Vance: You know, with company restaurants, one thing worth pointing out is that in Q1, we had 475 closure days due to remodels and program conversions. Obviously, this is not going to happen for the rest of the court. We'll have less closure days for the rest of the year. So that's what's baked into our guidance.
Nick: And in terms of the alcohol licenses, et cetera, is that behind us or is that still an ongoing headwind?
Vance: That's mostly behind us at this point. So that's tailwind for us.
Nick: Got it. And in terms of, you know, just the company on mix going up, you talked about sort of the potential acquisition, you know, post the bankruptcy. Are we Are we comfortable with the mix now, or is that something that could continue to go up through the rest of the year and potentially to 2027?
John Payton: Hey, Nick, it's John. I'll take that question. The way we think about it are two parts I'd answer. The first is we are certainly more amenable today than we were in years past to taking back restaurants or a portfolio of restaurants in order to strengthen them, strengthen the system, prevent closures, and then to re-franchise them, which we think we can typically do in about three years after we acquire them. And so we will continue to do that when we think it's the right portfolio and it's right for the brand, and that we can use those restaurants to advance our initiatives, like proving out the remodel, converting to duals, testing our programs and technology. What we've also said is that while our goal is not to get to 5% of the portfolio that's company-owned, I'm comfortable getting to 5% and still being asset light and having all of the benefits of being asset light. So that's about the threshold you should think about in terms of where I'm comfortable going, but that's not the goal to get there.
Operator: Thank you very much. Thank you. And as a reminder, ladies and gentlemen, if you do have a question at this time, please press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again. And once again, we ask that you limit yourself to one question and one follow-up. Our next question comes from the line of Dennis Geiger from UBS. Your question, please.
Dennis Geiger: Great. Thanks, guys. I wanted to come back to the focus on quality and price points, I guess, value in particular. You guys spoke to sort of, you know, having the right value message at Applebee's, the two for 25, something new coming this quarter as well. I guess the question is, you know, where that value mix was, maybe for both brands in the quarter. And then just kind of on the go forward, again, is two for 25 plus something new? Is that kind of going to be the playbook over the balance of the year? Do you think you have to do even more there based on some of the consumer pressures that are out there that you're observing currently? Just any Any thoughts on that front, please?
John Payton: Yeah, Dennis, good morning. It's John. I'll start with Applebee's, and then Lawrence can address it for IHOP. In terms of the mix for the quarter, about 26% of our tickets had value items on it, which would either be two for 25 or an LTO. That number's down from about a third, which is what it's been for many, many quarters. And the reason there is because we had the ultimate trio, um, as a national promotion in Q1, and we, we moved it out of the national price point to being priced individually by franchisees. So technically we don't count it. Uh, but I would say in terms of the trend and even what we see in the ultimate trio sales, we still are running at about a third of our tickets include some sort of value item. And that's been consistent now for, uh, five, six, seven quarters. When it comes to two for $25, yes, that is our primary message in terms of the way we're communicating value to entrees and appetizers for $25 or $12.50 per person. And the way we're keeping it fresh in addition to the consistent message throughout the year is by introducing a new item to it. In addition, we will have LTOs from time to time, including next quarter, also value-driven LTOs designed to drive traffic. And the last thing I'll mention, which I think is interesting about the two for 25 program, Dennis, is that almost 62% of the items on two for 25 are the upsell. So it's not the entry level $25. It's guests that are paying two or $3 more for tier two or two, $3 more for tier four. Remember the franchisees set those increments based upon their market. So it's doing what it's supposed to do. It's driving traffic with the two for 25 message. And then two-thirds of the time, it's actually upselling beyond the $25. And then, Lawrence, can you address the value question for IHOP?
Lawrence: Absolutely. Hey, Dennis. How's it going? In regards to the value mix at IHOP, it has been around 20 – for Q1, it's 22%. That's slightly higher than Q4, which is at around 20%, but it's remained fairly consistent. The uptick in Q1 was primarily due to a big promotion we had with bottomless pancakes. that John referred to earlier. And this promotion is part of our value mix, which our value mix consists of the everyday value menu at $6 in addition to other promotions like the bottomless pancake or the free pancake promotion that we have on National Pancake Day, as well as our senior menu. In terms of moving forward, we are staying consistent with the $6 value message. It resonates extremely well with our guests. Ever since we launched the $6 value message with House Phase, which is Monday through Friday in October 24, and then evolved it into the $6 everyday value menu in September 25, and even this past March, we've evolved it even further by adding a new item, our BLT, to expand the day part propositions. We've outperformed black box in traffic every month in 2025 and continue to do so into 2026. And we're going to continue that momentum with that everyday value menu. And similar to Applebee's, we are balancing that with innovation. Not only did we do the BLT adding to the $6 value menu, but with the barbell strategy, we've complemented that with new product introductions, whether it's our stuffed and stacked omelets, new coffee introduction,
Dennis Geiger: that we had this past march and there's obviously more to come great thanks guys as a quick follow-up and you touched on it some but you know we've heard from some of your your peers uh a little bit about check management in in recent months and i know you just kind of touched on you know kind of the value mix there so that that could certainly uh someone answer the question but but anything beyond what you just touched on on check management thinking about appetizers, beverages, desserts, and otherwise that you've observed over the last couple of months in particular?
Lawrence: In regards to IHOP, and I'll throw that in John's capacity for Applebee's, in regards to check management at IHOP, we have, you know, in 2025, we were laser focused on driving value. And, you know, our primary messaging across the board was value because At that time, we did not have a strong equity in the value landscape. And so we maintained that consistency. It's why we've seen our traffic growth, especially in black box, every month in 2025. As we've gotten into 2026, we've now complemented that because we've complemented our value messaging with the barbell strategy and driving our innovation layers. It's why we see different messaging right now, even within our social platforms, PR, etc., with that of innovation, whether it's our omelets. But we have different layers that we're going to balance with coming up this summer as well as into the fall and winter. And you'll see a cadence of both value combined together with innovation to really go after that barbell strategy and create awareness across both platforms.
John Payton: At Applebee's, Brian, average check remained at about $39.00. That included a slight menu price increase that the franchisees put in place in Q1. And we did see some migration toward lower priced items or, you know, at the expense of a drink or an appetizer. But like I said, we did maintain the average check at $39.
Dennis Geiger: Great. Thank you, guys.
Operator: Thank you. And our next question comes from the line of Brian Moen from Piper Sandler. Your question, please.
Allison Archibald: Hi, this is Allison Archibald for Brian Moen. Thanks for taking the question. At IHOP on the California heritage remodel, I just wanted to ask in a very open-ended way, but can you talk more about what we should expect to see with the remodel, maybe the cadence or how many units are eligible, how many you expect to use, anything like that? Thank you.
John Payton: Thanks, Alice. Lawrence will take that.
Lawrence: Yes. So at IHOP for the California Heritage redesign and remodel, this design is based on a platform which we've seen across international as well as in our dual brands, which is what we incorporated this bright, modern design that is distinctively IHOP. And we are very early in the process, actually. And we're working with our franchisee partners on the incentive program, you know, similar to that of Applebee's. And we'll have more to come over the next several quarters. But, you know, we're excited because we're starting to see some of the remodels happening currently. But, again, we're very early in the stage, and we'll have more in the upcoming quarters to share.
John Payton: And, Alice, I would add two things. One is, if you haven't had a chance, we have a dual-brand video on our IR section of our website. And on that video, when you look at the IHOP portion of the interior, that is the California heritage design. So to give you a sense of what it looks like and how fresh and modern and contemporary it is. And since you asked, I'll comment that, you know, the Applebee's remodel program, refresh program continues. We're in year two and the franchisees are enthusiastically participating. And we expect that we'll be at about 40 percent of the portfolio by the end of this year. That is considered to be current.
Allison Archibald: Thank you.
Operator: Thank you. And our next question comes from the line of Todd Brooks from Benchmark Stone. Your question, please.
Todd Brooks: Hey, thanks for taking my questions. John, I want to start off. I mean, you talked about the stocking horse situation with the franchisee for the 50-plus units. But if you look at the base, and I guess this applies to both brands, your assessment of kind of franchisee health is we're maybe getting to a little tougher consumer environment here. And would you expect to, you talked about a willingness, not necessarily wanting to force yourself there, but would you expect more growth in the corporate owned base, not necessarily getting to the 5% kind of cap that you talked about, but just with the environment and wanting to keep those stores in operation, because at this point, I don't know that there's really a lot to learn from running the stores. It's kind of that willingness to invest and convert to dual. So I just wanted to get the thoughts on franchisee health and if we should see an acceleration in corporate store or corporate taking back franchise locations.
John Payton: Yeah, I'll talk specifically about NRP and some of your questions, and Vance can talk more broadly about franchisee health. But a couple of thoughts. Todd. The first is that, you know, the NRP situation is very specific to that owner and what was going on within their fund and decisions they made about financing. In fact, the restaurants that we're potentially taking back via the stocking horse bid, it's a healthy portfolio. So it will be, you know, it will be accretive to us. So I don't think it's appropriate to project the NRP situation onto the portfolio. The other point you made about is there anything left to learn, I disagree with you there. I think that there is still a lot left to learn from walking in our franchisee's shoes and owning restaurants. As many of you know, we have not owned restaurants in the last couple of years, and it's been a while. And so to have 100 or so restaurants that we are running where we can be testing the new POS technology, We can be putting our menu innovation into the restaurants faster and sooner than if we're running tests across the country in test kitchens. When we can be rolling in our guest service programming and our training materials, all of that is beneficial to us, and I have a high value in that. In addition, as you suggested, to being able to renovate them and convert them to duals. We also think that we can see the progress we're making in the restaurants that we own. They're all, excuse me, trending. in positive directions, particularly when it comes to growing EBITDA and profit. And we think that they'll be accretive to us when we re-franchise them in three years. So I'm all in on that. And now I'll pass it to Vance to talk about franchisee health more broadly.
Vance: Hey, Todd. So with franchisee health, reminder, these are franchisee self-reported financials, and we collect them a quarter in the rare, as we've said in the past. based on what we're seeing is that the franchisees have steady margins on average and that's because of the steady sort of sales performance and cost management initiatives that CSCS and the franchisees are doing together, our supply chain co-op. Franchisees are aligned with our strategy and they remain committed to growing with us. We're also just practically making We have workout programs with franchisees to accelerate incentives, to accelerate remodeling, relocations, and various workout programs to promote and really unlock dual brand territories. So you see all of this is happening behind the scene. And ultimately, as John and I have said before, we believe dual brands. normal comp growth. So we're very enthusiastic about pushing that agenda and franchisees as well.
Todd Brooks: That's great. And just by follow-up, if I can, on the duals, you talked about kind of that range of one and a half or two and a half type of sales lift relative to the individual branded location. You talked about the strong lift at Hawthorne, which I think you said was a strong restaurant going into the conversion, but what type of lift do you need for the conversion to a dual to really pencil? Does the one and a half times lift get the return that you or a franchisee is looking for on the dual? Do you need closer to the two times? Just if you could frame that up a little bit, that would be helpful. Thanks.
John Payton: Vance, you can address that.
Vance: Of course. Todd, so the way you think about using economics for the conversion with dual brands is that the the flow through on that incremental sales that you're generating is going to be a lot higher than the traditional four wall margin. It's because you're not really paying more rent and you're not necessarily increasing your labor by that much to compensate for for the increase in sales. So that flow through should be in the north of 30% margin. So if you just do the simple math of assuming a $2 million restaurant adding another million dollars on top of it, that's a $300,000 flow through to the franchisee's bottom line. And then what we're seeing is that the cost of the conversion is about a little over a million dollars. It depends on you know, if there's any deferred maintenance and structural work that you have to do, which is site-specific. But just, again, using, you know, using simple math on the million dollars with the $300,000 flow-through, that's very attractive payback math for the franchisees and for company restaurants, for that matter.
Todd Brooks: Okay, perfect. Thank you both.
Operator: Thank you. And our next question comes from the line of Brian Vaccaro. from Raymond James. Your question, please.
Brian Vaccaro: Hi, thanks, and good morning. I was hoping we could just double-click on the underlying consumer dynamics that you're seeing. You obviously noted the softness within lower income, but I'm curious if there's anything worth noting from a day part perspective or even weekday versus weekend for either brand. And then the follow-up question is just also could you comment on the average check and traffic trends that you saw within the comps in Q1 for each brand?
John Payton: Yeah, Brian, it's John. On the consumer dynamic, I can talk about both brands since the consumer behaves similarly over time as well as last quarter. The first thing I'll say is reiterating the point that you mentioned, which is when it comes to looking at income cohorts, higher earners, lower earners, the only real change that we've seen this quarter and the last couple of quarters is that our our price sensitive, more value oriented guests seem to be staying home a bit more and or looking for lower cost alternatives. When it came to other cohorts, we didn't see a significant change in behavior that is worth noting. When we look at day parts, when we look at weekdays, when we look at geography, there's no pattern there either. It's largely consistent this quarter to the past couple of quarters. And so I would really just target that consumer behavior issue on the guess that's really most impacted by gas prices and the economy in general. And then when it comes to average check and traffic trends, I'll turn it to Vance.
Vance: So, Brian, hey, good to hear from you. You know, John talked about average check for Applebee's was $39. For IHOP, it's about $35. You know, menu pricing for Q1 was $35. about 4% for Applebee's and 3% for IHOP. Applebee's actually saw positive P-Mix this quarter. IHOP was negative P-Mix. And then both brands saw negative traffic, but IHOP beat Black Box every month for the quarter.
Brian Vaccaro: Okay, great. Thank you for that. And then I guess last question for me, it was just around closures. Just wanted to touch on that. It seemed to step up here a bit in Q1. I think 20 at IHOP and 32 at Applebee's. But I believe you maintained the net development targets for the year. So could you just help us square that up a bit? Thanks again.
John Payton: Vance, we'll let you wrap up with that question.
Vance: Sure. Brian, so we've said that closures, usually what we see is sort of that 1% to 2% of the system. That's kind of the average closure rate. In the last year and this year, it's slightly elevated because we do have more franchise agreements come due than normal years, so that's reflected. As I've mentioned before, we're proactively making deals, work out programs with franchisees to accelerate relocations and unlock dual brand territory. So that's also reflected in the closure numbers. We're maintaining the net development number because we have a pretty strong pipeline of dual brand that we're opening. standalone IHOP that we're opening. And so that's what's baked into our guidance. One other thing we've said before is that, you know, typically, Brian, what we see is the closures tend to be lower sales volume restaurants, right? And then the openings are bigger sales restaurants. So it's not one-to-one, right, in terms of unit count. So there's accretion happening there as we relocate and build a new restaurant and closing down an old restaurant that's in the old part of the town, for example.
Brian Vaccaro: Okay, thank you.
Operator: Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to John Payton, Dine Brand CEO, for any further remarks.
John Payton: Jonathan, thank you for guiding us today. Your expertise is valued as always. Thanks, everybody, for your questions. We appreciate it and the time you spent with us. And like we said in our release and on this call today, we are pleased with the brand's performance during the quarter, despite tough environment. And we've got the plans in place to continue to appeal to our guests, particularly those who are increasingly value-oriented over the next quarter. And you'll see some new news in the next couple of weeks that we think is going to drive a lot of traffic to both brands. So thanks, everybody, and have a great day.
Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
