
Financial Data and Key Metrics Changes - Total revenues for Q2 2025 were $283.7 million, down from $300.2 million in Q2 2024, reflecting a decrease of 5.1% [18] - Comparable restaurant revenue decreased by 3.2%, with a 4.4% increase in net menu price offset by a 5.5% decline in guest traffic [18] - Adjusted EBITDA increased to $22.4 million, up $8.8 million from the previous year, driven by cost efficiency gains, particularly in labor [20] - Restaurant level operating profit margin improved by 270 basis points year over year to 14.5% [18] Business Line Data and Key Metrics Changes - The "Hold Serve" initiative focused on maintaining labor efficiency, resulting in a significant improvement in restaurant level operating profit margin [6][18] - The "Drive Traffic" initiative included the launch of the Big Yum Burger deal, which has shown early success in improving traffic [8][24] - The "Find Money" initiative led to a reduction in general and administrative costs, with expectations of $3 million to $4 million in benefits for 2025 [10][19] Market Data and Key Metrics Changes - Guest traffic trends decelerated through the quarter, attributed to increased competitive promotional activity [18] - The company expects comparable restaurant sales to decline by 3% to 4% for the remainder of the year [21] Company Strategy and Development Direction - The First Choice Plan aims to return the business to sustained growth in traffic and same-store sales, focusing on five key pillars: hold serve, drive traffic, find money, fix restaurants, and win together [4][5] - The company is investing in critical deferred maintenance and restaurant upgrades to enhance the guest experience [12][13] - Refranchising efforts are underway to engage existing and potential franchisees, with plans to provide further details in the November earnings call [11] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges faced in the current operating environment but expresses confidence in the First Choice Plan to drive long-term success [3][30] - The company does not expect traffic trends to improve overnight but is laying the foundation for sustainable growth through strategic initiatives [10][30] Other Important Information - The company ended the quarter with $24.4 million in cash and cash equivalents and has repaid approximately $20 million of debt, resulting in a net debt to adjusted EBITDA ratio of approximately two times [20] - Capital expenditures are expected to be on the higher end of prior guidance at approximately $30 million as investments are made to implement the First Choice Plan [22] Q&A Session Summary Question: Can you elaborate on the journey to labor efficiency and its impact on margins? - Management noted that operators have become more disciplined in managing labor, leading to consistent improvements in efficiency, with expectations of a 1% drag on restaurant level profitability from the Big Yum initiative [35][39] Question: What actions are being taken to enhance guest experience in the near term? - A holistic approach is being taken, including investments in facilities, technology improvements, and traffic-driving initiatives [48][50] Question: How are franchisees responding to current promotions and changes? - Franchisees are supportive of the initiatives and are participating in promotions, with management noting that franchisees generally operate at better margins than company-operated locations [63][77] Question: What is the outlook for same-store sales in the second half of the year? - Management indicated a directional expectation of a 3% decline in Q3 and a potentially larger decline in Q4 due to tougher comparisons [66] Question: What is the expected impact of commodity costs on profitability? - Management highlighted that rising commodity costs, particularly for ground beef and poultry, are expected to create a $2 million to $3 million headwind in the second half of the year [69] Question: What are the company's targets for debt reduction and refinancing? - Management stated that the optimal debt level will depend on refinancing discussions, with an objective to complete refinancing in 2026 [71][72]