SONC
#Thank you, Denise, and thank all of you for joining us today.
For the quarter, we reported a flat adjusted earnings per share of $0.43 on a 1.2% decline in system same-store sales, lapping a positive 2% comp in the third quarter of last year.
The same-store sales consisted of positive product mix of approximately 2.7%, and that was more than offset by the negative traffic in the quarter.
Margins at the company-owned drive-ins increased by 40 basis points, primarily driven by our recent refranchising efforts involving the sales in lower-margin drive-ins.
We continue to make progress on accelerating new drive-in development as well.
Our current area development pipeline is 5% higher versus this time last year, and our system remains on track to open 65 to 75 new units this year.
And then, finally, the last point you see on this page, we continue to return cash to our shareholders, repurchasing $30 million of stock during the quarter, or almost 2.4% of the shares outstanding.
And to the third quarter, we have purchased throughout the year, including the third quarter, we purchased about 9.9% of the shares of the company outstanding.
Now before I get into the specifics of the third quarter performance more specifically, I want to take a moment to comment on our recent release that you almost certainly have seen, announcing our newly promoted Chief Marketing Officer as well as other key additions to our marketing team.
All of us here at Sonic are very excited that Lori Abou Habib, who is a 10-year veteran with our company and most recently was Vice President of National Marketing, has been named as the new CMO of our company.
Lori has really extensive experience with our brands, she\
Thank you, Cliff.
For the quarter, system-wide same-store sales declined 1.2%, while adjusted earnings per share were flat.
Traffic was negative, partially offset by higher check.
Franchise revenues increased $1.8 million or 3.7% as a result of our refranchising initiative and net new unit growth, partially offset by same-store sales declines.
Total company adjusted operating margin improved 440 basis points to 27.9% in the quarter, driven primarily by a higher mix of franchise stores.
Company drive-in margins improved by 40 basis points in the quarter mainly driven by our refranchising effort, partially offset by sales deleverage.
Food and packaging was favorable by 100 basis points given benign cost inflation and the impact of refranchising.
We have logged in a majority of our commodity costs through the fiscal year and anticipate our commodity basket inflation to be up slightly for the full year with 1% to 2% inflation in the final quarter.
We are currently running menu pricing at 1% at our company drive-ins since we did not replace pricing that rolled off during our spring menu change.
Labor margin deteriorated by approximately 80 basis points in the quarter.
Sales deleverage and labor inflation combined to drive approximately 115 basis points.
Direct labor inflation, excluding our Colorado markets, increased by 3%.
Colorado markets experienced an 11% wage inflation, which brings our total weighted average to about 4.5%.
These pressures were partially offset by refranchising favorability of around 35 basis points.
For the quarter, our adjusted tax rate was 33.6%.
Historically, when noting GAAP to non-GAAP adjustments, we've applied the same effective tax rate to GAAP and non-GAAP items.
To increase transparency, we are now segregating the tax rate associated with the change in taxes when adjusted for the non-GAAP items from the effective quarterly tax rate, which may be different.
The tax rate reflected for the refranchising gain in the third fiscal quarter of 48.6% is a higher rate because it reflects taxes associated with non-GAAP adjustments made in prior quarters.
The most meaningful non-GAAP tax rate to consider is the 36.9% fiscal year-to-date rate, which can be calculated using the details in the GAAP to non-GAAP table.
This adjusted rate does include the favorable impact from the early adoption of ASU 2016-09, which relates to the recognition of excess tax benefits related to stock option exercises.
The adoption of the standard is likely to result in increased volatility in our adjusted quarterly tax rate, and the amount recorded is dependent on the timing and amount of stock option exercises.
For the third fiscal quarter, adoption of this standard did not have a material impact on the tax rate.
As we go on to talk about free cash deployment, as of the end of the third fiscal quarter, we had $45.2 million remaining on the $173 million share repurchase authorization for fiscal year 2017.
Year-to-date, through the third quarter, we have repurchased approximately 4.9 million shares at an average price of $25.95.
We will assess the rate of share repurchase and dividend payout for fiscal 2018 in our upcoming budget planning cycle in the August board meeting.
Our intention is to continue to grow the dividend annually from the current $0.14 per share.
We will also be reviewing targeted debt levels in light of the recent completion of our refranchising effort.
As we look at our capital structure, we ended the quarter with $52.1 million in unrestricted free cash.
We anticipate free cash flow of approximately $55 million to $60 million this year.
Please note that we have refined our definition of free cash flow to exclude expenditures related to build-to-suit development projects.
Build-to-suit drive-ins are restaurants that we build with the intention to sell to predetermined franchisees in the very near term.
As proceeds from the sale of build-to-suit drive-ins are recognized as investment cash flow, we have never included them in our definition of free cash flow for market purposes.
Given that we do not recognize the proceeds, we believe that netting expenditures on the build-to-suit against free cash flow obscures the free cash flow generation of the business.
We anticipate capital expenditures of between $46 million and $48 million for the fiscal year, which is inclusive of build-to-suit expenditures of approximately $6 million.
This compares to our prior capital expenditure guidance of $40 million to $45 million that assumed approximately $4 million of build-to-suit activity.
As we look at our fourth quarter outlook, and as Cliff mentioned, we now expect system same-store sales to be flat to down 1.5% in the fourth quarter, equating to an approximate 2.5% same-store sales decline for the full year.
Adjusted fourth quarter EPS is expected to be $0.43 to $0.45, putting us within our current full year guidance of down 2% to 5%.
The modestly lower same-store sales performance is offset primarily by a lower tax rate and lower incentive compensation.
The same-store sales forecast assumes continued negative traffic through the summer and positive check.
Our same-store sales performance of down 1.2% in the third quarter was consistent in our expectation of a [markedly] improved trend from the first half of fiscal year.
Though we continue to drive towards positive low single-digit comps by the end of the fiscal year, traffic trends in May and June have been slightly beyond our prior forecast, driving the change in our sales guidance.
With respect to company-owned drive-in margins, we are refining our full year margin expectation to approximately 15.3% versus prior guidance of 15.5% to 16%, primarily reflecting the lower same-store sales assumption as well as continued pressure on labor rates, including higher wage rates in Colorado.
Our fiscal fourth quarter restaurant-level margin guidance of approximately 18% represents a 100 basis point improvement over the fourth quarter of last year, reflecting the benefit of our refranchising effort and the lapping of several cost headwinds.
The extent of the margin improvement will ultimately depend on same-store sales performance.
We have sharpened our projections for full year SG&A expense to approximately $81 million, primarily reflecting lower incentive compensation based on lower same-store sales and profits in the second half of the fiscal year.
Our expected tax rate for the fourth quarter is 35% to 35.5%, and the full year tax rate is now expected to be between 34% and 34.5%, reflecting the early adoption of ASU 2016-09, as previously discussed.
To conclude, while the third quarter of fiscal 2017 showed a meaningful improvement and trend given more normal comparisons and an improved marketing calendar, we remain focused on returning to our targeted cadence of low single-digit same-store sales growth.
We continue to execute against our technology initiatives and continue to progress towards fulfilling the potential of our more highly franchised business model, including higher free cash generation as we look out over the next several years.
With that, we will open the call for questions.
The regional element of that, Matt, did not play in.
I think we have a slightly different challenge with our company stores, which ---+ so to answer ---+ kind of answer your question what played in, it was not those elements so much.
Frankly, I think it has more to do with the rate in the last several years, the rate of turnover that has evolved in those stores and the quality of service that customers are experiencing.
And so we both made a number of investments, particularly at the management level and different by market.
But we've also, in this calendar year, made a change in leadership of who's managing our company store operation post disposition of stores, with the objective of having a different approach to stabilizing and improving the tenure of management and also a shift in culture of accountability there that we just simply weren't developing.
And with that change in leadership and some refocused efforts on the manner in which management is working in those stores and working to a sufficient degree, make sure of the compensation, you have them both working at a level of work and compensation that's right for that marketplace.
And the consequence of this is we have started seeing some improvement and turnover at the management level.
And this is occurring at a point in time where, according to the People Report, as you're probably familiar with, in fact, it is showing in our industry deteriorating or increasing levels of turnover.
So we actually felt good that we're going contra trends in the industry.
And the surveys that we do with our employees, franchise store employees and company store employees show that the employees' greatest connection for engagement and retention and performance is to the Assistant Manager, and so that's very much where we're focusing and that's where we've seen an improvement in retention.
It has not yet developed or progressed to reflecting improved retention of staff, but we believe it will.
And keep in mind ---+ well, anyway, the point in time ---+ we did these surveys in the spring and it's a little bit different time to do the survey because our business transition of employees is winter and summer.
But anyway, that aside, we do have confidence for a variety of reasons including what the employees tell us that with that reduced turnover of the manager, assistant manager and the relationship there, it will, over time, reduce turnover of the staff.
And we're confident with that.
We will also see better customer service and, in turn, with a better customer experience, growth in sales and profitability.
So we ---+ this is a ---+ has been a bit of a challenge for our company stores.
We believe it's a move in the right direction, but it's not something that will happen in just a quarter or 2.
Well, 2 reactions there.
One is, particularly as it relates to the scale that McDonald's presents, their ubiquitous nature ---+ we're hardly in a market where are they're not, only in some smaller rural areas would they not be present where we are, but given their ubiquitous nature and given their scale, and given their AUV and given their system sales domestic competition with us, when they go positive, it really does impact everybody just because of the scale, and that's kind of a mathematical element.
But that aside, we do track what happens.
We work to track what happens with customers by customer type, by product ---+ excuse me, product line.
And so to the extent that we have impact in specific lines, like drinks, and we're seeing that impact, it's ---+ believe it or not, it's not attributed to the one of the 3 majors, let's put it that way.
We see it more of a challenge.
A broad challenge with a lot of new folks coming into the business, but there are some specific competitive activities that we can track customer behavior and it's not to McDonald's.
You talked a little bit about accelerating some of these initiatives on POPS and your excitement about the integration of mobile.
What have you seen in the test that you can share.
What are you learning from your customers.
What are they ---+ how are they using it, the frequency, check, things of that nature.
And can you give us a sense also just what the actual traffic number was.
Because you gave us a little bit of the mix and pricing, is it just literally ---+ is there anything else.
Or is it just the mix and the price for this quarter.
Why don't I deal with the first part of it, and <UNK> will give you a reaction on the latter part of it in a moment here.
So I want to be clear about my terminology.
As I said, we shift resources.
It's a little less of an acceleration.
Because if I were using the term acceleration, it would probably immediately make you say, well, that's great, how quickly is that going to happen.
The fact is these things occur progressively.
I mean, our industry competitors that are doing very well with these tools have been utilizing them for years and building data banks and leveraging that, so building knowledge that they can then utilize in their business.
So to the extent that we started using things like this, we've used them more for market segment or trade area segmentation rather than customer segmentation.
We've now moved to a point with this revised app that does integrate it with POPS and POS, that when we get to the point that we have mobile order, we'll have a much more robust tool that will allow us to start building that data on an individual basis and we can have far more associations, not 1 to that individual, but 2 with demographics.
When a person ---+ when a woman living in Austin does this and so on.
So it'll build a ---+ we'll be able to build a databank that we have less of to date.
So we have had, with some of the efforts we've have to date, particularly in the market segment activity, we've had some positive results with some of it.
Some of it has not been ---+ I mean, you take a shot at it and it doesn't yield much.
So the efforts have been mixed.
But we are learning from that and learning things that we can repeat then and work to continue the business ---+ excuse me, work to continue to refine our approach to this aspect of our business.
So I'm afraid that's not overly responsive to you, but this is why I'm also trying to portray to you that we're ---+ with the ---+ it's less about getting POPS and POS in almost all the stores now, although that's a big deal, it's more about getting the app integrated and this has taken us a while to have the app rebuilt.
We did have an app in place, but it was an off-the-shelf app from a vendor.
And we realized some time ago, 12 to 18 months ago, that we really had to have the ---+ we had to own the IP in a way it can integrate with POPS and POS if we're going to make this work.
And so, in a way, we kind of started over there.
But we did roll out the new app, a new version last month.
It went very well, and we're very pleased with how it went.
And it bodes well for the next stage of mobile order and, at which point, we can really start moving into a different type of learning about our customers and marketing to them.
But we can also show them a very different experience when they come in back to this point, first in line, every time.
Nobody ---+ none of our competition can have 12 orders come in at the same time and have everybody pull into a single stall and get served by a carhop.
Everybody else has to ask for you to wait in line.
The more people they get at the same time, the worse a problem it becomes for them.
We don't ---+ we won't have that, we'll turn our table faster.
And then with respect to the sales question for the fiscal third quarter, we have ---+ we probably ran about a little bit under 2% on pricing, about another 50 to 70 basis points of positive product mix shift more than offset by negative traffic declines, <UNK>.
You have perceived that correctly.
Our perspective, what drove it was, last ---+ I mean, a year ago, let's just say, when we saw in retail and restaurants a sudden slippage in traffic and sales, the nature of the competition up until that time that had been ---+ the primary activity and the shift prior to that time had been really solely value driven.
And so with that slippage in traffic, our view was we got to see is this something that consumers will respond to and is it momentary and do we need to drive, in a short-term fashion, drive traffic back, what will it look like if we just ignore this trend.
So this is when we came on with the $5 Boom Box.
And it did get a lot of usage, but ultimately, we came to the view that it was not driving incremental traffic and we were just trading off what the customers might have been utilizing our menu for otherwise.
And so as the ---+ really by the time we certainly into this calendar year, as this fiscal year has progressed, it's been our objective to move away from that strategy and towards more traditional product news, day part, new product news, service differentiation approach with our marketing activity.
So you perceived that correctly, that's what drove it.
We have had post-winter, when we go back and look at the negative comps in the winter and how negative they were, we have seen an improvement in the sense that they though negative, not nearly so negative.
And the other thing I'd say, too, is depending on a variety of factors, we also had days where we have positive comps.
So it's not like they're all negative.
And that's a better picture than we saw through the winter.
So I think there are some payoff to this.
But we've ---+ we're kind of in a middle ground where, in '13, '14, '15, we've made some real refinements to our creative and our media in particular, but also our products and promotions.
And those things all wove together really nicely, '13, '14, '15 into '16.
We fully intended to bridge into these 21st century mediums.
These, we believe ---+ let's just say, 3 years ago, we had an app that would get us there.
But 1.5 years ago, we came to the conclusion that the off-the-shelf app might work for somebody, but what we were trying to do with POS and POPS and have that integrated, we could not do it with an off-the-shelf app.
And that's why we, in essence, we slowed down so that we can eventually speed up.
And that slowdown phase is kind of where we are now.
And it's not fun, it's a little painful.
But we also believe that the slowdown will permit us, near term, to speed up once we have mobile order and can have that integration of all these elements.
So the ---+ so I'm wandering a little bit, I hope that's responsive to you, this is why we shifted more to the product and service differentiation.
But the service piece, I think, is also going to be heightened near term when people can order off-premises and be first in line when they come to Sonic.
Pull into the stall, enter the stall number on your app, and boom, they're already making your food inside, they know which stall you're in and you shorten the whole process.
Yes.
So that's ---+ we're currently in our budget planning cycle.
And our board meeting is going to take place in August, and so we're reviewing various scenarios right now, Will.
So we'll talk about that in August, and then subsequent to that in October.
But we're looking at the fact that we are a higher franchise business model and what that means from a capital structure perspective.
So that certainly higher leverage is certainly one of those alternatives that we're looking at.
And in this context, we're also ---+ as our board would expect, we're also looking at alternative uses of capital, what should we be doing in order to make sure we're doing what's best for growing the brand and then also best for our stockholders.
Okay.
I'll take the first part of that and <UNK> will take the second part.
The technology initiative is intended to have several benefits as it relates to the sales driving piece.
The primary piece there is the customer interface on lot and the customer interface off lot.
So POPS on lot and the app or online usage off lot.
The technology initiatives go beyond that because they do include the point-of-sale system, which is already helping the average operator from an inventory control standpoint and methods that were implemented there to help them evolve their management style and improve margins from that standpoint as it relates to inventory.
But over time, with the evolution for the individual operator should help them with inventory, with labor and with cash management and revenue enhancement with the portion that comes in cash.
Now as it relates to the use of technology and the benefits to the consumer, we see this as, one, to the extent we start building a database by consumer, it will help us from a marketing standpoint.
So it should help drive traffic over time and build over time.
And we've seen this with our competitors that have been most successful in development of these tools.
They do drive traffic very positively and consistently, and it takes their AUV and profitability to a very different place.
Consumers who spend using a credit card or an app, their tickets are larger than the cash ticket in our business, we see that.
And they particularly ---+ well, anyway, we see the difference, and in both cases, it's higher than the cash customer.
So that may not be new news, but it is part of the equation.
So we would expect the customer that has some frequency with us the fact that they can ---+ the app has a place now for your favorites, it has a place for your past order, your most recent order, so the ease and convenience of doing that literally with one push of a button if that's what you want.
In other words, I want the same thing I had last time.
And there are a lot of people who do that, particularly at mealtime, particularly at lunch.
So I'll take my last order.
So the ease and convenience when you can, with a consumer, help them save a step in the process, which in this case could be ordering ---+ the whole process of ordering on premises and payment on premises, when you can condense that into one step that allows them with one push of a button to place their last order, to repeat their last order and pay for it with use of their app, it is a very significant advantage to a consumer.
And we saw that 12, 15 years ago when we implemented PAY<UNK>
We knew ---+ if we can put the correct card reader at the stall that would cause people to come to us because it's the technology at the time, they wouldn't have to stop and get cash at an ATM.
It sounds a little quaint now, but 15 years ago that was the case.
So when we put that in place 15 years ago, over time, we went from 5% of our sales in credit cards to 55% of our sales in credit cards.
And we think this can and believe this can have some similar impact on the business in terms of the ease and convenience of ordering and payment.
And when they come on lot, they pull into a stall, they don't wait through a drive-through line, they don't have to go into a store ---+ into a store and wait in line.
They pull into a stall, they enter the number from their stall shown on the screen on to their app, connect inside, all of these are integrated, and ---+ so the ease and convenience should help with driving consistent usage.
And when they do that, they'll spend more money.
So it's kind of all the above.
And I'll turn it over to <UNK> for the other part of the question.
Yes.
On the call, our guidance for same-store sales in the fiscal fourth quarter was flat to down 1.5%.
For the fiscal year at approximately about in the neighborhood of 2.5% down.
And so if you look at the range for the fiscal fourth quarter, that could have an impact, that 2.5% decline, anywhere from 10 to 20 or 30 basis points.
So that's what we mean from that perspective.
With respect to the decreased drive-in level margin guidance, that is in part due to decreased performance.
But it's also due to the fact that we had not expected to see such dramatic wage inflation in those Colorado markets.
And that's disproportionately impacting that labor line.
So I'll do the Colorado piece and <UNK> will deal with the beef piece.
As it relates to any specific market, any thoughts about refranchising, we'd only do that in confidence.
We'd only do that internally, I think, and in conjunction with our operating partners there, franchisees, et cetera.
And so there's probably ---+ there's not a time that we would discuss any specific market that we had any plans for ---+ either way, without dealing with that internally first.
So I don't have a response other than that.
It is our intention with that stable of stores, you might say, the inventory of the stores that we have at this point, it is our intention with the investments we've made in POPS, POS and some trade reps to ---+ and the labor investments we've made and the change in management to focus on improving those and attempt to move into a much more profitable base.
If we're not able to do that over time, then we'll rework our strategy.
But for the time being, that is the focus of our effort.
And as to the beef, <UNK> will pick that up.
Yes.
So a portion of our inflation in the fiscal fourth quarter is related to beef, although we're contracted for most of that through February.
But another portion is related to other commodity costs namely, as you know, we sell quite of bit of ice cream and the butter market continues to be pretty volatile, and so that's another commodity that we've seen some pressure on in addition to just some other ancillary items.
But I would tell you beef and butter are the primary drivers.
So, <UNK>, this is <UNK>.
I think what I would tell you is we absolutely think that we can return to a normalized earnings per share growth model, and it will look a little different because we are a higher franchise business model.
What will be notable though as we go into fiscal '18 is ---+ and I'm going to point out a couple of items, is that for SG&A, and you just noted this, we've has been flat due to the fact that we've reduced our incentive compensation.
And so as we look to next year, there will need to be a minimum of about $3.5 million investment in SG&A just to bring us back to recalibrate the assumption that we'll be meeting performance.
And that doesn't include regular adjustments for inflation and for increased headcount.
So that will be something that will be a headwind from an earnings-per-share perspective.
But as Cliff outlined to you, we are in our planning cycle, and we're focused on how do we drive same-store sales through our traditional way of focusing on product innovation, distinctive targeted value messaging and through that ICE infrastructure, which we feel very positive and confident about.
As we look to ---+ when you talk about investments in our brand, and this again goes back to use of free cash, first and foremost, we always look to invest in the brand and what makes the most business sense and where we can get a return.
Since we have moved to a higher franchise business model, you'll see some slight reduction from a maintenance CapEx perspective for our company drive-ins.
As we continue to see opportunities in either relocations or retro or rebuilds, we will continue to make that investment as we have seen, historically, a 28% to 40% sales lift from those investments.
Then the other big piece is just technology.
And as we move to a higher franchise business model and we look at the investments in the brand that we make, it's really, over time, capital expenditures will be primarily focused on those system technology expenditures.
And as we know from looking at other successful companies, that's a constant reinvestment to ensure that we are continuously improving the customer experience.
So an understandable question, and a question that we are asking here and answering in more than one way.
First, let me say to you that as it relates to the way that can work, if you're talking about the potential bottleneck, if you do get 10 or 12 people ordering in a relatively short period of time and pulling on lot in a similar time line, that if they have gone through some parts of the process, review the menu or the ordering process, the payment process and that has all occurred off lot, you now are in a position to, as you'd say in full-service dining, turn the table.
It will turn tables more quickly than you would be able to otherwise.
And so in the ---+ in that context of getting food to a customer ---+ and of course, it does assume that the service time is the same, and I'll talk about that separately in a moment, if the service time is the same, in fact, the customer can move on more quickly.
And most customers do take their food and leave the lot, some stay on premises.
So the turning-the-table thing should enable us to have more throughput capacity, to the extent it's ever constrained by the length of stay and the number of cars on lot, it enables ---+ it just frees up parking space.
Now as it relates to the throughput capacity in the drive-in and the actual potential for the standard kitchen, our average store is doing just short of $1.3 million.
We have had for years conventional SONIC Drive-Ins that do $2.5 million and $3 million.
We have variations on the conventional drive-ins, they're opening in newer markets where they're not doing in $3 million to $4 million range.
We do have stores doing in excess of $4 million, and they have sustained at that level.
So these are with relatively conventional kitchens.
So the throughput capacity, if it's operated well, the throughput capacity for an average store is greater than what we are experiencing today, and significantly greater.
So to the extent that the technology drives that kind of demand, we do have business across 5 day parts, we do have greater capacity than the average store is called upon to address today.
And as we turn tables faster, even though in the busiest part of the day, it will enable us to serve more customers.
Now that being said, those 2 things being said, the fact is, yes, we are addressing with our average operator.
What does this mean.
What does this mean for staffing.
What does it mean for anticipating the level of business.
What does it mean for level of leadership.
How do we look at assistant managers 5 and 10 years ago.
And how do we look at assistant managers today.
So these are very active points of discussion and consideration and recommendation by us to our operators, that are active points of discussion at our convention, at our regional meetings and our individual business meetings with individual franchisees.
So you're right to be on point about it in your question, but it's not going unanswered in our business.
Let me do ---+ I'll do the first part and <UNK> will talk about the second part.
Well, first of all, as it relates to sales trends, we're only talking about through May 31.
Secondly, we don't ordinarily talk about what happened to this product line or what happened to this day part, and we probably won't start that today.
So I'm afraid I don't have a lot of detail for you on that, so I'll turn it over to <UNK>.
Yes.
So I can answer the second question, <UNK>, we have been engaging the build-to-suit program since fiscal year '15 on a more limited basis.
We started to break it out on our 10-Q and annual report probably within the past 12 to 18 months.
And as we've seen success with it, we've been able to ---+ literally, we designate, we partnered with certain franchisees under certain circumstances, and they usually buy us out within anywhere from 3 months to 2 years.
It's just something, as we were looking at capital expenditures and free cash flow, we wanted to point that out and we want to start incorporating that going forward and thought that would be helpful context.
Yes, so good question.
And I think I understand why you would phrase it the way you did.
The presentation where you ---+ we did make at that time and we have made at times in the past had to do with our multi-layer growth strategy.
And so what we laid out for analysts and investors was, here are the multiple points that contribute to our EPS growth and we laid out the first from the same-store sales, then you got margin improvement, then you got new store developments, then you have our ascending royalty rate, and then you got use of free cash.
So we laid out those 5 points out along these upward swinging arrows to show how these things contribute to our EPS growth.
And then we put a ---+ if we were going to have mid- to high-teens, let's just say, EPS growth rate, what portion of that teens EPS growth rate is made up by each of these components.
And so when we talked about 3% to 5% in that context, it was what portion of the EPS growth would be made up by the same-store sales, as an example, or stock buybacks or whatever.
So I would want to clarify, Bob, that in that presentation, that's what that 3% to 5% was.
Now at the same time, if you go back to '14 or '15, I was kind of surprised because, in fact, we produced 3% to 5% comps.
But that was an interesting scenario that occurred because of a lot of other good activities that was going on.
Now in terms of it being 3 years ago and we laid that out for you, the process of getting this implemented in our system, 3,600 stores, the whole process is much more arduous and much more plodding than we might have anticipated.
We are ---+ I think as we've said, in this year, we're hitting 90%.
So it's getting done, but it's just been a hell of a lot more work and a lot more arduous than I thought and it's required us to focus a lot more resources on fewer initiatives.
And the consequence of this in part has been that the infrastructure is getting done but the beauty, the quality of outcome that we would expect from them, frankly, has had less investment and less work.
So there's not ---+ I mean, there's not a whole lot more I could tell you other than that.
There are steps we've taken along the way and we are investing in outside vendors to help us get there.
We're investing in people even more so now, but we have been for a while.
In spite of the fact that the SG&A may have been held constant over a period of time, our investment in technology, not just infrastructure, but IP and usage, development of it, has been quite significant over the last several years.
So will we get back to where we were, in fact, in kind of the '14, '15 time frame, that's not something we've laid out as an expectation.
But as our AUV climbs, we believe we can get back to some combination of positive traffic, price increase and other methods of engaging customers that would get us back to a moderate single digit, low single digit.
And then if we do that and open stores at net increase 2% to 3% and higher volume, we'll get back to where that multilayer growth strategy as those types of contributors and will get us a nice EPS increase here year-by-year.
They ---+ and it can be in this kind of sequential ---+ it's not a 1-year deal, it's not 1-year pipeline for opening stores, it's not 1-year pipeline of customer engagement initiative.
These are things that can build and grow and build on themselves.
I feel very confident about that.
And you can see people like Panera and Domino's and Starbucks that have done it and they build on it, and it's beautiful.
Okay.
Thank you, Denise.
And thank ---+ again, thank all of you all for participating.
We appreciate your interest in the company.
We appreciate your patience in kind of this transition time.
We got a great brand and a lot of power moving the right direction.
And near term, we believe we're going to harness that in a way to take our business to another level as well.
So thanks for your interest, thanks for being here today.
We look forward to seeing you along the way.
Take care.
