Steven R. Coke - Papa John's International, Inc. Steve M. Ritchie - Papa John's International, Inc. Joseph H. Smith - Papa John's International, Inc..

Will Slabaugh - Stephens Inc. Alexander Russell Slagle - Jefferies LLC Peter Saleh - BTIG LLC Alton K. Stump - Longbow Research LLC Frederick Wightman - Citigroup Global Markets, Inc. Chris O'Cull - Stifel, Nicolaus & Co., Inc..

Good day, ladies and gentlemen, and welcome to the Papa John's Second Quarter 2018 Conference Call and Webcast. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference is being recorded.

I would now like to introduce your host for today's conference, Steve Coke, Vice President, Investor Relations and Strategy. You may begin..

Thank you, Gigi. Good afternoon. Joining me on the call today are President and CEO, Steve Ritchie; and our CFO, Joe Smith. Steve and Joe will have comments about our business and provide a financial update, after the prepared remarks, Steve, Joe, and Mike Nettles, our Chief Information and Digital Officer, will be available for Q&A.

Our discussion today will contain forward-looking statements involving risk that could cause actual results to differ materially from these statements. Forward-looking statements should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our SEC filings.

Please refer to our earnings release in the Investor Relations section of our website for a reconciliation of non-GAAP financial measures discussed on this call. Finally, we ask any members of the media to be in a listen-only mode. Now, I'd like to turn the call over to Steve Ritchie for his comments.

Steve?.

Our most important ingredient is our people. We have 120,000 corporate and franchise employees, and they are outstanding people, dedicated to the company's success. Recognizing recent events, we realized that we need to do more to put our best foot forward and ensure we are doing right by all members of the Papa John's family.

We recently promoted Victoria Russell to become the first Chief of Diversity, Equity and Inclusion for the Papa John's International. Victoria has been instrumental in forming and leading our Diversity and Inclusion Committee beginning late last year and has shown tremendous passion for the brand.

Victoria will be leading efforts that ensure our company's commitment to diversity and inclusion remains a top strategic priority across all aspects of our business operations.

Consistent with this commitment, we've also engaged Nimbus (08:27) as our multicultural agency of record to help us further align our internal and external D&I efforts on the communication strategy. Second, improving our brand differentiation.

Our work to drive new branding and marketing campaigns that differentiate Papa John's and refocus us on our value proposition is more important now than ever as we try to reestablish trust with our customers.

Moving forward, these efforts will take into account what consumers, in particular millennials and Gen Z consumers expect from a business, including their expectations that companies have an active role in making the world a better place.

These efforts are underway, with a roadmap that refocuses the organization around the core purpose and the values that have always been a part of the Papa John's story, a relentless pursuit of better.

Papa John's has always been about bringing people together and being part of those moments when people are together and we expect these values will be more clearly communicated and more directly linked in our marketing. Our franchisees and team members continue to work hard and demonstrate their dedication and attention to quality every day.

But we have to be more than a product and an experience to be relevant to the consumers we have lost, and the consumers who simply felt we weren't for them. Last week, we engaged a new marketing partner, Endeavor Global Marketing to assist us and get the right message to re-engage with our customers.

Together we are focused on ensuring that our marketing underscores that our "Better Pizza and Better Ingredients" mantra is tied to the steps we are taking towards becoming a purpose driven company.

We are confident that Endeavor is the right partner for us as they will provide not only creativity and content, but a unique position as a cultural marketing agency that can take our core brand DNA and marry it with their influence, access and activation expertise to craft our way forward. You'll begin to see their work come to life in Q4.

Third, creating accessible value. We continue to focus on driving value perception by providing everyday accessible value to our customers, but we also want to ensure we build consumer trust through transparent and consistent pricing models. We know the importance value plays as part of our calendar and menu strategy.

During the second quarter we offered a $12.99 bundle. While this had potential, it was clear that promotions alone are not going to reinvigorate trust in our brand given the broader sentiment issues. That being said, accessible value does have an important role to play.

And as we implement our brand relaunch, you should also expect to see value offerings. Knowing value can come through choice, variety, bundles, limited time offers and other options, we are focusing our efforts on building an arsenal of well tested proven products and offers that we believe will gain broad support from our franchisees.

More importantly, from a customer perspective, we look for products and offers that generate high consumer interest and appeal that will result in transaction gains. Along these lines, we recently completed a pricing study that evaluated each restaurant in our U.S. system, to aid with appropriate pricing in their respective markets.

Changes are already beginning to happen to create accessible value for our customers across all of our restaurants. Fourth, implementing technological advancements. Our digital teams continue to make significant strides towards deploying an aggressive portfolio of technologies aimed at radically improving the consumer experience.

We are committed to reaching our customers where they live and allowing them to order from us whatever way they choose. Today, we're proud to announce the rollout of an API that will allow us to leverage a new preferred national partnership with DoorDash and a voice ordering by Amazon Alexa.

Additionally, this technology will give us the ability to launch future partnerships with unprecedented speed and cost efficiency. Papa John's is a mature delivery player with tremendous reach. However, there are still many customers in outlying rural areas, even some suburban developments who live outside of our delivery zones.

With their industry leading coverage, consumer base and fulfillment technology, DoorDash will help to mitigate this challenge. More than 1,000 restaurants in hundreds of cities across the United States will soon be able to expand their delivery areas utilizing DoorDash technology to serve communities that would have otherwise been excluded.

The digital teams have also completed several technology integrations that will help us reach more customers. We have brought on a new credit card processing partner to improve security, added more payment methods with Apple and Google Pay and have completely rewritten our mapping platform.

These changes will provide consumers with more choices and greatly improve their ordering experience. We continue to work towards a significant expansion of our industry leading Papa Rewards loyalty program and are drawing on new analytic capabilities to inform our customer engagement model.

This new data driven insight led approach is designed to allow us to reach the right customers at the right time. There is also ongoing work at the restaurant level around inventory and quality control. We are testing new machine learning technologies to ensure that every pizza is made to the Papa John's standard.

All of this work is dedicated to the pursuit of a better customer experience. Lastly, is improving unit economics. With the recent negative sales trends, the need to operate more efficiently at the unit level is elevated.

Our systems unit economic model has been challenged this year with higher insurance, wage pressures and other cost of doing business. We have employed third party efficiency experts to review the potential for improvements within our restaurants. They are also conducting time and motion studies.

Their work will directly supplement the work we are doing within our restaurant design of the future. Also, we are having an open dialog with many in our franchise community, discussing the most appropriate and effective forms of temporary support as a result of these recent events.

I have traversed the country seeking input from these leaders and visiting restaurants and taking calls and exchanging emails with numerous franchisees to hear what they have to say and get feedback of what we can do better.

Our franchisees live in the same communities in which they operate and the Papa John's leadership team is committed to supporting them and to helping them rebuild trust in our brand in their communities.

While we are still finalizing the level of support, we expect that it may include short-term royalty reductions, reimbursement for certain costs related to individual restaurant's decor and other assistance. We will make every effort possible to mitigate closures and ensure our franchisees have the ability to be highly successful once again.

I firmly believe, and they can. I'll now turn the call over to Joe Smith for a financial review of the quarter and the updated outlook for 2018.

Joe?.

We're forecasting North America comparable sales of negative 7% to negative 10% for the full year, taking into account the significant and negative impact of the July 11 media coverage, and the continued media coverage. We are forecasting International comp sales of negative 2% to positive 1% for 2018.

Our net global unit development of flat to 3% growth. We are forecasting over 350 global openings for 2018, mostly in International markets. This forecast assumes a number of store closures in the U.S., but we are continuing to take steps to mitigate the number of closings.

Diluted earnings per share excluding certain items I will talk about in a moment of $1.30 to $1.80 for 2018. Our debt to adjusted EBITDA is expected to be in excess of 4 times at the end of the year.

The diluted earnings per share guidance excludes the impact of the previously mentioned China refranchising, and the estimated future costs related to recent events, including but not limited to, costs for reimaging, the accelerated replacement of certain branded assets, financial assistance to domestic franchisees, branding initiatives, our third-party audit of the culture of Papa John's, and additional legal and advisory costs.

While we are still in the process of gathering information regarding these future costs, we have developed a preliminary range of $30 million to $50 million for the remainder of 2018. Finally, in light of the above anticipated costs we expect to incur for the remainder of the year, I want to touch on our financing agreements.

At the end of Q2, we are comfortably within our debt covenants, but based on our revised lower financial forecasts, we have proactively begun discussions with our bank group.

With the company's history of strong cash flow, our constructive long-term relationships with our banks and our comprehensive plans to improve the business, if any accommodation is needed, we fully expect that we will be able to obtain one. I'll now turn the call back over to Steve Ritchie for his final remarks before we take Q&A.

Steve?.

Thank you, Joe. In closing, we are working to demonstrate that our future will not be defined by the words and actions of one person.

Rather, Papa John's is 120,000 corporate and franchise employees including restaurant managers, delivery drivers, production, distribution, and other hourly team members that live, work, and play in neighborhoods around the country and the world. We have thousands of suppliers, vendors, franchise owners, stockholders, and so much more.

Collectively, we are committed to the company's success, and despite the setbacks we've recently encountered, I am confident that together, we will continue to move the brand forward, and execute on our strategic plans. With that allow me to say we appreciate your continued support. I will now turn the call over to the operator for Q&A..

Our first question is from Will Slabaugh from Stephens, Inc. Your line is now open..

Yeah. Thanks, guys. And I appreciate the color on July.

Just given the rapidly changing sales trajectory that we've seen lately, I was wondering if you'd be willing to give us any more color on those trends just in terms of if you feel like we've seen the worst of it maybe in mid-July or whenever that may have been and have slowly been improving, or was that negative 10.5% or so fairly representative of what you've seen the last three or four weeks?.

Sure, Will. It's Steve. Thanks for the question. And as you know, typically we don't break out cadence of comps, but I think given the circumstances here, that we should provide you guys with a little bit more color and provide some interim guidance around what has occurred here.

So I think I'd first go back to last year and to – all the way back to the November. I think it's important to understand the impact of consumer sentiment. So if you go back to the third quarter of 2017, we were 1.1% positive, and directly after the earnings call, we saw a very sharp decline.

The quarter ended up negative 3.9%, but the comp trends have basically been between negative 5% and negative 6% since that event, and the comments from our founder. Fast forward to July, to your point, so as you can see, the third quarter was a negative 6 point – the second quarter of this year was negative 6.1%.

The cadence of the comps throughout the periods in the second quarter were very consistent to that overall quarter number. And again, after the July 11 article that came out from, again, very inexcusable and irresponsible comments from Mr. Schnatter, we saw another precipitous drop of roughly 4% from the trend.

So we do think, as you saw negative 10.5% for July, we do think we have stabilized a number there. I don't want to get into the August numbers, because it's very early into Period 8 here.

But we do think we've experienced the significance of the decline, and we've provided our outlook based on the infancy of what we have seen and that's why we have reguided to negative 7% to negative 10% for the full year..

Got it and thanks for that. Wanted to ask you about value as well. It sounds like the value tests that you've run so far, it's tough to discern whether it's going to meet expectations or not just given all that's going on. But this goal I know has been out there for a while in terms of improving the everyday value message to the customer.

Where are we in terms of finding a value platform you feel like that can be more permanent on the menu that the customer can rely on? And what should we expect to see from a value perspective from you guys in the coming quarters?.

Sure. Will, it's Steve again. So, I mean, we've done a number of tests in various markets throughout the country to understand the appropriate value offering, to understand the incremental lift that we can get and obviously trying to balance the top line and the bottom line for our franchisees.

As I stated in my prepared remarks, it has been difficult to find the right value or promotional offer to drive incremental traffic while we're dealing with the consumer sentiment challenges and that was even prior to the recent events that have occurred here in July.

So we believe that the new creative agency that we brought on board in addition to the new multicultural agency we brought on board and the new PR agency and a very talented group of internal leaders, this is around shifting to very purpose driven marketing, running parallel with the appropriate value offers.

So it can't be one silver bullet just in terms of value offering. It's got to be really repurposing the brand.

And I'm very encouraged by the support that we've gained on some of this – the listening tour that we've been on for the last three weeks to gain understanding from our team members, from our franchisees, a number of conversations that we've had with the investment community, community leaders throughout, and we've got broad support, very much alignment with our independent directors and the leadership team on the strategy to move forward.

So we're very confident that this is a new day for the Papa John's brand. And frankly, an opportunity as we work through these sentiment challenges to leapfrog within the category and frankly the industry to do something that is uniquely different than anything we've ever done before..

Got it. Thank you..

Thank you, Will..

Thank you. Our next question is from Alex Slagle from Jefferies. Your line is now open. ..

Hey, thanks. Wonder if you could talk more about the health of your franchisees and updated thoughts on the potential for increased number of closures in the coming quarters, and I guess any other ongoing efforts to ensure the stores are all in the right hands..

Sure. Alex, it's Steve. I'll start. So, I guess, the good part is we've had a heck of a run over the last five years. 2015 was a record year for sales and profitability for the vast majority of our franchisees. That was followed in 2016 with another record sales and profitability for the vast majority of our franchisees.

We were experiencing a slight slow-down up until the earnings call event in November of 2017, but we got a very stable base of franchisees. We've got high average unit volumes across the better part of the network.

But clearly the sales pressures that have occurred here over the last three quarters have put a lot of pressure on the bottom line for all of our franchisees.

That's why I've outlined in the prepared remarks that we'll be doing some things to help support our franchisees in a time of need to make sure that we've got healthy unit economics to mitigate as much pressure on closures as we can, given the – in the early stages of the sales pressures that dipped again here in July, we have incorporated a much broader range to the bottom sign all the way down to 0% up to 3% on the overall global development side.

That does incorporate a lot of potential closures there, but we think we can strike the right balance, be well within that range and this is more of a temporary issue, over the rest of 2018, and then we can really start to move the brand forward back in 2019 and beyond. So I think, again, very resilient franchisees.

We've been out talking to these franchisees. They're very excited about the decisions that the leadership team has made in tandem with the independent directors of the board, very supportive of that. I think it's a real opportunity to once again leapfrog and move the brand forward in a very positive direction..

And then if you could update us on the status of the key sports partnerships.

I guess to what degree some of those are suspended and what steps you can take to improve that situation?.

Sure. So as you guys know, I think we've talked about before, we have over 160 collegiate and professional partnerships around the world here, though it's predominantly in the U.S. Very strong partnerships. Those partners have mostly stood very strong with the management team here. We have lost a handful of those partnerships here.

I do believe, once we demonstrate the actions and the efforts not just words, but actions, we have the opportunity to win back those partners that we have lost.

But I do think we still have a very strong stable of partnerships that we'll be able to carry the brand forward and as we continue to assess our partnership and our involvement in sports across the network and our diversification of all of our messaging, making certain that we're appealing to the right audiences, as I talked about millennials and Gen Z.

What is the appropriate mix of media and messaging in this more purpose driven branding that we'll be introducing here in the fourth quarter..

Got it. Thank you..

Yeah. Thank you, Alex..

Thank you. Our next question is from Peter Saleh from BTIG. Your line is now open..

Great. Thank you. Just a couple of quick questions here on the guidance.

The potential to, I guess, pierce some of the covenants here sometime maybe later this year, is that – are the costs associated with any changes to the covenants, is that already embedded in your guidance for this year?.

Yeah, Peter, this is Joe. We have considered increase in potential interest costs and costs that would be associated with that. Again, we're just trying to get ahead of the situation and starting our conversations with the bank group. And like I said, we're confident that we'll be able to obtain an accommodation if one is needed..

Got it. And then the – I know you provided a range of $30 million to $50 million of incremental costs. I'm assuming that's embedded in your outlook for the balance of this year.

Are there any thoughts on if that would bleed into 2019 as well?.

Yeah, it's probably a little early for us to kind of see that. We're going to have to kind of evaluate how things are going, how quickly our – the franchise – our customer sentiment turns around. So it's something that we'll continue to monitor and provide updated guidance as things become a little more clear..

Peter, and I'd just – I would add to that. I think the importance is obviously getting top line moving again. So we've got the right agencies, we've got the right internal leadership team and we've got the full support of the franchise community. So that gives us optimism as we start to introduce new initiatives in the brand.

We can start to turn the business around, get sales back going the right direction. And as we do that, that obviously determines the level of support that we need to provide as we get into 2019..

Great. And then just on the advertising budget, I know you spend a fair amount of the ad dollars in 3Q and in 4Q historically during the heavy football season. This year, obviously a lot more changes and you may not have ads ready right away to invest behind.

So, how do you plan to spend a lot of the ad dollars especially in 3Q? I know you said 4Q, you'd probably have more creative coming out..

Sure, so, I mean, I can get into a lot of specifics around it Peter just from a competitive standpoint but, I mean, 3Q is predominantly already in the calendar and is already baked. Obviously a lot of work that is in motion with the addition of the new agencies that have been brought on board here.

We did have a plan prior to the July events, but we are re-evaluating every step along the way of that plan to ensure we've got the right messaging, we've got the right media allocation of those investments. We do have a very robust national marketing fund.

The contribution's there, but clearly the sales pressures have put pressure on the access to the dollars that are available. But we do think we have an opportunity to figure out how to make sure we've got the right allocation of those investments to make sure we get the message out there. So more to come..

All right. Last question from me and then I'll hop off.

Are you guys currently off air, off TV for the time? And if so, when do you plan to be back on TV?.

We actually are not off air. We're actually on television last week and we are again this week with a launch of an LTO, limited time offer product which is our barbecue meats pizza. So that is some fresh creative that has been out there. Just staying focused right now to product.

It is a transitional period for us as we bring on the new agencies and create the new brand work, but we do intend to stay on air with some of the promotional activities that we had planned.

Obviously there's a lot of things that are running parallel to that from a public relations standpoint, will be to build up from the input we receive from the listening tour, so there'll be a number of actions and initiatives that you'll see, but I do – we do plan to stay very active just in terms of our marketing activities..

All right. Thank you very much..

Thank you, Peter..

Thank you. Our next question is from Alton Stump from Longbow Research. Your line is now open..

Great, thank you.

Just to follow-up on the conversations that you're having – of course, the franchisees who are domestic, which I'm sure you want to keep them private – but if you'd just be able to shed some color on how serious I would presume that they're certainly mentioning that if you don't give us X rebate for X time, we're going to shut down our stores.

How much of that do you think is them actually planning to shut down stores versus a potential negotiation to of course get at least for short term, excitable rebate out of loyalty, if I can ask?.

Sure, Alton, it's Steve. I mean, we got – here's what I'll say is we've got a great relationship with our franchisees. I've always prided our team on our ability to build collaborative relationships with our franchisees and that goes on both sides.

And that's with trust and understanding the realities of situations and being collaborative on determining the right way forward. We also collect profit and loss statements from all of our franchisees each year so we've got a lot of data and metrics to understand the circumstances around where they are.

We also own as you know 600 plus corporate restaurants so we know the impact financially in our restaurants looks quite similar to the impact on our franchisees.

So it'll be all met with balance and doing the right thing to make sure we've got strong health in the unit economics of our franchisees and doing the best we can to stabilize those businesses.

But I don't think there's ever anything maliciously intended by our franchisees to leverage this situation at all, and we'll be coming to terms with those folks in very short order here..

That's helpful. Thanks, Steve. And then Joe, a quick follow up now, and then I'll hop back in the queue. As far as your change, obviously we see a lot going on for Papa John's taking off pizza boxes. Also signage. Any kind of timeframe as to when all that may be done here in the U.S.

at least?.

Sure, so it's early. I mean, right now we're just in the process of collecting all the assets that we have out there that need to be changed out. Some of the easier things are some of the materials inside of the store, but it will be a process. I think, we do believe the lion's share of those things to Joe's point can be completed in 2018.

But it is still very early in the process right here whether or not some of that bleeds into 2019 at this point in time, I cannot say for certain..

Okay. Thank you, gentlemen. I appreciate it..

Thank you, Alton..

Thank you. Our next question is from Greg Badishkanian from Citi. Your line is now open..

Hey, guys. It's actually Fred Wightman on for Greg.

Can we just talk a little bit more about the closures you guys have outlined? Were these stores that were already sort of at the margin to begin with is sort of the way to think about the change in the unit growth guidance that that is really due to incremental closures versus people pulling the plug on future development?.

I think, Fred, for the most part that is true that most of them are on that marginal basis in doing that..

And Fred, I'd just add, I mean, I think obviously we had a guidance previously that was outlined on the global unit side. I think, we – obviously it's very early on the sale declines that we've experienced here in July.

So what we've had to do is our direct line of sight right now if that sales performance continues and persists through the rest of this year, that is the potential implications of the closures that we've outlined in our updated guidance.

If sales are able to improve more quickly or the right – we strike the right balance with our franchisees, clearly there's less likelihood that we would see that significant of closures in the U.S. and clearly we're going to do everything within our power to prevent closures. We're not in the business of closing restaurants.

We're in the business of opening restaurants and building this brand for the future..

Great, thanks, and then any update on the CMO search? Is filling that role something you guys feel is key to dealing with some of the challenges you're facing, or is that sort of something that's on the back burner?.

No, it's still very much a priority. So we are in the middle of that process in trying to identify a new marketing leader for the organization. We've had a number of strong external candidates that I have spoken to and we also have internal candidates that are also very qualified for the role.

So it is a priority, and in the interim period of time I have been leading the marketing function. But I think we've, the team has taken a number of actions hear to make some big decisions to bring on some very strong and capable external resources to assist us as we work to identify that new marketing leader..

Great. Thank you..

Thank you, Fred..

Thank you. Our next question is from Chris O'Cull from Stifel. Your line is now open..

Thanks. Good afternoon, guys. Steve, I had a few questions related to the franchisee assistance.

When do you think the company will decide on the level of support?.

Sure. I mean, I think obviously as you would assume, we've worked into our outlook and our guidance numbers the impact what we intend to do in terms of franchise support, so we have discussions that will be happening in short order with our franchise advisory council that represent their constituents, the rest of the franchise body in the U.S.

We have some consensus internally on where we think that goes, so I think the discussions will be in fairly short order and we'll come to a mutual agreement that I think will move the brand forward and move our franchisees forward together..

Will the support that you guys provide include any conditions for franchisees in order to obtain it?.

We're going to work through those things, Chris. I mean, I think there's a number of variables that we've got to take into consideration for qualifying for any terms of financial support. And this isn't new.

As you guys know, we've done a number of incentives over the years for our franchisees and most of those incentives have qualification criteria to be able to gain that support, so this is likely to be no different, but there's a number of things that we're evaluating to support our franchisees.

One of course being that short-term royalty relief that I identified before..

Okay. And then, Joe, just the franchise royalties and fee income year to date I think is down about 10%. And I understand obviously a large portion of the decline is related to the comp sales being down.

But, can you describe the royalty relief or the higher royalty waivers as the 10-Q describes it that has driven the remaining 4% to 5% decline?.

Yeah, a little bit would be the unit closings, but then also as you say, I think, we disclosed in our first quarter, we were proactively addressing some markets that were underpenetrated and needed – and also facing some higher costs, so we had increased some royalty waivers in some of those areas. And that was again the first half of the year.

We already had some reductions in royalties for some stores, again particularly on the West Coast and other parts of the U.S. with higher labor cost and occupancy cost. So that's the other part that makes up the balance..

How does it work in terms of the duration of that relief? Is it tied to sales recovery or profit recovery? Or the ones that you've taken out – the relief you've provided so far, how do you kind of wean people off that?.

Yeah, it was start – beginning of the year, it started out at a certain level, it was based on sales levels. The higher the sales levels, little bit less the royalty and then over time, it was – it is reduced as we go out in time..

Okay. Great. Thanks, guys..

Thank you, Chris..

Thank you. Our next question is from Will Slabaugh from Stephens Inc. Your line is now open..

Thanks. Just a quick follow-up on a bigger picture point.

Just curious how open you as a management team and then the board if you could speak to the extent that you can speak for them or open to efforts to improve shareholder value through any sort of strategic alternatives, whether that may be additional refranchising, G&A cuts or anything else that may be on the table..

Sure, Will. It's Steve. I mean, I think the most important thing to us is improving shareholder value over time. It's been a big priority. And we know that we're improving shareholder value, we're improving things for the overall brand and all of our team members within our corporate restaurants and clearly our franchisees.

So in terms of refranchising, we've been an opportunistic buyer and seller. Over the last year and a half, we've been more seller. So we've now three markets that we have divested of approximately 100 restaurants, we'll continue to evaluate that. I mean, clearly it's a difficult time for the Papa John's brand but there is a way forward.

There is a clear way forward for the brand so we don't want to knee-jerk react and do anything that is short-term.

We want to protect the integrity of the brand and protect the long-term shareholder value that is ever so critical to what we need to accomplish here, and I will tell you that myself and the independent directors of the board are very much in line with the strategies specifically as it relates to the five strategic priorities and the cultural initiatives that we intend to put in place here.

So I think we're very aligned on that and big picture-wise, we have a plan and we know this plan will be effective..

Okay. Thanks, Steve..

Thank you, Will..

Thank you. Our next question is from Peter Saleh from BTIG. Your line is now open..

Hey, guys, just one more on my end.

Given all the potential unit closures in the back end of the year, are you looking at any of these markets that are, I guess, underpenetrated and considering and making them, or some of those stores company markets where you would come in and put your own capital to work and maybe go the other way instead of refranchising, but actually buying some of these stores? (49:03-49:14) Hello? (49:15-49:30).

Ladies and gentlemen, please stand by. The conference call will begin again momentarily. Ladies and gentlemen, please stand by. (49:37-50:09) Our next question is from Chris O'Cull from Stifel. Your line is now open..

Thank you.

Can you hear me okay?.

We got you, Chris. I guess we lost Peter. Peter, if you have that question, you can come back on and get back in the queue. Go ahead, Chris..

I just want to make sure I was clear on this. The $30 million to $50 million that you're kind of giving the range for some of these costs, that is not included in the adjusted EPS range of $1.30 to $1.80.

Is that true?.

That is correct..

Okay, okay. I just wanted to make sure I was clear on that..

That is correct..

Thank you. Our next question is from Peter Saleh from BTIG. Your line is now open..

Hey, guys.

Can you hear me?.

We got you this time. Sorry about that..

Yeah, no worries.

So I don't know if you heard the question or not, but my question was, given some of the unit closures that may be occurring in the back end of the year, are you considering expanding I guess the company owned markets? Maybe you guys would walk in there and buy some of the stores that these franchisees would be selling? Or will you just let some of these units close?.

Well that's something, Peter, it's Steve. So that's a good question. So that's something that we always consider and when it comes down to closures, first thing we try to work through is with acquisition or transfer opportunity with very viable, capable strong franchisees pending on the geographic area of some of these franchise restaurants.

We do consider from time to time acting on our right of first refusal with those deals.

A lot of one-off stores traditionally that's not going to be in the best interests of the company, but we're going to evaluate all the options as they're presented to us, if there is some sort of an increase in closures that does exist here because of the declines in the sales..

All right. Thank you very much. That's all I got..

All right. Thank you, Peter..

Thank you..

Thank you. At this time, I'm showing no further questions. I would like to turn the call back over to Steve Ritchie, CEO for closing remarks..

All right. Thank you, Gigi. I know it's – I would just say to folks, sometimes the greatest opportunities happen in the most inopportune times.

And I couldn't be more excited than I ever have been in my 22 years with the Papa John's brand to flip the switch and look forward, not be distracted by the words and comments of one individual but look forward to move this brand forward, and we have in complete unified Papa John's family both internal and external that is behind the vision and the mission to move this brand forward.

So I appreciate your continued support, as shareholders of this brand and I look forward to meet with many of you in person in the very near future. Thanks, and have a great evening..

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect..