Greetings and welcome to the Bloomin’ Brands Fiscal Second 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 is 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 second 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 performance. 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 second 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. Our priorities remain unchanged as we continue to navigate these challenging times. We are focused on taking care of our people and serving food in a safe environment that protects both our team members and customers. The investments made over the past several years to enhance the customer experience and rapidly pursue the emerging delivery opportunity have been critical to our success in navigating this pandemic. At the onset in March, we were able to quickly pivot to an off-premises-only business model as dining rooms were forced to close. The rapid growth we experienced in off-premises sales allowed us to keep substantially all of our locations open during this time. Starting in May, states began the process of partially re-opening their economies. Our decision not to furlough or layoff any employee during this pandemic has allowed us to quickly prepare our restaurants to re-open dining rooms in a safe and efficient manner. As of July 19, 2020, almost all of our U.S. company-operated restaurants have reopened with limited in-restaurant dining capacity. During this time, we continue to maintain elevated safety measures including additional sanitation and disinfecting practices, using gloves and facial protection for our employees, as well as contactless payment options for our customers. In addition, dining room seating configuration has been modified to adhere to social distancing and reduce capacity standards. Customers have responded in taking notice of these additional safety measures. This has translated to improving demand, as overall weekly sales have consistently increased since dining rooms reopened. At Outback, for the most recent week ending July 19, comparable restaurant sales were down 10.7% versus the prior year in locations that have reopened with limited in-restaurant dining capacity. Importantly, these locations are also maintaining a high off-premises mix…

Thanks, Dave, and good morning, everyone. Before I discuss our Q2 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 this morning, 92% of our company-operated restaurants have dining rooms opened and effectively all of these locations are operating with some level of reduced seating capacity. As these dining rooms have reopened, we have seen steady improvement in the same store sales results throughout our portfolio, while we were operating with an off-premises only business model in late April, our combined U.S.-comp sales were down approximately 50%. Over the last few weeks, our combined U.S.-comp sales results have been down between 17% and 19%. Importantly, over the last 3 weeks, we have been able to retain over 50% of the off-premises volumes that we built while our dining rooms were closed in April. We are pleased with the improvement in our sales trends as well as our ability to maintain a significant portion of our off-premises growth. Recently, there’s been an escalation in COVID-19 cases, particularly in states such as Florida, Texas and California. We are paying close attention to developments in these states, especially Florida, where we have 21% of our company-owned restaurants. To this point, the increase in COVID cases has not had a material impact on our Florida comp sales results. Month-to-date July comp sales in Florida have been roughly in line with the balance the system. In addition, we have seen little change in Florida trends from where we were in June. We are seeing similar trends in Texas. In California, where we have a large Outback franchise presence, as well as 20% of…

Thank you. At this time we’ll be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question is from the line of Jeffrey Bernstein with Barclays.

Thank you very much. Good morning.

Good morning.

I had 2 questions; 1 question, 1 follow-up actually. The question just being on the restaurant margin, you talk about the relative resilience and the low-single-digit positive margin despite the quarterly U.S. comp down 40%-ish. Just wondering if you can give any more color on the greatest area maybe of relative strength. And if the comp stabilized at the current, I guess, you’re running down in the teens levels, what do you think is the appropriate restaurant margin, whether you can share sensitivity or perhaps what was the comp in margin specifically in June, so we have a frame of reference? Obviously, the comps swung wildly through the second quarter, so it’s hard to assess. But if you can give kind of a current status in terms of what the margin would be on the relative comp, that will be great. And then I have 1 follow-up.

Yeah, we’ll dig in and figure out what the P6 margin was. We can give you that perspective. But what I would to tell you, Jeff, is our goal, the efficiencies that we saw, certainly in P6, our goal is to retain as much of that efficiency as possible as we move forward. We learned a tremendous amount over this time period about ways that we can do things more effectively, more efficiently. A lot of it was driven by the menu simplification work. That’s absolutely something we want to preserve moving forward, that’s going to help in cost of goods sold in terms of waste reduction, and it’s going to help in labor in terms of fewer prep hours. So those areas are absolutely key focuses for us. The other big toggle that when you look at the restaurant operating expense line is your marketing expense, and And I think that we’re just going to have to play a wait-and-see approach as it relates to marketing. Obviously, if we have high ROI ideas related to – that we feel are worth pursuing, we’re going to invest marketing dollars behind those. But right now with the restaurants at limited capacity, they’re fairly full. We don’t feel the necessity to really invest a lot of marketing dollars at this point in time. But moving forward, that could change. And obviously, that could change our perspective on how we invest marketing dollars. But if you look at the P&L, certainly in Q2, the marketing pickup, the $23 million we call out in terms of marketing expense efficiency is a big, big driver. In terms of P6, restaurant margins were 13.5%. Last year, it was 16.1%. So obviously, we made a lot of progress there. Now, again, keep in mind that as you think about P4, P5, P6, there are some changes in terms of fixed and variable costs because P6 is a 5-week period as opposed to 4-week periods that you’d see in the other periods.

Got it, but the idea that period 6 had a 13% plus restaurant margin, and comps are seemingly in line to a little bit better than that now. It’s not unreasonable to assume you could sustain a double-digit restaurant margin in the back half of the year or is that something very unique to P6 where you’re likely to see restaurant margins pullback meaningfully?

Yeah, look, I think at these volume levels, we’ve obviously proven that we can generate positive cash flow in this environment, but I think a lot of our go-forward profitability is going to depend on what fixed costs come back into our business, and we talked about marketing, but other things like training expenses, travel expenses, things that maybe hit a little below the restaurant margin line, those are all things that we have to weigh in terms of when we bring those things back into the fold. And as the situation improves, we’re going to evaluate which of these levers, if any, we will deploy throughout the year with the goal being that we’re going to set ourselves up for success when we emerge from this pandemic.

Yeah, I think, Jeff, what it really points to is what a terrific job our team is doing. If you look at the change in sales trends, obviously, consumers want to come and enjoy in-restaurant dining. So, you see the improvement in sales trends during the quarter. You see the off-premises business continuing to do well, and you see a corresponding improvement in profitability. That’s what we hope to do the balance of the year, and our team is doing a great job getting that done.

Got it. And then my follow-up just on that exact point, being in New York, we don’t see a lot of people keen to go out for in-restaurant dining, but I get the impression a lot of markets are different. So, Florida and Texas specifically, I know you talked about capacity reductions really having a minimal impact on the overall sales trends, which is very encouraging. I was wondering whether there’s any incremental color on that or maybe other states are seeing some pressure with the press on the broader infection spike across the U.S. or, like you said, maybe you just don’t see the slowdown because you’re still at limited capacity. And therefore, the demand is still exceeding the seating capacity even though there might be some signs of a consumer pullback. Any kind of color on that would be great.

Yeah, Jeff, what we’ve learned is when you open appropriately with in-restaurant dining in a clean, safe environment for consumers; you offer the food that we offer and the service that we offer, people want to come on our restaurants. And Chris mentioned on the prepared remarks that the sales trends were good in Florida, Texas. There hasn’t been an appreciable change. Our team continues to do a great job in the restaurants, providing a great environment for our customers. And people want to come in and enjoy some dining. I mean, it’s clearly what we’re seeing. And so, we hope to continue to see that going forward. We’re certainly going to do our part to provide a great environment for our customers and our employees.

Yeah. And just a little color on the geographic trends that you brought up. I think generally speaking, states that opened up early have outperformed, Tennessee, Georgia, a lot of the states that have outperformed have been in the south. We actually had 129 restaurants across the portfolio post positive comps this past week. And over half of those were in the south. The Midwest is also doing pretty well candidly, Ohio in particular. But to the point you raised, the Northeast does remain challenged. Certainly as in-restaurant dining has been slower to resume and in some cases, not even reopened yet. And then the other thing I would call out is what we called out in the prepared remarks in terms of California, the closure of those dining rooms, certainly from a company-owned perspective, and Fleming’s is having an outsized effect on the comp.

Understood. Thank you very much.

Yeah.

Our next question is from the line of Sharon Zackfia with William Blair. Please proceed with your question.

Hi, good morning.

Good morning.

I guess, I mean, it’s been really impressive to see how quickly Outback, in particular, has rebounded in its comp trends. I’m just curious as you think about the components of the business and how seating capacity is impacting results. Where are the hurdles for your 4 concepts in kind of getting back to pre-coronavirus levels? So like for Fleming’s is alcohol a big component that you can’t recapture? I’m just trying to figure out like how far you can go in the current environment, because it’s been very impressive, but I’m not sure how much further low-hanging fruit if there is any left?

Thank you, Sharon for that. Yeah, we do believe we can go further in the current environment. What we have seen is the capacity constraints on the weekends during higher volumes, right? That will hold us back a little bit. So we’ve seen some of that. Our beer, liquor, wine mix is not quite as high as it once was. But we’re working very hard on that. But I look at the ingenuity of our people. I’m thinking about in particular Fleming’s Prime Steakhouse and what they’re doing with outdoor dining, what more things we can do with our marketing programs. We’re really leaning hard into digital, and we’re learning a lot. That’s helping us on marketing. So, Sharon, I guess, the main point is what we’re trying to lean forward is, we’re trying to lean forward in keeping our large share of our off-premises business. We’re trying to really plus up our digital marketing efforts. We’re trying to be nimble like Fleming’s is with their work in dining, in in-restaurant dining. And I think our hurdles are the capacity on the weekends and then rebuilding our beer, liquor and wine mix.

I guess just delving a little bit further on Bonefish and Fleming’s, which have been lagging a little bit, can you give us some perspective on what percent of Fleming’s business is typically business related? And then, for Bonefish, is there anything in particular you’d call out? I mean, is it, generally, used for more celebratory experiences and we’re just not seeing as many of those currently or why do you think Bonefish has lagged Carrabba’s and Outback?

Yeah, well, I think the main thing there is they’ve done a fantastic job getting your off-premises business going, which really didn’t exist prior to the pandemic. But it’s still – their share of off-premise business is still less than what you’d see at Outback and at Carrabba’s. In addition, it’s a concept that enjoys a robust alcohol mix in their business and we haven’t been able to build that all the way back. But when you look at in-restaurant dining, which gives us so much heart, the Bonefish team is doing just as well as the other casual dining brands in their in-restaurant dining performance. On Fleming’s, I don’t have off the top of my head how much is business dining. But I know the team is working very hard to kind of rethink that. And one of the things that’s been a really cool innovation is, they’ve had some success with virtual Fleming’s dining, and we’ve done some of that. So it’s – they’re really trying to innovate around the core share.

Yes. Thank you.

Thank you.

The next question is from the line of John Glass with Morgan Stanley. Please proceed with your question.

Hi. Thanks very much. Good morning.

Good morning.

Chris, you had mentioned this, there was a cohort of Outback that were positive. I can’t remember the number maybe you could just remind us. But what’s different about those stores, for example, those ones that don’t have in-dining capacity restrictions, or is there to-go business just outsized? Or did they – were they creative about outdoor seating in other places? What’s different about those restaurants that allowed them to actually comp positive?

Well, I think, what we’re finding, John, is great restaurants are great restaurants. And they get sales gains in-restaurant dining, they have a very strong and loyal customer cohort. And they’ve done a fabulous job on off-premises. Okay. So it’s not like the ones fighting against the other, both are building. And as a result, you have a situation where both things are working at the restaurant, the managing partner is doing a fantastic job and you’re building sales even with some of the restrictions that are going on. So it’s really partner-driven in the history of the restaurant driven more than anything else, John?

Yeah. And just to follow-up with the numbers, John. So it’s 129 restaurants across the U.S. concepts. So Outback, Carrabba’s, Fleming’s, Bonefish, 105 of those 129 locations are Outback Steakhouse locations.

Okay. That’s helpful, incremental. And can you just remind us what is that to-go business in dollars and the average weekly sales of the Outbacks are like around $60,000, so – with the dining rooms open? What is the dollars for the to-go business and how is that trended over the past 4, 6 periods as you talked about them maintaining 50% of the prior to-go business?

Yeah. Let me give you some perspective on kind of how we think about the progression of those numbers. So if you go prior to COVID, we were doing about $10 million a week in total off-premises sales. And then obviously, we shifted to an off-premises only model in March, and obviously, those investments that we’ve made and that have paid off in a really big way. We tripled the off-premises business, and it peaked at about $32 million a week in off-premises in April prior to the dining rooms reopening. So now, obviously, we have 92% of the dining rooms back open. We – this past week, we did $23 million in off-premises dining on $52 million of total sales. So that mix right now is about 55% in-restaurant, 45% off-premises.

And I just want to add, if you look at business like Carrabba’s and I was talking to the Carrabba’s management team yesterday, enjoyed that call, our managing partners and everything. I mean, the investments we made off-premises, the carryout, the delivery business, that shift is going to stay that is something that’s going to stay with casual dining. People enjoy our food and the fact that we’ve been able to make these gains during this time, the investments that we’ve made have really paid off for our company.

Great. Okay. Thank you.

Sure.

Next question comes from the line of John Ivankoe with JPMorgan. Please proceed with your question.

Hi, thank you so much. And having been outside of Nashville last week, it was great to see how busy with the Outbacks, in fact, actually were in that market. So the question is really on simplification broadly. And you did kind of highlight your menu simplification work, less waste around COGS, your prep hours around labor, and obviously, less marketing. I understand that most of that is going to stay, but my question is how much more you have to go? Is there more that you can do on the menu? Is there more that you can do around not just reducing hours around prep, but actually changing some of the structure of both the back of the house and the front of the house of really reducing the number of labor hours on a given level of your customer transaction versus what you’ve done before. In other words, what inning are we in terms of this menu simplification work actually driving further margin improvements relative to what you saw in June and July. Thanks.

Yeah, John. One of the things that we’re trying to do as a company is emerged from the pandemic as even stronger, more focused company. And the work you’re talking about is spot on. I can get into details, but I can tell you that Outback Steakhouse, for instance, we’re doing work on menu back of the house and things very proactively, because we like what we see. And we think we can offer consumers the choice that they want and need in a great environment, even in a more profitable way, because of some of the menu simplification work we’ve done, because of some of the labor scheduling that we’re looking at and because of some of the equipment work that we can do. But I don’t want to get into more details than that, because it’s the work is underway. But it’s going to happen in all of our brands. And we’re using this time to aggressively move forward on that, because I think you make an excellent point.

Thank you.

The next question is from the line of Alex Slagle with Jefferies. Please proceed with your question.

Hey, thanks for the question. I hope everyone is well.

Yeah. Thank you.

If you could talk to strategic opportunities to invest further in your off-premise business and leverage this demand, if there are any developments you can speak to whether procedural changes or changes in equipment or restaurant layout to enhance your capabilities?

Sure. Like I mentioned earlier, it’s a big opportunity for us that we’re capturing and we’ll continue to capture. I think you have to look in a few different fronts. Number one, you have to make sure at your restaurants are set up for success. So to-go rooms making sure the assets are laid out to delivery and everything else. That’s number one. Number two is, our digital marketing efforts and our partnerships with third-party providers in our own work is really underway and we’re very happy with our partnerships with our third-party providers, and we’ll continue to work through that. Number three is, we don’t want to wish misfortunate any restaurant company, but there will be changes in the restaurant footprint and we’re going to have a chance to reposition assets, relocate restaurants, which was so successful for us prior to this, but there’s going to be more opportunities. So we’ll be able to put our restaurants in a more convenient place, the more updated restaurants. We’re certainly going to pursue that. And then on the operating front, I know, all of our brand leaders are thinking very carefully about how they can think through even provide even better delivery and to-go service and their labor models. I think those are the things that we’re doing to make sure that this is really top of mind. And I just think it’s also a mindset. I spent a number of years in Pizza Hut delivery, and yes, they have a mindset about doing delivery and stuff. And I think our team – our Outback team, in particular, has done a fantastic job of retaining their in-restaurant sales and also getting the incrementality coming out of the off-premise business. So those are the 4 or 5 things that we’re doing right now. And that we’re also going to position ourselves strongly for the future, because it’s very clear. Our consumers want our food in their homes, or in the restaurants. We’re going to be ready to do both.

All right. Thank you.

The next question comes from the line of Brian Vaccaro with Raymond James. Please proceed with your question.

Thanks, great to reconnect with you guys. I want to ask about capacity utilization and what measures you’ve taken to address occupancy limits? And, I guess, have you installed plexiglass barriers? And how much is that benefited utilization? And could you also comment on what measures you’ve taken to optimize outdoor dining?

Sure. 3 or 4 things, Brian. Number one. We look at table turns, right? We don’t want to rush anybody on the restaurant, but we’re with capacity constraints. We’re very – we have measurements against that. We take a look at what’s going on there. Two, the plexiglass is in place appropriately in our restaurants. Three, outdoor dining is clearly in place and we’ve got some great pictures from our people doing some really creative outdoor dining things. We’ve got a restaurant up in Chicago, for instance, the Bonefish Grill, it just is doing an amazing job in their outdoor dining. Having – with the dining room is virtually closed, they’re doing volumes even higher than what they were doing prior to all this. So those are the steps we’re taking measuring times – table turnover times. We’re doing something to the asset and plexiglass, and we’re doing some things with outdoor dining, all the while conforming to local state safety standards, making sure things are clean and our customers and our employees feel safe.

And the other thing that I would add to that is that as we have migrated on this journey. We’ve been slowly reintroducing lunch back into the equation as well. So when you think about it, capacity utilization also includes daypart utilization. So putting lunch back into the mix is an important part of that puzzle as well.

Okay. And I wanted to circle back to Florida as well and the recent trends there, obviously, encouraging to hear. It’s holding up relatively well. But I was curious, if you crack down into the dine-in versus off-premise, are you seeing dine-in dip more, but a pretty meaningful channel shift over to off-premise? Or is dine-in also holding up relatively well?

Yeah. They’ve stayed relatively stable. There hasn’t been a whole lot of migration to off-premises. It’s small, if anything.

Okay. Okay. And last one, just on G&A in the low $50 million range here on an adjusted basis. Is that a decent run rate to expect going forward? Or are there maybe additional savings opportunities on your radar? Or perhaps we could see it tick up a little bit from here as compensation or other dynamics normalized along with sales.

Yeah. It probably makes sense to give you some of the relative components of the Q2 G&A. So you can get some perspective on kind of what sticks and what doesn’t. So to your point, there was about $19 million of favorability year-over-year in G&A. There are 2 buckets that you probably want to break that down into. In February, obviously, we laid out the anticipated $20 million of cost savings that we’re going to benefit our 2020 results. Most of those savings are going to hit in G&A. So those savings are all on track. In Q2, we had nearly $11 million of benefits related to those efforts. And so $5 million of that we talked about, which was the cancellation of the managing partners’ conference. You had about $2.5 million of lower professional fees and legal fees, and then you had lower compensation expense as we work to reduce our overhead that was about $3.5 million. The conference expenses and the professional fees are largely isolated to the second quarter. But I think you can expect the compensation benefits to continue throughout the year. The other large bucket of G&A savings related to efficiency gained during COVID. So specifically, there’s probably about $7 million in total related to reduced travel, reduced meetings expense, lower training expenses, and then lower compensation expense. So it really depends in terms of those expenses on a go forward basis. How long this pandemic carries on because the longer that we’re able to see some of these efficiencies in meeting expense and travel expense, obviously, that’s going to benefit our G&A numbers moving forward as well. But at some point in time, as this business continues to normalize, those expenses will be reintroduced back into the business. So some of it, for sure, the $3.5 million, I think, is absolutely safe to say, it’s going to continue. But beyond that, it really honestly depends.

I think the other thing I’d add, Brian, is we’re learning a lot during this time about our cost structure and everything. So we’re – we’ve made some really great progress starting in February, and so that continues, so more to follow on this as time passes.

All right. Thanks very much. I’ll pass it along.

Thank you.

Thank you. The next question is from the line of Jeff Farmer with Gordon Haskett. Please proceed with your question.

Good morning, and thank you. Just a couple of quick follow-up questions. So what is the off-premise sales mix breakdown between curbside pickup, in-house delivery and third-party delivery, so across all three of those channels? And how should we be thinking about the relative margin performance across all 3 of those channels?

On the margin side, they’re very attractive, not as attractive as in-restaurant dining, because we don’t have the high alcohol mix like we do potentially in some of the restaurant dining. But, Jeff, that’s clearly where the customer is going and we’ve got some very favorable third-party contracts, and we do a great job doing our own delivery. So we’re very pleased with the performance of sales and profit performance out of that channel.

Yeah. And on the mix, we’re – we’ve seen a steady increase in delivery as an overall mix of the total off-premises sales, and in particular, third-party delivery. This most recent week, just as an example, and it’s fairly reflective of what we’ve seen over the last month or so. To-go is about 55% of the overall mix, in-house delivery was 13%. And then you had 30% was third-party. So obviously you can see that’s massively increased as we’ve been turning on that that lever and we’ve seen customer behaviors change a little bit amid this pandemic.

And those percentages are a percentage of our to-go business.

Percentage of the total to-go business. Yeah. So [indiscernible] to-go.

Understood. And that makes perfect sense. Thank you for that color. And just one more. You guys did touch on it. But can you provide more color on Brazil, as it relates to sales recovery prospects in coming months? I realize you don’t have the so-called crystal ball, but just in terms of thinking about what the back half of 2020 is going to look like. And then more specifically, what average unit volume or same-store sales recovery level would be required to get that segment back to or that country, at least, back to breakeven restaurant level margins.

Yeah. They – their PR team are doing a great job down there. The Sao Paulo and Rio has opened back up with some restrictions, more restrictions in Sao Paulo and Rio. And then, we’ve seen a stair-step increase in sales gains. And don’t forget that they had a relatively small delivery and no carryout business. It was all – they basically have mall-centered business. And malls in Brazil are different, just as a reminder, everybody than in the U.S. It’s much more of an entertainment place and things where people go. But we’re seeing the pickup in in-restaurant dining. And as more restaurants get added, they go state by state as well. As more restaurants get added and the restrictions get less onerous, we will see a pickup in sales. Now I think, Jeff, as we all know, that will depend on how the – how and when the restrictions are lifted and how things move forward. But the team is clear. Like in the U.S., the customers in Brazil want to come back in the restaurants and enjoy our dining.

Yeah. And the only thing I would say just in terms of thinking about profitability moving forward. They do a larger volume in those restaurants than we do here in the U.S. So they’re a little more efficient in terms of leveraging their fixed costs. So I would imagine that the sales that they would need would be less than what you would need here in the U.S. to recover and get back to profitability.

And I just want to – as Chris mentioned in his remarks, but importantly, we have not had to make additional cash infusions on Brazil and nor do we believe given current trends, we see making any more cash infusions for the foreseeable future. They’re standing on their own.

All right. Thank you.

Our next question is from the line of Lauren Silverman with Credit Suisse. Please proceed with your question.

Thanks so much for the question. Following up on the off-premise composition, you talked about the 50% of off-premise sales gains being maintained. Is there any difference in the to-go versus the delivery occasion in terms of how we should think about the sustainability of the occasion?

No, it’s – they’re both – they’re – all of them are holding up. That’s clearly our goal. And we talked earlier in the call about the steps we’re taking to make sure we can achieve this while restaurants open up.

Okay, great. And then are you willing to share where your dine rewards membership is in the quarter and then any changes in the strategy regarding the leveraging of technology within the restaurants going forward?

Sure. Dine rewards is over 11 million members. It grew – it’s growing more rapidly during this time than did prior to this. It’s a very successful program. It’s something that we’re going to continue to support. And also think through how we can take it forward. I think our digital work that we’re going to be doing will be a big part of that. And we keep the customer information, we have a lot of information with that. And we’re very pleased with the program and the investments that we’ve made. And we’re going to make it even better watch this space.

And any changes to how you’re going to leverage in-restaurant technology, whether it’s the in-store tablets or anything that you’re giving to team members in a big way?

I think we always look at our POS device to see if there’s something there, but – and we’ve done some of the – yeah, we’ve done some of the contactless payments and things, right. That’s all there. But I don’t see anticipate additional big investments in tablets and things. But I do think that, for us, I think where you’ll some big, big progresses in digital marketing and the technology behind that.

Great. Thank you so much.

Thank you.

Next question comes from the line of Brett Levy with MKM Partners. Please proceed with your question.

Great. Thanks for taking the time for the question and sharing all the information. So you glossed over this briefly earlier, when you were thinking – when you were talking about some changes to your portfolio. But could you delve a little deeper into how you’re thinking about the current portfolio, not just in terms of brands. But also in terms of the existing units that you have what needs to be done structurally at these units? Are you having conversations with landlords, either about the existing rents or that future projects and what that could mean for your unit economics going forward? And then when you think about where you are now, do you think you still need to pare down additional units? When do you think returning to unit growth makes more sense? Or do you think optimization is probably something we think about for 2020 and 2021? Thanks.

Yeah, sure. So I think for us, the biggest opportunity, I mentioned earlier, is the new unit relocation opportunities, especially at Outback Steakhouse. There’s going to be opportunities in the marketplace. And we’re very well positioned for that. I think everybody who’s listened to these calls over the years now, our relocation program is very successful, and we anticipate that going forward. As far as optimization of assets, I think, Chris, and the finance team, along with our real estate team has done a really good job staying on top of anything that needed to be closed or addressed. I really don’t anticipate much in that area. Going forward, we’re very pleased with our portfolio. Now I think that the Outbacks business in particular is an opportunity for us as we get into beyond this pandemic to grow it. Secondly, we are doing work with our landlords. As of June, we were paying rents with no issues or anything. But we are taking the opportunity to restructure leases and reduce our cost structure. And we’re pursuing that with some gusto, and our team is doing a wonderful job there. So Brett, there’s a cost saving opportunity. And then there’s an investment opportunity behind relocations, new units, et cetera.

And if you think about just furthering on what you said about some of the structural moves, what percentage of your system do you think needs significant overhauls to make off-premise much more seamless? And do you think that what percentage of the portfolio do you think has the – really the box and the bones right now, where that makes sense and how much of it has to be adjusted or relocated or just something that you’ll just have to work through the current infrastructure? Thanks.

Well, we we’ve worked very hard. This delivery thing is not new. This is 3, 4years old. And so we’ve worked very hard at making sure our assets were in their construction to make sure that we can deliver and have carry-out. Now, we can always make it better. And that’s one of the things I mentioned earlier about looking at relocations or looking at bump outs and things. But, for us, there are very few restaurants that need major structural changes to achieve the delivery and carry-out opportunities we have. And you see that in our numbers. I mean, you see that in the sales gains we’ve seen. Now, before all this started, we had identified up to 100 Outbacks that could be relocated for many different reasons, better dine-in, better delivery, newer assets, everything else. And so, we’re going to pursue that, like I mentioned earlier, with a great deal of determination. But I can assure you that the asset configurations we have today can achieve those sales volumes in delivery and carry-out, otherwise we wouldn’t be seeing those numbers. We’re going to continue to improve that though going forward.

Thank you very much.

Our next question is from the line of Matt DiFrisco with Guggenheim. Please proceed with your questions.

Thank you. I have a little bit of a follow-up there. I guess, just want to be clear also, as far as the success you’ve had in the to-go business and delivery, off-premise, and aggregate, is there anything in there as far as promotional activity that you’re doing that might be considered less aggressive going forward? Or you’ve already begun to dial it back from maybe earlier on in those higher peak levels? Or is the sort of a 50% of – holding those 50% is sort of in a comparable promotional environment? And then I have a follow-up.

Yeah, the…

Yeah, the only thing that I would note is that certainly at the outset of this we were doing free delivery, certainly our in-restaurant or do-it-yourself, we were doing free delivery early on, or migrating away from that now. The other thing I would say is that when you look at the third-party aggregators, new users or the first time visitors can get that free delivery option. After that, they’re paying a delivery fee.

Okay, and then, sort of just a follow-on to that, focusing on that 55% overall to-go, especially the ones who are doing a pickup at your store, I realized there’s no alcohol. So the check is going to be kind of funky. But if you look at the entrees, is there anything there that you can see as far as reading into that consumer? I guess, historically, people have thought of delivery as maybe a higher income occasion. Are you appealing to you think, as broad of a demographic in off-premise as you are historically have in the in-store? So, relative to your historic in-store demo, how do you think that off-premise demo compares; higher/lower/in-line as far as a household income basis?

Sure. What we’re seeing is expand the channel. We’re seeing the to-go business, people that use our own delivery service or use to-go, tend to be your more traditional customer. You could see when they order and what they order, et cetera. And the great thing is we have all this information. And then, when you look at the third-party people, the order sizes are a little bit smaller. They come at different times. So obviously, we’re reaching a new consumer. And so we’re – that’s the part that we’re so excited about as far as the opportunity to leverage that going forward as restaurants continue to reopen. So, Matt, I would say, basically, in summary, people that use our existing systems either to-go or in-house delivery tend to be our more usual customers, and the people that use the third-party aggregators are some of our newer people in our business.

But is that third-party aggregator, is there anything that tells you that’s a less value-oriented customer? Can you tell that from what they’re ordering, as far as entrees or is it too hard to tell?

The main thing is just the party sizes are a little bit lower, but the mix of the menu and everything we can’t really see a difference.

Yeah, that’s right.

Excellent. Thank you so much.

Thank you.

Our next question comes from the line of Jared Garber with Goldman Sachs. Please proceed with your question.

Good morning and thanks for the time. I just wanted to jump in and talk about a little bit of the new marketing and digital enhancements you guys talked about. Can you just discuss some of the things you’re thinking about in terms of that more targeted digital marketing? I know you guys saved a little bit over $20 million this quarter in reducing that. But how are you thinking about shifting that, those dollars into this more targeted digital marketing spend?

Yeah, we’re looking very carefully at the vehicles and also the targets. And we’re getting more and more granular every day to improve the return on investment, and making the offers that we make much more targeted and importance to people that want to use our products. And that enables us rather just a mass advertising blowout, this then enable us to target that consumer, offer the opportunities, and that inherently increases our return on investment. And so for us, like Chris mentioned earlier, us, we’re going to fund the ideas. If it’s got a great return on investment, we’re funding that. And so, there’s no cap per se on the advertising piece as long as we get the returns that we’re looking for. But we’ve made a pretty big investment in digital. We’re going to make even more and make more progress in the months and quarters ahead.

I appreciate the color and if I could just, with one follow-up, on the menu simplification, can you give us any additional color on, maybe some of the items or the buckets of items that you’ve removed from the menu? Is it primarily appetizers? Is it entrees? Is it sides? If you could just give a little bit extra color or context to how the menu simplification process has gone, that would be really helpful. Thanks.

Yeah, it’s lower mixing appetizers, lower mixing entrees and lower mixing sides, and really plussing up the stuff that we do so well and really doing a great job on those things. I mean, that’s what we’re trying to do here. And so that’s – and that’s benefited us tremendously in the restaurants.

Yeah, the big thing and – that’s right. And the big thing that I would say too is that when we look at menu simplification, a lot of it has to do with the prep-work that goes on before the item gets served. So the prep-work in the back of the house, taking hours out of that, simplify the menu has been a key, key focus of the operations teams as they think about what items to add back to the menu as we exit the pandemic.

Thanks, appreciate the time and congrats on the acceleration in the business.

Well, thank you, appreciate that.

Our next question is from the line of Andrew Strelzik with BMO. Please proceed with your question.

Hey, good morning. Excuse me. Just following up on some of the efficiency commentary, are you able to kind of give us an order of magnitude of how much better you think margins would be at, say, prior peak versus before? And then, the other question that I had, in terms of the off-premise business that you’ve not retained, have you been able to diagnose kind of who those customers are? Are they shifting to dine-in? What’s going on with that cohort? Have you been able to kind of dig in on that? Thanks.

Yeah, sure. I mean, as restaurants reopened, people are using our restaurants in a dine-in environment and maybe not quite as much delivery or to-go. And we expect that and we welcome that actually. And to keep the percentages that we’re keeping is very, very gratifying. On the margin piece, our goal, prior all this starting, was to pick up a couple of hundred basis points in margins. We were well on our way to do that. These efforts that we’re taking are going to continue to help us move along our way. And the sales gains we hope to achieve. The market share gains, we’re achieving. The cost management that we’re doing, at both the overhead level and in-restaurant. And we’re going to emerge a stronger, more profitable company with really great sales opportunities that we’re pursuing right now.

Okay. Thank you very much.

Thank you.

Our next question is from the line of Gregory Francfort with Bank of America. Please proceed with your questions.

Hey, thanks for the question. I had one follow-up and then a question. Just on the simplification, do you guys look at it in terms of either SKU or menu items? And can you, I guess, frame up how much you take it out during COVID? And then, the other question I had was going back to the check, what’s been going on with pricing? I guess, have you been cutting or rising pricing any differently in COVID? And as you come out of it, I guess, what are you thinking about doing there? Is a customer – because you’re having a lot less seats in the restaurant, you can push pricing a little bit harder or is – I guess, I’m just curious, any philosophical thoughts? Thanks.

Sure. Our intention is not to push pricing. Our intention is to win, providing great service, great food, at a great price. And I think we’re achieving that. And as we look at the menu mix items, we cut it back by a third or so, maybe a little bit more than that. And we’re going to add some back here, as we reopen back up. And I think we’ll be very thoughtful about that. And the team has done a really good job in test marketing and consumer reach. And so, you’ll see us not at the levels that we once were. We’ll be at lower levels, but we’ll be higher than what we are today.

That’s helpful perspective. Thanks.

Thank you. At this time, I’d like to turn the floor back to Mr. Deno for closing remarks.

Well, thanks for attending the call today. We appreciate the questions and look forward to speaking with you in fall. Thanks again, everybody.

Thank you, everyone, and this will conclude today’s conference. Thank you for your participation. You may now disconnect your lines at this time.