Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from [Unidentified Analyst] from Lehman Brothers.
[Unidentified Analyst] - Lehman Brothers
The cost of sales as you mentioned was significantly lower than prior year as well as the preceding quarter as a percentage of restaurant sales. Can you talk about that?
F. Mark Wolfinger
Rayfer, its Mark. I briefly talked about it in my comments but it’s primarily driven by the success of Building Your Own Grand Slam. Obviously, it is a popular brand per se, as the Denny’s brand. That’s sort of what we’re known for, the Grand Slam. It’s also a very, very attractive food cost structure to it. So we were very pleased with the kind of mix we saw in that product line during the second quarter and that was the key contributor to that movement.
[Unidentified Analyst] - Lehman Brothers
Are you actually experiencing food costs inflation or just offsetting it with the menu types?
F. Mark Wolfinger
Yes, we are experiencing definitely food cost inflation on the commodity side and again, we don’t see that changing whatsoever. I mean, if anything, I think the inflationary factors will continue to build. I also mentioned in my comments, obviously, we have taken pricing actions over the last 12 months as well. At the same time, when you look at our product cost line-up and if you go to our menu items, the Grand Slam is a very attractive food cost structure which is out of the gate to begin with.
[Unidentified Analyst] - Lehman Brothers
As far as your re-franchising activities, are you encountering any slowness in terms of financing availability to your re-franchising activities?
F. Mark Wolfinger
This is Mark again. It is getting tougher, no doubt about it. I would say the word slow is probably the way to put it. I think that there are a number of transactions out there that we’re very positive and optimistic about but it is definitely a slower process when you go through the finance and metrics now. Again, I think there’s a stronger selectivity there on the part of the third-party financing entities. Right fully so, in the given credit market situation out there. As I mentioned in my comments as well, we remain on target to our original guidance of 75-100 company stores to be sold during 2008 and obviously we have 41 under our belt the first half of the year.
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