Dine Brands Global, Inc. (DIN) Earnings Call Transcript & Summary

Please welcome Executive Director of Investor Relations, Ken Diptee.

Good morning, everyone. I'm Ken Diptee, Executive Director of Investor Relations for Dine Brands. On behalf of the team, I'd like to welcome you to our Investor Day. Today, you'll hear from members of Dine's executive team. You'll also hear from our franchisees, who provide their perspective. They are not speaking on behalf of Dine or the brands. Before we start, a few housekeeping items. As you know, we issued an 8-K this morning containing the slides with today's Investor Relations presentation, which is also available on the Investors section of our website. Over the next 4 hours, the team is prepared to share our growth plan. We'll have a short break and wrap up with the Q&A session. Please hold all your questions for the Q&A session. To get us started, it's my pleasure to present Dine Brands' CEO, John Peyton.

Thanks, Ken. Good morning, everyone. On behalf of our leadership team, thank you all for being here. We're thrilled to welcome those of you that are here with us in the room and those of you that are watching us online. And the first moment of success is that this suit is the first time it's been on in 2 years, and it still fits. So that's an awesome sign that we're making progress. We're excited to share with all of you today our story for long-term growth. And by we, I mean, our very talented team that are here in the room, who you'll hear from throughout the day and we're super confident that our collective team will do everything that we set out to do. So to kick us off this morning, I'll provide an overview of the Dine Enterprise. You'll then hear from our Senior Vice President of Strategy and Development, Scott Gladstone. We'll then turn it over to our CIO, by way of video, Justin, to highlight the investments we're making in our digital experience followed by our brand presidents, John, Jay and Tony. And each of them will discuss their ambitions for growth, their businesses' competitive advantages and their bold ambitions for the next 5 years. You'll also hear from franchisees. We have IHOP Applebee's Greg Flynn, who's the CEO of Apple American Group. And on behalf of IHOP, you'll hear from Karl Jaeger, Senior Managing Director of Argonne Capital. And finally, Vance Chang, our CFO, will close this out with our financial outlook for the next 5 years of business summary, and then we'll bring the whole team up for Q&A from all of you. We can take questions in the room, and we'll also take questions from folks watching at home, and we'll give instructions for that. We've also got 1 of our Board members here today. Mr. Mike Hyter is the CEO of The Executive Leadership Counsel. Thanks for being here and would love for everyone to have a chance to meet Mike as well during the breaks. So I joined Dine, 14, 15 months ago, because I believe in the allure and the power of strong brands. And I believe in restaurants. Restaurants are essential to strong communities. There were humans come together to connect and people appreciate and need that need for connection now more than ever before. And Dine is entering 2022 stronger than ever. And let me tell you what I mean when I say stronger. 5 years ago, strength in the restaurant business was the number of bricks-and-mortar stores that a restaurant had. Today, strength is about your technology. It's about your digital innovation. It's about your loyalty program. It's about communicating with your guests when, where, how they want to be served and how they want to talk to you. And it's why 2022 for Dine is an investment year. This is the year that we intend to solidify our back of house, our front of house and our consumer-facing technology. It's a year that we intend in partnership with our franchisees to launch our new prototypes and build new restaurants. And it's a year in which we're building back some crucial positions that we cut during the pandemic. Our strength is also evident in our performance before, during and importantly, as we emerge from COVID. So you can see we're comparing '17 to '21 here. Our revenue is absolutely recovering from the pandemic. Our 2017 revenue of $732 million included pass-through advertising revenue, which is in the red box, grew to $732 million with pass-through -- sorry, $896 million with pass-through advertising revenue in 2021. We delivered robust EBITDA $221 million in 2017, $253 million last year. Strong earnings growth. EPS has grown from $4.09 to $6.54 last year. And as a result, we generate significant cash flow, $191 million last year. All of this fuels are consistent history of meaningful capital return to our investors. And our projections for 2026, 5 years from now, are equally compelling. Revenue is projected to grow to $1.1 billion. EBITDA is projected to grow to $350 million. Adjusted free cash flow is projected to be $225 million, and adjusted EPS will grow from last year's $6.54 to $14.50 a share. Vance will fill you on the details behind that as we go. So our growth beyond 2022, will come as we invest in innovation. Innovation that drives the acceleration of opening new restaurants, innovation that drives the acceleration of comp sales by investing in technology and menu innovation, breakthrough marketing and loyalty, and innovation from growing new sources of revenue like virtual brands. So each of our business units have significant levers to pull in these 3 areas, and you'll hear from them throughout the day. Now as you consider our plans for growth, it's important to understand the steps that we've already taken during the pandemic and how our achievements from the past 2 years make us stronger today than we've ever been before. First, we've innovated the in-restaurant guest experience. For example, our hygiene and our safety protocols are enhanced. They've become the new standard in our restaurants. Guests can now use their cell phones to put their names on our wait lists, QR codes to view menus, then offer us feedback. And servers are now leveraging tablets. It makes them more efficient. They turn tables faster, they make more money. When it comes to off-premise guest experience, during the last 2 years, we've innovated our to-go packaging. It keeps food hot longer. It beautifully merchandises the food when people open the bags. Applebee and IHOP grew take-out and delivery to more than 2x what it was before COVID. This is largely incremental business that we intend to nurture and grow. And we changed back of house processes over the last 2 years to support this higher off-prem business. We introduced Carside Express at Applebee's, we introduced Curbside at IHOP. And finally, we're stronger than ever before, because we've streamlined operations during the past 2 years. We've identified new sources of revenue that strengthen our performance for our franchisees. Now some examples, our menus are now streamlined. They're 2/3 of what they were before COVID. And as a result, our kitchens are more efficient. We have less food waste, faster prep times, improved quality, improved consistency of what we serve. Applebee's launched Cosmic Wings. IHOP is testing 2 new virtual brands, Thrilled Cheese and Super Mega Dilla in 7 markets in 50 restaurants. That's expanding and providing additional revenue to our IHOP franchisees. We worked with franchisees during the past 2 years to expand our sales channels, be it ghost kitchens via virtual brands in the U.S. and abroad. And I'd wrap up the benefits of the last 2 years, if you can think about the last 2 years, having some benefits, by saying that our relationship with our franchisees has never been stronger. Working together to navigate the crisis was truly a trial by fire that strengthened our bonds with one another and really has us aligned in both brands and our vision for the future. So we sit here today stronger than ever and poised for growth, because of what we call -- what makes us uniquely Dine. And what makes us uniquely Dine is our world-class brands, our scalable platform, our super talented teams and exceptional franchisees and our asset-light model. And I'll talk a moment about each of those. The first is our world-class brands. I learned long ago that brands win when they're different, better and special. And IHOP and Applebee's are truly different, better and special. IHOP began making people smile back in 1958 when Al and Jerry Lapin opened the first IHOP in California. And ever since then, they've been known for their iconic pancakes, their freshly made craveable breakfast items. Now their all-day dining menu. IHOP brings joy and a sense of belonging and we call that the recipe for joy. There's over 1,750 IHOPs across the country and around the world, system-wide sales of $3.1 billion and it's #1 among family dining restaurants in the U.S. For Applebee's, it all started in 1980 in Atlanta, Georgia, when Bill Palmer opened the first restaurant that would later become Applebee's. And today, Applebee's embodies what it means to be all American and locally relevant. We call that Eatin' Good in the Neighborhood. Applebee's has almost 1,700 locations in the U.S., system-wide sales of $4.2 billion. And the bottom line for both of our brands is that they are category-defining brands that connect in emotional ways with our guests. Second, our scale is uniquely Dine. Our IHOP and our Applebee's purchasing co-op, for example, procures approximately $2 billion in goods and services for our restaurants annually. That significant market footprint helps mitigate to some extent the availability of certain items as well as helps us manage cost dynamics, particularly at a time like this. And our scale also enables us to invest more in technology than either IHOP or Applebee's could do on its own. And you're going to hear from Justin, our CIO, and our business unit leaders today, specifics about our technology investments from last year and this year. The third thing that makes us uniquely Dine is our team, our incredibly talented team, whether it's the executive team, many of whom are here today, our 500 headquarter staff in Kansas City, L.A. and across the country, our 338 outstanding franchisees, and their 150,000 team members across all the restaurants. There is no better team in the industry. And when speaking of teams, success is not only about strong leaders, it's about consistent leadership, which is why I'm thrilled that both John and Jay have committed to new 3-year agreements that keep them at the helm of both our brands until 2025. And that's a testament to their commitment to their brands, and Dine's commitment to their savvy and steady stewardship of Applebee's and IHOP, particularly during the past 2 years. Finally, we've got a 98% franchised business model. We're the most highly franchised in our peer group. And this enables us to generate substantial free cash flow, which enables us to return significant amount to our shareholders, while also investing in the long-term growth of our brands. And during moments like this, when labor and commodity costs are rising, we deliver less volatile results from period to period than those businesses that are capital intensive. And most importantly, asset-light allows us to invest in what we do best, menu innovation, marketing, technology, all for the benefit of our franchisees. So I'd like to spend a moment on ESG. It's an increasingly important topic to our guests, to investors, to regulators and others. ESG, like everything that we do with Dine, is guided by our core values, and we're pursuing both ESG and operational excellence in a balanced, thoughtful way and with urgency. So our ESG ambitions fall into 4 categories: people, plant, planet and governance. Did I get that right? People, planet, food, I apologize, and governance. Last year, we focused on establishing baselines. This year, in 2022, you'll see us begin to set goals. And in 2023, you can anticipate that we will make ESG a component of executive compensation. We published our inaugural ESG report last year, it's available on dine.com -- dinebrands.com, and our annual report published in May will be up in a few weeks. So I'll begin to wrap up by sharing why we're so optimistic not only about Dine, but about the full-service restaurant space. And I'll start with full-service restaurants. If you consider the market opportunity that's before us, first, the restaurant industry remains a $485 billion market, and the casual and family segments are expected to fully recover by 2023. Within that, U.S. consumers are increasingly optimistic as we emerge from COVID. The most recent research tells us that 44% of consumers plan on going to restaurants more than they did pre-COVID. And 35% say they'll go just as much as they did before the pandemic. That's good news for us. The second is industry consolidation that we've seen for the last couple of years. It's created white space, and it's revealing new growth opportunities for both our brands. And pandemic-driven closures, while unfortunate, are about 10% to 12% of the restaurants in the U.S. that also creates new white space in highly desirable locations for our brands. And as we study the market, we see more than 200 opportunities for full-service Applebee's. We see more than 350 market opportunities for full-service IHOPs, and you'll hear about those growth plans from John and Jay. The third thing that's really changed over the last couple of years is guest behavior. The pandemic accelerated a number of trends that opened -- a number of trends, and it opened a new future really for the industry, such as we've got new transaction technologies that support the third-party delivery apps. We've got outdoor dining. We've got the surge in off-premise dining. We've even got alcohol to go as a fledgling opportunity. And fourth, virtual brands and ghost kitchens exploded during COVID, and that creates a highly incremental opportunity for our franchisees to leverage growth and to leverage the scale of our platform. We really like virtual brands, and we're leaning in, because they're low cost to develop and deploy versus building a bricks-and-mortar restaurant. They can be highly targeted to a consumer demographic or to a daypart. It's easy to test and learn and improve as you go, and it's easy to turn them off and turn them on. And so international markets like the Middle East, for example, are far ahead of the U.S. in deploying those kitchens. And we're looking to them for the lessons learned in best practices that we're bringing back to the U.S. You'll get some insight from Tony on that topic. And so when you think about that market opportunity, then think about Dine. And I'll recap our strengths. And again, what makes us uniquely Dine. We've got the best team. We've got exceptional franchisees. We're the largest and scale matters in this space. It matters for tech investments. It matters for supply chain. Scale matters for marketing and advertising. And it matters for growing a strong, healthy, robust, stable group of franchisees. And our 98% franchise model delivers robust margins and generous cash flow. So our scale and our asset-light model combine for a meaningful return to shareholders. So the industry's entered a new normal and that presents a new normal for us at Dine. Consumers have pent-up demand for restaurants. They've internalized new habits for off-premise and delivery. And thankfully, IHOP and Applebee's have become prominent players in off-premise during the past 2 years. Guests today have a desire for great food, for experiences and gatherings that only restaurants can provide -- only fabulous restaurants, only Applebee's and IHOP can provide. Before I move on to conclude, I do want to address the horrific events that are unfolding in Ukraine. I know that they're on all of our minds. While today is about promoting Dine's wins and our optimism for the future, the weight of what's happening in Europe is on my mind, it's on our team's mind. I know all of you are thinking about it as well. I can tell you that we don't have restaurants in Russia or Ukraine. And at the moment, we do not have plans or pipeline to build restaurants in those markets. We also have de minimis exposure to goods and services from Russia. So we are -- that's our status as a business. But we're all impacted in 1 way or another by these events, and we certainly remain hopeful for peace. So a reminder of how the rest of the day will unfold. Scott, our strategy leader, will be up to give you a deeper dive into our view of the restaurant space and why we see the opportunity for growth. We'll follow that by a video from our CIO, Justin is going to talk to you via video, so we can show you the technology in action. He's also here in person, so he'll be here for Q&A at the end. Followed by presentations from each of our business unit leaders. And then finally, [ our ] Vance, our CFO, will bring us home. So I'll wrap by ending where I began and telling you about my favorite brand and how I think about brands. My favorite brand is probably 1 you've never heard of, unless you're from Westport, Connecticut, and know tiny Compo Barber Shop. This is a picture of Tommy. He started Compo Barber in 1958 after he left the Navy as a Navy barber and passed away just a few years ago. Back when my son, Scott, was 2.5, 20 years ago, I took them to Tommy for his first haircut. And if any of you have kids, and you can remember what that first haircut is like, Scott was not happy about getting his first haircut. So a lot of screaming, a lot of crying, a lot of arms waving and a very uncomfortable overheated dad trying to stuff his kid into the chair. So I said to Tommy, "You probably only got like 30 seconds, just 2 snips would really help." And Tommy said, "Dad, go away." And I said, "Go away? Do you see this mess that I'm leaving you with?" He said, "Go away." I walked away and as I looked back over my shoulder, Tommy put his arm around little 2.5-year-old Scott, whispered something in his year, Scott stopped crying, sat still and got his first ever adorable haircut. So you probably know the end of the story. For the next 20 years until Tommy passed, Scott and I got every 1 of our haircuts from him at Compo Barber every month. We were loyal for life. We were loyal for life, because in that moment, whether it was Tommy's quality haircut or in our world, our amazing pancakes or amazing chicken wings at Applebee's, it's not about the food, it's not about the building, it's about that personal connection between our team members and our guests that happen in little 30-second snippets every day. That's what hospitality is all about. That's what Applebee's and IHOP do so well is making those human connections happen between our team members and our guests every day. So with that, I'm going to wrap and I'm going to introduce our next speaker. Scott has a -- the Senior Vice President of Strategy. He's an alumni of BCG and Bear Stearns. He joined Dine 6 years ago to lead Applebee's strategy and development. And last year, moved up to join our executive team and is now leading enterprise-wide strategy. One of Scott's COVID accomplishments is that he is on a 72-week Peloton win streak throughout a break. Slightly a few more weeks than mine. And he claims to have never failed to solve Wordle. I can't claim that either. So Scott, welcome and talk to us about...

Good morning. I'll clarify a few things. I'm not John's son, although the same name and a little jet lag this week, we're coming out from L.A. I missed Wordle on Monday. So -- but I'm back on my streak as of yesterday and no spoilers [ around here ] in the audience. So with that, I'm going to dive a little bit deeper into a couple of the themes that John described at a high level and give you a little bit more context to some of the brand plans and why we're doing some of the things that we're doing. So to jump in, 3 key themes that we've seen during COVID and 1 of the -- my favorite quotes that I've heard, and I think a few people have said at this point is that crises like COVID, they don't create new trends, they just accelerate existing trends. So everything we're seeing now are themes that we were aware of that we're focused on, to some extent before COVID, but it has advanced arguably 5 to 10 years over the last 2. The first is around technology. So digital technology. Pre-COVID, really [ a company ] the digital experience. It was, I'd say, a challenge in some ways to prove out of business case to make those investments consistently. Now with the acceleration of so many consumer behaviors, there's an expectation that technology is really within all steps of the restaurant experience. So we enable both our consumers and our operators to engage more efficiently with the brand. The second is around off-premise. Off-premise has been growing for the last 10 to 15 years within casual dining. It's been really the growth engine of the segment but growing at a fast rate on a very small baseline. Post-COVID, it's exploded obviously, by necessity, guests had to order more online, more digitally. It's become a core habit. And the benefit for our brands is that we're now in the consideration set for an occasion that was maybe an afterthought for some consumers. So now we can really more effectively compete with brands in the QSR and fast casual space. Lastly, delivery. So delivery, obviously, a segment of off-premise. It was -- there's a lot of unknowns with delivery, especially pre-COVID, obviously, explosive growth prior to the crisis, but questions as to whether that was sustainable. And I think even as of last year, question says, will delivery remain when dine-in business comes back. We are seeing it remain, and it's really influencing new formats and business models as we reach our consumers and creating new sales channels for us to explore. So the first thing, and I'll dive into each 1 of the 3. So the first is around digital. Digital has dramatically expanded consumer touch points. I think we're all aware of this as consumers. If you think about the journey -- consumer journey with a restaurant brand, it's really in these 3 segments, and we'll repeat these segments in a couple of slides. There's a discovery phase. I'm hungry. I want to eat, where do I go? Previously, that was traditional forms of media. That's TV, that's radio, that's out of home, et cetera. Now we all know there's a multitude of channels that you can engage with brands on, whether that's social media, whether that's different streaming services, et cetera, that all informs our marketing approach, right? How do we reach consumers in a more targeted way, in a relevant way and meet them effectively at the point of decision-making? The second is around ordering, handoff and payment. That's really within the 4 walls of our business. And again, it was really focused on that physical interaction, right, a physical menu, physical POP, that physical handoff. And now we're exploring new technologies and introducing technologies that makes it more efficient for our operators, right? Things like server tablets, things like bring your own device where a consumer can view the menu in the future order and also pay on their own device. And then lastly, feedback. So feedback -- we always want to hear from our guests. Largely, that was maybe word of mouth in the past. Now we all know there's a number of review sites. There's places we need to monitor with social media and lots of technology, ultimately, that powers all of that. At a high level, all these touch points, they add a lot of value both to consumers and to our operators, and it really enhances overall journey, but you have to make decisions and choices as to which ones to invest in as you go. The second thing on our industry is the demand pools have changed, right? And this is industry data, this is NPD Crest full-service restaurant industry. Obviously, as we all are aware, 2020 was a huge disruption. And you can see the overall demand of dollar shrunk significantly. We saw those come back, and that was reflected also in our results for 2021. And as John mentioned, we expect to get to back to pre-COVID levels as we get into next year. The second thing is that those -- again, those pools have changed. So the mix is different. Pre-COVID about 20% of industry dollars went to off-premise. That then escalated significantly, and it's now at 40%. What's interesting is that while the mix is changing, right, as demand dine-in dollars come back, you see relative stability in off-premise dollars. So as dollars are staying fixed. Again, the brands have grown their off-premise sales dollars by over 2 times. Through the crisis, and we're not seeing much impact as dine-in comes back. And so what we're seeing is a highly incremental business that provides us a tailwind as dine-in does recover. And then lastly, around delivery. So delivery, it's somewhat of a controversial topic to restaurant operators and merchants. Are they a partner? Yes, they are a great partner. And they provide us, again, with an incremental sales channel that we think is very important to our business. Are they a competitor? They are a competitor to us as well in certain ways, right? They compete for our guests. They have a lot of control over our placement within an app, and that can impact sales and performance over time. What we're doing is twofold, ultimately is to partner with the DSPs, the third-party delivery companies, use our scale to negotiate the most favorable terms to make sure we have the best placement within a delivery app and ultimately, at the same time, try to trade those consumers back into our direct channels. And what this slide shows is just that delivery is evolving in the same way that other marketplaces have and maybe Netflix and Etsy aren't the first examples that come to mind. I think we talk a lot about hotels and what has happened in that industry. But if you think about Netflix specifically, it's about content, right? Why do you go to Netflix? You want to see the next new thing. And there's a lot of similarities, especially when you think about virtual brands. Think of food as content in a lot of ways, these DSPs trying to find new relevant ways in which to hook consumers, have them come back, put that new brand at new menu item really well merchandised and showcased menu up in front. You can see here McDonald's. This is a little bit of a dated picture, but McDonald's has a top spot that's negotiated, and that's a way for them to drive more consumers into their platform. So from those 3 themes, 2 key opportunities for our brands, and these are different. These are emerging over the last couple of years. One is around the business model. So how do we get to market, how do we engage with our consumers. There's this emergence of delivery-only facilities, right? Delivery is now a much larger share of dollars and an absolute dollar's much higher so it can substantiate itself on its own within a facility. The second is around technology, how do we think about technology, how do we double down and ensure that we're developing that direct connection to our consumer. And I'll dive into both. So I'll talk about virtual brands and ghost kitchens first. And again, we really see this as -- it's obviously emerging. We're in the early innings of how this whole piece of the industry evolves, but we're very positive on it. And we think it's something that does represent a new incremental revenue stream for our restaurants as we go forward. So first some definitions, because it's a little complicated when we say virtual brand and what does that mean? So we'll kind of talk you through kind of the 4 main players within this ecosystem. So a virtual brand, what is a virtual brand. It's a brand with no visible brick-and-mortar footprint. It lives largely on the third-party delivery sites like DoorDash or Uber Eats or GrubHub. And we have 3 brands at the moment. We have Cosmic Wings with Applebee's, and we have Super Mega Dilla. I call it Dilla. I've heard diya, but however you want to say it, just order, and Thrilled Cheese. So we've got these 3 brands. At the highest level, what's important to know is that a virtual brand is a brand, right? It's a brand that has to have a purpose. It needs to be differentiated. It needs to be compelling. It needs to solve the need for the consumer. It's not just about pasting up a menu on the delivery platforms. And we think we really have a competitive advantage here, because we know how to nurture brands. And we know how to launch brands, which is critically important. Second is around technology. So you got to make this the least complex process as possible for your operators. And so the technology that powers that is critical. So we have the integrations in place. So now these orders look very similar to an Applebee's or IHOP order to our operators, trying to reduce as much of the complex as possible, well publicized in the industry around tablets and the complexities that introduced to restaurant operations that are now all out of the business. The third piece is around our operators. So ultimately, we become more of a fulfillment center in a lot of ways. So our teams were able to leverage, in this case, our franchisees and their teams cross-train their labor and get efficiencies and make this food. And with everything we do, all these new initiatives, they're all tested, they're all validated, and we seek to buy in from our franchisees. And our franchisees are very excited about these opportunities, because they see the incremental sales dollars and flow-through that they represent. And then lastly, a ghost kitchen. A ghost kitchen at the end of day is just a facility. So it's just where the food is made. In this context of virtual brands, we are the ghost kitchen, right, or the host kitchen. Applebee's or IHOP kitchen is serving as the ghost kitchen for a Cosmic Wings or Super Mega Dilla. But there's also ghost kitchen facilities like cloud kitchens and others where you can rent the space, and we can deploy our traditional brands and our virtual brands in the future, and we'll talk about what that means for development. So as an ex-consultant, I love 2 by 2s. So I'll walk you through this one, which has a lot of dimensions, such as maybe 4 dimensional. So on the x-axis is the type of kitchen. So is it controlled? And what I mean by control, is it dedicated to your brand? Is it like a freestanding Applebee's or IHOP? And then a third-party kitchen, which is 1 of these ghost kitchen facilities. And then as you go up on the Y axis, the bottom left box of legacy is your core brand, is the core Applebee's or IHOP brand and then a virtual brand. As you go to the right, those capital requirements get lower. So a ghost kitchen is extremely more efficient to open from a capital perspective, using round numbers, $2 million to open a freestanding restaurant, $100,000 to invest in equipment to get into a ghost kitchen facility. So it significantly changes your return profile. On the X, as you go up, it's operating requirements. So obviously, there's a lot of labor that goes into operating in Applebee's or IHOP. To add on a virtual brand, it's no labor, right, or largely incremental, depending on sales volumes. So for us, the implication is that, historically, the way that we've gone to market and what is still a core piece of our strategy. So you'll hear more about this from the brand presidents, is our traditional restaurant brands. Applebee's and IHOP in their own dedicated facilities is still a big piece of our business, but that was the only way we could really go to market pre-COVID. Now with the growth of delivery, there's 2 more ways we can go to market. One is virtual brands in our traditional spaces. And we have a huge advantage here. Again, the distribution points, 3,300 domestic locations with the ability to scale out operations, right, which is hugely important. We -- our teams are used to running marketing campaigns 6 to 8 times per year. They know what it's like to operationalize new menu items and new concepts. It's very differentiated from what you see from other players in the space. And in delivery, number of locations matters. You want to be as close to the consumer as possible and we're the only 1 in full-service dining that can do that. Now second is traditional brands, our traditional brands in ghost kitchens. So again, that returns profile is significantly different for a ghost kitchen versus a traditional freestanding unit. This gives us the ability to enter trade areas that we weren't able to penetrate before, especially in urban. So if you think about a place like New York City, where development costs are extremely high, this is a tool that we can use going forward. And so this is a huge complement to our development toolkit as we go forward. And you'll hear from Tony about the efforts we've made internationally and are making great strides with using this to enter new markets. I'll [indiscernible] a little bit now about technology. So again, we talked about the requirement to deepen that customer and brand relationship. And ultimately, if we're going to compete effectively with not only the competitors in our restaurant space, but also the third-party delivery companies, you got to give your guests a reason to come and give them technology that complements their experience or gives them a reason to come directly to your website and app. And when we picked this photo, I didn't think of it as a technology photo, but it is an overlay, because you can see that blue disc right there. That's a QR code that's on the table of an IHOP that enters you into an experience where you can view the menu ultimately, as we go forward, will you be able to order, to pay, to leave feedback, and to do other things. So we're going to [ wait ] to launch a digital experience and make an unknown customer, largely a known customer in our environment. So you'll see a lot more of this from Justin in the video that comes right after me. But to give you a little bit more context behind why we are making certain investments, again, across this guest journey, there's, again, this discovery phase. And we want our teams to have the ability to create targeted messages to reach targeted segments, ultimately to drive incremental traffic and do so at a lower effective cost to offset media inflation. So really important for us to drive efficiency and, ultimately, to reach consumers where they are looking to make that decision on where to eat. Within this ordering and experience and handoff, we're really trying to accomplish a few things. So we want guests to be able to engage with our restaurant and our team members via their own devices, but not just for the sake of it, but in order to increase speed of service and to enhance that experience. So if I want to pay, if I want to maybe in the future, have a refill, if I want to order, that can all be done on my own device. Just want to empower our team members and especially in this environment. We want to find ways to enhance service levels and increase labor productivity. Server tablets are a great example of that and something that has been rolling out through the Applebee's system and is also on the road map as we launch our new POS. Within off-premise specifically, we want to give guests the ability to order from anywhere. So we're agnostic as it relates to where they order from. But we want them -- we've got those orders to come in seamlessly, and then we talked about integrations and why those are important. And then lastly, we want to reinforce a quick and easy handoff experience. So guests in the off-premise world, they care about 2 things. One is a quick in and out. and the second is around an accurate order. And so there's technologies available to us that allow us to meet those needs of the off-premise consumer. Payment, again, briefly mentioned payment, but there's a multitude of payment options now. We want to be able to offer digital forms of payment, Apple Pay, Google Pay, et cetera. We want to increase speed of service and payment security, especially for chargebacks in the online world. And then lastly, feedback, find ways to capture feedback from consumers, so we can deliver consistent experience, and empower guests' recovery. All these technologies, they -- there's a business case behind them, right? So there's either financials, either operational or about driving guest experience, and this is meant to highlight kind of how we are thinking about deploying those investments. This is a snapshot of our tech stack. It's not our full tech stack. It also doesn't reflect our full road map, but I want to highlight a couple of things. In order to power those experiences, we now have those technologies in place. So if you were to look at this picture 2 years ago, you see some solutions, but there will be some gaps as well. And there might also be some other vendors in place. So it's critically important is we didn't stop investing and launching these products over the last 2 years. And now we feel like we're really in a great place to offer these experiences to our consumers. You also see we're picking best-in-class vendor partners. So people like Salesforce, people like FlyBuy, people like FreedomPay, these are all best-in-class providers within our space, which really do give us a strong footing. The only thing to note here, and you'll hear more from Justin, that POS and point-of-sale, that's a big place -- that's a big focus for us as we go through '22 and '23 for both of the brands. So both of the brands are initiating a POS migration that's going to give us increased scalability and flexibility as we go forward. So with that, I'm going to segue to the video. I just want you to keep in mind those 3 themes that we talked about at the beginning as we go through the day. One, this increase in digital technology and technology in general, how they're really within every step of the process now. The second is significant growth in explosion off-premise. And then last, we have delivery is shaping and shifting the way that we're able to go to market. And with that, I thank you for your time, and I'm going to hand it off to a video with our CIO, Justin Skelton.

CRM stands for customer relationship management, but specifically, there are 2 components around CRM. One is our digital marketing capability, which is a fully integrated digital marketing platform that has integrations with social media as well as offering things like push notification, e-mail campaigns, digital wallet. Those capabilities that allow us to interact with our customer. The second piece is loyalty. Like most companies, we're working on deepening our relationship with our customers, and we'll do so through execution and implementation of a loyalty platform this year. And what that's going to allow for is a customer, for example, coming in, they've got their personal device. They'll be able to scan the QR code on the receipt, thereby collecting points. They will be able to redeem those points. And they can do it nationally, but what's most important there is they have to complete a profile, which from our perspective, allows us to gain valuable information about our customers such that we can actually direct these push notifications and other things to them later on. For the on-prem, we get into technologies that specifically are used within the restaurant. For example, we've got a new point-of-sale platform we're rolling out this year for IHOP. We actually piloted in 2021, so this year is the year that we actually implement that capability. There are 3 components of that. There's the point-of-sale system, there is a KDS, which is kitchen display. And there's also the tablets, integrated tablets will be part of that package, if you will, that we will be deploying for IHOP throughout the year. But we're expecting a lot out of in terms of improved server efficiency, improved table turns. The tablets actually are integrated, because they actually include payment swipe capabilities that are part of the tablet that the server will be able to use. It's also 1 of the vehicles to allow for relief in our labor shortages that we're experiencing as well, because the servers will be much more efficient than where they are today. We're going to completely revamp and we're going to redesign the web and mobile apps for IHOP, starting with IHOP in 2022, and then we'll finish up that rollout for Applebee's later on in the year. Compared to where it is today, it's going to be a whole new look and feel. So the user experience, the user interface will be totally different. We're going to put in enhanced order flow capabilities. And then as I pointed out, loyalty, the web and mobile app is going to be fully integrated with loyalty as well as our [ Pay 'N Go ] and some of our other capabilities. FlyBuy essentially allows the guests to go on to their mobile app, order their food ahead and it has geofencing capabilities, which as they're en route to the restaurant, the restaurant can see specifically where they're at. And what that allows us to do is to make sure that we time the delivery and make sure that the food is hot when it's brought out to the customer. The customer doesn't have to call when they get there and notify the restaurant that they're actually in the parking lot. We already know that already. And we'll be able to bring that food out hot. BYOD stands for bring your own device. And essentially, it's technology we're deploying for both IHOP and Applebee's. But what they can do is they can scan the QR code, which will allow them to bring up the menu. They can then execute an order. And then when they get done, they actually can pay using their device. And then subsequent to that, they can actually complete a survey and they're on their way. We took a collection of different technologies, enhanced those technologies to deliver the order-ahead dine-in experience. Essentially, the guests will be able to order their food ahead much like they do with the FlyBuy that I explained. The difference with it is, is that with order-ahead dine-in, they will actually be dining in versus picking up the food. What it will do would be allow the guests to actually sort of get a head start, right? Go in, get seated immediately, get their food, pay and leave. We know during that daypart. There's a competitive landscape. People don't have a lot of time to eat lunch. So we want to be able to take advantage of that from a competitive perspective, and we believe order-ahead dine-in will allow us to do so. It's in our to think innovatively. And we've got a couple of things that are being tested right now in a few of our restaurants. Number one, we've got a location that's actually testing robotics. And then the other type of technology is being tested right now is food lockers. So we believe that these things will have merit going forward. But it's just in our process to make sure that we actually have a method for being able to test these technologies. Innovation is core of what we're doing, but not only focused on what we're going to be delivering today, but also what we plan to deliver in the future.

So thank you to Scott and thank you to Justin. I like Scott's 4x4 box, and it shows you where the restaurant industry has been and the opportunity we have. And with that opportunity and these new revenue streams comes complexity, comes a need for greater technology. And I hope what you see in listening to Scott and listening to Justin, is that we have deep thinkers on these topics, and we have real technical experts. Justin is our CIO, my boast about Justin is that last year, our tech team delivered 95% of its projects on time or early. And they spent over 95% of what they were supposed to spend. I've never had a tech team that actually accomplished its entire budget in the year without carryover. And that's how I know our commitment to having new applebees.com, ihop.com, flip.com, the corresponding apps and the IHOP POS as well as the infrastructure for our marketing programs are all going to be on time and complete this year with Applebee's POS to follow next year. So now we'll transition to Applebee's and then we'll take a break. John Cywinski, who many of you know well, is a true industry expert. He was once a very successful franchisee of Dunkin' Donuts and Sonic Restaurants in Chicago. So he has been on both sides of the business. He has held key leadership positions at Brinker, at Yum, and at McDonald's. He is a Board member of the National Restaurant Association. He's on the Executive Committee. And today, I don't know if you know this is John, is your 5-year anniversary at Dine. So congratulations on that, and welcome.

My, how time flies. Yes. I think today may be that anniversary, John. So thank you for that introduction. Scott, great job. Justin, a terrific job on that video. Good to see all of you again. This is 1 of our first live meetings in a long time and it feels really good. I have the privilege of sharing with you the Applebee's story. And it's not a good story. It's a great story. We're proud of it, as a team. I'd like to paint a picture on where we've been, because I think the foundation is important, more importantly, where we're going and how we plan to unlock the growth of this terrific brand moving forward. Chapter 1 -- and I'll frame this in 2 chapters. And I will go back to '17 through '21. I'm thoughtful. I look at Greg Flynn in the back of the room. This is my second stint. My second 5-year stint with Applebee's and I'm very fortunate the franchisees asked me to come back in 2017. The brand was challenged as many of you know. We had a mission to turn this brand around and unlock the growth that we all knew was possible here. And we, as part of that, established 8 strategic imperatives. And I'll be quick here, but I think it's important to understand. The first 1 was reestablishing trust and partnership and pride in this brand, which was always there among the franchisees. I'm not sure it was there among the team and then belief. Belief that we could indeed rather quickly accomplish something remarkable. I didn't want anyone on our team, who didn't have that passion about franchisee collaboration and didn't have that commitment to accomplishing something special. We've done that, and we've done that in spades, and I'll provide some context on that. My candid belief coming back, and I did ask the Board, Mike, when I came back in for the ability to be completely honest. And my view is the brand had lost its way, and in particular, lost sight of its guests and maybe who the brand was and what it stood for. So embracing our brand essence. I'll frame that for you. It's obvious. All you have to do is talk to a little focused group of folks across the country, and they'll tell you exactly how they think about Applebee's and that's a good story as well. Building not just a good team, but a world-class, best-in-class leadership team was an imperative. It's something we did fast. In large part, that team is still here. They are remarkable. I'll reference a couple of them as we move through this. But that team and our franchise partners are the reason for our success. We love culture. We have a very unique culture at Applebee's, and we worked hard to reestablish that. And it was very important that a results-oriented culture of accountability, something I firmly believe in and our team believes in was embraced by everyone on this team. And we love being held accountable and in particular, as we look back at last year's results. We talk to guests, because the guests have different occasions and need states when it comes to dining behavior. You know that. You all live within this world where sometimes you have time to dine out, sometimes you don't. We have a tremendous insights and analytics team that provide us the insight that we need to make proper investments in decisions and to be very successful in the execution of our initiatives. Everything we do is occasion-based and insight-driven. We felt it was important way back in 2017 that we not just have an impact in the category, we disrupt this category that's been around for a long time, kind of overdeveloped back then and mature, formidable competitors. You remember the DOLLARITA. That was an example of a form of innovation that disrupted in a really cool way and broadened our demographic in a very significant manner. I'll provide some other examples as well. I felt and I was honest with our franchise partners that we're going to hold them accountable for restaurant excellence. This, at the end of the day, is a people business and a restaurant business, and it all happens under the tutelage and kind of the oversight of that restaurant general manager. We believe in restaurant excellence. It was very interesting to me and very telling that our best franchise partners, again, I'm looking at Greg, he said, "Yes, hold us accountable," because we had a lot of variability back then, and our mission was to tighten it up and deliver on our guest expectations. And the final point in this, as I look at the portfolio, maybe the most important point, it was imperative that we would eliminate restaurants that were not just low volume or underperforming, perhaps even brand damaging. I remember looking at a quintile analysis, and it was very clear that those restaurants should have closed probably a long time ago, part of that candor in our dialogue with the Board, and we were given permission. We closed 300 restaurants over a 5-year time frame by design. The great news is that's done. And I look at this portfolio of 1,578 restaurants in the U.S. It's rock solid. Those P&Ls are healthy. Our franchisees, restaurant level and NTT level are better positioned than they've ever been in my estimation. And Greg will share his perspective on that later. I should also mention with point number 8, it wasn't about just eliminating brand damaging restaurants. We set very high standards for this brand. And not every 1 of our franchise partners in my estimation was capable of running as fast as we wanted to run and delivering on those standards. We needed to make some changes in the franchisee portfolio as well. We've done that. I'm proud of this group that we work with. Our vision. Last time I was with you, and I'm looking at many of you were here in 2018, our last Investor Day, we said we'll go for Applebee's. So we're going to generate an incremental $300,000 per restaurant over a 5-year time frame. That was the vision. This is the slide that I presented back then in 2018. '17 was a transitional year. It was essential that we build that foundation that I just spoke to, generating relevance, maximizing relevance among our guests, reestablishing who we are and what we stand for and maximizing cash flow was an imperative for the franchisees. We were successful in -- 2018 was a record year. 2019 wasn't far behind. Then our mission was to accelerate that growth, profitable growth, again entity and restaurant level, moving forward. And we were well on our way. Greg and I talk a lot about mojo. This brand has mojo. Now the last 2 years have been unfortunate, maybe, from -- John talked about this. The Applebee's brand oftentimes is at its best when it faces adversity because we're entrepreneurial, and our franchisees are not only tremendous partners, they're just -- they're resilient. And so we unleashed this entrepreneurial spirit and this can-do attitude [ and ] this little band of brothers on a mission. And we were very successful in what I think would have taken 20 years to unlock, figuring -- cracking the code on this brand's reason for being. And so adversity did create a lot of opportunity. These are -- I never thought I'd see headlines like this. These are front page New York Times magazine from kind of that April, May, June time frame, if you recall that in 2020. '21 was a, breakthrough doesn't do it justice. It was a remarkable year for the brand. Our average unit volumes, weekly volumes, restaurant level, $50,500. That's an all-time high for the Applebee's brand. 6.2% comp sales growth versus the last kind of normalized baseline year of 2019. If you want to look at it versus '20, we were up 38% that year as well. We are the category leader on attributes that are very important to our brand position: affordability, menu variety, convenience, overall brand awareness and within overall brand awareness, I'd say to-go awareness and delivery awareness, piggybacking on Scott's points. When guests think about those things, they think about Applebee's. I mentioned that we have indeed completed this system rationalization. We've optimized the portfolio. Those 1,578 restaurants that we have are great restaurants. There are a handful, probably, that still need to close, but it's a very small number. And so I'll frame exactly what you can expect moving forward. Most importantly, average unit volume moved. I said we had a bold goal to generate another $300,000. We generated another $400,000. We moved from $2.2 million to $2.6 million per unit. That's our current AUV, some of that because we pruned up the system, some of that is just pure demand from the guest in organic growth, and we're very proud of that. And in the words of -- we have a song later in 1 of our videos, Bachman-Turner Overdrive, you ain't seen nothin' yet from this brand. This chart is my favorite chart, and it has 2 components. It's monthly comp sales '19 -- or '21 versus '19. You have kind of the impact, I can't remember if that was Delta, COVID back in January and February impacted the entire -- look at that remarkable comp sales consistency over time, really from the middle of March, double-digit growth versus '19 and December would have been double digit had it not been for Omicron, which hit us in the last 2 weeks of the year. That's the picture, and that's the picture of momentum. And then what makes our team and our franchisees most proud is -- kind of pi**es me off a little bit that it wasn't 52 weeks. But literally, with 1 exception being the first week of 2021, Applebee's outperformed the entire casual dining category as represented by BlackBox for 51 consecutive weeks. That's hard to do. I think in 2018, we outperformed for about 45 consecutive weeks. But not only did we overperform, we overperformed by 740 basis points. And you're wondering perhaps, all right, well, if you cut that differently and look at it versus '20, how did you do? We outperformed by 960 basis points if I look at it versus '20. Regardless of how you look at it, it's a remarkable performance. We're not satisfied. It's the tip of the iceberg. It does illustrate what's possible with a fully optimized brand, which is what we have here with Applebee's. Now I want to talk a little bit about Chapter 2. What you can expect moving forward over the next 5 years, including this year, unlocking our full potential, accelerating market share. We view this, and our franchise partners view this, as a tremendous market share opportunity post COVID, my firm belief. And John and I believe this, we've talked a lot about it: Trust and scale win. I'd probably add culture to that. Those brands that over the past 2 years have earned the trust of their guests, perhaps more importantly the trust of their team members, are going to win. And guests do go through this process of thinking about whether they can trust a restaurant in this environment moving forward. There will be winners and there will be losers. This point about scale. It not only is scale from a brand perspective in the aggregate or the Dine entity. It's scale within the franchise community. I have 31 partners who have significant scale and culture and best practices and processes. They're sophisticated, they're savvy. I'll talk about them a little bit later. We are exceedingly well positioned for not just sustained growth, but accelerated growth. That's our expectation. There will be 2 components and I'm very happy to be talking about not only comp sales but now new restaurant development. You can expect that from us moving forward. We've cleaned up the system. That run rate will be a 3% to 4% annual system growth rate. Most of that coming from comp sales, some of that as we move forward here coming from new restaurant growth, and that will be sustained over time. We believe in differentiation. Winners have a clear brand identity and they understand where they play really well and where they win. Here are 6 categories where Applebee's wins. Our brand essence is not only unique, it's almost perfect. And I'll dimensionalize that for you. Our demographics are -- they're really broadly appealing in such a good way. We are more affordable than virtually everyone. That was important pre-pandemic. Post pandemic in an inflationary environment, I believe that's a critical win for the Applebee's brand. We have variety, which means there isn't a veto vote when a group decides to dine out. Scott hit on the off-premise business. I will frame specifically where we are. And we're ambitious on this critical growth engine for the brand. And then my humble point of view is we innovate and execute with the best of them, and perhaps better than everyone out there, and I will provide you some examples of that. When you ask the question, who are you, Applebee's? What do you stand for? More importantly, when you ask guests across the country, this is what you hear. You're familiar, you're friendly, you're welcoming, you're inviting, you're really comfortable. I can kind of come as I am. You're not a pretentious brand. And many of them will actually -- my lawyer in the room, Christine, won't like this, but a lot of them reference that television show Cheers and that lyric: Sometimes you want to go where everyone knows your name. That's how America views Applebee's. Kind of like a good friend, which we view as a tremendous strength. We boiled all of that down to a brand purpose and it's important brands have a purpose. Now we have our overarching positioning, which is that wonderfully grammatically incorrect, eatin' good in the neighborhood, which we love and more importantly, America loves. Our statement is this, and John touched on it. There's an emotional connection that happens every time a guest dines in with Applebee's, and oftentimes with that off-premise business as well. Applebee's makes it easy for family and friends to connect with 1 another, whether in our dining room or in your living room. We're that wonderfully familiar and affordable little escape from your everyday. We facilitate connection, on-premise and off-premise. In a world where, coming out of COVID, where everyone perhaps is connected via a cell phone, one could argue perhaps the world is more disconnected than ever. And so those little moments that John referenced happen in our restaurants. And America's hungry to dine out, they're happening more so than ever, and I'll provide some context on that as well. Perhaps the best representation of that recently, we filmed -- we filmed our guests, I don't know, 6, 9 months ago in the middle of the pandemic. And we really felt in 2022 that we were going to come out of this. And we felt an obligation to thank our most loyal guests, our guests we refer to as our regulars. They have such tremendous brand affinity. The ad I'm going to show you is there's a screenshot of it here. There's not an actor to be found. These are real people. We kind of changed their life a little bit by putting them up on national television, and it reflects the essence of the Applebee's brand. So let's go ahead and run that 60, please. [Presentation]

My belief is authenticity is important in communication, in advertising and merchandising. I think authenticity is a word that you find associated often with Applebee's. That wonderful young man, 94-year-old Chester, who you saw with a World War II cap. He is a great-grandfather. By the way, that was shot in Pittsburgh at 1 of [ Greg ]'s -- actually a couple of [ Greg ]'s restaurants. But Chester comes to Applebee's every week. They do know him by name. He's 94 years old. You saw some of his great-grandkids in that shot. I mentioned -- and we're proud of that work, our demographic profile. We are -- now this is relative to the casual dining category. This is how I would suggest you think about Applebee's. We are younger, surprisingly so, more diverse, and we have more families. It surprises people to find out that 54% of our guests are Gen Z and millennial, but they are. But I love that balance from an age perspective, from an ethnicity perspective, and certainly from a kind of with family and without family. I'll take that demographic profile over any brand out there. It's a strength. Affordability is important -- more important than ever. You can see here average check. This is NPD/CREST. We are at the lower end of that kind of $14 to $15 spectrum. And as discretionary income perhaps is challenged here moving forward, we like this position. Whether you look at it via NPD/CREST or Technomic, we are that entry level kind of value-oriented brand, and we find great strength and opportunity with that. We win on affordability. When we ask -- and we have a brand tracker and this represents 5 years, which brands -- and the question is here -- do you find affordable enough to eat there often. Applebee's wins consistently head and shoulders above some other very formidable competitors that we respect. But we love that position on affordability. We reduced our menu. So you remember way back in March, literally, in April and May, we reduced -- we went from 160 menu items to 100, out of necessity. At that point in time, when we had lean teams, the government said shut down your dining rooms, we wanted to ensure that we could execute well, really well in our restaurants. So we made a change. That's something that would have taken 20 years, it happened in 2 months. And now it's time to bring back innovation, and we're in the process of doing so. This is our current menu. But it's that tightrope, balancing kind of that simplification and our ability to execute really well for that guest and delivering innovation. Our teams know how to do that. These are some examples. And when you think about culinary innovation, Applebee's is all about abundance, and we're about craveable indulgence in mainstream flavor profiles and recipes, products and menu items that you can actually pronounce. There was a point in time where Applebee's had stuff on the menu where we now have a policy that we put in place that says look, if a guest can't pronounce an item, it's not going to make its way onto the Applebee's menu. And so what you will find, and I'd encourage you to go out to an Applebee's, you will see these. Most of these menu items today, Sizzlin' Skillet Sensations are coming. Those Sugar Dusted Donut Dippers, we believe in forward names for our brands, are to die for, and we're going to feed you later. I'm actually going to feed you the Impossible Burger, our first plant-based burger, our Brew Pub Loaded Waffle Fries, the Donut Dippers and we'll give you kind of a center of the plate Sizzlin' Skillet. So I hope you didn't overindulge with your IHOP this morning. The part of the business that we love off-premise is represented here. It is, on a pre-pandemic basis was 13% of the mix, about $6,000 per restaurant per week. It's now 27% of the mix, about $14,000. And our dine-in business is coming back. We're not only holding the off-premise business, our dine-in business is coming back, think about that when you think about average unit volumes. Our off-premise business is in excess of $1 billion, it's actually about $1.1 billion. That's larger than many of the brands that I compete with. And again, I'll tip my hat to scale on this point. It's going to continue to grow while our dine-in business continues to grow as well. That's a Q4 of '19 versus Q4 of '21 look. Our objective here is not to simply compete and to be available. I think there was a point in time, I know this with certainty, a decade ago, where Applebee's was not really part of that consideration set. If you didn't have 1.5 hours to dine in and you were on the go or you were at work and no 1 wants to prepare a meal, you're probably thinking about McDonald's, Wendy's and Burger King and maybe a Burger Fry and a Pepsi through a drive-through window, in a sack. Now we are competing directly with QSR and fast casual, and we're winning, and we're stealing share, and our food is better. It's real food at Applebee's. John talked about our packaging. The packaging is exceptional. I've got to throw a shout-out to Scott. We got some resistance from franchisees, like, can you bring the cost down? We said, "No, we're going to have best-in-class packaging because the food needs to travel and we do that really well. We have more points of distribution than anyone. When you order to-go, you want to get in your car and just drive around the corner. You don't want to drive a long distance. If you're going to have it delivered, you don't want it sitting in some fellow's car for 30 or 40 minutes, God forbid. Category-leading awareness on both To-Go and delivery, there is no veto vote. Given that varied menu that I just shared with you, I've arrived notification that Justin has put in place, meaning when you pull onto our lot, because of geo-fencing we know you're there. Makes the experience that much better and easier. We are migrating aggressively all of our guests to digital. Whether it's an online order, whether they choose to order through our call center, we want to handle that well. We don't want dropped calls. Our core competency, candidly, is not bartenders and team members answering phones. We want them focused on our guest in the restaurant. So we take that out of their hands. We have tamper-evident packaging, which is very important from a guest perspective, particularly with delivery and order accuracy stickers are now coming throughout. That may not seem like a big deal, but one of the biggest complaints that you'll find in the category is, I get my food delivered or I bring it home, and it's not the food I ordered. We're actually really great at this right now. We were good -- off-premise business at Applebee's is a core competency. It's a lever we're going to pull. We're going to lean in aggressively and we love our position. The best representation of this one. And I can't remember if I shared it with you guys last time we were together. It's an ad we call Runaround Sue. It's pretty self-explanatory. It's -- this is a 60-second story of how we integrate into the life of an everyday woman, who is our core guest, and we love this guest. I would tell you that our off-premise guest, if you're wondering about cannibalization, this is highly incremental and our most frequent guest and our most loyal guest is our off-premise guest. So have fun with this one, let's roll it. [Presentation]

And here, I've got to, I've really got to provide a shout-out to our marketing team and our agency [ Gray ] in -- actually all of our agency partners, Joel Yashinsky is our Chief Marketing Officer, and he's brilliant, and he's a great partner. But you can get that sense of authenticity in how we communicate and convey this brand in a very relatable way that certainly resonates with our guests. Scott talked about Cosmic Wings. As much as I'd love to quantify that for you today, I can't and I'm going to resist doing so. We launched it in February of last year. It's only available via delivery. Although we did put it into our restaurants in November, December, we did it for 1 specific reason. We wanted to maximize awareness and trial, and then we moved it to the delivery providers. And so this is an example of a very specific target, a well-defined target, a very clear differentiated position, co-branded menu. You're taking -- you're talking about wing lovers and Cheetos lovers, and we've got great partners with PepsiCo and Frito. It's highly incremental. And we're currently in the process of integrating as we speak with DoorDash, we're going to be up at about just shy of 1,500 restaurants shortly, and Grub Hub. And by the time we get to end of Q2, we will be fully deployed. At that point in time, I'll be able to answer the question for you as to the size of this business. I don't want to be premature on that one, but it is incremental. Our team members love it and our guests, in particular those young wing lovers, love Cosmic Wings. We are introducing -- and this is a big idea, drive-through pickup windows. This is not how you would think about a drive-through window at a QSR restaurant. You can't come up to our window and necessarily order through a speaker and then pull up and pick it up. This is Texarkana, Texas. And Allen Smith -- all of our great ideas, by the way, come from our franchisees. Dollarita did, drive-through pickup windows came from Allen down in Arkansas. This is his restaurant. This is the first one. He has built 2. We opened our third in Columbia, South Carolina next week. My expectation is that we'll have 15 by year-end. The outlay to, the investment to build this depends upon your geography, it could be $100,000. But the operational, the team member, the financial and the guest benefits are significant. It's a small sample size. As we move forward, I'll begin to frame that for you in a very concrete fashion. But our franchisees are jazzed about this. It's a significant -- think about this. I mean it's snowing out there today or sleeting. In cold-weather climates, you don't have to deal with rain or snow or ice. Team members don't have to go outside. The order is ready, you pass it through. And then all those delivery drivers who have been queuing up in our bars waiting for their orders, they too can just move right through this lane. It does beg the question: with almost 1,600 restaurants, how many of these can you convert? And we're going to answer that question. I can't today. I suspect it's pretty sizable. You have to take away some parking spots. You have to have municipal approval to do this, but we have a strong argument for it. And we're leading the way, and we're going to be aggressive on this front. I mentioned innovation and execution. It's a core strength. Not only do we love this, we do it really well, and we like to take risks. Sometimes it's new product introduction, sometimes it's co-branding with partners like Cheetos or PepsiCo. Sometimes it's working with a film studio like the Walt Disney Company. Sometimes it's leveraging our very important alcohol business with guys like Dwayne Johnson and Teremana Tequila. It's all represented here. We have $140 million of media muscle that we deploy nationally annually, because our franchisees believe that we are marketing and an operations-driven brand. They contribute 4.25% to us, and they trust us to execute really well and to bring innovation to our guests. And our media strategy is, in my estimation of core competency. I'd say -- about 60% of what we deploy is traditional media. About 40% would be emerging nontraditional. It is very scientific. There's a little bit of an art to it. Our objective is to maximize awareness and trial in this ever-evolving highly, highly fragmented media landscape. Scott put up 1 of his -- I always give Scott grief for putting up slides that fill the whole slide up top to bottom. But when you look at the number of content providers out there in the media landscape, it has proliferated significantly over the last decade. We are device-agnostic: Whether -- can whether you're looking at your telephone, whether you're on your iPad, whether you're on a plane, whether you're at home, regardless of the device you use, we know how to find you and target you, television, digital, mobile, social display, search, CRM, and the list goes on. This is a place where we play really well. And we have 6 distinct occasions. There are actually a few more beyond these 6, but value is driven by price. Family is driven by kids. Craveability is driven by I'm hungry, and I want that signature menu item. Convenience is driven by the fact that I don't have 1.5 hours, I need to pick something up and take it home. Social oftentimes involves alcohol [ and ] that emotional connection, oftentimes late at night or on the weekends, special occasion, could be an anniversary could be a birthday, could be date night at Applebee's. Date night is something that happens every night in our restaurants. And I've just got -- I've got to talk about Walker Hays. This is Walker. He's a country music artist and his wife, Lainey, -- they have 6 children. He is a salt of the earth guy and a regular Joe, and I mean that in the most favorable way. He wrote a song with his writing partner. We didn't do this. We just rode on those coattails. And he wrote this song Fancy Like Applebee's because he lives in Nashville, and he's a country artist and his friends used to say, "well, yes, you must have a pretty good lifestyle" like "you live well." He said "No, actually, we go to like Burger King, McDonald's and Wendy's all the time. But a great night for us is we go to Applebee's." And he's genuine and he's authentic and he wrote a song about it, and we have a long-term partnership with him now. We felt last year, when America was really dealing with the brunt of this COVID thing, that they wanted to let loose. He and his daughter started to dance to this song and secured more than 750,000 TikTok video submissions. And we said, we're going to use the best of those, and we're going to let America let loose, and we're going to celebrate kind of our freedom and our independence. And we did so with several ads. I'm going to play 1 of them for you here. Let's roll that, please. [Presentation]

[ So yes ], I honestly can't remember in my career, and I've been around a long time, more buzz about a brand than we experienced through this and our guests and our team members. Don't forget that half the reason we produce the stuff we produce is for our team members. Let's go back 1 slide, please. So Wendy, if you could -- thank you very much. I referenced that we are now moving into net new unit growth at Applebee's. We will achieve that next year in '23. Our portfolio rationalization is complete. Think about this, we've contracted 15% by design. The category has contracted just through COVID over the past 2 years by about 11% or 12%. We know where these 250 very high-volume trade areas are and we're going to leverage those with our franchisees in a multitude of ways, anticipate scaling up to 20 net new units moving forward. It's going to take us a little bit of time to ramp up the full development pipeline. Last year, we closed 25 restaurants. We're not going to do that again. I think my expectation here is that we close 15 or so, maybe less, this year. And then my expectation is we'll get pretty close to 0 in terms of closures while we're ramping up new units, nontraditional, traditional and conversions. That number will be in excess of 20 as we move towards 2024. This is our new prototype. Our probably sales to investment ratio used to be about a 1:1 ratio. This is a 1.3:1, very favorably received by our franchisees. Our franchisees developed this with us. We have good guest insights. This is what's being deployed depending upon the circumstance. You notice there's a To-Go lane and a drive-through pickup window where we can implement that as well. So this is how we plan to unlock growth and really the full potential of the brand and restaurant profitability. The late-night daypart is a significant opportunity. It's the only daypart, when I looked at last year, that didn't grow. We grew significantly at lunch, in the afternoon, and at dinner. Late night is going to come back. That's probably the daypart that's the hardest to staff, quite candidly. But then again, and maybe Greg talks to that. He's having some experiences there that are significant incremental growth opportunities. It's a core equity for us. Late night, half price apps at Applebee's is something that we do really well. Pay and Go Mobile payment is coming. Restaurant profitability, if you recall, 4 years ago we retained PwC and we went to work on restaurant-level P&Ls and we secured a 200 to almost 300 basis point reduction in that P&L, we're going to go again. Probably won't see the benefits of that financially at the restaurant level until '23, but we're doing a lot of work now that will unlock that growth. New point-of-sale system is coming, along with handheld tablets. We're looking at new kitchen equipment. Our kitchen line hasn't been -- hasn't been redesigned in 20 years. We believe we can unlock a significant amount of innovation there, escalation on the new restaurant development front and then best-in-class innovation and execution, which is what we do really well. Final point. Our business model is unique. We only have 31 franchise partners. They are large, they're savvy. They're smart, sophisticated strategists. They know how to leverage scale within their entities. Best-in-class culture I find throughout, and I attend a lot of those GM conferences, and they're impressive. Their financial health is stronger than it's ever been. and any weak players, by the way, as I mentioned, disappeared quite a while ago. We have deep collaboration and partnership, and I thought rather then talk about that here today, if we could advance that slide, please. That I'd introduce my partner, Greg Flynn. Now Greg, this is almost overwhelming, has a -- Greg has 2,400 restaurants. He is the largest franchise operator in the world, I think in excess of $4 billion, Greg, kind of about the same size as Applebee's within your own entity, not just Applebee's but Panera, Taco Bell, Wendy's, Pizza Hut, Arby's, would be the portfolio. Greg is perhaps my best partner. He was franchisee of the year. We just recognized him for the fourth time, this past year. He walks the talk on restaurant excellence. Greg, would you mind sharing your perspective on the business, please? Thank you.

I'm Greg Flynn. I'm honored to be here. And I think the fact that I'm here speaks volumes about Dine and Applebee's. I haven't spoken at an investor conference like this in any of our other brands, notwithstanding the fact we're the first, second or -- whatever, we're large franchisees in all our brands. I actually was invited to speak in 2018 as well. I had never been invited before 2018. And what happened is we got an Applebee's in the late '90s, and it was already the strongest casual dining brand then. And casual dining was, in my view, the best category then. Now it becomes very competitive. But all brands go through some tough times and Applebee's went through some tough times. Honestly, it sort of tacked the wrong direction in the sort of mid- to late teens. And I think that was really because the leadership then didn't understand what America loves about Applebee's. Anyway, the brand sort of has turned itself around, and that is due in large part to John and the team he assembled. And the thing about John is he really understands the Applebee's guest and loves the guest and the brand. Like he used the term many times today, authentic. Like he appreciates how authentic our brand is, and embraces it rather than fights it or tries to change it. And you know what, that resonates. America, especially right now, America, they can smell fake a mile away, and they really love real. So he's done that really well. He also has put together just a world-class team. I have a pretty broad view on the industry, but also teams. And John's is as good as it comes. John mentioned he was here before. He was our Chief Marketing Officer from 2000 to 2005, something like that. Those were sort of glory years, and it was partly because the advertising was so great and the marketing was so great. And the best brand leads are marketers, in my opinion. So John has brought that back to this brand, this deep understanding of what guests love about us and how to speak to them and how to give them what they want. So that's good. The other thing is the effect of the pandemic. It's very true that what doesn't kill you makes you stronger. And this is the best example I've seen in my whole career. So 3 -- lots of things happened. And John's touched on lots of them. But 3 basic things happened. One, 1 week ago -- or sorry, 2 years ago this week COVID hit, our dining rooms all shut. And we kept all our restaurants open, but with skeleton crews and managers. That's when we went from like 160-something menu items down to the 100 that John mentioned. John said, "Oh, that would have taken 20 years. No, it would have taken forever. It never would have happened. Like, we had tried, in all of our concepts we've tried to reduce our menus by a meaningful amount, and it's nearly impossible. And it takes a black swan event to do it. And we got one. And so now the complexity is reduced in our kitchens, food waste is lower, our cooks do fewer things better. Everything about it is better, right? So that's -- and that's a permanent change in our business. The second is growth in off-premise. I mean you touched on it a lot. But I'll tell you, I think what happened is we just got trial. We got millions and millions of people trying us because they were trying everything. And a lot of people don't want to cook. And if you don't want to cook and you don't want to feed your kids fast food, like we are a really good option, because as John said, it's real food, right? It's convenient, it's not expensive. And of those millions of trials, some -- a lot of it stuck, right? And it's also kind of sticky. You download the app, you populate the app, your credit card's in it. You can hit reorder, like it just becomes easy. So we saw off-premise peak at over 50% of pre-COVID sales. It's settled down to now just under 30%, but it's held for a year at that level as dine-in sales have come all the way back. So that's it. And then the last thing that really happened because of COVID is the competitive landscape became more attractive. So -- and especially in our category. So 10% to 12% of all restaurants closed, but they were basically all sit-down restaurants, and they were basically all independents and small chains. And I feel really bad because I love independent restaurants, I go to them all the time. But for our business, it's a tailwind and it's got legs to it, like it's going to help us for years. So you add all that up and Applebee's became a step function better business because of COVID. And let me just put some numbers to it. 2019 was a very good year for us. We did something like $72 million in EBITDA for Apple American Group. We did $115 million in 2021, 60% increase over our pre-COVID year. It's the best performer of our 6 brands, last year and right now. And I can't talk about like nonpublic information. But suffice it to say, it's kicking a** right now, I mean, really doing well. Okay. So that's my perspective. I am totally bullish on Applebee's. And years ago, people were talking about the death of casual dining. There will always be a large market for sitdown dining with liquor. It's an experience. And now there'll always be a market for good off-premise real food. The combination makes us just a very powerful place to be going [ forward ]. Thank you.

I love that. You made some folks in the back room a little nervous when you started quoting numbers. But then when you said we're kicking a** that suffices. Hey, I'm going to close this. And I'm going to close it with 1 statement. We are better positioned than we've ever been. And I've got to thank our team and the support from Dine and in particular, our franchise partners. And I was trying to figure out the right way to send you to a break, and I thought let's play you the best of the best. And when we communicate with our guests and we create content, we try to do -- we try to accomplish 2 things very simply: make them hungry and make them smile. And hopefully this 2-minute reel will do that for you. It's 11:05. We'll come back at 11:20, Susan, I believe? If you want to know what eatin' good in the neighborhood is all about, you'll see it here. Let's roll it. Thank you. [Presentation]

Thank you. We're going to take a quick 15-minute break. It's a hard start at 11:20 Eastern time. Thank you. [Break]

So thanks. Welcome back, everybody, for Part 2. Jay is up next for IHOP, another industry veteran with deep experience. He's actually our only executive who's worked for both Applebee's and IHOP during his 14-year career with Dine. So he has great perspective for us at the enterprise level. He joined us after a long career at Friday's. Jay is a board member of the International Franchise Association, and fun fact, this is true, Jay is a nationally ranked horse racing handicapper. He can do regressions in his head. Jay, welcome.

A little like handicapping stocks, right? You may want to talk afterwards. So I hope you all enjoyed your IHOP breakfast this morning. That menu back there, it actually included some of the best-selling items, obviously pancakes, omelets, burritos. But it also had back there, if you noticed, it was the very first plant-based sammie, only available at Flip by IHOP here in New York, was back there as well. So I hope you had a chance to try that. When guests consider a brand to engage, dine or interact with, there needs to be a purpose behind that brand. At IHOP, we believe a brand is a promise, and a great brand is a promise that's well-kept. And our promise at IHOP is when you dine with us, you experience this sense of comfort, togetherness and belonging, or as we like to say, IHOP holds the recipe for joy. What does that mean exactly? Well, we have a great heritage that allows our brand to really transcend time. We're an integral piece of the communities that we serve in and we provide a great experience with great food at a great value that brings joy to our guests' lives, whether our guests dine with us or take their food To-Go and enjoy with family and friends. Ultimately, our brand is a destination for joy. In 1958, the International House of Pancakes was founded in Southern California by 2 entrepreneurs. The simple mission was for providing a delicious and joyful start to their guest's day with food that fueled their body but satisfied their cravings. Nearly 65 years later, IHOP is truly a brand that brings joy to a multitude of guests from every background and walk of life. Obviously, kids love IHOP, their families love IHOP. Their grandparents love IHOP, college students love IHOP too. And that love for this great brand transcends generations where these guests come back with their families or their friends to share the same experiences that they remember so fondly through the years. Starting with that very first location, that single restaurant in Toluca Lake, California in 1958. IHOP now is a 100% franchise brand with more than 1,650 restaurants in the U.S. and over 1,750 globally. Despite having one of the highest number of units in the family dining space, we still have a large opportunity to see this brand grow throughout the U.S. even more and worldwide. IHOP is also #1 in our segment when it comes to brand awareness and affinity. And in 2021, we held the top position for share of voice in our category. IHOP has a long history of growing the business. Our comp sales prior to COVID-19 had great momentum that was building. In 2018-2019, the brand achieved 8 consecutive quarters of positive comp sales. In 2020, when the pandemic hit, our sales fell to only about $14,000 per restaurant per week, as the family dining and breakfast concepts were hit particularly hard during the pandemic. By the end of 2021, we've been able to come back to at or near those 2019 levels. And our development story has been consistently strong for years as well. And with a focused strategy, we've been able to redirect those numbers to pre-pandemic levels by focusing on 3 key areas of the business, which includes our comp sales growth, obviously, and what we're doing to protect and grow our current restaurants through marketing, menu, the guest experience and technology. A strong focus on development and leveraging new channels for growth. The other key piece is ensuring we're always doing this in close collaboration with the heart of the business, and that's those franchisees. Now let me tell you a bit about our franchisees. They're really what makes our brand so special. Those folks that choose to invest in IHOP, their entrepreneurial spirit and their passion for the communities they serve. They're a core component to why IHOP is where we're at today and the reason we continue to serve smiles daily in our restaurants. Our business is 100% franchise with nearly 270 franchisees across the U.S. And unlike many brands, we have a very diverse range of franchisees, really large and very small. About 75% of our franchisees have fewer than 5 restaurants. But we also have very large franchisees that own 50 or more restaurants across our system, which provides stability with these larger organizations. We also have a very diverse set of franchisees with more than 60% of them representing different ethnicities and cultures. We pride ourselves on being a brand that's relatable. A brand that not only bears a national logo, but it's also a small business that is a core part of each community that it serves in. IHOP is not just a big brand, a big corporation behind it. It's run by local entrepreneurs who are passionate about their businesses and the communities that they serve in. IHOP is ultimately a place where the owner often knows the regulars' names when they step foot in the door. I want to share this video with you about 1 of our franchisees, [ Adena Bau ]. She came to the United States in 1991 as a refugee from a war-torn country, with the hopes of a better life. Let's take a look. [Presentation]

I think [ Adena ] shows kind of the spirit of our smaller franchisees, they still want to grow. She started with 1, she's up to 4 now. So we've got a system with great stories like that. There's a lot of very similar stories. Our franchisee of the year last year in 2021, [ Bernardo De Jesus ], came from the Dominican Republic, he started his career with IHOP as a dishwasher, and now he owns 2 restaurants of his own. We have 1 franchise group that started with 1 restaurant and is now our second largest franchisee with over 100. These franchisees are what makes us who we are. They're different, they're better and they're special. They have great passion for this brand and the folks in the restaurants that bring joy to each of their guests every day. Look, our strategy is focused. As we expand on how we're going to grow this business through comp sales, development and new channels, I want to break it down a little bit more for you. First, we look to grow through comp sales. This really comes down to the work we're doing inside the restaurants, communicating our brand positioning, that menu optimization and customization since -- sustaining and growing our off-premise businesses, growing our non-breakfast business and really creating that one-to-one relationship with our guests. First, I'll start with the brand positioning. We recently selected a new agency of record to harness how our Recipe for Joy comes to life in everything we do and the messaging we share across channels. As we look at the way we approach our marketing, everything is done through an omni-channel lens. The easiest way -- you probably heard that term, the easiest way to think about what's omni-channel is think about how you interact with your personal phone every day. How many apps do you use, spending time on Instagram or buying things on Amazon or ordering from Uber Eats, watching TV shows, Sunday Night Football, you get the picture. omni-channel allows us to reach many different guest segments with different messages in those spaces, not just broad national TV. Our media strategy is all about meeting our guests where they are, more specifically where their eyeballs are and on what channels that influence them. Not just when they dine with us, but when they're making decisions immediately about dining. Our positioning will be pulled through all of these messages, whether it's on TikTok, Hulu, YouTube or still we'll do broadcast television as well. We'll segment the message to the type of customer we're reaching on the channels we're leveraging to reach them. And with that, I think we can all use a pancake. [Presentation]

So the second piece and probably maybe the most important piece of our strategy is really optimizing and modernizing the menu. Food is at the center of everything we do. As we look at our menu, we want guests to think about it as a destination for everyday dining rather than just a place for special occasions. In the next 12 months, we're going to roll out healthier or lifestyle options that include things like protein pancakes, fresh berries. And we'll start testing new protein options like plant-based breakfast sandwiches like you had this morning. We'll also infuse new and unexpected ways to enjoy classic IHOP favorites like a new twist on French Toast and pancakes. We know that customization is highly desirable at IHOP. It's my choice, my way for our guests. More than 80% of our orders are customized by our guests of what's listed in the menu. We know our customers love to mix and match items. A pancake with bacon and eggs is pretty common, but a burger with hash browns or even a burrito with a side of mozzarella sticks. With these insights in mind, our teams are working on menu strategies that allow for even more customization and options for our guests 24 hours a day. We're also looking at the ways guests dine with us today. Obviously, COVID changed a lot about the way guests use us. Off-premise is something we've continued to focus on and grow. We now look at off-premise, that business and menu a bit differently than we used to in the past. Today, our to-go business is over double 2019 levels, and it's held there now for 15 months. We've been able to hold on to it by marketing a bit differently and introducing new menu items that are a little more portable and easier to enjoy on the go. For example, during the pandemic, we introduced new burritos and bowls and handcrafted melts. Those 2 menu items collectively make up about 5% of our sales mix currently, and they've helped drive additional everyday occasion guests into our restaurants. Our PM business is the next component for our comp sales growth. We know we need to expand beyond breakfast and focus on providing guests with all-day options at a great value. Of course, everyone knows us for our delicious pancakes. We all enjoyed them this morning. But we're focused on being more than just a breakfast destination. Our PM focus really kicked into high gear with IHOb and the launch of steak burgers in 2018. And since has expanded with Buttermilk Crispy Chicken, Burritos & Bowls and most recently, those handheld -- those handcrafted melts I talked about. They cater to all dayparts. At IHOP, we provide a great experience with great food at a great value that brings joy to our guests. Value; about half of our guests make under $50,000 a year household income, which is why value is a key component to round out what the menu offerings are. In late 2020, we launched IHOPPY Hour, our brand's first-ever PM value platform, designed to drive incremental traffic and sales at hours when we're really just not that busy. That menu includes full entrees with sides and snacks starting at just $6 from 3:00 p.m to 9:00 p.m. While this platform continues to evolve, we're pleased to share that it currently drives about 8 to 10 percentage points of incremental traffic during that time and for a full week system impact of plus 1% in comp sales. We'll continue to offer everyday value platforms and pricing to ensure that we can reach those particular guests for more occasions. The last piece to wrap up our comp sales growth is that need to create that one-to-one relationship with our guests. So early April, we're launching the brand's first-ever loyalty program. It just got announced broadly today. You may have seen it already; the International Bank of Pancakes. Come on, come on. come on It's kind of fun, right? So we know loyalty programs. They're what customers expect right now. They want to be rewarded for their loyalty and the money they spend with the brands that they love. And as you look across industries, whether it's airlines, hotels or even quick service restaurants, these brands are leveraging loyalty programs and incentives to grow share of wallet from people. The International Bank of Pancakes is a true earn-and-burn program designed to enhance our direct relationship with our guests and ultimately drive additional visits to IHOP. It allows our guests to collect what we're calling PanCoins. You get it. For example, 3 PanCoins will get you a free short stack at IHOP because a PanCoin is a pancake. Understand? I thought you would. PanCoins can be redeemed for several items on our menu. We'll even have a Stack Market where you can trade PanCoins for things like movie tickets, IHOP Swag and more. This program is a one-of-a-kind and first in our category that will allow us to deepen our relationship with our guests and build brand loyalty. As we turn to growth outside of our 4 walls, we're doubling down on development. The past 2 years, we were one of the only brands able to keep opening new restaurants. In fact, we opened 37 of them last year, just in the U.S. We even opened 2 of our new concept Flip'd by IHOP in Lawrence, Kansas and New York City. Our approach is bullish. Our goal is to more than double our historical unit rate of 40 to 50 openings per year. This will take our domestic unit count from 1,657 restaurants today to over 2,100 by the end of '26. To do this, we have 4 different vehicles for developers to invest in IHOP, which include our traditional IHOP restaurants. That's our legacy method of development. We've opened over 400 restaurants in the last 10 years using this method and are proud of the work we've done together with our franchisees to achieve that. The second is our nontraditional development, which is the segment of our business that's been gaining traction in recent years. The nontraditional audience is captive. And the primary method of development is really in heavily concentrated places like travel centers, malls, airports, entertainment venues or casinos. The third vehicle is our new small prototype, which is another great example of IHOP responding to the current marketplace. It's become apparent that the need for a 4,000-plus square foot IHOP is no longer the mandate in every single market. So especially with the expansion of off-premise dining, there's some benefits to this. And the biggest benefit is a small prototype has lower rents on average and in addition, at the lower cost to build it for developers. The fourth and final method of development is our new Flip'd by IHOP brand. We opened 2 in 2021 and are looking to open more this year. Our plan is to test this brand in urban, suburban and nontraditional markets to see where it resonates the best. Flip'd by IHOP is really our fast casual version of IHOP if you think of it like that. It's got a faster, more on-the-go menu. We know our guests crave that iconic food that they love from IHOP, but a traditional IHOP is sometimes not the service style a guest wants or needs for a particular occasion. With guest needs evolving, this is the perfect time to test and launch this new concept. Right now, we're really focused on 2 key areas, where the brand is going to perform best and specifically, what about it performs best so we can test and learn. As we start to open more locations, we'll continue to determine and grow what that development approach will be with this new brand. I do think it's important to note that all 4 of these methods of development are all available to doing conversion opportunities where we take on a closed down restaurant of some other concept and turn it into an IHOP. We're very good at this. We've got about 600 of them in our system right now. And these conversion opportunities are clearly increasing post-pandemic. We're seeing this in real-time. It's about 50% of our incremental openings that the franchisees are bringing to us for sites are indeed conversions. The economics are typically very attractive in a way to hedge against some of the current inflated construction costs on new buildings. Now as we shift to new channels of growth for us, we've learned guests are leveraging restaurants differently, obviously. We see a huge, huge opportunity for IHOP with virtual brands, considering our footprint and our kitchen capacity. A large percent of our business is done at our peak AM hours for breakfast, especially on the weekends. You combine that with the fact that we have about 1,000 of our 1,650 restaurants across the country have 2 full kitchens to handle that weekend crush, but they sit absolutely dark most of the week. You see the opportunity our brand has to execute virtual to-go businesses. We have tremendous capacity to generate more business out of these kitchens, especially at PM and overnight hours when we're slower. We [ moved with ] several potential providers and landed on one that fits our business vision and goals. So I'm pleased to share that we recently entered the testing phase with the Nextbite. Nextbite owns various delivery-only brands which send orders to our kitchens to fulfill. Their business model is pretty simple. Our staff makes the orders and the delivery service drivers pick them up for the customers. The current test includes 2 concepts. The first is a quesadilla concept, Super Mega Dilla we differ on this. And the second is a grilled cheese concept, Thrilled Cheese. We chose those items because they fit what we do best, cooking on flat top grills. We're really griddle masters in our restaurants. We make our signature pancakes, our omelets, our burgers, almost everything we make, we do on those griddles. So quesadillas and grilled cheese sandwiches were the perfect fit operationally from that perspective to adapt in our restaurants for lunch, dinner and late night business. We're currently in the beta phase of the testing, and we have 48 restaurants that have both of these brands in their restaurants right now available in Lexington, Dallas, Phoenix, D.C., Columbus, Las Vegas and Providence. Next month, we'll expand our test to 31 more restaurants in Dallas and D.C. And to date, we're seeing about 1,000 to 2,000 in incremental sales per week at these locations. I might also add one thing is that those particular locations have not even touched that extra kitchen that can be turned on to do these brands. This is through the first kitchen only right now. We've also received great franchisee feedback with many of them requested, how can I get in, how going to be part of the test or they're in it and they say, "How can I expand this to more restaurants quicker? Let me have it." We're excited about this new relationship with Nextbite, big opportunity. The future is bright for IHOP. We're a destination for joy. We have a solid strategy to set our business up for success in 2022 and well beyond. We're investing in key growth categories, including new technology platforms, our new loyalty program, new point-of-sale and kitchen display, new development vehicles to build restaurants and new channels like virtual brands. We're doing all this with the goal to drive additional sales and traffic to our restaurants so franchisees can make more money and continue to invest in building more restaurants with us. So I'd like to leave you with a short from Karl Jaeger. He's from our largest franchise group, Argonne Capital, have over 250 restaurants. And like [ Adena ], he's passionate, driven and a key reason this brand is so special. Let's take a look. [Presentation]

So I just want to say thank you. We're looking forward to a fantastic 2022 and beyond for this great IHOP brand. But mark your calendars, new campaign, new creative and the launch of International Bank of Pancakes in April, mark it down. Thank you. [Presentation]

Thank you, Jay. We're super excited about what's going on in IHOP and in particular, the International Bank of Pancakes. Some of you may know, I came to dine after almost 20 years at Starwood. I -- Starwood hotels. I ran the SPG loyalty program for a couple of years in the mid-2000s. And loyalty matters, loyalty makes the difference. This currency, I think, is terrific. The exchange rate makes sense for our customer. And I think it's going to do a lot to move share and grow share of wallet. So we're excited for that. We're on to International. Tony joined us in early 2020 just in time to manage the impact of COVID overseas, which was even more impactful and lasted even longer in terms of affecting the business than here in the U.S. And he's now just getting to talk about growth and strategy after 2 years of playing defense. He came to us from Church's Chicken, where he led international development and from a long career at Burger King, where he spent 17 years in development and legal roles. And I'm told that Tony was so beloved Burger King that the company still uses his photo in their recruiting and he left years ago. So Tony, welcome.

Thank you, John. I was -- thankfully you didn't put a photo up there. I was much younger back then. Good morning, everyone. It's still morning, isn't it? I think so. I'm happy here today to talk to you a little bit about the International business. The key to international growth and creating value for our shareholders is to work closely with our franchisees to unlock the potential of our core markets. Our plan leverages our presence and our potential for sustainable, long-term growth and shareholder return. It builds on our strengths because we've learned to stay agile and adapt. We've learned from the past, and we understand we need to do things differently, and that's the cornerstone of how we're growing internationally. As John mentioned earlier, what we're seeing take place in The Ukraine is, well, it's heartbreaking, and we're all watching it very closely. And just as a reminder, we don't have any restaurants or any team members or franchisees in The Ukraine or Russia at this time, and we don't have any development plans for any of these markets as well. And just our hearts go out to all of those who have been affected. As of the end of last year, we had 201 IHOP and Applebee's restaurants and 21 ghost kitchen locations in 20 different countries and U.S. territories. These restaurants and our network of franchisees, they're supported by a diverse and highly talented team located in the U.S. and many of our international markets, including Canada, Mexico and The Middle East. And as you can see, ours is a prioritized portfolio of geographies that are reflected in 4 core markets. These core markets represent 85% of our total restaurant count and 90% of our total system sales. First, Mexico. Mexico represents 43% of our units and 37% of total sales. Next, we have Canada, representing 20% of international restaurant count and 19% of system sales. Our third core market is The Middle East, with 15% of the international unit count and 19% of sales. And then lastly, we have Puerto Rico in the Caribbean, which represents 7% of the restaurant count, but 15% of our overall system sales. Now IHOP and Applebee's are either the #1 or #2 American family dining or casual dining brand into each of these 4 countries. We have successfully offered local consumers a taste of Americana, which, by the way, they crave, while adapting our menus to meet their taste preferences, so they ultimately become loyal customers. And while this may seem like a decent accomplishment, it's not. It doesn't even scratch the surface of what's possible. We know these core markets are underpenetrated and that we need to expand access to both brands with new restaurants. We firmly believe there's plenty of juice left in these markets, and we plan on leveraging our base to build the international business going forward. Using the same growth framework you've seen today, the International division is to grow revenue at a compounded annual growth rate of about 25%. Our strategy is primarily focused on expanding our footprint using traditional and nontraditional facilities while driving comp sales via investments and innovation. We aim to drive additional revenue without adding much incremental G&A because our infrastructure is already in place. So from a marginal perspective, international growth remains a very attractive option. There are 4 key critical elements that will enable us to achieve our growth objective. First, we're taking a new approach to traditional brick-and-mortar restaurant development; second, we're embracing ghost kitchens; and the final 2 enablers, well, they involve strategic investments on our part. As we've been saying, 2022 is an investment year, and internationally, we're allocating our resources to deepening relationships with franchisees and consumers to deliver a differentiated experience, one that is second to none. We're also making targeted investments to ensure that we are relentlessly committed and focused on innovation across multiple consumer touch points. We're confident these investments will pay off in 2023 and beyond. And let me share with you more on how each of these 4 elements contribute to our growth plan. We've been thinking about traditional development differently, right? We're now focused and strategic. But we always -- we haven't always been that way in the past, right, making sure that we're not being opportunistic and flag-planting. We're being intentional and disciplined, right? So we don't add any new markets until we stand up and grow to scale healthy brands in our existing markets. We conducted a headroom analysis on the potential of our core markets. What we learned is that we could achieve our growth objectives by expanding with existing and new franchisees in our current core markets. Accordingly, we plan to add between 50 to 60 new restaurants and 40 to 50 ghost kitchens per year over the next 5 years by focusing on our core markets of Mexico, Canada, The Middle East and The Caribbean. There's no need to add new geographies where, quite honestly, the response to our brands is unknown. The markets we're in today, they have significant upside. We just need to make sure we realize their full potential before expanding to new geographies. Now we haven't just been creating the strategy over the last year or so. We've actually delivered some wins. I'm happy to share that we have great new franchisees that have joined Dine Brands. We entered into new groundbreaker agreements consistent with our strategy for new restaurants in the UAE, Egypt, Canada and the English-speaking Caribbean. These new agreements represent 32 new restaurant commitments for future growth over the next few years, and there's more on the way. Now traditional restaurants, there'll always be our heart line, but we want to complement our brick-and-mortar development by leaning heavy in the ghost kitchens. Ghost kitchens internationally are well-established. They offer a low-cost, low-risk vehicle to make our brands available to consumers and markets and trade areas where we currently do not have an international presence. Ghost Kitchens allow IHOP and Applebee's to support high-delivery trade areas as well as untapped markets where the economics may not support a traditional restaurant. We anticipate adding, again, on average, 50 new ghost kitchen restaurants over the next 5 years, generating significant incremental sales and profits for the international business. And we're taking an entrepreneurial approach by expanding in core and noncore markets. Adding ghost kitchens to new geographies, it allows us to assess brand performance with minimal risk and cost while seeding potential new brick-and-mortar markets in the future. One of the distinct advantages Dine Brands offers investors is the existence of 2 brands whose relative strengths, well, they complement each other nicely in terms of dayparts. So from the outset, our vision was to create a ghost kitchen space that could support both brands. We designed a ghost kitchen facility that is around 130 square feet so that both IHOP and Applebee's can operate out of the same space with team members who've been cross trained to deliver our exceptional products. We believe Dine Brands is uniquely positioned among all of our competitors to offer this dual brand model, making us an attractive option to ghost kitchen operators globally. And as with our conventional restaurants, we see significant momentum and early wins with our ghost kitchen business. We established relationships with 3 leading international kitchen operators, ghost kitchen brands in Canada; Kitopi in the Middle East and foodpanda in Southeast Asia. We opened 20 ghost kitchens across 6 different markets in 2021, and we plan on more than doubling that number this year with many new partnerships, markets and units to come. Ghost kitchens represent an exciting new frontier and a much-needed change to our overall conventional approach to growth. And while these are our development goals, we also have sales goals, and we plan on having a very strong 2022. And then we plan on growing on average about 2% comp sales every year on average over the next 5 years. We'll do this by allocating additional marketing dollars. We'll also focus on deepening relationships and the commitment to innovation. Now let me dig into each of these areas. First, deepening our relationships. We're making critical investments to obtain consumer and market insights in Mexico and the Middle East to better understand our strengths and opportunities relative to our opponents, to our competitors. We're adding resources to collect data and build our own insights to drive brand relevancy. And when we enter new trade areas, we've set aside funds to co-invest with franchisees so we double down on local marketing efforts to increase brand awareness and drive trial. And by the way, just as we need to serve our guests, we also need to serve our franchisees if we're going to drive scale. We know to be successful in a market that's not up to scale, you need franchisees with common goals and a shared focus on how we can grow together. And to do this, we'll emphasize more frequent interaction and increase our levels of support to better understand their challenges and their future plans. This will allow us to strategize how we can work together to expand our footprint. Finally, we're making smart investments that enhance the guest experience through a blend of established and new innovative solutions, so guests can enjoy our brands on an international scale. Our investments in innovation are focused on the following 3 areas: First, technology. There's a need for a modernized point-of-sale platform to support future growth. So we'll be rolling out a new POS system later this year. We'll also launch a new website and app for guest ordering. These investments will allow us to consolidate technologies and enhance our CRM capabilities, while giving us better insights into restaurant-level profitability, cost savings and traffic drivers. Second, culinary. We are innovating our menu and expanding our culinary teams to create new offerings that better meet the expectations of our international guests. And third, new restaurant prototypes. We're testing a new dual brand restaurant in late 2022 to assess the viability of operating both brands under one roof, utilizing the same kitchen infrastructure and resources while preserving brand identity. We're constantly learning, innovating and adapting with technology, culinary and restaurant design to better engage with our guests and provide them with the experiences they expect when they visit us. Now our new international playbook is discipline, and it leverages great insights on how we grow in each of our core international markets. We're committed to making targeted investments to ignite and support our growth and produce significant returns for Dine Brands and our franchisees. We see an opportunity to grow especially in our core markets. Those markets have driven strong performance in the past, and we know there's plenty of opportunities to expand our existing footprint. We have a clear plan for growth and one that is grounded in reality and already producing results. And that's why we believe we will seize the incredible opportunities in front of us. Thank you.

Thank you, Tony. So as you can see, we're leaning into international in a big way. Tony has really made his mark in the last 2 years, not only in managing with our franchisees who were struggling during the past 2 years, but really helping to craft a strategy focused around these 4 key markets and leveraging ghost kitchens to drive our growth, and we're planning for much more growth internationally than we have in the past. So it's time for Vance to help put a bow around all of this and title the financials together. Vance joined us after spending the last 20 years in both investment banking and also building high-growth consumer and health care companies. He's a high-impact CFO. That's why we asked to join us because he got a track record of driving both innovation, but also focusing on execution and delivery. And that's exactly the profile we need as we pivot from the defense of the last 2 years to innovation and accelerating our growth. So Vance, bring us home.

Thank you, John. I feel like you've seen my section already. So I don't know if I have to deliver this. But good afternoon, everyone, and we're very excited about our business prospects, and we have a unique opportunity to accelerate the growth at Dine going forward. Now it's my intent to share with you today how our plans and investments in 2022 will translate into financial objectives and value for our shareholders. So today, I have 4 key topic areas that we'll cover. First, I will share with you our investment highlights and our commitment to create shareholder value. Second, I'll review our historical business and financial performance and to help you understand the benefits of our highly franchised business model and how we have recovered from the pandemic. Third, I'll provide details on our longer-term financial projections and as a result of the investments that we're making in 2022 and the capital allocation strategy. And finally, I'll tie our growth plan together with what's in it for the investors which is a compelling total shareholder return. We have a scalable platform with 2 iconic brands that are very well-positioned to take advantage of the restaurant renaissance that John has been talking about. The pandemic has impacted the competitive landscape removing approximately 10% of the casual dining restaurants, which presents an opportunity for us to gain share. The pandemic has also accelerated a need for technology and those with scale and capital like Dine are best positioned to win. We have very specific plans in place to grow our revenue, our EBITDA and our EPS through the key strategic investments that we're making today. Additionally, compared to our casual dining peers, we're more highly levered -- I mean, franchised at 98%, which means we generate higher EBITDA margin, and we have higher cash flow conversion than the rest of them. Now this model allows us to return a significant amount of capital back to our shareholders and then very strong total shareholder return in the next 5 years as a result of the plans that we laid out for you today. The key to creating incremental value for our stakeholders, including our shareholders, is to generate consistent long-term organic growth. So we accomplish that by investing prudently in high-return projects and initiatives. In our case, we're currently focused on technology, on franchisee support, on development and new revenue channels. Now because we have a very high operating leverage, we can fund these investments with our self-generated cash flow. So however, a key reminder is that we're also committed to returning capital to shareholders. Now we've had a strong recovery from the pandemic. The total consolidated revenues have grown at a CAGR of 5% since 2017. And we have recovered close to 100% of pre-pandemic levels by the end of 2021. Despite the restaurant closures during COVID and the Applebee's store optimization program that John C. had talked about earlier, our adjusted EBITDA has also recovered approximately 92% of 2019 level and growing at a CAGR of 3% since 2017. Because of our asset-light model and our low CapEx requirements, we continue to have very high-quality adjusted EBITDA. So as an example, our 2021 CapEx is only 7% of our adjusted EBITDA, in line with our 2019 level. And roughly half of that $16.8 million in CapEx in 2021 was related to investments in strategic IT initiatives. So adjusted free cash flow has grown at a 32% CAGR to approximately $191 million in 2021. This is well above the 2019 levels, now partially due to the repayment of the franchisee assistance program during the pandemic, which had a $30 million benefit on cash flow for the year. So as I mentioned earlier, one of the key benefits of our asset-light model is our high operating leverage. We generate higher adjusted EBITDA margins versus the rest of our CDR peers. So another benefit of the model is that we have less exposure to commodity and labor cost fluctuations versus brands that own and operate their own stores -- their own restaurants. So that insulation has allowed us to take a longer-term view in how we build our brands and invest in the infrastructure on behalf of our franchisees to better serve our guests. As you can see with the chart on the left, consensus estimate for 2022 adjusted EBITDA margin show Dine in line with other highly franchised comp sets at 14% above the fast casual group and approximately 15% above the CDR peers, which are primarily company-operated and asset-heavy. Additionally, our free cash flow conversion is significantly higher than company-operated peers and more in line with our casual -- with our highly franchised peers. So now moving forward, here's a recap of our 2022 financial guidance, which we issued last week in conjunction with our Q4 earnings release. As a reminder, 2022 is an investment year for us. Our guidance reflects the upfront costs associated with the incremental investments in G&A and CapEx to unlock and support the sustainable growth for the next 5 years. Dine has a strong track record of diligently managing our G&A. Even with the planned increase in G&A in 2022, our cash G&A would only increase by approximately 2% CAGR since 2017. So why are we investing in G&A? It's to build the people capacity that we need to execute the growth plans that we have laid out for you today. As you can see on the G&A bridge, from 2021 to 2022, the higher performance compensation from last year will be offset by the critical positions and spend that we cut during COVID so which will bring us back to par, right? And beyond that, we're increasing G&A in the areas of technology initiatives in franchisee support and unit development. So the largest component of our G&A investments is in technology, okay, which is primarily tied to new hires in IT to implement and support our CapEx projects. There is a small portion of our technology spend that's nonrecurring once projects are completed. Regarding franchisee support, this relates to operations head count to support unit development growth as well as adding talent to our business analytics, consumer insights and marketing teams. We expect these growth investments to deliver growth in revenue, in EBITDA and EPS over the next 5 years, which I'll go through in a few slides. So in conjunction with planned increase in G&A, we also have CapEx investment projects in 2022. Historically, our CapEx requirements have been lower than our peers, both in terms of CapEx as a percent of revenue and also as a percent of EBITDA. Frankly, they have been a bit too low. By allocating a modest portion of our cash flow to high-return projects in 2022, we can accelerate the growth potential for our brands. Now CapEx projects are mostly related to the design and the implementation of various technology initiatives that we have planned for the year. We broke out the 2022 CapEx plan by 3 buckets. The first bucket is projects that can help us drive growth. The second bucket is projects that can help us support the growth once we achieve it. The third bucket is projects that are maintenance-related. A little more than half of our 2022 CapEx spend is going to be in the first bucket. It includes a lot of the initiatives that Justin mentioned in his video earlier today. These investments will allow us to have more targeted campaigns, marketing campaigns and loyalty programs for customer acquisition and guest retention. They will improve our guest experience, including ordering pickups, dining, paying and increase the lifetime value of each one of our guests. The second bucket is for projects that we need to support the growth, right? So they help with compliance, reporting, analytics, training, enterprise planning, just to make sure we have the foundation in place to support our brands and our franchisees as we grow. Growth costs money, right? The people we're hiring and the projects that we're implementing will set the stage for accelerated growth, realizing attractive return over time. We're going to monitor the progress of our growth initiatives very closely. We'll make appropriate adjustments to dial back the infrastructure costs as necessary. Now these are relatively low-risk investments that will help with growth, protect our downside and make a stronger platform in the long run. So for those of you that are new to Dine, I want to highlight our diversified revenue streams and the general trajectory of these revenue streams over the longer term. The core of the business is our franchise revenue, which consists of royalties, franchise fees and advertising. So that represents approximately 70% of our total revenues. For us, advertising is a pass-through cost for us. But the sizable advertising dollars that we have available to spend for our brands speak to one of the scale advantages that we have over some of our smaller peers. For Applebee's, we currently generate revenues from -- also from 69 company-owned restaurants, we acquired these restaurants from a distressed franchisee back in December of 2018. At the time, these restaurants were some of our lowest performing restaurants, and now they're currently the third-ranked portfolio in our system. So while our strategy is to remain asset-light, we feel like this is a testament to the strength of our team and our operational capabilities. IHOP has 3 unique revenue streams that I want to point out, which are dry mix, rental and financing income. Now we earn a spread on our proprietary pancake mix, the leases that we sublet to our franchisees and equipment that we have financed on behalf of our franchisees. Specifically, the rental and financing income are tied to our legacy IHOP business model. The rental and financing income are leases that will wind down over time, which is why the long-term trajectory of these revenue streams will decline. But as you have heard from the team today, we're optimistic on the growth of the brands and have plans to grow our royalty streams at a faster pace and generate margin expansion over time. So here is the money slide. This is our 5-year projected revenue goal. This is without advertising revenue, which is a flow-through line for us. But you have heard from the brand presidents today on their plans to hit this target. The model drivers for the revenue growth are the following 3 things. First, comps. Assuming no further disruption from the pandemic, we're aiming for both brands to generate comps of approximately 2% a year as a run rate in a normal inflationary environment. Second is development. Over 1,000 net new restaurants globally, including ghost kitchens, to be built over the next 5 years. Approximately 70% will be traditional restaurants in various formats and 30% will be ghost kitchens. Third is new revenue channels, such as virtual brands to add approximately another 1% of revenue growth. So there's upside to our plan as we build incremental virtual brands to further leverage our global footprint and restaurant capacity for different dayparts. Combined, we're targeting 4% to 5% CAGR in revenue growth over the next 5 years to $750 million by 2026 without advertising revenue. So now here's a summary of the rest of our financial goals over the next 5 years. We just discussed the revenue drivers on the prior slide. But including advertising, we have a goal of achieving $1.1 billion by 2026. We expect approximately 60% to 65% of the incremental revenue to flow through to our segment profit on average. So this will drive EBITDA from $253 million in 2021 to $350 million plus in 5 years, with margins expanding from 40% -- 41% to approximately 47%. Because of our strong cash flow conversion, we anticipate our free cash flow to hit over $225 million by 2026. As for EPS, our goal is to achieve a high teens growth rate from $6.54 a share to over $14.50 a share through a combination of profit growth and share buybacks over time. So what happens to our G&A post 2022? As we talked about before, 2022 is the foundational year that will set us up for longer-term growth without another step function increase thereafter. As we discussed, we have a very high operating leverage model that generates a lot of cash. All the investments that we've talked about today are being funded by our cash flow. But we also know that capital return has been and will always be a key part of our capital allocation strategy. So the priorities for us are: one, investments in the business and technology and other growth initiatives; two is debt management, making sure that we -- and also making sure that we maintain financial flexibility to address any remaining uncertainty from the pandemic, from the war, from inflation, from labor and supply chain issues, all these things going on in the world right now; third is returning capital to shareholders; last is we'll continue to explore opportunities to leverage Dine's scale, our national franchisee footprint and our shared services platform to generate revenue and cost synergies through corporate development initiatives and acquisitions. We have been and will always continue to be very disciplined with this approach. So let's start with investing in the company. As I had mentioned, 2022 is projected to be higher-than-historical levels in CapEx because of the key investments for growth. But after 2022, we do expect CapEx to moderate to a more normalized level to approximately $20 million a year given our asset-light business model. A core part of our capital plan is to maintain a strong balance sheet. So cash gets factored into our net leverage calculation, as you know. And we're currently at 3.86x, the lowest level since the fourth quarter of 2015. And while we feel comfortable operating at higher leverage levels if needed, we're currently where we should be in terms of net leverage given the current environment. As shown on this slide, we're currently more levered than our CDR peers because of our asset-light model. But we're less levered than our highly franchised peers, even though we have a very similar business model. So going forward, our target net leverage is 4 to 4.5x and as we balance our cash between capital returns and net leverage levels. So in Q4 of 2021, we announced a reinstatement of our dividend at $0.40 a share. And we noted that was a starting point for us to grow from. Now in Q1 of 2022, we announced an increase -- a 15% increase of the quarterly dividend to $0.46 a share which is currently a 2.5% dividend yield. This is an attractive dividend yield relative to our peers, and we have plans to gradually further increase our dividends over time. We also recently announced a new $250 million share repurchase authorization. We do believe that we're undervalued, and we're trading at a significant discount to our peers. And we'll use the share repurchases as a key part of our overall strategy to increase shareholder value over time. As of Tuesday, we have repurchased 392,000 shares back at $69 a share for a total of $27 million since we reinstated the current repurchase program back in November of 2021. So the successful execution of our strategy will drive our projected annual shareholder return. When combined with adjusted EPS growth in the high teens, an attractive dividend yield, our current plan provides for a compelling total shareholder return. With that, I will turn the presentation back to John. Thank you.

[Audio Gap] Q&A. We're going to move to about 30 minutes of Q&A, and we're going to set up some chairs behind me and the team will join. And then while we're doing Q&A, we will also start to prepare a delicious Applebee's lunch for you that John will explain and invite you to enjoy that when we finish Q&A, and then we'll be here during that as well.

So we're going to -- I'm going to invite up the leadership team while we're setting up our chairs. [Operator Instructions] Okay. So why don't we have the team join us. All right. So the light is a little bit bright, so I can't totally see, yes. So Lauren, we're going over here.

Jeff Bernstein from Barclays. Two related questions related to franchising. The first one being in the U.S., clearly, a contrast -- well, first of all, contrast between your competitors who don't typically franchise in casual dining, but even within your systems, you have 30 franchisees on 1 system. You have 270 in the other. I'm just wondering how you think about that, whether 1 migrates towards the other, presumably there's benefits to one versus the other. So just wondering how you think about that. And my follow-up question is just on international and the franchise system. International hasn't really been much of a growth vehicle for you. But seemingly, it's a huge opportunity. I'm just wondering how you think about the franchise partnerships internationally, whether you're just talking about master franchisees or how you think about it country by country, because that would seem like that's the big growth opportunity

All right. Thanks, Jeff. I'll take it at a high level, and I will ask each of the business unit leaders to talk about the dynamic of their franchise group. Yes, 30 Applebee's franchisees has its benefits, which are -- you can get 30 franchisees in a room, and you can align on strategy, and you can have a debate like that. They also have deeper resources. They're consistently financially sound. And so one of the benefits that John enjoys is he can move the brand forward with 30 partners. There's no good or bad model there, right? The alternative model is Jay's model, right, where he's got 270 franchisees that range from some franchisees that look like large Applebee's owners and others that are like we heard in our video, someone who owns 4. We love that as well because the energy and commitment you get from somebody who owns 4 Applebee's, 4 IHOPs, it's their family business. That's an incredible motivating factor that keeps them very close to their businesses, right, in a way that sometimes a larger one can't be. In terms of do we think one model is better than the other? No. Do we think we want one to look like the other? No. They're uniquely Applebee's and they're uniquely IHOP, and we're proud of both. Would you like to add anything?

Jeff, it's a terrific question. I love the Applebee's business model. We operate in very different categories. So think about casual dining, it's 205,000 restaurants dominated by independent players. The top 20 brands account for about 10% of the units, probably 50% of the dollars. John is right. We -- that group, Greg, included 31 partners, we gather frequently. We talk all the time. Those are really highly strategic discussions around investments, return on investments. And in particular, when I think about the last 2 years, we're just really agile and nimble and we can move quickly, which is one of the benefits of that model. And I do believe scale -- in that instance, within their entities allows them to attract and retain talent and to share best practices and deploy those best practices pretty quickly. So I like the model. But keep in mind that we operate in a very different category than Jay.

It's interesting. That's like a high school debate team question, which is better, because I could argue either side. There's pros and cons of both styles. I love the mix of our franchisees. We do have those very large strategic franchisees, and they serve on all of our councils and committees and such. But we also have this entrepreneurial spirit of an individual franchisee that started as a dishwasher and there's something powerful about that in your culture about, hey, I can -- even if you work for 1 of the larger franchisees, they see all these other franchisees and understand that I could own a franchise one day. I could do this. There's an American Dream thing there that is powerful for the culture of the business and how they work. And that transitions over time, too, right? So you have some people that want to keep growing. Some people want to grow fast. It's no different than people managing a portfolio, right? What's your risk tolerance, how quick do you want to grow, et cetera. But there's a lot of growth opportunities, obviously, in the IHOP business. And I think that you can grow faster, sometimes when you have more people, right? You get 270 franchisees, if 75 opened 1 restaurant a year, I got 75 new restaurants, real quick, right? So there are pros and cons either way.

And when it comes to international. Yes, I'm new, Jeff, Tony is new, and it was an opportunity for us to take a fresh look at the opportunity. And when we looked at our relatively small footprint versus the opportunity, we think it's time to lean in, but do it in a focused way. And clearly, Tony, we're doing that -- you want to speak to the models we're looking at, masters and things like that?

Yes. I mean I think whether it's a single franchisee model or a master franchisee model, the important thing is to match the model to the market. right? And every market has a unique set of circumstances that would dictate one model over another. For example, I mentioned the new agreement that we have in the English-speaking Caribbean. That happens to be a master franchisee model. We'll build in certain safeguards that protect us to give us the control that we need in the particular market. But we're somewhat agnostic when we look into a new market, and we're going to let the circumstances and the conditions of that market dictate which model we use going in. With that said, our preference is to have more control rather than less control. So we'll be very judicious in using the master franchisee model.

Jeff, may I make 1 more point. I think this is important for both brands. Franchisees on the outside looking in want into these brands right now. And we're in a position where we can be very selective. We brought in Jim Long, Apple Mountain into Utah, I think it was 4 years ago, one of our newer franchisees. He was our #1 ranked franchisee in the system and loves the fact that he chose to invest in Applebee's 4 years ago. So there's a big demand right now for both Applebee's and IHOP in the market.

Jake Bartlett from Truist Securities. My question is on the long-term growth algorithm. I just want to make sure I understand the component. So 2% same-store sales, and I think 1% from virtual brands. But wouldn't -- that would be part of same-store sales just to kind of clarify. So we're really looking for 3%. And then I want to understand how the development, 30% coming from ghost kitchens. Are those going to be -- are those stores counted as units as we see them -- your unit count is one question. But how do we think about the volumes coming from a ghost kitchen versus a traditional store, just as we kind of build up that?

So I don't know if I'm on. So the ghost kitchens are not in our current count right now. So going forward, when we have more volume, we will disclose that separately. So they don't -- it will mess up our AUV and restaurant count, et cetera. In terms of economics, I think, Scott, let me know if I'm wrong, but the typical ghost kitchen restaurant volume is probably half to a little bit less than half of a traditional brick-and-mortar.

I think it varies. And so at Applebee's, we have 2 ghost kitchens open, both in Philly. We're opening our third in Miami with a $125,000 investment. It's not inconceivable that you could have $1 million revenue asset on $125,000 investment. But there's going to be a lot of variability depending upon location, concentration of demographic. We just don't have enough in the ground right now. We're accelerating.

Yes. I mean just to add, I've got 21 ghost kitchens. And we're definitely in a test-and-learn phase. So it's probably a little early to talk about bottom line contribution from the ghost kitchens. What we have learned -- we've learned a few things. One, the -- and by the way, most of the restaurants at the ghost kitchens that we've opened up, 20 of them opened up in last year, and most of those opened up in Q4. So it's relatively new. But what we have learned is that the sales from the earlier units continue to grow. And they continue to grow despite adding new ghost kitchen units into the marketplace. We've learned that at the point that we talked about seeding markets, one of the reasons we're able to attract a new brick-and-mortar franchisee into UAE is because of the success that we've had with our ghost kitchens. So we were able to attract that new franchisee. And finally, we've learned that there's an opportunity to potentially charge higher royalty with respect to those ghost kitchen units.

And the key to success is marketing ourselves and merchandising ourselves on the delivery apps, right? Because that's where Applebee's and IHOP will show up. They're going to show up via the delivery apps. And so the investments we're making in our CRM and our technology to do that and the building back of some marketing resources that we lost during COVID are all to help fuel the ghost kitchen growth.

And so Jake, I think, Vance, we're not incorporating into our unit projections, ghost kitchens because of the variability in that volume, right? But there will be a significant component of our growth from that. And as an example, I anticipate a balanced mix of traditional and ghost this year from Applebee's.

I have 2 questions. Greg Francfort from Guggenheim. Scott, first, you talked about trading customers on the third-party apps back to your channels. Can you maybe talk about how you're going to do that? And then my other question was for Vance. Your projections include a 2% baseline comp in a normal inflationary environment. It feels like it's going to be a pretty heavy inflationary environment going forward. Why not go out with something a little bit more aggressive just under that assumption, given what we're seeing right now, just the thought process through that?

So let's start with Scott. And I know we're going to conclude with Jay on that one.

So I'd say to the questions around trading a third-party delivery customer into your own channels, driving them into Applebee's or IHOP.com. So 2 components. One is probably marketing, the second is technology. For marketing, it's just -- there's a big awareness play. And so we got a big benefit from COVID, but you'd be surprised when we do the research, the gap between the awareness of the core brand with their to-go offerings. So most consumers, they don't -- haven't historically thought about it in their considerations, so we need to remind them. And so there's a number of -- if we think about marketing it, it's about building awareness. There's also kind of more street traditional tactics. It's as easy as putting a bag stuffer in the bag with an incentive that's to a DSP customer say, "Hey, next time get X off when you come to our channels." So that's 1 piece. On the technology side, you have to give a reason to the guest to come to your channels. So DSPs have made it very easy to create a sticky customer because it's an app, I downloaded it. I got all my account information saved, it's got my payment, and it's got a lot of options, et cetera. I think IHOP loyalty is a great example about how we're trading guests into the ecosystem because now I have an incentive to go to IHOP, where I'll earn points that I can't otherwise earn on the DSPs. And there's a number of different features and initiatives that kind of on the longer-term road map to do more of that. And that really is the key point, right? It's the loyalty program and how that's going to go.

Which is exactly the point I was going to make because I'll give you an example. One of the things we talked about, you join now, we're inviting our kind of our online e-mail club people that we've had forever. They're the first people we're targeting to convert them to the new program. Well, if they convert and join now, they're a founding member and the benefit of being a founding member, you get free delivery for life if you order through our channel. And that's a prime example.

And if they remember the loyalty program, we know them. We know their phone number, we know their e-mail address and we can market to them in a way that we can't if they're exclusively ordering via the third parties.

And then on the inflation point, look, I think, first of all, our franchisees control menu pricing. So it's not us deciding that. But I think that the way -- we've been very disciplined. Our franchisees have been very disciplined with how they control their menu pricing. And it's a way to gain share at this point. When everyone else is raising, they've been disciplined. And they're gaining market share as a result. So as far as our projections going forward, obviously, we're not economists, I'm not going to sort of claim where I think inflation will be but if it turns out that there is more than what's in our model, then that's upside for our plan.

Brian Mullan at Deutsche Bank. Thanks for everything today. You're making significant investments into the platform. You've discussed the benefits of scale With that in mind, can you just give us your current thinking on M&A and your potential willingness to grow via that avenue? I know it's not something you've discussed today, but you have discussed it in the past. And if it is something you're still interested in, maybe could you discuss the parameters around what you look at? Does it need to be full service? Does it need to be franchised and how you think about that?

Sure. I'll take it from a high level, and then I'll ask Scott to talk about some of the parameters that we're looking at. We get opportunities that come to us all the time -- the phone rings, and we take a look at them. We also are diligent and one of the reasons why we elevated Scott to the enterprise level is also being diligent about looking at what's out there so that we're aware of opportunities. And so whether it's inbound or we see something, we're taking a diligent approach to looking at those opportunities. There's nothing on the table right now that we're active in, but we never say never. When we do look at something, our screens, Scott, you can share some of the way we look at this.

Without being too specific, ultimately, we're looking -- if we were to do an acquisition, we look to change the growth profile, right? And so we want to find something that has a growth profile that we find interesting and that it's not only about acquiring that growth, but also that is -- that we're able to add value to, right? So we have to -- there has to be a level of synergies there, either from the revenue or cost side for us to justify the investment. Category, relatively agnostic, obviously, don't want to compete with our core brands. But we're open and we'll be looking at various concepts. Again, that would kind of be able to fit a certain growth profile. And I think from the franchising standpoint, it's hard to find fully franchised concepts outside of our own, right? We are not looking to change the model. We want to remain highly asset light. That may require us to -- if we were to acquire a concept, refranchise or grow in a franchise way from a corporate base. And that would be something we assess, but we wouldn't be looking to change the overall profile of the company.

And then from my perspective, we evaluate each internal or external project's opportunity costs and return on capital requirements, right? So look, currently, if you see -- look at the plans that we laid out for you today, there are just lower-hanging fruits right now, internal, organic projects that we're working on that can get us higher return, lower risk. And then so these are the top projects that we're tackling right now. And we think, ultimately, we can get investors the attractive total shareholder returns that we signed up for.

Mike Halen, Bloomberg Intelligence. So I have 2 questions they may both get rejected. Pun intended with the Big East and ACC tournament here today. The first one, I want to build on Jake's question, right? So with more unit development coming from some of the smaller format stores, is there any other targets between now and 2026 you can share with us, whether it be system-wide sales growth or square footage growth that might help us model this out? And then the other thing is if there's any other data points in terms of unit economics that you haven't already shared that you'd be willing to give us, that would be a big help.

So well, let's start with Vance on what we can share.

Well, so I would say that of the, call it, $200 million of incremental revenue growth that we shared with you guys, half of that is from IHOP. 30% of that is from Applebee's and 20% of that is from international, just in broad buckets. I don't think we have shared unit economics -- specific unit economics in the past publicly. So I don't know if there's much I can say at this point on that other than the fact that John and Jay both talked about in terms of the health of the franchisees and what you heard from Greg and Karl in the video earlier.

So John's leaning in, but you're going to be careful and judicious in what you say.

John's always coaching me on that point. So unit economics, restaurant level economics. I would just say moving from 2.2 million AUVs to 2.6 million AUVs and leveraging scale from both labor and a food perspective, probably tell you all you need to know about franchisee financial health. It is -- if I were to pull Greg back up here, it is substantially better than it's been at any point in the last 5 years. And their willingness to invest is very high and their confidence in our future is very high. So when I say we're poised for growth, a lot of that comes right back to the unit. It doesn't work well if unit level economics aren't working.

I think from the IHOP standpoint, I would just say our franchisees probably don't have a record year going on last year like John, but they're coming back very nicely from this and so is the profitability. And when you think about the opportunities I talked about with virtual brands, that's all incremental sales and profits for franchisees. So they're really excited about what that's going to do to their 4-wall profit.

Ken, you've got some questions from the chat?

Yes.

Hold on 1 second, we got to just -- can we turn up Ken's mic?

Regarding 2022 EBITDA guidance, what are the embedded cost assumptions for IHOP and Applebee's? And what does that assume for off-premise sales versus dine-in sales?

We haven't guided to that level of details. I think we talked about G&A as a whole. But as you can think about going forward, I mentioned IHOP is -- half of our growth is from IHOP. So a bigger portion of the G&A is from IHOP and then respectively, sort of versus the growth plan that I mentioned earlier. I think that's probably a broader rule of thumb that we can use, but we haven't guided on that specifically.

Ken, is that the only question?

[indiscernible].

Ken, just 1 added point with respect to kind of the off-premise growth and the on-premise growth. We moved from $6,000 to kind of almost $14,000 per restaurant per week if we look at Q4 of '19 versus Q4 of '21. We genuinely expect that to be a sticky component of our business, and we love it and our guests love it. Think of that and then the dine-in business coming back. And that will give you some perspective on how we view that on-premise, off-premise mix. They're both going to be growth engines for us.

It's Eric Gonzalez from KeyBanc. You mentioned about 10% to 12% independent restaurant closures. I'm wondering if you're factoring in the replacement cycle and what you're really seeing out in the field right now in terms of independents coming back? Or is this more about the conversion opportunities that you're seeing a lot of those independents being replaced by large chains such as Applebee's and IHOP?

Yes, Eric, I wouldn't -- on the Applebee's front, I wouldn't comment on independents versus chains other than to say, casual dining, 11% contraction in units throughout the pandemic. It's going to be fluid. It will be interesting to see -- there'll be winners and losers and draw your own conclusions on that front. There will be opportunities. Certainly, there's a lot of white space out there just via our own planned contraction. Given the category contraction, there's going to be even more -- conversions will be a part of that. We just opened our most recent restaurant last week for those of you here in New York, many of you are in the Bronx, Riverdale, Roy Raeburn, Zane Tankel -- it wasn't a traditional box. It wasn't freestanding. It's an end cap, 4,000 square feet. It's got actually a walk-up pickup window. It's a beautiful restaurant. We would encourage you to see it -- you'll see more of that kind of nontraditional application of finding a new restaurant opportunity in this space.

Maybe if I can throw another one in there on innovation. Seems like it's been a big part of the story, but so is also streamlining and simplification. You talked a lot about how Applebee's went from 160 to 100. So I'm wondering if we could think about or tell us where that is today and how you're balancing the innovation versus keeping that menu lean? And then maybe a similar question for IHOP. If you could talk about the journey there from when things were first shut down and where you're balancing innovation versus streamlining?

Eric, on the Applebee's front, we -- the brands tend to, over decades, proliferate. Greg talked about it. It would have taken a long time to get to 100. We're kind of right there. Right now, we added a few products with Cosmic Wings, but a very single-digit small number. And then Kevin Carroll, our Chief Operations Officer, is our czar for discipline. When we add products, we will have the discipline to remove products based upon all the data that we have. And so we have no intention of scaling back up to anything north of 110 menu items. That 100 to 110 allows -- that's the sweet spot in terms of execution and still allowing for occasional innovation.

And that's the key point. I'll jump in before Jay comes in. As I've been visiting restaurants across the country, one of the questions I ask every general manager and every kitchen manager is, we've reduced our menus, whether it's IHOP or Applebee's, by about 1/3. What are you missing? What's the impact? What are guests asking for? And I literally get the same answer every time, which is our kitchens have never been more efficient. They've never been able to manage food waste as well as they can and that their guests -- we did it, obviously, using data and metrics. We pulled out the right items, guests aren't asking for anything to come back. And they say to us, don't change a thing. With the exception of knowing both brands have a strategy of rotating through innovations and LTOs along the way.

Ditto, ditto. The only thing I would add to that is that -- you heard me talk about -- one of the things we do need to do is if you want to become an all-daypart menu that's driving traffic and more than just breakfast, we've got to expand some of that non-breakfast menu. That doesn't necessarily mean your count has to go up. But it means you've got to be disciplined -- I equated it would look like a water balloon, right? It's the same amount of water in there, but you're going to move it in different places. You're going to move those quantity of menu items around a little bit to achieve strategic traffic. And I think that's the important thing is how do you become more contemporary with your menu -- not lose all the great breakfast things you have, but you -- we have so many things at breakfast, it can probably even go back a little more to open up some space for some other things that help us with other dayparts.

I saw the mic go this direction. Okay.

Nick Setyan from Wedbush. The guidance is obviously very -- I mean, it's very -- it's incredibly good guidance, right? I mean, in terms of your long-term guidance here. So when I think about kind of the trajectory from '22 to '23 and the cross over the years through 2026, should we think about it in a pretty consistent way? So 2023, we're talking about $8 plus in EPS?

So we talked in terms of 5 years on average so that we don't get into specifics each year, but it's consistent. I think that's how the model works. Now if new projects come up that generates high returns, it's not like we won't take it. But yes, I think we don't foresee anything to disrupt sort of the gradual flow. But also, I would say that this is not guidance, it's our long-term goals. Guidance was for 2022 calendar year. More of a technical...

I did notice that John didn't step in to coach you, Vance, how to answer that, but that's a great answer.

And just as a follow-up, obviously, even if you do some percentage of what you say you're going to do, your stock is going to be much, much higher. So given the cash that you have on your balance sheet, why not do like an accelerated repurchase plan now before your stock goes up a lot?

Yes. So our cash is higher than historical levels right now, but we announced a new dividend. We announced a new repurchase program. So we're actively exploring different ways to hit that total shareholder return, however way we do it. The stock valuation will determine the split between the dividends and buybacks, right? So if the shares are under traded at a discount, I think that we'll lean heavier on buybacks. If not, then we'll be heavier on dividends. But it's that total shareholder return that we're going after.

We're going to go here and then we'll go to this side again.

Jeff Bernstein from Barclays. Vance, just wanted to follow up on the long-term guide. We talked about the mid-single-digit revenues, which seems pretty straightforward with a 2% comp and presumably some unit growth. But to get to the high single-digit EBITDA growth, which I think you show in a slide going from 41% margin to 47% margin.

That's right.

But the G&A all in from '21 to '26 is growing at 6% per year, not just the cash, the full G&A, including the big jump up that you're doing in '22. But if you're growing revenues at mid-single digit, you're growing G&A at a higher rate than that. Just trying to figure out conceptually how we're getting this margin expansion and high single-digit EBITDA growth. That's really the only line you guys have to play with there.

Right. So I think G&A, the 2% CAGR that we talked about is cash G&A, right? So that's the piece that gets factored into our EBITDA. So that's the first point I want to make. So if you're looking at total G&A, there's depreciation, stock-based comp, et cetera, that's not part of our EBITDA. The other thing is there is leverage off of our G&A over time. But 1 piece of it is what we talked -- what I talked about earlier, which is the declining of rental, financing income, but the increase of royalty income, which is a higher flow-through rate. So that mix change, that contributes to our EBITDA margin expansion too -- as well.

And if I could just follow up. My other question was just the differential you guys see between royalty and marketing fees between the 2 brands. It seems like IHOP pays a much -- a higher royalty fee, a lower marketing fee. Are those negotiated periodically? It would seem like there's an opportunity to presumably raise the marketing contribution that IHOP franchisees are paying or raise the royalty that Applebee's are paying. Like, how do you think about those 2 rates for each brand and where they go over the next few years?

So why don't we talk about the marketing fee first and how that works in sort of periods of time. So you want to talk about Applebee's and then we'll talk about IHOP.

Yes, Jeff, with Applebee's. And I didn't put it on the list, but one of the first things that I did in partnership with the Board and our franchisees back in 2017 was to declare their 3.5% advertising contribution was not sufficient. That we were a big brand. We needed to express that brand very visibly. We demonstrated over a 6-month time frame what that overinvestment would lead to very tangibly. Franchisees said, "we're all in" and they've been all in at 4.25%. And I would use this as a plug with my franchise partners to say, we may even look at something higher at some point. And I wish Greg was in the room, so he can smile back at me and say yes.

May, may.

That's a may.

So at IHOP, the actual franchise agreement is less than 3.5%. In fact, we go get an amendment done with the franchisees for periods of time to get an agreement to maintain it or go up at that point. We just redid this for an additional 5 more years starting this coming January. So we're all the way through 28, I think, now with 3.5%. So we do have that committed. We won't be going back down on that, which is great news. And now can it go up? Yes, it could, but we just now got the deal redone at 3.5%. I don't see that going up anytime soon. But business conditions could change that. It was business conditions that changed Applebee's at some point when that happened, right? So nothing says that it wouldn't happen, but I wouldn't bank on that. I wouldn't put that into your model. And we do charge 4.5% royalty, which is 0.5 point more. I don't see that changing right away either at this point unless, as Tony said, you start getting into ghost kitchens -- you start getting into different models. Now you may have an opportunity to charge a different royalty rate, et cetera. But that's way down the road after you test those kind of things and figure out what that looks like.

So when you think about it all in, the slight difference between the 2 royalty rates, the slight difference, both an owner of IHOP and an owner of Applebee's is in for about the same total cost to the brand parent.

I think we're out of time. So Ken, why don't we finish up with what's on the we're going to keep going? Good. All right. So Ken, we will take another one from the remote.

Sure.

And we've got one more in the room too, that I see.

Can you provide the domestic unit growth profile for each brand?

Can you -- what was that -- one more time? We missed it.

Can you provide the domestic unit growth profile for each brand?

Sure. Jay, you want to begin? Your domestic growth plans.

Profile?

Profile. Domestic, growth profile. Profile in numbers? Or it's not clear from the question?

Meaning like what are my 4 different kinds -- are they going to be? Or...

Well, the question is, can you provide the domestic unit growth profile for each brand.

Well, the unit growth, I mean, if you just look at the numbers that you've got there, I think what does that come out to? Like 400-plus restaurants over the course of that time. So I've said numerous times, we're going to double our historical growth rate, which has been in that 40 to 50 restaurants a year. So if you double that, you're at 80 to 100 restaurants, 90 to 100 restaurants, in that range, on new openings. And we've also said that right now, that traditional -- remember, I said we have 4 different types of vehicles for investors to use. Right now, the majority of those are still going to be our old traditional type prototype, probably more of them that are conversions right now just because it's opportunistic at the moment. We've always had quite a few of those. So we'll get probably more conversions of all types, even smaller units. We're getting some folks that are looking at Pizza Huts, fast food restaurants, et cetera, that because we have a small prototype design now, we can now make that into an IHOP as well. So I think that mix will keep shifting over time, less of the big 4,000-plus square foot traditional restaurants and more of the nontraditional, more of the smaller prototypes and then more Flip'd too, as we get that matured.

And then with Applebee's, we've conducted a full U.S. market analysis. We know where the sites are and there are very conservatively at least 250. We know that with precision. We did hire a very talented development leader, Vice President of Development for Applebee's in October, Don Reyburn, we hired him from Brinker. Don is in the process of rebuilding our pipeline. We opened 5 traditional restaurants last year. We will open more than 5 this year. In addition, we'll have ghost kitchen units. And then we'll scale from there. Ultimately, we will achieve or attain net new unit growth from a traditional restaurant perspective next year in '23. And then our objective is to attain 20 net new units on an annual basis as we move forward. And perhaps a greater number, time will tell. We're going to be aggressive, and we'll do so with our franchise partners.

Okay. I think I have 2 questions left on this side.

Brett Levy, MKM Partners. Two questions on the technology front. But they're also sales related. So don't get overly excited. When you think about technology, we'll start with the loyalty program. As you roll out across IHOP, given the heavy concentration across Applebee's, what do you really need to see within IHOP to accelerate the implementation across Applebee's and how quickly could you get that rolling? And then just across the technology front, with all of the other initiatives, how should we think about it in terms of what you can do to drive operating productivity and possible cost savings for the franchisees as well as how much of that can be incremental to free up the pipeline to drive incremental sales growth?

Got it. All right. I might have hugged Justin too soon.

Yes, I think it was too soon.

Let's start with IHOP. And I think the first question is about when you think about the loyalty program and the technology that's supporting it, what is the incremental business that we're thinking about as a result of the program?

Well, we've got kind of a math model in our head. Remember, I said the first people we'll try to convert are the people in our loyalty program already. That is not the same kind of program. It's more of an e-mail couponing discount type program that is old school, so to speak. And we've got a little under 10 million people in that program. So if we can convert even 1/3 of those people and then convert those people into being what we call active members that are engaged -- so again, we haircut it, we hair cut it again and then say, can I get 1.5 to 2 more visits per person of those folks. You're talking high -- a little under $100 million that you can get in sales across the system. So we've looked at this as conservatively as possible to go, okay, we're going to haircut this, haircut this. We think it has the potential to be much higher than that. But we didn't test this in great detail because we didn't want it out there. We kept this under lock and key. So we're going to launch it in pretty much real time and engage our current loyal guests as much as possible to drive as much incrementality as possible.

And then, John, do you want to talk a little bit about between new point-of-sale, new specific kitchen technology, the ways in which we're thinking about handhelds, the operational impact in Applebee's. And then Jay, if you've got anything to add, you can do that.

Yes, Brett. The -- from a data perspective on that point, we've had significant investment in our ability to market with you one-on-one from a personalization perspective. And we have ways to grow that database and acquire more. And the new point-of-sale system will not only help us understand guest behavior, we can tokenize that and apply it in a very customized CRM manner. So that's all headroom and opportunity for us moving forward. The other technology investment that we find extraordinarily beneficial is handheld server tablets. I think John referenced it, we -- if you're a server at Applebee's and you now have a tablet, which we have in 600 restaurants. And next year, when we fully deploy point of sale, we'll have it in all 1,600 restaurants. I can cover more tables. I don't have to run to a point-of-sale terminal. It makes my life easier. Most importantly for me as a team member, I can make more money. And as a franchisee and, my P&L, a lot of those drink orders today because of the way our system operates, don't get captured as revenue generating. So franchisees end up making more money with tablets as well. It's probably the one thing Justin and I have talked a lot about is -- it's probably the lowest hanging fruit for us and our franchisees are anticipating that investment. It pays dividends.

Yes. For us, we're a little behind where they are on tablets and ahead, obviously, on the POS, developing it. And that's a little bit on purpose. We knew we were moving to a new POS so we didn't want to engage the franchisees, get them to all go by tablets that worked with the old POS. Let's get the new POS system and then go to tablet. So we're going to be doing the same thing. Most of the franchisees will go at the same time or briefly thereafter to roll out tablets when they get their POS. So you don't just -- a POS system at 1,650 restaurants, this doesn't just happen, okay, we're done in a quarter. This is going to take 1.5 years to implement this across the entire system. So they'll get a new POS, they'll get tablets and you'll see that going throughout the system, across the system at the speed as fast as we can do it, that makes sense, that the franchisees feel supported and that it goes very smoothly. So probably the end of -- we're rolling it out beginning now but we're somewhat slow rolling still and getting that out there and getting our -- it's kind of like you're also working on the ramp-up speed on how fast can you -- how many can you do in a week? How many can you go at that rate? So in essence, the POS test was done, now the implementation is being tested right now. We've got -- our third largest franchisee will be completely finished with doing all of theirs in their 60-plus restaurants in the next few weeks. So he's kind of helping us figure out how fast can you go in this implementation, and that will help us understand the full implementation over the next year and half.

Yes, I would say -- I'd say essentially it was 3-legged stool of what we're putting in the restaurants from a tech perspective, and both Jay and John covered it, right? So you've got the point of sale, you've got kitchen display system, and you've got tablets with card swiping capabilities. So that's sort of the 3-legged stool, if you will. Those are the big 3 that are going to be impactful from a technology perspective within the restaurant.

Okay. Final question.

Jake Bartlett from Truist Securities. And I've been sitting here trying to think about how to cloak this question to make it seem like it's not asking 2022 sales guidance. But I'm going to fail. So the question is, I'm trying to understand, it feels -- I know you're not giving the actual guidance, I don't think you're going to in your response. But maybe just some of the moving pieces and how you're thinking about them. It seems like, for instance, the virtual brand contribution of 1% over 5 years would be more front-end loaded. It's something that continues to grow after it's been rolled out kind of abnormally. So that would be closer to the 5% near term. But the other moving pieces, and just to your broad thoughts, as we come out of the pandemic, it seems like there's a lot of people that have been reluctant to go out to restaurants are going to be going out. So it seems like they're -- just that alone could be a really big tailwind in near term. And then also with pricing being a little higher. So maybe just maybe in answering that question, is traffic -- was traffic in 2021 higher or lower than it was in '19? So is there some kind of traffic layer to regain that we should think about? And then the other is -- it's a big question on people's minds right now, but the lower income consumer. You talked about being an affordable brand. I think that means you're more exposed to a lower-income consumer concerned about gas prices, other nondiscretionary expenses being up. So how do you think about some of those moving pieces in the near term?

So I'll address the second point first. So lower income consumer, we're -- it makes up a big part of our demographics. But I think if you look at grocery inflation compared to our menu pricing, it's comparable, if not a little lower than grocery store inflation. So from that perspective, I feel like it's -- people have to eat, and we offer great value, great technology which reduces friction of how they interact with us. All those things will help. In terms of how we think about 2022 revenue, like you said, we didn't guide on it. But I think that the framework I would put is what Jay and John both talked about, which is off-premise being steady and then on-premise gradually returning, and that will drive a lot of the same-store growth. And then development will happen over time, right? So that's not going to hit right away, but we hired our VP of Development. We hired -- we turned on these initiatives in the beginning of the year and then the growth projects will happen throughout the year. That's why there is a timing mismatch, if you will, for 2022 guidance in terms of EBITDA. But really, I think I asked everyone to think about this in a longer-term perspective. In 5 years, our target is to hit our 20% shareholder return. There are a lot of different levers we can pull. And then I think we're -- don't judge us on 1 quarter or 1 year. Judge us on 5 years.

And Jake, I'll give you 3 examples quickly with Applebee's, I alluded to 2 in my remarks. The first 1 is off-premise. It's a growth engine. It's incremental. Virtual brand Cosmic Wings have yet to fully deploy to DoorDash. We believe there's incrementality there for obvious reasons. They're the largest player. And I referenced that when I look at last year, and I look at growth across dayparts, lunch was up, afternoon was up, dinner was up; late night was not. That was a headwind, difficult to staff, Friday night, Saturday night, after 10:00 PM or 11:00 PM for all the obvious reasons. Now we jump to where we are now. Looking forward, our franchisees look at that late night opportunity as a tailwind. They'll staff it properly, and we'll leverage it in a meaningful way. That's another growth engine that could emerge.

Yes. And that tailwind, late night, is true for IHOP as well. All right. So if I'm reading the signals in the back of the room correctly, we have timed this perfectly And you're all going to -- we invite you to stay in your seats and we're going to serve you Applebee's at the table. So first, I want to just say, thank you to all of you who joined us in person. I want to say thank you to those who participated remotely. We're going to put up a slide here and share what lunch in the room will be. And if you're watching remotely, we hope that you go on the app and order it because it's going to look really good. If we have that slide, John is going to just take a moment here to explain to the room, but we'll sign off remotely. Thank you all for joining us. Thank you to the team for all your hard work to share our story. Thank you to the team in the back of the room for all your hard work to make this happen. And thank you all for coming out for what I think is one of the first in-person investor days we've had in 2 years. So it feels good just to see everybody. And if we have the slide of --

[ Wendy, ] let's pull up the slide with the tasting photo. So if you're wondering how much time it's going to take, it depends on how fast you want to eat. This is going to come out rapid fire. The 2 things that you have right now on your plate are our plant-based Impossible Burger -- that's new, it's on the menu. As well as a sampling of our Brew Pub Loaded Waffle Fries. Very indulgent. The next item that's going to come out -- will come out in 5 minutes, is a Sizzling Skillet sensation. And you'll -- we're producing this here in the hotel. So I don't know if the sizzle will be there as you would find within Applebee's. It's a -- can we bring up that slide, please, [ Wendy? ]

They're working on it.

Thank you. And then really, I'd encourage you to stay because you're going to get powdered sugar all over your nice [ coiffed ] clothing -- is Sugar Dusted Donut Dippers. So our new dessert. The buzz on this is tremendous. So enjoy it, and it's coming out fast as well. It will all be to you within the next 5 minutes.

All right. Thank you, everybody. Appreciate it.