Greetings and welcome to the Bloomin’ Brands Fiscal Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow management’s prepared remarks. It’s now my pleasure to introduce your host, Mark Graff, Group Vice President of Investor Relations. Thank you, Mr. Graff. You may begin.

Thank you and good morning, everyone. With me on today’s call are: David Deno, our Chief Executive Officer; and Chris Meyer, Executive Vice President and Chief Financial Officer. By now you should have access to our fiscal third quarter 2020 earnings release. It can also be found on our website at bloominbrands.com in the Investors section. Throughout this conference call, we will be presenting results on an adjusted basis. An explanation of our use of non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures appear in our earnings release on our website, as previously described. Before we begin formal remarks, I’d like to remind everyone that part of our discussion today will include forward-looking statements, including a discussion of recent trends. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from our forward-looking statements. Some of these risks are mentioned in our earnings release. Others are discussed in our SEC filings, which are available at sec.gov. During today’s call, we’ll provide a brief recap of our financial performance for the fiscal third quarter 2020 and a discussion regarding current trends. Once we’ve completed these remarks, we’ll open up the call for questions. With that, I now like to turn the call over to David Deno.

Well, thank you, Mark, and welcome to everyone listening today. Since the beginning of the pandemic, our priority still remains unchanged. We are focused on taking care of our people and serving food in an environment to protect both team members and customers, maintaining a motivated, well-trained and engaged employee base that is committed to providing a safe dining experience, which is critical to our long-term success. The decision not to furlough any employees during the pandemic reinforces this principle, and it enabled us to retain a very engaged workforce. This is paying off and has been a big part of our success in driving results ahead of the restaurant industry throughout the pandemic. It is clear that customers want to come back to restaurants, and they are confident in our ability to provide a safe and welcoming dining experience. Our dining rooms across the country continue to maintain elevated safety measures, including additional sanitation and disinfecting practices as well as contactless payment options for consumers. This hard work has been recognized by our customers and in several reports. In August, Black Box released the Restaurant Guest Satisfaction Snapshot where Fleming’s Prime Steakhouse was ranked number one in food and number one in service. In addition, three of our restaurant concepts were ranked in the top five in intent to return. A recent Newsweek magazine survey recognized the best customer service in casual dining. Bonefish Grill was ranked first, and Outback was ranked fifth in the same survey. We do not take this recognition for granted, and I appreciate the hard work our operators do each and every day to earn it. I would also like to thank everyone in the restaurant support center. Each of you do a great job supporting our award-winning restaurants. Across the U.S. portfolio, we experienced consistent weekly sales momentum throughout the third quarter. In-restaurant sales continued to improve each week as consumers become more comfortable dining in restaurants. In addition, our off-premises business remains robust and we are retaining approximately 50% of the incremental volume achieved while dining rooms were closed. As a result, U.S. comp sales outperformed the industry by over 850 basis points in the third quarter. Importantly, we continue to outperform the industry in the fourth quarter. A large part of the success is due to the progress made behind our investments over the past several years to enhance the customer experience and pursue the rapidly emerging off-premises business. These strong sales trends, combined with disciplined cost management, enabled us to significantly outperform margin and profit expectations in the quarter. The pandemic provided an opportunity to look at our business differently and reassess the operating model. This holistic review has identified efficiencies to further optimize how we run and support our restaurants. For example, we simplified our menus and reduced limited time offer discounts. Importantly, these efforts have contributed to reduced complexity, improved consistency, and increased profitability across revenue channels. We are leveraging these learnings to drive more efficiencies going forward. We made great progress across the following key priorities during the quarter that will enable us to become a stronger and more efficient restaurant company. Let me now spend a few minutes discussing how we are doing versus each of our objectives. First, we are retaining a large share of our industry-leading off-premises business even as dining rooms reopen. The pandemic has proven the importance of this channel and the role convenience it plays for consumers. Over the past few years, we made the investments in operations, channels, and culture to build and grow a strong off-premises business. We will leverage our strong capabilities to capitalize on this growing opportunity. Of particular interest, Carrabba’s is especially seeing a lot of success. We believe delivery and carry-out will be an important growth catalyst for Carrabba’s moving forward. Second, we continue to make progress on managing expenses and improving margins. Our efforts to reduce costs were in place well before the pandemic. This past year, we learned even more about the business and made additional improvements to how we manage expenses including labor, advertising, and overhead. These learned efficiencies provide optimism about the ability to grow margins once we exit the pandemic. Third, our improved sales trends coupled with disciplined cost management enabled us to generate positive cash flow in the quarter while paying down debt. We currently have over $550 million of available liquidity, providing us with increased stability and significant financial flexibility to capitalize on future opportunities. Fourth, the Brazil business has seen significant improvement in sales and profit trends. All of the Outback restaurants in Brazil have safely reopened with limited in-restaurant dining. In September, Brazil Outback comp sales were down 23%; and over the last couple of weeks, sales in Brazil have been down 5% to 10%. This is a major improvement versus prior trends and is an indication of the strength of the Outback brand in Brazil. The country continues to ease capacity restrictions and effective capacity is approximately 50% in most cities. Delivery remains a strong contributor to sales, and we are retaining a large portion of this business. The team has been actively managing costs, while leveraging learnings from the pandemic to drive additional efficiencies. As a result of this great work, Brazil generated positive cash flow for the quarter. Outback remains resilient and one of the highest regarded brands by consumers in Brazil. And finally, we've been able to accomplish these results while strengthening the value proposition and customer experience at Outback Steakhouse. In early September, we launched a new menu at Outback designed to reinforce our steak leadership through more accessible premium cuts and larger portions while also lowering menu prices. The menu is performing even better than what we saw in test. We are seeing strong customer feedback on value, and guests are trading up to larger and better cuts of steak. Our attachment rate on appetizers is growing and alcohol mix is improving as well. All of this helps grow sales and profitability while improving guest satisfaction. In addition, this efficient menu design reduces complexity, which improves execution and consistency that results in an improved customer experience. Before I turn the call over to Chris for a deeper look at our third quarter financial results, I want to elaborate on two growth channels we are testing that complement our dine-in and off-premises business. The first test is a fast-casual brand called Aussie Grill. For those of you who may not be familiar with the concept, Aussie Grill was originally created for international franchisees who wanted to expand more aggressively with a smaller footprint. As we saw our success internationally, we quickly brought the brand to the U.S. The differentiator for Aussie Grill is a menu of bold flavors. They serve steak, burgers, chicken, ribs, and salad with fast casual convenience. The first few locations in the U.S. have been promising and we opened the first free-standing Aussie Grill in Tampa in May. Consumers can eat in, carry out, use the drive-through, or have their order delivered. The financial returns from Aussie Grill are very promising and initial sales and profits are above expectations. As a result, we are expanding the concept and plan to open more Aussie Grills in 2021. The second growth channel is a virtual brand called Tender Shack. This virtual brand leverages the kitchens of our existing restaurants for cooking and delivery. Last month, we launched the brand in the Tampa Bay area. Like Aussie Grill, consumer response has been strong and sales are ahead of expectations. As a result, we have now expanded the test to Texas, Oklahoma, Kansas, and Missouri. Tender Shack offers a high quality, very limited menu featuring chicken tenders, fries, cookies, and drinks. The brand promises and delivers on casual dining quality at a fast-food price. The chicken segment is a large and rapidly growing category. We have the assets and talent to take advantage of the significant opportunities. It's clear the consumer wants great food in a convenient format. With Aussie Grill and Tender Shack, we believe we have an opportunity to create incremental growth channels that consumers will love, are perfect for today's environment, offers attractive economics, and will remain relevant as dining habits have changed. Bloomin' Brands has the right people, assets, and capabilities to meet the needs of today's consumer to capture the opportunity in front of us and beyond. In summary, we were very pleased with our third quarter performance. We exceeded our objectives, rolled out key growth initiatives, and gained market share. Finally, as a result of our current momentum, we are in an even stronger position to take advantage of the opportunities ahead of us in this evolving landscape. And with that, I will now turn the call over to Chris.

Thanks, Dave and good morning everyone. Before I discuss our Q3 results, I want to provide some perspective on recent sales trends and how we are successfully navigating the current environment. We began the process of reopening our dining rooms in early May in accordance with state and local guidelines. As of yesterday, 99% of our company-operated restaurants have dining rooms opened, some with a level of reduced seating capacity. This is up from 92% at the time of our last earnings call in July. As Dave mentioned earlier, we are continuing to employ elevated safety measures in the restaurants to ensure our consumers feel welcome and safe. Restaurant capacity continued to increase during the third quarter, and we have seen varying results across the country. For example, in Florida, restaurant capacity was recently increased to 100%. And as of this time, we have not seen a commensurate increase in sales in certain parts of the state. Tampa and Jacksonville are responding well and seeing weekly volume increases, while more tourist centric areas like Orlando and South Florida are relatively soft. Conversely, we are seeing good sales gains in states such as Georgia, Tennessee, and Texas, where we have a large presence. We will continue to closely monitor these key markets as the year progresses. In terms of overall sales performance, U.S. comp sales were down 12.8% and have improved steadily over the past several months. For perspective, U.S. comp sales in September were down 7.9% versus down 24.3% in June. This positive momentum was driven by in-restaurant sales growth, while maintaining strong retention of our off-premises business. At Outback, comparable restaurant sales were down 10.4% in the third quarter, and experienced sequential sales improvement every month, with comparable restaurant sales down 7% in September. Our across the U.S. concepts saw similar monthly progress and sales results. We are pleased with the continued momentum and overall sales trends. One thing I wanted to point out about our sales moving forward. Although comp sales remain a key measure for performance, we are increasingly more focused on building absolute sales volumes week-to-week and gaining market share. Comp sales comparisons have the potential to become less informative as we enter the holiday season, especially if there is still significant restrictions on capacity that limit our ability to grow in-restaurant volumes. It is difficult to predict where capacity constraints and the consumer mindset will be in December. As a result, it may be challenging to dramatically increase our in-restaurant volumes during December if we maintain current capacity levels. However, we are extremely confident that between our rigorous safety protocols in-restaurant and our strong off-premises business, we will be well positioned to maximize our sales in these critical weeks and months ahead. Turning now to other aspects of our Q3 financial performance. Total revenues decreased 20% to $771 million. GAAP diluted loss per share for the quarter was $0.20 versus $0.11 of diluted earnings per share in 2019. Adjusted diluted loss per share was $0.12, versus $0.10 of adjusted diluted earnings per share last year. As it relates to our operating expenses, there were a few areas worth calling out. Since the onset of this pandemic, we have been focused on simplification efforts to improve efficiency and lower costs. This has had a positive impact on several areas on our P&L. In Q3, food and beverage costs were 150 basis points favorable to last year, driven by record low waste, as our streamlined menus continue to demonstrate the benefits of our simplification efforts. Even with the introduction of the new Outback menu, we continue to see waste favorable to pre-COVID levels. We are also seeing benefits from reduced discounting, which is showing up in higher overall check averages. The labor line was 190 basis points unfavorable as we had significant de-leveraging on this line from sales being down year-over-year. Similar to COGS, however, we also benefited from simplification efforts. This showed up in a reduction in food prep hours. We are also continuing to find efficiencies in off-premises labor as that business continues to grow. Off, operating expenses were 170 basis points unfavorable due to sales de-leveraging and increases in to-go supplies, and menu printing costs for the Outback new menu. These increases were offset by a $20 million reduction in marketing expense within the quarter. Despite the de-leveraging in our P&L from lower sales, our focus on expense controls allowed us to generate a 10.7% restaurant margin in Q3. More impressively, our U.S. restaurant margins were positive 11.4% in Q3, which was only 10 basis points below last year, despite significantly lower sales volumes. Moving forward, we will be very thoughtful about how we introduce expenses back into our business. And as we emerge from the pandemic, we remain committed to achieving the margin improvement goals we shared with investors back in February. On the G&A front, Q3 was down $11 million from last year net of adjustments. This included a $5 million benefit related to cost savings initiatives that we discussed in our February earnings call. In addition, we had another $4 million benefit from reduced travel and training expenses related to COVID. Our adjusted tax rate for the quarter was 58.6%. This is a product of our negative pre-tax income, as well as additional tax credits such as our FICA tip credit. One other P&L item worth noting is our franchise and other revenues category. This was down $11 million year-over-year due to lower royalties and marketing contributions from franchisees. This decline was driven in part by deferred royalties and lower sales on our west coast restaurants. These locations have been more impacted by the pandemic than our company-owned footprint. As sales and profit trends improve, we would expect an increase in royalty and marketing contributions, as well as the plans collection of our deferred royalties. Turning to our balance sheet. Since our last update on July 24, we have improved our total domestic liquidity position to $551 million, which includes $103 million of domestic cash and $448 million of availability on our revolving credit facility. Our strengthening sales performance, combined with disciplined cost management has enabled us to tightly manage cash, enhance liquidity and allow for continued financial flexibility. In closing, although this situation has been challenging, our performance throughout this pandemic has enabled us to continue to improve our operating model and deliver strong results. And with that, we will open up the call for questions.

Thank you. We will now begin the question-and-answer session. Our first question comes from Jeffrey Bernstein with Barclays. Please go ahead with your question.

Great, thank you very much. My question is on more recent trends. I think you mentioned, Dave, that you're still outpacing the industry thus far in October after what was I think you said, 850 basis points in the third quarter. It just sounds like, as peers talk about the industry as well, maybe there's concern about the onset of colder weather and the recent spike of COVID infections and just unease around the elections. So I'm just wondering if you can give any kind of color, a little throwing, I wasn't sure exactly what you meant when you talked about your comments around the December period, but just wondering whether you see further opportunity to improve sales from here prior to a prior to a vaccine, and then I had one follow up.

Good morning. We believe there is potential to enhance our sales for the rest of the quarter. So far in Q4, our sales have exceeded industry performance, and our revenues are growing weekly. This is happening because more customers are dining in, while we also maintain strong off-premises sales, which have been very beneficial. Our aim is to continue this progress as we advance. When we enter the busy Christmas holiday season, we want to maximize our capacity while adhering to safety regulations. We have various meal times and different days of the week to leverage, along with a robust off-premises and catering business that we plan to utilize to boost our sales on a weekly basis. As Chris noted, the strong holiday season may present challenges with comparable performance, but our focus remains on consistently increasing revenues week after week.

Yes, Jeff. I would like to add that typically, weekly volumes increase significantly in the last three weeks of the quarter, especially in December, and our restaurants tend to be quite busy. However, it's essential to remember that we currently have fewer seats in our restaurants than we did before the pandemic, which limits in-restaurant volumes. Therefore, we believe it is more beneficial to focus on absolute volume changes, as comparable sales results can be complex and misleading. Regarding the winter season and weather, it's worth noting that outdoor dining is not a significant factor in our overall sales performance. Most of our outdoor seating is in the southern U.S., where cooler weather can actually enhance outdoor dining in many of our locations. Overall, we are confident in the strategies we have in place as we approach the holiday season, but we want to ensure everyone is aware of our existing constraints.

Understood. And then my follow-up was just, as you talked about the challenges of the broader industry during this pandemic, I think a lot of people have been talking about independent closures as maybe a net positive for the larger chains like yourself, allowing for market share gains. So with that said, I'm just wondering if you're seeing any of that yet, maybe you can offer any kind of color of magnitude in terms of those closures. One of your peers talked about how they expected a big real estate opportunity to play out with grade A sites becoming unavailable. And yet, they mentioned not really seeing that yet and not seeing the favorable lease terms yet, so just wondering if you can comment on the independent closures and the real estate and rental markets most recently? Thank you.

Certainly. We are strong supporters of the restaurant industry and do not want to see any harm come to independent or chain restaurants. However, some independents and chains have faced challenges. We are well-positioned to capture market share and acquire locations, although we haven't observed a significant amount of this happening yet. We are ready to advance on a market-by-market basis and plan to take market share, emerging in an even stronger position. Our off-premises and dine-in businesses are both well-prepared for the future.

Great, thank you. Thanks for taking the call. If you could just last quarter, you gave us a little bit of color in terms of how well your portfolio was doing in terms of the number of units that are generating positive comps. If you wouldn't mind going a little bit further into how you're doing the variances by states, those that have higher capacity versus those that are still challenged, and do you have any sense as to where you are right now in terms of total capacity and where you think you could be whether based on the states stay where they are, just the efficiencies you can do with partitioning and moving tables around? Thanks.

Yes, we have achieved significant efficiencies through our outdoor dining initiatives, including the partitions we've built. Chris can provide more details regarding capacity and any necessary follow-up. However, the situation does differ by state. States like Georgia, Texas, and Tennessee are performing very well, and we are seeing positive results in those markets. Additionally, our off-premises business continues to thrive, and we are consistently maintaining that momentum. We are ready to operate safely and capitalize on increased capacity as it becomes available.

Yes, and just a couple stats. Brett. So in Q3, we had 159 of our locations that posted positive same-store sales results. In September, that number jumped up to 271 locations with positive comps. And that actually included 42% of our Carrabba’s locations posting positive comps in September. So very strong performance.

Thank you. Can you provide an estimate of the market share you've gained? Achieving 850 basis points in the third quarter is impressive, but there is still a significant range between being positive and actually taking market share, and 850 basis points reflects that.

Yes, Brett. We don't have particular share data. I mean, I think 850 basis points is a very good number. And we're very proud of it. And we are continuing to outperform the market in Q4. So we don't have shared data. But I can tell you we are very well positioned to capitalize on current trends and trends going forward as a company.

Yes. And even though we didn't provide direct context as it relates to our performance, it is worth reiterating that our weekly volumes have posted increases from where they were in September.

Hey everyone. I’ve been asked this question directly, so could you provide a straightforward yes or no answer or simply share the number? Can you give us the U.S. company system number for October? It's clear that this was initiated due to COVID. I understand there have been sequential increases in average weekly sales. Is the number better than September, or can you share a specific figure before I proceed with my next question?

Yes, I will stay with giving our practice of not getting too many details, especially as we move forward as a company. We'll stay with the fact that we're outperforming the industry as we have been during the third quarter.

Okay. All right. And again, do you want to quote with whichever industry number that that because these numbers aren't actually publicly reported the 'industry numbers', can you tell us what that industry number is that you're benchmarking against?

It’s the well-known industry numbers, Black Box, etcetera.

Well, that's why I'm asking you that question. There are two different data sets. Additionally, you have more updated numbers than we do, so I wanted to ensure that we are all aligned as we set our crucial expectations for the fourth quarter.

We're on the same page, and we're ahead of both.

Okay. That's good. And then Dave, I apologize for the lengthy question. We've discussed costs over time and how the organization is evolving in terms of overhead, data, technology, and various types of support. Can you provide a qualitative view of how that's progressing and talk about how you might make better decisions more quickly in the future?

Yes, sure. We started this journey well ahead of the pandemic, if you recall it and I’ve been following our story. We were addressing our cost structure in the restaurant and an overhead for quite some time and made some moves in the organization earlier this year. And we've become a leaner, faster moving company. I mean, take a look at what we've done with Aussie Grill and Tender Shack. I mean, boom, the Outback menu. And we've also learned a lot about our data in the digital business. And so those kinds of things, we are moving very, very quickly. We're moving within weeks of these decisions like Tender Shack, etcetera. So that has helped us a lot John. And as we go forward as Chris mentioned, at the restaurant level, clearly, we've been we had a good done a very good job managing various line items. And we see that opportunity moving forward, because we've learned a lot. And we've also learned a lot about our organization as we've managed it, and you can see it in our numbers, how our overhead costs of G&A costs have come down sequentially, year-on-year. So we think we have a leaner organization, a more rapidly moving organization, a more efficient organization, and a more effective organization, as we've gone through this year.

And at this point, have all those changes been made? Or might we be looking for more as we get into 2021? In other words, where are we on that journey in terms of what's been put in place?

I think we've done a fantastic job putting virtually everything in place, and we get to enjoy that for the balance of this year and into next year.

Thank you. Our next question comes from line of John Glass with Morgan Stanley. Please proceed with your question.

Thanks, and good morning everyone. I wanted to follow up on that. What do I think investors and maybe other companies are trying to frame this is to think about when sales do return to normalized levels? What either the restaurant level margin, or maybe more importantly, just the enterprise level margin could be right, you said those cost savings were in place. And so now sales are going to come back? Can you quantify what you think the retention of those cost savings could be? And therefore what the enterprise margin could be given that you laid out some costs in February? I think you're probably going to learn more since then, what can you quantify that for us?

I'll speak to it broadly, then I'll turn it over to Chris. Again, for those of you who followed our company, we talked about a 200 to 250 basis point opportunity in our company before the pandemic. And we made a lot of moves prior to the pandemic to set ourselves up, and I think John you are familiar with some of those. And we also believe that, there's certain line items, our P&L and I'll turn over to Chris to provide some more examples that provide some opportunity for us as we grow this business, but this journey started well before the pandemic, and we've learned a fair amount during the pandemic.

Yes, and not to overly repeat what Dave said but to give you a little more quantification and specificity. We felt good about our ability to grow margins coming into this year pre-COVID. Not only because of what we learned. This isn't just because of what we learned during the pandemic. We had talked about the $20 million of identified cost savings heading into 2020. And we called out with that an 80 basis point improvement in operating margins and our original 2020 guidance. Then we called that another $20 million of cost savings for 2021 that had been identified. So obviously, the original plan for 2020 was put on hold due to the pandemic. But that $40 million of cost savings is still intact. Now on top of that as Dave said, we've learned how to be more efficient in our operating model. And so if you kind of go line by line, I'll give you a little bit of perspective on how to think about some of those things. It's all going to start with sales for us where we are generating say our sales with less discounts, that's showing up in check average. We've not needed these discounts in this environment to drive traffic. And that is improving the margins and the flow through. I think there's learnings there for us moving forward. Cost of goods sold clearly is the biggest area where we've seen improvement in terms of our margin structure at the restaurant level. A lot of that is driven by waste reduction. Waste was a major priority pre-pandemic. But due to the simplification efforts that we're seeing, and the better execution, the less re-cooks all that, we are absolutely confident that level of that's going to continue. Labor is the biggest area of reduction in terms of the biggest area reduction; labor's in terms of prep hours, which is again, a product of the simplified menu. Now, hours are going to come back into the restaurant as we see increases in sales, but we feel good about our ability to hold on to some level of this benefit. And then we have a large opportunity in marketing. During the pandemic, a reduction in marketing expenses has made sense given the capacity constraints. But once we get past the pandemic, we have tools that will allow us to deploy the most efficient marketing programs. And that gives us an opportunity to reduce marketing spending without losing effectiveness in terms of driving traffic. And then Dave has talked about the G&A savings. Now we've seen some increment not some; we've seen quite a bit of incremental G&A savings in travel and training as a result of the pandemic. We do expect a lot of that to come back into the P&L after we're in the hospitality business. And that personal connection is going to be important. However, we've learned to be more efficient in our use of online communication and we're hopeful we can leverage some of this to save some additional G&A dollars moving forward. So look, not an exact quantification, but the sum of it is that entering the year we felt good about closing the margin gap to our peers. After the learnings from the pandemic, we feel even better about that ability.

That's very helpful. Just one follow up on the international margins, so the U.S. was essentially flat year-over-year, your comps were down low double digits. Does that relationship hold for International that is to say, as Brazil is improving to, I think down high singles or whatever the number you quoted. Could you see the same kind of order of magnitude that you could get close to last year's margin on the current sales in Brazil?

Yes. As they improve, there's no reason why they couldn't do that. Absolutely. In fact, their volumes are even bigger. Their overall average unit volumes of the restaurants are an even bigger advantage in that respect.

And I just want to call out the Brazil team. I mean, the bounce back we've seen, they've done a fantastic job, and they generate positive cash flow in the quarter. So really pleased with what's going on down there.

Thanks. Good morning. Question on the margins. First on cost of goods. If you could dive a little deeper on the leverage seen there. Never seen it that low. Just thoughts on how much of that sustainable or if this should be viewed as the low point. And then just any context on the current run rate, restaurant level margins at current sales levels? And how we should think about that heading into the fourth quarter?

Yes, it's interesting that you brought that up. The 30.1% cost of goods sold we reported this quarter is likely the lowest we've ever achieved in our company's history for a quarter. This is largely due to our ongoing simplification efforts, along with the initiatives we implemented before the pandemic aimed at reducing waste. Additionally, the insights gained from streamlining our menu have significantly contributed to this favorable outcome. The only negative aspect is a slight increase in commodity inflation, though we've managed to mitigate this effect. In fact, we've experienced more favorable trends in commodity costs over the last few quarters than we anticipated at the start of the year. This combination of excellent execution by our teams in the field and our disciplined approach at the Restaurant Support Center has led to this impressive result. Did you have another question, Alex, regarding the restaurant?

Yes. Restaurants run rate.

Yes. To consider that, if volumes continue to improve, there will naturally be an enhancement in restaurant margins. However, this improvement is completely reliant on the volume levels and their continued growth throughout the quarter.

Thanks and good morning. Just a couple questions on store margins. Starting with the U.S., could you give us a sense of how margins trended through the period? Maybe some color on September versus July? And with comps continuing to improve, would you expect U.S. store margins to be up year-on-year in the fourth quarter?

Yes. We're probably not going to give that direct level of guidance as it relates to our expectations for Q4 margins. There's just too much uncertainty in terms of the environment to make that kind of declarative statement. But I guess, what I can tell you is if you think about June margins versus September, they were actually fairly flat. What I would tell you about June versus September restaurant margin is we did roll out the new Outback menu in September, and there were one-time costs associated with that as it relates to extra training hours that we rolled in, menu printing costs, we've done a lot of work to simplify the menu, take off some of that excess collateral. So we had to reprint new menus. So those costs fell into September. And if you took those out, then we would have shown pretty solid improvement in our restaurant margin level from June. Now obviously, as the quarter progressed restaurant margins continue to improve, but because September was a five-week period versus a four-week period in July and August, there's a little bit of a disconnect there in terms of how you think about the progression.

And June is a five-week period.

Okay. And on Brazil, could you provide some more context just sort of on what you're seeing in terms of environment down there? What are some of the primary factors that have allowed sales to improve to the degree they have? And I guess with comps, I think you said comps were down five to 10 in October. Could you give us a sense of where store-level EBITDA is more recently?

So, we won't get into restaurant level EBITDA by month. I mean, that's probably a little too granular for that type of guidance. But let me just say, Brian, it's a clear indication of how strong the brand is down there. It's the leading casual dining business by far. It's one of the best brands in the country. So as things open up, people miss Outback. The second thing is, much like the U.S. and some of our businesses, we really didn't have much of an off-premise business in Brazil. And they introduced it and we're hanging on to it as the dining rooms reopened. That's also been extremely helpful. We generate positive cash flow in Q3. There's no reason to think why we can win them generate positive cash flow in Q4. So, we're just really pleased with what the team is doing down there.

Okay. And then last one from me back to sales, I understand it's all about absolute sales volumes in a COVID world. I guess, thinking about the seasonality that you mentioned, moving through the fourth quarter. Just to make sure we're all on the same page from a comp perspective, since a lot of investors are focused on that metric. If you held October AWS at Outback through the quarter, could you give us a sense, what would that sort of translate into in terms of December comps? Or maybe how much higher last year is December average weekly sales volumes compared to October just to frame the seasonality?

Our goal is to ensure that our volumes increase consistently rather than remain stagnant on a weekly basis. We want to see growth. As Chris noted, the past two or three weeks align with the Holiday Season, and we aim to leverage catering and off-premise options to enhance restaurant volumes. Chris, do you have anything else to add?

Well, I would just give you some perspective on last year volumes. So, if you look at the beginning of the quarter, last year the U.S. portfolio was running $65 million of sales or so a week. And then you get to the last couple of weeks and that bumps up to call it $75 million of sales. So I think that that's the kind of progression you're looking at from a last year, a year ago base. And again, look, we hope that we can continue to progress and that there is ability to grow volumes in the box in the last few weeks of December. But we just want to make sure that everyone understood kind of how that played out last year.

Whether it's various day parts, whether it's different times of the week, whether it's off-premise, whether it's catering, whether it's dining, we will be prepared to grow those volumes.

Yes. And just to reiterate again, I mean, we have seen volumes increase in October from where they were in September, which is progress.

Yes, Alright. Then just last one on Tender Shack, obviously encouraging to see the test expanded and you said sales, the consumer response and the sales have been strong. Could you give us a sense, just ballpark kind of average orders a day or any context on the contribution that you're seeing?

It's early, Brian, I really don't want to get into that kind of detail quite yet. Just that we expanded to the new markets. But I think you know us pretty well. We had expectations for the brand. We're beating those expectations from our customer, sales, margin, operation standpoint. And we would not be expanding the test unless we felt that we had something there that we're pretty excited about. Same thing with Aussie Grill, freestanding location in Tampa where our plan is to build up the pipeline here in Florida and begin to do that. So I think what you're hearing from our company is multi-channel, convenience, great food, and we're going to capture as much of that as we possibly can.

Fair enough. Thank you.

Thank you. Our next question comes from line of Jeff Farmer with Gordon Haskett. Please proceed with your question.

Hi. Good morning and thank you. Two questions for you guys. So when we heard from you in late July, and then again today, you did highlight sort of a handful of initiatives that were meant to increase capacity. You talked about Plexiglass, increasing table turnover, outdoor dining space, reintroducing lunch. The question I have for you is if we look across all of those initiatives, which do you feel have proved most effective in delivering capacity gains? And as we look forward, which would you expect to be most effective in delivering future capacity gains?

Yes. Well, stepping back, Jeff, again, we've tried to get this volume gains through every single channel, outdoor dining, off-premises, which we feel very good about. In-restaurant dining, all those things have come together for us. But let me just step back for a minute and talk about the things that you can expect from our company over the next few quarters as we drive traffic and sales. We talked in the script about the new menu at Outback Steakhouse. If you haven't been yet, I really would encourage you to go. We've captured the value opportunity. We've captured the abundance opportunity. We've got combos. And we're very, very pleased with that. So that's a big catalyst for in-restaurant dining. Second, our goal is to achieve at least 50% of the gains, where we started in March to where we are today in off-premises, and we think we have a best-in-class off-premises and casual dining, and we want to be able to serve our consumers at home or in the restaurant and off-premises enables us to do that. We talked earlier about opportunities to relocate and build sites. We're going to be capturing that as the world changes. Then we look at Brazil. We talked about Brazil and the gains that they're making. That's a big part of our growth as well. And I'm really pleased with what they're doing there. Then there are a couple of new ideas that can be a part of our growth equation, and that's Tender Shack and Aussie Grill. And we've got that going within our company. And then finally, we talked earlier on the call, Jeff, about capacity coming out of the restaurant business. It's too early to tell exactly how that's going to look. But it's not too early to tell that we are going to be very well-positioned to capture those opportunities as we go forward. So each of those multi-channel, multi-concept opportunities for us are a big opportunity. I just want to say one more thing, and then I'll turn it back. And I've been really pleased with what Carrabba's is doing in off-premises. That could be a piece of business for us that will be permanent and structural and carryout and delivery the customer has really responded to that offering. So it's really great to see.

Alright. Thank you for that, David. Just one other follow-up. So this is really another crack at an earlier question on the cost side of this business. So, in February, you guys did point out an opportunity to deliver an additional $20 million in cost savings in 2021. Obviously, a lot of moving pieces in terms of the COVID backdrop, you've accelerated some of those efforts. But when the dust settles and we're looking at the opportunity for cost savings in 2021, that remains relative to everything that you've done in 2020. Can you put a number on that for us?

In terms of - I'm trying to understand the question. So we had the $20 million this year. We have another $20 million next year you're talking. We feel - I guess I would just say, we feel really good about our ability to deliver on both of those numbers.

Okay. I was just clarifying that. I wasn't sure if you had pulled forward some of those potential cost saves, or maybe uncovered some additional cost saves. So you answered the question, $20 million is still a good number to use as we move forward to 2021?

Yes. I would note that when considering your modeling, this year was primarily related to general and administrative expenses. In fact, the majority of it was attributed to G&A. Next year, we expect a slightly more balanced distribution between restaurants and G&A expenses.

And Jeff, non-financial comments for that is, I think he knows about. We just never going to stop. And we've learned a lot about digital marketing and how we can grow the business more efficiently. There's all kinds of different things. And Chris has talked about a few of those already, that we can use going forward, and we're just never going to stop. So we feel great about what we've done already and what we can do in 2020 and 2021, and we're just going to keep moving.

Thank you. You've talked about better managing costs, some of the changes you've made to the business pre-pandemic in recent months, like discount, simplification, marketing, labor. So can you talk about your confidence that these cost-saving initiatives won't impact execution negatively? Or that some of these costs or discounts won't have to come back as the market gets more competitive?

Sure. One of the things we've tried to do during this pandemic is serve food and provide great service to our customers. And we think we've reached a level of cost and service that we're quite proud of. Newsweek just came out with the best customer service in 2020 and Bonefish and Outback are in the Top-5. Black Box came out with their surveys. Fleming's is number one in two key measures, and Bonefish and Fleming's are in the Top-5 in intent to return. If we look at the measures, the consumer measures that we're looking at, in the pandemic after the costs have come out, we are making significant progress. And that's because our operators are focused on our two key priorities, serving great food and taking care of our customers and our people in a safe environment. So, we are really trying to make sure that these things stick going forward. As far as costs, Chris talked about costs, we're going to be very careful about what we add back because we've learned a lot. And as we look at marketing spending, or overhead spending, or what we spend on labor, I think we've got a really seasoned management team that knows what the return on investments look like and what we're going to be adding back and when, while taking care of the customer and our employees.

Great. Thanks. And just to clarify on further sales improvement from here. It sounds like the lifting of capacity restriction isn't going to be more meaningful than season demand. Is that fair? There are combinations subject to further sales improvements? And then trends across regions, you called out the differences in Florida and strengthen markets that reopened earlier. But as you see in sales stall or any volatility in trends in markets that have seen resurgence cases?

We have not experienced any impact from cases or resurgent markets. Our aim is to safely provide services to customers as dining capacity increases. We previously discussed maximizing our opportunities across different service channels, including delivery, carry-out, and dine-in, as well as throughout the week. We will continue to pursue these opportunities as capacity grows, while also managing and learning from various channels.

Great. Thanks for taking them. Just a few follow-ups. On the Tender Shack opportunity, can you just talk about the strategy so far with respect to rollout in terms of where the virtual brand is being honed? Is it sticking in the Carrabba's brand across the country to date? And perhaps how we should think about that going forward? Is going to be multi-branded even though it's going to obviously stay at the Tender Shack online? And then another question after that.

The most important aspect for us is the markets, and we expect all of our restaurants to be involved in the Tender Shack launch, if we proceed. The Carrabba's team has been excelling in off-premises sales, and the Outback team is introducing a new menu. As a result, we decided that Carrabba's would be the ideal place to begin. We aim to select markets where we have strong representation to gain valuable insights moving forward. Overall, we are very satisfied with the results.

Okay. And just going back to kind of the discounting question earlier, and some of the margins questions as well. How much does the new menu at Outback help solve for some of the lower discounting that you're doing? I mean, it sounds like it's constructed in such a way that you're going to see some costs and labor savings. However, at the same time, you've lowered some prices on some key items. So maybe if you could talk through that a little bit, I'd appreciate it.

Yes. The team did a great job. We basically want to address the value equation at Outback Steakhouse through permanent menu changes. So let me just talk about a few of those. If you love the Bloomin' Onion, it's $2 less expensive. If you love Aussie Cheese fries, it's less expensive and you get more. If you love our ribs, you get more. If you want to trade up to our bigger stakes, sirloin and also higher cuts of meat, you get the gap between the base and the higher cut is closed more. How did we do this and why are we so optimistic about everything? One, it addresses consumer need, the value equation, Outback food at a great price. That's number one. Number two is, the team did a great job identifying costs to take out of the business because of simplification that will enable us to pay for these changes without a large if any traffic increase. But what's happening is we also added combos to the menu. What's happening? Attachment rate of appetizers are going up. Beer liquor wine mix is going up. The number of steaks that are being ordered at the higher end of the menu is going up. Our attachment rate looks really great; our per-person averages are looking really great. So when you combine the cost savings with the sales opportunity, with the simplification and what the customer gets out of this, we feel very good, Jon, about what that addresses from a value equation standpoint, we don't have to rely on discounting all the time, but also is good economically for us. That's the purpose of the menu.

Thank you, ladies and gentlemen. This concludes our question and answer session. I'll turn the floor back to Mr. Deno for any final comments.

Well, thank you everybody. We appreciate you for joining us today and we look forward to updating you in February with our Q4 results. Take care.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.