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Executives

Cheryl Fletcher - Director, Finance & Investor Relations

Cheryl Bachelder - CEO and President

Mel Hope - CFO

Analysts

Michael Gallo - C.L. King

Chris O'Cull - Suntrust

Mark Smith - Feltl & Company

Kenneth Smith - Lenox Equity Research

AFC Enterprises Inc. (AFCE) Q2 2009 Earnings Call August 20, 2009 9:00 AM ET

Operator

Good day, ladies and gentlemen, and welcome to the second quarter 2009 AFC Enterprises Incorporated Earnings Call. (Operator Instructions).

I would now like to turn the call over to Ms. Cheryl Fletcher, Director of Finance and Investor Relations. Please proceed, Ma'am.

Cheryl Fletcher

Before we begin, I would like to read the following forward-looking statements. Certain statements made on this call regarding future events and developments in future performance as well as management's expectations, beliefs or projections relating to the future are forward-looking statements within the meaning of the Federal Securities Laws.

These forward-looking statements are subject to a number of risks and uncertainties. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are competition from other restaurant concepts and food retailers, disruptions in the financial market, our ability to franchise new restaurant units and expand our brand, increases in food and labor costs and the risk factors detailed in our 2008 Annual Report on Form 10-K and other documents we file with the Securities and Exchange Commission. You should not place undue reliance on any forward-looking statements. Those statements speak only to the date they are made.

During this call, references maybe made to the non-GAAP terms of EBITDA and free cash flow. The company defines EBITDA as earnings before interest expense, taxes, depreciation and amortization. The company defines free cash flow as net income plus depreciation and amortization plus stock compensation expense, minus maintenance capital expenses. The company's computation and reconciliation to GAAP measures of the numbers referred for these terms are contained in our earnings press release that can be found on the company's website at www.afce.com.

I would now like to turn the call over to Cheryl Bachelder, our CEO and President.

Cheryl Bachelder

Thank you for joining us for our second quarter earnings call. We are pleased to report a very good quarter for Popeyes. This quarter was our best same-store sales quarterly performance since the first quarter of 2006. This was accomplished in the face of the weakest domestic QSR traffic trend since the second quarter of 2001. The driver of our US performance was our investment in national media.

Our effective ad spokeswoman Annie offered America the food they love at prices they could afford. This brand and market share building activity was married with a better restaurant experience for our guests due to improving operations. In short, our strategic roadmap is delivering the desired results.

I will now share the detailed results of our quarter and year-to-date, followed by an update on the four pillars of our strategic plans and our updated guidance for the full year 2009. Mel Hope, our CFO, will then review our second quarter and year-to-date financials, as well as provide you an update on the amendment to our credit facility.

Our second quarter performance was good on all measures. Our global same-store sales were positive 4.3%. Excluding non-operating income, our earnings exceeded street expectations at $0.18 per diluted share.

Year-to-date, we generated $14.7 million in free cash flow, and we ended the quarter with cash balance of $19 million. Year-to-date, EBITDA margins remained strong at approximately 29%, and are among the highest in the restaurant industry. As Mel will discuss in more detail, on August 14th, we completed an amendment to our credit facility, giving us more financial flexibility and stability going forward.

Our domestic same-store sales were positive 4.3%, compared to the first quarter, which was slightly negative at negative 0.3%. According to independent data, our second quarter domestic sales continue to outpace chicken QSR by more than two full percentage points.

We also outpaced total QSR category by more than five percentage points. This performance reflects the positive traffic counts we saw in our restaurants. We moved aggressively in this quarter to grow our market share by giving our guests what they want, Superior Louisiana food with compelling value for both the single and family user. We invested in national media with a strong spokesperson, who successfully delivered that message to our core customer.

In the first week of our second quarter, we promoted Popeyes Pay Day on April 22nd. This national one-day event featured 8-pieces of our signature Bonafide chicken for only $4.99. As we indicated in our last call, the guest response was outstanding and it delivered one of the best Wednesdays in our recorded history.

In the month of April, we promoted our Bonafide bone-in chicken two pieces for a $99 or 9 pieces for $7.99. In May our delicious freshly prepared Louisiana tenders with a side and a drink were $2.99 or nine tenders for $7.99, and In June we came back again to the highly successful Bonafide chicken values that we offered in April, giving our guests a reason to come back to Popeyes again and again. These promotions were supported with seven weeks of national media and delivered positive same-store sales.

Our operations team completed the implementation of our restaurant equipment standard this quarter. At the end of June, Popeyes restaurant operators purchased and installed headsets and timers, the essential equipment for delivering great drive-thru service. We are now rolling the training and tools to improve service times to our guests at every restaurant.

We continue to see steady improvement in restaurant operations as measured by our guest experience scores. By the end of the second quarter, our guest experience monitor GEM, showed our percent Delighted scores up more than three points since the end of the first quarter and up 14 points from last year, when we implemented the program.

We have seen measurable improvements in almost every attribute of GEM. Our speed of service, value for the money and food quality scores were all up three points since the end of the first quarter. When guests get distinctive Louisiana food at great value, they leave our restaurant smiling.

Our restaurants saw significant relief in commodity costs this quarter. Our bone-in chicken costs improved more than 6% compared to the first quarter of this year and year-over-year food costs for the system improved by 4%, impacting restaurant level margins by a 100 to 150 basis points. On a year-over-year basis, we expect our food cost to see significant improvement in Q3 and Q4 as well since we will be lapping record highs of year ago.

In the second quarter, our development team opened 16 new restaurants globally, compared to 32 year ago. These new openings consisted of five domestic restaurants and 11 international. We had 22 restaurant closures compared to 31 year ago.

Our international business continued to perform well with positive same-store sales for the 11th consecutive quarter. For the second quarter international same-store sales increased by 3.9%, this was driven primarily by strong sales in Korea, Canada and US military bases abroad, which was partially offset by negative performance in Latin America and the Middle East.

I would now like to give you an update on the four pillars of our strategic plan. First, the building of our brand. For the first half of this year, we paired our famous and favorite menu items with compelling value, supported them with 13 weeks of national media. This formula delivered strong same-store sales performance led by traffic increases.

Given the recent traffic declines in the QSR category over the past two quarters and the compelling value offerings and new product promotions in the sector, we believe the second half of 2009 will remain a challenging and value-focused consumer environment. As such, we will continue to emphasize our distinctive Louisiana food with excellent value for our single and family users.

An important piece of perspective: Our second quarter plans reflected a conscious decision to aggressively market our brand during this intensely competitive period, which included the trial period of our competitor’s launch of grilled chicken. Popeyes’ strategy worked, and we expect guest momentum to continue in the second half, albeit at a more moderate pace.

Based on our same-store sales performance year-to-date and the expectation of a continuing value-focused environment in the second half, we are now projecting same-store sales for fiscal 2009 to be flat to positive 2%. That's up 1% from our previous guidance.

The second pillar of our strategic plan is running great restaurants. We are making solid strides in improving our restaurant operations. As I have mentioned improving speed of service at our drive-thrus is the primary focus. With timers and headsets now in place, we are rolling the training and the tools to improve our drive-thru times.

We have recently begun a pilot of this speed of service program with franchisees from three markets within our system. The initial results are very encouraging. Our times are coming down, and the guest experience scores are going up. Longer term, this improved experience for our guests will translate to sales performance. For every three cars added daily to the peak drive-thru hours, Popeyes’ comp sales would increase 1%.

Third, we are making solid progress on improving our restaurant unit economics. I am pleased to report that based on our franchisee P&Ls for the first quarter of this year, our restaurant operating margins improved by 2.8 percentage points from the fourth quarter. We expect improvements through the rest of this year as commodity costs steadily improve from year ago highs.

As we indicated on our last call our supply management services purchasing coop has locked in corn and soy meal prices for 2009. Based on these costs, we expect our full year 2009 bone-in chicken costs for the domestic system to improve by 2 to 4 percentage points over year ago. We also expect to see modest declines in other commodities such as wheat and cooking oils, which we do expect to be partially offset by higher packaging costs and labor costs due to the July minimum wage rate increase.

Additionally, we have completed a full diagnostic analysis of our supply chain system and identify further cost savings, which will begin to flow out to our restaurants in 2010. We remain committed to finding ways to lower restaurant operating costs and improve our restaurant profitability, while maintaining excellent food quality for our guest.

In addition to strengthening the quality of our restaurant operators and improving our unit economics, our development team is continuing to cultivate a strong pipeline of current and new franchise developers, both in the US and abroad. We are readying the right operators and the right real estate, so that we will be accelerating our new unit development with quality operators and sites as the credit markets and world economy recover.

Consistent with our previous guidance, our global new openings are expected to be in the range of 90 to 110 restaurants this year. Given the favorable restaurant closure rate year-to-date, we now expect our closures to be 110 to 120 restaurants, resulting in zero to negative 30 net restaurant closings, compared to our previous guidance of 140 to 160 restaurant closures and 30 to 60 net closings. As a reminder, our restaurant closures typically have sales significantly lower than our system average.

Finally, as you know, I believe that alignment and collaboration with our franchisees is essential to our success. For the past two years, we have conducted a franchisee satisfaction survey to assess the health of our partnership. I am pleased to report that the 2009 survey results are in and show a steadily improving partnership on the things that matter most to our franchisees, a strong brand, operations excellence and sound unit economics. We remain committed to being a transparent and highly engaged relationship with our operators in the Popeyes system.

In conclusion, our strategic plan is delivering positive results, improving sales and profitability for our owners with reliable cash flow and earnings performance to our investors. Together with our franchisees, we took some bold actions in the second quarter to grow market share. Our plan worked. These results are accomplished at a time, when QSR traffic was at its weakest point in years.

We continue to be serious about running excellent restaurant operations for our guests and we are steadily improving the guest experience. Restaurant food costs are improving as we capture commodity savings and operating efficiencies. New unit openings are on track for the full year and we are cultivating a quality pipeline so that if the market recovers we can accelerate our new unit growth with attractive returns to the owners.

We remain committed to managing our G&A tightly with selective investments in key strategies that we judge to be essential to the long-term growth of the brand. With our highly franchised business model, this business plan continues to generate strong and steady cash flow every quarter.

I will now turn the call over to Mel Hope, our CFO, who will highlight our second quarter and year-to-date financial performance and update you on the new terms of our amended credit facility. Mel?

Mel Hope

As Cheryl mentioned, I will first review our financial performance and then I will update you on the new terms of our credit facility, which was amended on August the 14th.

Our second quarter earnings per share of $0.25 beat the street expectations. Year-to-date earnings are at $0.45 per diluted share and let's discuss the results in that order; the second quarter, followed by the year-to-date overview.

Our earnings for the second quarter are $6.4 million, which includes $2.9 million of non-operating income, which is included in the other expense income net caption of our income statement.

Excluding the impact of the non-operating income, earnings would have been $0.18 per diluted share, compared to $0.17 per diluted share in the second quarter last year. During the second quarter, sales from company-operated restaurants were $14.1 million. These revenues were lower than 2008, due to the company's successful re-franchising of 27 company-operated restaurants in the Atlanta and Nashville markets.

After giving effect to franchise fees and royalties, general and administrative expense savings and lower depreciation and amortization, the second quarter operating profit was improved by approximately $900,000, as a result of re-franchising these company restaurants.

Franchise revenues increased by $1 million to $20.6 million in the second quarter compared to last year. This increase was primarily due to the increase in royalty revenue resulting from positive same-store sales of 4.3% and new franchise restaurants.

Our G&A expenses were $13.2 million or 3.1% of system-wide sales compared to $11.5 million or 2.8% of system-wide sales in the second quarter last year. The increase was primarily attributable to the company's $1.4 million investment in national media advertising.

Our second quarter EBITDA was $12.5 million or 35% of total revenues among the highest percentages in the industry, compared to 14.5% or 37% of total revenues in the second quarter of last year. This $2 million decrease in EBITDA is primarily due to the G&A investments I mentioned previously, and less non-operating income, which was $2.9 million in the second quarter compared to $3.8 million last year.

Operating profit in the second quarter was $11.4 million versus $12.9 million in the second quarter last year. Our interest expense decreased by $600,000 to $1.3 million for the second quarter of 2009 compared to last year. This decrease reflects the favorable average interest rates and lower average debt balances compared to last year. Our tax expense of $3.7 million reflects an effective tax rate for the quarter of 36.6% compared to 40% last year.

Let’s talk about the year-to-date results. Year-to-date our earnings have been $11.4 million or $0.45 per diluted share, which includes the favorable effect of $2.5 million of other non-operating income. That non-operating income is primarily associated with the sale of non-properties in Texas. Excluding the non-operating income, earnings per share would have been $0.39 per diluted share compared to $0.38 per diluted share last year.

Total revenues year-to-date were $83.6 million versus $92.6 million last year. Lower year-to-date revenues were again the result of our successful re-franchising of 27 company restaurants in the Atlanta and Nashville markets.

After given effect of franchise revenues, general and administrative expense savings and lower depreciation and amortization, the company's year-to-date operating profit was improved by approximately $1.3 million as a result of the re-franchising transactions.

Year-to-date our G&A was $30.9 million compared to $27.6 million last year. This increase is primarily due to our investment of $3 million in national media advertising during the first half of the year. Our year-to-date EBITDA was $24 million with margins of 29% and our operating profit was $21.3 million versus $26.2 million last year.

Let's talk about our usage of cash. Our highly franchised business model continues to generate strong free cash flow. Year-to-date we have generated $14.7 million in free cash flow and repaid $4.2 million of our credit facility. We ended the quarter with a total debt balance of $114.9 million and a cash balance of $19 million. During the balance of 2009, we expect to emphasize debt repayment as our primary use of our free cash.

As we indicated previously during the second quarter we successfully completed the re-franchising of 13 restaurants in the Atlanta market and sold nine properties in Texas. The company received $7.5 million in combined net proceeds and recognized a net gain of $2.8 million during the quarter from these activities. This gain is reported as a component of the other expenses and income net caption on our income statement.

Let's spend a minute and talk about the amendment to our credit facility. Subsequent to the end of the second quarter on August 14th, we completed an amendment of our 2005 credit facility, which extended the maturity dates of both our revolver and the term loan portion of the facility by two years.

In connection with the amendment, the company reduced its outstanding term loan from $110.5 million to $103.5 million, and the revolving credit facility commitment was reduced from $60 million to $48 million. The rate of interest for borrowings under the 2005 credit facility as amended is LIBOR plus 4.5%, with a LIBOR floor at 2.5%.

Under the amended terms of our credit facility, the company may resume purchasing shares of common stock, when our total leverage ratio is less than 1.75 to 1. At the end of the second quarter, our total leverage ratio was 2.49 to 1. Rapid delevering would bring our expected total leverage ratio below 1.75 to 1 sometime in the back half of 2010.

In the third quarter of 2009, we will expense $1.1 million of consent fees and write-off approximately $800,000 of deferred debt issuance costs associated with the credit facility, approximately $1.8 million of costs related to the amendment will be deferred and amortized over the remaining term of the facility.

Overall, we are satisfied with the market terms of this facility and we appreciate the cooperation of our lenders. We believe this amended credit facility gives us greater financial flexibility and certainty to grow the Popeyes brand and create value for our shareholders.

Before we open the lines for Q&A, let's summarize our full year guidance for 2009. As Cheryl mentioned earlier and as we have indicated in our press release, we expect total global same-store sales for fiscal 2009 to be flat to positive 2%, an increase from our previous guidance of negative 1% to positive 1%.

Consistent with previous guidance, we also expect global new restaurant openings for 2009 to be in the range of 90 to 110. We have had fewer restaurant closures than we projected and given this favorable experience, we now expect restaurant closures to be in the range of 110 to 120s restaurants during 2009 resulting in zero to negative 30 net closings compared to our previous guidance of negative 30 to 70.

During 2009, we will continue to tightly manage G&A and invest in key strategic initiatives, which management believes are essential for the long-term growth of our brand. As a result, we expect fiscal 2009 G&A expenses to be consistent with our previous guidance of 3.1% to 3.2% system-wide sales, which is among the lowest in the industry.

We now expect our 2009 earnings per diluted share to be $0.66 to $0.70, as compared to the previous guidance at the upper end of the range of $0.62 to $0.67 per diluted share. This earnings guidance includes the new terms of the company's credit facility as amended as well as the net gain on sales of properties recognized year-to-date.

Excluding the non-operating income and the expenses and write-offs related to the amended credit facility, which will be recognized in our third quarter, 2009 earnings guidance would be $0.65 to $0.69 per diluted share, compared to 2008 earnings of $0.65 per diluted share, which also excludes non-operating income.

I want to thank you, and now we are going to open the phone lines to your questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Michael Gallo with C.L. King. Please proceed.

Michael Gallo - C.L. King

Good morning and congratulations on an excellent quarter. My question is just around the drive-thru speed of service initiative. It sounds like you've gotten rolled out now on the drive-thru timers.

I was wondering one if that had any impact in the quarter in terms of seeing improved throughput times whether it was simply too new to have any impact. When you expect to start to see some impact from that and any better feel for in units now that had it for several months. What kind of improvement you're seeing in just overall throughput and what effects you're seeing on comps for that?

Cheryl Bachelder

I’d say the first step, as I indicated, is getting everyone prepared with the proper equipment in place. We're now getting the training in place and the blocking and tackling reporting. So, you can track and reward and incentivise people around it.

So, I would say, Mike, it had a minimal impact on our second quarter results, and I would expect it to have increasing impact in the back, towards the latter end of this year, but I can tell you that our stores were lit up in the second quarter, and our speed of service ratings improved three points over the first quarter. So, I think attention to speed of service is already having a natural positive effect on our business.

Michael Gallo - C.L. King

Okay, great. One of the things, I don't think you broke it out, but you indicated it was mostly transactions that drove the comps in the quarter. Was there any pricing in the menu or menu shift that?

Cheryl Bachelder

It was primarily driven by customer counts.

Michael Gallo - C.L. King

Okay, great and then just final question. Obviously as we head to the back half of the year here, certainly July, it looked like it was another very tough month for the industry. Have you been able to maintain the momentum that you came through the second quarter with? Or you know, obviously the guidance implies, you're not going to be able to maintain that in the second half. Is that just some conservatism given a weak environment or just something you're seeing beyond that?

Cheryl Bachelder

Mike, yesterday I was looking at consumer confidence, spendings, savings rates, all those economic measures for July and August, and as you know, they're not very strong. So, I think everyone in the restaurant industry will be taking that into account. I'm not going to speak or guide to our performance in July or August, other than to say the marketplace continues to be a very value-focused environment.

Michael Gallo - C.L. King

Okay. Keep up the good work. Thank you.

Cheryl Bachelder

Thank you, Mike. Appreciate the questions.

Operator

Your next question comes from the line of Chris O'Cull with Suntrust. Please proceed.

Chris O'Cull - Suntrust

Cheryl line of question relate to the systems media plan. It's my understanding that the plan is to prove the benefits of national media to the franchisees and then shift the investment from the company to the franchisees. Is that correct?

Cheryl Bachelder

That's not how I would say, say that, Chris. As you know, our marketing dollars are all provided by our franchisees, contractually at a rate of 3%, and as we've told you in the fall of last year and this year, we've made a corporate investment to accelerate the growth of our company and we made that commitment to our franchisees through 2009.

So that's, you see that reflected in the national media plan that we've executed year-to-date, as Mel mentioned. We've invested $3 million year-to-date and that has contributed to stronger communications and rating points to our guests.

Chris O'Cull - Suntrust

So, would the plan be to remove that, will you see that kind of spend in 2010?

Cheryl Bachelder

Chris, I'm not guiding forward to 2010 on our investments, what we've talked about publicly is that we've committed to invest in media through 2009.

Chris O'Cull - Suntrust

Okay. What is the media plan for 2009? The $3 million year-to-date is it going to continue that run rate for the back half?

Cheryl Bachelder

Chris, I don't typically talk about media spend in the go-forward months and so I think I'm going to have to pass on that question.

Chris O'Cull - Suntrust

Okay, well maybe the question is intended to understand G&A, SG&A a little bit, is the run rate we've seen over the first two quarters, is that comparable on a per-week basis, Mel for the back half?

Cheryl Bachelder

Yes, I think the best way to answer that then, Chris is we talked about the fact that we are tracking towards the 3.1% to 3.2% G&A rate and that does include our marketing investment.

Chris O'Cull - Suntrust

Okay. So that should continue for the back half.

Cheryl Bachelder

Correct.

Chris O'Cull - Suntrust

Then one last question, I know it's obviously been difficult for small businesses to get financing the past 12 months. Is it fair to assume the openings will continue at the current pace for the next 12 to 18 months?

Cheryl Bachelder

We're confirming our opening guidance and believe we're on track to make those numbers, Chris. The new unit openings are always back-end loaded in the plan. So, that is also true this year as you can tell by our year-to-date openings compared to our guidance.

Operator

(Operator Instructions) Your next question comes from the line of Mark Smith with Feltl & Company. Please proceed.

Mark Smith - Feltl & Company

Hi guys. Couple of more questions here for you. First half, can you quantify at all the impact of the pay day promotions that you had early in the quarter on comps?

Cheryl Bachelder

I can't give you an exact impact on the quarter comps, as I mentioned, it was strongest Wednesday we've had in recorded history. We've more than doubled our sales that day. So, it's very strong impact on the month of April, in which it occurred.

Mark Smith - Feltl & Company

Okay and maybe a different way of asking it, without looking at July and August, can you talk about the comp trend during the quarter?

Mel Hope

Our guidance for the full year is probably as much of an indication about how the trend is expected to continue through the back half of the year.

Mark Smith - Feltl & Company

Okay.

Cheryl Bachelder

I guess the point that perspective I'd add to that is, I talked about all three promotions that we had in the second quarter, our bone-in chicken and our tenders promotion and all three of those events, Mark, yielded very strong traffic to our restaurant. So, very solid quarter, very solid three promotions.

Mark Smith - Feltl & Company

Okay. Just a housekeeping question; what was the timing of the closing on the Atlanta transaction?

Mel Hope

The last one, the 13 restaurants that we sold were early in June, like the first or second week.

Mark Smith - Feltl & Company

First week or so in June, okay and then, lastly, just trying to get more insight into occupancy revenue and expense. Can you just talk about the impact of the transactions in Texas, selling some of those as well as any impact that the Atlanta, the 13 restaurants that you sold, that will have on your occupancy?

Mel Hope

Well, the properties that were sold in Texas, those aren't going to have any impact on occupancy cost. Those were sold to a franchisee, where we owned the land underneath the buildings and so those were real estate sales and shouldn't have a real meaningful impact on our rental and comp. The other one you asked about was the sale of the company’s, the Atlanta market is that right?

Mark Smith - Feltl & Company

Yes, just if any real estate on those restaurants that were sold?

Mel Hope

There were two properties in there, but it wouldn't be a meaningful number.

Mark Smith - Feltl & Company

Okay. So, maybe a little bit down on what you'd see in a rental income, but not enough to really move the needle?

Mel Hope

Yes, slightly, but not a lot.

Operator

(Operator Instructions) Your next question comes from the line of Kenneth Smith with Lenox Equity Research. Please proceed.

Kenneth Smith - Lenox Equity Research

Two questions, please. On the credit agreement, would it be fair to say that when you net it all out that your interest expense rate, the rate rather would be about 2 percentage points higher than you've been paying?

Mel Hope

Well, the cash payment rate at with 2.5 LIBOR, 4 and 450 basis points spread above that is 7%.

Kenneth Smith - Lenox Equity Research

Right.

Mel Hope

Is that what you're asking?

Kenneth Smith - Lenox Equity Research

Yes, I see that and I guess you were paying five after the derivative, right? Six before?

Mel Hope

When you blend it all in, we were paying closer to four.

Kenneth Smith - Lenox Equity Research

Closure to four, so, you’re going up by about 300 bps then? Okay and you don't have any scheduled lump sums on this? It's more the function of, what your leverage ratio is?

Mel Hope

Yes, that portion of the agreement changed only slightly, but we don't have scheduled payments. We have mandatory payments at the after each year end, which are based on a working capital formula.

Kenneth Smith - Lenox Equity Research

Okay. Do you have any other assets to sell to could produce cash other than the potential sale of the remaining company-owned units and can you comment on where that stands, I know you put it on the table, but can you give a little color on your thinking there?

Mel Hope

Well, the remaining company-owned restaurants that you mentioned are currently not for sale. They're not on the market and the company will reconsider that, when the time is right, but right now we intend to run them.

In terms of other assets to sell, we do have ownership of some properties it's a not, where we're still involved in restaurants that are owned by franchisees. It's not a huge number and they hasn’t. We don't have any intention of parting with those right now.

Kenneth Smith - Lenox Equity Research

Okay. Cheryl, can you talk about, when conditions improve, when unit openings improve, what it's likely to look like in terms of domestic versus international?

Cheryl Bachelder

I've talked about our long-term goals in that arena, Ken, in the past, and said that we believe there is a long-term potential to double units in the US and more than double internationally.

As you can see in our year-to-date performance international is tracking well, and the international market is seeing less issues around financing and economic issues to hold that growth. So, I’d say slight advantage to international over the next 18 months.

Kenneth Smith - Lenox Equity Research

Okay. So, kind of the way it's been of late?

Cheryl Bachelder

Yes.

Operator

There are no further questions. I would now like to turn the call back over to Cheryl Bachelder for any closing remarks.

Cheryl Bachelder

As always we very much appreciate you joining us for the call and asking good questions and expressing strong interest and support for our brand. So, we will look forward to talking with you again in November at the close of our third quarter. Thank you and have a great day.

Operator

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a good day.

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