Question-and-Answer Session
David Tarantino - Robert W. Baird & Co., Inc.
Hi, good afternoon.
Jeffrey A. Blade
Hi, David.
David Tarantino - Robert W. Baird & Co., Inc.
Question on the more aggressive promotional strategy, is this something that you’re thinking about as a near term tactical approach, or something that you might need longer term to improve your value equation?
Jeffrey A. Blade
We are primarily thinking about it as a near term tactical initiative to respond to the current competitive environment. So, if you look at the longer term history of Steak ?n Shake, couponing has always been some part of the mix at some level of promotion but we have traditionally not played in deep discounting arenas, and buy one, get one and more deep discounting. So, some of the near term tactics do represent a specific competitive response to the current marketplace realities.
David Tarantino - Robert W. Baird & Co., Inc.
Okay, and then just a follow up to that, what do you think the risk is of damaging the long term position of the brand given that you’re overall approach has been to be a premium price point and a premium position brand, how does the short term promotional strategy play with that approach?
Jeffrey A. Blade
Well, we think that some of the near term promotion is actually very consistent with it, so in arriving at the $2.99 double Steakburger and fries promotion we evaluated a lot of potential options and alternatives and the thing that we did not want to do was anything that would specifically damage the long term health or perception of the brand. So, we are discounting a specific item that remains one of our most popular items and we believe it’s an opportunity to do several things, to reinforce the core equities of Steakburgers, so true to what we’ve been saying for the last several months. Secondly, even at the $2.99 price point, it’s a little bit deeper discount than what we traditionally do on our coupon sets; our coupon sets typically have a discount in the 30% range. This is more like the 40% range. But, it still gives us the opportunity to have some average ticket benefit from the fact that folks will complement it with a soft drink or milkshake, etcetera. So, we do expect that while the absolute discount is a little deeper, it’s consistent with the overall brand, it doesn’t stray too far from the couponing that we’ve done and it still does not in any way shape have a string into the dollar menu item battle of McDonald’s and Burger King and Wendy’s and others.
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