Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Brian Moore of Wedbush. Please proceed, sir.
Brian Moore - Wedbush
Good afternoon.
Bill Koziel
Hey, good afternoon Brian.
Jim Hyatt
Hi, Brian.
Brian Moore - Wedbush
First question would be I guess I think you said roughly 4% price increase for '08 as well as the quality customer servicing issues you're going to have in place. How might we think about restaurant level margins on a full year basis? And then if you could also give some more color on your wheat exposure as well as other commodities that are contracted or not contracted and speak to the absolute level of food inflation this year that you expect?
Jim Hyatt
All right. Very good. Well, let's take the commodity one first, I mean as a benchmarking, the cost of our flour is a wrong ingredient, it comes in the back door in a bag to benchmark that January of '07 the price per bag was $12, January of this year it's $16, so its up $4. And then going into April, May, June, there is about a four-month window where that bag is going to jump into the 20s. The effect of that on the restaurant will be about $500 to $550 a month per restaurant for about four months.
Now we have a contract in place that levels that price and we think we are going to return back to some normal state going into the summer but with our price increase we have that covered. Now other margins or other parts of the cost of goods we also have been working on as an example we have favorable cost this year in our soup contracts, our chicken contracts and some others. So we have been able to lever and make improvements in other areas so that the flour impact does not have an impact as it probably is with our competition or other businesses that have a different food delivery system, if you will.
Now the margin impact that we communicated to you before on our last call was that we would make a about a 70 basis point improvement in our margins on cost of goods and I still feel very good about that. I think we closed 2007 with a 23.4, we are looking to post around 22.7 for 2008. So we are going to take a little bit a headwind, we are going to claw back a bit of performance and we are going to do other good work on our commodity costs working through there. All right.
- To read the full transcript on Seeking Alpha, click here »
