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Brinker International Inc  (NYSE:EAT)
Q1 2019 Earnings Conference Call
Oct. 30, 2018, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and welcome to the Brinker International Q1 F19 Conference Call. At this time, all participants have been placed on a listen-only mode and we will open the floor for your questions and comments after the presentation.

It is now my pleasure to turn the floor over to your host, Mika Ware, Vice President of Finance and Investor Relations. Ma'am, the floor is yours.

Mika Ware -- Vice President of Finance and Investor Relations

Thank you, and good morning, everyone. With me on today's call are Wyman Roberts, Chief Executive Officer and President of Chili's; and Joe Taylor, Chief Financial Officer.

Results for the quarter were released earlier this morning, and are available on our website at brinker.com.

As is our practice, Wyman and Joe will first make prepared comments related to our operating performance and strategic initiatives. We will then open the call for your questions.

Before beginning our comments, please let me remind everyone of our Safe Harbor regarding forward-looking statements. During our call, management may discuss certain items, which are not based entirely on historical facts. Any such items should be considered forward-looking statements with the meaning of the Private Securities Litigation Reform Act of 1995. All such statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such risks and uncertainties include factors more completely described in this morning's press release and the Company's filings with the SEC.

And, of course, on the call, we may refer to certain non-GAAP financial measures that management uses in its review of the business and believes will provide insight into the Company's ongoing operations.

And with that said, I will turn the call over to Wyman.

Wyman Roberts -- Chief Executive Officer and President

Thanks, Mika. Hey, good morning, everyone. As you saw in this morning's press release, it was a strong first quarter for Brinker, with positive comp sales of 1.8%, positive comp traffic of 3.6% and earnings per share of $0.47. And Chili's performance continues to climb, up 2% in comp sales and 4% in traffic for the quarter. We're pleased with our continued momentum at Chili's. We remain committed to our traffic-driving strategy and believe there is plenty -- still plenty of upside in both the near and long-term for our business and for our shareholders.

Last year, we committed to improve the guest experience at Chili's by making meaningful investments in the quality and consistency of our products, increasing convenience for our guests and offering an even more compelling value proposition. To execute those improvements, we had to give our operators a simpler model. Every quarter since then, we've delivered sequential improvements in our results. By fourth quarter, we were capturing share, driving traffic, and running positive comps. And this quarter as has been our best yet, outperforming the industry on sales and significantly outperforming on traffic.

With our most recent menu, we introduced a comprehensive value strategy that brings to life value propositions that are compelling to our core guests at both lunch and dinner. We've taken an aggressive approach to creating offerings that meet a variety of consumers needs and that leverage the unique attributes that differentiate the Chili's brand.

We know our guests well. We listen to them and we are committed to make it affordable for them to enjoy Chili's more frequently. Our guests are telling us that our focus this past year on ensuring our food is faster and hotter is having a big impact on their experience. We can see it in -- we can see that progress in every metric we track. And the strategic work we've done to accelerate our takeout business kicked in during the second half of fiscal '18 with the introduction of our New To Go online platform. Our New To Go business continues to grow double digits and now we're growing traffic both inside and outside the restaurant. So we've dialed in the basics and we'll continue to refine and tweak as we move forward.

As I spend more time in our restaurants with our team members and guests, it's clear that our next step is to focus on executing more consistently, especially during peak times. So the Chili's leadership team and I are delving down on our support to our operators, focusing on delivering on systems that ensure we can execute with excellence for every guest 14 shifts a week. And it starts with the talent we have in our restaurants. The whole industry is rightfully concerned about talent, where to find talent and how to afford it. The good news is, we believe we have a competitive advantage in the talent marketplace, because we've created a best-in-class system to keep and build our best talent versus having to buy it from the outside. Our hourly and manager turnover is significantly better than the industry and we're growing our top performing hourly team members and the top performing operators. We're retaining and developing the people who have learned our culture, our systems and our promise to our guests from the ground up, true ChiliHeads.

I'd spend my time so far talking about Chili's, but the Maggiano's team also continues to execute well as Kelly Baltes transitions into his role as brand President, I'm excited about what they'll deliver as they're heading into their biggest season of the year. Globally, we're working hard with our partners to address some of their ongoing macroeconomic headwinds, but we're encouraged by the ongoing demand for the Chili's brand internationally and we plan to maintain our industry-leading rate of brand expansion into the foreseeable future.

Bottom line is that our teams are focused on getting better every day. We have a world-class restaurant support team that's driven to provide our operating teams with the systems, insights, innovation and marketing that enables them to provide our guests with outstanding experiences. We are all excited about what lies ahead, and I'm thrilled to be part of the team.

And now, I'll turn the call over to Joe to walk you through the numbers. Joe?

Joe Taylor -- Chief Financial Officer

Hey, thanks, Wyman, and good morning, everyone. We began our fiscal year '19 performance with a solid first quarter as a continued execution of our strategy to drive traffic kicked into a higher gear. Combining comp sales for Brinker in the first quarter were positive 1.8%, another very nice step forward in the sequential improvement of this important aspect of the business.

At the brand level, Chili's reported quarterly net comp sales of 2%, and our Chili's US franchise network reported comp sales of 1.5%. The international franchise networks comp sales reflected strong performance in important markets such as Mexico and the Caribbean. However, these were more than offset by the economic issues in our Middle Eastern markets. Maggiano's net comp sales reflect year-over-year.

As Wyman mentioned, the primary driver of the comp sales increase that Company-owned Chili's was quarterly traffic improvement of 4%. Chili's was positive to the industry in traffic by over 460 basis points, gapping the industry every week of the quarter. Our industry gapping traffic momentum has carried forward into the first part of our current quarter.

Chilli's realized momentum across the business with positive growth at dinner and lunch dayparts, as well as positive growth from both in-restaurant and To Go operations. Our To Go business at both brands performed significantly well, with Chili's up 17% for the quarter and Maggiano's up 20% on the strength of its new Double Your Portion carry out strategy.

Chili's net price for the quarter was flat year-over-year. However, underlying this figure was menu pricing of 1.3%, a level in our target range of 1% to 1.5%. The difference in our menu pricing level on reported net price is the year-over-year change in comp expense, which we record against gross price.

As it relates to mix, the effective traffic driving 3 for $10 offer did impact the brands reported mix for the quarter, resulting in a negative 2% impact on comps.

Our restaurant operating margin for the quarter was 11.1%. The 1.5% decrease is in line with our expectations and is a combination of investment into our food and value propositions, along with the sale leaseback related rent expense and the adoption of the new revenue recognition standard as detailed in this morning's press release. For comparative purposes, without the sale leaseback impact and the change in accounting standard, our operating margin would have been 12.5% for the quarter. Within the operating margin performance, cost to sales for the quarter increased 20 basis points to 26.4%, primarily as a result of our initiative to provide our guests with the compelling value proposition.

We continue to see overall market conditions in our supply chain that support a status quo cost environment in the near-term. We are 86% contracted across our commodity basket for the current quarter and 50% contracted through the end of the fiscal year.

Restaurant labor increased 20 basis points year-over-year, driven by anticipated wage rate inflation and an increase in quarterly health insurance claims. We continue to expect our wage rate inflation to be between 3% to 3.5% for the year. Restaurant expenses for the quarter increased to 27.3% due to the increased rent expense and the aforementioned change in revenue recognition. We also recorded a somewhat higher spend for restaurant level maintenance this quarter compared to last year.

Our first quarter adjusted earnings per share before special items increased almost 12% to $0.47 for the quarter.

Our first quarter ending lease suggested leverage decreased at 3.58 times EBITDA as we applied proceeds from the sale leaseback to reduce revolving credit borrowings. We do currently anticipate leverage will increase somewhat in support of our capital allocation strategies with a target of 3.9% to 4% for the remaining quarters of this fiscal year. We continue to execute our capital allocation strategies during the quarter with capital expenditures of $31.2 million, reflecting the higher spend from the restaurant reimage program now fully under way at Chili's. In addition, we paid dividends of approximately $16 million and repurchased approximately 2.1 million shares during the quarter.

In summary, it was a good start to the fiscal year, driven by the execution of our strategy at the restaurant level. Our operators are focused on driving improved traffic at our brands, growing market share, and improving our flow through as we move forward with our strategy implementation.

With our comments now complete, let's open the call for questions. Kate, I will turn it back to you to facilitate. Thank you.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, the floor is now open for questions. (Operator Instruction) Our first question today is coming from Sara Senatore. Please announce your affiliation, and then pose your question.

Sara Senatore -- Sanford Bernstein -- Analyst

Bernstein. Thank you. Two quick questions, if I may. The first is, I just wanted to sort of understand this kind of traffic gained versus the industry. I mean, certainly it seems like the value proposition is helping, and some of the comp investment that you're doing is certainly helping there. I know you get this question a lot, do you have any sense of where that might be coming from? It strikes me that you and other broader, varied menu restaurants have done quite well, and then some of them more narrowly focused, both the, call it, Bar & Grills have struggled. So I was just curious about that.

And then I wanted to ask a related question about margins because it sounds like ex some of the changes in accounting, your margins are actually flattish, which is relatively rare in this environment. So maybe talk a little bit about what you're doing there and what the opportunities to offset might be going forward?

Wyman Roberts -- Chief Executive Officer and President

Hey, Sara, this is Wyman. I'll answer the first question and I'll let Joe kind of deal with the margin issue. The growth that we're seeing in traffic is, I think, coming from a broader spectrum than maybe typical. And I think that's representative of kind of the compelling nature of some of the offers both at lunch and dinner, as well as the To Go business growing. So, we're growing lunch, dinner and takeout at a pretty good rate. I think we're taking share from a broader group of competitors, and you might normally consider if it was some just one-off promotional strategy targeted to maybe one of our more obvious competitors. So, that's the way I see it. I don't -- when we look at kind of the broader market it doesn't look like there isn't one player giving it up as much as it is coming from a broader spectrum which we think is a good strategy. So that's kind of how we see it.

Sara Senatore -- Sanford Bernstein -- Analyst

Okay. Thank you. And just to clarify when you say broader, do you mean like not just other full service casual diners but QSRs as well?

Wyman Roberts -- Chief Executive Officer and President

Yeah, I think so. I think especially when you think about takeout, and I think some of the pressure that casual dining has experienced with even some fast casual. I think we're starting to become more competitive and in a lot of those spaces now with the availability of -- and the quality of the To Go offering value propositions in both takeout and lunch and dinner we're starting to kind of solidify our positioning across -- I mean, several of those big spaces.

Sara Senatore -- Sanford Bernstein -- Analyst

Thank you. Understand. And then just on the margins?

Joe Taylor -- Chief Financial Officer

Yeah. Sara, I think it's a really smart. You're exactly right. If you do factor out those two changes that I cited, it is a relatively flat margin environment. It's really hard work being done across a number of different areas, particularly in the restaurant. It's great work being done by supply chain to effectively manage that piece of the business. We're getting more effective and efficient from a marketing perspective. But there is heavy lifting that's being done across a number of different light items. Obviously, there's puts and takes, ups and downs within that, but overall we are -- we do have a strong belief that we can manage those margins. We have, I think, a pretty good track record of being effective operators and they're really bringing that to bear.

Sara Senatore -- Sanford Bernstein -- Analyst

Thank you.

Wyman Roberts -- Chief Executive Officer and President

Thanks, Sara.

Operator

Thank you. Our next question today is coming from John Glass. Please announce your affiliation, and then pose your question.

John Glass -- Morgan Stanley -- Analyst

Thank you. Good morning. It's Morgan Stanley. Can you talk about -- a little bit about how mix -- you think mix sort of flows through the balance of the year? It was tricky this quarter, you had a strong mix last year assuming the mix was a little bit in reaction to that. Can you just talk about how you think that progresses, is it more like stronger traffic and negative mix the balance of the year as you seek to create the traffic through value? And if you're willing to talk about what percentage of sales may be the 3 for $10 actually represented? How big has that got on your menu mix?

Wyman Roberts -- Chief Executive Officer and President

Hey, John. Yeah, it's a great insight. So, obviously, last quarter, if you remember, we were setting ourselves up for this strategy and we were -- we weren't -- we're kind of running higher check, lower promotional mix. So as we wrap against that with the more aggressive value proposition, the mix piece was accentuated. We don't anticipate seeing that level of mix as we roll through the rest of the year.

With regard to how 3 for $10 is doing, I don't want to get specific. It's kind of competitive there. I'll just say, our -- we look at kind of all our value platforms, if you will, in totality to say, hey, we are offering enough value for those guests that need value and there are segments in the marketplace that are more value-oriented. Do we have the right kind of mix in our menu? And we feel really good about where we're sitting right now with the combination of several kind of more value-oriented platforms on our menu. We think we've got a really nice balance.

John Glass -- Morgan Stanley -- Analyst

And just you brought the topic of turnover and staffing and one of your competitors, or direct competitors talked about sort of adding more staffing to restaurants to continue to drive sales. Are you staffed in your view appropriately? Do you need, or are you still needing, or are you still have open positions in restaurants that you feel like you've got the right staffing given the increased traffic levels you're experiencing?

Wyman Roberts -- Chief Executive Officer and President

No. We feel good about our staffing levels. We're really focused on building and supporting the quality of the team members we have, both hourly and management. Our focus is on making sure that they're supported to do the job that we expect that our guests are looking for.

John Glass -- Morgan Stanley -- Analyst

Got it. Okay. Thank you.

Wyman Roberts -- Chief Executive Officer and President

Right. Thanks, John.

Operator

Thank you. Our next question today is coming from Gregory Francfort. Please announce your affiliation, and then pose your question.

Gregory Francfort -- Bank of America Merrill Lynch -- Analyst

Hey, it's Bank of America. Joe, I had two questions for you. The first is, I think you said around 140 basis points between both rent and the franchise accounting changes. I guess, the other operating line ex those two would have been down about 30 basis points. What's the driver there and is rolling off plenty sort of drive that 30 basis points or can you quantify that amount at all?

And then the other question I had was, as you look out at rising interest rates, what are your thoughts on fixing the debt at a greater portion of the debt than you do today?

Joe Taylor -- Chief Financial Officer

Well, first on the margin question. Yeah, you're right in the ballpark as it relates to the impact, probably slightly just a couple basis points higher than that 140 basis points. Again, taking that off the table, there is a number of different deltas. The benefit -- there is a benefit actually from rolling out plenty within the margins as that loyalty cost shifts back into the comp side of the equation. So that's one of the positives there. Obviously, effectively managing through labor. One of the things we talked -- again going back to some of the prior comments about focusing a lot of time and attention on retention and training. That helps to work through the labor environment by keeping folks and getting more tenured folks in place. So again, number of different puts and takes, but the delta you're talking about 140 basis points to 150 basis points is right in the ballpark.

As it relates to fixing the debt, I mean, we, obviously, have a component of our debt that is already fixed. We watch those markets closely. We have incorporated what we think will be a conservative rate environment into the numbers that we provided for the year. And you just kind of watch the markets closely what we may do down the road, I'll say to doing down the road, but it's something that's front of mind and we evaluate it in the context of where we see the business going over the next several years and what's going currently in the rate markets.

Wyman Roberts -- Chief Executive Officer and President

Hello?

Mika Ware -- Vice President of Finance and Investor Relations

Greg? All right.

Wyman Roberts -- Chief Executive Officer and President

Thanks, Greg.

Operator

Thank you. Our next question today is coming from Robert Derrington. Please announce your affiliation, and then pose your question.

Robert Derrington -- Telsey Advisory Group -- Analyst

Yeah. Thank you. Telsey Advisory. Wyman, could you give us a little bit of an update on how the Chili's Rewards program, how the membership is growing? I know you've put a lot of energy behind that, and there were some strategic changes in the way you're going to use that in your promotional mix, and in your plan in this fiscal year. Any kind of color on how that membership is growing and are you pleased with the progress there?

Wyman Roberts -- Chief Executive Officer and President

Hey, Bob. Yeah. We absolutely are pleased with the transition from Plenti over to -- back to My Chilli's Rewards and a wholly owned (ph) loyalty program. Our loyalty database has grown significantly with an acquisition, kind of an aggressive acquisition strategy we started kind of late last year. We are well over 6 million active loyalty members and committed to kind of continuing to grow it. Right now, I would say, we are using a couple of different strategies, and probably we think we have potential to leverage that group significantly more than we are today as we kind of move through different phases of the program. So, excited about where the program is at today in terms of how we've been able to grow it up. Look forward to continuing to grow it, and we see a significant upside as we kind of more aggressively market against that group kind of in the future.

Robert Derrington -- Telsey Advisory Group -- Analyst

I appreciate that. Could you quantify for us the statement that I think either you or Joe had made about the second quarter today trends "still outperforming peers." Was that on traffic or nominal comps, was that second quarter-to-date versus the first quarter trend? How do we understand that?

Joe Taylor -- Chief Financial Officer

Hey, Bob. The comment was specific to traffic. I didn't quantify it for you, but we are continuing the market share gaining momentum in traffic that we talked about in the first quarter in this first part of this quarter.

Robert Derrington -- Telsey Advisory Group -- Analyst

Okay, terrific. Thank you.

Wyman Roberts -- Chief Executive Officer and President

Thanks, Bob.

Operator

Thank you. Our next question today is coming from Stephen Anderson. Please announce your affiliation, and then pose your question.

Stephen Anderson -- Maxim Group -- Analyst

Yes. Good morning. With Maxim Group. Looking at the line with supervisory and not the expense, you're talking about the increased rent that you're paying. So when we look at that line also to account for maybe an increase in managerial pay to try attract. I know you referenced that in your prepared comments. But do you find that you have to maybe pay your managers maybe a little bit more? You said that your performance gotten better and is that should be reflected in that number?

Joe Taylor -- Chief Financial Officer

And again, I think you were talking about the restaurant expense line. Management -- restaurant level management is going to be in the labor line, Stephen.

Stephen Anderson -- Maxim Group -- Analyst

Okay. All right.

Operator

Thank you. Our next question today is coming from Jeffrey Bernstein. Please announce your affiliation, and then pose your question.

Jeffrey Bernstein -- Barclays Capital -- Analyst

Thank you. Barclays. Two questions. One kind of following up on the traffic question from earlier that 400 basis points this quarter, looking back to last year this quarter it was down 800 or so. So, obviously, fairly easy compares. I'm wondering if you can talk about the sustainability of the traffic, because it does look like the compares are much more difficult for the rest of the year. So I'm wondering how you think about the give and take of the more difficult compares or maybe what traffic number is assumed in your full-year fiscal guidance, just to kind of get a sense for expectation on traffic going forward?

Wyman Roberts -- Chief Executive Officer and President

Hey, Jeff, it's Wyman. Yeah. Obviously, the -- we don't give traffic number guidance, but you've got our sales numbers and you kind of know our pricing strategy. So, yeah, there was a little bit of an easier lap as I had already mentioned last year first quarter, but we continued to see the strategy playing out well for us and to continue to grow traffic into the near future. So, we think the combination of improved quality, stronger value and then just better execution is going to allow us to continue to move forward with growth in traffic for the near future. We've also, obviously, got some marketing strategies and tactics that we will bring to bear that are going to be incremental to what we have been doing. So, we don't anticipate just going up against next year without some new exciting kind of initiatives to kind of lean into it.

Jeffrey Bernstein -- Barclays Capital -- Analyst

Got it. And the reference as to market share, I'm not sure whether it's implicitly (ph) looking at what your traffic or comp has grown relative to the industry or whether you have data to support maybe what your actual market share is. I'm just wondering how you would compare your absolute market share whether it's within Bar & Grill or within the broader category, maybe what that's been versus what it is now versus historic or how you even measure that in the first place?

Wyman Roberts -- Chief Executive Officer and President

Yeah. There is a several industry metrics that we look at. We always are looking at the broader casual dining category and then keep an eye on Bar & Grill. But we'll look at the broader casual dining marketplace to understand how are we performing. And again, as we've said, our strategy is to grow share through traffic and to grow the traffic, Chili, specifically over the last year has been our goal and it's kind of playing out for us and we're excited about kind of that -- how that is working. And the long-term viability of that plan we think is the best place to be.

Jeffrey Bernstein -- Barclays Capital -- Analyst

Got it. And lastly, can you -- are you sharing what your takeout or To Go mix is in total? I think you mentioned what each one of the brands was growing. But I'm wondering what the base is that we're referencing?

Joe Taylor -- Chief Financial Officer

Yeah. The one we've talked much about, obviously, is Chili's, it is pushing up into the high 11%, 11.7%, 11.8% kind of range there, Jeff.

Jeffrey Bernstein -- Barclays Capital -- Analyst

Great. Thank you.

Wyman Roberts -- Chief Executive Officer and President

Thanks, Jeff.

Operator

Thank you. Our next question today is coming from David Palmer. Please announce your affiliation, and then pose your question.

David Palmer -- RBC Capital Markets -- Analyst

Great. Thanks. RBC. Just looking at the same-store sales components, we can all see the quarter, there's a pretty dramatic switch there in terms of traffic versus check. I understand that you're making adjustments now the 2 for $22 and then I think you're not only adjusting price but components of that menu. You got the $5 margaritas. I think that margarita of the month, and then you're presumably kind of keep on at least pulsing that 3 for $10. So, I'm wondering if you're getting a sense of how adjustments are going to play out from here and how much of a goal is it for you to have a more balanced traffic and check, and is that balance coming into focus even as you see some recent results?

Wyman Roberts -- Chief Executive Officer and President

Hey, David. Yeah, absolutely. And I think what you're referencing is what's kind of happening on our menu today, right. So we've had value platforms in the past. And I guess, one of the things that maybe differentiate a little more from some others is we have made a commitment really years ago not to rely so much on an LTO strategy. We just -- from an operational standpoint, we think the more you can lock your value proposition and it gives your operators more continuity and the ability to execute on a day-in, day-out basis better than having to kind of throw a major menu shifts and innovation out them on a frequent basis.

So, we understand the importance of new news and innovation but we really want to keep value propositions as much as we can locked in. And so, what we've done with the menu as we have started to look at some of our more traditional value propositions and modified them, you mentioned 2 for $22, that's been changed with this more recent menu. So -- and as we lean more into the 3 for $10, which is working very well for us both at lunch and dinner, we are also able to look at our lunch propositions. And then you've also mentioned our kind of more happy hour $5 margarita program.

So, we bring these programs in, we tend to lean into them for longer periods of time than the typical LTO. It also takes pressure off your marketing that you don't have to kind of recreate urgency every six or eight weeks, you get to build a loyal guest base against the ongoing value propositions that you offer. And that's kind of the strategy we're taking.

And with regard to how it's playing out for us. We feel pretty good about where we're at right now. Like I said, we're dialing it in. We're always going to be getting smarter about where it's working for us on the menu and some regional stuff, but our franchisees are also very happy with this approach. And so, we're kind of moving forward from here.

David Palmer -- RBC Capital Markets -- Analyst

Okay. Thank you.

Wyman Roberts -- Chief Executive Officer and President

Thanks, David.

Operator

Thank you. Our next question today is coming from Jeff Farmer. Please announce your affiliation, and then pose your question.

Jeffrey Farmer -- Gordon Haskett Research Advisors -- Analyst

Thank you. And it's Gordon Haskett. So I believe you guys plan to remodel 250 restaurants this fiscal year. I'm just curious what the downtime is for a remodeled restaurant and how you guys handle that downtime in terms of calculating the same-store sales?

Wyman Roberts -- Chief Executive Officer and President

Hey, Gordon. That's an easy one. There is zero downtime. We don't close. We work them at night. We're redoing bathroom. So, occasionally, if there is something that happens, they may have to deal with it a little bit. But right now we're not having to close really for any business opportunities.

Jeffrey Farmer -- Gordon Haskett Research Advisors -- Analyst

Okay. That's helpful. And just one more follow-up, a lot of questions about this. But were you surprised by the customer response to 3 for $10? I think you ran the promotion earlier in the year and didn't seem to get the same traffic number, at least it was on a smaller scale. So, any surprises for you in terms of running it over the summer and the strong customer response?

Wyman Roberts -- Chief Executive Officer and President

No. Actually, we're pretty much in line with what our expectations were based on what we saw last year when we brought it out the first time.

Jeffrey Farmer -- Gordon Haskett Research Advisors -- Analyst

Okay. And just final bookkeeping one, any updated guidance on interest expense post the refinance?

Joe Taylor -- Chief Financial Officer

No. Jeff, for our policy, if we had any updates, we would give them to you in the press release and the comments. So, nothing today as it relates to guidance.

Jeffrey Farmer -- Gordon Haskett Research Advisors -- Analyst

Okay. Thank you.

Operator

Thank you. Our next question today is coming from Karen Holthouse. Please note your affiliation, and then pose your question.

Karen Holthouse -- Goldman Sachs -- Analyst

Hi. Karen Holthouse, Goldman Sachs. Just what are you doing with the labor line, it looks like labor costs for a store week were actually rising a little bit slower than that like 3% to 3.5% wage inflation. So I was curious if there's one-time items around your timing around workers comp or anything that affected that line? Or with the growth of To Go, are you actually able or are you in a position where you can grow labor costs below really even kind of grow labor costs less and underlying inflation even with traffic growth?

Joe Taylor -- Chief Financial Officer

Yeah. Karen, you are correct. I mean, average labor per restaurant is up but within that that wage rate level that we've talked about, there is obviously a lot of things that go into that calculation of being very effective and efficient on how you use those hours in the restaurant, how you apply them in -- for in-dinning versus To Go, things of that nature or something. We spend a lot of time and work very closely with the operators to achieve as efficient an operation.

We will be -- as business grows, as volumes increase, yes, there are hours to go back into the business, but you can be very efficient in how you apply those hours. There are some other puts and takes in there as it relates to insurance and workers comp and things of that nature, but I think the utilization of the hours is the big one that we focus time and attention on.

Karen Holthouse -- Goldman Sachs -- Analyst

And then as we're looking through the balance of the year, is there anything -- or, I guess, this quarter as well, any sort of mismatches in terms the cadence of advertising spending (inaudible) that we should be aware of?

Joe Taylor -- Chief Financial Officer

Not really. I mean, I think, again we've developed a marketing plan that runs throughout the year, has it very established cadence but nothing that I would point to. Again, we continue to talk about our opportunity to be a better direct marketer and a more efficient marketer in that regard and I think we'll continue to move the ball forward as it relates to those initiatives and there are some potential cost benefits that arise from being able to become even better at the direct marketing side of the equation.

Karen Holthouse -- Goldman Sachs -- Analyst

Great. Thank you.

Operator

Thank you. Our next question today is coming from John Ivankoe. Please announce your affiliation, and then pose your question.

John Ivankoe -- J.P. Morgan -- Analyst

Hi. Thank you. With J.P. Morgan. A couple of model questions, if I may. First, in terms of the incremental rent expense from the $455.7 million you received. How much is that? I mean, is there a rate that you're willing to give? And if possible, can you talk about the run rate reduction in D&A that you also get from that project?

Joe Taylor -- Chief Financial Officer

I think what we talked about before is, on an annual basis, it was going to have roughly a $30 million impact for the year on the rent side of the equation and there's roughly an $8 million benefit from a depreciation effect. So, we closed during the first quarter, so it's not exactly an even quarterly, John, but you can kind of get the sense of how the quarterly flow that'll be going forward.

John Ivankoe -- J.P. Morgan -- Analyst

And what you thought is what you got, I guess, maybe (multiple speakers)?

Joe Taylor -- Chief Financial Officer

Yeah. Very much, John. Yeah. Very much in line with what we are expecting.

John Ivankoe -- J.P. Morgan -- Analyst

And then, I think in your press release you have 52 locations left, if I read that down correctly. So might that come in another tranche or you happy keeping those properties where they are?

Wyman Roberts -- Chief Executive Officer and President

Yeah. At this point, there could be some small one-off, but I'm not -- I don't see it one another significant transaction or a meaningful delta as it relates to those properties.

John Ivankoe -- J.P. Morgan -- Analyst

Okay. And then finally, there is a $269 million gain that you recognized, I guess, quarterly over 15 years. I mean, you guys obviously are very good at calling out your adjustments. But is that because of the length of the transaction or the length of the amortization? Is that going to be in your reported earnings, or your -- well, I know that will be in your reported earnings, but is that going to be adjusted out of earnings or will that be left in earnings?

Joe Taylor -- Chief Financial Officer

That would be adjusted out, John.

John Ivankoe -- J.P. Morgan -- Analyst

Okay, perfect. Thanks for that.

Joe Taylor -- Chief Financial Officer

And then I think you'll see the lease accounting standard change coming down the road here pretty quick that will have an impact on it. So, in all cases, it will not be part of the adjusted earnings.

John Ivankoe -- J.P. Morgan -- Analyst

Okay. Thank you.

Wyman Roberts -- Chief Executive Officer and President

Thanks, John.

Operator

Thank you. Our next question today is coming from Will Slabaugh. Please announce your affiliation, and then pose your question.

Will Slabaugh -- Stephens -- Analyst

Stephens. Thank you. I wanted to follow-up on a question or a point you made rather, Wyman, on the comments earlier. You mentioned some opportunities, I think you're executing more consistently and especially at peak. What's led you to do that conclusion and maybe what's the feedback been from your guests around those peak hours and is that presenting a measurable headwind that could potentially go away down the road?

Wyman Roberts -- Chief Executive Officer and President

Yeah, Will, I think we track, obviously, our guests very closely to make sure we're delivering on our promises as we've increased the traffic, especially during those busy weekend nights, Sundays. We put more pressure on the restaurants and we need to make sure that we're supporting them, so that they can deliver in volume to the level of expectations the guest has. So, yeah, right now I'd say, there is opportunity there. I don't think it's significantly outsized what it's been, but there is probably always been opportunity there that we are now just going to go after even harder than we had before.

Will Slabaugh -- Stephens -- Analyst

Does that require additional labor as well --?

Wyman Roberts -- Chief Executive Officer and President

No, not necessarily, that's why we're really kind of use this. I've talked about our systems and our focus there. Sometimes, we haven't helped our operators in those busiest times by not providing a consistent experience in terms of support. So we've got to make sure that when they're busy, we make it easy for them, support them with very smooth, little distractions, if you will, and so that's part of it. And the other part is, making sure that the systems that we know will make them successful in running a great weekend shift are being implemented. And so, that's kind of our focus.

Will Slabaugh -- Stephens -- Analyst

Got it. And just a quick follow-up on your different markets, if I could. Did you see any geographic differences in performance in either Texas or surrounding markets for just the rest of the country?

Wyman Roberts -- Chief Executive Officer and President

Well, it's been an interesting couple of years now with hurricanes in and out and then the post hurricane kind of halo you get and you wrap on that. But the good news I think from where we sit, when you kind of filter a lot of that weather out is that there seems to be some really broad -- broader reaching strength across the markets. And so, not as much regional strength or weaknesses we have seen probably, with like the oil situation a couple of years ago. So there seems to be a much more consistent strength across the country.

Will Slabaugh -- Stephens -- Analyst

Got it. Thank you.

Operator

Thank you. Our next question today is coming from Howard Penney. Please announce your affiliation, and then pose your question.

Howard Penney -- Hedgeye Risk Management -- Analyst

Hedgeye Risk Management. Thanks for the question. Wyman, I don't think you or Joe have uttered the word delivery yet in this call, and certainly in your scripts I don't see it is. If you did, I missed it. So, I was just curious this To Go, or pick up the new delivery.

Wyman Roberts -- Chief Executive Officer and President

Hey, Howard. Our focus is really right now on takeout. Like we've said on prior calls, we are definitely in the delivery business with probably I think somewhere up to 50 different delivery companies nationwide, so it's still a very fragmented, although there are obviously some bigger players that are coming in. We're first off focused on making sure that the delivery options, if there's going to be a big one that it works well within the system. And right now, when you walk into a restaurant you see multiple iPads for every delivery partner. Those don't integrate very well into a restaurant system, especially a busy restaurant on a weekend night as we've talked about. So, our focus right now with some of these big partners is just to say, listen, if you're going to partner with us you've got to give us an operational model that works and you have to start thinking about how you integrate with us and I think that's important.

And then, obviously, the whole issue around incrementality and profitability is also on the table. And then the data around we, obviously, value our customers and the relationship we have with them. So those are other -- those are some kind of secondary issues that have to be looked at very closely as you kind of get more committed to delivery. Don't have an aversion to it, but we're going to walk into it with our eyes wide open and with partners that kind of understand our business. So, that's kind of how we're addressing delivery. Much more excited right now about our ability to drive convenience with takeout.

Howard Penney -- Hedgeye Risk Management -- Analyst

And I'm just curious (ph), how you get at the level of incrementality, if it's possible?

Wyman Roberts -- Chief Executive Officer and President

I mean, we have a lot of very effective analytical models that can help us understand incrementality. So I don't think -- now, I know there are some big players out there that are seeming to struggle with the actual incrementality of delivery, so I'm not saying we're like the only people that obviously analyze their business and try and kind of determine how incremental something like delivery is. But we would obviously do both qualitative and quantitative research to understand, OK, where are these guests coming from and how often are they changing their frequency, if they're currently our current guest.

Howard Penney -- Hedgeye Risk Management -- Analyst

Awesome. Thank you.

Wyman Roberts -- Chief Executive Officer and President

Thanks, Howard.

Operator

Thank you. Our next question today is coming from Chris O'Cull. Please announce your affiliation, and then pose your question.

Chris O'Cull -- Stifel -- Analyst

Thanks. It's Stifel. I have a couple of follow-up questions. First, Wyman, has the traffic performance been more consistent when the Company's on and off deals like the 3 for $10?

Wyman Roberts -- Chief Executive Officer and President

Well, this quarter, we ran that message quite a lot pretty much the quarter. So it's -- so, obviously, when you have a compelling value proposition like 3 for $10, you're going to see traffic respond. And as I mentioned earlier, our preferable strategy is to make sure our value proposition on the base menu is compelling, so that we don't have to go in and out and basically going to whipsaw the restaurants with traffic changes that are just totally promotional-driven. So that's our focus and absolutely consumers' respond to strong value proposition, especially when it's communicated in a very good way and we appreciate the work that marketing team has been doing to kind of position, not just the price, but the quality and the differentiated offerings that come with the Chili's message.

Chris O'Cull -- Stifel -- Analyst

So reasonable inference would be that you're going to continue to promote that type of deal on a consistent basis going forward?

Wyman Roberts -- Chief Executive Officer and President

We think value is critical, again having on the base menu, keeping it top of mind for consumers, yeah, we don't see that moving away. Again, it's been -- that's not necessarily a new strategy for us. We've been kind of following that strategies for the last eight or nine years. This is just a kind of a refreshed version of it.

Chris O'Cull -- Stifel -- Analyst

Okay. Fair. And then, can you explain or I guess, -- I assume you guys conduct employee surveys and maybe some benchmarking studies. But can you help us understand what really drives retention at Chili's, and what specific aspects of employment at Chili's make it more compelling than other chains?

Wyman Roberts -- Chief Executive Officer and President

Sure. Chris, just to your point, so we survey every team member in the Company, typically twice a year. Every once in a while, maybe only once. But we ask every team member in the organization how they're feeling and -- about their about their job, about leadership, about where the brand is at. So, we have -- we take it very seriously, our team member engagement and feedback, and I think that's a big part of how you keep them engaged in and working with you.

We also understand it's a job and how much money they make is critical. And so, we work to find that balance between efficiency for us, which also -- if you're a front of the house team member, usually turns into higher tips for you and a higher wage. And so, getting as much -- getting them to make as much money as possible is also a high priority for us and that goes across the board, we want our managers to bonus, we want our team members to have high hourly wages and be as efficient as possible, so that they can make good money. And the average server at Chili's is, will average is over $20 an hour. Those are the kind of things I think staying connected, making sure they're making money are the things that keep your turnover down.

Chris O'Cull -- Stifel -- Analyst

We've heard other restaurant chains talk about back in the house turnover and just difficulty in hiring back in the house -- certain back in the house positions. How does Chili's compare in terms of pay for some of those roles versus their benchmark, whoever you benchmark against?

Wyman Roberts -- Chief Executive Officer and President

Yeah. I think we're competitive. We did -- it's a market by market kind of situation, you're always out there benchmarking against the competition. We have some very -- so back of the house is very interesting, right. We have -- you won't walk into a restaurant where you won't find typically a 10-year plus back of the house team member or two or three or four at Chili's. There is a lot of tenure that you tend to churn, if you will, a little bit more on some positions, the dishwasher position is a hard one sometimes to fill. And so, those are a little bit more high turnover, but we have some really amazing team members in the back of the house that are long tenured and again very important to our ability to execute.

Chris O'Cull -- Stifel -- Analyst

Okay. Great. Thanks, guys.

Wyman Roberts -- Chief Executive Officer and President

Thanks.

Operator

Thank you. Our next question today is coming from Peter Saleh. Please announce your affiliation, and then pose your question.

Peter Saleh -- BTIG -- Analyst

Great. Thanks. BTIG. I just want to come back to the conversation on takeout. I know you said it's about -- it's in the low-double-digit percentage mix and growing about double digits. But how much of that do you think is repeat usage versus trial? And how incremental is the takeout business to the overall Chili's sales?

Wyman Roberts -- Chief Executive Officer and President

Peter, we feel really good about the takeout business to grow. We think it's significantly incremental. And regardless of whether it's incremental to -- it -- the takeout, I guess, are going to take -- it's going to offer takeout. So if you're not getting those takeout dollars, they're going to move to somebody who else who offers the takeout option. So, the desire for today's consumer across the demographics to find convenience and to spend a little more time at home is undeniable. And so, we're fortunate, we've got a menu that -- because of the nature of our menu and the quality of our operators execute, I think our takeout works very well, and you can tell by the percentage of guest of sales that the kind of flow into takeout that we've got a good offering.

Peter Saleh -- BTIG -- Analyst

And are you guys measuring the customer satisfaction scores for both takeout and dine in, or are they kind of correlated? How do they compare?

Wyman Roberts -- Chief Executive Officer and President

We do measure them. I'd say, we're focused right now on making sure that our takeout experience is strong and doing the things that we've talked about a little bit on this call with regard to high volume weekends. We also are making sure that as we increase the volume on takeout that we're staffing it correctly, we've changed packaging. We've got systems in place and that our staffing is allocated appropriately, so that as we grow that business and we think we can grow that business significantly from where we are today, that we are setting ourselves up and our operators up for success.

Peter Saleh -- BTIG -- Analyst

Great. And then just my last question is coming back to the value proposition in the 3 for $10. Is there -- do you have to keep pulsing this message in consistently, or is there a honeymoon period after which you pulse it in for a few weeks where you can stop and still see the traffic coming into the stores?

Wyman Roberts -- Chief Executive Officer and President

No. Again, we're kind of committed to putting value proposition on the menu. And so, building awareness for building and understanding from consumers that the strong value propositions are available. So, there is no need for this, hey, build awareness, then you take it away, then you build awareness, we're not working that model, and we haven't worked that model for a while.

Peter Saleh -- BTIG -- Analyst

All right. Thank you very much.

Wyman Roberts -- Chief Executive Officer and President

All right, Peter.

Operator

Thank you. Our next question today is coming from Andrew Strelzik. Please announce your affiliation, and then pose your question.

Andrew Strelzik -- BMO Capital Markets -- Analyst

BMO. Good morning. Two questions for me. You've had a couple of forms of the loyalty program, but as it's been growing pretty rapidly, I'm wondering how long does it take until you have enough data to more effectively leverage that loyalty customer the way you were talking about earlier.

And my other question, we've heard some conflicting views on the health of the low and more budget conscious consumer, that seems like it overlaps reasonably well with Chili's and the strategy that you're employing there. So, just curious for your perspective on that cohort. Thanks.

Wyman Roberts -- Chief Executive Officer and President

So first on the whole loyalty situation, yeah, we have definitely had some learning over the last four or five years on loyalty. I think we are smarter for those journeys. And right now what we've got is a really solid base, large base of very loyal users that we have a relationship with. And again, right now we're not -- we're focused a little bit more on acquisition and building into the database. And as we get a little further down into the year, we'll probably start to get more aggressive with regard to, hey, having conversations with them that are going to drive more frequency and push the database a little harder and the royalty base. So, Andrew, those are just kind of strategic decisions we make as we kind of move through the process.

Overall, though, as Joe mentioned, we're committed to a direct marketing approach, leveraging technology, leveraging the talent that we have in-house, which is I think second to none in terms of how to have these -- how to build these databases, how to build these relationships with these guests and then how to effectively communicate to them the things that are most important to them and motivating to them.

With regard to the second question, sorry, Andrew, I kind of lost what was it -- it was --

Andrew Strelzik -- BMO Capital Markets -- Analyst

Sorry. It was the health of the lower-end consumer, budget conscious consumer?

Wyman Roberts -- Chief Executive Officer and President

Yeah. So, the budget-oriented consumer, obviously, just by the nature of kind of what puts them in that category is always going to compel define value and typically at a price point that works for them. So, obviously, when we commit to putting in value price points that are some of kind of what we think strongest in the industry, then we resonate with those folks more. And I think that's kind of our commitment. We know that the budget-oriented, if you will, consumer is under pressure, they do want to eat out more their casual dining fans and they just have to have opportunities that fit within their budget and we're committed to kind of giving them some good options.

Andrew Strelzik -- BMO Capital Markets -- Analyst

Great. Thank you very much.

Wyman Roberts -- Chief Executive Officer and President

Yeah.

Operator

Thank you. Our next question today is coming from Nicole Miller. Please announce your affiliation, and then pose your question.

Nicole Miller -- Piper Jaffray -- Analyst

Piper Jaffray. Thank you. Good morning. I want to hear about more how you're driving the sales and traffic in the restaurant. Could you talk about how that is spread across lunch or dinner, weekday or weekend? I'm wondering if that has anything to do with beverage incident? And then finally, wondering if that has anything to do with the remodels? So do you over index in regards to the traffic coming in the restaurant where you've remodeled? Thanks.

Joe Taylor -- Chief Financial Officer

Nicole, we're seeing improvement really across all of those areas that you just mentioned. As it relates to the reimages, I mean, we're still very early on in that process. The ones we did last year in -- particularly in the New England area, yes, are seeing gains also on the traffic side of the equation. But I think the impact of reimage, really from our perspective, will start to have more of an impact as we move into the third and fourth quarter of the year. One of the things that we have designed to help us move forward with this plan, and frankly deal with some of the laps that we come up against in the second half of the year.

But again, we're seeing both improvement in the restaurant at dinner and in lunch. Interestingly, as you see, a greater pick up on the lunch side and the lunch has been a little bit bigger with pick up the dinner that was I think the best opportunity we had based on the last couple of years. That does have a small impact when you think about alcohol mix and consumption. But really across the board, we're pleased with the impact of the programs throughout the week and at both dayparts.

Nicole Miller -- Piper Jaffray -- Analyst

And then in terms of COGS, fairly benign inflation. But how about the distribution piece, is there anything you see changing there? Because that's an industry that's also under intense pressure in terms of labor and sometime can create shortages of actual product delivery drivers et cetera. So what do you see in terms of distribution?

Joe Taylor -- Chief Financial Officer

Again, that is definitely part of the supply chain. It's part of the -- when I talk about the cost environment across our supply chain, it includes that. Our team does a great job at working and developing those relationships. We're comfortable where we stand from a distribution standpoint, both in the short and long-term, but it will be a challenge for a lot of players in the industry going forward. And I think, again, it's an opportunity for us to differentiate and manage cost structures.

Wyman Roberts -- Chief Executive Officer and President

And Nicole, I just think, again, this is where it scale. There have been a couple of questions today about where you're getting market share. And I think independents are going to struggle more, and again, the category is 50% independent and this is another one of those situations where, if you're -- if you have scale and you're dealing with distributors in a large way, then they're going to push you kind of more to the top of the list. And they're making list now, right, because as you mentioned, they're under a lot of pressure. So, I think this is just another example of where independents are going to feel the pressure a lot more than maybe some of the bigger chains.

Nicole Miller -- Piper Jaffray -- Analyst

Yeah, absolutely agree and it's important point on scale. Last question. Could you call out the percentage of marketing in the quarter? And then, will it be a fairly, I guess, do you want to say even year-over-year cadence going forward? And just kind of curious about your split between digital versus TV these days and how you're really measuring those returns?

Wyman Roberts -- Chief Executive Officer and President

Nicole, we usually don't split it out. We accrue evenly pretty much unless we make a change. So it's that the accrual is kind of set. I think as you identified, we have a very diverse marketing plan. We're using all of the channels, if you will, to market to our guests and potential guests. The traditional media inflation world around TV has scrutinizing that aspect of the marketing budget, if you will. I'd say that intensely, 7%, 8% kind of looks like never ending chain of inflation that they get for a television advertising in a world that we're trying to keep our pricing strategies in the 1% to 2% range, just continue to put a lot of pressure on that part of the budget. So we're very aggressively looking at how does digital and social play out relative to other and where we're getting the most fang (ph) for our buck from a marketing expenditure perspective. And I'll just leave it at that, that it's under -- we're aggressively looking at how do we play -- how do we get the marketing dollars to deliver the biggest return.

Nicole Miller -- Piper Jaffray -- Analyst

Thank you. Appreciate your time.

Wyman Roberts -- Chief Executive Officer and President

Thank you.

Operator

Thank you. Our next question today is coming from Brian Vaccaro. Please announce your affiliation, and then pose your question.

Brian Vaccaro -- Raymond James -- Analyst

Raymond James. Thank you. Just a few clarification on the margin question. On pricing specifically, I think there was about 130 basis point negative impact of comp expense that offset that underlying pricing you called out. I think ticked up a little bit versus the 90 bps in the fourth quarter of last year. I might be wrong, but I think in the last call you said you expected that comp expenses sort of dissipate going forward. So, could you give some color on what drove that headwind intensifying and how we should think about net pricing over the next few quarters?

Joe Taylor -- Chief Financial Officer

Yeah. Brian, let me give you some clarification on that, because it really wasn't a negative delta in that regard. What we talked about last time was 100 basis points of comp expense that we specifically applied in that fourth quarter to reinvigorate and reactivate the loyalty program. There was additional comp expense underlying that, but it was an incremental 100% that we wouldn't have necessarily been using on an ongoing basis. So it's an apples-to-oranges comparison to looking at that number versus the 130 basis points that you're accurate with.

I think, again, we have an opportunity as we move forward; one, to work through the year-over-year lapse of our use of comp expense and that will happen as we move into the back part of this fiscal year. But we are not utilizing that same level of loyalty activation comp expense that we specifically talked about in the fourth quarter.

Brian Vaccaro -- Raymond James -- Analyst

Okay. All right. I'll follow-up on that offline. And on the labor line specifically, Joe, could you quantify the pressure you saw on insurance in the quarter? And then I thought bonuses were expected to be up at both the store level and the corporate level versus sort of depressed levels last year in the first half of fiscal '19. Did that occur this quarter, both labor and G&A?

Joe Taylor -- Chief Financial Officer

Yeah. And again, when we talked about bonus and incentive compensation guides for the year, that was obviously an annual. So, don't typically get into first, second, third, fourth quarter laps in that regard. Sales, profits and guest metrics all feed into those calculation. So there can be some variabilities, you kind of move through the year in that regard.

The health insurance piece of the equation was roughly a 20 basis point drag in this quarter. Obviously, from a health insurance standpoint, it's based on your actual experience as to what you're seeing from the claim side of the equation. So, in any one given quarter you might have an anomaly based on what that actual experience is and that was -- in this quarter it was about a 20 basis point drag.

Brian Vaccaro -- Raymond James -- Analyst

Understood. And then just last one, on the other OpEx line, I think the rev rec change based on your disclosures was about 70 bps in the quarter, which would imply sale leaseback rent about 70 as well. Can you confirm that that math is correct? And then thinking about that margin differential, I think you said R&M was higher in the quarter. So, is there something else that would be down or maybe that other item that was down year-on-year was the ads expense line? Thank you.

Joe Taylor -- Chief Financial Officer

You're right in the right ballpark as it relates to those first two. R&M expense was up year-over-year, again that's one of those you can have quarterly fluctuations within that line. That was one of them. There's a number of other things I think I referenced, the benefit moving out of the loyalty year-over-year we're still lapping that but there is several ups and downs in other line items, but those are the biggest ones and you got the deltas right on them.

Operator

Thank you. Our final question today is coming from Jon Tower. Please announce your affiliation, and then pose your question.

Jon Tower -- Wells Fargo -- Analyst

Nice. Jon -- sorry, Wells Fargo. And thanks for taking the question.

Joe Taylor -- Chief Financial Officer

Hey, Jon.

Jon Tower -- Wells Fargo -- Analyst

Just hammering on the traffic piece and going back to the comments you made really open up the Q&A. I believe you mentioned that Chili's is picking up traffic from a broader spectrum of concepts. And to me that implies that you're drawing in new customers. But you are also seeing an increase in frequency from existing customers. And if you are seeing an increase in frequency, when these customers are coming back to the stores, are they moving around the menu, trading up, maybe using different dayparts, or are they going back to what originally drove them back into the stores?

Wyman Roberts -- Chief Executive Officer and President

Hey, Jon. I don't know I can give you all that level of detail on how they're moving within the menu. But, obviously, with the offers that we've got and the compelling takeout proposition that we have and the ease with which they can take out, we're seeing growth across all categories. So, our some frequency improvements with our more loyal guests, as well as some increases in lighter or new guests. So, it's a broad -- the traffic growth is coming from a kind of a broader swath of consumers and that's -- we think that's a good thing. Exactly what -- who's going where and where they're trading from? That's a level of detail that we're probably just not going to share right now.

Joe Taylor -- Chief Financial Officer

Yeah. And one thing, Jon, I would add is, the investments we made back into the business be it food, be it the To Go operations, the value propositions are working across all -- both dayparts and throughout the week. So, we've created opportunities I think for a guest both new and loyal to find more compelling reasons to come in at different times too. So that's -- I think that's helping as we move forward too.

Jon Tower -- Wells Fargo -- Analyst

Thank you for answering the question.

Wyman Roberts -- Chief Executive Officer and President

All right, Jon.

Mika Ware -- Vice President of Finance and Investor Relations

All right. Thank you. So thank you, everyone, for your participation and joining us today and we look forward to talking to you next time.

Joe Taylor -- Chief Financial Officer

Great. Thanks everybody.

Mika Ware -- Vice President of Finance and Investor Relations

Goodbye.

Operator

Thank you. Ladies and gentlemen, this does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.

Duration: 67 minutes

Call participants:

Mika Ware -- Vice President of Finance and Investor Relations

Wyman Roberts -- Chief Executive Officer and President

Joe Taylor -- Chief Financial Officer

Sara Senatore -- Sanford Bernstein -- Analyst

John Glass -- Morgan Stanley -- Analyst

Gregory Francfort -- Bank of America Merrill Lynch -- Analyst

Robert Derrington -- Telsey Advisory Group -- Analyst

Stephen Anderson -- Maxim Group -- Analyst

Jeffrey Bernstein -- Barclays Capital -- Analyst

David Palmer -- RBC Capital Markets -- Analyst

Jeffrey Farmer -- Gordon Haskett Research Advisors -- Analyst

Karen Holthouse -- Goldman Sachs -- Analyst

John Ivankoe -- J.P. Morgan -- Analyst

Will Slabaugh -- Stephens -- Analyst

Howard Penney -- Hedgeye Risk Management -- Analyst

Chris O'Cull -- Stifel -- Analyst

Peter Saleh -- BTIG -- Analyst

Andrew Strelzik -- BMO Capital Markets -- Analyst

Nicole Miller -- Piper Jaffray -- Analyst

Brian Vaccaro -- Raymond James -- Analyst

Jon Tower -- Wells Fargo -- Analyst

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