Good morning and welcome to Dine Brands First Quarter Conference Call. I'm joined by Richard Dhal, Chairman of the Board; Steve Joyce, CEO; Tom Song, CFO; Jay Johns, President of IHOP; and John Cywinski, President of Applebee's. Before I turn the call over to Richard for opening remarks, please remember our Safe Harbor regarding forward-looking information. During the call, management may discuss information that is forward-looking and involves known and unknown risks, uncertainties and other factors which may cause the actual results to differ than those expressed or implied. Please evaluate the forward-looking information in the context of these factors which are detailed in today's press release and 10-Q filing. The forward-looking statements are as of today and it seems no obligations to update or supplement these statements. You may also refer to certain non-GAAP financial measures which are described in our press release and also available on Dine’s website. With that, I’ll turn the call over to Richard.

Thank you, Ken. Good morning. I hope you and your families are doing well. I wish to take a moment in this call to give my thoughts. Clearly, the primary focus of the company for management and the board is the crisis brought on by the coronavirus pandemic. The well-being of our guests, employees, franchisees, and investors is of utmost importance and concern. I wish to assure you that the board and management are working ever so closely to ensure that everyone's expertise is brought to this war. The board is constantly updated on the ever-changing situation and is participating in all the major decision making. I know you have read our earnings announcement. We have made some very tough decisions and the board is completely supportive of these actions. We appreciate and respect the strength and can-do attitude of our team members, our franchisees, and our vendors knowing that together we will succeed. I'm very proud to be a part of this company and this team. I thank them and all of you for your support. Now, I'll turn the call over to Steve.

Thank you, Richard. Good morning and thank you for joining us today. Before we begin, I would like to say that I hope everyone participating on the call is safe and doing well and your families. These are truly unprecedented times. The country and our industry as we know it have changed drastically. The physical distancing measures and government mandates requiring restaurants to close or only allowing all premise to go and delivery have had a significant impact on our industry as a whole. During the unceasing challenges we faced this past month, I have been tremendously proud of the resiliency, focus, and commitment of our teams, our franchisees, and the thousands of restaurant team members across the country and the communities in which we serve. Each have stepped up to work tirelessly on behalf of our company and brands during these trying times. I've truly seen the best of our people. Our Board of Directors is actively engaged with me and the management team and is confident that we have the leadership, resources, and agility to manage through these various scenarios with a steady hand and a clear path. Our response to the impact of the coronavirus is ongoing. Dine's cross-functional crisis team has been fully engaged with the authorities at all levels to obtain timely information, which has enabled us to maintain business continuity and make informed and crucial decisions related to operations across the organization, as well as our company-operated restaurants. The health and safety of our team members and guests remains our number one priority. We have been monitoring the virus around the clock, making up-to-the-minute decisions on how best to stay safe in our work and in our restaurants while also keeping critical operations running. To our franchisees, I'm pleased to say that despite mandatory dine-in restrictions and other restrictions that mainly limited business to off-premise only, approximately 82% of our domestic restaurants remained open for to-go and delivery services at the end of the first quarter. In fact, both brands have experienced meaningful growth across these sales channels, particularly in delivery. After transitioning to the off-premise-only model, we have seen our domestic system-wide off-premise sales grow by 71% between the week ended March 1 and the week ended April 26. Growing our off-premise business at both Applebee's and IHOP has been part of our long-term growth plans over the last three years. As a result, our franchisees were able to pivot to a to-go and delivery-only model with minimal operational disruptions. Technology and innovation have played important roles in our off-premise strategy. While before the pandemic, we launched several digital initiatives across both brands, including building new and enhanced ordering capabilities to make it easier for guests to order and to support the expansion of our catering business. IHOP’s off-premise platform was already strong before COVID-19, but with increased demand for takeout, we introduced curbside pickup at IHOP, which is completely new for the brand. We'll continue to leverage technology that we've already developed with guest safety in mind. When dine-in service resumes in our restaurants, we’ll rapidly move to offer guests the option to use our personal device to order and pay. I'm pleased to say that the performance of our off-premise business has enabled many franchisees to cover their variable costs and this reduced capacity. Tom will provide an overview of franchisee economics shortly. Both John and Jay will also provide more details on their respective brands a little later. To help minimize the impact on franchisees significantly affected by the mandated restrictions, we have offered financial support by deferring royalty, advertising and other fees, lease payments, and remodel obligations on a case-by-case basis. Please remember that these situations are very fluid, so we will continue to work closely with our franchisees on support measures and operational challenges. Additionally, we believe that the newly established programs under the Cares Act have provided substantial liquidity support for those franchisees who were able to access the funding. The crisis has created some uncertainties and just as other brands and businesses work to manage their operations, we must do the same. To help get through this period, we had to make some incredibly hard decisions to reduce our operating costs and this included furloughing some of our support team members. We came to this decision as a last resort after several other efforts to reduce costs and cut non-employee expenses over the past several weeks. We have de-prioritized discretionary spending and we have implemented cost savings including a freeze on new hires and substantial reductions in contractors. We believe these tough decisions will help us to get through these difficult times and emerge from this crisis in a positive position to bring back our furloughed team members as conditions improve. We remain optimistic that Dine and our two strong brands will be able to safely navigate the road ahead and look forward to welcoming our guests back into our restaurants. With that, I'm now going to turn the call over to Tom to provide an overview of first quarter results. Tom?

Thank you, Steve. Good morning everyone, and thank you for participating today. I hope that you're all doing well. Our industry is certainly in uncharted territory. I'll begin by discussing how we respond to the pandemic and the steps we've taken to reinforce financial flexibility. Last month, we drew down a total of $220 million from our revolving financing facility or variable funding note, which was issued as part of a securitization we completed in 2019. While we didn't have an immediate need for additional cash, this action was taken as a precautionary measure given the uncertainty caused by COVID-19. In doing so, we shored up our balance sheet. At the end of the first quarter of 2020, we had $395 million of cash with $345 million being unrestricted. I'd like to highlight that this includes cash held related to IHOP advertising funds and the company's gift card programs. Given our solid cash position, minimal CapEx requirements and asset-light business model, we believe we have strong liquidity to manage our brands and operations through the crisis. Regarding our quarterly cash needs, the company estimates its cash general and administrative expenses to be approximately $35 million per quarter. The company has $16.4 million of quarterly interest payments under securitization and VFN drawdown that I just mentioned. These projections exclude gross lease exposure of approximately $1.3 million per quarter on franchise restaurants that are currently closed and being monitored. Our cash G&A forecast represents a one-third reduction of controllable costs assigned for the remainder of the year. In addition, we have reduced the capital expenditures by $1.5 million to approximately $6 million for the remainder of the year. Covering the securitization, we're currently paying interest-only and the quarterly principal payments with only the mandatory obligations as our leverage ratio goes above 5.25 times. These quarterly payments would be $3.25 million if we exceeded that leverage. As of March 31, the leverage ratio was 4.79 times. I want to highlight the debt service ratio, which was 3.93 times as of March 31. Now, let's turn to assistance for our franchisees. At the Dine level, we've implemented several programs to help ensure the stability of our franchisees at both brands. We're evaluating, as Steve mentioned, on a case-by-case basis requests for royalty and advertising payment assistance, which includes deferrals of near-term payments. Specifically for IHOP franchisees, we've reviewed requests for rent and financing deferrals and engaged with landlords on behalf of some franchisees regarding rent concessions. Switching gears briefly to franchisee economics, our analysis has shown that unit economics under restricted off-premise-only conditions were generally consistent across both brands. Many franchisees have been able to substantially reduce costs and cover variable costs and sometimes rent with the current sales levels under the off-premise-only model, which is comprised of to-go and delivery service. This is why we've been very pleased with the aggregate number of open restaurants, which is a testament to the quality of our franchise operators we have and their impressive ability to tackle these severe conditions. As Steve mentioned, at the end of the first quarter, 82% of our domestic system across both brands was open for business, the vast majority of which offered off-premise service only due to the state and local government restrictions on dining room service. As of April 27, 84% of our domestic system was open. This increase in openings is due to the meaningful sequential growth in both takeout and delivery sales at Applebee's and IHOP in April compared to the first quarter of 2020. John and Jay will provide more details on our off-premise operations. Now, I'll briefly recap our first quarter financial results. Adjusted EPS for the first quarter of 2020 was $1.45, compared to $1.90 for the first quarter of last year. The decline was due to the lower gross profit as a result of a significant decrease in guest traffic as state and local government restrictions were implemented on dine-in service and mandated stay-at-home orders. Regarding our G&A, we continue to drive year-over-year improvement in G&A. For the first quarter of 2019, G&A was $37.5 million compared to $42.5 million for the same period in 2019. The decrease was mainly due to lower compensation expenses and decline in costs of research and professional services. Turning to our tax rate, our GAAP effective tax rate was 23.2% for the first quarter of 2020, which was essentially flat to the 23.1% for the same periods in 2019. With respect to our cash flows, for the first quarter of 2020, cash from operations increased to $29.6 million from $28.9 million for the first quarter of last year. We're very pleased with the fact that, despite the challenging start to this crisis in March, our adjusted free cash flow was relatively stable at $27.5 million for the first quarter of 2020, compared to the same period in 2019. Adjusted EBITDA for the first quarter of 2020 was $61.7 million compared to $74.7 million last year. Regarding capital allocation, as disclosed last month, due to the uncertainty caused by COVID-19 and the need to take precautionary measures, the company has terminated all outstanding orders for repurchases of its common stock in the open market for the foreseeable future. Our Board of Directors has also suspended our cash dividend. We will re-evaluate our capital allocation strategy as industry conditions improve and normal restaurant operations resume. At this time, we are not updating our guidance beyond my previous comments related to our expected expenses, while we anticipate that we will revisit this as restrictions are lifted. With that, I'll now turn the call over to John.

Thanks, Tom, and hello everyone. My objective here today is to share as much detail as possible about the current state of the Applebee's business. For context, let's start with Q1 performance before the crisis emerged. As outlined in the release, Applebee's had tremendous momentum prior to the various government restrictions placed upon restaurants. Comp sales results through the week ending March 8 were positive 3.2%, rolling on positive 1.4% from the same timeframe a year ago. In total, Applebee's posted 10 consecutive weeks of positive comp sales to start the year, and meaningfully outperformed the casual dine-in category before the downturn began the week ending March 15. This downturn, along with local dine-in restrictions, led franchisees to quickly shift to the off-premise business model we have today and given the uncertainty at the time, franchisees temporarily closed 251 of our 1,657 domestic restaurants in mid-March. Now, the good news here is, the number of temporarily closed restaurants is getting smaller with each passing day, as franchisees reopen their off-premise operations. At present, approximately 175 domestic locations remain closed and we expect that number to become even smaller over the next 10 days. In total, we have about 1,492 Applebee's restaurants open for off-premise business and we anticipate all of these restaurants as well as most of our temporarily closed restaurants to reopen their dining rooms once the local municipalities provide a green light. Now I'd like to share our comp sales in detail. From the point in time the crisis emerged, through this past week. After being up 3.2% year-to-date from March 8, we progressed from minus 15.8% the week ending March 15 to minus 76.0% the week ending March 22, to minus 80.6% the week ending March 29, marking our lowest point of demand since the crisis began. April comp sales were minus 72.6% the week ending April 5 and minus 76.5% the week ending April 12, but it's important to note that 838 restaurants were closed on Easter Sunday, making this a very tough week to read. Our comp sales then improved to minus 64.9% the week ending April 19 and minus 64.4% the week ending April 26, representing our best performance yet, which I believe we all benefited from stimulus checks arriving across the country over the same timeframe. For additional geographic context, system sales ranged from minus 70% to minus 80% in California and Texas, to minus 50% to minus 60% in the Midwest and Northeast over the past two weeks. So in total, Applebee's is currently capturing approximately 35% of last year's average restaurant volume, again depending upon the geography. From an absolute dollar perspective, Applebee's average weekly off-premise sales have now almost tripled from about $6,500 per restaurant at the start of Q1 to approximately $17,700 this past week. Keeping in mind, our average restaurant volume of approximately $2.4 million at the end of 2019. Interestingly, Carside To-Go has moved from 70% of mix in mid-March to 76% currently, with delivery representing the balance of 24% of mix. While in this off-premise mode, all restaurants are operating, obviously with a very small team, reduced hours, and a limited core menu to ensure operational excellence. I'm also pleased that our franchise partners are reporting that they've successfully retained the restaurant management teams, which will help us significantly with reopening of dining rooms. Now, I'd like to shift gears and frame our actions from a marketing perspective. Effective March 18, we chose to discontinue all Applebee's national media spending and we remained on hiatus throughout the crisis. The only modest activity currently taking place is through our own postings on Twitter, Facebook, and Instagram, as well as our database activation and, of course, local restaurant signage to make our guests aware that we are indeed open for takeout and delivery. In addition, we successfully canceled 100% of our Q2 media commitments; although we certainly had access to media inventory once we decided to reintroduce national marketing. As I review the past several weeks, it’s clear to me that our guests are favoring Carside To-Go over third-party delivery, in part because they trust the Applebee's brand, they can pick it up themselves and they don't have to worry about additional third-party handling. Plus, after a bit of a prolonged cabin fever, I believe our guests really enjoyed getting out of their homes and hopping in their cars for a little indulgent escape to the neighborhood Applebee's. We're seeing this across the country. I'm also pleased to report that our first dining room reopening occurred this week, on Monday and Tuesday in Georgia and Tennessee, in accordance with local regulations and in strict adherence to safety, sanitation, and social distancing parameters as well as our new service protocols. As of this call, we're applying best practice learning before we begin a smart, measured, and sequenced expansion in Texas, Oklahoma, Iowa, Utah, Alaska, North Dakota, Montana, Missouri, and as of this morning, it appears in Nebraska we'll be opening up as well, with other geographies to be determined. It's certainly conceivable we have more than 200 full-service restaurants open next week, including dining rooms, with the cascade of additional restaurants to follow, contingent, of course, upon guidance from state and local governments. It's my expectation that our off-premise business will remain robust and continue to play a critical role in the lives of our guests moving forward. I should also note that our supply chain remains in very good shape and is poised to satisfy demand throughout this rolling cascade of openings. A quick note on franchisee engagement in this environment: we initiated interactive town hall calls beginning in mid-March for all franchisee leadership as well as the entire Applebee's team. This cascade of communication and connection has proven invaluable as our primary means of real-time engagement, strategy, and alignment. In total, we've held 17 of these calls over the past six weeks. Finally, I'd like to take a moment here to thank our franchise partners as well as our very talented Applebee's and Dine teams for their remarkable resilience, perseverance, and certainly entrepreneurial spirit throughout this crisis. It's my personal experience that these leaders often rise to the best in tough times. We become even more unified and determined as a result of this adversity, and I'm confident we'll come out stronger than ever and sooner than most folks expect. With that, I'll turn it to Jay.

Thank you, John. Good morning everyone. I hope you're all doing well and staying safe during these tough times. IHOP’s first quarter performance was significantly impacted by the effects of COVID-19 and mandated restrictions on restaurant operations, as other restaurant companies have also disclosed. IHOP’s comp sales declined 14.7% in the first quarter as traffic fell sharply in March, due in part to restrictions on dine-in service, statewide mandates for our guests to stay home, and separate restaurant closures. Since the beginning of the second quarter, we started to see consistent improvement in April's weekly sales. For the week ending April 5, sales were down 81.5%. By the week ending April 26, sales were down 75.4%, an improvement of 600 basis points. As the restrictions on dine-in service and statewide mandates were implemented, we were able to pivot quickly. I want to recognize and thank the countless team members, franchisees, and the restaurant teams who continue to work tirelessly to adapt to this ever-changing landscape. The brand remains nimble and shifted to an off-premise-only model over just a few weeks, based on state-by-state implementations of stay-at-home protocols. Additionally, to meet the convenience needs of our guests in support of safe distancing practices and ultimately do our part to help flatten the curve, we rapidly developed curbside pickup in over 1000 domestic restaurants. This new option for guests is performing very well, and we're pleased with the results. In fact, curbside pickup doubled to 6.3% as a percentage of total off-premise sales for the week ending April 5 compared to the prior week and continues to see progressive growth, increasing to 7.2% of off-premise sales the week of April 12, and 8% for the week ending April 19. Most of our domestic restaurants remain open and operate under this off-premise-only model. In doing so, we're able to help the communities in which we serve by providing guests with that brief respite from being indoors to come pickup a great meal or have the convenience of delivery right to their door. In fact, delivery sales in the first quarter of 2020 increased 57% compared to the first quarter of 2019 and now account for 39% of total off-premise sales. The restrictions on dine-in occasions were partially offset by the continued healthy growth in our off-premises business in the first quarter, which is driven by an even mix of traffic and check. Off-premise accounted for 13% of sales in Q1, an increase of approximately 200 basis points compared to the fourth quarter of 2019. We may have fundamentally reset consumer awareness of not just our to-go and delivery capabilities, but also how portable our food is as guests are becoming increasingly familiar with our off-premise platform. Approximately 80% of our domestic restaurants remain open at the end of the quarter primarily for off-premise service only with a few exceptions. As of this week, approximately 79% of our domestic restaurants remain open. We have a road ahead. Our goal is to return to a sense of normalcy and resume full-service operations when first and foremost it is safe to do so. At the onset of the pandemic, the IHOP management team acted swiftly; we remain fully engaged, working around the clock with our Dine Brands cross-functional team and IHOP internal teams. Our franchise leadership council, our franchisees, and our supplier partners as we've implemented our crisis plans. Our immediate actions remain focused on stabilizing the business. This is 80% operations-focused with two main goals: keeping our team and guests safe and making restaurants easier and more cost-effective to run under these unique conditions. In parallel, the immediate operational stabilization efforts, we’re also planning on relaunching the brand when current conditions subside. From an operation standpoint, we understand the restaurant industry will be impacted significantly coming out of this and the guest experience will be different. We know we will not return to business as usual, pre-COVID-19 going forward; more than value will be top of mind with our guests, and we're taking this into consideration when our restaurants reopen. We believe that personal safety is now up there with value and craveability, and IHOP is going beyond standard operating procedures and mandates to include more overall cleanliness. In our view, guests will have a higher level of scrutiny than ever before. Restaurants that offer the most reassurance will win when they reopen. I'm pleased to say that we have aligned with IHOP’s franchisees on what an open for business strategy is. We want to safely drive traffic back into our restaurants as soon as we can. Operational actions that we've implemented include training on coronavirus protocols to ensure proactive and reactive measures if a team member is suspected of being exposed or confirmed to COVID-19. Providing team members with CDC-recommended guidelines for facial coverings, and implementation of social distancing standards that follows CDC recommended guidelines. With nearly 1400 restaurants open, more than 1400 restaurants were opened primarily for to-go and delivery. As a means to serve our guests, we've developed a comprehensive guide for our franchisees to use to prepare the restaurants to welcome guests back to dine-in at their favorite IHOP locations as the state starts to lift the stay-at-home mandates. Some of our key relaunch tactics include this development and rollout of curbside pickups to provide a means for guests to have significantly less guest exposure to team members. We're also committing changes in the dining room such as not having items on the table until the guests arrive. These changes are being made with the safety of our guests and team members in mind. To wrap up, while we're currently faced with industry challenges, we have a strategy in place for the path forward. We believe the strength and appeal of IHOP will remain intact as guest demand ramps up once again. With that, I'll now turn the call back to Steve for closing comments. Steve?

Thanks, Jay. To close, these are difficult times, unprecedented. I strongly believe though that Dine's fundamentals remain strong. We will continue to execute against our strategy and manage the business with a long-term view. In doing so, I have full confidence we will get through this together. Now, we'd be pleased to open the call for any questions you may have. Operator?

Thank you. Our first question is from Jake Bartlett with SunTrust. Please go ahead, Jake.

My first one is on the health of the franchisees and two parts to that. I think it's one of the more in the biggest unknowns that investors are facing, so I have a concern. So one question is, could you give us any insight as to the level of leverage within the franchise system? Any kind of broad indication would be helpful. And then the second part of that question is, you mentioned that franchisees are generally able to cover their variable costs at these levels, but could you give including fixed costs at the restaurant level, what sales level or what sales decrease from normal is breakeven at the unit level including variable and fixed costs?

Yes, so obviously leverage levels are shifting. However, having said that, what I've asked Tom to do is kind of give you some insight into four-wall profitability and how we look at that at various revenue levels. So Tom, do you want to walk you through that?

Yes, normally, across those brands, our restaurants do about $6,000 to $7,000 in sales per day. Again, there's a lot of variability, but that tends to be kind of the average between the two brands. So what we notice is that an extreme stress level around $700 per day, we notice that a lot of restaurants will make it work – it is worthwhile for them to keep the doors open for off-premise with a skeleton crew. But having said that, what we're now seeing is more in the neighborhood of $2,000 to $3,000 of sales per day. And what that starts to do is at the lower end of that spectrum, it starts to cover variable costs and rent; at the higher end of the spectrum, that starts to cover variable costs and more of fixed costs. That $3,000 per day level equates to about $1.1 million of AUV for the year. And if you listen to kind of our view or franchisee financial health, that is a substantial level that, on the lower end, supports an open restaurant.

Got it. That's really helpful. And then I had a question really about the difference between the performance of IHOP and Applebee's? IHOP had a fairly robust off-premise businesses as well, kind of going into this but the performance has been, sales had fallen more and then there hasn't been as much of an increase, since the kind of trust. Maybe if you could just discuss some of the reasons for that and whether it's just particularly exposure to breakfast or anything else that's going on that we should be aware of?

Yes, so I'm going to ask Jay to fill this in. Obviously pre-crisis, Applebee's, we started earlier on bringing the Carside To-Go back, giving it a lift up over where IHOP was. IHOP’s business, though, has been growing rapidly and has seen really great growth through this crisis. Jay, want to talk a little bit in detail?

Yes, I think that we've seen great results on growth initially, patterns very similar to what John saw from a trajectory standpoint. We initially went way down but then immediately started gaining week after week consistently. As we implemented protocols in all the restaurants we rolled out curbside without much marketing, really just local marketing, and email clubs and things like that to get people to know about it. As they experience, obviously it's more amount that starting to happen, and people are learning about it. So we're growing rapidly and we're really pleased with the trajectory. I think a couple of things to remember when you compare the two brands: Applebee’s has a much longer runway of how long they've been doing off-premise, and Carsides for a decade practically. And just in the last two or three years, we've really started ramping up on the IHOP side. So I think there's a little bit of an advantage from that. And I do think, to your point about breakfast, we feel that probably is a difference in what the guests are using the meals for their. They're not working there at offices; they're staying at home. So sometimes that stopping on the way to work to get breakfast, that meal is now gone. It's a very easy meal for parents that are busy working at home watching the kids to give them cereal or toaster pastries, etc. So it's an easy meal to replace yourself if you're doing your own cooking now. So that probably has a little bit of impact, a home meal replacement if you're only going to order half, one time a day, the places that are doing dinner replacements look like they're winning more than some of the others. So, I think there's a little bit of all of that right now that's probably causing the difference between the two brands.

Thank you. Our next question is from Nick Setyan with Wedbush.

Thank you, and thank you for all the detail you guys provided today. One clarification: the comp calculation will that include the closures? And then the question is, as these stores open up, both IHOP and Applebee's, how are you thinking about in-dining sort of incremental margins? Do we see maybe cash flows turn a little bit more negative as you staff up again before the sales come up or come back? What percentage of sales given the capacity constraints early on? Can we think about breakeven within the dining room as opposed to the difference between dining room and then the off-premise only model? Are we seeing issues kind of hiring labor or do you have any sort of benefits versus wage rates that everyone has been talking about in the background? Can you just address some of those things that would be very much appreciated? Thank you.

Certainly. Let me start and then you can discuss our expectations for profitability. Our strategy is consistent across both brands and applies to both our restaurants and those operated by our franchisees. As we reopen our restaurants, we've already had some open for just two days, and it's encouraging to see customers coming in to enjoy meals and drinks. While we won't disclose exact figures now as they aren't meaningful, our team members are genuinely happy to return, and many seemed excited to be back at work. Over time, we plan to increase staffing, and franchisees are likely to do the same. There’s a specific number of staff required to operate a restaurant, which means our fixed costs are relatively low. We retained a number of managers, who will be handling some hourly tasks temporarily. Our aim is to gradually bring back staff as revenue permits. We're currently uncertain about how many people are willing to dine in at this stage, depending on local regulations. We hope to maintain high off-premise sales while gradually boosting our in-restaurant business, which we expect will enhance overall profitability. Most of our franchisees and we have been managing to cover variable costs and some fixed costs at our current sales levels. As we revitalize restaurant sales, we expect to keep covering variable costs while also addressing fixed costs more effectively. Tom has outlined the thresholds for starting to manage our lease obligations. What we lack visibility on is how many customers are comfortable dining in, and we want to avoid speculation. In the coming month, we'll learn about the entry comfort levels of the public at this stage of the situation. We are committed to ensuring safety in our restaurants, with extensive health protocols in place, such as gloves and masks for staff, and thorough cleaning procedures. In the next month, we'll observe the segments of the population that prefer dining in versus takeout, and we anticipate this will evolve over time. However, we cannot predict how quickly this transition will happen or how soon we will return to a stable level of dining activity. We’re prepared for various scenarios, whether demand rebounds swiftly or more gradually, and will manage our costs while our franchises do the same in response to revenue fluctuations resulting from the reopening. Tom, let's discuss how we can evaluate these incremental sales and profitability.

Let me ask you the question on closures: if the restaurant was closed for the duration of the week, then obviously, it's not included in comps. But another way to think about it is, if the restaurant had sales during the week, either in the prior period or this period, it is included in the comps, in this type of changing environment, as you've had some closures that happen. We're reporting these comps; I think it's a little bit more conservative the way we did it. We didn't exclude those restaurants. And so, hopefully that answers your question on closures. The second question on the incremental margins, I think Steve went through it pretty thoroughly, but another way to think about it is pointing out that the way these restaurants are staffed currently is a bit heavier on the managers. And so that is a lot of your fixed costs. So when you bring back staff, and again, we're still in the early phases of bringing that staff, that staff is for the most part highly variable as this food cost.

And Nick, this is John, I just very specifically, keep in mind, Steve said, two days of data here, but in Georgia and Tennessee, what color sample sizes, best 60-ish restaurants, all our dine-in business during those two days versus the week prior is incremental. So it will differently; our off-premise businesses take a hit when we opened up our dining rooms. And our team members, perhaps surprisingly, are very enthusiastic about coming back having not had any issues whatsoever on that front.

So regarding your question about bringing employees back, our employees were not laid off; they were furloughed. Many of our franchisees have had employees who have been with them for a long time, and overall, we tend to have lower turnover compared to the industry. Many of these situations have persisted for an extended period. There are programs in place to assist people that may affect employment dynamics. We will need to see if business levels increase and if we face challenges in bringing people back. Our expectation is that we will be able to rehire as needed based on revenue levels, and we believe there are many individuals who want to return to work. We'll monitor the situation closely, but our general sense is that, over time, we will gradually restore a higher number of employees as our needs and revenue levels dictate.

Thank you. Our next question is from Brian Vaccaro with Raymond James.

I wanted to just circle back to your earlier comments on daily sales volumes, sort of necessarily covered the variable and fixed costs. And my phone was glitching, so I apologize, but I think you said the upper end of the sort of $2,000 to $3,000 a day range. And my question is, does that materially differ between the two brands? And I guess, I ask it in the context of current sales volumes. I think some quick back-of-the-envelope math would suggest current sales volumes that IHOP are in the low one, Applebee's is sort of in the low twos and just trying to understand what type of sales improvement you need to see from current levels to stabilize store-level EBITDA at the franchise level.

So I was speaking to both brands, Brian. And you've just got to keep in mind, there’s huge variability when it comes to sales results. What I'm trying to speak to is the average in the system. We're seeing some good evidence that, particularly on the Applebee's side, people are able to get the higher end of that range, as you noted. On the IHOP side, you're starting out with lower sales volumes to start with anyway. So, we feel pretty good that the best indicator of sustainability is an open restaurant, and we're trying to encourage and help our franchisees obviously keep as many restaurants open as possible.

Okay. And I guess switching gears a little bit to the franchisee relief that the company provided. I understand it the fluid dynamics, but could you drill down a little further on say what percentage of franchisees may have received relief, whether it be royalty relief, the ad fund or rent relief on the IHOP side? And maybe as part of that, just to make sure everyone's on the same page. Tom, could you review any differences in booked revenue versus cash collections that occurred in Q1? Or what you might expect in the coming months until business conditions normalize.

So let me take the first part of that. I think it's fair to say when it's all said and done and we're still working through this with the franchisees, but when it's all said and done, most of the franchisees are going to get some level of relief from us through deferral of, as Tom mentioned in a lot of cases it could be royalties, the ad fund, but then other fees as well. I think we have looked at a 60-day deferral, and then a payback period to come subsequent to that with a little bit of grace in there. So, we're still working through that with documenting it and pulling it all together as a program. But in general, I think when it's all said and done, most of the franchisees are going to be part of that program and that's the assistance we've provided them today. And we'll look at, as that goes through, where franchisees are. As we've done in the past, we'll work with individual companies to see what needs, what if anything needs to be done to help assist them in reopening their restaurants. It's interesting when we talk to the franchisees though and we are doing it daily. There's a fair amount of, we're going to get through this with the franchisees. You're not hearing a lot of gloom and doom from our core group of folks. And they are positioning themselves for reopening. They're preparing to get back to normalized levels at some point. Both employment and revenues, they’re actually looking forward to things kind of coming back. So, I think there's a lot of uncertainty still remaining as to how long this lasts, and what's consumer sentiment about dining and restaurants, and a lot of the things that need to be experienced over the next month or two as we start seeing what patterns emerge. But I think for the most part, our sense is, you know what, I know people are tired of being at home. I think people are going to want to start venturing out more. And how many people feel good about coming out? We're doing everything we can so that people view our brands as protecting their safety. For example, all the syrup containers are gone from the tables; that's coming out in individual containers for the foreseeable future. So people know that no one's touched anything that they're touching. Everything comes straight from the kitchen. Fewer people handling, we're hoping to move rapidly to you can even pick the pay on your own device so you're not pushing other buttons. There are lots of things that we're going to do to reinforce the fact that we're doing everything we possibly can to make this a safe and great experience. As we get the restaurants open, we will want to jumpstart some of the restaurant business by starting to go back into doing some advertising and marketing. We'll work through with franchisees how to advance spend, but then collected back. We expect to be able to sort of begin to tell a new story that opens one that we're obviously doing everything we can to protect our safety. But here's a great opportunity to come into the restaurant, so we're going to continue to work along those lines. Tom, do you want to?

Hey, Brian, you wanted more details on the franchise relief program we've offered?

Yes. And just was there any deferral of royalties in the first quarter? I mean, looking at the financials, thinking about booked versus cash collections and if you could walk us through some of the more meaningful?

Yes. So it really started in March because that's when the impact really hit our franchisees. So, the way to think about it is, some portion of March between the two brands is subject to deferral. April is subject to deferral, and again there's differences in payment timings between the two brands and so one has subject royalties and fees that are offset a little bit by a couple of weeks. So, for the most part, it is March and April, and in the deferral period it is fairly substantial with the payments spread out over an extended period of time. When we benchmarked this, Brian, against other franchise owners and the restaurant industry, we found that to be one of the best programs being offered. We realized the impact to our franchisees was greater due to the dining restrictions, so we wanted to get out there with a good program to start with.

Thank you. Our next question comes from Jeffrey Bernstein with Barclays.

I have two questions. Just one, as I think about specifically the Applebee's system and the comps we're seeing and I appreciate the week-to-week color. It looks like the recovery, while it has progressed, seems like it might be slower than peers. I'm just wondering as you think about Applebee’s is most recently comp down 65% or so. I know there were some peers comping down 40% or 50%, and therefore perhaps it progressed a little more quickly. I'm wondering if there's any differences between brands or differences between initiatives that you guys have pushed versus peers, or perhaps you're being more conservative in terms of what you're offering. Just trying to get your feel for the pace of recovery and whether you think the stimulus or tax refund benefit to accomplish significant or was more modest. And then I have one follow-up.

Sure. Let me start and then ask Jay and John to comment individually. I think in general, we're looking at our peer groups. I would say that we would highlight the difference between some of their performance and ours based on marketing spend. So they stayed on the airwaves longer than we did. As we looked at whether or not we felt that the spending would justify the incremental revenue, our sense was we're better off waiting and then having strong campaigns as people are coming back and the restaurants open. Our sense is, yes, we might have some individual competitor brands that are doing somewhat better than us, but as we're kind of thinking that's going to be eradicated as we go forward and begin to market again to folks. I think we're quite pleased with the growth of what we've gotten off-premise and our hope is that we hold that level of business and add to it on a highly incremental basis, the restaurant business, in-restaurant business back. So John or Jay, thoughts?

Sure, Steve. I think just Steve hit the primary point, the difference in strategy during this highest stage, the administration went off air and discontinued on marketing. I think that's the primary point. Number two, a couple of those brands you're referencing are public companies, predominantly company-owned starting with a higher percentage off-premise mix to begin with. When you're looking at kind of off-premise sales versus year ago full sales, you'll see a delta there start with a larger base, if you will. And then a couple of those brands are very heavily run on delivery and then aggressively marketing and offering free delivery throughout this crisis. So I think those will be probably three variables that would specifically address the question you're asking.

I think I have sides very similar to something in both settings. We immediately did two weeks; we pulled our regular campaign, we were doing it. We nearly went to two weeks of off-premise campaign knowing that we were newer to the off-premise game than some of the other people we were competing against. So we wanted to see that message. So we did that for a couple of weeks and then we shutdown all the rest of the marketing outside of just some basic local marketing to save our money for later for relaunch. So very similar tactic.

Yes, and I think the other things that as we entered into the crisis, the thing that's really disappointing is Applebee's was having an amazing quarter. IHOP was doing just fine and Applebee's was just blowing on and it felt like great, now we're on the formula, like we said we were going to; we're back. Just when we thought we were going to do great, another 18% impact hit. So it's just a shame that this happened when it did. And I think that gives us confidence going forward that when we reopen, if we just keep doing what we're supposed to be doing, we'll do just fine. The Applebee's franchise group right now is very aligned. I look at these calls we have one of the benefits: the restaurant that just opened in Georgia and Tennessee; we were on a two-hour call yesterday and those geographies that open next will be on a call on Friday going into the weekend. We’re sharing best practices and nuanced detail around what to expect one time guest pulls out at the lot. So collaboration across these 30 or so franchise groups, and the same can be said for IHOP is tremendous.

And to clarify, Tom, I know you were asked earlier about the stores that are closed. And obviously constantly distorted, if you're factoring in a large number of stores, comping down 100% presumably, but just to clarify, put your comment was that if a store is closed for the week, it's excluded from the comp base, is that right?

No. So if it's closed for the entire week, it is excluded. But if it did record sales for the week, it is included for those days.

As an example, that Easter week, 850 Applebee’s restaurants closed on that day; that's in the comp number. And so there’s a far larger number that was in the comp number a year ago. And that's why that's a tough.

It's a good question to ask. All the folks that were you get a good apples to apples comparison of how they're treating their comps.

Yep. And the other question was just, Tom, I'm just wondering in terms of sensitivity. As we are still early in calendar 2020, can you give a frame of reference in terms of annual benefits, earnings, or contribution earnings from how are you looking at it, whether it's a point of comp or from a margin perspective? Just trying as we think about modeling out 2020 and 2021, a sensitivity or a framework as your comps do recover over the coming months and quarters? Thanks.

I think it's still a little too early to provide a general assessment. For comparisons, you can still refer to our previous guidelines. However, regarding guidance, as I've mentioned before, we are maintaining our cost guidance for now.

Our sense, I know, it's frustrating, but our sense is there are so many variables that could impact the recovery that we're going to have to make so many assumptions. Even that it becomes sort of a speculative exercise, and I don't think that provides value. I think if you have a view as to how the recovery occurs, I think what you should assume is our guidance would be we would run versus our competition and versus previous, based on the variables that you think are going to happen. If you think the customer is going to come rushing back and that we're going to have full restaurants in the fall, which would be great, by the way, then our numbers would be very different. If you think it's a gradual slow build in '21 before you kind of get back to relatively normalized levels, we’re not going to get into speculating because that’s all it is at this point. But let me tell you something, we were having a hell of a quarter. So it's just a shame that this happened when it did, and I think that gives us confidence going forward that when we reopen, if we just keep doing what we're supposed to be doing, we'll do just fine.

Thank you. Our next question is from Brett Levy with MKM Partners.

Great, thank you. I appreciate all of the color throughout the release in the call. And I hope everyone out there is doing well. If I could just ask a little bit of risk. I guess taking Jake’s question from a different perspective, and also just how you're thinking about when it's appropriate to spend at the corporate level and just the incremental costs that the franchisees are seeing. If you think of it this way, you've obviously talked about some deferrals and easing the pressure right now as sales are slowing. But you're also going to get to a point where there could be more off-premise impacting margins. There's going to be more incremental costs. There’s potential for incremental costs on the labor front for the restaurants as they try to marry sales and the algorithm. How are you thinking about additional aid or relief or reducing stress for your franchisees as they start to see these incremental costs hitting their P&L after going through a period where they faced challenges?

So on a gross picture, we think we've provided the assistance to the franchisees that's required at this point. And we have no plans to do anything else. Obviously, as we've done in the past, we'll work with individual franchisees if there are specific situations that we can help them that makes sense; then we will obviously continue to do that. Tom, do you want to tell a little bit about the cost picture from a variable?

The second part of your question, Brett, was on the corporate side. And so we've laid out what our cash quarterly cash G&A represented. It's actually quite the reductions. We would like right now, we're focused on supporting the franchisees with, for example, technology initiatives related to off-premise. As we see a better sign of the trajectory of the reopenings, we'll continue to bring back not only our furloughed staff as we find that demand, but also we'll be ramping back up some of our corporate investments. But for now the numbers I cited are the run rate that we plan on.

But let's be clear: the ramp up of those costs and bringing back our team members will be measured with the revenues that we're generating and collecting. So there is not an expectation that we've got a big upfront spend that we've got to do, that we’ll create the revenues. So our sense is to balance between good cost management and working what we've got. We've got a strong framework of teammates still on board. They're able to help with a lot of what needs to be done to reopen the restaurants. We'll obviously, as we reopen more, we'll bring more staff back, but we're going to do it in a way that we think matches revenue with costs. So we're not expecting to see a big spike in costs without revenues and collections offsetting that.

Well, thank you. And if I could just ask one more question about the franchise community, have you gotten a sense that there could be some movement within the structure? Are there franchisees looking to get out of a system for franchisees not being able to stay head above water after this? And how would you think about that either bringing them back into the fold like you did with Applebee’s system or other consolidation within the system or from outside the system?

Well, so clearly our goal is to retain as many of our restaurants as we possibly can. This obviously has the potential to create some change. We have all of that at our disposal and we will continue to do that. We have the ability to bring those restaurants in-house. We have the ability to bring in new ownership for those restaurants. At this point, we're carefully working with all the franchisees. We're monitoring carefully where they are from a liquidity standpoint and matching with their cost structures in their debt. The good news is we've been doing this for quite some time, so we're actually in a good place with our franchisees about working and sharing data back and forth so that we can help. In some cases, it'll be assistance on an individual basis to serve the franchisees. In some cases, it may mean us taking over; in some cases, it may mean us facilitating restaurants, going to new ownership. We expect some pickup in that over the next several months. We don't really have at this point, the ability to say, "Oh yeah, we're going to retain 99% of the restaurants and we're going to be able to add some more." The one thing that's clear is that this could also create some opportunity because there are some things on the positive side that we haven't talked about, and that's the inventory for our categories is going to decline. How much, I've seen lots of guesses, but we'll see. So, there would be less competition. That's a good thing. The ability to pick up on some conversions may pick up, and so we've got, it's too early for us to see net-net what we end up with in terms of overall inventory if we tried to look towards the middle of next year. But we'll get more knowledge and more awareness of where we are and what's available and what can we save and what won't and what does that do to our net restaurant ads for the year, that's all kind of going to play out I think over the next six months, and we'll see how that goes. I think we'll be able to give you a much better, clearer picture I think probably as we get into the fall.

A couple of points there, just to add on Brett. This is John. Our franchisees acted very quickly — I'm talking right on March 15 to preserve cash. They took actions, committed furloughs, and those that decided to temporarily close closed almost immediately. As I mentioned, we were at about 250 temp closures; we're at 175 today. That number is rapidly declining, and every time I talk to our franchisees, they intend to reopen the ones that are temporarily closed, and they're anxious to do so.

So thank you again for your time. Obviously, it’s just unprecedented set of events that we're facing. However, I will tell you that I've been proud of the team and the way that they're operating, our franchisees and what they're doing, not only to preserve their businesses and their jobs for their team members, but also what they're doing in the community. Their stories are overwhelming sometimes, when you hear this. So, it's one of these things. I've been in this business almost 40 years; I've never seen anything like it. But I've been through a number of things that had some of these characteristics and we always came out the other end and that's our expectation. So, I hope everybody stays safe and we'll look forward to talking to you in the future when we've got a lot more insight into where things are going. Thanks.

And with that, ladies and gentlemen, we conclude today's program. Thank you for participating. You may now disconnect.