you know, that comps are trending positive in the quarter. I think your guidance, the full year guidance implies positive comps in the quarter. So do you expect comps to continue to remain positive? Is that correct as far as the full year guide is concerned?

Yeah, I think it'll be somewhere around flat to slightly up.

Okay. And just my follow-up, Mark, you talked a lot about strategies, simplifying the menu, reducing marketing complexity. You're taking the promotional calendar down from three to two. And that sounds like it makes sense, but it also sounds like that gives you less opportunities to drive the business potentially and create frequency and accelerate sales. So can you talk about the balance approach you're taking here between simplifying the business and driving traffic?

Well, yeah. Well, first of all, thanks for the questions, Brian. But I think the simplification for us, we see as a positive to drive business because it'll allow us to focus on what matters most. And I think part of our challenge in the past was we had so many things to execute that we didn't do a great job really on anything. So the whole idea of simplification isn't to eliminate, it's to focus. And we believe the result of that should be positive.

Your next question comes from the line of Sarah Senatore with Bank of America. Please go ahead.

Hi, this is Aisling. I'm for Sarah. Just on franchise level margin, it's now expected to be around $265 million. Can you help us separate the impact from closures and real estate sales from the underlying pressure in the franchise business? And, And, you know, as those actions normalize, you know, what do you view as the right base for franchise-level margin going forward?

Yeah, so I can give you kind of the breakdown, for the quarter anyway, on the closure impact. So the closure impact was about $1.5 million. We haven't, year to date, sold a significant number of restaurants to franchisees. So you won't see any material impact of that on our franchise-level margin. um but that could change going forward i want to say we sold about four restaurants to franchisees so nothing material there but the biggest drivers are obviously the closure program and the lower sales driving franchise level margin lower obviously the franchise level margin is variable based on sales so when we see the uptick in sales start you're going to see that flow through to the franchise level margin great thanks um my follow-up is on digital just can you update us where digital and delivery economics stand today you know are these channels still driving profitable incremental sales there's you know there's still some kind of work to do

there thanks so overall this is Rachel by the way overall our digital percent of sales is around 22 percent for the quarter in terms of the overall economics there's still a lot of work to do I would say to make sure that every transaction is profitable through those channels we're working very closely with our franchisees to make sure that it makes sense for their business as well as for ours and I don't know if you guys want to add anything about digital strategy but that's kind of where we sit today yeah I think one of the things we'd like to do on digital is not be so promotional but be more brand specific be more engaging with our customers and bring more exciting

products, not just promotional. So I think you'll see the strategy slightly evolve from where it's been, which will also help drive profitability.

Yeah, maybe just one thing to add back to your franchise level margin question, just to help you build your model. We've said that for each closure, franchise closure that we have for an underperforming restaurant, it impacts our franchise-level margin by about $80,000.

Your next question comes from the line of Dennis Geiger with UBS. Please go ahead.

Great. Thanks, guys. Mark, I wanted to ask a high-level question about the five key priorities that you outlined to drive the consistent same-store sales growth. Helpful color on the priorities, as well as a rough sense of sort of what the timing looks like on those priorities, it feels like. But just wondering if you could share a bit more on maybe where you think some of the lower hanging fruit within those priorities lies, as well as maybe where there's a little bit more of a heavy lift among those priorities?

Yeah. So, first of all, we spent quite a bit of time with our franchise partners over the past couple of months, really identifying what are the key fundamentals that we have to be better at and that's really where those five priorities came from it was not just us but we had a three-day off-site with the leadership of the franchise group and really focused on we've got to know our consumer better we've got to understand what they want and we have to be able to deliver that quality means everything that we touch from the restaurant to the food to the prep to the packaging even to the team members because we'll we'll be launching new uniforms next year. The look and feel of the restaurant. We have a refresh program going on right now that is really starting to take off. We've got more than a quarter of the system have signed up for just in a couple of weeks. And then ops excellence. And I think this is the one that's probably the most challenging to get consistency at all of our 2100 doors. And our ops team has done a lot and will continue to do a lot. We have field ops people now out training we have franchisees that are welcoming the different training programs that we have and consistent follow-up in the restaurants but that is a that's a broad one because the back of house is a little bit different in each rest not in each restaurant but in quite a few models that we have so we want to bring more consistency to how we deliver the experience to the consumer they're all underway. There's different groups working on all of them. But to me, it's the ops excellence and being consistent throughout the system, which is a real coordination between us supporting our franchisees.

Very helpful. Thanks, Mark.

Your next question comes from the line of Brian Mullen with Piper Sandler. Please go ahead.

Thank you. Just wanted to ask on the store closure comments earlier you know thanks for the update of your 4q expectations understood this might extend into fiscal 27 could you just expand on that a little bit what's the disconnect between what the pace you were expecting to see versus maybe the pace the franchisees are doing this yeah so i i think we've said that the closures have have occurred at a slower pace than we had expected um and that's due to the lease obligation that remains once the restaurant is closed.

Sometimes that burden is more than the loss they incur for operating the restaurant. That being said, we have hired a third party firm to work with us on exiting the leases. They are currently working through the list of restaurants prioritizing and up and running. So we do expect that that closure rate will accelerate. We do think, just based on overall profitability, if you think back to when we announced Jack on Track, we said we needed to close about 150 to 200 restaurants. Since then, we've obviously had four more quarters of same-store sales losses. So we are reevaluating our closure program as a whole. I think the restaurants that we didn't close in 26, you can expect to carry forward into 27, and I would expect elevated closures to continue into 28.

Okay, thanks. And then can you just give an update on the Chicago market? You know, last call you talked about starting to see some positive signs on the top line, which is good for margins. And then related to that, do you want to own that market long-term or find a partner?

Yeah. so Chicago we did see improvements on the labor and food and packaging lines so that was good news we did turn on digital in that market and that provided some pressure to the middle of the P&L with the digital fees in our newer markets digital sales are a higher sales mix and obviously those are less profitable just because of the digital fees that you have to pay I will say that AUVs for Chicago are running under company averages. I think when we went into that market operational execution and core leadership has impacted sales but going forward we have a new VP in market who's been focusing on the people and bringing the right leadership we believe to turn the market around. He's also very financially focused and looking on controllables and we're starting to see that impact the margins there. So good news there. I think as we progress with the stable leadership in place, we're going to gain more traction in that market. And I'll say that as far as long term, our plan has always been to seed that market and franchise it. But right now we're just focused on getting the market to where it needs to be.

Thank you.

Your next question comes from the line of Logan Rick with RBC Capital Markets. Please go ahead.

Hey, good afternoon. Thanks for taking my questions. I just wanted to ask on the same-store sales improvement quarter to date, just if you can help us understand what the biggest drivers of those are and then what you think the biggest opportunities you guys have in the near term on same-store sales growth for Q4, and then I go follow.

Yeah, so as we started Q4, we entered our Philly cheesesteak window. As I noted in the prepared remarks, we pulled that window up based on the underperformance of our Hot Ones window. That has provided a really good balance between premium and value. The chili cheesesteak has a very strong center of the plate offering combined with strong add-on products in our soft and loaded wedges. So I think what you're seeing with this window is that our dollar-by-all strategy is balanced and it's really working. And as a result, as I mentioned, the sales trend is positive. We're seeing stronger check and traffic, and we're benefiting from that. So we think this is a really good window and indicative that we're on the right marketing strategy. As we end the year, we have a window at, I think it starts the last two to three weeks of the year a very exciting collab that we have that we're looking forward to so we really see that this momentum is going to continue great that's helpful and then just curious if you saw any impact from the uh world cup in in q3 as a lot of the games are in some of your core markets thanks yeah so i'll say we did see a benefit in our core markets that hosted um especially in the LA market, and it was a decent lift for a few weeks, but nothing that provided a significant lift for the overall system for the quarter.

Very helpful. I appreciate the call.

Your next question comes from the line of Jim Sanderson with North Coast Research. Please go ahead.

Hey, thanks for the question. I wanted to go back to the visits you've made to stores and the discussions you've had with franchisees. I'm wondering, how are you giving those visits, looking at labor and staffing levels amongst the franchisee store base? Is that where they should be, or is there further investment that has to be made in order to execute on a new marketing or product development program?

No, I think the labor model is fine at this point. The issue really is sales. It's not labor. Labor looks bad because sales have declined, and I think really we're running at a pretty low labor rate. And I don't think the execution is about more investment. Right now, it's just doing fundamentals. And I think that old saying of less is more, and that was to an earlier question. We just need to pick a few things, which we've done together, franchisees and us together as the franchisor, and said we need to win in these four or five key areas. And if we do that, we can start to build some positive momentum. I think we're all aligned. We just had this great conference a few weeks ago where we rolled out these five initiatives and everyone aligned behind them, and we're all, you know, holding hands as we move together and execute against these strategies. So I think we're in really good shape, and, you know, the things that we pick do not require more investment.

All right. Thank you for that. I just had a quick follow-up question on the store margin guidance. I think at 16%, what is the most important step down as far as fourth quarter goes, what we should be watching for to get to that level for the year?

I'm sorry, on the 16.5%, I think, yeah, yeah, I think it's Chicago. I think that that market, if you take Chicago out, our restaurant level margin would have been 18.5%. So those restaurants do impact our consolidated results. So I think Chicago is going to be something to watch and something we're watching internally to get to where we think we need to be or where we plan on being.

Thank you very much. I'll pass it on.

Your next question comes from the line of Arian Rosian with Guggenheim. Please go ahead.

Hi, thanks for taking my question and congrats on the progress. It looks like the competitors are upgrading their chicken and beverage platform. What are your thoughts and expectations on that front? Are you anticipating any major upgrades there? Can I have a follow-up on menu simplification?

Yeah, I think – is it Arian? Is that – Yes, yes. Nice to meet you, Arian. Look, I think beverages is a big opportunity, and everyone in the space is looking at beverages. We have a very good beverage platform. platform. Our shakes are amazing. I think it's about doubling down on what we have in terms of that. Chicken is the protein of choice right now, and we have to innovate in chicken. Now, we've got great chicken offerings right now, and so to me, it's more in this menu reimagination. It's how do we focus on, and that would be some of the core products that I would be focusing on, which would be beverages, specifically our shakes, and how do we do a better job around chicken, and a lot of that, I believe, is going to be how you see it visually on the menu board, which we're working on. So those are big opportunities, and, you know, as everyone else is looking at them, we need to look at them, too.

Yeah, and I'll just add a couple things, you know, on drinks. One differentiation is the access that we have to our partners and our products and the innovation that we put into them. Our Red Bull infusions are a strong example of that, and you can continue to expect that we're going to build on that platform. And then as far as chicken, we've improved the quality of our chicken over the past year, but we do have some room on quality perception, so we'll continue to work towards that.

Got it. Thank you. And on menu simplification, I just want to make sure I understand. Are you considering a noticeable decline in the SKU count as you're in on what moves the needle for the customer?

I think there will be a small reduction in SKU count, but the menu simplification is really not about eliminating products. Some will go because some really carry no sales with them at all, but it's really more about how we lay it out and how it needs to be easier for the customer to look at the menu board and not get panicked and be able to pick their meals or their favorite items with a little bit more ease. and that's really what it's about i'm actually we're in our boardroom right now and i'm looking at a couple of these examples which are pretty pretty awesome uh so we're excited to get into that in 2027. that concludes our question and answer session i will now turn the call back over to mark king for closing remarks hey everyone thanks for joining today um we got a lot of work to do here but we're excited about it and uh we'll uh talk to all of you soon thanks for joining Ladies and gentlemen, this concludes today's call.

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