on the floor, back of house improvements those sorts of things were all part of it is helping increase that throughput. But I don't have a breakdown for you.

And Andrew, this is Chris. One of the things we mentioned is getting KDS rolled out is really just the starting line. And a great example I'll give you is, we now have visibility into ticket times and cook times that we never had before because of our manual process. So we're creating the benchmarks now to start to focus on and work on improving. And we've been pleasantly surprised by the impact that we're seeing even week over week with just the visibility into those metrics.

That's great. And then, Chris, is there anything you'd point around efforts where you're leaning in to spend the delivery traffic headwinds? Or are these transactions that you're less worried about chasing just given a lower margin profile?

Yes. We're focused on our in-restaurant dining customer. We -- like I said, we'll continue to accommodate the off-premise occasion. We don't feel like we have a lot of influence there. We could market into it. But as you know, we're traditionally not a mainstream marketer. Our marketing spend is much lower than most in our industry, and we're certainly not going to use those bullets on a third-party occasion. So our focus is still going to be on in-restaurant. And then as long as we continue to see it grow like we have, I think we can say that we're winning there.

Very good. Thank you.

Thank you. [Operator Instructions] Today's next question comes from [Maggie Laurence] (ph) with Raymond James.

This is Maggie on for Brian Vaccaro.

Hi, Maggie.

Hi. How are you? Just a quick question on labor. In the last 10-Q, there was noted a new labor scheduling tool/protocols. Can you just provide some more color there? What capabilities does is that compared to the prior tools protocols you were using? Is there any way to quantify the benefit?

I can't quantify the benefit, but the tool itself gives our operators a cleaner look at how labor is running, how scheduling is running, how they can throw it up against expected traffic. And as a consequence, it gives them just improved insight into how to run a business and it helps them control their front and back of house scheduling. So it's just easier tool, more accessible, easier for them to evaluate where their staffing goes. And when I say I can't really quantify the benefit. What I can say is that I know that we are -- we operate with more efficiency and it comes out in our overall percentage of labor. But I don't have something that I can tell you that tool did this in the labor percentage.

Okay. Thank you. And then just quickly on other OpEx, what are you seeing in terms of utility and other inflationary cost lines in that line? And how do you expect that to play out going forward?

Utilities and other costs have typically run higher and they're all -- the expected inflation of those is included in our overall flat to 2% up.

That’s helpful. Thank you so much.

Thank you. Ladies and gentlemen, this concludes your question-and-answer session. I'd like to turn the conference back over to the management team for any final remarks.

Great. Thank you. Thanks, everyone, for your thoughtful questions. We look forward to finishing the year strong with a continued focus on serving more demand and creating memorable experiences for every First Watch customer. Thank you.