Good day and welcome to the Denny's Corporation Fourth Quarter and Fiscal Year 2020 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Curt Nichols, Vice President, Investor Relations and Financial Planning and Analysis. Please go ahead, sir..

Thank you, Cody, and good afternoon, everyone. Thank you for joining us for Denny's fourth quarter and full year 2020 earnings conference call. With me today from management are John Miller, Denny's Chief Executive Officer, Mark Wolfinger, Denny's President, and Robert Verostek, Denny's Senior Vice President and Chief Financial Officer.

Please refer to our website at investor.dennys.com to find our fourth quarter earnings press release along with any reconciliation of non-GAAP financial measures mentioned on the call today. This call is being webcast and an archive of the webcast will be available on our website later today. John will begin today's call with a business update.

Mark will then provide some comments about our franchisees and development. And Robert will provide a recap of our fourth quarter financial results and current trends. After that, we will open it up for questions.

Before we begin, let me remind you that in accordance with the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 the company knows that certain matters to be discussed by members of management during this call may constitute forward-looking statements.

Management urges caution in considering its current trends and any outlook on earnings provided during this call such statements are subject to risk, uncertainties and other factors that may cause the actual performance of Denny's to be materially different from the performance indicated or implied by such statements.

Such risks and factors are set forth in the company's most recent annual report on the block 10-K for the year ended December 25th, 2019, and in any subsequent Forms 8-K and quarterly reports on Form 10-Q. With that I will now turn the call over to John Miller, Denny's Chief Executive Officer..

Thank you, Curt, and good afternoon, everyone. I hope each of you have remained safe and healthy since we last shared an update on Denny's.

Our fourth quarter we're setting up to be the best sales performance since the pandemic began until a resurgence of COVID cases caused states and localities to reinstate stay-at-home orders and capacity restrictions in December.

While losing access to outdoor dining in California, where 25% of our domestic system is located, was a pause in our recovery story, I'm so proud of how our teams kept up their focus on the future and ensuring that Denny's is well positioned for the recovery.

As restrictions began to lift in January, domestic system-wide same-store sales thus far in February have improved to their highest points during the pandemic, despite having a similar level capacity restrictions as of September through November time frame.

This indicates the consumers are ready to dine with us again and the sentiment around vaccinations are starting to drive more consumers into our restaurants. The vaccination is expected to be available to a high percentage of the population by mid-year.

We are looking forward to the second half of the year, and our exceptional team members and operators are ready to welcome guests back in to more and more of our dining rooms. In this dynamically changing environment, we have been focused on four key guest-centric themes, reassurance, value, comfort and convenience.

I'll now touch briefly on each of these. As guests continue to return to our restaurants, it is more important than ever that we remain focused on the health and safety of our team members and our guests.

We are committed to reassuring our guests that Denny's provides a safe dining experience by consistently executing our enhanced cleanliness and sanitation station procedures at all customer touchpoints.

We've also provided multiple options for a safe experience beyond our dining rooms, including outdoor seating, curbside pickup, drive-up ordering and contactless delivery. Our second area of focus is value. Denny's is known for every day value.

We believe value will remain important in this economic environment as guests seek to maximize the impact of their dollars on quality food options for the whole family. We understand that value comes in different forms and we consider our value approach to be a comprehensive balance between price, abundance, convenience and bundled value.

Starting with price value, our well-known $2 $4 $6 $8 Menu has strong affinity with our guests 14% level.

We continue to feature abundant value options like our popular Super Slam, which sold nearly 11 million plates in 2020, with off-premise being a large focus we strive to provide to be in space value to our guests through free delivery in ordering through our website or mobile app, which is also induced new consumer trial.

Additionally, we have seen our Denny's rewards members increased by over 20% since the beginning of the pandemic, allowing us to have more targeted offerings delivering directly through our guests.

Lastly, we were able to feed nearly 385,000 families to our new bundled value lineup of Shareable Family Packs offering a delicious, cost-effective way to feed a family of four. Our third focus area is comfort. We strive to ensure that Denny's is a place where our guests were welcomed and valued.

And whether they're dining with a large family or as party of one, we believe our guests view the Denny's experience as a time to build connections in an environment that is both inviting and comfortable.

After issuing multiple streamlined menus, we began using a full core menu in November, providing more comfort food options, even though the menu is approximately 25% smaller than our pre-pandemic core menu.

We will also be launching a comparably sized new core menu next week that continues to feature our culinary innovation with new creations within our bowls and melts categories.

Our operations team has also reinforced the critical need for comfort by reminding our entire system of the rules we live by, including expectations that everyone is welcome to dine at Denny's, everyone is treated like our favorite guests and everyone has shown kindness and respect.

Our established Heritage restaurant image has also received consistently positive guest feedback largely due to its welcoming and relaxed feel. Despite the pandemic, our system completed 22 remodels in 2020, including five in the fourth quarter. And our final area of consumer focus is convenience.

We believe our guests will continue to expect technology to bring enhanced value to their dining experience, whether in-restaurant or off-premise options like our Denny's on Demand platform.

We have also implemented curbside pickup parking signs to deliver a better experience for our guests and team members while promoting guest-controlled digital ordering from the parking lot. We recently launched our Apple Pay for our Denny's on Demand iOS mobile app, and we continue to promote outdoor dining solutions we are permitted.

We were fortunate to already have an established offering in this business through our Denny's on Demand platform prior to the pandemic.

Average weekly sales for all off-premise transactions have doubled since the beginning of the pandemic, growing from approximately $4,000 per week per store a year ago to approximately $8,000 per week per store through the first two weeks in fiscal February.

We have been pleased with our ability to sustain this higher level of off-premise sales as dine-in transactions have evolved. We are also excited that our test-and-learn culture has yielded two new virtual concepts that we believe will provide additional market share opportunities. The first of these is called The Burger Den.

This concept allows us to focus on one of our strengths, great burgers with new varieties using ingredients already in our pantry. Test results have been favorable and suggest the transactions from these tests are highly incremental. Over half of our domestic locations have signed up to participate in a three-phase rollout.

The first group launched earlier this month while the remaining two groups are slated to launch by the end of the first quarter. The second virtual concept called The Melt Down features handcrafted melts with fresh ingredients.

While this brand is able to utilize approximately 70% of what is currently in our pantry, our innovative culinary team has crafted new craveable products, such as the Giddy-Up Melt featuring brisket burnt ends with sharp white cheddar, creamy barbecue sauce and pickles on grilled artisan bread, or the Talkin' Turkey Melt, made in the turkey, bacon, tomatoes, Provolone cheese and creamy herb spread.

Test results have been similarly encouraging for The Melt Down, and over half of our domestic locations are expected to launch starting in the second quarter. These brands provide opportunities at dinner and late night to leverage underutilized labor and kitchen space.

In fact, they were 70% of transactions from The Burger Den occurred during the dinner and late night dayparts. In closing, I sincerely want to thank our leadership team and franchise partners for their continued engagement, steadfast resolve and unwavering commitment to this brand.

I am very much looking forward to this new year and working collectively with our teams to reassure our guests, provide compelling value options and deliver the comfort and convenience our guests see, whether it be our dining rooms, on our patios, or in the comfort of their homes.

With that, I'll turn the call over to Mark Wolfinger, Denny's President, to discuss more about our franchise and development..

Thank you, John. I want to echo your comments about our innovative and dedicated teams, and I also look forward to what this brand can accomplish in 2021 and beyond. Currently, 98% of our domestic system is open, including over 1,000 restaurants operating with open dining rooms. This is an increase of almost 25% from the end of December.

However, we still only have approximately one-third of our domestic franchise restaurants operating 24 hours a day, seven days a week.

While we cannot control state and local restrictions and the related impact on our sales trends, we have been working diligently with our franchisees to analyze the incremental sales and profitability potential from expanding their operating hours.

Turning to development; we are very encouraged that even in the midst of a global pandemic, our franchisees opened 20 restaurants during the year, including four restaurants during the fourth quarter. This included eight international openings in four different countries, which brought our total number of restaurants to 1,650.

Additionally, our system completed 22 remodels during the year despite remodels being deferred until 2022. These openings and remodels underscore the confidence and future opportunities our franchisees see within the brand. However, the pandemic has also prompted higher closures than our historical run rate.

During the fourth quarter, 17 franchised restaurants closed along with one company restaurant, bringing the year-to-date system total to 73 closures. Six of these closures during the year were due to lease expirations.

The remaining 67 closures are related to franchised restaurants with average unit volumes of approximately $1 million prior to COVID-19, a level which is well below the 2019 franchise average unit volume of $1.7 million. We believe that pandemic accelerated these closings that we had otherwise anticipated over the next few years.

However, this acceleration should ultimately enhance the overall health of the franchise system, allowing multi-unit franchisees to focus on their more viable restaurants. As a reminder, the average restaurant requires approximately 70%, that's seven-zero-percent, of its 2019 sales to cover both fixed and variable cost items.

Although December was challenging for restaurants impacted by additional restrictions, we are pleased to say that, on average, our restaurants continued to see sequential improvement in profitability with each successive quarter.

This momentum, coupled with the initial round of PPP funding was very helpful with almost all of our domestic franchise restaurants receiving stimulus support. We are currently supporting our franchisees in their efforts to secure another round of PPP funding, and we believe they will be successful again.

While we anticipate additional closures, we believe we have weathered the worst of the pandemic and are on an upward trajectory toward historical recovery.

We look forward to returning to net restaurant growth in the future and are confident that we will do so backed by our existing domestic and international development commitments, including over 75 commitments from our recently completed refranchising strategy.

At the same time, we believe our overbuilt industry will suffer an unfortunate and meaningful rationalization of seats through the pandemic, largely at the expense of small independent full-service operators. While we don't celebrate this prediction, we believe brands that survive will have an opportunity to gain market share.

We have a proven record of converting existing spaces into Denny's locations. In fact, over 60% of our openings since 2011 have been conversions. These less capital-intensive opportunities provide enhanced ROIs for franchisees and our experienced development team is already assessing the landscape for future Denny's locations.

I will now turn the call over to Robert Verostek, Denny's Chief Financial Officer, to discuss the quarterly performance.

Robert?.

Thank you, Mark, and good afternoon, everyone. I will share a brief review of our fourth quarter results and current trends. As a reminder, our fourth quarter results include an additional operating week as 2020 was a 53-week year for us.

Domestic system-wide same-store sales declined 33% during the fourth quarter after momentum in October and November was overshadowed by the reinstatement of stay-at-home orders and additional capacity restrictions in December.

In fact, for the first time since the pandemic began, outdoor dining was prohibited in California, where approximately 25% of our domestic restaurants are located.

Consequently, California restaurants weighed on the total domestic system-wide same-store sales results by approximately 7 percentage points in December and 5 percentage points during the fourth quarter.

Same-store sales at domestic restaurants operating with open dining rooms declined approximately 25% for the fourth quarter, compared to a decline of approximately 48% at those domestic restaurants operating with closed dining rooms.

Before discussing current trends, I want to mention that we will continue our standard practice of comparing 2021 domestic system-wide same-store sales to 2020. Additionally, we will provide a comparison of 2021 domestic system-wide same-store sales to 2019.

We believe comparing to 2019 will provide a more consistent and informative representation of our recovery. With that being said, we have been encouraged by the sequential improvement in January and February as restrictions have started to ease.

Domestic system-wide same-store sales for the first two fiscal weeks of February declined 25%, which is a significant improvement from December. In addition to the weight of government-imposed restrictions on our business, we have also discussed the impact of stores operating with limited hours during the pandemic.

Domestic restaurants, which were opened 24 hours in the fourth quarter had a same-store sales decline of approximately 23%, compared to a decline of approximately 39% at domestic restaurants operating with limited hours.

While we estimate that our overall same-store sales results in Q4 were impacted by approximately 8 to 10 percentage points from restaurants operating with limited hours, we were encouraged that the sales through the first two fiscal weeks of February declined only 6% for the approximately 375 restaurants operating 24 hours with open dining rooms.

Franchise and license revenue decreased 27.4% to $47.2 million primarily due to the impact of COVID-19 on sales at franchise restaurants as well as fewer equivalent units, partially offset by an additional operating week.

Franchise operating margin was $21.4 million or 45.2% of franchise and license revenue compared to $31.8 million or 48.9% in the prior year quarter. This margin decrease was primarily driven by the impact of the COVID-19 pandemic on sales and fewer equivalent units, partially offset by an additional operating week.

Company restaurant sales of $32.9 million were down 32.6% due to the impact of the pandemic on sales and fewer equivalent units, partially offset by an additional operating week. Company restaurant operating margin was $1.4 million or 4.3% compared to $8.7 million or 17.7% in the prior year quarter.

This was due to the sales decline and related deleveraging impact of COVID-19, as well as the reduction in equivalent units, partially offset by approximately $1 million of favorable reserve adjustments and tax credits related to the CARES Act and an additional operating week.

Total general and administrative expenses were $20.5 million compared to $15.4 million in the prior year quarter.

This change was due to an increase in share-based compensation expense, partially offset by a $3.1 million decrease and corporate administrative expenses from cost savings initiatives and previous reductions in personnel due to the COVID-19 pandemic including approximately $900,000 in tax credits related to the CARES Act.

These results collectively contributed to adjusted EBITDA of $8 million, with approximately $2 million attributable to the 53rd week.

Interest expense was approximately $4.6 million compared to $3.6 million in the prior year quarter, with the increase primarily due to higher interest related to our recent debt amendment and the amortization of de-designated interest rate swap losses from accumulated other comprehensive loss, net.

The benefit from income taxes was $100,000, yielding an effective income tax rate of 2.7%. Adjusted net loss per share was $0.05, compared to adjusted net income per share of $0.23 in the prior year quarter.

Adjusted free cash flow after cash interest, cash taxes and cash capital expenditures was $2.1 million, compared to $12.1 million in the prior year quarter primarily due to a reduction in adjusted EBITDA and higher cash interest, partially offset by lower capital expenditures and cash taxes.

Cash capital expenditures, which included maintenance capital, were $1.5 million compared to $3.2 million in the prior year quarter primarily due to the prior year real estate acquisitions related to our 2019 refranchising and development strategy.

We ended the quarter with approximately $225 million of total debt outstanding, including $210 million under our credit facility. This is the lowest reported balance since entering our credit facility in 2017.

After considering cash on hand, the remaining capacity under our credit facility and current liquidity covenants, we had approximately $82 million of total available liquidity at the end of 2020. The pandemic has affirmed for us the value of a conservative leverage philosophy.

Prior to the pandemic, we would have targeted longer-term leverage somewhere between three times and four times adjusted EBITDA. We are currently more comfortable with a range of between two times and three times.

Turning to our business outlook; given the dynamic and evolving impact of the COVID-19 pandemic on the company's operations and ongoing uncertainty around the timing and extent of an anticipated recovery, the company cannot reasonably provide a business outlook for the fiscal year ending December 29, 2021 at this time.

As a reminder, on December 15, 2020, we entered into the third amendment to our existing credit facility, which reduced the revolver commitment to $375 million, with an additional step down to $350 million on the first day of the third quarter of 2021.

Financial maintenance covenants are raised through the first quarter of 2021, followed by the introduction of more favorable covenant levels in the second and third quarters of 2021. Under the amendment, we are prohibited from paying dividends, making stock repurchases and other general investment until we deliver our 2021 third quarter results.

Therefore, we intend to deploy cash towards paying down our revolver as we continue to enhance our overall liquidity position. Additionally, capital expenditures will be restricted through the third quarter of 2021.

Finally, I want to mention how proud I am of how our field leadership and home office teams have remained focused on serving our guests while also managing business costs to support Denny's recovery through the challenges of the COVID-19 pandemic.

In doing so, we have and will continue to leverage the strength of our asset-light business model and fortified balance sheet to ensure the success of our dedicated franchisees and this brand. That wraps up our prepared remarks. I will now turn the call over to the operator to begin the Q&A portion of our call..

[Operator Instructions] We'll take our first question from Nick Setyan with Wedbush Securities. Please go ahead..

Hi. Thank you. I think I heard a remark that in February, units that have both the dining open and are open 24 hours, those units were down 6%.

Did I hear any of that correctly?.

Hey Nick, this is Robert. Yes, you did hear that. That was for the first couple of fiscal weeks of February. So we continued to make progress on our same-store sales results and are really encouraged by the fact that when we're 24 hours with the ability to serve guests in the restaurant, we are really making some headway.

So yes, those restaurants were down 6%. You did hear correctly..

And is there any way to maybe break down like the weekend comp versus the weekday comp? Is it possible that maybe the weekdays are already flat, maybe even positive? And I'd say it's mostly the weekend of the capacity constraints that are leading to the downtick..

So we're kind of looking at the data we have available to us right now, Nick, that may be one that we have to take off-line with Kayla and Curt. Frankly, I don't know if we have any insight to what you're saying. But again, down six in the 24/7 dine-ins are really positive. Really, -- and we broke this out in our results.

It's in the investor deck on Slide 13. If you look at that, we broke out the ones that have 24-hour operations, I think the key is really pushing forward on that on 926 that are more limited right now as opposed to the weekend versus weekday, I think there's a large benefit to getting those restaurants open.

And we have been working with our Denny's Franchisee Association board, and they are fully supportive of the movement towards 24/7 operations.

And we have developed -- in the process of developing those flow charts that kind of that if-then kind of logic that says, if you're in a state that has this level of capacity, then we want you to move to 24 hours over this time frame. So that's really one of the key focuses as we move forward here..

Understood. That's pretty amazing, that that's where they are, those stores. Regarding the virtual brands, obviously, dinner and the non-breakfast dayparts has been something that you've been trying to tackle for a long time. And it does seem like this could potentially be a pretty wonderful addition to the capacity availability during those dayparts.

Any early indication in terms of what the average weekend sales contribution could be from those brands?.

Yes, Nick, this is John. We've not given any indication yet and are not ready to guide. I would just say that the transactions were incremental and therefore, sort of reached the threshold that it made sense to expand the test and then beyond the test to a rollout on a sign up basis.

So as we've said, in January and then again, affirming on today's call that we'll -- about 1,000 restaurants have signed up for The Burger Den and a similar number for -- to roll out over the next two or three quarters for -- I'm sorry, it was about half the system.

Let's check the script but a significant number have signed up with the enthusiasm to get it going. Now where it grows, when you have the system behind it in more time and support, now that will be a different matter. There's probably seen enough on a modest test to continue to roll it..

Just a follow-up on that.

What kind of support over time for those brands do you envision? I guess, maybe the answer is that it's too early to know exactly where that evolves, or what kind of support?.

Sure. I think if you look at what's happened with the handful of brands that are -- that have done -- that have been talking about this more regularly, they've had -- they have social media channels and different channels to support this more deliberately rather than just through search through DoorDash or Uber Eats.

So I think there's a difference between a launch platform where you discover them and something a little more deliberate in support when you have enough scale..

Understood. Thank you very much..

Thanks, Nick..

And we'll move on to our next question from Michael Tamas with Oppenheimer..

Thanks. Hope everybody is doing well. Just it seems like you guys have a lot of sales catalysts in front of you from opening up at late night to the virtual brand and the menu changes you've talked about.

So do you have any rank order or bucket how you think the impact of these will be felt going forward? Just from the outside, it seems easier to sort of flip the switch on the virtual brands versus trying to convince 70-ish percent of your franchisees open at late night.

Just -- can you maybe just talk about how you think those sort of play out?.

Sure. Well, I think we're a brand that's been around for 68 years, and we've built tremendous equity in late night.

We've been talking in the last year and a half since we've had post sort of scale of our Heritage remodel program to continue to work on four dayparts as an all-day diner, and are just now wondering into sort of the middle innings on building dinner and late night brand equities beyond just breakfast all-day equities.

So the desire for the brand, for our whole brand, our franchisees to get to continue with our dinner and late night efforts is a frustrated desire because of the pandemic and what it's done to limiting hours. So a lot of -- so I'd say our priority in order would be expanding the hours. Remember, the -- it's part of our brand tradition.

We don't lose -- it's a long historical built of equity. We don't want to lose and we have dayparts based on family needs and flexibility required for their livelihood. So getting those folks back to work, getting those sales back in our system is a priority for us.

And remember, even on the virtual brands, when others are closed and we are open late night with the virtual brands to be able to provide service, that's proven to be a benefit for us, a unique benefit for us in particular as well.

And then I'd say, remember also, I just want to make this point that a lot of those limitations are based on jurisdictional restriction, not necessarily franchisee's desire to open. So restaffing is a component of it, but a bigger component, I think, is just the permission to do so. So those will come in time.

And then I think right behind that would be because of the high profitability of dine-in sales is to build all four dayparts dine-in, but we don't want to have the high teens, low 20 margin of third-party delivery to-go or in the high incrementality of it, the averaging down the age of our brand.

Just in the last from April till now, we've got about 40% of these to-go transactions at -- up to age 45 and it'd be the inverse of that for dining in, we're about 40% would be up to age 45, and then boomers and seniors will represent 60% of the dine-in. So these are beneficial for trial for our brand.

And so holding on to that share while also building dine-in would be the next priority. And then, of course, virtual, we think can be a key component to fill in those dayparts for our brand..

Awesome. Just a quick follow-up on that and then another question. Is there any sort of incentive program to get franchisees to open for late night, I think, like you guys were running during the fourth quarter? And then the real question is, you talked about for a little while now, the pulled forward unit closures for future years.

So does that mean that maybe as we get through '21 into '22 and beyond, that there may be some below average closure years, or how does that sort of play out here? Thanks..

Hey Michael, it's Robert. I'll take the first piece of that with regard to the 24/7. You were -- you are correct. We did have an incentive in the fourth quarter. And we did improve the number of units that were open and operating for -- in the fourth quarter by about 10% with that incentive.

Currently, as we have moved into Q1, we have not re-implemented that incentive.

In fact, our chosen path from this point now has been working directly with our Denny's franchise association leadership to get their support, and we will be and have already been done working our DMA meetings, designated marketing area meetings, with the various franchisees to move in that direction.

As restaurant dining rooms continue to open up, there is more and more appetite to get to 24/7. So we will work through that. And I do believe that we will be successful with regard to that. As we move forward, particularly, again, as restrictions, curfews, dining rooms could get back open, we have a high sense that we will get back to that.

And it really is with what John -- really an extension of what John just said. It's our heritage, and we will get back to that..

Michael, it's Mark. So I'll take the second part of your question here. And I think it's a real good one. It really speaks to, I think, the other side is a pandemic and just a couple of fact-set points here. One is our closing number in 2020 was 73.

I mentioned in my comments, 67 of those were franchise restaurants with AUVs, or average unit volumes, of $1 million or less, versus $1.7 million average unit volume. So again, those are 2019-type of comparables because obviously, 2020 has the impact of the pandemic. So 67 of the 73 closures were basically low volume stores.

And just as a reminder to everybody on the phone, we -- if you go back and look at the last five to 10 years, we've been averaging about half that number in closures, call it, mid-30 range. So basically, our closure number had doubled in the current year, obviously, because of the pandemic.

We do believe that this obviously was a pull forward of closures in the future because of the low volume aspects of that. And again, when I look at the other side of this, which is the opening equation, as we -- I think all three of us mentioned in our comments today, we believe there's a drive opportunity on this -- other side of this pandemic.

I mentioned the fact that we continue to see a great deal of seats leaving the marketplace in full serve. A large portion of full serve dining in the US is independent players. And again, we don't relish or celebrate that situation that clearly creates an opportunity on the opening side, especially in the domestic business.

So again, we're going to drive the opening number as we go forward. And the closure number, again, as I mentioned, we believe that probably was a pull-forward, especially when you look at 67 of the 73 with those low volume numbers of $1 million or less in average unit volume..

Awesome. Thanks, guys..

Thanks, Michael..

Thank you. We'll take our next question from Jake Bartlett with Truist Securities..

Great. Thanks for taking the questions. My first was about off-premise mix and the off-premise average weekly sales that you mentioned. I think sometimes we look to Florida to see what the future might look like with much less restrictions, people getting back to sort of normal a little bit in terms of the behavior.

But I'm curious, in stores in Florida, or maybe others that have less restrictions, how have the off-premise sales held up? And I know thousands kind of average, so if you could kind of break it down to stores that are kind of have less restrictions, and has that -- does that remain elevated still in those types of markets?.

Well -- this is John. We may want to take that one offline, too. I have sort of the brand-wide data, and it's -- I sort of tell you, February to February, how it's moved, and dine-in was 88%, February here at 66% now. Pickup's gone from 7% to 18%, third-party from 4% to 14% and so forth. And I can give you that information on the year.

I don't have at my fingertips the markets that have been like at 75% capacity. So that might be a question we have to address in future release. That's a great question..

Okay..

Hey Jake, this is Robert. Just a quick add on to that. But we really haven't broken that out specifically the way you looked at it. But one of the things that I think to pay attention to is with our comp, and we quoted within my script how California impacted the entire quarter, I think it was 5 points on the entire quarter.

So that would mean other states, such as the Texas and Florida where there are less restrictions, are performing much better. And even within that, we have still maintained this nearly doubling of the off-prem sales.

So while we haven't specifically said what Florida is off-premise and with their less restriction, it's safe to say that without a higher level of what -- where they were in prior years, we wouldn't be able to maintain that doubling. So I hope you kind of get that the loose correlation there..

That makes sense. And what I'm really trying to get is your level of confidence that the off-premise sales will remain elevated even as diners come back into the store..

Right. I would say elevated is a good word. This is John again. But I think, again, to predict precisely what happens and how people work, how they office, their use of third-party and their desire to get out, all those things are predicted to be dynamic changes. So I'd say that we've come short.

We'll maintain a good portion of this, but the percentages are going to move around as restrictions continue to lift..

Got it. And then, I had a question about unit growth in 2021. I know you're not giving specific guidance, but think we talked recently about, I think it was 50 to 75 stores that are in that kind of $1 million to below AUVs and that would more kind of potential for closings. I think you called it a guardrail for closures.

Does that remain true? And has that changed with the latest round of PPP? So I'm just trying to understand whether you expect elevated closures to stay around for the next couple of quarters, or has the PPP change things?.

Jake, it's Mark. That's a great question, a very broad one. So I'll try to sort of take it apart a little bit, and maybe John and Robert will jump in here as well if I miss something. So I think back again on the annual number, we had 73 closures, 67 of those were low volume, $1 million or less in AUV.

We did mention in one of our previous calls, I think it was in the third quarter call, the fact that -- I think it was in Robert's script, actually, Robert mentioned that before we had the question, we had identified somewhere between 50 and 75 more lower volume stores.

And so obviously, some of those closed during the fourth quarter to take our total number up to 67 closures on the low volume side, 73 in total, 67 low volume. I think the other part of your question was around PPP and really the second round of PPP, which obviously we're in the early stages of the application process.

Again, we're supporting our franchise system and are optimistic about the PPP funding. I think I would stick probably with that 50 to 75 range that Robert provided and knowing that we also closed some during the fourth quarter as well.

Again, an average unit volume of $1 million is not universal as far as the profitability of that location depending upon where you are in the country. So obviously, the higher operating environments like the West Coast, average unit volume is, obviously, the expectation out there is stronger, the cost of real estate, the cost of labor, etc.

But in other parts of the country, a lower volume store, lower -- below the chain average. And again, our franchise system average is $1.7 million, those stores actually may be profitable in different parts of the country. So it's tough to provide a universal response.

But again, I go back to Robert's comments in third quarter that was 50 to 75 more lower volume stores. That was a US number, by the way. We obviously closed several more during the fourth quarter that took our number to 67 closures, low volume side.

And so that number, that 50 to 75 range sort of sticks with some kind of adjustment, obviously, the fourth quarter closure. So that's a long-winded response, but certainly happy for a follow-up question, Jake, if you have any..

Great. No, that's very helpful. And then really the last question is on the virtual brands, you've mentioned that 50% are going with one concept, 50% are going with the other.

Is there overlap between those two? I'm just trying to figure out whether you've given the franchisee a choice of one or the other, or if not, what went into the decisions? Is it more of a regional from separation, or how do you become -- how is that 50% of the franchisees are taking on each of the two brands?.

That's a great question. This is John again. So widespread interest, it falls along the typical lines. We have franchisees that are hungry for transactions. The trial like to be front-ended test and change. And they would be the type of franchisees that would do both brands.

And then we have others just for complication reasons or staffing level questions, might want to just do one of the two and not both. And so you get a mixed bag across the whole system of how this is being adopted.

And then you have those that say, let's -- let everybody else go first and figure out all the challenges of training and inventory and then they want to surely jump in after things have been perfected a little bit. So that tends to be our style of rolling things out that wouldn't be seen as a brand mandate. It's not straight-line Denny's-related.

It's a benefit to help build transactions -- incremental transactions for our system. So we've been pleased with the enthusiasm about it. The system asks the same kinds of questions of how things are going in the test stores. And again, there's a fair level of interest and sign up in the early going..

Great. Thank you very much. Appreciate it..

Thank you. We'll now take our next question from Todd Brooks with CL King & Associates..

Hey. Good afternoon, everybody. Hope everybody is well. Just a follow-up -- hey everybody. Just a follow-up to that last question.

How unusual is it -- and I know you haven't shared results with the virtual brand test, but with new initiatives in the past, how unusual is the strength of this response from the franchisees where you see half the base willing to move forward fairly quickly with both of the brands?.

Right. Well, this is very unusual because it's a virtual brand, and there would be no part in our history. Quite frankly, there's not a real strong precedent in the industry history to do those virtual or host kitchens. I'd say that's a fairly new phenomenon that's been born. Some people see it as a race.

If they have scaled brands with distribution across lots of states to get something in there to grab the space or the page in DoorDash and others see it as a distraction.

There are some types of things that if you go first and big, you can grab a lot of share, but we don't think that the -- we don't think that the results of a couple of prominent announced brands will be that similar results for all virtual kitchens. We think that's -- there are some extraordinary standouts and people use that as the benchmark.

They might be disappointed, but there's been some extraordinary launches. But we do still think it has a place, when you have capacity and family dining Sunday through Thursday after 5:00 and late-night capacity, and can build virtual brands with a small number of SKUs in the wheelhouse of your cooks' capacity.

So in our case, we're particularly good at the grill. We have large oftentimes double-wide grills in our restaurant. Cooks don't have to run down to the fryer very often for these options other than to put some French fries or onion rings in the orders.

It's an opportunity for us to sell shakes, and it's also an opportunity ultimately to build brand equity by how things are revealed or discovered through time, or to add some of the favored items into the core menu at Denny's. So it has a positive benefit to scale brands, and we think it's good to be in this game and participating.

So there isn't really a benchmark. It's a great question.

I would say when it comes to enthusiasm, it's very similar to the norm of who wants to be at the front end of anything complicated, new buttermilk pancakes, and it used to be sort of a box-and-add-water [ph] versus something more complex, larger pancake, different spatula size, different grill capacity and how much room we took up.

And all those things are quite complicated and different when we first rolled it out a few years ago, and there are those of early adopters saying, "I can't wait to get it." Another said, "Well, let me wait till the end." So I say it's a similar response to that -- the kind of things that are just painted [ph] in an organization.

But again, this is -- it's just an unprecedented day in industry history..

That's helpful. Thanks, John. And then, John, you talked earlier about kind of a reopening flow chart in the 24/7 operating model. And I guess it may be helpful. I mean, people look at this 926 units that are still in the limited model.

Is there a way to parse that between operators that would be allowed to open or choosing not to do it now because of staffing reasons versus how much of that bucket just would be unable to open or it would make sense to open given current restrictions?.

Yes. I would say very little. This is due to a franchisee digging in their heels and say, "I just don't want to do it right now." I think most of this has to do with legitimate restrictions and the process of sort of marching back towards opening and lift.

So the staffing and the logical progression of building up the talent and the capacity, we followed it to. And so I think, therefore, this is going to happen in a fairly material way as the year and these restrictions unfold. We're waiting for the colors to change basically in each jurisdiction..

Which makes sense why there wouldn't be an incentive program is now done, if it is truly capacity-constrained. And then that final -- sorry, go ahead, John..

Well, I was just going to add one point that Robert made earlier about how -- in his script, how the similar results and also in mind at -- to the early going in this year compared to October, November. Remember that in California, as things have lifted before, you had the summer to build up dining rooms on the parking lot.

And then with the recent change here in the middle of winter, so even though those lifts have occurred very, very recently, in California, it's still takeout only, but the ability to resurrect staff for dining rooms, I would say that that's still late and it's still coming.

So we've had really strong similar results in spite of the fact that there aren't as many diners on the parking lot reopened as of yet. So it's a positive sign about how you look at it..

Great. That's helpful. And then my final question is -- it goes back to what Jake was asking about with incremental off-premise revenues. Trying to think about it a different way.

If we look at components of off-premise and if we talk to curbside and how customers have embraced that, because I think that may -- you may get extra visitation because you're almost creating a drive-thru like experience that drives frequency.

And then if we could talk about your views on outdoor is an incremental source of sustainable off-premise revenues as dining rooms reopen, I'm just -- out of the 4,000 incremental, I think there's some times of these new initiatives that would be stickier third-party delivery for a dine-in transaction?.

Yes, I think that's pretty easy to look back in history, see family dining, breakfast, lunch, dinner and late night, and how that breaks out. Breakfast and lunch sort of makes up the bigger component versus dinner and late night.

Dinner and late night is when people want to use a patio or maybe early in the morning in temperate places, California, Arizona in the spring and fall. But on the whole, dining on the patio, I'd say, is sort of not a major long-term initiative for us. It's to get through pandemic.

Carhop, curbside service, the main point is if I'm coming to pick up, and I'm not using delivery today, don't make me get out of my car. So, different parking lots will have different configurations.

And so whether it's curbside delivery, carhop, order from the parking lot, and maybe I ordered on the way here from my app, god forbid, while driving, and sort of we'll park somebody to make sure we can text and get them food.

But the point of it is all of those different types of delivery systems vary by store, but there -- we believe those are sort of permanent installations for contactless safe, secure, sanitary and good packaging that holds food the long time for a better dining experience. All those things we think are permanent installations for full service.

And frankly, for quick-serve and fast..

Great, thank you..

Thank you. We'll hear next from James Rutherford with Stephens Inc..

Thanks for getting me in here. Just a few quick questions kind of tie some other questions have been asked already. I was curious on the temporary closures. At the end of December, 31 units were temporarily closed. And then that ticked up a little bit in January and February.

I'm curious what drove that given kind of from what I have seen, it looked like maybe there were a few incrementally fewer restrictions in those months. Just curious on that front. And then a couple of other follow-ups, please..

James, this is Robert. Yes, we have seen a few tick-ups with regard to that. If you recall some of the latest data with California. They have just recently begun lifting those restrictions with regard to their dining. And candidly, they're not back in any material way to on-prem dining. I believe we have maybe one unit that is open to on-prem dining.

So I think it's just a -- just the aggregation of the effects predominantly in those states where there hasn't been that on-prem dining. I don't think that, that is an indicator of the closures.

I do think it is more along the lines of what Mark spoke to earlier, the lower volume units in the how the 50 and 75 units in that $1 million or less adjusted for what happened in Q4, how they react going forward.

So I don't think that's really an indicator of closures, just more over a prolonged impact of just really being tightened down with some pretty significant restrictions..

Got it, that's helpful. And then, I just had two numbers-related questions. If I got my math right, the royalty rate in the quarter was around 3.8%. Was that some sort of incentives because a little bit below the 4.1% you historically have run. Just kind of how to think about that going forward.

And then G&A was $20.5 million, up a little bit sequentially and year-over-year. I know there's a lot of peak components of that. So just any help you can provide on G&A and into royalty rate going forward? Thank you so much..

Hey James, it's Robert again. With regard to the royalty rate, you are correct, that was in that 3.8% range. One of the things that I think I know with regard there was the idea that with our third-party delivery, the fees associated with the third-party delivery, we do not charge royalty on those, although they do come in through the top line.

So again, that is a concession, that's not a permanent concession that we have made to our franchisees. But one that is in existence currently, and it really has helped support the -- really the doubling of our off-prem business over that time frame.

So that really is probably the largest piece to help you reconcile the royalty rate that we would have. They're typically that 4-plus. As you would see stated, as we move the margin from 4.0% to 4.5%, that impacted on those -- not charging a royalty on those third-party fees. Remind me, pardon me, on the G&A question..

Yes, no problem. It was just the G&A was, I think, $20.5 million or so this quarter. So the touch up kind of year-over-year and sequentially.

And I'm just curious kind of what the run rate to go on the go-forward G&A, please?.

Yes. So that's an excellent question, James, and happy to answer it. I think that, in large part, what you're seeing in Q4 is just really some variability on the incentive compensation on how it was recorded over the year, particularly in that stock-based compensation.

If you go back and look at the early on quarters, we reversed off a bunch of stock-based compensation. The Board then came back and modified a couple of those plans. There's 8-Ks out there that would point to those modifications that then required us to book some of that back up in the back half of the year, particularly into Q4.

So when you look at it on an annual basis, it makes more sense than if you do on a quarterly basis. If you look at one of the longs that I called out specifically, however, was in that, what we're calling the corporate administrative expenses. Internally, we call that core G&A, that is down quarter-over-quarter and year-over-year pretty significantly.

Kayla Money, who works on Curt's team, actually included a really, really nice chart on Page 33 in the investor deck that really kind of breaks out the flow of G&A. And when you look at it, that core G&A is down significantly and really a couple of pieces on that slide.

We call out how we progress through the savings that we indicated from our refranchising and development strategy of -- late 2018, into 2019, and some of the more and the impacts of what we have done through COVID.

So, I think that really the volatility exists in some of those incentive compensation lines but the reality is, is that core, the core G&A piece, the salaries, the T&E and the such is down and will continue to be down when you look at that chart..

Very helpful. Thanks and congrats on the progress you all are seeing..

Thanks, James. Appreciate it..

Thank you. We'll take our next question from Jon Tower from Wells Fargo..

Great. Thanks for taking the questions. Appreciate it. Most of them have been answered, but just kind of following up to some earlier ones on the domestic development commitments.

Can you maybe tie a time frame for those 75 that were affiliated with the refranchising commitments really in 2019? Should we think about those opening over the next three years, over the next, I don't know, 10 years? I'm just curious to kind of get an idea behind that?.

Yes, Jon, that's a great question. It's Mark, and I'll address your comments there. On the development agreement, we said we've got north of 75 domestic development agreements. Again, you're absolutely right, that came out of the refranchising strategy in 2018 and 2019.

And normally, the way those development agreements work is the first store, as I say, multi-unit development agreement. The first store probably opens 18 months, 18 to 24 months out after the transaction closes. So I'll get to some specific answers on your question.

One of the things that we've done is we've extended time frames for both a remodel commitments and new store development commitment. So that, again, that was part of are working very closely with our franchise community, being empathetic with everything that they're going through from a capital cost standpoint.

On the development agreements themselves, they were extended by a year. To specifically answer your question, a significant portion of those new store development agreements really kick in, I would say, '22 and beyond. And actually, a lot of them kick in '23 and '24 time frame. Yes.

And I think probably in a follow-up call with Curt and Kayla will probably give you a little bit more specifics, but that gives you the flavor of those agreements..

Okay, thank you. And then thinking about the remodels themselves, obviously, that's been delayed a little bit as you just hit on.

But because of COVID and everything that's taken place, how -- has the plans on the actual remodels themselves, have they been tweaked a little bit to address perhaps even just the greater off-premise mix, maybe easier ingress -- egress for customers? Obviously, you've now rolled out curbside.

But has the remodeled prototype change and/or the cost behind those changed because of what we've seen in the past, I guess, almost 12 months now?.

Yes. So that is a great question. As you can imagine, with the multiple versions of curbside, carhop service, drive-thru kiosk with actual windows, pickup windows or ordering windows. The equipment, headsets and all things required to test those.

And then the enhanced to-go stations at the pickup stations inside the restaurant for third-party delivery company fees [ph], our servers fees, all those things have evolved over the last couple of years in how remodels have been done. So each of those are sort of incorporated in along the way.

So therefore, the latest prototype -- if you're a new franchisee or a franchisee with lot of development agreements and said, what's the latest greatest, we keep those plans fresh, we refresh those all the time. And there are local store options for a number of different approaches, depending on the size parking lot, ingress and egress.

In terms of additional costs, I'd say it's not a material change because it's been evolving over quite a period of time. Now, if someone put in a fast-food style drive-thru, double-lane and preview windows, that would be more expensive.

But with an average seven or eight-minute advertiser time and other than a well-done steak, it's sort of eight or nine-minute cook time as in a full-service restaurant. You're not going to try to put in a 57, 60-second drive-thru type operation.

This would be more a pickup or a late-night security thing and you park off to the sideway until we call you back up for your food being ready. So, the way it's applied in a full-service application lends itself to our operation, our 24-hour operation, with modest changes in cost and modification. So we do refresh those along the way.

But I don't think I answered the full question there. I might have missed a piece..

No, you got most of it. It sounds like it's going to be a bit of a case-by-case basis in terms of what the franchisee wants to do with the individual location..

And what their lot will allow them to do. So again, the remodel plans and the prototype plans evolve in real-time as these initiatives unfold. Now as far as any texture change to the remodel, Heritage 2.0 does address external and internal imagery and just refreshes the Heritage prototype.

So that program, to Mark's point, has been delayed but there is still enthusiasm for that version of the brand..

Got it. And then, just switching a little bit to the virtual brands.

In terms of how this is going to be communicated to the consumer, will there be a brand affiliation to Denny's? So will it be The Melt Down brought to you by Denny's? And the reason I ask that is thinking about some of these options are very successful on virtual platforms, how quick can you bring it to your stores? And will consumers then come to your stores if they know it's available there, if there's no brand affiliation.

I guess I'm curious to kind of think how you're handling all those..

Yes. So some of these things, like a grand slam which that appears as a melt and then also on our menu, they're all very identical now. You just -- it's not overtly Denny's, but if you look at the fine print -- or it's not really fine print. If you look beyond the bottom, if you're paying attention, it already claims brought to you by Denny's.

So the astute customer, once the trades sort of make their publications, I doubt if there's anybody that's ordering It's Just Wings and doesn't know it comes from Chili's by now.

And I do believe this is becoming an expectation of the third-party delivery companies that they expect you to review that so that they don't find themselves in hot water as well. So I think the transparency is a consumer expectation, we would be no different.

We do expect to build some brand equities sort of on the back end of this as more of these things can find their way onto the core menu..

Got it. And then just last one from me, and I know it's very early days, but the vaccine has been slowly rolling out.

Are you seeing anything, perhaps in some of the markets that have looser restrictions than, say, California, where you're seeing some of the older guests return to the stores, certainly relative to what we've seen over the past several months, I guess, it might be hard to see what they're doing online.

But certainly, Indiana [ph], are you seeing all their folks come back?.

I think it -- this is a little bit of a -- could never approve it. Each state, or each jurisdiction -- Austin has the personality. San Antonio has a personality. Miami Beach has got a different personality than Fort Lauderdale. Each township seems to behave in unison to some degree. This area is a little freer to go out.

This area is a little more conservative and afraid. It does have age associated with it, whether it's more conservative and less risk-taking among seniors and boomers because of the natural risk associated to lungs and immune systems of those of us that are older.

But it does seem that that's in very active states, you see that applied a little less conservatively. And then in places where the governor is especially concerned and the news about it is a little more conservative, and you see a little bit more conservative consumer behavior.

So, it's been interesting to watch how that gets applied a little differently. I do believe that as the vaccines come out -- my mom's got a lung disease. She's 84 years old. We've been really protective around her. She's got the vaccine.

She's ready to go right back to San Francis Hospital and start painting everybody's nails like she did every Monday the last 20 years there, and she's ready to go back and do all of her voluntary at the church. She, all of a sudden, believes she's bullet-proof.

So I do believe that that attitude of that generation will prevail, and they're going to be out to eat before you know it..

All right. Thank you and best of luck. I appreciate the time..

Thank you..

Thank you. We'll take our next question from Brett Levy with MKM Partners..

Great. Thanks. Appreciate you guys fitting me in. In the past, you've talked a little bit about qualitatively how your different dayparts have performed. If you'd care to share a little bit more color in terms of how a different day part cohorts did, how you did weekday, weekend? And then I have a question on the franchise side..

Sure. This is John. I'll let Robert add some details I might not have. But if you look at the quarter and you look at the full year of 2020, it's not really different than 2019 or 2018. Our breakfast dayparts about 29.5%, call it, percent of sales. For the quarter for the year, it's right at 29%. Lunch is 34.6% for the quarter, for the year, 35%.

So they behave in real similar ways so far. Dinner is about 19.5% and late night about 16.5%. So that makes up the daypart mix. And Robert, you might want to comment on the balance of that question..

Yes, John. So when you look at it, Brett, and if you look at the performance over the course of the year, and this is pretty consistent whether you're looking at the quarter of the year, we actually have had some pretty good performance on a relative basis into the dinner and late-night dayparts.

The daypart that's trailed pretty much in 2020 was that lunch daypart as people reacted to the pandemic, but we were really kind of pleased frankly with how dinner and late night responded. In particular with late night, we were pleased as we captured more trials.

People that have that opportunity, other locations were closing early and have the opportunity to come see what we could do at late night, which involves many of those franchisees that we talked about getting back open 24/7. The ones that did that really were somewhat rewarded for that.

So I would say, on balance, the dinner and late night dayparts were realistically outperformed the launch -- sorry, lunch daypart with breakfast kind of holding its own..

And just taking that a step further, you talked about the late night comp went down 6% for those units able to go 24/7. What did you see in terms of restaurant level margins for those -- for the different cohorts, whether it's the 75%-plus capacity, the 25% capacity, those operating with the 24/7? And then just one follow-up..

Yes, Brett, it's Robert again. With regard to that, we really haven't broken that out.

What I can tell you is if you think back to when we started talking about the -- our refranchising strategy, taking you back two years now, we talked about getting to 18% to 19% restaurant level margins once we have rightsized the portfolio, getting down to this number of units.

I can tell you that the complement that make up those margins down today are a little different, right? So we have doubled our off-prem business and we -- and as such, we would have additional third-party fees, we have additional packaging costs. So that will impact how we look at those 18% to 19% margins. But the reality is the sales is all here.

So while we haven't given the specific number, as you get closer to flat sales to 2019, we'll be approaching those adjusted 18% to 19% levels that we get to. That's really the driver here is getting the sales and leveraging those back up. Admittedly, they will be impacted by how much of that doubling of that off-premise business that we keep..

And then just one question, conversations you've had with the franchise community, just a thought of how they might be thinking about it. They've obviously had -- they're getting the assistance from PPP.

They've gotten the systems from you, but now they're being asked to return to the normal 24/7, introduce the virtual brands, they'll have to layer on remodels in that. And now there's also the looming specter of rising minimum wage.

How are they feeling about all of this while still dealing with what could be just drinking from a firehose in terms of sales recovery?.

Well, I think in general, the -- if you're in the hospitality business, you have the rhythm of remodels, development, wage and commodity discussions on a regular basis. So I think that people are tempered for this.

To say drinking from the firehose when you're adding on virtual brands, third-party delivery changes in technology, a new remodel scheme, we've been amazed at how scrappy our system has been sort of adopting these things in real time.

I think what goes a long way is the level of communication we have with weekly steering calls with our Denny's franchisee association leaders of each of our brand advisory councils and then monthly calls with our leadership team with the full Denny's Franchisee Association board and then very active brand advisory councils through marketing supply chain that are on weekly calls for just all things related to marketing, operations, rollouts, training schemes.

And I think that commitment to really good communication helps temper what feels like a heightened level of activity and recovery going on in the system. We've also delayed remodels and development dates, which I think gives people a form of relief and understanding.

And then because different parts of the country have different experiences with tip credits and wage inflation, we also have a lot of restaurants that have gone through, but the rest of the country is now considering. So I'd say our ability to talk about these things on a regular basis has helped temper that feeling of it being a firehose.

Hopefully, that helps. I don't know Robert or Mark, if you want to add anything..

Yes, John, this is Robert. Just to add on with regard, I think minimum wage was mentioned within that question from Brett.

I would tell you that we -- I'll let John, you speak on the Denny's philosophy towards minimum wage, but just practically from a numbers standpoint, I think the best representation of the financials related to minimum wages, it comes out of California.

If you think about, as they've increased their minimum wage kind of in a tempered pace over that time frame, if you look at that time frame from us, California has outperformed the system.

And during -- over that time frame, they had six consecutive years of positive guest traffic -- not just positive sales, but positive guest traffic as the minimum wage was going up. But it was a very tempered way, still going on, putting money into the pockets of our consumers, right, to spend back with us.

So, we actually have seen the benefit of minimum wage in a tempered way. I will correlate that to what happened in Arizona with the November 16 election where they had their minimum wage increased 25% overnight across the entire spectrum of our hourly labor pool.

And that was much more difficult to deal with, to capture -- to cover a 25% minimum wage increase even on a dollar basis, let alone a rate basis, required us to take 5% to 6% to 7% pricing, and that's just so unnoticed by our consumer and does have a traffic consequence.

As I mentioned, in California, when you're more moderated in those increases, we can cover that with 2% to 3% pricing and thus not as impactful to the consumer. So, we -- again, I'll pass it over to John to talk philosophically about minimum wage, but we have seen it within our system in a way that can be beneficial..

And philosophically, all I'd say is that we're a brand that supports the notion that there's going to be a breadwinner in every family that ought to be able to make a living wage.

At the same time, we believe that our industry, restaurants and retail are unique, but also supports the need to have a starting wage and those sometimes politically deal at odds with each other.

And rather than being a political lightning rod, we just are advocates for small business and good sound policy, and we always appreciate it when leadership in the state level, governor level, or Congress, senate will give us a listening ear to understand our industry, whether it be tips or wage or the pace of wage inflation.

So we want to be a sounding board for a reason..

Thank you. I appreciate all the color..

Thanks, Brett..

Thank you. That does conclude today's question-and-answer session. I'd like to turn the conference back over to management for any additional or closing remarks..

Thank you, Cody. I'd like to thank everyone for joining us on today's call. We look forward to our next earnings conference call in early May, and we will discuss our first quarter 2021 results. Thank you all, and have a great evening..

Thank you. That does conclude today's conference. Thank you all for your participation. You may now disconnect..