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All right. Thanks for being here. My name is Brian Mullen. I'm the restaurant and food distribution analyst here at Piper Sandler. We're very pleased to have the team from Dine Brands. We've got CEO John Payton and CFO Vance Chang. We also got members from the IR team in the audience. Thank you guys for being here um just want to start with ihop brand got a new leader in january of 25 right with lawrence kim been a little over a year and a half a bit of an open-ended question for you but john it would be great to get your perspective you know how have you seen the brand evolve in that time what lies ahead on the priority list for the for the standalone brand and i asked that in the context of three really solid quarters of outperformance in a row on black box to traffic and so we just would love to hear your big picture thoughts on that standalone and we'll get to the dual later Got it. So IHOP welcomed Lawrence Kim, who came in as president two years ago. He has a long career, had a long carrier at Yum! Brands and Taco Bell. So we were attracted by his Taco Bell pedigree as well as his strong marketing, digital, social. And what you're seeing now, the last couple quarters of IHop outperforming Black Box in traffic and most recently in comps, is the fruits of two years of the strategy that he's put in place along with the team. And the key components of that, Brian, are, believe it or not, IHOP never had an everyday value menu. And so last year we went to five days of everyday value. This year, seven days. And that's combo meals for $6. And so it's the lead of the barbell strategy. And it's driving traffic into the restaurants. And then once you're in the restaurant, we do a really good job of merchandising the higher end, higher margin, more exciting items. Second thing he's done is he's focused on accelerating menu innovation. So things like Dubai pancakes and the stuffed French toast that rolled out Monday are examples of the pipeline getting much stronger. And then finally, what he's really good at is digital and social, and we're seeing a big difference there in terms of the way IHOP is playing and appearing in culture on a much more regular basis. Thank you. And then as that everyday value platform made that shift from five days to seven days, clearly it's working. but is it fair to say you're happy with what it's done for the business for Dine, but then also franchisees broadly on board with that as well, sales and profitability? Everyone's happy with how that's going? Yeah, franchisees are on board for a couple of reasons, but one is we've got a very elaborate committee structure where the brand team and the franchisees work together. So IHOP or Applebee's can't and won't put a promotion in place that the franchisees don't agree with in terms of the price point, the margin, and the food item itself. And so they were on board from the beginning with everyday value, but it was a sales process that convinced them that the five days would generate the incremental traffic. We proved that. Then we went to seven days, had to prove that. Then they voted this year to make it permanent. So it is a process, but they're on board. Okay, and then sticking to IHOP, just, you know, your most recent earnings call, you discussed off-premise sales to continue to see growth at IHOP. You also called out catering in particular. You know, maybe just speak to both of those, off-remise demand for IHop more broadly, and then just elaborate a little bit more on the catering opportunity and where that stands. Yeah, sure. And the answer for IHO is very similar to Applebee's as well. And so just for context, before COVID, off prem was about six, seven eight percent of sales for both brands and in the five years post pandemic it's 22 23 percent and growing and so it's been very consistent there in terms of that opportunity so the two brands both became part of the off-prem consideration set in a way they weren't before we had to do a lot to learn how to do that right so all those 3 000 restaurants were not built to have a quarter of their business going out the side door so there was a lot of macgyvering back of house in terms of process and procedures in order to carve out the space to effectively do off-prem we had to look into and improve our packaging because it just wasn't as important when you're only doing seven rate percent in terms of how the packaging looks but also how it functions and keeping the food hot we had to learn how to work with you know DoorDash and Uber eats and merchandise our product on the third-party sites etc and now your point about catering it's It's been double-digit, quarter-over-quarter growth since IHOP relaunched its catering program last quarter. There's a technology component to it, you know, with the catering-enabled websites. All of our to-go packaging or catering packaging is new and accommodates the larger portions, and it's been driving off-prem, and we think there's a lot more upside. Okay, thank you for that. And then we'll switch over to Applebee's. John, you're currently the president. you are already the CEO of this company so I'm sure you knew a lot about Applebee's before that happened but maybe since I know a little bit more now so where I was going with that what have you learned, what's going well at the brand right now and then what are your biggest priorities or the brand's biggest priorities for the stand-alone brand over say the next 12, 24 the biggest opportunity for Applebee'S if you step back a moment the full service dining or the category that Applebee''s competes in is having a bit of a shakeout, right? So there's brands that seem to be fading a little bit, like Friday's and Red Lobster, and there's a couple of our competitors that have had a really good couple of years or a really Good Couple of Quarters, and Applebee's is posting 1%, 2% comp sales growth, and that's okay, but not good enough. So what we're focused on, no surprises, because the formula is pretty similar. So we've spent the last year and a half really investing in a new menu innovation and not just individual items, but categories and platforms that will be new and can be built out. And you'll see those begin to roll out in the first quarter of next year. We've implemented more new food this year than we have in years because we built up that pipeline. O.M. Cheeseburger in the First Quarter was an example of that. The second thing that we're focused on is our marketing message, which when I got there two years ago, we didn't have even an in-house social media team. So now we've got, you know, a bunch of kids sitting in a room that are doing social all day long and monitoring everything. You know, a great example of that, Brian, is we weren't even two years ago doing regular social listening. So, you know, an example of that is a week ago, someone we didn' know, posted, I haven't eaten an Applebee's in 10 years and I never would, and normally we wouldn't even know that happened. Our guys found it right away. We sent her an Applebees gift card. She went to Applebeez and did a mea culpa and posted that. It was great, and she didn't realize, 2.5 million views, and we were missing that this time two years ago. So it's been the food, social, and bricks and mortar. So the Applebee's restaurants, the last renovation cycle was 2020, beginning of COVID. So we excused it because the franchisees and we were not going to invest in that at the time. So they're now 14 years behind the last renovations. And we're now two years into a refresh of all the restaurants. And the franchisee's will complete about a third of the portfolio this year on the way to half next year. So the short answer to your question, coming into it two years ago, focus on the bricks and mortar so that the restaurant buildings themselves look fresh and clean, menu innovation, much more contemporary marketing, and the fourth one is just focusing on core operations, which is managers in the front of the house, not in the back of the House, talking to their guests, and off-premise accuracy, which is our number one mistake on off-rem, missing items. Okay, thank you for that. And then I'm going to ask about dual brands, a very important part of the story, some really encouraging signs so far. I'll just give a little context for everyone, and it'll be a little long-winded, I'm sorry, but I promise there's a question here. Maybe just to go through, there's something like 1,500 Applebee's. There's something likes 1,800 IHOPs open today. Majority of those are in the U.S., not all of them, the majority. So, John, that's the context. Maybe give us the background on dual brand strategy. How did this originate, the logic and the business case, and where are you with that strategy now today? So there is a bit of a story here. Of our 3,600 restaurants, all but 220 are in the U.S., so we're primarily U.K. for both brands. The dual brand, if you haven't seen it, is having Applebee's and IHOP in the same restaurant. It's one combined menu that goes from breakfast through late night. If you know diners in the Northeast, it kind of looks like a diner's menu and subtly cues the two brands going from blue to red as the day parts progress. The staff are cross-trained. The restaurant itself is a beautiful combination of the Aja Blue and the Applebee's Red, and it's one restaurant, but you certainly see both brands there. Guests can choose to sit wherever they want, and they can order from that single menu all day long. You know, the strategy behind it is it's a day part play, and it's activating the restaurant all day long. And so when other brands in the past have tried duels, like, you know, KFC and things like that, they're competing day parts. What's so compelling about this is Dine Brands just happens to own the Premier AM and Premier PM brand. IHOP, since it was invented in 1967, has been trying to address dinner as its most difficult day part. And so for the IHOP franchisees, this is a solution to dinner that they've been looking for for 60 years. For Applebee's franchisees it's the morning day part, which they're closed for, so it's a whole new revenue opportunity they didn't have. And so in terms of making the box more productive 24-7, that's exactly what this does. The first one was overseas in the Middle East of all places. And I think when you're 6,000 miles from headquarters, you can do whatever you want and then ask permission later. So they actually designed and opened half a dozen of them on their own before we were even paying attention in Pasadena, where we're headquartered. I was hearing great things, and there were a couple in Mexico as well. I flew to see them two years ago, came back and said to the team, this is a really big idea. And we opened the first one a year ago, April. So it's been about a year and a half outside San Antonio, partnership with a franchisee who's really good at developing and building restaurants. And in a year-and-a-half, we now have 45 open. On the way to 80, we'll be open by the end of the year. All but three of those are conversions, meaning the original brand added the second brand. The economics are now that we have 45 opened, very steady in the sense that it costs about a million dollars to add the second band. A little bit more if you're an IHOP adding an Applebee's, because you've got to build up the bar and all the equipment with that. A little less if you are an AppleBee's adding an IHOPE. They are seeing consistent revenue growth of 1.5 to 2.5 times the original revenue. If it was a $2 million IHOBE, it becomes a $3 million combo. And the most compelling thing for me, Brian, is when you talk about innovation. And no one came to us and said, you should put IHOP and Applebee's in the same building because no one would ever think of that. But when you look at the tickets, two-thirds of the tickets in the restaurants are items from both sides of the menu. So in the morning, we're selling pancakes and ribs, and in the evening, we'RE selling omelets and skillets. And so guests that are experiencing it are actually taking advantage of it. So we'RE giving them something they didn't know they wanted. And we've got a very robust pipeline for next year as well. mimosas and Bloody Mary is now available at IHOP via the Applebee's liquor license yes very good and then and thank you for that it's very helpful and then maybe just kind of to build upon that answer if you were to assume an Applebee unit is up on lease expiration or or franchise expiration or you could assume an IHop unity that you know either way you know maybe just take us through the decision tree for that hypothetical franchisee it seems like the options are renew it as a standalone concept you know maybe with a remodel maybe not you know converted to a dual brand or maybe just naturally some restaurants are going to close so as you work with your franchisees across the two brands on these situations like how involved are you and how are you helping them evaluate and and how are these discussions going and how has that evolved now that you have 45 it's literally what you just described right so so we know as when leases are up for example and we know when franchise agreements are up, as do the franchisees. And those conversations begin one, two years in advance. So it's not sudden, typically. It's not certain. And that is the conversation, which is, OK, you've been here for 30 years. Does it make sense to continue here? Or has the market moved and you really need to be 10 blocks down the street is always the first conversation. If it makes sense to continu, which typically it does, because 94% or something of our agreements are renewed, so it's a very high renewal rate. Then it comes down to renovate or convert to a dual. I can't remember if I mentioned, but we see 900 opportunities for dual brands in the U.S., and of those 900, 450 are new builds, and 450 are conversions, meaning an existing brand adding a second brand. And when we came up with 900, you can imagine we built a big model back at headquarters that has a lot of assumptions and market conditions and population growth and traffic into all those markets. And we ran the model saying that we're not going to approve any restaurant that would cannibalize an existing restaurant. If we had, for example, said, okay, run it with 5% to 10% impact, it would have been 1,600 restaurants instead of 900. So many franchisees don't have the opportunity to convert to a dual. So if you're in Applebee's and there's an IHOP two miles away, we're not going to approve it, which is why we get to that 900. So you'll continue to see the majority get renovated and the minority, this 900, become. And point understood, it's not sudden. You have visibility. When you get to this, is there a lot of nudging and convincing, or do you feel like you've already kind of got a lot franchisees where they're aligned, the ones that make sense? Yeah, on duals. So on Duels, it's been an interesting process. It has not unfolded exactly as we thought it would. So our initial hypothesis when we said we're going to do this is we figured Dine Brands would have to build the first 10 as, like, proof of concept to demonstrate the numbers to get franchisees on board. And then we would probably have to heavily subsidize and incent the first franchisees to go. So our first one was in partnership with our franchisee in San Antonio. a long-time IHOP franchisee that had 30-plus restaurants there. They actually purchased the Applebee's franchisee in San Antonio, so they then owned the market for both brands and could put a conversion anywhere they wanted to. That made it easy. And so we subsidized that one, as we expected to. Then when it opened, we flew the Applebees and IHop franchisees that are the typical developers down there, about 20 of them, to see it. And our book of business built right from there. So as you know, we didn't have to build 10 of them ourselves, and our incentive to franchisees in terms of key money has been steadily declining. And what was particularly impressive to us is the guys we flew down there are the restauranteurs who've been doing this for 30 or 40 years, and our largest franchisees, Flynn Group, It's already in New York, Thrive in Kansas. Those franchisees own hundreds of restaurants in multiple brands. They saw the concept, and they said, there's something going on here, and they signed up. So the answer to your question is it's not a hard sell generally. Of course, with 400 franchisees, there are those that are traditionalists and are still in wait-and-see mode, but more than enough are building the pipeline that we've got. And I would also add that this is – we're in the process of creating FDD for the dual brand next year. So everything John said is based on existing franchisee base. Once the FDD is out, we then can have a sales portion go out and pitch to new franchisees. We're precluded from doing that now. And that might contribute to the 450 of the 900. Yeah. Okay. I did not know that. Thank you. Yeah. So our expectation is that once we have an FDD early next year, and by that time we'll have 100 open, 30 or 40 of which will have been open for 9 to 12 months, you'll have much better stats to rely on, and we'll bring in fresh franchisees that will probably tackle the open markets. Okay, that's great. And then more recently I've heard you discuss fine-tuning the operational model, maybe making the kitchen more efficient. This is to dual-sill. So could you just elaborate a little bit on what that means, what you're working on? And I think you discussed looking at the next generation of the menu, so is this just learnings from what you have and what's going on there? Yeah, so we're calling it, you know, what we launched with to now is 1.0, and now we're working in 2.0 based upon the lessons we learned. We think we got it 80% right out of the gate. The biggest learnings we have is that IHOP franchisees need more help in running a bar, And so we've been sending our teams in, coaching them real time, and we have to think about the training. You know, they looked at it as another cost center and didn't think about it as much in terms of what is the role of a bartender and in terms OF building a culture and welcoming in regulars and helping servers learn how to sell drinks and all of that. On the Applebee's side, no matter how much we warned them, it was hard for them to anticipate what happens at an IHOP on Saturday and Sunday morning. And the volume of work there is a surprise to them. And what's surprising about it is everything at IHop is scratch, right? So it's all real eggs. There's nothing formula there. And with breakfast, as you all know, it's always scratch and almost everything is custom. Everybody does something to their eggs differently than how it's listed on the menu or their pancakes. And that was a whole new way of working for the IHOP kitchen staff, the Appalachian kitchen staff. So it's things like that that we're going back at to strengthen the training based upon what we now know is hard. And we've also seen some insights around you need a little bit reconfiguration of some of the equipment in the kitchen, whereas the flat top relative to the fryer based upon the different ways the menus are mixed. And that's all sort of just tweaks going forward. Okay. Thank you. And then moving away from the dual, just back to the standalone brands, you know, it seems like corporate has an option here sometimes. Dine Brand now owns 118 Applebee's units on the, I think that's the right number, on the balance sheet. That's grown a little bit over the last year or two. Just understanding that you want to re-franchise those over the long term, which you've said, you know. As you look in the near to medium term, do you anticipate maybe taking more restaurants on the balance sheet before you're able to re-franchise as that? Are there still situations where that might make sense for you? You know, Brian, John has mentioned that we are comfortable with up to about 5% of the portfolio being company-owned restaurants. There are strategic reasons why it's good for us to have these restaurants play offense and defense at the same time. Having said that, that's not the goal, right? We're just saying we're comfortable up to that point. And even with our existing restaurants, we're early in the process of turning them around. But even in our current state, there is already demand for the restaurants already. So what I foresee... Meaning franchisees have contacted us. From the franchisees, right? And so what I perceive is this portfolio not really being static. What's likely to happen is we're going to re-franchise a bunch of them. We may take on some more and then back and forth. So there will be some inflow and outflow of the portfolio, but the long-term objective is to improve the physical infrastructure of these restaurants and turn around the operations and prove out the remodeling case study, prove out the dual-brand case study to the franchisees. And plus, we build credibility with the franchisee as well. So we get a lot of street cred from the franchisee communities because we know they're paying. We understand what they're going through. Understood skin in the game. And keep company ownership at or around 5% as it recycles. Okay. Yeah, okay. And then just, Vance, capital allocation board recently authorized another 100, well, it was in May, but another 100 million share repurchases. I think you've repurchased a sizable chunk of shares on a year-to-date basis. As you move forward, you know, how do you evaluate the opportunity to continue to repurchase shares? What kind of leverage target ratio should investors be mindful of, you know, in that context as you sit here today? Our leverage level is sitting a little bit above five times right now. And it's because we're really excited about the investment opportunities, not just within the company, you Know, but also with our stock. So we've been deploying capital towards CapEx company restaurants dual brand initiatives remodeling incentives as well as buyback of our stock so as long as there's returns there i think we're going to keep keep the the the current strategy the playbook at play and and while protecting our balance sheet you know you ask the question what's our long-term leverage level target we've said what we've set in the past is you know should being that the mid force we've been at this current leverage level before and we've worked it down subsequently so we're going to do do that again here it's going to be done through growth of EBITDA based on turning around company restaurants based on dual brands start contributing to our bottom line and that's we're gonna see that soon you want to talk about the unique nature of of our debt that's a really good point so a lot of investors especially if you're new you you don't understand sort of the securitization capital structure that we have which is very shareholder friendly and it's very flexible it's covenant-like it's not like bank debt or the traditional corporate bond market and so high yield and so you know we have access to investment great cost of capital again like I said covenant light and and our debt service DSCR which is the only really leveraged covenant that we we would lose sleep over we have over 70% you know cushion in terms of where the covenant requires and where we're sitting at so so it's less about leverage it's more about DSCR and we're comfortably over that and our bonds are trading at par above par so so the market is comfortable with with our credit quality okay very good one we are actually up on time that went quick so thank you guys both for being here thank you