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

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

Well, thank you, Mark, and welcome to everyone listening today. Since the beginning of the pandemic, our priority still remains unchanged. We are focused on taking care of our people and serving food in an environment to protect both team members and customers, maintaining a motivated, well trained and engaged employee base that is committed to providing a safe dining experience which is critical to our long-term success. The decision not to furlough any employees during the pandemic reinforces principle and it enabled us to retain a very engaged workforce. This is paying off and has been a big part of our success in driving results ahead of the restaurant industry throughout the pandemic. It is clear that customers want to come back to restaurants, and they are confident in our ability to provide a safe and welcoming dining experience. Our dining rooms across the country continue to maintain elevated safety measures, including additional sanitation and disinfecting practicespractices as well as contactless payment options for consumers. This hard work has been recognized by our customers and in several reports. In August, Black Box released the Restaurant Guest Satifaction Snapshot where Fleming’s Prime Steakhouse was ranked number one in food and number one in service. In addition, three of our restaurant concepts were ranked in the top five in intent to return. And a recent Newsweek magazine survey recognized the best customer service in casual dining. Bonefish Grill was ranked first, and Outback was ranked fifth in the same survey. We do not take this recognition for granted, and I appreciate the hard work our operators do each and every day to earn it. I would also like to thank everyone in the restaurant support center. Each of you do a great job supporting our award winning restaurants. Across the U.S.…

Thanks, Dave and good morning everyone. Before I discuss our Q3 results, I want to provide some perspective on recent sales trends and how we are successfully navigating the current environment. We began the process of reopening our dining rooms in early May in accordance with state and local guidelines. As of yesterday, 99% of our company operated restaurants have dining rooms opened, some with a level of reduced seating capacity. This is up from 92% at the time of our last earnings call in July. As Dave mentioned earlier, we are continuing to employ elevated safety measures in the restaurants to ensure our consumers feel welcome and safe. Restaurant capacity continued to increase during the third quarter, and we have seen varying results across the country. For example, in Florida, restaurant capacity was recently increased to 100%. And as of this time, we have not seen a commensurate increase in sales in certain parts of the state. Tampa and Jacksonville are responding well and seeing weekly volume increases, while more tourist centric areas like Orlando and South Florida are relatively soft. Conversely, we are seeing good sales gains in states such as Georgia, Tennessee and Texas, where we have a large presence. We will continue to closely monitor these key markets as the year progresses. In terms of overall sales performance, U.S. comp sales were down 12.8% and have improved steadily over the past several months. For perspective, U.S. comp sales in September were down 7.9% versus down 24.3% in June, this positive momentum was driven by in restaurant sales growth, while maintaining strong retention of our off-premises business. At Outback, comparable restaurant sales were down 10.4% in the third quarter, and experienced sequential sales improvement every month, with comparable restaurant sales down 7% in September. Our across the…

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

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

Sure, yes. Good morning. Yes, we do see the opportunity to improve sales, the balance of the quarter. And as I mentioned, our sales so far in Q4 have outpaced the industry, and our revenues are building each week. Why is that? More people are coming in the dining room, and we're holding on to our off-premises sales, which have been, very, very helpful. So, we're going to continue to try -- obviously, it's our objective to, to do that as we move forward. And then when we get to the really, really high Christmas holiday season, we would like to fill the box up as well within a proper safety and regulation environment, right. But we've got different day parts different days of the week. And we've got a really great off-premises business and catering business that we hope to use as well, Jeff to build our sales week to week to week. The only thing that I think Chris mentioned was last couple of weeks when you have a really high holiday season; you've got the comp lap there, but again our job and our goal is to continue to build revenues week-to-week.

Yes, Jeff. And I would just add to that. In a typical year, weekly volumes really step up the last three weeks of the quarter, particularly in December, and our restaurants get pretty full. But it's important to keep in mind; we still have fewer seats in our restaurants now than we did pre pandemic, so that just creates some sort of artificial limit to in-restaurant volumes. And so we just think it's much more constructive to pay attention to absolute volume changes, because comp sales results can -- and the percentage change can get a little bit get a little bit different -- difficult to assess. The other thing I would add, you mentioned the winter season and the winter weather, it is important when you talk about things like outdoor dining, it is not a material driver of our overall comp story. And the majority of our outdoor seating is located in the southern part of the United States, and the cooler weather actually helps outdoor seating in the majority of our restaurants. So, I think that we feel good about the levers we have in place heading into the holiday season. We just want to make sure people were aware of just some of the inherent constraints that we have.

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

Yes, sure. So first of all, let me say by -- we are really a big supporter of the restaurant industry. We don't want to wish any ill will on any independent or any chain. But yes, there have been independents that have struggled. And yes, there have been some chains that have struggled, and we are very well positioned to gain share, to pick up sites. We haven't seen a whole lot of that yet, but we are well prepared on a market-by-market basis to move forward. And we would intend to take share and come out in an even stronger position. And when you look at it, you look at our off-premises business and our dine-in business, both are very well positioned for the future.

Great, thank you.

Thank you. Our next question comes from the line of Brett Levy with MKM Partners. Please proceed with your question.

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

Yes, sure. First of all, we’ve captured a lot of the efficiencies through outdoor, some of the outdoor dining work we've done, which Chris talked about the partitions we built, etcetera. And Chris can get in some of the capacity and things if we need to follow up on that. But, it varies a little bit by state. I mean, clearly Georgia, Texas, Tennessee, etcetera, are doing really well, and we’re seeing good results out of those markets. And then our -- like I mentioned before, our off-premises business is continuing to do really well, and we’re holding on to that incrementally. So, we are prepared to operate in a very safe environment and take advantage of capacity as things expand.

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

Great, thank you. And I know you -- I know Jeff had asked this. Can you give an order of magnitude at least in terms of what kind of market share you've taken? Because obviously 850 basis points in the third quarters is a solid number. But there's a lot of room between positive and taking share, and 850 basis points backs.

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

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

Thank you very much.

Thank you. Our next question comes from line of John Ivankoe with JPMorgan. Please proceed with your question.

Hey guys. Well first, I mean, I've been asked this question very directly, maybe you can give a direct yes, no, or answer or just tell us what the number is? Can you quote in October U.S. company system number for us? I mean, everyone we're, you guys have obviously you kind of had to start this because of because of COVID. And I do understand, kind of sequential increases, and in average, average weekly sales? Is should we -- is it a number better than September? Or can you provide a hard number before I ask this next question.

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

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

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

Well, that's what -- that's why I'm asking you that one. That one, there's your two different data sets. And secondly, you have more updated numbers than we do, so that's why I just wanted to make sure that we were all on the same page there as we set the critical fourth quarter expectations.

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

Okay. All right. That's good. That's fine. And then Dave, obviously we have -- and I apologize for wasting my make wasting my words on that question. We've obviously talked a lot about kind of costs over time, and how, the overall organization, is kind of evolving both from an overhead perspective, from a data from a technology various types of support. Can you kind of get give us a, not necessarily, good quantitative, but kind of qualitative view of how that's going and specifically talk about how, how you might be able to make better decisions faster going forward?

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

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

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

Okay, enjoy. Thanks, guys.

Thank you, John.

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

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

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

Yes, and not to overly repeat what Dave said but to give you a little more quantification and specificity. We felt good about our ability to grow margins coming into this year pre-COVID. Not only because of what we learned. This isn't just because of what we learned during the pandemic. We had talked about the $20 million of identified cost savings, heading into 2020. And we called out with that an 80 basis, point improvement in operating margins and our original 2020 guidance. And then we call that another $20 million of cost savings for 2021 that had been identified. So obviously, the original plan for 2020 was put on hold due to the pandemic. But that $40 million of cost savings is still intact. Now on top of that as Dave said, we've learned how to be more efficient our operating model. And so if you kind of go line by line, I'll give you a little bit of perspective on how to think about some of those things. It's all going to start with sales for us where we are generating say our sales with less discounts, that's showing up in check average. We've not needed this discounts in this environment to drive traffic. And that is improving the margins and the flow through. I think there's learnings there for us moving forward. Cost of goods sold clearly is the biggest area where we've seen improvement in terms of our margin structure at the restaurant level. And a lot of that is driven by waste reduction. Waste was a major priority pre pandemic. But due to the simplification efforts that we're seeing, and the better execution, the less re-cooks all that, we are absolutely confident that level of that's going to continue. Labor is the biggest area…

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

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

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

Thank you.

Thank you. Our next question comes from line of Alex Slagle with Jefferies. Please proceed with your question.

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

Yes. So it's funny you mentioned that. So the 30.1% cost of goods sold that we posted this quarter. We were trying to go back into our history books. This we think is the lowest cost of goods sales number that we have ever posted in the history of our company in a quarter. And it has a lot to do with the fact that the simp between the simplification -- first of all the efforts that I talked about, the things that we were doing pre-pandemic in terms of reduction of waste. And then the additional learning from the simplification efforts in the menu, that's driving a significant amount of favourability. And then the other thing that I did briefly mention is that we are seeing higher check averages. And a lot of that is a reduction in discounting. We're just -- I know we've been on this journey for discounting for a while. But the reality is that we still had some level of discounts in our system. And right now we're just not doing discounting aside from just the discounts that you'd see through our dine rewards program. So on top of that, those two big positive variables. The only downside really is just a slight unfavorability from commodity inflation, but it's been pretty mitigated as well, we've been pretty -- we've been running more favorable in commodities in the last couple quarters than we thought we were going to coming into the year. So just that perfect storm of great execution by our teams in the field, as well as discipline here in the Restaurant Support Center has driven that number to that level. And you had another question, Alex, was it on just over restaurant that [Indiscernible]?

Yes. Restaurants run rate.

Yes. I think the way to think about that is that as -- should volumes continue to improve, obviously, there is a pickup there when you get to restaurant margins. But it is entirely dependent on the level of volumes and volumes continuing to increase throughout the quarter.

Got it. Thank you.

Thank you. Our next question comes from line of Brian Vaccaro with Raymond James. Please proceed with your question.

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

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

And June is a five-week period.

And June was -- yes, that's why I'm comparing it to June, because June is [Indiscernible] period as well.

Yes. And you had said June five-week period. I'm trying to remember I think you said it was in the mid 13s, if memory serves, store margins in June?

That's right. That's right, Brian, 13.5%.

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

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

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

Sure, what we're going -- we can say is our goal, and as we have seen is our -- we don't want our volumes to hold on a weekly basis. So we want them to absolutely, absolutely build. And as Chris mentioned, the last two or three weeks from a seasonality standpoint, that's the Holiday Season, and we want to take advantage of catering and off-premise and things like that to build the restaurant -- to build that restaurant volumes up. Chris, is there anything else you want to add?

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

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

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

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

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

Fair enough. Thank you.

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

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

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

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

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

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

Yes. And I would say if not -- I'd say, just one thing to keep in mind as you're thinking about modeling and things like that. This year a lot of that was G&A. In fact, the vast majority that was G&A. Next year, it might be a little more split between restaurants and the G&A structures.

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

Thank you.

Thank you. Our next question comes from line of Lauren Silberman with Credit Suisse. Please proceed with your question.

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

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

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

We have seen no impact from these -- any cases, resurgence in markets. Our goal is to safely serve customers as dining capacity expands in markets. And we talked earlier about achieving our day part opportunity, our channel opportunity, delivery, carry out and dine-in and our day of the week opportunity. So we're going to pursue all that. So as capacity expands, but we also can control and learn and grow from different channels as well.

Great. Thanks so much.

Thank you. Our next question comes from line of Jon Tower with Wells Fargo. Please proceed with your question.

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

Sure. The most important thing for us are the markets and we anticipate all of our restaurants to participate in the Tender Shack rollout, should we go that far. The Carrabba's team, as I mentioned earlier, has been doing a fantastic job in off-premises. The Outback team is rolling out a new menu. And therefore, we felt that the Carrabba's team was the best place to start. And we want to pick markets that. We're very well represented and get a good read going forward. But we're -- like I said earlier, we're very pleased with the results.

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

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

And thank you for that. I appreciate it. And then just quickly turning to the balance sheet and uses of cash, obviously, it sounds like reinvestment back in the business is going to be a top priority. But I am curious; your debt levels are obviously higher than they were pre-pandemic. And I'm curious to hear how quickly you think you can start paying down debt or perhaps your priorities in terms of debt pay down relative to reintroducing the dividend at some point in time, and/or reintroducing a buyback?

Yes. So what I would tell you is that every tenant of the strategy that we laid out in February as it relates to our long term thinking about how to drive total shareholder return is still in place in my mind. It's just been delayed by the pandemic. And it's just really comes down to a question of when we can get back on that journey, which to your point included a heavier dose of debt paid down to get our credit metrics where we were comfortable with them. It involved increasing the dividend. There were a lot of tenants to that we felt really strongly about. And obviously investors agree with that as well, the way that the shares performed after we announced that. So look, it's about getting back to that. Now to your point, there is a pacing and sequencing to get to that. We are in a situation now where we are going to focus on debt pay down in the short term and get the debt levels to an area at a comfortable level before we turn back on a dividend. Don't know the timing of that. I mean, again, that is largely dependent on the length and duration of the pandemic. But our focus, and again, we've been generating positive cash. We have been paying down debt as we've been getting cash flow coming into the business. So that has been the priority thus far now. And we also keep in mind, we do have -- because of the revisions to our credit agreement, we have a capital expenditure restriction through Q1 of next year. At that point in time, I would expect us to reinvest a little more in CapEx, but not -- look, we're not going to go back to spending capital like we were three or four years ago, where it was like $250 million to $300 million. Those days are behind us. So what I can tell you though is, we're going to be opportunistic, if there are opportunities with real estate or what have you, we're going to be armed and ready to take advantage of those opportunities. But I think that going back to the large levels of capital spending are behind us, the focus will be on debt paid down. Ultimately, we would love to get that dividend back in place as well.

Awesome. Thank you.

Thank you. Our next question comes from line of Greg Frankfort with Bank of America. Please proceed with your question.

Hey. Thanks for the question. Maybe just one quick follow-up to that last one. I think it's probably - it's very difficult to figure out the timing of when you can get your leverage down. But is there a number or targets that you have in mind for where that would go to? Then the other question I had was, can you talk a little about the off-premise mix. I may have missed it. But does any quantification for where you stand recently in terms of off-premise mix or delivery mix and how that business is going? Thanks.

Yes. I'll start with the first one. So we've always talked about a three times lease adjusted leverage ratio being our target that we think it makes a lot of sense for the company. Obviously, we're not at that right now. But over time, that's kind of where we would sort of shoot for two to get for the long term. And then I'll let Dave answer the other question.

Yes. If you look at our off-premise mix, which is carryout and delivery, it's 39% of the business with -- in Q3 with Outback and Carrabba's being a bit higher than that and Bonefish and Fleming's being lower. And like I've mentioned many times, we're very pleased what we see both within our own delivery channel and our third party partnership.

Got it. And maybe one last follow-up on. You talked a little about some of the food efficiency that you guys been doing. Any quantification on how much the food waste has come down? Or how much sort of gains or efficiencies you found there? I'm just trying to think of how much of this has been inflation or deflation in commodities versus efficiencies you guys have taken out on the food waste? Thanks.

Yes. It's a big number. I think just to give you perspective on waste. We always talk about waste as a percentage of sales historically in the 3%, 2.5%, 3%, sometimes higher or lower, depending on the concept. We've got that down below 2% in a record low levels, which is fantastic. I would tell you that if you translate that to the P&L improvement that we saw in Q3 and cost of goods sold, it's probably worth 80 basis points, the waste factor alone.

Thank you. Appreciate it.

Thank you. Our next question comes from the line of Andrew Strelzik with BMO Capital Markets. Please proceed with your question.

Great. Thank you and good morning. My first question is on Tender Shack and Aussie Grill. I'm just curious how you're thinking about resourcing that at the corporate level. Is that really a reallocation or is there maybe some incremental spend there, obviously, within the context of the broader margin improvement, opportunity? And kind of how that trends over time if and when these brands scale? And if you could share at all, I know, you don't want to talk about the sales and margin side. But if you could just share kind of how the customer for those brands compares to some of the legacy brands?

So, on the organization front, we've always had our best success, when we have people dedicated to that effort, both at Aussie Grill, and we've got a team dedicated to it at Tender Shack. We've got two terrific leaders in our company that are leading the way on it for us that owned it. And they're working closely with the Tender Shack case, especially working closely with the brand. So we -- and it's all within the context of the numbers you've seen. So, we've got our G&A, and we've been able to introduce these two new opportunities. And it's been really good to see. And it's an opportunity for us over the long term. As far as the customer goes, we think it'll be a younger crowd. And somebody that we've seen people order single, and we've seen people, we offer to large groups, we've seen both. So early days, but we see a large attractive customer base to it and different types of occasions.

Great. That's helpful. And then my other question is just on the labor environment. Can you talk a little bit about what you're seeing in terms of retention and turnover. And in the event that we get an increase in minimum wage, kind of what the implications and levers to offset some of that would be?

Sure. Our retention and turnover levels are really, really good. And we have a very experienced and engaged employee base. And I think the decision that this management team made to not furlough or let people go is really paid off as the in-restaurant dining came back, we were prepared and ready to go, and our team has been very grateful for what we've done, and you could see in our turnover levels, at all levels of the company, managing partner, managers, team members, etcetera. A minimum wage, I think there's one thing, we don't know where the policy is going to go. There's one thing that I think we've demonstrated during this time is we're a very fluid, flexible organization. We'll be ready for whatever comes to fruition. A very large majority of our employees make a buck $15 an hour. So we'll be ready. And we'll be ready to address it and move forward.

Okay. Thank you very much.

Thank you. Our next question comes from line of Sharon Zackfia with William Blair. Please proceed with your question.

Hi, good morning, Just two questions on International. What would be the breakeven call for that business to inflect back into profitability? And then secondarily, just curious on dine rewards. How has that been trending during the pandemic? And have you seen any kind of uptick on dine rewards members as a percent of the transactions or sales?

Yes. I'll turn over Chris in a minute on the International piece. And maybe that's more of a Brazil question than anything else, but because that's where we have our operations. But it's -- a Dine Rewards, it's up to 11.5 million members, it's extremely valuable entity for us, our customers, our Dine Rewards customers are doing -- are coming in, they're loyal. We are marketing to them. They're a great source of information. And like I said before, we've learned a lot in our digital marketing, and Dine Rewards is part of that. And that's something we're going to continue to work with as we go forward, especially as we source more revenue. It's been a really terrific program we introduced a few years ago, and it's been very helpful during this time.

Yes. And I just on the on the Brazil question. I would say, look, we talked about the U.S. business a couple quarters ago in terms of the breakeven where we needed to be and it was like in that 20% sales range, 20% down sales range. I can't imagine there'd be too much different then that in Brazil, maybe even a little better than that. They could do a little better than that number in Brazil just given their volumes. And again, they're already generating positive cash flow, which is fantastic.

Thank you. Our next question comes from a line of Jared Gerber with Goldman Sachs. Please proceed with your question.

Good morning. Thanks for taking the question. Just two quick ones from me. I wanted to get a sense of what you guys are seeing in the Carrabba's business? And why that -- why the results maybe have been so strong there? And what makes it sort of more applicable with the off-premise side of the business. And then a follow up on potentially Fleming's and Bonefish, is that somewhere we could see, maybe some either some more pressure or potentially less acceleration as we move into the fourth quarter, just given the sort of the dynamics of the business related to potentially more business travel or holiday gatherings. Thanks.

Sure. I'll take both of those. On Carrabba’s, hats off to the team. I mean, they've done a great job on off-premise. Obviously, they have a food form and pasta and other things that travel well. But having been in the pizza delivery business myself for many years, it's also a mind-set and a culture that they've built. And they've done a great job with that. And we think that this brand is going to benefit more than any other one, as far as the off-premise opportunity. So it's, that's the reason why. I mean, I think it's got affordable price points on off-premise. It's got the food forums, etcetera. On Bonefish and Fleming's, like the other brands, we're seeing growth in in-restaurant dining. The Fleming's team, especially is doing a great job. And, we see the consumer coming back into the restaurants at Fleming's. Now, obviously we don't have some of the private dining and some of the business travel that we had before. But if you look at some of our sales trends during the week, there are days that in a safe environment are just doing really, really, really well. And we have high hopes during the holiday season we can provide Bonefish and Fleming's to the customer in their home or at the restaurant in a really great way. So that's part of our sales revenue bills that we've seen so far this quarter, and we expect in those two brands to continue to grow that business. And then when the -- when the customer, the business traveller comes back, there'll be a layer of business that Fleming's doesn't have today that they're going to be able to add back on. But Fleming's has done a great job during this time, providing customer service and great food and we're seeing in the numbers.

Thanks so much.

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

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

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