Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of John Ivankoe – JP Morgan
John Ivankoe – JP Morgan
I was hoping you could maybe give us some more specificity around the smaller shops, satellite shops economics as you’re currently planning for company markets, just a sense in terms of what your [all-in] capital investment is what kind of sales per unit you’re expecting and if it’s fair at this point to give some margin expectation per box. And if possible, to apply that relative to what franchisees have been doing.
James Morgan
I think we will be able to do that at some point in the not-to-distant future. It’s a little early—we’ve done some modeling, we’re just now getting the shops up, we’re not real sure whether the international experience is going to reflect on the domestic experience because they’ve gone largely toward fresh shops and we’re probably going to go largely to hot shops so I think the answer is, we’re not quite prepared to do that yet.
John Ivankoe – JP Morgan
I know in the past you’ve discussed various operational initiatives that you’re trying at the store level in terms of labor cost savings, going from salary to hourly employees, could you give us an update, at the store level where you are in terms of cost controls, whether things have been done or if there’s anything that we should be looking forward to in the future?
Douglas Muir
We are beginning to see a little headway we think in shop labor. We’re not where we need to be but we think directionally we’re headed in the right direction and making some progress. Generally we are experiencing operating expenses at shop level running a little favorable to plan and that’s been one of the reasons we’ve been able to overcome to some extent higher gasoline and certain commodity costs.
James Morgan
When we mentioned that in June and I do think that’s a significant—could be potentially a significant factor, it was only about a month later that we were fortunate enough to be able to bring in a new head of company store operations and with her experience, 25-26 years with a major in well thought of QSR operation, we really—we didn’t stop it by any means but we really decided it was too valuable an input for us not to get more of her input. Give her a chance to be on the ground for a little while before we continued to push forward on that. So we didn’t stop it but we slowed it down a little bit in order to make sure that it was in sync with what she saw as most opportune without sacrificing the operational quality that we were trying to generate.
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