Dine Brands Global, Inc. (DIN) Q3 2014 Earnings Report, Transcript and Summary

Good morning, and welcome to the Third Quarter 2014 DineEquity Inc. Earnings Conference Call. My name is Brandon, and I'll be your operator for today. [Operator Instructions] Please note that this conference is being recorded. And I will now turn it over to Ken Diptee, Executive Director of Investor Relations. You may begin, sir.

Good morning, and welcome to DineEquity's Third Quarter 2014 Conference Call. I'm joined by Julia Stewart, Chairman and CEO; Tom Emrey, CFO; and Gregg Kalvin, Corp. Controller. Before I turn the call over to Julia and Tom, let me remind you of our Safe Harbor regarding forward-looking information. During the call, management may discuss information that is forward-looking and involve known and unknown risks, uncertainties and other factors, which may cause the actual results to be substantially different than those expressed or implied. We caution you to evaluate such forward-looking information and the context of these factors, which are detailed on today's press release, as well as in our most recent 10-Q filing. The forward-looking statement made are as of today, and assumes no obligation to update or supplement these statements. We may also refer to certain non-GAAP financial measures, which are described in our press, and also obtained in DineEquity's Investor Relations website. With that, I'll now turn the call over to Julia Stewart.

Good morning, everyone, and thank you for joining us today. This morning, I will review our third quarter performance highlights and provide a recap of the progress at both IHOP and Applebee's. Then I'll turn the call over to Tom for a summary of the financial results, I'll then close with a discussion of our capital allocation strategy. We've got a lot to cover this morning before we take your questions, so let's get started. By now, you've read our Third Quarter Earnings Press Release and Dividend Declaration Press Release. We've delivered another strong quarter. Adjusted earnings per diluted share increased $1.14 from $1.10 in last year third quarter. We continued to generate strong free cash flow of approximately $45 million, of which $14 million was returned to shareholders in the form of a third quarter cash dividend. Year-to-date, we generated free cash flow of roughly $95 million and returned a combined total of nearly $73 million or 77% of free cash flow to shareholders in the form of dividends and share repurchases. We've also made good progress on our international growth strategy. I'll provide more details on that shortly. Now, let's review the third quarter performance of our 2 brands. I'm pleased to say that same-restaurant sales were positive for both IHOP and Applebee's. Our strategies are having a positive impact. To build even stronger partnership, we held our 2 franchise conferences this month to meet with our IHOP and Applebee's franchisees. I'm pleased to say that both meetings were successful and we continue to have very strong alignment with all of our franchisees. Turning now to IHOP's results. IHOP same-restaurant sales were positive for the sixth consecutive quarter. For the third quarter, domestic systemwide sales increased 2.4%, supported by solid performance from our 3 new signature dishes that showcased IHOP taking innovation to the next level. I would also like to point out that sales were positive across all day parts for the third consecutive quarter. IHOP continues to significantly outperform the family dining segment, based on industry sales and traffic data, which is a testament to the hard work and dedication of both our brand team and our franchisees. While we are pleased with these results, we are not going to be complacent. There are still more that we can do to sustain our current momentum. I challenge the team to work aggressively on differentiating IHOP as much as possible. Their hard work and dedication have yielded some real wins, such as the new menu design, understanding our consumers better than ever before and significantly improving in restaurant operations. We will continue to think boldly and build on our achievements. Our ability to do so, will be aided by our recently completed comprehensive segmentation study, giving us very specific insights into which target segments are the most relevant to drive sales and traffic, what our target guests want us to do differently, what motivates consumers to visit our restaurants and how we can entice our existing guests to return more frequently. Now let's switch gears to Applebee's. Applebee's domestic systemwide sales increased 1.7% in the third quarter, representing the second consecutive quarter of positive sales. Importantly, sales were positive across all day parts. Delivering consistent and sustainable positive sales and traffic is imperative to long-term success. Here, too, our segmentation study has provided us with valuable information into what needs to be done to achieve our goal of not just retaining our #1 position in casual dining, but building an insurmountable lead. As I've said before, we have very strong alignment with our franchisees. They are enthusiastic about the road ahead and the 5 key pillars of our reset strategy. And just to refresh your memory, they are: achieving operations excellence; being #1 in brand perception with our target segments; delivering day part strategic growth; providing a personalized experience; and defining the Applebee's of the future. We've refined our new menu positioning and developed a pipeline of new items, which we expect to roll out in 2015. We're adjusting our media strategy to better communicate with our target segment and we have a strategic road map with a long-term vision for the brand. We're working to ensure that our external initiatives are aligned with our new consumer insights. Now turning to our international expansion of both brands. We've completed much of the foundational work in research to enhance our value proposition for our international franchisees. The team has completed the largest international research project to date, and developed a robust, long-term strategic plan for growth. The hard work has already yielded some results. Year-to-date, we've signed 5 new international development agreements, representing 28 new restaurants. In the last 9 months, our international franchisees have significantly exceeded the rate of development compared to the same period in 2013. In addition, we recently completed our international brand positioning study, which showed strong acceptance in key international markets for our 2 great brands. To establish a solid and sustainable international growth platform, our plan will focus on building a development pipeline by enhancing restaurant profitability with our existing partners and attracting qualified new partners; creating new, innovative and flexible footprint; and developing a relevant, market-specific and differentiated positioning for each brand. We're off to a good start. We're pleased with our progress and we're optimistic about our growth prospects. I'll continue to provide periodic updates, so stay tuned. And with that, I'd like to turn the call over to Tom for our third quarter financial review.

Thanks, Julie, and good morning, everyone. I'll begin with an overview of the third quarter financial highlights and then discuss our updated 2014 performance guidance. I'll then comment on the completion of our securitization refinancing. As Julia said, we had another strong quarter. Third quarter adjusted earnings per diluted share increased to $1.14 from $1.10 in the third quarter of 2013, mainly due to lower G&A expenses. The decline in G&A was partially offset by slightly lower segment profits, which mainly resulted from a decline in termination and other related fees related to franchise restaurants in the same quarter a year ago. I'd like to point out that the total of such fees was approximately $546,000 in the third quarter of 2014 compared to roughly $4.9 million in the third quarter of 2013. Regarding G&A. G&A expenses declined slightly to approximately $34 million from $35 million in the third quarter of 2013, mainly due to decreases in costs associated with travel, consumer research and professional services. Some of the favorability in travel expenses was due to the timing of our annual franchise conferences, which occurred in the fourth quarter this year compared to the third quarter of 2013. And it's worth noting that G&A is expected to be higher in the fourth quarter of 2014 than it has been historically, mainly because of the timing of various expenses such as personnel, professional services, and franchise conferences for both brands in the fourth quarter and brand new projects aimed at future growth. We continue to actively manage our G&A. Turning briefly to the balance sheet. The cash balance as of September 30, 2014, increased to approximately $133 million compared to $106 million at December 31, 2013. The higher cash balance is primarily due to the timing of the pending October interest payment on the 9.5% senior notes and cash allocated for deposit in certain interest and principal reserve accounts to satisfy requirements under the securitization refinancing. On free cash flow. We generated very strong free cash flow of approximately $45 million in the third quarter, and returned over $14 million of it through a third quarter cash dividend. Our dividend is the centerpiece of our capital allocation plan. In the first 9 months of 2014, we've returned a substantial portion of free cash flow through quarterly dividend payments and share repurchases, and we believe this demonstrates our ongoing commitment to create value for our shareholders. Now, regarding our updated 2014 guidance. I urge you to review our earnings press release for complete details, but I'd like to touch on a few highlights here. Profitability-wise, we've revised guidance upward on our business segments. Franchise segment profit is expected to range between $331 million and $334 million. Interest expense for 2014 was revised downward and is now forecast to be roughly $97 million. For the fourth quarter alone, we expect interest expense to be approximately $22 million, inclusive of roughly $6 million of interest expense from the 9.5% bonds we are retiring. The timing of the redemption of the old 9.5% bond resulted in 1 month of interest payable, following the completion of the securitization financing. Please refer to our September 30th press release. Cash from operations was revised upwards and is expected to range between $120 million and $130 million, and the increase as a result of expected higher profits and lower interest expense. And lastly, free cash flow was revised higher and is expected to be between $109 million and $119 million. Finally, regarding the refinancing of our debt. For the last 1.5 years, we've been intensely focused on refinancing the debt to lower our cost of capital. As previously announced, it was a successful process that led to a new securitized debt structure. This new debt structure gave us the best way to lock-in a low fixed rate for a long duration. We believe that 7 years at 4.277% was a very good outcome. The new debt structure increases our financial flexibility and is a very good match for our business model. With the securitization transaction completed, the redemption of our 9.5% senior notes on or about October 30th will conclude the final phase of the refinancing, which will result in annual interest savings of about $34 million pretax. And now, back to Julia to share the details on how this will positively impact our capital allocation strategy. Julia?

Thanks, Tom. Our new capital structure dramatically improves our ability to enhance shareholder value. As we've promised, now is the right time to announce our new capital allocation strategy, which balances our commitment to return a significant portion of free cash flow to shareholders, with our desire to invest for strategic growth. Reflecting our confidence in the business, our plan to return cash to shareholders is in 2 parts: Part 1 is an increase in the quarterly cash dividend by a meaningful 17%, effective with the fourth quarter of 2014 dividend, payable on January 9, 2015, to shareholders of record on December 3, 2014. Part 2 is a significant increase in the share repurchase authorization for our common stock to $100 million, from the remaining previous authorization of approximately $40 million. While we did not conduct any share repurchases during the third quarter due to the debt refinancing process, we've repurchased approximately 779,000 shares under the prior authorization, at a total cost of roughly $60 million through June 30, 2014. It's also our intention to explore the potential of investing in a growth vehicle beyond our current 2 brands. We believe that our scalable shared services infrastructure can accommodate a smaller concept to drive long-term shareholder value. Our eager to develop franchisees and our core competency in franchising convinced us that another concept can help drive long-term growth and leverage our G&A. An ideal strategic fix would be an emerging concept with a potential for domestic and international expansion. Additionally, it would not compete directly with our existing brands and would need to be a very attractive development opportunity for our current franchisees. I want to emphasize that while we are evaluating this growth option, we do not have a timetable, we are not in a rush and a transaction is not imminent. We don't have anything today on our radar. Regarding debt reduction. We believe that it does not make economic sense to de-lever from current levels for the foreseeable future. We recognize our commitment to a sustainable, capital allocation program, of which the dividend is a cornerstone of our plan. We expect to use the majority of our remaining free cash flow after dividend payments for share repurchases. We think that our new capital allocation strategy is sustainable and will build long-term shareholder value. Of course, we'll continue to review our program on an ongoing basis. To close, we accomplished a great deal this quarter. We delivered strong third quarter results. We successfully completed our refinancing to secure a low fixed interest rate for the next 7 years and we delivered on our promise to enhance shareholder value with the announcement of our new capital allocation strategy. We're turning the page on a new chapter, and I'm very optimistic about the road ahead. Now with that, Tom and I would be pleased to answer your questions. Operator?

[Operator Instructions] From Raymond James, we have Bryan Elliott. Bryan C. Elliott - Raymond James & Associates, Inc., Research Division: I had a question, usually, particularly, in light of the research that you've recently completed. The question is basically, to what do you attribute the recent improvement in casual dining demand? And more importantly, what factors do you think are necessary to make it sustainable?

Gosh, Bryan, I do think this notion of gas prices and disposable income, certainly, those two things are having an impact, and people's sort of general feelings that things are getting better, whether they are or not, just a sense of this generally -- things are getting better. I think all those things contribute. And I think, as I've often said, in casual dining, the most critical piece of success is differentiating yourself and truly being unique in the category. And that, frankly, is what have spent all of our time and effort on, and hopefully, you will really see the effect of that in 2015 in every aspect of the business, trying to really differentiate ourselves, so that we're unique, and people would say, "Gee, it's just different at Applebee's than everyone else." That's really our focus, but certainly, I think, some of the economic indicators would suggest there may be a slightly positive impact, overall, in the category in the industry. Bryan C. Elliott - Raymond James & Associates, Inc., Research Division: Would it be fair to characterize Applebee's as having a sort of a more economically challenged core customer relative to casual dining at large, and therefore, as the category is coming back, it's probably being driven by those folks being able to come back into the market, and maybe, come more frequently or return from not being able to come and that, that might allow you to widen your gap relative to Knapp? Is that underlying market scenario or sector scenario unfolds?

I know that there was probably a lot of intuitiveness about your comments, may have to historically agree with that. But I think the link -- work that we have done this year with the segmentation study, would say that we have some real opportunities with some key target segments to really drive successful traffic into our restaurants and they are economically sound and have the wherewithal. So I would tell you that the key target segments we are working on are not necessarily hamstrung with their pocket book. What I would say is they are incredibly maniacally focused on value for the money, and we have to make certain that everything we do gives them the value for the money, but they are able to go out to eat. That's not so much the issue. But they are very value conscious, some of our target segments. And I think what we need to do is make certain that we are very focused on that, and communicating it the right way. I don't want to give away trade secrets here, but there's a couple of really key items we've learned about price value through this most recent research that you'll begin to see -- oh, I'd say, immediately. Bryan C. Elliott - Raymond James & Associates, Inc., Research Division: And I guess, you have to be encouraged that, with a couple of large competitors giving away food, those value customers still came to Applebee's rather than go get the free food, or almost free food, so that's encouraging as well.

I would agree. Thanks, Bryan. And I think this is our last call with you.

From Longbow research, we have Alton Stump online.

I just have a question. Obviously, there's been a lot of talk about overall industry demand getting better, fuel and gasoline prices certainly being a key part of that. But as you look at the third quarter results, which, as I see, it was the best for Applebee's from account growth perspective, that we've seen in a couple of years, what internally did you do, whether it was the pricing, LTOs or how much of the comp was just traffic? Any color that you could provide as to what you did internally to drive such a good number on the comp front on 3Q.

So I think it's a fair question. I would tell you that the All You Can Eat Cross Cut Ribs was a very successful promotion for us, with a strong sales mix and a refill rate. But more importantly, the communication was very strong. It was a new unique product. There is no such thing in the industry as a crosscut rib. It has the unique flavor profile, unique sauces. And I think, frankly, with both brands, you're seeing our innovation and our creativity really taking us to a whole new level. When you're the first in a category with a new product, that's worthy of talking about. So that word-of-mouth, I think it's having a fairly positive impact on Applebee's. At the same time that we're talking to the consumer, and some of these new target customers -- and I was speaking with Bryan earlier. But also, that we are doing it in sort of a unique way, and trying to continue to differentiate ourselves. That's a fancy way of saying, whether it's media, whether it's the social, digital, whatever it is, we're really focused on those target segments.

Makes sense. And then, one quick follow up to that, just on the traffic standpoint, any breakout, because they're both concepts, but particularly to Applebee's, as to how that did in the quarter?

Yes. Slightly negative, still, on the traffic for Applebee's. And now -- but now we are -- it is just slightly negative on the traffic. And on IHOP, positive sales and positive traffic.

From Wells Fargo, we have Jeff Farmer.

A handful of questions, but just quickly on the model. I'm curious if you're willing to give us a better sense as to what you expect the quarterly interest expense run rate to be, as we enter the first quarter of '15?

Yes. This is Gregg Kalvin. For the cash, the cash interest rate on the new debt is $14 million a year, so that's the run rate right now, is the $1.3 billion at the new rate. That's securitized debt only. There's a few other pieces in our yearly guidance on debt that we give, but that's common, security-type of debt.

Okay. And then, just on the potential pursuit of a third concept, again, recognizing that you're just sort of starting to do this, but I'm curious what your parameters are in terms of either unit count or geography. And I guess, more specifically, would a 50-unit concept be any more or less attractive than a 500-unit concept? How are you thinking about this right now?

Yes. It's really early on. And thank you for the question. And the way we think about it is something that doesn't compete with our current 2 brands. So it wouldn't be in family dining, and it wouldn't be in casual dining. And quite candidly, it's really all about our franchisees being able to develop it. So it has to have a whole bunch of white space or it doesn't make sense. So that's why something small and something unique is what we would probably look for, but it's something that our franchisees would want to develop and would welcome and that it had a great 4-wall economic kind of look out.

Okay. And then just final question. Again, I think you briefly touched on this, but just thinking about Applebee's marketing strategy and where it stands today across TV, radio, digital and the like -- print. Just sort of -- I guess, looking at where you are today and thinking about we're potentially you could be in '15 and '16, how do you expect the marketing strategy to evolve here? You pointed out the environment's changing, but how will your media message change with the slightly more dynamic backdrop of casual dining?

Well, I'm trying to answer this question carefully, because I don't want to give away the moon and the stars here competitively. There is no question that TV is still the most effective way, on a broad spectrum, to reach consumers. However, having said that, we will continue to target that television much more effectively, given some of the recent feedback that we've got from the target segmentation study. In addition, we are looking at very unique ways that we can reach some of those targets with social and digital in a much more effective way than we ever have before. And that's really the focus. It's getting very creative and very strategic in reaching those target segments. And additionally, besides TV, social and digital, there's obviously opportunity for one-on-one marketing. So when you think about that mix, it can be very powerful.

From JPMorgan, we have John Ivankoe online. John W. Ivankoe - JP Morgan Chase & Co, Research Division: I have a couple of questions as well. I'll ask them one at a time. Firstly, Gregg, I think you were the one talking about this. But could you tell us the GAAP interest rate on that securitized financing?

We're not guiding on the GAAP interest rate right now. We have to -- in the fourth quarter, we have to go through accounting on the extinguishment of the debt. So that remains to be determined as to what the noncash interest is. But the cash interest is -- let me clarify on the last comment, because we gave a quarterly number, $14 million quarterly, you multiply that kind of towards $56 million a year, on the cash interest, so that's the cash interest on the new debt. And your noncash interest, we'll guide on, at the year end call. It's not going to be significantly different, likely, from what we have now, or it may be a little lower. John W. Ivankoe - JP Morgan Chase & Co, Research Division: Okay. And secondly, Julia, you're mentioning third concept, and you would specifically want it to be grown by your current franchisees, and there's a big school of thought that's out there that suggests that you want to have your franchisees focused on 1 brand, and that might even exclude like other ancillary businesses that they may have; in other words, having them exclusive to your brand. So could you help us, kind of philosophically, understand what the advantages and disadvantages would be to open up or allow your franchises to do other concepts other than the core of IHOP or Applebee's businesses?

Absolutely. We've had a lot of interest from our existing franchisees. And probably, the way to think about it is it is ripe for refusal. I mean, if they certainly don't want to grow, or they have other interests, then we would certainly allow that. But I think the most important thing is our franchisees have been very good to us over the years. We have a great partnership with them. I would absolutely want to make certain that if they want us to develop that third concept, that they will be given the first opportunity. If they didn't, we would certainly recruit outside our current bandwidth. But we have some terrific franchisees. And just like we're trying to leverage our shared services and our infrastructure, so are our franchisees. They want to leverage their G&A just like we do. So that's been their sort of focal point to us, if they want to have that opportunity. So I would certainly give them the first in line and if they didn't, then we would certainly have, probably a cadre of people interested in growing, but especially for those that are sort of reaching their maximum capability within a particular DNA or a trade area, this provides them that white space. And internationally as well. So again, it's early stages but a concept, not a brand, something small, something unique. It could be fun. And again, not in any hurry, don't have anything on the horizon. John W. Ivankoe - JP Morgan Chase & Co, Research Division: Okay, understood. I guess, within your existing 2 brands, how are your organizational capabilities around G&A? In other words, you've done a very good job of keeping G&A at very moderate levels of growth. I mean, is that what you see going forward? Or it doesn't make sense for you to begin to invest for some additional capabilities?

That's a great question. I think that is something that we've been talking about internally. In fact, in Tom's prepared remarks, when he talked about a few of the brand projects that we're working on, just that fact of how do we accelerate this to marketing capabilities. So certainly, we'll continue to look at the G&A and right now, I would tell you, organizationally, we're pretty set. We feel pretty good about our other infrastructure, but we are constantly looking at evaluating at where they may be some unique opportunities, and frankly, that comes largely from this notion of differentiating the brand. And I think, as I mentioned, last quarter, we were actively looking for an IHOP president and, of course, we're looking to replace Steve Layt when he was Senior Vice President of at Applebee's. So those 2 are current searches. So we're always looking, but I think we feel very good about the infrastructure we built and frankly, the scalability and the leverage ability of it. But we're always looking for unique and better opportunities, especially, frankly, in that whole front of how to differentiate yourself. John W. Ivankoe - JP Morgan Chase & Co, Research Division: Understood. And finally, for me, I mean, obviously, commodities were a big theme in the third quarter of '14 for a bunch of different companies. Obviously, I understand you're 100% franchised, so we didn't see an impact on your P&L. But when we -- with your co-op in place, what kind of commodity pressure, perhaps, did the franchisees see in the third quarter of '14? And if it's possible to maybe give an initial view on 2015 and how that might be influencing their attitude towards menu pricing?

Yes. I'll let Tom try to grab the numbers through the call, but I'll come back at the end of it.

For '14, they're both, basically, low single digits, asymptomatic, obviously. The protein stuff is higher. We're in the process of actually looking at it next year right now and revising our forecast. So I don't have one for you yet. But we're in the process of going through that right now. But '14, it's low single digits.

What I'm just going to say is, in general, I know it sounds like a standard line that I always say, but both brands certainly have the capability to price with inflation, and franchisees have either held to that or slightly less, historically. There is nothing on the horizon that would indicate that they would be more than that.

From KeyBanc, we have Chris O'Cull on line.

Julia, can you help us understand how you're thinking about the dividend growth going forward? I mean, obviously, the 17% increase was a big increase, but should we expect it to grow through a combination of free cash flow growth and increase in the payout ratio going forward? Or how should we think about it?

I think that's a good way to think about it, that we'll continue to look at increasing the dividend as we continue to get more cash over time. I think what you just said is a good way to think about it.

So the payout ratio could increase as well, over the next few years?

I was just going to say, I think that over time, we'll look at the growth rate. And today, we have a -- I think, the second -- almost the first highest yield on the industry. So we'll continue to look.

Okay, great. And then, Tom, I had a follow-up to your G&A outlook. Did you expect it to be relatively -- did I hear you say it's relatively flat year-over-year in the fourth quarter or...?

I didn't really actually say. We guided on the whole year G&A number. It's in the back of the release.

The reason we did -- yes, what I was just going to say is the reason we guided is because fourth quarter is going to be higher than it has been historically, because the conferences were in the fourth quarter of this year and historically, they're always in the third quarter. So we didn't want you to take the run rate and run it through the year.

Yes, that's why I made that remark. But you can get there with the guidance number for the year in the back, there.

Okay. So you provided instead the G&A guidance for the year.

It still stands between 1.44% and 1.37% for the full year.

Because you won't get there when you look at the first 3 quarters. That's why we guided, but we also reminded you that fourth quarter was going to be higher than usual.

Okay. Now that would imply a pretty big tick up in the fourth quarter relative to the run rate and year-over-year. Is that reasonable?

Yes. I mean, we based it on the fact that we had the franchise conference in the fourth quarter that were in the third quarter in prior years and so forth, and the other things that we talked about.

Yes, you got -- you're hiring 2 execs, you've got 2 major conferences that were -- yes, that's why we guided that way.

The other part of that guidance, it looked like, it was an $18 million in stock-based comp, initially, that was the initial guidance. That's clearly running below that now. Is that still relevant?

We're not ignoring you, we're looking.

A little less than $18 million for the full year.

Okay. And then franchise expenses were up about 13.5% year-over-year in the quarter, which was a tick up, obviously, in the rate of growth from the previous two. How should we think about that going forward, that level of growth?

Yes. That's -- I think you shouldn't necessarily predict that for next year. That is some increase in the advertising on the IHOP side. That was some voluntary franchisee increase on the advertising. So we'll guide on that for 2015. Can you help run through the P&L?

That's 110 [ph] on the dollar on the expenses side, and 110 on the dollar, on the expense side on the IHOP brands.

We will get back to you for 2015.

From CL King, we have Michael Gallo on line. Michael W. Gallo - CL King & Associates, Inc., Research Division: Julia, question on -- could you update us on some of the loyalty program test, where that stands?

We are a work in progress, like the country-western song. We are working on it. We are taking our time. We are looking at, right now, the big cash, and I know you know this. You do need to take your time on the algorithms and what the implications are of that. So we are in the process. We have tests going at both brands and very, very robust testing in multiple hundreds of restaurants, but really doing the thorough analytics on the algorithms. Should have more to talk about in early 2014, but when you're largely a franchise system, you've got to make sure that those algorithms make sense to be able to go back to franchisee and make sure it makes sense for them. So we're being very thoughtful and planful in our testing. Michael W. Gallo - CL King & Associates, Inc., Research Division: Okay, great. And then, also, my recollection is you also have a 2 for $25 test, is that something that's still being evaluated? Or what's the early read there?

I think the early read is there's some franchisees picking it up. I don't think we're at this point -- I don't think Steve and the team have necessarily a massive plan that they're going to do it for the system. But there are some franchisees in parts of the country that are picking it up and running with it. It works for some. But I don't know -- at this point, I wouldn't say it's a national run.

From Telsey Advisory Group, we have Peter Saleh on line.

I just wanted to ask about the tablets, and if you could just give us an update on the tablets for Applebee's. And what the implications have been for the top line and for the margin for the franchisees. And any thoughts you have on rolling out tablets to the IHOP system as well.

So we still -- nothing has changed from our original indication that we would be continuing to roll out and have the tablets produced, and should be finished at some point, mid- to later -- a little bit later in the year, next year. It's too soon on the actual indicators and what we see, in terms of check average and upsell and so forth. I think the bigger issue -- the IHOP side, because we are doing some other work on the infrastructure for POS, I don't know if we'll go to stay at the table, we may skip that technology and do some other things. We're doing some testing and looking at it all now. But we're evaluating it right now. That's a great question to ask me early next year.

Okay. I'll keep that in mind. And then, the other question -- last quarter, you mentioned there was a significant opportunity to gain some share at the bar for Applebee's, any update on your progress there?

There's a lot, I just can't, probably, competitively talk about it. I think the important thing to note is that every aspect of that bar program is either in-test or in the process of going into tests, with a lot of excitement and energy from the franchise community. It's a huge focus, I feel very good about it, and I will be in a much better position to talk about that next year. But we have a great deal of testing going on right now. And when I say every aspect, I really mean every aspect. As you think about the bar, whether it's the drink offerings, the food offering, the bartender, the ambience, sort of every aspect of the bar. And yes, we still believe very much that there is an opportunity to steal share.

And our last question is a follow-up from Bryan Elliott with Raymond James. Bryan C. Elliott - Raymond James & Associates, Inc., Research Division: I just wanted to take a moment, and for the record, in the transcript, to clarify that Raymond James Research situation. So Brian Vaccaro, as many folks know, has been promoted to my partner, and we are together fully engaged and committed and remain so. Thank you.

Thank you, Bryan. Thank you, for that clarity.

And congratulations to the other Brian.

And congratulations to the other Brian.

Thank you. We will now turn it back to Julia Stewart for final remarks.

I want to thank all of you for participating on the call. The reporting date for our fourth quarter results is now scheduled for Wednesday, February 25, 2015. If you have any questions in the interim, please contact Ken, Tom or myself, and make it a great day. Thank you so much.

Ladies and gentlemen, this concludes today's conference. Thank you for joining. You may now disconnect.