PZZA
#<UNK>, it's Steve.
So I'll give a little bit more color around that.
When we launch the quality guarantee, strategically, clearly we had a plan in mind.
We wanted to talk about her clean label work that we've been doing for the last 3 to 5 years.
Clearly it was a branding spot.
I think just in terms of timing and the promotional environment, probably could've been better timing just in terms of the traffic mover.
But we did accomplish what we set out to accomplish to educate the consumer on why is Papa John's different.
Why are we the recognized quality leader within the category.
But we did move to a slightly more retail-driven promotion.
We did have our $9.99 offer ---+ the large, up to five topping promotion that was even in the branding spot.
But we moved to a more retail-driven focus, switched some of our media from [$]30s to [$]15s and that drove significant traffic because it is certainly a good value offer for Papa John's.
It's not, to John's point, the $5 prices that we've seen from some of our competitors.
But we saw strong traffic momentum towards the tail end of the quarter.
That promotion did quite well.
We wrapped the quarter with that.
And as you can see in today's environment, we have ---+ we're on the medium's promotion ---+ two mediums, two toppings for $6.99.
Which is more premium compared to what some of our competitors have done but we've tested the medium offer for years in the local markets and it's also performing well.
<UNK>, this is John.
Not to give away our age, but Steve and I have been doing this combined for over 65 years.
I remember June of 1993 we went public.
And pizza was doing a Big Foot pizza.
So we've pretty well seen just about everything that you can imagine and we've dealt with about everything you could imagine.
So when the thing bobs and weaves a little bit, we wake up and do this every day.
And that's our job and that's what we do.
And so from time to time, they're going to get ---+ I mean the question is when they go from $5 a pizza to $4 because they will, because they have to.
And I'm sure we'll feel that a little bit.
But again, after three or four or five weeks we get right back on our game plan.
Not a tremendous amount of bumpiness, <UNK>, but I'll hit it a little bit.
So as I noted in the opening remarks, the conference is $0.01 to $0.015; so not a huge number.
And then as you look forward kind of at that cadence ---+ what's it look like.
I'd say overall, G&A will probably be a little bit higher in the second quarter due to the event ---+ due to the conference as well as some investments we're making in our technology team.
And then you should see it kind of come back in the second half of the year to more moralized levels.
And as we've said, we expect overall G&A as a percent of sales to be about the same as last year.
So a spike up a little bit in the second quarter, come back down second half, be about even for the year directionally.
Yes, Dave, it's Lance.
I'll start and then I'll let John or Steve jump in if they'd like.
Certainly we do expect higher comp sales going forward, as you've heard.
But with that said, we do have a few headwinds.
You're going to continue to see FX rates.
You're going to continue to see additional investments in our IT and international infrastructure, which are really the two major drivers that you've seen.
And then, frankly, we think it's a little bit early in the year.
We'd rather get a little further under our belt before we address earnings guidance changes.
So I think those are the main reasons.
Anything you guys would add.
<UNK>, it's Steve.
I just had a couple things.
I think the key point is it's early, as Lance had alluded to.
I think if you look at our 2% to 4% guidance, obviously that aligns with what we've got posted on our earnings guidance of $2.30 to $2.40.
If look at our stacks, it's not hard to look at the fact that we're 66 in Q1, a 5 Q2 goes to 31 in Q3, and then a 2 in Q4.
If we can produce the stacks that ---+ and I think we're confident we can.
Obviously, those things could potentially have potential upside.
But at this stage in the game, I think that's why we look at the guidance that we have put forth.
And, <UNK>, this is John.
The thing that we really focus on is the restaurant profitability.
And we've ---+ Evan and his team, Simon, we've tripled our restaurant profitability over the last four years and we're having the best year we've ever had in 2016.
So if you're driving restaurant profitability, that's where your income is coming from.
It is just a healthy situation.
I'll start and then guys can jump in.
So we've seen a little bit of wage inflation.
Overall, if you kind a look at that other restaurant operating line, in the neighborhood of half of that was wages and half of that was continued insurance pressures that we've spoken about before.
So I'm not going to go into exactly what we're seeing from minimum wage and what we're not.
But the other thing I will say is, we're in some of our corporate markets which is close to our P&L, are not in some of those New York, California, where you see the real high minimum wage.
But there is pressure throughout the rest of the country in various forms.
<UNK>, it's Steve.
The only thing I would add is the way we look at it is try to balance things.
So we look at it, as John alluded to before, profit after FLM.
So in Q1 obviously commodities are down, sales were down a little bit but we still were very competitive on the bottom line.
Our strategy is to drive the top line sales and leverage what's happening within the environment.
We know wages will move.
Frankly, we want to be able to continue to give our team members raises because the performance has driven us to look at it from that strategic rationale.
But I think that you'll look at us continue to drive top line sales and be able to mitigate that.
The key point is, again, the significant movement in overall wages are in states where we don't currently have corporate restaurants.
<UNK>, this is John.
The $50,000 number ---+ our managers would have to go backwards to make ---+ our managers make more than $50,000.
So we're already covered there.
The drivers make more than the $15 an hour.
And that leaves you really the people in the store that are prepping in doing the phone.
And the more you drive your IS platform, the less of those folks you need.
So I think we're in a perfect position to handle any kind of wage increase.
The thing that we do look at, we scrutinize quite a bit is cheese and fuel.
Because as long as we've got some cheese hedged and some fuel hedged, it's pretty hard to miss the number.
Everything else kinds of falls in place.
Without getting specific, <UNK>, we're actually ahead on development in the first quarter and to period four.
We're actually ahead of our budget and our forecast.
Yes, <UNK>, we never use the weather as an excuse.
But ---+ and I don't want to get too specific here because all upset Lance.
But P1 had a nice start and the weather did impact P1.
Easter wobble ---+ you want to jump ---+ handle that one, Steve.
The Easter wobble was clearly the very last week of the quarter.
These things, <UNK>, as I had said before, they're not significantly material because typically weather shakes itself out on a year-to-year basis.
From a quarter-to-quarter those things end up becoming factors but not material factors, which is kind of why we don't ever call out a specific number to it.
I think the key point, again, is that the significant traffic momentum that picked up towards the tail end of the quarter offsetting really some of those other factors as it relates to weather and wobbles from a calendar standpoint.
<UNK>, I'll kind of give you the ---+ our ---+ how we operate our marketing.
We move extremely quick.
We did the MLB ---+ we took that from soup to nuts in less than three weeks with a commercial.
So we ---+ not only are we flexible, but if we need to make a change it just doesn't take long to put me in a studio and get the creative done and get it out in the market.
Steve, you want to hit the different ---+
<UNK>, let me give you the mindset ---+ this is John ---+ give you the mindset that we have.
You all see the comp number once a quarter.
We see that number every day.
And so I can tell you, when that number turns negative, the place doesn't feel near as good as when the number's positive.
So we're on this everyday.
And so if it is ---+ we do have a negative day, we're on this ---+ what happened.
What happened.
How do we fix this.
<UNK>, this is John.
The cheese is about at 35 right now.
Yes.
The thing about cheeses is it is capable of going from $1.35 to $3.
And we just believe that we just can't miss our number on a quarterly basis ---+ not that we're chasing number ---+ unless something that comes way out of the box that we can't influence.
So what we're trying to guard against is any kind of really downside incase cheese does do something crazy.
So let's say were hedging cheese right now at $1.65 or $1.70 and we've got half or 60% hedged and the cheese goes to $1.35, we're fine with that.
It's not a problem.
But what we don't want to do is be sitting there at $3 a pound and not have it hedged.
<UNK>, I would say it's remained extremely aggressive this year.
And again, that always aligns with where the commodity environment is with cheese prices being as low as they are.
That's going to be more favorable.
It's going to drive a more competitive environment.
As we've said in the past, in a more competitive pricing environment, the national players are going to be more significantly discounted and they're going to be taking share from the independents and the regionals.
So it seems to all come back to consolidated share within the category.
The big players win, leveraging the strengths to the economy of scale and the strength of technology.
So, it works out well for us in the long term.
That's why we're well on her way to our 13th consecutive year of positive comp sales.
It's all about consistency in the long-term for Papa John's.
<UNK>, this as Lance.
So you had a couple things really bringing that margin down a little bit.
One of them again, foreign currency had about a $700,000 impact.
The other thing is we did ---+ we do now show certain sublease rental income from the UK.
We show it grossed up when we did show it net.
And it's essentially a zero margin business.
So it drove that margin down.
That's a 2% and it will look that way the rest of the year, so that you're aware.
So really on a go-forward basis, it's really kind of a percent you were looking at in the first quarter.
And that was really driven somewhat by the foreign currency.
And then a little bit due to China.
We continue to have weakness in the China market.
And as Steve and John both referenced, we're moving forward there with a re-franchise plan.
<UNK>, and I would just say ---+ it's Steve ---+ on international market, there's going to be volatility.
And you certainly can't take percentages to the bank.
We want to grow this business dollar for dollar, year after year after year.
I think we've demonstrated that since 2012.
The international business has certainly been moving in the right direction.
I think Jack Swaysland and his team has provided an infrastructure for growth.
That's why we're so excited about 2016 being a record year for total new country openings.
New country openings are low single-digit in year one but that provides us with a platform to really drive that dollar growth up in the right direction.
Percentages are always going to move around in an international business.
Sure.
I'll just do that for the high level, <UNK>.
I'm not going to get into a lot of the numbers.
But what you'll have remaining ---+ you'll have zero corporate stores on the international side.
And then you will have two QCCs, one in the UK, one in Mexico.
The one in Mexico's really very, very small.
So really what you're talking about as far as owned assets on the Company's books will be the commissary over in the United Kingdom, which is a pretty significant contributor.
That's all you'll be looking at post sale.
Again, the percentages game ---+ we're careful with.
So we try to drive the top line side of the business.
The sports partnerships that we have, whether it's the Major League Baseball league sponsorship, the NFL league sponsorship or the over 150 sponsorships we have from collegiate to professional ---+ all of those are designed to drive brand awareness.
The activations drive sales.
And ultimately they drive more profit after our food, labor and mileage numbers.
So yes, some of those promotions are quite aggressive.
In fact some of them are 50% off after a game day win or a number of points or goals that are scored.
But ultimately we know we're bringing in new customers.
We're building the brand awareness.
And we're growing the overall brand.
<UNK>, it is Steve.
55% are total digital online sales.
60% of that is coming now from mobile channels.
We have previously announced that it is 50% so it's now up to 60%.
On the overall 55% or the 60% or both.
Promotional activity is certainly one of them.
Clearly a lot of our promotional strategies is driven to drive conversion from off-line to online.
Some of that's just organic consumer behavior.
Consumers are moving more to technology.
And then a lot of is just the enhancements that we've made to the foundation on our platforms.
We believe that the customer experience in our digital channels is improved.
So that's driving the retention in frequency levels to drive the overall mixup.
The mobile side is just obviously been the most accelerated driver of growth within the digital platform.
And I don't suspect that's going to slow down anytime in the near future.
The guidance is using actually kind of probably high ---+ mid to high $1.50s.
We certainly take a look at our forecast as cheese prices move around.
<UNK>, this is John.
The farmer breaks even about a $1.55, $1.60 a pound.
So when they start losing money, then that's not good.
Sooner or later the supply and demand have to set in and the price will go up.
Thank you, Shannon, and thanks, everyone, for being on the call.
We will talk to you next quarter.
