Good day and thank you for standing by. Welcome to the Third Quarter Dine Brands Global Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today Executive Director of Investor Relations, Ken Diptee. Please go ahead.

Thank you. Good morning and welcome to Dine Brands third quarter 2021 conference call. I'm joined by John Peyton, CEO; Vance Chang, CFO; Jay Johns, President of IHOP; and John Cywinski, President of Applebee's. Before I turn the call over to John, please remember our Safe Harbor regarding forward-looking information. During the call, management may discuss information that is forward-looking and involves known and unknown risks, uncertainties and other factors, which may cause the actual results to be different than those expressed or implied. Please evaluate the forward-looking information in the context of these factors, which are detailed in today's press release and 10-Q filings. The forward-looking statements, 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 release and also available on our website. With that, I'll turn the call over to John.

Thanks, Ken, and good morning, everyone. John, Jay, Vance, Ken, and I appreciate you taking the time to join us this morning. Q3 was another terrific quarter for Dine Brands. For the second consecutive quarter, both brands beat their competitive sets. Average weekly sales for IHOP and Applebee's exceeded 29 pre-pandemic levels for the first time, and we recorded a 48% increase in quarter-over-quarter EBITDA. Dine's posting results like this for two reasons: the resilience of our two world-class brands; and the value of our asset-light model. And Q3 reinforced again the benefits of our highly franchised business, in driving our strong performance versus our peers. Let me explain why that is. First our model reduces complexity and is a significant generator of cash. It allows us to keep our operations lean and our movements agile. And during moments like this, when labor and commodity costs are rising and guest behavior is uncertain due to the pandemic, we delivered less volatile results from period to period. Said another way, asset-light allows us to invest in what we do best, which is menu innovation, marketing and building technology. And at the same time, Applebee's and IHOP continue to gain share, because guests trust us, they love us and they appreciate that we're focused on delivering delicious food at great value while also providing experiences that are enjoyable and safe. And just like I said to all of you when I first joined, Dine Brands that win are different better and special and they're able to create emotional connections with guests, particularly during tough times and that's exactly what our brands have been doing all year. So, today I’ll share highlights of our fantastic Q3 results. I'll talk about our view of this moment in time in the industry and I'll address…

Thank you, John and good morning, everyone. I'll start with a review of our operating results. Franchise revenues for the third quarter were $161.1 million compared to $121.8 million for the same quarter of 2020. Excluding advertising revenue, franchise revenues increased 30% primarily driven by higher domestic franchise restaurant same-store sales. Turning to the company restaurant segment. Sales for the third quarter were $35.3 million compared to $27.4 million for the third quarter of 2020 improvement of 29%. The improvement was mainly due to an increase in customer traffic. Rental segment revenues for the third quarter of 2021 was $31.3 million compared to $26.2 million for the same quarter of 2020, an increase of $5.1 million. This included an increase in percent rental income based on franchisees' retail sales and a decline in level rent adjustments. Adjusted EPS for the third quarter of 2021 was $1.55 compared to adjusted EPS of $0.80 for the same quarter of 2020. The increase was primarily due to higher gross profit partially offset by higher G&A expenses. Now regarding G&A. G&A for the third quarter of 2021 was $43.7 million compared to $36.9 million for the third quarter of 2020. The increase was primarily due to higher personnel costs associated with our incentive compensation accrual, which will fluctuate based on company's performance. Regarding our GAAP effective tax rate. Our effective tax rate for the third quarter of 2021 was 24.9% expense compared to a 9.4% benefit for the same period of last year. Our effective tax rate for the third quarter of 2021 varied from the rate for the same period of last year primarily due to the onetime recognition of income tax benefits from the release of unrecognized tax benefits in the third quarter of 2020. I'll now provide highlights from the cash…

Thank you, Vance and good morning everyone. I'm really proud of our team and our franchise partners as they delivered another exceptional quarter for the Applebee's brand. After posting a 10.5% comp sales increase in Q2, Applebee's delivered a 12.5% increase in Q3 when compared with our 2019 baseline. This marks Applebee's best quarterly comp sales performance under Dine Brands ownership highlighted by sequential improvement throughout the quarter. Additionally, our Q3 year-to-date comp sales increase of 5.3% has surpassed our record-setting 2018 performance. I'm also pleased to report that our company restaurant portfolio is now our number four ranking comp sales performer throughout the system. To put all this in proper perspective, according to Black Box Intelligence, Applebee's has now outperformed the casual dining category for 35 consecutive weeks by an average margin of more than 600 basis points. I attribute our sustained success to three primary factors; superior restaurant level execution, breakthrough marketing innovation, and our genuinely relevant brand positioning. Applebee's is that affordable little escape from your every day. In a turbulent world where that's familiar and comfortable place right around the corner where you can simply come as you are. In many respects, we're kind of like a good friend which clearly resonates with America in this environment. Most importantly, America trust Applebee's, we consistently see this in our data, and it's certainly evident in these unprecedented results. This momentum is also reflected in our brand attributes where Applebee's continues to rank number one with within casual dining on brand awareness, affordability, menu variety, convenience to go and deliver awareness, and advertising awareness. In addition, Applebee's continues to outperform the category average on key metrics such as overall experience, staff makes me feel valued, family-friendly, great-tasting food brand, affinity, and importantly, visit intent. As I break down…

Thanks John and congratulations on the impressive results again this quarter. Good morning everyone. IHOP's business continued to improve. Third quarter comp sales were essentially flat relative to the same quarter of 2019. This reflects a sequential improvement of three percentage points compared to the previous quarter. Our strong results led to IHOP outperforming the family dining category for the second consecutive quarter according to Black Box. I'm excited to report that domestic average weekly sales – unit sales are back above our pre-pandemic levels for the first time this year. Average weekly sales for the third quarter were slightly above $36,000 per week, exceeding the average for the same quarter of 2019. Approximately 83% of our domestic restaurants are open for standard operating hours or greater and approximately 27% are operating 24/7, which trails pre-pandemic levels of approximately 45% that were operating 24/7 previously. We believe that additional upside as more restaurants resume standard operating hours as well as overnight. For the third quarter, off-premise sales accounted for 23% of sales mix, which is more than double the mix for the third quarter of 2019 and reflects significant retention compared to the same quarter of 2020, when restricted in capacity stricter indoor capacity restrictions and governmental mandates related to COVID-19 were in effect. We believe we can retain most of our off-premise dollar volume and we're confident that our strong off-premise business will be complemented by the demand for in-restaurant dining. For the third quarter, our sales mix consisted of 76.7% dine-in, 13.1% delivery and 10.2% to go. To build on our achievements and remain the leader in family dining, we're going to continue to focus on what we can control. This framework includes a new approach to marketing, launching a loyalty program, development and virtual brands. I'll briefly…

Thanks, Jay and congratulations to kid Chef, Ryan. We're super proud of him and thanks John and thanks Vance, and to your entire team for all the hard work and delivering on our solid quarter. The road recovery from the pandemic has certainly been a winding one for all of us. And despite the twist and turns, we at Dine know where we're going. We're focused on both the here and now of supporting our franchisees and giving guests the experiences they know and love. And we're also focused on the long-term plans and actions that we need to undertake to accelerate our growth. Most importantly, we never lose sight of the fact that the key to hospitality is those very special intimate human connections between our guests, and our team members however and wherever those connections occur. And with that we're looking forward to taking your questions.

[Operator Instructions] Our first question comes from the line of Brian Mullan with Deutsche Bank. Your line is now open

Thank you. Congrats on good quarter. John in the prepared remarks, you referenced you recently hired a VP of Development at IHOP. Can you maybe remind us is this a new position at in, or is this replacing someone was at IHOP when you joined? And then related can you just talk about your expectations for the position, what the person brings to the table just highlight any -- a few things you'd like to see him help change moving forward? I know you want to double the historical unit growth pace by 2023. Any tangible action items you could highlight for us?

Sure, Brian. Thanks for the question. I mentioned we hired three Vice President of Development. So I'll specify on all 3. The VP of development at Applebee's is a new position. It was a shared position in the past, person and multiple responsibilities. We're now devoting one senior role only to development. The same is true for international. We've had an international leader of the business that was responsible for both development and operations. Now we've added in a senior leader who is only responsible for development. And at IHOP to your point it was a replacement of a leader who we had. And our hopes and expectations for Jake and for all of our VPs is to take is to bring a strategic approach to the way in which we develop our restaurants, and the way in which we work with our franchisees. And when I say strategic I think that we can be much more assertive as an organization and bringing opportunities to our franchisees and doing extensive analysis of the markets to demonstrate the potential for new restaurants and that we can move from being order takers, to bringing the market and the opportunities to our franchisees. That's my expectation not only of Jake, but of our other two development leaders as well.

Yes. This is Jay Johns at IHOP. As John had said, it is a replacement position. And we really want to become more strategic with our development. It's not just about hitting certain numbers. It's about how we're doing the market planning to add additional restaurants to the markets we're already in. How do we start in territories maybe we haven't been in before. This is where some of our new vehicles may come into play, you think about flipped, the smaller prototype. This starts to open up some other territories that we may not have gone to before. So we needed some new thinking, some fresh thinking and that's where we're going with that.

Okay. Thank you. And then a follow-up on IHOP, Jay you mentioned, I think, 27% of the locations are now 24/7. I think you said it was 45% prior to the pandemic. My question is, do you anticipate that going all the way back to where it was? And is staffing the only issue here, or are there perhaps other considerations for franchisees? Are there some franchisees who maybe don't want to, for whatever their reasons may be? Any color would be great. Thanks.

Thanks, Brian. I think that it's a combination of a few factors. So, obviously, staffing is part of, just the economics part of it as well, right? When the pandemic happened, people were trying to cut costs, they're trying to make things easier to execute, because you have less staff, that's also important that things are easier to do and they tighten down on what hours they were operating. I think we've seen it slowly coming back. But it's not going to all come back at once. This is going to be location by location and franchisee by franchisee. As they get staffed, as they see the ability to get back open more hours you'll see that. And I think, we'll -- what typically would happen, no different than sometimes in a new restaurant opening. That's almost what this has been like. The franchisees have had almost reopen their restaurants from doing to go an off-premise only to now you get the dining room open. The next stage will be how do you get to usually, what we call, 24/2 which is stay open 24 hours on just Friday and Saturday night where the busiest opportunity is and then you expand from there. So I think we'll get back a lot closer to where we were. I just can't give you a time line on when that's going to be. But it will continue week by week and month by month as we move, until we get back much closer to where we were in the past.

Thank you.

Our next question comes from the line of Jake Bartlett with Truist Securities. Your line is now open.

Great. Thanks for taking the questions. My first was on the comment, on Applebee's and I'm not sure if I got it right, but I think you mentioned quarter-to-date same-store sales were 5.3%. Maybe if you can just confirm the comments on the fourth quarter to date sales level. And if that's right, what would have driven the deceleration. We saw pretty consistent monthly improvement throughout the third quarter. So maybe just some comments there. And then also, on the IHOP side, anything you share on the quarter-to-date would be helpful.

Hey, Jake. Good morning. This is John. The year-to-date through Q3 comp sales figure for Applebee's plus 5.3%, within the quarter 12.5% increase versus 2019. Those are both versus 2019 and sequential improvement throughout. We love the trajectory and the momentum and it's what we expected and is obviously creating a very healthy environment for our franchise partners.

Yes. This is Jay. On the IHOP side, again, we've been making improvements throughout the year and getting very close to flat this past quarter. We're still down a little over 8% for the total year. First quarter was still pretty tough for us. But we've been making progress ever since and we'd look for that to continue to improve, the staffing improves, et cetera. But we're not sharing anything about fourth quarter right now.

Got it, got it. And just as I look -- this is on the Applebee's side. As I look at the cadence struck in the quarter, there was an improvement, as I mentioned, as you guys mentioned, which is different than other concepts have seen. So trying to understand what drove that? You mentioned the summer marketing kind of viral hit there. Any reason to think that that wouldn't continue to accelerate, just given your marketing plan, or was there something unusual in the quarter from a marketing perspective that maybe shouldn't be replicated?

Jake, the progression was solid from the low 12% range to the high 12% range. As I mentioned, remarkably consistent since March, all-time highs under Dine ownership. It's fundamentally restaurant execution and innovation, not just marketing innovation, culinary innovation, technology innovation, advertising, media you name it. The team is locked in in partnership with their franchisees. And we have visibility to a 2022 plan and it quite frankly fires us up. So I'm not going to speculate on a future look. But suffice it to say the brand has probably a tighter partnership and a more optimistic partnership with its franchisees than I've seen in my five-year tenure.

Great. And then last question is just on really getting down to a franchise profitability and some of the drivers there. You mentioned your 6% commodity inflation for the year. Could you remind us what that would and what inflation was for the third quarter what that implies for the fourth? And then given I assume that the accelerating pressure, what are franchisees doing to offset that? How much pricing might they be taking, how is there. Do you have a sense as to whether your profitability is taking a hit here or there's offset such as less discounting or pricing or what have you?

Thanks for the question, Jake. So look on inflation, generally speaking, I'd say it takes about 2 to 2.5 points of menu pricing to cover 10% of commodity inflation for our franchisees. We do provide pricing elasticity tools to our franchisee partners to help them with pricing decisions. And depending on the franchisee, they've been tracking anywhere between 1%, 2%, 3% of menu pricing increase per year in the past two years to cover inflation.

Yeah. And Jake, this is John. On the Applebee's side, I would say, if you look generally speaking full year 2021 versus a year ago, 6% bump in commodity costs, our franchisees continue and they're independent operators. So they take independent actions. They tend to be highly strategic and measured in how they apply pricing. And if I look at 2021 versus 2020 as an example, the average price increase throughout Applebee's from our franchisees would be about 3%. And historically, as Vance referenced, typically between 1% and 2% on an annual basis.

Got it. Thank you very much. Appreciate it.

Our next question comes from the line of Brian Vaccaro with Raymond James. Your line is now open.

Thanks, and good morning. I wanted to start out on the Applebee's advertising and obviously you saw some huge successes this quarter. But John, can you help also just frame how much the spend was up say versus Q3 2019. And just ballpark your expectations on where spend levels might shake out moving through 2022? I imagine Q1 2022 will be up a lot versus Q1 of 2021 because you didn't spend much this year. But just any context on -- you can provide on the year overall would be appreciated.

Hey, Brian. Yeah, good question. I probably won't quantify for you to the extent, you'd like me to. Recall in Q1 we pulled back on spending in 2021. So naturally, the full year is kind of backloaded Q2, Q3 and Q4 elevated versus -- actually not so much Q2, but certainly Q3 and Q4 elevated versus that 2019 baseline. And then on a full year basis, a pretty comparable media allocation. Again, we pulled back in Q1. We're well positioned in the balance of the year. And then as I look forward for the reasons, I've referenced, I anticipate the brand being in in really great shape as we move into 2022 from a media perspective. I like our position.

All right. That's helpful. And I guess shifting gears a little bit just a little context on staffing levels at each brand. Maybe you could provide some perspective on where average levels are. But also help us with the pockets of tightness maybe what percent of units might still be meaningfully below 2019 levels, however you might define that. And are you -- is it possible to frame kind of a comp drag you might be seeing at either brand due to staffing challenges?

Hey, Brian. This is Jay Jonas. I'll start with IHOP and then turn it over to John. The franchisees they're still having staffing issues. And there's probably several hundred restaurants that are more impacted than others. And you can see that in some -- they still have some reduced hours of operations. And most of that is because of staffing level. So once they can get enough staff they fully intend to get back to regular operating hours. And that is causing a little bit of a drag on our business. You think about earlier, we were talking about the overnight hours where I'm still missing almost half of my overnight hours. So we're probably impacted by a couple of percentage points just on reduction of hours compared to 2019, and that is staffing related. They're making progress and we get more restaurants and open a few more hours weekly. But again, it's somewhat of a slow process right now, and it's very fluid. You get ahead and the next week, you're back behind is another restaurant across the street is also short staffed. It's a competitive – very competitive world out there, and people will move quickly for an extra $1 an hour in this marketplace. So it's going to take a little more time before this gets back. But right now, I would say that, our restaurants are probably in the 85% staff range.

And I would say, Brian on the Applebee's side very similar. Where we feel it most quite naturally as you'd expect, would be on the Friday. On Friday and Saturday nights late night, I think 11 o’clock, 12 o’clock even into the 1 A.M. hours parts of the weekend to staff it's coming back. And I would argue that brands with – it's not just trust from a guest perspective brands who have a clear reputation in the market, and are trusted by team members. And franchisees who have very strong culture, and I would say, our 30 partners have exceptional culture. They're sophisticated. They know how to recruit and retain with the best of them. But I'd be lying to suggest, we're 100% staffed we're not at the moment. Weekend late night is where we feel it. It's getting better, but it remains a priority and a challenge throughout the industry.

Okay. And then more broadly just on the labor environment. Are you hearing in kind of the recent conditions, are you hearing from your franchisees that they're starting to see any green shoots of improvement as delta concerns seem to be easing are you seeing application flow increase, or maybe turnover declining? Any color on those dynamics.

I wouldn't – this is John. I wouldn't quantify anything, Brian. The marketplace is improving generally speaking. And in those late night hours is where we specifically see the challenge. And one would have to imagine that, each and every brand in this industry approaches this challenge differently. I do love the fact that, we have a strong culture. We have an aspirational brand, and we have sophisticated franchisees, who know how to navigate. So I believe we are very well positioned on this front, relative to others in the category.

Okay. And then just one quick clarification if I could, just on the franchisee profitability comment you made at Applebee's, is it right that the strong sales leverage you're seeing versus 2019 and some of the ops improvements I think you rolled out as well. Is it right that that's sufficient to offset sort of the near-term COGS and labor pressures we're all aware of. We're store margins and profitability can sustain solidly above 2019 levels in your view moving through next year?

Yeah, Brian cash is flowing well. And certainly, revenue is a big part of that. We're working both sides of the equation. Revenue growth puts our franchisees in a terrific position, but we're all also work on the cost side productivity, throughput, efficiency, technology, taking steps to reduce cost, you've heard us reference in the past some PwC work that we've done, historically in Applebee's that has removed 200 basis points of cost from the P&L, we very much took a hiatus on that initiative. Over the past 18 months, we will be activating that again in 2022, which represents meaningful opportunities. So yeah, revenue would be the biggest lever there. And as a result, they're in very good shape.

All right. I’ll pass it along. Thank you.

Thanks, Brian.

Our next question comes from the line of Eric Gonzalez from KeyBanc Capital Markets. Your line is now open.

Hey. Thanks. And great results this quarter. Just wondering if I could ask about the recently announced capital allocation strategy. The payout ratio is maybe towards the lower end of what one might expect from a highly franchised business. Should we think about that as a starting point, or is that 25% or so payout ratio likely to be maintained over the next few quarters? And maybe you can give us a little more color on how we should think about the share repurchase -- the level of share repurchases we should think about as we model going forward. Thanks.

Thanks for the question Eric. So as you know we've added a really strong track record of returning capital to our shareholders and that will remain one of our top priorities. For dividends, we think that the $0.40 quarterly dividend represents a healthy dividend yield and payout ratio as a starting point to grow from as you pointed out. Going forward, we will continue to evaluate and balance our capital allocation strategy focusing on the things that John talked about earlier, which is investments in business and technology and other growth initiatives, returning capital to shareholders, debt management, and more importantly maintaining financial flexibility to address any remaining uncertainty from the pandemic. Now on the buybacks, our goal is to support the stock opportunistically with ROI in line, right, based on our view of the intrinsic value of dine and we'll do that with our 10b5-1 plan and will be other consistently supporting our stock.

Yes, Eric, it's John Peyton. I would add that the key word is our approach here is to be prudent. And I said to you the last couple of quarters when we got comfortable that we've had some sequential quarters of predictable and sustainable performance, we would return to the dividend and that's what we did. And now we want to see another couple of quarters of predictable and sustainable growth, as we think we're on the other side of the pandemic and that will enable us to look at the dividend and potentially increase it over time. But we think it's best to be prudent right now given this point of time.

Understood. And the -- earlier in the call, I think maybe as Jake who asked about the inflation -- or implied inflation for the fourth quarter. So, maybe if you can comment on that? And maybe an early outlook on what you think inflation might be into next year, including any comments on hedging or contracts that you have outstanding?

Based on what we can see second half inflation is about 10%. And I talked about it earlier just generally speaking, it takes about two to 2.5 points of menu pricing increase to cover a 10% hit on commodity inflation pricing. So John and Jay both talked about the fact that in the past year or two our franchisees have been taking anywhere between 1% to 3% of pricing increase per year, so that's covered what we've seen so far.

And the second part of your question about next year we're going to wait until next quarter Eric, when we do our guidance for 2022 to talk about costs and all of our guidance as part of one conversation.

Great. Thanks. I’ll pass it on.

Our next question comes from the line of Brett Levy with MKM Partners. Your line is now open.

Great. Thanks for taking my call. On the development side, when you think about your approach, how are you thinking in terms of new versus existing? Are you thinking about anything in terms of with your capital allocation maybe buying in franchisees to drive some consolidation? And how are you thinking about company ownership?

Brett, I'll speak on the Applebee's front since we're kind of newest to the game. As you know we've spent the better part of the past four years optimizing the brand, pruning up the system, we closed about 300 underperforming low-volume restaurants. So we're ready for growth. We plan to close fewer than 1% of our portfolio next year. We've lined up a number of franchise partners and plan to build 15-plus new restaurants in the near term as soon as we can activate those sites with our new development partner [indiscernible], as John referenced. And some of those will be traditional, some of those will be conversions. There's a high level of enthusiasm there. And then I do expect that to accelerate moving forward for the Applebee's brand, which is refreshing. We've been building to this in setting the system up for this new level of growth in this very modest closure rate for quite a while, pandemic got in the way of us activating it. But we're ready now and we're moving forward beginning next year.

Brett, this is Jay at IHOP. Obviously, we've been doing development quite some time. And as I just referenced earlier, we're going to try to be more strategic about this and how we develop markets how do we -- we have franchisees that already have multistory development agreements. So obviously there'll be some of that. There's territories where there are no development agreements at this point. So that's a possibility in those areas. We have a lot of existing franchisees that we believe we'll like to get into the development game post pandemic especially if the economics are right to do that. And the amount of conversion opportunities that are out here. Obviously the economics are very good on conversions. And we've been seeing about half of the pipeline over the last year or so has been conversion opportunities. We've got about 600 restaurants in our system now that are conversions. So we're very good at doing this. We've got a lot of experience doing it. And then we've got our new platform I've been talking about with Flip and our small prototype. And I think that's going to open up more territory still. And I think in some markets there's a lot of opportunity to bring in some new franchisees as well into the system besides the ones that we already have.

And Brett, it's John Pete. Just wanted to address two of the questions that you asked as well, which is you asked about our own funding and if we would use that to potentially consolidate franchisees. And the answer to that is no we're much more likely to use our funding though to encourage franchisees to develop in the form of key money or incentives. And we've got a program like that already in the marketplace for Flip. You also asked about our inclination to own restaurants. And there too I would say we're not inclined to own additional restaurants. One of the reasons we're performing so well this year is because of the asset-light model that I mentioned in the opening comments. And our intention is to remain a highly franchised business.

Right. Just following up on that. With the existing units that you have in place what are your thoughts on your company operated? Is that something you see as a good fertile testing ground and you want to hold on to it, or is that something that you'd look to get yourself back to the 100% level?

Yes, it's certainly a fertile testing ground, while we have them and we'll have them because of COVID right. Our intention to sell them has been delayed. What we're proud of is, is we purchased a portfolio that was underperforming and because of the management team that's been in place there it's now one of our top five performing portfolios both in our same-store sales improvement as well as guest improvement. Originally the company said we'll hold them for two or three years two years of COVID has delayed that. And so we've got another year or two to go and then we'll report back on where we are.

And then just on moving into another direction. Can you talk a little bit more about how you're thinking about the pacing of your loyalty rollout not just at IHOP, but also as it makes its way over into Applebee's?

This is Jay. As far as IHOP goes we're actually going to be in test in piloting this at the end of the year here in the fourth quarter. And our intention is to roll this out system-wide probably first half of next year.

And Brett on the Applebee's front we have significant investments on the -- in terms of personalization and customization from a CRM perspective. We continue to believe the best form of loyalty is wow that guest every hour, 1.5 hours are there and ensure a high degree of affinity for the brand and loyalty and repeat visitation. So we believe in restaurant execution and it's one of the reasons the brand is performing so well.

Thank you.

Our next question comes from the line of Nick Sapien [ph] with Wedbush Securities. Your line is now open.

Thank you and congrats on an incredible quarter. Just given the momentum we're seeing here in Q3 and out of Q3, the EBITDA guidance just given the year-to-date EBITDA in Q4 implies a step down in Q4 maybe even a little bit above the step-up in G&A. So I guess I just wanted to kind of get the puts and takes around the implied Q4 EBITDA.

Sure, Nick. Good question. We do expect Q4 performance to hold strong, but we also do anticipate higher G&A costs from activities such as consumer research and product development, franchisee support services and headcount, travel expenses, et cetera, that we more or less paused until now and plus the continued incentive compensation accrual based on company performance. So you're reading it right and that's – that's our guidance so far for this year

Yes. It's John P. I'll give you a good example that we're happy to have, which is our Applebee's annual conference is back on. In November, we'll have 350 people, who are really excited to come together and celebrate the brand. They haven't gotten together in almost two years. And Nick, in my mind that's an expense worth having in the fourth quarter to bring the team back together in all of our franchisees after a two-year absence.

Yes, it makes sense. When you talk about sort of doubling the IHOP historical unit growth rate by 2023, can you just give us – just point to what that exactly means. 2019 I think it was sub-1% but before that it was 3%. So are we talking about 5%, 6%, potentially net unit growth in 2023, or are we talking about a different number?

Well, I've talked about this. Typically – this is Jay. I've talked about this typically in our units we've developed. So to put it in perspective, I think historically over the last decade we've developed about 40 new restaurants a year. So to double that you're looking at it more like 80 restaurants by the time you get to 2023. So we're not doing future guidance that far out on exactly what those numbers look like. So that gives you a ballpark idea of what we're talking about as far as amount of development.

That's very helpful. And then just last question. Cosmic Wing any update there?

Nick I know you'd be asking about that. This is John. We love Cosmic Wings. I referenced that we held off on a very meaningful expansion to DoorDash, the number one delivery player because of supply challenges in particular around boneless wings and bone-in wings. I anticipate expanding Cosmic Wings from a delivery perspective to DoorDash in very early Q1. That supply of product will be there. And the reason we're being prudent and thoughtful on that front is we're going to generate some incremental demand there. We want to be able to satisfy it. And then the final point I'll leave you with is a little tease that in a couple of weeks there's going to be some meaningful news on the Cosmic Wings front. So stay tuned. And there will be something buzzworthy that comes across the transom very soon.

Sounds good. Looking forward to it. Thank you very much.

Thank you.

Our next question comes from the line of Jeffrey Bernstein with Barclays. Your line is now open.

That's quite a teaser. Look forward to the news on Cosmic Wings. Two bigger picture questions, John P, I think you mentioned that research showed 110,000 restaurant closures. My guess is that's a number since the start of the pandemic. That would work out to be north of 15% of the industry but my math. Just curious, if you would say that's a similar mix. I'm just wondering what your thoughts are as the operator of two of the biggest brands in America in terms of the outlook for reopenings of a lot of those closed restaurants maybe an outsized acceleration for growth in 2022. Just wondering, your kind of bigger picture thoughts being your context in real estate and development and just your touch around the country. Any thoughts on the reopening opportunity for all those units across the industry?

Yes, Jeff, thanks for the question. So number one, your math is right. There's multiple sources on restaurant closures since the beginning of the pandemic and it's about 10% to 15%. And the number I cited on the call today was from BCG. The sources of data will also show that unfortunately it was disproportionately independents that closed during the pandemic. And so, it's less likely that those restaurants will reopen because of what we know about the economic nature of independence. And we see that while our heart breaks for the independents, it is an opportunity for the big chains like ours. And that's why we are leaning into development. And that's why we've hired three new development leaders that we think our world-class and upgrade the talent that we have, and it's taking advantage of an opportunity at this moment in time.

Understood. And then my other question is just, as you think about the broader portfolio obviously 2021. Good luck trying to find any rhyme reason to trends that we saw like you said. But as we think about 2022, 2023, just thinking on more normalized, I mean we can kind of forecast our own comps and you gave some color on the unit growth, but assuming there's some modest G&A leverage, which I'm just curious your thoughts on, what we should think about over the next few years in terms of more normalized EBITDA and EPS growth not looking for specific guidance per se, but just what you think the model can generate over the next couple of years on a more steady-state basis on the bottom line? Thank you.

Yes. Jeff, we will get into more guidance in our Q4 announcement. But we are taking a more balanced approach going forward in terms of how we manage our G&A investments. And the goal is to invest in organic and strategic growth and also looking -- continuing to look at acquisitions. So, this is an asset-light model. There is leverage to be have with our infrastructure, but there is potentially more that we see with prudent investment in growth.

And in terms of potential for bottom line growth over the next few years in terms of the portfolio?

Top line and bottom line. But without getting into specific guidance numbers, we think there is growth because this is -- again this is an asset-light model, our G&A infrastructure can be leveraged. You're exactly right.

Thank you.

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All right. Thanks guys. We appreciate the time and your questions and we look forward to speaking with you next quarter. Have a great day.

This concludes today's conference call. Thank you for participating. You may now disconnect.