Greetings, and welcome to Bloomin’ Brands Fiscal First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow management’s prepared remarks. It is now my pleasure to introduce your host, Mark Graff, Group Vice President of Investor Relations. Thank you, Mr. Graff.

You may begin..

Thank you, and good morning, everyone. With me on today's call are David Deno, our Chief Executive Officer; and Chris Meyer, Executive Vice President and Chief Financial Officer. By now you should have access to our fiscal first quarter 2021 earnings release. It can also be found on our website at bloominbrands.com in the Investors section.

Throughout this conference call, we will be presenting results on an adjusted basis. An explanation of our use of non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures appear in our earnings release on our website, as previously described.

Before we begin formal remarks, I'd like to remind everyone that part of our discussion today will include forward-looking statements, including a discussion of recent trends. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from our forward-looking statements.

Some of these risks are mentioned in our earnings release, others are discussed in our SEC filings, which are available at sec.gov. During today's call, we'll provide a brief recap of our financial performance for the fiscal first quarter 2021, a discussion regarding current trends and select Q2, 2021 guidance metrics.

Once we've completed these remarks, we'll open up the call for questions. And with that, I'd now like to turn the call over to David Deno..

Well, thank you, Mark, and welcome to everyone listening today. The first quarter was a strong start to the year, and we had very good results across many measures. Results further reinforce our belief that the strategies and tactics are working, and set us up well to achieve our near and long-term commitments.

Thank you to the teams and the restaurants and restaurant support center for your unwavering commitment to serving our guests. Your dedication to bringing great hospitality, service and experience every day is what makes our restaurants so successful. Thanks to all of you for your hard work.

The first quarter performance was the culmination of a multi-year effort to elevate the guests experience, grow healthy traffic and pursue operational and simplification efforts to improve margins and profitability. This was accomplished by, first and foremost, taking care of our people and customers.

We did not furlough any employees during the pandemic and this decision has contributed to low turnover. Maintaining a motivated and well-trained and engaged employee base is critical to our long-term success.

As sales volumes are now exceeding pre-pandemic levels, these actions provide a competitive advantage to retaining talent as the industry faces some staffing challenges. Second, we are focused on providing great food and service to customers in the dining room, while maintaining our off-premises volumes.

We made significant investments pre-pandemic to capitalize on the growing off-premises demand, as consumers shifted towards convenience. Our to-go and delivery businesses are performing very well, and the high off-premises retention levels are contributing to the strong sales outperformance.

Third, we have been aggressive in pursuing opportunities to further optimize how we run and support our restaurants. We are realizing efficiencies through simplification efforts and across operations, menus and marketing it for offers. This has led to lower waste, reduced prep and training hours and improved execution.

These benefits translate into lower costs in the restaurants and in the restaurant support center. We will continue to look for ways to reduce complexity, improve consistency and increase profitability across revenue channels.

As a result these actions, we had higher than expected volumes and generated significant margin and profit improvement in the first quarter. We believe the strategic and operational framework we outlined last quarter can deliver consistent performance in the quarters ahead.

As the country reopens, we remain focused on optimizing revenue channels across both in restaurant and off-premises. Our goal is to preserve off-premises volumes, as dining room capacity grows. The Carrabba's team has done an exceptional job in this area. In the first quarter, Carrabba's off-premises sales were a portfolio high of 42% of revenue.

We will enhance and strengthen the company's delivery and carryout business by first, continue to provide great food and service. For example, the family bundles platform at Bonefish offers convenience at an attractive price point. The offering provides a fully prepared meal for five starting at $29.99, with six different options to choose from.

And second, by expanding our technology in digital efforts. We improved our online ordering system for Outback and Carrabba's in late March. This technology creates a faster and simpler ordering process and resulted in a higher average check.

We are seeing strong consumer adoption with approximately 65% of all off-premises sales in Q1, handled through our digital channels, representing 147% growth versus the prior year. In addition, we are in the process of updating the Outback mobile app to improve off-premises execution for customers and our operators.

We expect a new app to be available in Q3 of this year. As we increase off-premises revenue, we will also continue to grow our dine-in business. One of the key drivers is the new menu at Outback, which is performing ahead of expectations.

We designed the menu to reinforce our stake leadership through more accessible premium cuts and larger portions, while also lowering menu prices. We are seeing strong customer preference as guests are trading up to larger cuts of stake, enjoying larger portions, and increasing the attachment rate on appetizers and beverages.

In addition, the efficient menu design reduces complexity, which improves execution and consistency. This results in an improved customer experience. We'll be doing similar work at our other brands. The positive momentum of our initiative is carrying into the second quarter. Through the first four weeks, second quarter U.S.

comparable sales are up 12.6% on a two-year basis versus 2019. It is clear, customers want to come back to restaurants, and we are confident in our ability to provide a safe and welcoming dining experience. Now turning to Brazil.

Beginning of March, the country experienced a second spike in COVID cases, which caused the government to impose new lockdowns to slow the spread of the virus. This led to significantly reduced or closed in restaurant dining capacity for majority of the country. During this period, our restaurants primarily operated in off-premises only capacity.

However, in recent weeks we've seen in restaurant dining restrictions beginning to ease. This has resulted in improving weekly sales volumes per store from $21,000 to $35,000 over the last four weeks. In addition, on April 24, Sao Paulo, which is our largest market announced they are reopening in restaurant dining capacity to 25%.

This provides further optimism about the future continued pace of the recovery. We expect these reduced sales volumes while temporary to disproportionately impact Brazil's second quarter results. As a reminder, last year when Brazil underwent the first wave of COVID, we had to operate with an off-premises only business model.

As capacity restrictions eased, sales improved quickly. We would expect a similar recovery once Brazil emerges from this recent wave of the virus. These near-term headwinds do not diminish our long term enthusiasm for the business.

We remain optimistic and expect Brazil to emerge stronger, with an even better market position when the pandemic subsides, given the following. First, we have a leading market position and Outback remains a highly regarded brand with strong consumer appeal. Second, the competitive landscape could look very different on the other side of the pandemic.

We expected a large number of restaurants as high as 30% will remain permanently closed in Brazil. This reality combined with a high level of pent up demand for our brands could provide meaningful and rapid growth opportunities for this business on the other side of the pandemic.

Third, we have an incremental revenue channel on off-premises that did not exist before the pandemic. And believe, we can retain a large portion of this business moving forward, even as restaurant dining grows. Lastly, we have a great local team in Brazil.

We are confident that they will not only navigate the pandemic, but also capture the major opportunities we will have once the crisis is over. Finally, returning to the U.S., we had the financial power and capability to build our development pipeline in 2021 and beyond.

Later, Chris will talk about the very successful refinancing that we just completed. As the environment stabilizes, we are finding opportunities for development. In the U.S., Outback new restaurants relocations, along with new Fleming's and our stronghold markets will be the priority. In addition, we'll be building a few Aussie Grill test units.

Internationally, we will continue to expand our great business in Brazil, and they're able to fund their development. In summary, we are off to a terrific start. We are making significant progress against key initiatives to enhance the customer experience, simplify operations and optimize our cost structure.

The learnings developed through the pandemic have put us an even better position to capture these opportunities to drive total shareholder return. I can assure you, we will not rest at our success and we'll be aggressively pushing forward. We are confident we will merge a better, stronger operations focused company.

And with that, I'll turn the call over to Chris..

Thanks, Dave, and good morning, everyone. I would like to start by providing a recap of our financial performance for the fiscal first quarter of 2021. Q1, U.S. comp sales finished up 3.3%. This result reflected a significant improvement from the down 12.9% through seven weeks of Q1 that we discussed on our February earnings call.

This improvement was driven by a combination of an improvement in our recent trends, as well as the lapping of the onset of the pandemic in March 2020. Moving into Q2, traditional one year, comp sales calculations will be less instructive as we left the pandemic.

Although, we will continue to provide this one year view, we will also share both a two year comp sales perspective, as well as average weekly sales to capture a more complete picture of our performance. On a two year basis, as compared to 2019, Q1 comp sales were down 7.3%, two-year comp sales improved significantly as we moved into March.

In addition, average weekly sales per restaurant increased from approximately $62,000 in January to $75,000 in March. There are three primary factors driving that improvement. First, we are benefiting from several sales levers that are in place throughout our portfolio, such as the impact of the new Outback menu and our introduction of Tender Shack.

Also, the investment in and growth of our off-premises business is among the most important of these levers. Over the course of Q1, we saw relatively consistent weekly off-premises sales volumes, even as in restaurant sales returned as dining rooms reopened.

We started and ended the quarter averaging roughly $23,000 per restaurant, per week in off-premises sales. Off-premises represented 35% of our U.S. sales in Q1, which is only down 2% from Q4. This occasion is proving to be highly incremental and remain a key part of our growth strategy moving forward.

Second, we ended the quarter with 100% of our domestic company-owned restaurants open within restaurant dining. This is up from 85% at year-end. We have also seen an easing of capacity restrictions, while continuing to adhere to state and local rules, which vary across our portfolio.

Third, the latest round of government stimulus has been a catalyst for sales increases. We saw a large increase in weekly sales volumes over the final two weeks of Q1, after the stimulus was distributed. Importantly, we have seen this momentum carry forward into the second quarter. Through the first four weeks of Q2, our two-year U.S.

comp sales has been plus 12.6%. And in the U.S., we have continued to average $75,000 a week in sales per restaurant. Now turning to our brands, Outback Q1 comp sales were up 4.1%, and Carrabba's comp sales were up 8.9%. On a two-year basis, Outback and Carrabba's were down 5.8% and 0.6%, respectively.

The two-year sales results at both brands were ahead of the major competitive benchmarks. As has been the case since the onset of the pandemic, these brands relied heavily on our strong off-premises business. Total Q1 off-premises sales were 38% of revenues at Outback, and 42% of revenue at Carrabba's.

At Bonefish Grill, comp sales were down 2.9% in Q1, and down 16.3% on a two-year basis. The in-restaurant experience and bar centric culture of Bonefish has been impacted more by capacity restrictions, than our other casual dining brands.

Despite this, we have built an impressive off-premises business at Bonefish, and it represented 25% of their sales in Q1. Fleming's comps were down 2.3% in Q1, and down 15% on a two-year basis. Given their large California presence, 17% of Fleming's locations were closed for in restaurant dining, until mid-March.

We are pleased with their ability to drive sales despite this significant headwind. As it relates to other aspects of our Q1 performance, total revenues decreased 2% versus last year to $987 million. GAAP diluted earnings per share for the quarter was $0.63 versus $0.44 of diluted loss per share in 2020.

Adjusted diluted earnings per share was $0.72 versus $0.14 of adjusted diluted earnings per share last year. Adjusted operating income for the quarter was $91 million. This result exceeded our adjusted operating income from 2019 of $89 million. We achieved this level of operating income on $141 million less revenue than 2019.

Adjusted operating income margin was 9.2% in Q1 versus 2.7% in 2020, and 7.8% in 2019. This improvement relative to 2020 is driven by our ongoing efforts to drive efficiency into our business through simplification.

In terms of our Q1 adjusted performance by cost category, COGS was 170 basis points favorable year-over-year, driven primarily by waste reduction and increases in check average, following the rollout of the new Outback menu. As we indicated last call, our commodities are largely locked for 2021, and we expect little to no inflation for the year.

The labor line was 300 basis points favorable year-over-year. Similar to COGS, we also benefited from simplification efforts. This showed up in a reduction in food prep hours. We are also finding efficiencies in off-premises labor as that business continues to grow. In addition, we are lapping relief payments to our hourly employees from 2020.

Operating expenses were 160 basis points favorable due primarily to a $19 million reduction in domestic marketing expense year-over-year. In addition, we had favorability in areas such as R&M and utilities. This favorability was offset by increases in to go supplies and third-party delivery fees related to the growth in off-premises.

On the G&A front, Q1 was down $3.3 million from last year net of adjustments. This includes the ongoing benefit of cost savings initiatives that we have detailed on prior calls. We remain on track to achieve $15 million of cost savings in 2021, and reaffirm that our G&A expense should be between $225 million and $230 million for the full year.

Overall, we were pleased with our first quarter results. And importantly, it keeps us on track for our long-term margin commitments we laid out for investors last quarter. On the franchise front, as California reopens we are seeing improved sales performance for our 46 locations in the state.

Over the last several weeks, our California market has been comping positive on a two-year basis. We will be collecting on deferred royalty amounts as that business recovers. Our non-California franchise locations, both domestically and internationally, continue to perform well and we are collecting royalties from these locations.

Turning to our capital structure, we recently completed a refinancing of our credit facility and added a new $300 million bond into our stack. The credit facility is a five year $1 billion facility with a $200 million term loan A, and a $800 million revolver.

The facility carries an interest rate of LIBOR plus 2.50 and the rate will decrease as we pay down debt. The bond matures in 2029 and carries an interest rate of 5% and an 8%. These moves have diversified our capital structure, staggered debt maturities, ensured ample liquidity and secured our balance sheet for the foreseeable future.

Moving forward, we will continue to pay down debt with all excess free cash flow until we are at or below our targeted leverage ratio of 3 times net debt-to-EBITDAR. As our EBITDA continues to improve, we are confident that we can make significant progress towards achieving our objective in 2022.

Once we reach our targeted ratio, we will evaluate further debt pay down or other uses of cash to enhance shareholder value. Turning to Q2, as I discussed, we have seen significant domestic sales momentum to start the second quarter. In addition, we maintain a high degree of visibility in our margin improvement journey.

Given this, we have provided guidance for the second quarter. We expect Q2 total revenues to be at least $1.03 billion. This outcome for total revenues assumes a weekly average sales volume of approximately $72,000 in the U.S.

for the remaining nine weeks of the quarter, and a weekly average sales volume of $35,000 over the last few weeks of the quarter in Brazil. The U.S. volume assumption for the balance of the quarter is a slight decrease from current volumes on the assumption that there will be some resumption of traditional seasonality as we get into the summer months.

Should this seasonality not materialize, there will be upside to this outlook. We expect EBITDA to be at least $130 million, consistent with our Q1 EBITDA total. The primary reason, we do not expect a higher EBITDA flow through on sales increases between Q1 and Q2, is driven by the short-term COVID specific challenges we face in Brazil.

Also, as Dino mentioned, there have been staffing challenges within the industry here in the U.S., but any costs associated with hiring have been built into our Q2 guidance. We expect our U.S. segment sales, profit and operating margin to be better than Q1. We expect GAAP EPS to be at least $0.54 and adjusted EPS to be at least $0.60.

The only adjustment to EPS that we are currently expecting in Q2 is to our diluted share count. Under GAAP, we are not allowed to consider the share count benefit of the hedge that we entered into related to our convertible bond.

We have taken that benefit into the share count used to derive adjusted EPS, which in this case is a $0.06 impact on Q2 EPS. In Q2, we expect that adjusted diluted share count will be approximately 99 million shares. But share count is highly dependent on our weighted average share price for the quarter.

In our last earnings release, we provided a table that outlines expected dilution from the convert at various stock prices. We believe our Q2 guidance reflects continued optimism for our current performance in the U.S. and a cautious near-term outlook on Brazil, as they finish out their quarter.

Given the ongoing uncertainty related to the pandemic and the shape of the recovery, we are not going to provide an outlook beyond Q2. We do however, want to reinforce our confidence in the margin framework we laid out for investors last quarter.

As a reminder, that framework suggested that once sales achieved 2019 levels, our adjusted operating margin will be between 6.3% and 6.8%. This is a 150 to 200 basis point improvement from 2019 levels. We have also committed to a longer-term framework to achieve 7.5% operating margins, as sales improve over 2019 levels.

This framework includes expansion of restaurant margins, lower depreciation expense, and ongoing favorability in G&A. In summary, this was another strong quarter for Bloomin’ Brands, and we are well on our way to becoming a better, stronger operations focused company. And with that, we will open up the call for questions..

Ladies and gentlemen, the floor is now open for questions. [Operator Instructions] Our first question is coming from Jeffrey Bernstein of Barclays. Please go ahead..

Thank you. Good morning..

Good morning..

Two questions. One just on the off-premise side of things, in terms of dollar retention, because obviously that's more important than percentages here. But, I think you mentioned you started and ended the quarter at $23,000 per week, I'm just wondering maybe where that was pre-COVID.

And where you think that $23,000 will settle once your dining rooms have fully reopened? Just trying to gauge what you think the incremental sales could be on top of the full return of dine-in. And then I have one follow-up..

Sure. Good morning, Jeff. We believe that as we've made the investment in off-premises carryout and delivery in over the years that it's an incremental occasion. And our goal is to retain as much of that weekly volume as possible. And we've been very successful, as dining room reopen to retain much of that.

And we anticipate that being an incremental occasion, as the dining rooms reopen and gives us the impetus for same store sales growth is one of the big reasons why we're seeing 12.6% sales growth versus 2019 right now. So it's an incremental occasion. And our goal is to hang on to as much of it as possible..

Yeah. And Jeff, just to give you more specificity on the actual numbers, so as you recall Outback was 15% or so of sales pre-COVID, Carrabba's was a little north of 20% of sales pre-COVID. We didn't have off-premises business to speak of at Bonefish or Fleming's.

So, I think that the number on a weekly sales volume standpoint, probably in that $13,000 per store, per week range, somewhere around there..

Got it. So you've gotten incremental, maybe $10,000 per store per week at Outback and presumably Carrabba's right now, relative to pre-COVID..

Yeah, that's right. And we think the Carrabba's opportunity is especially meaningful..

Got you. And then, my follow-up is just on the margin opportunity off of that incremental sales.

I mean, if you were to see those incremental sales hold, which, obviously there's some skepticism that that's fully sustainable, but if they were to hold, I'm just wondering how you think about the margin on those incremental sales? Presumably, there's less apps, desserts and drinks and things like that.

You have some fees for whatever third-party delivery there might be, but just trying to get a feel for what you think incremental flow through would be or what that adds to your margin if you were to hold on to those sales? Thanks..

Yeah.

And you're talking specifically about off premises, correct?.

I'm talking specifically about off-premise. Yes..

Yeah. So, couple things. One, I think it does vary a little bit by channel. But what I would say is, call it 20% of the 35%, that we had this quarter in off-premises mix was our to-go curbside. And the curbside margin is effectively and we've talked about this before, effectively as good as your in restaurant experience.

We've really got that thing wired. There's obviously less labor associated with it. But from margin flow through standpoint, we're pretty much indifferent from our to-go standpoint versus in restaurant. I would say, from a third-party standpoint, it is a little bit lower. But it is certainly pretty, pretty good relative to expectations.

I think that what we talked about a couple of years ago, there being a higher take rate, but that's for us, it's not an issue. We're feeling pretty good about our third-party margin. So, definitely an opportunity to generate some pretty high flow through on these off-premises sales..

Hey, Jeff. I just want to add one thing to the skeptics out there about off-premise. I mean, we have made significant investments in our digital efforts. And we improved our online ordering system this quarter to make it easier, to do a lot of different things we hadn't done before.

We're also making other digital investments that will enable the off-premises business. So, this is not a static event. This is something we're going to continue to build and grow..

And you said 20% of the 35%, just want to clarify that's more than half of the 35%, not 20% of 35%..

Yes. More than half of the 35%. Correct..

Great. Thank you..

Sure..

Thank you. Our next question is coming from Alex Slagle of Jefferies. Please go ahead..

Thanks. Good morning, and Congrats. The margins, I want to focus on is labor. I mean, I have to go back five or six years to see anything this low, just given like the tightening labor availability and the demand, capacity to dine-in. I imagined this would mark a low point for some time.

And can you talk about the dynamics of what kind of volumes you need to maintain this level of margin or other initiatives you have in place to balance, kind of getting the service level where you want it, also maintaining these strong margins?.

Yeah, sure. Thanks for the question. So, here's the response I give you. As you digest the Q1 results, we are in a very different world with regards to labor than we were pre-pandemic. There's no question that we are running and we'll continue to run a more favorable and efficient labor model than we did in 2019.

Between the simplification efforts with the menus driving favorability, we have a reduction in prep hours. And just generally speaking, there are more efficiencies now with how we staff our restaurants. So given that, Q1 sales exceeded our expectations, it's not surprising. We ran this level of favorability in labor.

And in terms of kind of the trending and how we think about that, this favorability could continue to a large degree in Q2. Now, as Dave indicated, we're going to have some step up and training, given the volume increases. But that's all incorporated into the guidance. So, we feel pretty good about where we are with labor..

The other thing I want to add is, much like our off-premises business, we're making investments in our restaurants to help and enable our labor costs to manage that, but also improve customer service.

We're making investments in back of the house equipment, and looks like our digital efforts on off-premises, we're making investments in technology to help our front of the house servers. So we have the scale and technology to move this forward. And as Chris said, this is a completely different environment than it was pre-pandemic..

Thanks. That's helpful. I'll pass it along..

Thank you. Our next question is coming from Brett Levy of MKM Partners. Please go ahead..

Just one follow-up and then a question. And the follow-up is, you just mentioned front of house type investments, can you go a little bit more into detail in terms of magnitude of the investments, what you think you could see in terms of either productivity or savings and pacing? And then I follow up..

Yeah, it's a little too early to say specific numbers, Brett, as what we think the technology savings will be. We believe it will be significant. There are two areas. One, the phone, customers phone is a big part of that. So they can control the customer experience and do pay to table or to tables, other kinds of things.

And as we do, we've got the scale and technology and resources to do that. And then we've got look at technology enablers for our servers, it will be the tablets or whatever it might be to help with them as they go forward. So those are the two things we're doing Brett, it's in test.

We're very optimistic about it, but it's a little too early to say exactly what the numbers would look like..

Yeah, and I'd say in terms of capital, we are going to deploy within our capital budget this year. We've talked about the numbers, but we're going to deploy anywhere from $20 million to $30 million towards IT initiatives this year..

Great. And just going back to the macro side of it, sales environment. Can you give a little bit more clarity? We're starting to see more states going to this 100% capacity. It just saw, Atlanta Sports says that their after stadiums are going there.

So can you give a little bit more clarity or color into how you're seeing the general makeup across the country? The more in the less impacted the earlier in the later markets? Thank you..

Yeah, first of all, I'll turn over to Chris for some of the details. But we're seeing the benefit of it. As the country opens up, people want to come back into restaurant dining. We're keeping our off-premises sale, which is sales, which is so great. But we are seeing that throughout our system. We're seeing it throughout our concepts.

And I'll turn over to Chris to talk about some more details. But it's been a good tailwind for us..

Yeah, and just to give you some perspective and we've talked about there being more of a regional skew to performance, and that still seems to be the case. And again, it has a lot to do with the fact that that a lot of these states are open up with 100% or so. So capacity, still with social distancing, and things like that.

But they're generally, you're able to get a little better throughput into those boxes. States like, just to give you perspective, this last -- call it this last four weeks or so, quarter-to-date, states like Georgia, Tennessee, Texas, Alabama, they all have Q2 quarter-to-date comps in that 15% to 20% range on a two-year basis.

Florida continues to do very well, although it is a little bit regional, South Florida, a little bit slower. But, we've seen a rebound in Orlando, Tampa, Jacksonville continue to be very strong. And then of course, you have the flip side where it's the same states we've talked about where you have a little more in terms of restrictions.

New York, New Jersey, Michigan, Minnesota, those have been a little behind in terms of our overall sales performance, but still even behind, they're in that either slightly down on a two-year basis or positive in the low single digits on the two-year basis. So, we're seeing sort of a sea change across the portfolio.

But, there definitely is some regional bias..

And then just one last clarification, can you give us a number in terms of where you see total capacity right now, in terms of seating? And then I'll turn into the queue..

Yeah, effective capacity, I'd say is in that 70% to 75% range..

Thank you. Our next question is coming from Brian Vaccaro of Raymond James. Please go ahead..

Thanks and good morning. I wanted to ask about the labor market current situation.

Can you just help frame where you stand in terms of your current staffing levels versus pre-COVID? And how you plan to manage the current situation? I think hiring and training is always a big cost for the industry, maybe just perspective on how much higher versus normal that could run in the near-term? And any other perspectives you see worth highlighting?.

Good morning, Brian. Well, first of all, let me say one of the big competitive advantages we had, which was a very smart move on our company's behalf, was that we did not furlough or let anybody go during the pandemic. So that gave us a higher staffing base, a more committed employee base, higher retention, and very low turnover.

So that base is extremely important as we go forward. Now we do participate in the restaurant business and our comp store sales are up 12.6%, so far this quarter. And Chris also mentioned that you can't look at 2019 staffing levels and say that we will return to those levels given that such a different world than the pandemic.

So, we are staffing where we need to be. We don't have any significant problems. Our team is doing a great job addressing the opportunities. And as we go forward, the guidance, the labor cost guidance -- like labor costs in our guidance, and as part of our model going forward.

But I think the decision to hang on to our people, not let anybody go was crucial, as we got to this point..

All right. And a lot of moving pieces obviously comparing the business today versus pre-COVID, the sales channels that are coming in and the different efficiencies, some of which are unique to you as you streamline the business et cetera.

But, I guess the question that I had was, is there a way to frame the business today is generating AUVs that are say around 10% above '19 level, taking into consideration the reduced prep hours, the efficiencies associated with off-premise, obviously less server labor, et cetera.

Is there a way to frame sort of the cost per week dynamic that you compared to '19, for an average restaurant that you run, that you would need to get back to, to comfortably run AUVs in the high single digits or 10% versus pre-COVID?.

Yeah. I don't have an immediate answer to that in terms of costs per week.

I guess, what I would say, Brian is, as you think about our go forward efficiencies and our go forward margin structure, I would just fall back on the commentary we gave last quarter, where we laid out a very detailed framework by category in terms of how we think this could come together and play out.

But kind of to your point, one thing we did say, though, is that we had an opportunity to get to 7.5% operating margins, as the sales environment improved over 2019 levels, indicating that we do believe there is ability to further leverage the P&L as sales volumes improve. And look, we're seeing that right now, obviously.

So, I would say in terms of sort of not the cost per week answer, but really just in terms of framing the go forward margin opportunity with the context of the environment we see today..

All right, fair enough. And then I just have one quick follow up if I could. Could you provide a quick update on Tender Shack, where the weekly volumes are trending for that business as it moves through the first quarter and quarter-to-date, relative to the prior targets you provided? Thank you..

Sure. We continue to do well in Tender Shack across all of our dimensions, be it financial impact to our restaurants, acceptance by our consumers, and running it by the operators. They're doing a really good job on that. When the restaurant dine-in occasion opened back up, the sales at Tender Shack did soften a bit.

We do believe that the $75 million annualized sales goal is attainable, but we have some work to do on that. With the restaurants reopening, we've got to increase the brand awareness, we've got to add some potentially some additional products, we've got to look at pick up opportunity in our restaurants. And we're looking at some partnerships.

But most importantly, our sales volumes right now are above our -- they are profitable. They're above the goals that we need to set. And we expect to see further improvement so far in the Tender Shack opportunity..

All right. Thank you..

[Operator Instructions] Our next question is coming from Sharon Zackfia with William Blair. Please go ahead..

Hi. Good morning, and congratulations on a strong first quarter and an incredible April..

Thank you..

I guess, it would be helpful to kind of get some insight into what restaurant level margins looked like for you, domestically in April.

And I'm wondering, I know you've talked about the shift in marketing to focus more on digital, but I'm wondering if there were any other shifts that you've done as on-premises has rebounded? Whether you pulled away at all from kind of off-premises marketing or made any other changes to the way you're addressing the consumer?.

Yeah. Hi, Sharon, thank you for the compound, we appreciate it. The sales growth or the digital efforts that we're doing will continue. There is going to be post-pandemic, certainly a shift in digital versus network television or cable television and things like that. And we're very well-prepared to making even more investments in that category.

We have very good sense of what our return on investments look like from the marketing standpoint. And we're going to support our dine-in business and our off-premise business. We will do both. And we'll continue to examine the marketplace and continue to spend primarily up against our digital efforts as we move forward..

Yeah. And on the restaurant level margin, we're still in the process of closing the books for April.

But, what I would tell you is the early read would suggest that we are on track to achieve what we talked about in the prepared remarks, which is we do expect to see improvement in margins in Q2 from Q1, driven a lot by the higher sales levels and a continuation of some of the efficiencies that we saw in Q1..

Thank you..

Thank you. Our next question is coming from Mho Crowe [ph] of JPMorgan. Please go ahead..

Good morning, guys. Thanks for taking my question. This is Rahul for John Ivankoe from JPMorgan. I'm just curious to -- wanted to understand better on what -- like if there is a way to quantify what kind of contribution in this results are from say temporary lack of hiring or inflation versus just because of structural better efficiency improvements.

I'm just trying to get a better sense for divergence between both these items..

Yeah. So, I think that if you think about labor in Q1, I would say the majority of the favorability that we're seeing relative to 2019 levels is driven by the simplification efforts that we're seeing.

And in terms of the hiring that we may have to do or the costs, in terms of hiring, the training costs, those are not prohibitive, they're not going to be a massive number in our P&L results. That's why we feel confident we can build them into the guidance and still have margin expansion in the second quarter.

So again, there are some increases in cost, there is some elements of sales being a little ahead of inflation, but the majority of our labor favorability that you see in Q1 is being driven by our simplification efforts..

Understood. Thanks, guys..

Thank you. Our next question is coming from Karen Holthouse of Wells Fargo. Please go ahead..

Hi, this is Karen on for Jon Tower. Another margin question for you. And maybe instead of kind of working forwards, working backwards. And if you look in the quarter, you were outperforming, you’re both at 6.3% to 6.8% margin target and even the longer-term one. And I understand some seasonality is at play.

But if we start to look at that more by cost bucket, could you sort of frame it as the line items where you think you might have been overshooting in the quarter?.

Well, your point is spot on. I do think that there is a seasonality in the business where Q1 will tend to over perform from a margin perspective.

I don't think anything we saw in Q1 changes us from that long-term framework we provided where we said, hey, look, we do believe there's 50 basis points or so of restaurant margin expansion in the long-term model.

I think you're going to see that in COGS, you're going to see that in labor, you're going to see that an advertising with some give back in restaurant operating expenses. So, with that framework, everything really came together kind of how we said it was going to come together.

Now, we just have the sales to support the hypothesis that we laid out for investors last quarter. So, I think we're in pretty good shape on that front..

Yeah. I think Karen too, we're making the investments in our business to continue to enhance margins and improve customer service. We talked about the digital investments, this will help us on managing ways to help us on the labor, cost going forward, all different kinds of aspects of our business.

So, not only are we enjoying the margin benefits right now, we are investing behind the business to set us up for the long-term to continue this kind of margin performance that we've been having..

And then one just quick question on the off-premise.

Can you share just percent of sales that was off-premise at Outback and Carrabba's in the first quarter, and then in April, quarter-to-date number?.

Yeah. Outback was 38% of revenue and Carrabba's was 42% of revenue.

And what was the other question?.

And then in April? For the quarter and then also in the April number?.

Yeah, we'll get that you. We don't have that..

All right. Thank you..

Thank you. At this time, I'd like to turn the floor back over to Mr. Dino for closing comments..

Well, thank you for attending everybody. We appreciate your time and look forward to updating you in July on our second quarter results..

Ladies and gentlemen, thank you for your participation and interest in Bloomin’ Brands. You may disconnect your lines or log off the webcast at this time. And have a wonderful day..