Good morning, ladies and gentlemen, and thank you for standing by. Welcome the Wingstop Inc. Fiscal Fourth Quarter 2019 Earnings Conference Call. Please note that this conference is being recorded today, Wednesday, February 19, 2020.

On the call, we have Charlie Morrison, Chairman and Chief Executive Officer; Michael Skipworth, Executive Vice President and Chief Financial Officer. I’d now like to turn the conference over to Michael. Please go ahead..

Thank you and welcome. Everyone should have access to our fiscal fourth quarter 2019 earnings release. A copy is posted under the Investor Relations tab on our website at ir.wingstop.com. Our discussion today will include forward-looking statements.

These forward-looking statements are not guarantees of future performance and therefore, you should not place undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause our actual results to differ materially from what we expect.

Our recent SEC filings contain a detailed discussion of the risk that could affect our future operating results and financial condition. We also use certain non-GAAP financial measures that we believe can be useful in evaluating our performance.

The presentation of this information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations to comparable GAAP measures are contained in our earnings release.

Lastly, for the Q&A session, we ask that you please each keep to one question and a follow-up question to allow as many participants as possible to ask a question. With that, I would like to turn the call over to Charlie..

Thank you, Michael, and good morning. We appreciate you joining us for our fourth quarter earnings call. Let me start by congratulating our team members and our franchisees, whom we affectionately refer to as our brand partners for helping Wingstop deliver another year of industry leading results in 2019.

Their hard work and dedication to our mission to serve the world flavor continue to lead us toward our vision of becoming a top 10 global restaurant brand. 2019 marked our 16th consecutive year of domestic same-store sales growth, which was 11.1% or almost 18% on a two-year basis.

We also expanded our global footprint with 133 net new restaurants, ending the year with 1,385 restaurants. The combination of same-store sales growth and 10.6% global unit expansion led to system-wide sales of $1.5 billion, an impressive increase of 20.1% versus the prior year.

This strong top line translated to adjusted EBITDA of $57 million for 2019, an increase of 16% over the prior year. Our 2019 results and the underlying strength of our business were driven by our continued execution of our strategy. People and infrastructure are the foundation of our strategy as we build the organization to the next level.

We believe our people are a key competitive advantage and we continue to invest in identifying and developing the best talent. Just last month, we hosted our first Investor Day since becoming a public company in 2015.

This Investor Day held in New York was an opportunity to gather the investment community and showcase the Wingstop’s senior leadership team, which I believe is the best team in the industry. We also leverage this successful event to ensure analysts and investors were anchored in our strategic path forward.

This path forward remains focused on three strategic pillars. Sustaining same-store sales growth through increased brand awareness and innovation, maintaining and enhancing our best-in-class unit economics and expanding our global footprint, all of which ladders up to our vision of building Wingstop into a top 10 global restaurant brand.

The success of sustaining same-store sales growth was highlighted by the strengthening same-store sales performance throughout 2019, fueled by the effectiveness of our national advertising, the expansion of our digital sales mix and the phased approach to our national rollout of delivery, culminating in an 11.1% comp for the year.

In 2020, our national advertising will build off the momentum we created in 2019. As a reminder, our campaign in 2019 was focused on brand building messaging campaign called, Where Flavor Gets Its Wings, which highlights that first bite experience of the craveable flavors that makes Wingstop so popular.

This campaign has been successful in building awareness, but more importantly, increasing conversion of those aware of our brand, but do not use as frequently to more occasions.

The result has been higher frequency levels along with the addition of new guests to the brand, all of which tied back to the acceleration in our same-store sales that we saw in 2019.

As we benchmark our brand funnel metrics, including awareness, consideration, and three-month usage, our GAAP to QSR peers highlights a significant runway for long-term growth. Leveraging the growth in system-wide sales during 2019 of 20%, we have more ad fund dollars to invest in 2020.

Our new TV advertising just hit the airwaves last week, where you will see us continue to highlight our flavor story, but also leave in a message of delivery@wingstop.com, now that we have national coverage for delivery.

In 2020, our messaging will be deployed in two 12-week national TV windows at breakthrough level TRPs while adding two additional weeks of media for the year. Our national TV message highlighting delivery will play a key role as we continue to execute against our goal of digitizing every transaction as 100% of delivery orders are digital.

We ended 2019 with 39% of sales through digital channels, and I’m pleased to share we have already surpassed 40% in January. As a reminder, we enjoy $5 higher average check on all digital orders, which is additive to our top-line growth.

Our pillar of sustaining same-store sales growth is supported by our strategies around national advertising, delivery, and digital expansion. All of these contributed to industry-leading comps in 2019 and have us well-positioned for 2020.

With such clarity in our strategies, we are confident to introduce three to five-year same-store sales target of mid single digits, up from our long-term target of low single digits. Driving top-line sales also helps bolster our overall unit level economics, which is central to our vision.

We know the importance of building average unit volumes and the leverage that provides on the efficient operating model. I’m proud of our domestic system achieving a record 1.25 million in average unit volumes in 2019. So, we don’t get lost in the law of averages.

As we look across results of our vintages by open year, we have a unique situation at Wingstop, where we see consistency in our same-store sales results across each class of new restaurants. We are also seeing restaurant openings improving each year.

The strength of our economic model is best demonstrated by our pipeline of sold restaurant commitments. Our pipeline at the end of 2019 was the highest it’s ever been with 610 new domestic restaurant commitments and 80% of the pipeline representing existing brand partners reinvesting in Wingstop.

The combination of same-store sales growth and best-in-class unit economics will continue to fuel our unit expansion. We believe Wingstop has the potential to grow to over 6,000 restaurants globally, 3,000 plus restaurants in the U.S. and 3,000 plus restaurants internationally.

In the fourth quarter, we made a $1.6 million investment in a strategic engagement with BCG on our international expansion strategy. The engagement was focused providing clarity on global brand positioning, market prioritization, optimal asset type, and an assessment of the infrastructure required, to achieve our substantial growth opportunity.

A key insight from this engagement was the ability of our brand to be positioned as a premium globally and as a result, charge a premium. This is the type of positioning enjoyed by brands like Starbucks and Five Guys.

We are continuing to prioritize markets that align with this premium positioning and have confidence in our targets and expansion plans. We also have confidence that we have optimized the engine in our international model, which includes our enhanced speed of service cooking platform.

The success of this positioning and optimized model, are highlighted by our recent expansion into Western Europe via a new market entry, France, where early results support our brand positioning and approach. We also saw a continued development in the UK with our first dark kitchen opening in the fourth quarter.

In 2020, you will see the strategy continued to take shape in our international business and like anything else, it starts with people. To ensure we successfully execute our international expansion strategy, certain investments in building out the organization are necessary.

In 2020, we expect to invest approximately $1 million to $2 million to further build out our international organization to support our future growth.

We believe we have a proven, highly portable brand and focus strategy and with the investment we made in Q4, we have a focus strategy and are well-positioned to deliver upon our goal of 3,000 plus restaurants in 15 priority markets.

As we look to 2020, we have confidence in our ability to deliver same-store sales growth, in line with our three to five-year outlook of mid single digits. This confidence is based on the underlying strength of the business and the clarity that we have in our same-store sales driving strategies.

As we look back over our 16 years of same-store sales growth, we have had multiple examples, where we have demonstrated the ability to deliver strong sales growth such as those experienced in 2019 year-after-year. I’m sure many of you are also interested in the results from Super Bowl.

For Wingstop and notably for myself as a lifelong Kansas City Chief Span, the Super Bowl was a tremendous success. We sold nearly 18 million wings and enjoyed a solid positive comp for the day while the Super Bowl is a very important event that brings a lot of excitement.

Our 2019 results highlights that our business is not built just upon special events, but rather everyday occasions, where guests can enjoy our wings as the center-of-the-plate meal. 2020 is underway and I could not be more excited about the future of our brand.

We remain confident in our strategies that we’ll continue to reward our shareholders, brand partners and team members. With that, I’ll turn it over to Michael..

Thank you, Charlie. As you’ve just heard from Charlie, we delivered another quarter of strong growth supported by our strategic initiatives. We expanded our global footprint by 45 net new restaurants delivering 10.6% unit growth, ending the year with 1,385 restaurants and we grew domestic same-store sales at 12.2%.

This unit growth coupled with the same-store sales growth led to a system-wide sales increase of 21.2% over the prior year quarter, totaling $397 million. This top-line growth translated to total revenue of $53.2 million for the quarter.

Royalties, franchise fees and other revenue increased $4.8 million in the fourth quarter to $23.9 million, driven primarily by 133 net new franchise restaurant openings since the fourth quarter of last year and a 12.2% domestic same-store sales growth.

advertising fees and related income increased $6.3 million to $15.2 million due primarily to the increase in the contribution rate to our national ad fund from 3% to 4% of gross sales in fiscal year 2019 as well as the 21.2% growth in system-wide sales.

As a reminder, advertising fees are consolidated in our financial statements as part of the new accounting rules, and have equal and offsetting expenses presented in our income statement. Our company-owned restaurant sales increased $1.6 million or 12.7% to $14.1 million. This increase is primarily due to same-store sales growth of 8.9%.

please note in December, we opened a new restaurant in the Kansas city market bringing us to 31 company-owned restaurants. This restaurant has had a strong opening, well exceeding our new restaurant opening sales target, validating the potential of the Kansas city market that we saw a year ago when we acquired three underperforming restaurants.

Cost of sales as a percentage of company-owned restaurant sales increased by 320 basis points compared to the fourth quarter last year. This increase was primarily due to a 7.6% increase in the cost of bone-in chicken wings.

Also contributing to the increase was the higher contribution rate to our national ad fund, increased it from 3% to 4% and cost associated with third-party delivery commissions. As we look to 2020, we expect wing inflation to be high single-digits.

Advertising expenses increased $6.1 million to $14.5 million, in conjunction with the increase in the ad fund contribution rate. Also to remind everyone, advertising expenses are recognized at the same time the related advertising revenue is recognized and does not necessarily correspond to the actual timing of the related advertising.

Selling, general and administrative expenses were $17.8 million in the quarter, which is $4.4 million increase versus the fourth quarter, 2018.

this was driven primarily by a $1.6 million for an international consulting engagement with BCG, $1.3 million related to our franchise convention, which has an equal and offsetting contribution in revenue, $500,000 for a one-time bonus associated with the execution of the CEO’s new employment agreement and separately, a $600,000 charge for severance associated with certain organizational changes to the senior leadership team.

Note the international consulting engagement was treated as an add-back to adjusted EBITDA as this was a one-time strategic investment. The balance of the increase in SG&A was driven by investments in technology and other strategic initiatives as we continue to position the organization for the next phase of growth.

Adjusted EBITDA, a non-GAAP measure increased 13.2% to $14.2 million for the fourth quarter and if adjusted for the non-recurring charges associated with our CEO’s new employment agreement and the severance charge I referenced earlier that were incurred in the fourth quarter, adjusted EBITDA growth would have been 22.4% for the quarter.

There is a reconciliation between adjusted EBITDA and net income; it’s most directly comparable GAAP measure, included in our earnings release. Our effective tax rate for the fourth quarter was 35%, above the anticipated 26%, driven primarily by these non-recurring charges.

adjusted net income in the fourth quarter was $4.3 million or $0.14 per diluted share, which is comparable to Q4 2018. A reconciliation between net income and adjusted net income is included in our earnings release.

reflected in the $0.14 adjusted earnings per diluted share is a $0.05 per share impact relating to these previously mentioned non-recurring organizational charges and higher tax rate as well as $0.02 per share impact of the securitization financing we completed in November of 2018. As of the end of the fourth quarter, we had $300 million in net debt.

We ended the fourth quarter with our net debt to trailing 12-month adjusted EBITDA at 5.3 times. We remained comfortable with a target leverage of six to seven times and we believe over the long-term, we will continue to delever through a combination of adjusted EBITDA growth and strong free cash flow generation.

We remain committed to returning capital to shareholders through our quarterly dividend, which is targeted at approximately 40% of free cash flow. Our board of directors has declared a dividend of $0.11 per share of common stock. This dividend totaling approximately $3.3 million, will be paid on March 20 to stockholders of record as of March 6.

We are consistently evaluating the best use of excess capital and fill our quarterly dividend is an important part of our commitment to our shareholders.

Now turning to guidance, we remain confident in our long-term target of 10% plus unit growth and low single-digit same-store sales growth, which we believe will deliver best-in-class shareholder returns.

But as you’ve heard from Charlie earlier, we are introducing three to five-year targets, 10% plus unit growth and domestic same-store sales growth of mid single-digits. We’re also providing full-year 2020 outlook for SG&A, which we expect to be between $59.5 million and $62.5 million.

We have included a reconciliation on our earnings release from SG&A as reported to an adjusted SG&A number that excludes transaction cost, costs and fees associated with investments in our strategic initiatives, non-cash stock-based compensation, and is further adjusted for convention and marketing related items, which have equal and offsetting contributions in revenue and do not impact profitability metrics.

The components that are included in the SG&A reconciliation for our 2020 outlook are convention cost of approximately $500,000, expenses related to national advertising of approximately $9 million and stock comp of approximately $8 million. Adjusting for these items, we expect adjusted SG&A for 2020 to be between $42 million and $45 million.

You heard Charlie referenced earlier the roadmap for our international expansion strategy, which included investments in our infrastructure to support our next phase of growth. Those SG&A investments are reflected in our fiscal year 2020 outlook provided here.

before opening the call for questions, we want to comment on our new corporate headquarters that we acquired in September of 2019. We are not anticipating any significant P&L impact for the new headquarters in 2020 and we are anticipating a move-in date into our new headquarters towards the end of 2020.

I want to thank you for joining the call this morning and look forward to delivering another year of industry leading results while maximizing shareholder value in 2020. We will now be happy to answer any questions that you may have..

Our first question comes from David Tarantino of Baird. Please go ahead..

Hi. Good morning. Just a couple of questions on comp outlook for this year. Charlie, or Michael, could you comment on how you expect the comps to play out across the year given the various comparisons you’re facing? And then, if you’re willing to comment on how the year has started, some perspective on that would be great as well. Thanks..

Good morning, David. I will first answer the first part of your question by really pointing to the two-year comp trend coming out of 2019 as an indicator to use to compare against the increasing, I guess, or more difficult compares as we sequence ourselves through the year quarter-by-quarter.

That’s probably the best benchmark to use to kind of get to what you think the one-year comp would look like. As for Q1, no specific comments other than really encouraged by the continuing momentum we had late in the year carrying us into this year. We did comment on a strong Super Bowl performance this quarter.

And would also comment towards the introduction of our advertising in this quarter, which started right after the Super Bowl and carries the messaging not only as the flavor of our wings, which is consistent with our Where Flavor Gets Its Wing campaign, but also a message around delivery and notably delivery through the wingstop.com channel.

We expect both of those to be able to – in addition to the additional 20% that – of dollars that goes into the ad fund based on our performance last year, to be able to carry us consistently throughout the year and lap the strong performance we had in 2019..

Great. And if I could ask just one follow-up. If I think beyond this year in your three- to five-year target of mid-single digits, that’s a pretty lofty goal, and I was just wondering if you could maybe talk through the rationale for raising the outlook for that time horizon.

What was it that gave you the confidence that the next three to five years would be higher than what your prior long-term guidance was?.

Yes. One of the areas we focused on at our Investor Day presentation was a view of our comp trends over the last 16 years.

And if you look at the performance of the brand when we made some sort of significant strategic shifts in our marketing or advertising efforts, whether that was to form co-ops as far back as 2004 or when we started to centralize our creative strategies around 2012 and then, of course, the most recent significant adjustment, which was the addition to the national ad fund.

In each case, we’ve been able to sustain strong comps each year and I think if – in not only each year, but for a number of years post that event. If we look forward to not only this year but for the next couple, three years ahead of us, we still believe we have multiple long-term growth levers that can drive our comp.

One is the significant gap we see with our peers, not only in brand awareness but also in consideration – in purchase consideration with Wingstop. We shared that at our Investor Day and feel like that is a real catalyst to long-term sustainable top-line growth for the brand.

And then beyond that, we see the continued growth in a very paced and thoughtful approach to delivery being a continued long-term driver as well. And then, of course, our digital mix continues to improve. We noted that in January already we’ve exceeded 40% of our sales in digital. Each of those digital transactions, as we know, carries a higher check.

So the building blocks of our comp include consistent measured ticket growth by way of digital and price, consistent transaction growth by bringing in new customers to the brand through our efforts that we’re using to place that extra 1% and then delivery being another driver of sustained comp growth.

So, we do have confidence in this increase in our guidance for the next three to five years..

Great. Thank you..

Our next question comes from Katherine Fogertey, Goldman Sachs. Please go ahead..

Great, thank you. One of my questions that I have here is about your comments around speed of service, and you kind of know that it was the focus of the Analyst Day, and then today, you kind of commented that it looks like it could all go ahead on that front.

Can you help us understand a little bit more about what that does to franchisee economics? What the returns look like for the restaurants that are running speed of service well only a limited number of locations? And is it your plan to put speed of service in all international locations? Or is it just a portion of them where it would make sense? And then just kind of rounding out on the speed of service question.

For domestic markets, you look to backfill that technology in the kitchens today in the U.S..

Hi, Katie, thanks for the question. I want to clarify for everyone what speed of service means as it relates to domestic versus international business.

I did just return from a trip to Europe looking at our restaurants that we’ve already had in place and the new ones that we’ve added to our portfolio in both France and the UK, including a dark kitchen that we recently opened in the UK.

I’m very comfortable that we have identified the right – both technology really through cooking procedures as well as the operational flows that we continue to tweak and enhance, but feel very comfortable that both combined can deliver a transaction to our guests within five to eight minutes at any given point in time, which is really important as we work on this premium positioning of our brand as well as placement of restaurants in key markets where speed of service is critical.

What I will say to you is that in the domestic market, our primary focus is to spend time looking at whether speed of service is necessary for our existing restaurants, or more importantly, is it important for us in really non-traditional-type assets. That would include airports, kiosk locations, stadiums, et cetera.

That’s really where we see that benefit, because those environments are the type of environments, where we want to have that quick transaction, because it’s more of an individual occasion. Our existing company – existing restaurants in the U.S. domestically tend to have a much higher ticket average that incorporates multiple people on those tickets.

So, we really don’t have a capacity constraint in the U.S. We’ve seen volumes, as you know, as high as $3 million, $3.5 million in our restaurants. We consistently eclipsed $2 million. Our company stores are approaching $1.9 million in average unit volume, all with the same cooking platform. So it’s not a capacity challenge there.

It’s really about the location of a site, where it goes and why that would be important for individual-type transactions. We see more of that in the international space than we do in U.S. But we’re just still going to tie that in. So, therefore, I don’t foresee any negative effect to the U.S. economic model.

It’s a relatively small investment in the equipment. It’s more about training and the process and procedure than it is about anything else. So I see that as a non-issue U.S. and a great opportunity and a catalyst for the international business..

Great, thanks. And I just have a follow-up too on the guidance? We saw some of the product innovation that you guys were working on at the Analyst Day.

Are you guys taking in any of that into your thoughts for this year? And then on that front, should we expect that this is the year that we should see some less reliance on wing prices and maybe some diversification across the board? Thanks..

Yes. And I appreciate that question. Certainly, we’re going to continue to test some technology within the restaurants to figure out how we can make the ordering process for the guests more seamless as well as the pickup of the product.

And you saw that at Analyst Day with our locker technology as well as innovations like kiosks, if we believe that they add incremental value. As it relates to the chicken product itself, we will start testing size that we were able to showcase those at Investor Day.

We think they have a lot of potential for our brand and can be that great offset to bone-in chicken wings when we see volatility in the pricing. What we would expect in our outlook for wing prices this year, fairly stable compared to what we saw in 2019. 2018, 2017 were kind of volatile years on both ends; very high in 2017, very low in 2018.

But I would submit that 2019 was a good demonstration of stability. And the current trends in the Urner Barry suggests that we’re following what I would consider it to be, if there is such a thing, a normal seasonality to the wing prices..

Great, thanks..

Next question comes from John Glass of Morgan Stanley. Please go ahead..

Hi, thanks very much. First, Charlie, I think at the Analyst Day you talked about a better data-sharing arrangement with DoorDash this year.

Can you talk about when that occurs, if it already is occurring and how you plan to use that data? And just on a related question on that is that I think is it your advertising is going to focus entirely on wingstop.com and directing people to your assets? Does DoorDash have a plan separately to advertise your brand in some form or fashion? Or is it solely your advertising of your delivery that will drive the delivery sales?.

Hi, John. The answer on the data-sharing centers around basic information that profiles the guests that use the DoorDash platform to purchase Wingstop’s products. And that’s a reciprocal. So we also can provide them with information about the type of customers that use wingstop.com to purchase our products as well.

But that is not specific to exactly their name, address, e-mail address and everything else, it’s more descriptive information that we can use in our marketing efforts to make sure we’re pointing to the right type of user. But it is sufficient for us to be able to make good decisions on where we point our marketing efforts.

As it relates to the other part of your question, yes, we think that it is going to be a mutual effort between Wingstop and DoorDash as it relates to advertising our products.

And I think one of the benefits Wingstop enjoys with our partnership with DoorDash is that our volumes are generally pretty high, meaning we bring a lot of traffic to their site, which is actually a benefit to DoorDash. And so we have experience where they have marketed our brand proactively utilizing their own dollars.

While it’s not specifically required between the two companies, what we found is that DoorDash will lean into brands like ours that provide them with great benefit and a good return on their marketing investment..

Thank you. Michael, can I just ask a follow-up, just maybe more a guidance or modeling related. First, you didn’t provide guidance on share count and the interest expense, I think you would prior. So maybe is this just a new way of looking at it.

And if – given that there may or may not be a recapitalization you don’t want to put a single number out there. If you could clarify that? And on the adjustments that you laid out for G&A, just we’re on the same page.

With the exception of share-based comp, you don’t plan on actually backing out any of these things as you think about your adjusted EBITDA. It’s just you’re helping us get to an underlying core G&A.

Is that right?.

Hey, John, thanks for the question. Yes, as far as it relates to share count, we didn’t guide to it. We don’t expect a significant change in the total shares outstanding. As it relates to interest expense, we have talked about this kind of multiple quarters leading up to 2020 as it relates to the anticipated timing of our next recap.

As we noted in our targets that we shared at Investor Day, we’re quite comfortable at 6 times to 7 times leverage. At the end of Q4, we were at 5.3 times. So I would expect us to be at a leverage position, presuming the markets remain favorable that we could go out to the market and revisit there our leverage in the middle of 2020.

So clearly, that would have an impact to total interest expense for the year. I think as we get further along in that process we’ll be able to provide some more specifics. And then the last part of your question, as it relates to G&A, you’re correct.

As far as the reconciliation from reported G&A to adjusted SG&A, we’re not anticipating any add-backs in those numbers. We’re just trying to provide a little bit more clarity into the numbers that flow through G&A and how they impact results.

And that’s obviously referencing 2020, not the $1.6 million investment that was incurred in the fourth quarter with BCG on the international strategic consulting agreement..

Thank you..

Next question comes from Jeffrey Bernstein of Barclays. Please go ahead..

Great. Thank you very much. Two questions, just one on the unit growth outlook. You achieved the 12.5% or so in 2019 globally and that was very similar to 2018.

Just wondering, as you look out not just over the next three to five, but even longer, it seems like you guys reiterated your confidence that 10% plus was a very reasonable growth rate for many years to come.

So I’m just wondering with the little margin of error that we saw in 2019, maybe just talk about your confidence and perhaps the balance of how U.S.

versus international plays out when you’re thinking about over the next few years? At what point the international is contributing whatever portion you would consider meaningful, but just how you think about the baton passing from U.S.

to international in order to sustain the 10% plus on a larger base?.

Hey, Jeff, the confidence we have really is supported by a couple of things. One, if you look at the strength of our pipeline and the increase that we’ve seen, especially on the domestic side of the business exceeding 600 restaurants, our tendency is to have some correlation in that pipeline to the number of restaurants that can come from it.

And so, I think it’s a good indicator of the potential in terms of our growth in the domestic business. I would also point to the strong performance for international in Q4. 13 net new restaurants in the quarter, which was a good indicator of the strengthening position of our business model in our international markets.

Certainly, we have identified markets that we don’t believe were priority markets that may have been on that list before. But we do anticipate, as we shared in our Investor Day, adding markets to our list that we believe are more applicable to the model that we expect to deploy for Wingstop.

And so, with the – with that on our list and our active work in those markets to bring them forward with new deals, we could – we expect to see that international does play a bigger part both in the short term as well as in the long term of our growth process.

So – and then I think the last piece I would add to that, just on the international front, is the noted investments we are going to take this year in both people and infrastructure to make sure that we’re well prepared for that growth..

Got it. And then just a follow-up on the speed of service discussion earlier. It sounds like internationally, and where you deem appropriate in the U.S., where speed of service might be more critical, it seems like you’re very comfortable with the product quality is comparable and the operation just seem comfortable with.

I’m just wondering the internal thought process or discussions with franchisees as to why not potentially convert the existing U.S. system and make all new units in that format. If presumably, I would assume consumers would seemingly prefer to have a quicker speed time even if you haven’t run into capacity constraints.

It would seem like that’s one of the headwinds you guys have faced is the 15-plus minutes that people had to wait. So what would stop you from doing a full refurbishment of the U.S.

systems to that new technology?.

Well, one of the things that we have to prove and demonstrate is that a new restaurant would have a high frequency of walk-in guests that order at our counter and what we’ve seen actually is kind of a flip of that, and more and more of our business is consumed via our digital channels, be it through carryout or delivery.

We noted in January that our digital mix has already exceeded 40%. I’m happy to say that about 160 of our restaurants have exceeded 50% and even more have gone over 60%. If you couple that with the fact that now our total off-premise business is around 80% of our sales, it would say that the issue we deal within the U.S.

is less about that walk-in traffic, and we don’t have our locations positioned in heavy footfall areas where individuals eat a lot of our product. So, therefore, we’re able to really meet their expectations or drive them to digital occasions, which could be well-timed. Now, there are exceptions to that.

So I wouldn’t suggest that it’s the entire system that gets retrofit, but there may be certain restaurants where we say, hey, this would be a great benefit to us to grow our dynamic market business. And of course, we’ll leverage that technology, and it’s a fairly simple flip.

We also have opened restaurants with and without this cooking platform recently and really haven’t seen a meaningful difference in customer satisfaction scores associated with the time of delivery of products.

Very helpful. Thank you..

Next question from Andy Barish of Jefferies. Please go ahead..

Hey, guys.

Can you give us a sense just on some of the earlier delivery markets, how you continue to see organic growth? And then also a little bit more flavor on sort of the broadening customer base, who you’re starting to bring in, what is that customer or demographic characteristic?.

Hey, Andy, on delivery, we are seeing organic growth, and we’ve commented on that before, but one of the things that we have not done until very recently is actually advertised delivery beyond the rollout, even in some of the original test markets and early rollout markets.

But we do see a nice, steady increase in the performance of delivery in those markets year-over-year. So we’re encouraged by that. What will really be telling is how these markets respond to the national advertising support of delivery and will that increase our overall delivery mix, and that’s to be determined.

We’ll probably comment a little bit on that next quarter.

As it relates to our guests, one of the elements we highlighted at Investor Day was the differentiation between who our core users are, obviously, we know them well, who we would call non-frequent fans, people who love our brand, but just don’t use us in the way that our core does and then what we also refer to as habitual QSR users, people who don’t use us today, but do use QSR restaurants quite frequently.

And our mention was that we really want to drive up consideration of Wingstop by pointing our advertising to those habitual QSR users, which tend to be a little higher income, certainly family-oriented and against our core consumer base, which has a higher propensity towards both African-American, Hispanic consumers.

We see a little bit more – less of that diversity in terms of our consumer base in the high QSR. So we are expanding the audience to whom we are marketing our business.

And actually, what we can now track and monitor is how we engage those guests and then move them through our funnel from being perhaps never or only infrequent users to become medium and heavy users, and we can actually monitor that performance. And we’ll continue to monitor that over time.

But the good news is we’ve actually increased our user growth as well as substantially increased the visit frequency amongst those guests..

Thank you..

Our next question comes from Chris O’Cull of Stifel. Please go ahead..

Thanks. Charlie, when do you expect to be able to make a decision about whether the system should add lockers to existing stores in the U.S.? And what are some of the financial benefits you’re seeing from the test? And then I have a follow-up..

Well, you need a number of purchase cycles with the lockers installed in our restaurants to be able to gauge what we believe is the true financial success.

What we believe the real outcome of the lockers and the business case behind it is – would center around an increase in guest satisfaction associated with long wait times for orders that are placed ahead of time.

So one thing we do know is our guests walk in, they have to wait in the queue and their order is sitting there ready, but they can’t get to the cashier to get them processed or even if they’ve already paid for them they still have to get to one of our cashiers to actually receive the order.

So lockers alleviate that congestion, and we have seen benefit of that. And so we’ve been testing it for a period of time in multiple restaurants to make sure we clearly understand it. The investment cost of lockers can be significant.

And so assessing a payback has more to do with what’s the long-term sustainable sales growth we can get from this investment.

And then the other piece is those lockers require as well an investment in back-of-the-house technology, which becomes, if you will, the brains of the restaurant that sits on top of the point-of-sale system that takes online orders and customer information, directs those orders to the lockers as well as passes that information back to the guest.

So both of those are substantial in terms of what it would take. And so we want to measure this very carefully before we approach our brand partners and say, "hey, we think there is a legitimate opportunity here.

But clearly – in the early stages, we clearly see, as other brands have seen, these lockers can address that congestion issue inside the restaurant. So we’re going to take our time and be very diligent about it before we formally provide a plan of how we would implement those in the system..

Okay, great. And then, Michael, I had just a modeling question. It appears to the advertising-related expenses that are in SG&A plus the amount in the advertising fund expense have not always equaled the advertising fund revenue. And I believe for the full year, the amount was close to a $4 million variance.

I know in the past you guys have expected that variance to be close to nil.

So why was it higher this year? And do you have any guidance for what type of variance you’re expecting in 2020?.

I would expect a pretty similar variance in 2020. And really, where that variance resides is in the revenue line with royalties and franchise fees and other. And what that’s comprised of is a vendor rebate that we receive on behalf of volume for the broader system. And that rebate is contributed, if you will, or spent on national advertising.

And so if you take all those component parts that you highlighted along with the other revenue piece, I just mentioned, it does wash on the P&L to zero..

Perfect. Thank you..

Next question comes from Nicole Miller, Piper Sandler. Please go ahead..

I want to ask about the dark kitchens.

What kind of human or financial capital do you commit? And then what kind of data are you getting? And I was also curious to understand if this is a way to eventually reverse engineer site selection? So you go into these somewhat newer markets when you’re talking about a dark kitchen internationally, and you’re ultimately going to find out where the demand is.

Is that just going to inform where you would ultimately put stores? Thanks..

Hi Nicole. Yes, it’s a great question, and it’s the data point of one I will start with. So take that with for what it’s worth. We’re still learning a little bit about it. We have been doing a lot of exploration work here in the U.S., both on our own as well as with some of the existing and emerging providers of this type of capability.

What – and I do think it will impact somewhat our site selection strategy. But if anything, it’s a compliment.

And it’s a compliment because it may present us with an opportunity to drop a restaurant into a trade area we, otherwise, would not have gone to either because real estate costs are extraordinarily high or availability of a true and thoughtful retail location would not be there.

A good example might be a business hub in a large market where there’s a lot of daytime population, a lot of businesses that are there, but there’s no real retail presence. We could drop a kitchen in and make it available for delivery to our guests. What we learned in the UK, we all know that real estate cost can be quite expensive there.

And so there are areas that if we believe the brand awareness is sufficient that we can start to point people towards a delivery-only model through a dark kitchen. Interestingly, our brand awareness, even with two restaurants in the UK, is quite strong.

So I compliment our brand partners there for doing a fantastic job of introducing Wingstop to the market, and they’ve been able to see very strong results out of this dark kitchen right out of the gate.

So it does give us some excitement about it, but it’s a data point of one, and I wouldn’t want to give any sort of indication as to what the future would be until we get a couple of these under our belt. But we’re going to continue to play with them and see what makes the most sense and then formulate a strategy around these.

But from a resource perspective, very easy to operate, limited number of people, definitely a much lower rent factor and investment cost because essentially you’re just dropping one of our kitchens into an existing small space. So it does really have a meaningful impact on the unit economics..

Thank you. And then just on wings quickly from modeling, I want to make sure we all understood that. High-single digit, I mean, that’s apples-to-apples in the prior year on wings themselves, but there’s a whole bird effort going forward.

So is total inflation net-net less than that and there’s less pressure on store-level margin?.

Yes. I mean, the high-single digit expectation is centered on the fact that we still expect to primarily be focused on bone-in wings this year. We are going to test the thigh product, but there’s not a specific rollout that we’ve contemplated in our marketing calendar for this year. So that’s more of a probably 2021 event.

But I think high-single digits is – in our business model, as I think we all know, is actually a very good year. So we anticipate that general stability in wing prices for the year based on that..

Thanks again..

Next question comes from Matt DiFrisco with Guggenheim Securities. Please go ahead..

Thank you. I just had a couple of follow-ups on the delivery side. I know you guys have said in the past, and you’ve reiterated that I think today, a $5 difference between the digital check and a regular check.

How much does though the delivery side of it also impact? I mean, is the delivery then again on top of that $5 given that it’s all digital? So I’m assuming that would be even above your historical digital carryout at $5?.

We’ve seen Matt that delivery checks as we grow the delivery business and get more experience are about the same as any other off-premise digital transaction. So we still would point towards that $5 incremental ticket as compared to a traditional walk-in occasion or phone in..

Okay. And then some – obviously, some more developed pizza players that have been in delivery for a longer period of time have sort of looked at takeout and delivery as incremental as you guys have mentioned them a couple of times now to be incremental, first, the carryout business.

But they’ve also promoted specifically menu items and price points for a carryout occasion and a delivery occasion to be independent.

Is there – is that perhaps something – another strategy down the line as you look to get into your sophomore year of delivery now on a national basis?.

Well, I probably would say this is more of our freshman year or lap number two of the freshman year, which would be one way to describe it because really, I mean, we just hit 100%, and we’ll get a full year of 100% rollout of delivery plus marketing. So really, this is kind of that first year. However, your question is a good one.

And certainly, I’ve personally seen this many – over many years of experience in pizza that, yes, there is differentiation in price to create value for that carryout occasion. I don’t anticipate that being something for Wingstop anytime soon.

But as we achieve maturity, that’s certainly within the realm of possibility that we could encourage guests to consider the carryout occasion. I would only say that still today carryout makes up 70% roughly of our occasions already. So in the pizza world, delivery is the clear winner with carryout being smaller.

So there is an incentive to drive more carryout business for profitability. But that’s way down the road in speculative at this point. Right now, we’re going to focus just on building the delivery business first..

Excellent. Last question, just a bookkeeping one. Can you remind us – I think you mentioned the DoorDash experience when you launched it last year, there was somewhat of a surge, almost an unexpected surge from a promotion that they had, where it drove a lot of revenue, but not necessarily – but also at a higher take rate and everything.

So, I’m just curious, when do we lap that again? Or when did that boost the comp, maybe that is not going to? Or is that something that’s promotionally going to be met this year as well?.

Yes, sometime mid-second quarter is when we experienced that, roughly May time frame. So I would expect that we’ll lap that then. The other thing that certainly we’ll talk about when we release Q1, which I believe somewhere in that time frame is. We’ll talk a little bit about any impact we’ve seen by promoting wingstop.com as our primary channel.

We see that as the catalyst to really offset the business that is coming through the marketplace. The only other thing I’d call out is that because of our negotiated – renegotiated contract with DoorDash we’re a bit agnostic as to where – what channel the business comes through.

It was meaningful at that point in time, but now the commission rates are pretty similar. So it doesn’t really matter to our P&L for that matter..

Thank you..

Next question comes from Nick Setyan, Wedbush Securities. Please go ahead..

Thank you. My first question is just a follow-up on the wing cost inflation commentary. If we just look at the Urner Barry pricing on jumbo wings, it actually looks like this year could be deflationary.

So can you just remind us, I guess, what some of the other variables are that we should keep in mind when we think about wing costs for Wingstop? And also, is there anything incremental on the strategy to stabilize wing costs that you first talked about during Investor Day?.

Yes, Nick, we really – we give this annual forecast based on what we learn within the industry, the chicken industry. So there are multiple prognosticators for wing prices out there, and we look at their information and use that to formulate our guidance on wings. It’s – as you know, it can be very volatile.

It could be impacted by any one major event or major players stepping in and sourcing wings in the market. And so I don’t think that there’s a risk of a high inflation event this year, but most people are pointing to just some form of modest increase in wing prices. So we’ve adopted that outlook as well for our business.

But I wouldn’t call attention to any one indicator that would suggest that we couldn’t, otherwise, be in a deflationary setting, but we’d rather not manage our business around the anticipation of deflation given what we’ve seen in the past..

And is there anything incremental on the strategy to stabilize wing costs?.

Aside from what we’ve already talked about with regard to the whole bird and the use of size, the whole wings as part of our testing strategy this year, we believe that, that’s going to be the most meaningful impact to any volatility long-term..

Got it. And then just last question.

Given the international unit growth commentary, is it a fair assumption that specifically in 2020 we’re going to see the absolute number of units higher than we saw in 2019 in terms of openings?.

The absolute number of net new openings, you mean?.

Yes..

That certainly would be the output of our guidance, yes..

Thank you..

Next question comes from Andrew Strelzik, BMO Capital Markets. Please go ahead..

Hi, thank you. My first question is kind of a bigger picture question on the uses of ad dollars in the ad contribution rate. I’m just curious how you’re thinking about that as a lever over time. I know you chose not to raise that percentage this year.

But with the system sales growth and things like that, how do you think about that as a lever and prioritizing the use of those incremental ad dollars?.

Well, it certainly is a lever that we have. But, as we’ve noted, and you also noted, I think, a 20% increase in system-wide sales on the domestic side fuels a lot of incremental ad dollars. And the bigger we get, those dollars can be very effective and very efficient in helping just to increase the scope and reach of our advertising.

And I think it’s proven itself in the performance that we saw last year. Last year, we saw something in the order of 40% to 50% increase in the ad dollars because we made the adjustment to 4% from 3%. But to pick up 20% more, and given our guided growth rates this year, we can continue to do that again.

We’ll make a decision as we get through the year as to whether or not we feel it’s necessary to capture another 50 bps or 100 bps on the ad fund. If we do, I think it’s the right business decision aligned with our brand partners, then we certainly can do that. So, we like having that as a lever to pull long term.

And I think the real benefit of these additional dollars is the quality of the media we’re able to place. That continuously gets better, which means we’re in more robust situations like sports and – notably, football, NBA, NCAA, things like that, which haven’t been really part of our media placement in the past.

So when you get to those more premium products or placements, it can have a meaningful effect, especially in introducing our brand to those non-users that we’ve talked about, those heavy QSR users they don’t invest today..

And then my other questions was on kind of interest that you’re seeing among newer franchisee or potential newer franchisees to the system. I think 90% of the stores last year were opened by existing franchisees, which is obviously extremely encouraging.

But I guess, how are you balancing kind of the current franchisee base? And then just among others, have you seen that accelerated all over the last kind of 12 to 24 months?.

Yes. We haven’t seen an acceleration in the number of new franchisees to our system. We are careful to identify markets in areas where we believe a net new franchisee can be beneficial to us, especially if they bring with them scale from an existing restaurant concept that they’re already managing that can help accelerate our growth in that market.

I point to one market, in particular, that I – we made a decision to do that, which is Miami. We’ve got a skilled operator that can accelerate growth in that market for us and is an existing large operator of another concept. So we’re thoughtful and careful.

But I would say the rate of what I refer to as our discovery days, which is when we bring new franchisees into the system has declined over the past couple of years. And instead – and we’re very happy with continuing to provide opportunities for growth, both in markets that they operate as well as new markets for our existing franchisees..

Great. Thank you very much..

Next question comes from Peter Saleh, BTIG. Please go ahead..

Great. Thanks. You guys mentioned that you’re doing two 12-week slides on TV this year, and that’s clearly up pretty significantly from last year. So can you talk about the performance – the sales performance maybe after you go off-air or what you’ve seen historically? You get a halo – it seems like you do get a halo effect on the sales.

How long does that last? Any sort of details around that would be helpful..

Yes. One thing, and we identified this and showed it at our investor presentation as well, is that while we are on nationally for those big windows that primarily cross half of Q1, half of Q2 and then most of Q3 and Q4.

In between that, we also are placing TV advertising locally in our major co-ops, which number close to 15 of these markets across the U.S. that also account for as much as 50% to 60% of our total restaurant locations. We stay on TV during those windows in between. And it’s the same messaging, but it’s pointed at a local spend.

So where we have efficiency, which is a growing number of markets, we’re still able to stay on TV as well as radio and strong digital, which is always present to be able to sustain the momentum we get from the national windows. And when we are on in those local markets, the TRP levels are as much as 80% of the total TRPs that we show nationally.

So it’s not a small amount of media..

Great. And just my last question would be on pricing. I know you guys talked about high-single digit wing inflation this year, but it sounds like that could – it could be a little bit lower.

What are franchisees thinking? Or what are you seeing so far on pricing plans for this year? Are franchisees stepping up and taking the price? Or is the traffic increase that they’re seeing just enough to keep them on the sidelines from raising their prices?.

Yes, after we went through the volatility in 2017, we made a concerted effort in collaboration with our franchisees to hire RMS to come in and help us, help them directly with their pricing efforts.

And so what that has translated into is about one to two points of strategic price increases per year that usually happen in two different instances throughout the year. So two cycles each year yielding about one to two points is what we believe is going to be the ongoing algorithm.

If there was some material events by way of food cost through wing prices or otherwise, we might reconsider that. But what we do believe is this constant 1% to 2% strategic increase mitigates any risk of transaction loss and builds in a little bit of upside in years like this year and last year where prices are relatively stable..

All right. Thank you very much..

Next question comes from Michael Tamas with Oppenheimer & Co. Please go ahead..

Great. Thanks. You guys showed a slide at the Analyst Day about the AUVs across the country, and I get that the AUVs are lower in the Northeast and Southeast because of the age of those units and maturity of the market.

But can you talk about maybe the performance of those stores relative to some of your legacy markets?.

Yes. I mean, performance-wise, from a top-line perspective, very consistent, which we’ve demonstrated as well that although their average unit volumes fall below that of mature markets in the west as well as in the southwestern part of the U.S. It is performing at a level that is indicative of how the brand really grew up.

And as we continue to add restaurants to these markets and fortify them through our purchasing strategy, we do believe that their unit volumes will continue to perform high. At today’s wing prices and today’s relative P&L costs, our breakeven levels are quite low. And so franchisees are able to sustain solid margins at these levels.

And I would point to what we expect out of our net new restaurants in their second year of operation is somewhere in the high $800,000 range, which matches these restaurants with a kind of low- to mid-teens operating margin at our standardized cost structure. So barring volatility, we believe that these restaurants are performing okay.

We certainly would love to see them experience what many of our operators have experienced in the south and western parts of the U.S. as they mature. And that maturity curve is consistent market to market for the business. So it’s really – as we’ve demonstrated multiple times, this brand has been able to stand the test up time.

And I think that’s evidenced by our generally quite low closure rate. And the closures that do happen don’t appear to be completely isolated to one geography, but tend to be isolated more to the quality of the operations and the operator themselves..

Got you. Thanks. Just a follow up. You’ve talked about the alternative birds, whole birds and size and whatnot.

Just wondering, that’s great for the COGS and for franchisee economics, what about from the demand side? Do you see a big push from customers? Or is that something where you need to actually educate the customer to sort of go into some of these alternative types of chicken? Thanks..

Yes. The best indicator we have is purely just research at this point, where we presented these products in comparison to our bone-in wings to them. The indications from our research is that there is great potential demand. Obviously, we have to test that, which is what we’re going to start doing here in the second quarter.

So more to come on that, and we’ll be able to talk about the demand levels of that product. The only other product I would point to is the national test we did of whole wings, where we did see a nice mix rate of the product unadvertized, which gave us confidence that consumers do appreciate these products, especially with a value offering behind it..

Great. Thank you..

Next question comes from Jon Tower of Wells Fargo. Please go ahead..

Great. Thanks for taking the question. Just a clarification first. Michael, I think you said earlier there’s going to be roughly 26 weeks of television – national television media out there.

So does that include any advertising that DoorDash would be doing? Or is that complimentary to what you got?.

Yes. That would not capture any sort of advertising that DoorDash would do. That’s simply the advertising that were you putting to work with our national ad fund dollars..

Great. Okay. Makes sense. And then just in terms of the domestic franchisee base, I think the numbers I have here are a little stale, but I think you had roughly 280 franchisees in the past and about 120 single-unit operators.

And your commitments have grown, but I’m just kind of curious if you could talk about how maybe that large, what is it, 40% or so of your store base that’s roughly in that single-unit operator format? Has that been much of an impediment to faster domestic unit growth?.

I don’t – I would not refer to it as an impediment to faster unit growth; however, what it does for us is just creates perhaps an inefficiency. But, at the end of the day, those 120 are now below 100 in terms of count. A lot of that is through the consolidation and our net number of franchisees in the U.S. is actually shrinking, not growing.

And so this consolidation effort albeit very thoughtful plan and over time, we do believe it’s going to yield a much smaller franchise base that has a lot more restaurants which creates efficiency and value for our franchisees who do want to grow their businesses.

So not an impediment, but it does create opportunistic – opportunities, I guess, for our franchisees to capitalize on the acquisition of the restaurant in the market..

Okay. And then just my last question. One of your larger competitors in the fast-casual space has turned on loyalty this year, and it’s been a nice boom to them, and you guys have had clearly strong same-store sales, and it looks like you’ve got plenty of drivers ahead, but in that conversation, loyalty doesn’t seem to come up.

So can you just kind of explain your thinking around loyalty and why it’s not one of the drivers, at least in the next 12 or 24 months to this business from a sales standpoint?.

Sure. And as you know, we believe we exist in a category of one. So no real direct competitor, but we are familiar with some of the loyalty programs that are out there.

We’ve opted not to pursue a loyalty program that has a if you buy you get a type of approach, instead we’ve built a robust CRM platform that allows us to connect with guests during their purchase experience and after the purchase as well as before and tailor messages and opportunities to them that would encourage them to seek out a new flavor or get their favorite flavor if they didn’t order it on their current order and maybe add some loaded fries or brownie to their order.

We found that, that actually is good at building check without discounting. It’s a great way to engage with our guests.

And I think if you look at the performance of the brand and the 16 consecutive years of positive comp store sales without discounting, we feel that we have a long runway ahead of us without having to use a program like that to ensure frequency..

Okay..

Next question is from Jeff Farmer, Gordon Haskett. Please go ahead..

Great. Thanks. And its late, so I’ll just ask one.

So just curious what was the delivery contribution to system same-store sales in 2019 Just curious if you can give us any color around that? And how are you thinking about that contribution from delivery as we get into 2020 on the same-store sales front?.

Well, we haven’t given any specificity, but certainly it was a contributor to our growth as we look forward, and we continue to advertise delivery and believe it to be an incremental occasion for us. It’s certainly going to be additive as its impact to our overall growth, but I can’t give you any specifics on that..

All right.

Just with that delivery sales mix, you might have touched on that, but what was that in the fourth quarter of 2019, roughly?.

Still low- to mid-teens..

Okay. Thank you..

Next question comes from James Sanderson, Northcoast Research. Please go ahead..

Hey, thanks for the question. It’s late.

So I’ll go through this quickly, but I was hoping you could provide some more detail about new stores that are actually opening in 2020 and how average unit volume should look for these new stores and how regional mix should trend? And this is really in light of the wide range you provided at the Investor Day on average unit volumes, not only in the United States but in international markets.

So hopefully, a little bit of texture on how these new stores will contribute to top line in 2020? Thank you..

Hi, Jim. Yes, we have gave some indication to the performance of new stores by providing what the 2018 class look like at our Investor Day, which those restaurants opened on average at $945,000.

What I would say is, with the continued halo of national advertising as well as the efforts we’re placing to make sure that we’re fortressing markets and creating that strength in each of the markets, that we’re opening in, we would expect, like we’ve seen over the years in other mature markets that our volumes continue to increase..

Okay. And as far as international markets, how should we look at that since that’s a relatively..

Well, there’s – it’s a tale of multiple different markets, right? So each average unit volume in every market is uniquely different. What I would say is we’re really encouraged by the strong openings that we’ve seen in Western Europe since we’ve implemented our new platform for growth in those markets.

And would hope that in these premium, well-positioned markets like the UK, France, new markets potentially like the Netherlands, we would be able to see continued strong performance out of the gates. And in some cases, these unit volumes have well exceeded what our national average is, even in the U.S.

So more to come on that, but that compared to a market like Indonesia, Malaysia, where we see generally lower – or even Mexico, lower AUVs, that’s not necessarily a negative indicator to the health of the brand because those lower AUVs can still deliver very strong profitable results for our franchisees..

Thank you..

Next question comes from Jake Bartlett of SunTrust. Please go ahead..

Great, thanks for taking the question. My question was about international commitments for new development from international. I know you didn’t mention at the Investor Day. I’m wondering whether you could give us an update.

Now just to get a sense as to where the pipeline stands? I know you’re kind of rebuilding it with the new plan, but any indication would be helpful..

Hey, Jake. This is Michael. Yes. About a year ago, the pipeline was roughly 500. And as we go into 2020, it’s about 400, a little below that.

And what you really see there is a couple of things; one, as Charlie referenced earlier, we’ve really kind of cold, if you will, kind of the markets we’re going to go pursue that are – that align with our strategy that we’ve formulated with BCG and shared at our Investor Day. So that resulted in us not pursuing a couple of markets.

And then also, we talked about this before and that we added additional development to the development agreement in Mexico, which took it from 120 restaurant commitments to 200. And so those are kind of the puts and takes that result in a little over 100 commitment count decrease in the pipeline year-over-year..

Got it. And then in the context of an earlier question, you mentioned – I think, Charlie, you mentioned that that you expect to open kind of net more units in 2020 than in ‘19.

Would you say that that’s true for the international, just to try to gauge what the kind of the trajectory is as that ramps up with the new plan?.

I think generally speaking, the ratio in 2020 of domestic openings versus international should be pretty consistent to 2019..

Okay. And then last question, just a clarification. I think in the release you mentioned that the convention costs were $1.3 million, then in the chart for G&A or SG&A, I think it’s less is $1.8 million. So just if you can clarify whether it’s $1.8 million or $1.3 million that would be helpful..

Yes, it was $1.8 million is what we incurred for the convention. So there was contributions recorded in revenue and then the expense in G&A. So no impact to profit metrics, but that was about $1.3 million higher than the convention cost Q4 of last year..

Okay. I appreciate it..

All right. Thanks, Jake..

This concludes our question-and-answer session. The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect..