Cracker Barrel Old Country Store, Inc. (CBRL) Earnings Call Transcript & Summary

Good day, and welcome to the Cracker Barrel Strategic Transformation Update Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Adam Hanan, Senior Manager of Investor Relations. Please go ahead.

Thank you. Good afternoon, and welcome to Cracker Barrel's Strategic Transformation Update Conference Call and Webcast. On the call with me this morning are Cracker Barrel's President and CEO, Julie Masino; and Senior Vice President and CFO, Craig Pommells. Before I turn it over to Julie and Craig, I'd like to call your attention to a few things. First, in our press release and on this call, we will refer to non-GAAP financial measures, such as EBITDA and adjusted EBITDA. I refer you to Footnote 1 in our press release for some important explanations and further details about these metrics. Second, the press release included an update regarding our expectations for our third and fourth fiscal quarters for this year, which we expect to be below our previous expectations due to weaker traffic trends. These statements and all other statements that may be made by management on their beliefs and expectations regarding the company's future operating results or expected future events are known as forward-looking statements, which involve risks and uncertainties that, in many cases, are beyond management's control and may cause actual results to differ materially from expectations. We caution our listeners and readers in considering forward-looking statements and information. Many of the factors that could affect results are summarized in the cautionary description of risks and uncertainties found at the end of the press release and are described in detail in our reports that we file with or furnish to the SEC. Finally, the information shared on this call is valid as of today's date, and the company undertakes no obligation to update it, except as may be required under applicable law. Please note that we won't be taking any questions related to our third quarter results or to fiscal 2024, as the focus of today's call is on our strategic transformation plan that is intended to drive our business for the next decade. We will report our fiscal third quarter results on May 30. At which time, we will provide a full update on our quarterly performance and expectations for the rest of the year. I'll now turn the call over to Cracker Barrel's President and CEO, Julie Masino. Julie?

Thank you, and good afternoon. I'm excited to provide an update on our long-term strategic transformation and discuss why Cracker Barrel has an exceptionally bright future. As I've shared publicly before, I joined the company about 9 months ago because I believe Cracker Barrel was one of the industry's most iconic and differentiated brands with high guest affinity, a great culture, a national footprint and a strong balance sheet. I also believe, however, that the brand has lost some of its shine and particularly post-pandemic, was not delivering the financial results that shareholders deserve. I took the job because I believe that the company's strength more than outweighed its challenges, that these challenges represented opportunities and that with the proper strategic focus, we could put the ship on an outstanding course. I am even more convicted today than I was 9 months ago. Cracker Barrel is a great concept and a great company. All the 4 elements are in place to be successful over the long term. But to ignite growth, we must revitalize the brand. To be clear, this is about refining and enhancing the brand, not reinventing or overhauling it. And this is something that any brand, especially one that is iconic and distinct and has connected with tens of millions of guests over many decades, can achieve. I believe that there's an emotional connection waiting to happen with our long-time guests and with our future guests, and that all the right pieces are in place to return to being a leading restaurant company with meaningfully improved margins and growth potential. But there is work to do. Before getting into the details, I should point out that today's call is about laying out the strategic framework we are employing to tackle our challenges and grow, not just in the next several years, but for the next 10 years and beyond. We're at the beginning of the journey, and we look forward to providing you with regular updates on our quarterly calls, beginning with our Q3 call on May 30. Okay. Let's begin. Right after I joined the company, we began our strategic work with extensive consumer research, including a consumer segmentation study designed to better understand behaviors, spending patterns and demographics of full-service restaurant users. This study differed from other ones that the company had conducted in the past because it included both Cracker Barrel and non-Cracker Barrel guests. This provided critical insight into why our brand is not resonating as much as it should with certain segments and has helped us identify our biggest opportunities. The study we undertook highlighted and confirmed the various core positives that led me to Cracker Barrel in the first place, such as the distinctiveness of the brand and the strong affinity it has with consumers. However, our research also underscores the challenges we face and why a transformation is necessary. For example, we examined our scores versus competitors for numerous attributes across the 4 key dimensions of food, experience, value and convenience. This research showed we generally rank in the middle of the peer set across many of these attributes, and we are not leading in any area. We will change that. Falling to the middle of the pack has impacted our traffic in recent years. To provide some context, compared to fiscal 2019, our comparable store traffic year-to-date is down approximately 16%. Although the casual dining industry is also significantly down during this period, the reality is we've lost some market share, especially at dinner. These traffic headwinds have in turn greatly pressured our financial performance. And when combined with the significant commodity and wage inflation we've seen, it's no surprise that our margins have significantly contracted compared to fiscal 2019. Improving traffic, particularly at dinner, is critical. Now let's talk about our strategy. As I discussed on our last earnings call, our strategy revolves around 3 critical imperatives: first, driving relevancy; second, delivering food and an experience that guests love; and third, growing profitability. Everything we're doing is anchored around delivering these ideas. These imperatives are supported by 5 strategic pillars, and each of those has a series of specific initiatives associated with it. We have approximately 20 of these initiatives. Some are focused on running the day-to-day business, and others are focused on transforming the business and are longer term in nature. I will be highlighting many of them today, and we will share details on the others in the future. Let's get into the 5 pillars, which are: first, refining the brand; second, enhancing the menu; third, evolving the store and guest experience; fourth, winning in digital and off-premise; and fifth, elevating the employee experience. Our first pillar is refining our brand, particularly with respect to our marketing so that it better resonates with today's guests and ignites fandom. Cracker Barrel is an iconic brand, but even iconic brands have to evolve. We know from our research that despite high levels of consumer affinity, we're just not as relevant as we once were. We need to address these dynamics by refreshing and refining the brand and reflecting this in all of the ways we interact with our guests, our marketing and messaging, our delicious food and unique retail products, our visual identity and atmosphere, and our in-store and off-premise experience. We recently selected and engaged an agency to assist us in this important work. While there's obviously a lot of detail to come, I can tell you that our work will continue to be grounded in extensive research in several core principles. First, we will remain authentically Cracker Barrel. Second, we will continue to be rooted in our country heritage and legacy. And third, we will evolve the brand in a way that will resonate with but not alienate current guests, while increasing our appeal to new guests. In short, we will take what is known and beloved about our differentiated brands and build upon it, so that it's more relevant to today's and tomorrow's guests. Our second strategic pillar is all about what makes up about 80% of our sales, our menu. Cracker Barrel is known for our home style country cooking, so we need to enhance our menu and make it more relevant to guests. We also have to make it easier to execute for our employees and help us reduce our fixed labor requirements. To increase our menu relevance, we're leading into innovation, particularly around the dinner daypart. Simply put, we have to have more food, especially at dinner, that is authentically Cracker Barrel that speaks to more current tastes. In February, we launched a core menu revamp test that included approximately 20 new items, several modified items and over 20 deletions. We've been pleased with the guest response. For example, 8 of the new lunch and dinner entrees are in the top 20 for entree product mix at these stores. We're also seeing strong mix from new items in other categories, such as our green chili cornbread and our banana pudding. We've now expanded the next iteration of this test to over 10 stores. And based on the positive guest response, we're introducing several of these new items to the full system this fall, including our premium savory chicken and rice, slow-braised pot roast and hash brown casserole shepherd's pie. These are just a few examples of upcoming delicious new menu innovation, and there's plenty more in the pipeline that we're excited about. In addition to innovating our menu, it's critical that we drive more efficiencies to improve profitability and make back-of-house jobs easier and more enjoyable, while we reduce the amount of fixed labor in our model. We have a lot of terrific menu items, but some of our recipes and processes haven't evolved in decades. While there are examples where this makes complete sense like handmade dumplings and biscuits, for example, there are others where it does not like hand cutting lettuce and pineapples. To assist us in this endeavor, we have engaged an industrial engineering firm to materially alter and improve our business model and find ways to improve efficiencies, simplify our processes and reduce the amount of fixed labor currently required in the back of house. We're also conducting a full review of our menu from a profitability standpoint, which is critical given the impact of food and labor inflation since COVID. And we're evaluating opportunities to improve the fully loaded margins for each item, including, for example, completing some sets outside of our stores. Additionally, we expect to delete certain menu items because we must balance our innovation with simplification. To be clear, we will continue to be a heavily scratch-made concept, and this is an important part of our DNA. But given the breadth and complexity of our menu, we think there's an opportunity to improve margins without affecting the guest experience through some targeted changes. Another way we are optimizing our menu is by enhancing our strategic pricing capabilities and practices, and this initiative is the one where we've taken the most action. We believe there's a large opportunity to improve the way we price, both across the menu and across stores, to hit the sweet spot where pricing at a store is optimized based on consumer willingness to pay, competitor prices and store operating costs. We have begun to realign our pricing tiers and optimize them based on more sophisticated criteria. We currently have 5 pricing tiers. And approximately 60% of our stores are in a single tier, which happens to also be the tier with the lowest pricing. This unbalanced approach has resulted in various pricing inefficiencies and inconsistencies. For example, we have stores in metro areas with an average annual household income of $55,000 in the same pricing tier as one with $90,000. This is illustrative, and household income is just one of several variables for our new pricing model. But the point is that we are moving to a more sophisticated approach to optimize our pricing. Menu architecture is another aspect of our pricing initiatives. We're evolving our pricing to be more strategic at the item and category level, creating a more balanced barbell architecture and adding offerings to fill in gaps, so that guests have different options based on their desired spending level, while allowing us to protect key value price points. Finally, we're also enhancing our pricing capabilities through better data science and tools. And we're implementing a robust test-and-learn approach with a more frequent cadence that will facilitate quick learnings and more agile refinement to allow us to build a multiyear pricing road map. We implemented our first test in March, and the results have been positive. We've seen a lift on average check of approximately 3% in the test stores, with no measurable negative impacts to traffic or value perceptions. This is just the first step of a multiphase initiative that we will carefully implement over the next 3 years, but we are pleased with the initial results. Before moving on, I want to emphasize that optimizing our price points across the menu doesn't mean just increasing prices. In several places, it may actually mean taking the opposite approach. We understand the lower-end consumer is challenged, and value is and will remain an important part of the brand, and we will work vigorously to protect it. Our third pillar is focused on the guest experience, and this encompasses both operational execution as well as store design and atmosphere. As I shared before, operational excellence and consistent execution are a top priority, and our teams remain committed to delivering a consistent guest experience every shift, every guest, every day. We are hyper-focused on the metrics that matter most: guest satisfaction, speed, hourly turnover and average skill level for key job roles. All of these metrics have improved in recent months and will continue to be a point of emphasis. The guest experience is also driven by our store design and atmosphere. This includes the quality and condition of our stores, both front of house and back of house as well as our overall design esthetic. Given our aging asset base, we are investing in both and believe this is critical to positioning us to win in the near and long term. This means that we will have to meaningfully increase our maintenance capital spending to ensure that our stores are meeting our brand standards, that they compare well to the competition and that our stores are desirable places to work. Craig will provide more detail on the level of investment, which we would characterize as defensive. But we are focused on areas that we believe will have the greatest impact on the guest and employee experience such as exterior paints, parking lots, flooring and restrooms. Of course, to improve relevancy, we have to do more than invest defensively. Historically, Cracker Barrel has made limited changes to our design esthetic, and we've probably relied a little too much on what was perceived to be the timeless nature of our concept. Two months ago, we began conducting a pilot remodel in 2 test stores. This included refreshing the interior and exterior of these stores by using a different color pallet, updating lighting, offering more comfortable seating and simplifying decor and fixtures. The goal, simply put, was to freshen things in such a way as to be noticeable and attractive, but still feel like Cracker Barrel. Among other things, we curated, reframed and repositioned decors that was brighter and warmer. We replaced our traditional lattice dividers with open book cases that open up the sight lines and allow for different displays. And we tweaked the retail area to better attract purchases of certain items. The guest and employee feedback has been highly encouraging. Guests have commented that the new design feels lighter, brighter, fresher and cleaner, and that they're especially excited in one of our remodels about having booths and banquettes as seating options. Just as important, our employees in these locations are enthusiastic about the investments we've made and have a renewed spring in their step as a result. We are expanding this remodel test, but we'll do so deliberately and carefully. We plan to test several different options that vary in scope, so that we can see what resonates most with the guests and employees and is most likely to lift traffic. We anticipate completing approximately 25 to 30 remodels in fiscal '25, and our learnings from these will inform our future plans. Of course, we will remain thoughtful and highly disciplined as we deploy capital for our stores. In addition to refreshing current stores, we are refining our store prototype. In fall 2025, we plan to debut a prototype that is approximately 15% smaller than our current prototype with nearly the same number of seats, but we won't be stopping there. We believe there's an opportunity to engineer an even smaller prototype, and this will help unlock unit growth over the long term. Retail remains a key differentiator of our brand and an important part of the guest experience. The team is evaluating and updating our assortments to ensure our products are fresh and relevant, while continuing to deliver superior value and a unique Cracker Barrel treasure hunt. Go ahead. In Google, Cracker Barrel versus Anthropologie. It's a thing and if you know, you know. We're also exploring collaborations with other brands to feature their products in our stores. We've demonstrated success with this shop-within-a-shop approach via our long-term partnership with Lodge Cast Iron, and I believe there are opportunities to partner with other brands. Finally, we are rationalizing our SKUs and rethinking various aspects of our merchandising to improve the shopping experience and to drive profitability. Our fourth strategic pillar is about winning in digital and off-premise. Both of these are important to today's consumer. With regard to digital, we continue to believe Cracker Barrel Rewards is one of the most engaging and differentiated loyalty programs in full-service dining. While it's still early, we're very encouraged by the initial success of the program. In fact, I'm pleased to say that after launching in mid-September, we already have nearly 5 million Cracker Barrel Rewards members, which is approximately 25% higher than our initial projections. We believe this speaks to the appeal and distinctiveness of the program and gives us confidence to lean in even more than we have. Knowing that technology will power our future, we will be accelerating additional investment in the rewards platform to further improve functionality, enhance personalization and improve our ability to leverage guest insights. And we'll continue to use the program as a key driver of value to our guests and to reinforce our relevance. With regard to off-premise, although we've seen solid growth, there's an opportunity to further grow this business and improve the experience. We have re-prioritized our off-premise channels so that we are appropriately focused on our largest and most profitable ones, namely individual to-go and third-party delivery. Of course, we also remain bullish about catering, particularly our occasion-based offerings around the holidays. But this is an area where we can be better, sell less and earn more. Turning to our fifth and final pillar. We're in the hospitality business, which is built on human connection. We exist to nourish people and bring them together around food and experiences. Our people are at the heart of everything we do. And ultimately, when you feel good about where you work and what you do, you're happier. And that translates to the guests. And when you do that across every restaurant and every shift, every day, that's how you develop a culture of excellence, and that's exactly what we're striving for. We'll continue to focus on staffing and retention to ensure that we have and keep the best people, and we're also focused on making everyone's jobs easier and more fulfilling through simplification. We're enhancing our training and development programs, and we're upgrading our tools. Managers are especially critical to our success. So we are determined to improve their experience and streamline their job to allow them to direct their time to what's most impactful, directing and coaching their teams and supporting a great guest experience day in and day out. I'll now turn it over to Craig.

Thank you, Julie. I share Julie's conviction on the brand, our team members, our strategy and our ability to execute. Now let's turn to capital allocation and our outlook. The company's Board of Directors is committed to a balanced capital allocation approach. Investing in the business to drive profitable growth continues to be the top priority, followed by returning cash to shareholders through a regular quarterly dividend and share repurchases. We believe we have significant opportunity to grow the core business by increasing our investments in it. As a result, we are shifting more capital towards investing in the core business, and we are reducing the dividend. More specifically, the Board is reducing the quarterly cash dividend from $1.30 per share or $5.20 annualized to $0.25 per share or $1 annualized. And we'll be investing the reallocated capital in what we believe are critical value drivers. At the end of the day, organic growth is our priority, and we all strongly believe that this decision is in the best long-term interest of shareholders. We remain committed to returning cash to shareholders and to providing an attractive and sustainable dividend. Our investment will be as follows. For the 3-year period, we anticipate total capital expenditures of $600 million to $700 million. This comprises the following amounts per year: approximately $160 million to $180 million in fiscal 2025, approximately $180 million to $220 million in fiscal 2026, and approximately $260 million to $300 million in fiscal 2027. The acceleration in fiscal 2026 and fiscal 2027 contemplates the expansion of our maintenance and remodel initiatives as well as additional technology investments. As Julie noted, we characterize the increase in maintenance capital as defensive. This work is aimed at bringing our stores up to our high brand standards in key areas. Approximately half of our capital expenditures are related to maintenance. Once this work is completed in fiscal 2027, we expect our maintenance capital spending to reduce to more normalized levels. Finally, as a reminder, we still have nearly $138 million left on our existing share repurchase program, which provides us the flexibility to be active in the market if and when it is appropriate and is another lever to enhance shareholder value. Turning to our outlook. We will now be providing adjusted EBITDA guidance going forward, as we believe it is more meaningful to investors to evaluate our performance before the impact of depreciation given the increase in our investments, which will result in higher depreciation expense. Additionally, we have modified our definition of adjusted EBITDA, and I encourage everyone to refer to Footnote 1 in the press release for additional information. From a timing perspective, fiscal 2025 will be an investment year as many of our initiatives will be in the early stages. Therefore, we expect our adjusted EBITDA results will be pressured in fiscal 2025 and are generally in line with or slightly lower than our fiscal 2024 results. However, we anticipate our results will significantly and sequentially improve by the second half of fiscal 2026 and into fiscal 2027 as our initiatives gain traction, culminating in fiscal 2027 sales of $3.8 billion to $3.9 billion and fiscal 2027 adjusted EBITDA of $375 million to $425 million. Although many of the initiatives Julie described are top line drivers and growing the top line is critical to improving profitability, we also remain focused on margin optimization through our cost savings program. And our guidance is inclusive of approximately $50 million to $60 million in cumulative cost savings over the 3-year period. Before turning it back over to Julie, I want to emphasize that the Board and management are fully aligned on our strategy on capital allocation. We believe our strategy, coupled with our strong balance sheet, and our modified capital allocation will drive meaningful long-term value creation and position the company for sustainable, profitable growth for many years to come.

Thanks, Craig. Admittedly, this is a lot to digest. So I want to finish with a quick recap of some of our key messages. First, Cracker Barrel has all the core elements in place to be successful. We are a distinct brand. We have an emotional connection with our guests, and we have passionate employees. Second, we have a deep grasp of our challenges, and our actions will deliver our business imperatives of driving relevancy, delivering food and an experience that guests love, and growing profitability. Strategically, we'll get there by refining our brand strategy, enhancing our menu, evolving our stores and guest experience, winning in digital and off-premise, and elevating our employee experience. Doing these things will not only help us return to appropriate levels of top line and bottom line growth in our existing stores but will restart the engine on new unit growth. If our new stores can reflect and support the strategic imperatives I've outlined today, we believe there remains a lot of white space for new units, including in places we've not traditionally been. Next, the management team and I have instilled a sense of urgency across the organization. Agile testing and learning is an important part of my management philosophy, and I've been pleased with how quickly the team has mobilized for new initiatives, such as our core menu revamp test, our remodel test and our pricing test. These 3 initiatives were all developed and implemented as part of our transformation, which began last fall. Although it will take some time for our initiatives to gain traction, rest assured that we have and will continue to drive urgency and move quickly but methodically across all layers of the organization. Of course, we need to do this with a more balanced approach to capital allocation. We simply have to invest in the future. Some of it is defensive spending, as I mentioned, and table stakes, if you will. Other spending will have a more tangible return over time. But after an investment period in 2025, we'll see improved performance starting in the back half of fiscal '26, which will improve in fiscal '27 and position us to further accelerate growth beyond. A balanced approach to capital allocation is the best path we see to sustainable value creation. And when combined with a strong balance sheet, we are confident we will have numerous levers at our disposal to drive equity value over time. Lastly, our future is so bright. We know what we need to do, and we are going to do it well and in a way that is authentically Cracker Barrel. And I want all of our shareholders and other stakeholders to know that the management team and I are energized and excited to make this happen.

[Operator Instructions] The first question comes from Brian Mullan with Piper Sandler.

I just want to ask on the second pillar, enhancing the menu. Specifically, I wanted to ask on the comments about streamlining processes to improve execution. Julie, in the prepared remarks, I think you referenced engaging some outside help here too. Sounds like you've identified some areas of opportunities. My question is when do you start executing on what? How quickly can you go? Just any examples you could provide or specifics around what you have in mind? Or the sequencing on that element of the plan? That would be really helpful to hear.

Sure, Brian. Thanks for the question. We've engaged an outside industrial engineering firm specifically because we believe there's a lot of opportunity in our back-of-house processes. Like I said in the prepared remarks, things like biscuits and dumplings, really, we haven't changed that in a very long time. So there's opportunity given the breadth and complexity of our menu to evolve our processes and our recipes to improve the efficiency and profitability. We're in the early stages with this outside consulting firm, but we look forward to updating on our quarterly calls the progress and the savings that we're going to realize from working with them.

The next question comes from Katherine Griffin with Bank of America.

Julie, you talked a little bit about retaining the authenticity of the Cracker Barrel brand while also improving its relevance and doing so in a way that doesn't alienate your current guests. Can you just elaborate a little bit more on what that tension is? And I guess, how you're approaching the strategy to maintain authenticity but maybe shift the guest cohort mix a little bit?

Sure, Katherine. Thanks for being on the call with us today. Look, we are so grateful for everyone who chooses to dine at Cracker Barrel or shop in our retail stores. They are what brings our brand to life and helps us create jobs and continue to exist. So we are very focused on keeping the guests who love us today, continuing to delight them in all the ways that we do, but we're really working to open the aperture a little bit. And the reasons for this really came about in the research that we did. When we started digging in, we realized that the competitive landscape has just changed so very much around us. The world is so different than when Cracker Barrel was founded 54 years ago. So some of it's about the competitive landscape and some of it is that our internal processes haven't adapted as much as we've needed to over time. So the relevant piece for us really starts with the brand. And that really shows up in so many different ways, the way we communicate, the things on the menu, the way the stores look and feel. And all of these things came up time and time again in our research as opportunities for us to really regain relevancy with our existing guests, people who have lapsed with us as well as, as I mentioned, sort of opening that aperture to new people to come and join us in the brand.

And Katherine, I'll add to that. In addition to the kind of normal structured way when you go about figuring out something like that with research and so on, I will tell you that the management team has been personally in-store numerous times at our stores, at the pilot remodel stores as well as the new menu test stores. Every one of us are talking to guests personally. We're sitting down with them. We're getting their feedback on what they like and what they don't like, and it is really encouraging. So there are certainly some things where we're not going to go 100% on the things that we've tested. But the overall impact, the overall feedback is very positive, even from really hardcore high-frequency legacy guests. Overall, very positive feedback.

The next question comes from Jake Bartlett with Truist Securities.

Mine was I just want to make sure I'm getting it right, that you're not providing an update for guidance for '24. I'm just trying to -- I'd love to be able to see what the growth rate is that you're anticipating from sales and from EBITDA for growth, but I'm not sure if I understand what you're seeing maybe the base is going to be.

Jake, it's Craig. We will provide an update on the 30th for the normal quarterly call. As to directionally, our traffic has been lower than we previously projected. So we'll be bringing down our projection as it relates to -- certainly, as it relates to operating income and now adjusted EBITDA going forward. But we have not provided a specific amount other than to say we will be bringing down the projection as a result of traffic that is lower than we previously projected, and we'll provide more details on the 30th. I'm looking forward to doing that then.

Okay. And in the past -- and this is maybe the more greater detail you provided at Investor Day. But you had in the past provided the algorithm drivers of growth for sales, for one, whether it's traffic, price, unit growth. If I look at mine -- our estimates versus '24, which is a 53-week year, so that helps '24, but it's a little over a 3% CAGR to the middle of your guidance in '27 for sales. So what is driving that? Is it really all the price optimization? You expect some positive traffic in there? Help us out in terms of what are the drivers of the sales that you're expecting.

Absolutely. So over the 3 years, there are a combination of things, price is certainly a component. We expect that over time, the traffic trend will also continue to improve at the brand as we regain some relevancy. We think that's more on the back half of the time frame. Certainly, in the first half, we expect traffic to remain pressured. Fiscal '25, we do want to just be clear there, we do see that as an investment year. For EBITDA, we expect EBITDA to be roughly in line with '24, if not a little bit lower. We do have some benefit coming into '25. But when you net it against the investments, relatively flat to slightly down. In '26, by the second half of '26, we expect that the traffic momentum will start to build, and that will compound with the cost savings that we talked about, $50 million to $60 million, and that will really drive a really strong '27. So there's a combination of traffic that's starting off softer, improving over that horizon. A component of that is pricing as well as well as the $50 million to $60 million in cost saves over that 3-year window.

Got it. And then my last question is just a little more detail on the $50 million to $60 million of cost saves. It's more than you -- the 3-year plan that you provided in your last 2 investor days. But it doesn't feel like -- I mean it feels like you're kind of now hiring a consultant or someone to help you figure out how much there is to save on, for instance, in your scratch cooking or kind of more processed food that comes in the door or what have you. So where do you get to the $50 million to $60 million? Is that something that you have visibility into at this point? It's a big number. Would love to kind of understand how much -- how kind of in the bag do you think that, that is.

Some of it is pretty well defined. We've been -- we have an ongoing cost savings program, and some of that is based on work that we've already started and we've invested and that's moving forward. There are other changes that we have not started but they're well defined, and then there's new work that we expect coming out of the industrial engineering project. I think we know -- we have enough experience with the business to kind of point out the obvious. It's complicated. The business is complicated. We've done a lot of work to understand, well, why has there been de-leverage as traffic has gone down? And some of that comes down to the fixed nature of some of our labor model. So we are looking in very targeted areas to start. And over time, we think there will be even more opportunities. So it's a combination of -- we have line of sight, and some of it we have confidence in because of the complexity of the menu.

The next question comes from Jon Tower with Citigroup.