Operator: Good morning, ladies and gentlemen. Welcome to today's Ruth's Hospitality Group First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the company's formal remarks, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions.

As a reminder, today's conference call is being recorded. I would now like to turn the conference over to Kristy Chipman, Chief Financial Officer. Please go ahead.

Kristy Chipman: Thank you, Gerald and good morning everyone. Joining me on the call today is Cheryl Henry, our President and Chief Executive Officer.

Before we begin, I would first like to remind you that part of our discussion today will include forward-looking statements. These statements are not guarantees of our future performance and therefore undue reliance should not be placed upon them. We would also encourage you to refer to the Investor Relations section of our website at rhgi.com as well as the SEC's website at sec.gov for copies of today's earnings press release and our recent filings with the SEC for a more detailed discussion of the risks that could impact our future operating and financial results. During this call, we will refer to adjusted earnings per share. This non-GAAP measurement was calculated by excluding certain items.

We believe that this measure represents a useful internal measure of performance. You can find a reconciliation of adjusted earnings per share in our press release for today's call. I would now like to turn the call over to the company's Chief Executive Officer, Cheryl Henry.

Cheryl Henry: Thank you, Kristy. Good morning and thank you for joining us today.

During our last call in early March, I mentioned there seemed to be a light at the end of the tunnel, and that we were past the peak COVID impact on our business. I'm pleased to reiterate that sentiment today, although we do continue to see pockets of strength and weakness across our system, mostly driven by local market conditions. But before I get into nuances of the recovery, I want to once again recognize the efforts of our team, both in the field and in the support center for their unwavering commitment to our guests. They have been operating in a volatile and challenging environment for over a year now. And I truly believe that because of them, we're a stronger brand today.

I also believe that the foundation we've built over 55 years, and the work we've done on our strategic priorities, including recruiting and training great people, using data and digital technology, and focusing on operational excellence has allowed us to navigate the crisis and to emerge an even stronger company. As we all know by now, during the first quarter, nationwide dining restrictions began to loosen. And by the end of March, nearly all of our company managed restaurants had opened dining rooms, including 74 restaurants with restricted capacity indoor dining, and one restaurant with outdoor dining only. And we were operating at an average of approximately 50% capacity across the company system. So as I mentioned, the portfolio has seen pockets of strength and softness.

Texas and Florida are bright spots, while New York and Hawaii are two of our opportunity markets that have historically had higher average unit volumes. To add some color, while Manhattan is moving in a positive direction and lifting capacity restrictions in the coming weeks, it remains closed for the most part, with residents still following state and local guidelines. In the meantime, in Hawaii, Waikiki remains under pressure challenged by the lack of international tourism, which has always been a key driver of sales. These two restaurants alone had a negative 280 basis point impact on the quarter versus 2019. I mentioned this to highlight that while the economy is reopening, we're not back to normal just yet in all markets.

But we are pleased to be seeing positive trends and substantial improvement in our operating results. To that point, we experienced accelerating sales trends for both company operated and franchise restaurants during the quarter and saw a sequential improvement in comparable sales for each month. Average weekly sales also improved throughout the quarter and I'm pleased to say that these trends have continued into April. In fact, our average weekly sales are now exceeding 2019 levels, which in our view reinforces that recovery is underway. For the quarter we also improved margins compared to 2019 as our operators executed the efficiency and capacity utilization initiatives implemented in 2020.

And digging a bit deeper, our company-owned restaurant operating margins was one of the highest we've achieved for the first quarter in the last five years. This is all positive news. As most of you know, since the onset of COVID, we have been working with one foot in managing pandemic operations, and one foot in the future. But with the positive news of increasing vaccinations, and the anticipation of restrictions being lifted further, we're more squarely on OpEx, focused on future planning and strategic investments. To that end, I'm happy to share that earlier this week; we amended our existing credit agreement, which allows us to increase our 2021 growth capital expenditure by $15 million to $20 million.

This will further accelerate our restaurant development and we now expect to open two to three new company-owned restaurants by year-end including Short Hills, New Jersey. We also expect to open another three to four restaurants in 2022. I'm also excited to share that we're recommitting to our investments in data and other digital technologies, which have become table stakes in the restaurant industry. In early 2020, we shared that digital transformation is one of our top three initiatives. It remains our goal to use technology to reduce friction and enhance the guests experience in an authentic way and increase the productivity of our team.

And while we did not foresee it then, as COVID hit, it forced us to be a digital business. We have learned a tremendous amount over the last year, including what works and what doesn't. And we know there's increased guest acceptance, almost a demand, and that we can generate sales and earnings growth with proper investments. Lastly, I'd like to touch further on capital allocation. With continued sales recovery and ample cash on our balance sheet, we're not only comfortable with a return to investing in the growth of our business and strategic initiatives, but we have started to allocate capital to reduce debt, including a $10 million repayment in April.

We intend to continue to pay down our debt as the year progresses until we're at the leverage ratio in our credit agreement that will allow us to distribute cash to shareholders. Once we achieve that leverage ratio, and see a more certain path to recovery, we intend to resume dividend payments to our shareholders with a goal of later this year. We'll continue to monitor our ability to do so. In summary, as restrictions are lifted and markets are opening for business, our team members and franchise partners are energized and focused on our future success. I'll now turn the call over to Kristy Chipman to cover the specifics of the quarter.

Kristy Chipman: Thank you, Cheryl. For the first quarter ended March 28, 2021, we reported GAAP net income of $9.1 million or $0.26 per diluted share compared to a net loss of $3.8 million or $0.13 per diluted share during the first quarter of 2020. Net income in 2021 included a $300,000 employee retention payroll tax credit, which reduced operating expenses. It also included approximately $445,000 of severance-related costs and $148,000 income tax benefits related to the impact of discrete income tax items. Excluding these adjustments non-GAAP diluted earnings per common share was $0.26 compared to $0.09 in the first quarter of 2020.

Total revenues for the quarter were $87.3 million compared to $108.5 million in 2020. Company-owned restaurant sales were $81.6 million compared to $103 million in the prior period. Comparable restaurant sales for the quarter versus 2020 declined 14.8% and by months were negative 38.9% in January, negative 25.7% in February, and then an increase of 72% in March as we began to lapse the initial impact of COVID. Compared to 2019, comparable restaurant sales for the quarter declined 26.2% and by month were negative 36.2% in January, negative 25.6% in February, and negative 14.8% in March. As you can see, we experienced solid improvement for each period during the quarter.

Furthermore, as Cheryl mentioned earlier, our positive trends have continued into the second quarter. Quarter-to-date as of April 25, sales increased positive 2.7% compared to 2019, which was negatively impacted by 710 basis points due to restaurants operating in Boston, Hawaii and Manhattan. During that same time period, a few of our largest markets, California, Florida and Texas, delivered comparable sales versus 2019 of approximately positive 8%, positive 20%, and positive 40% respectively. We are optimistic that as more markets move towards greater levels of reopening our restaurant sales in these locations will increase. However, it will take some time.

Quickly rounding out revenues franchise income for the quarter was up 4.6% versus the same quarter last year, while operating income was flat at $1.9 million. Food and beverage costs for the quarter as a percentage of restaurant sales were down 160 basis points to 28.1% primarily related to 1.5% of beef deflation compared to the first quarter of 2020, with approximately 90 basis points of benefit from the beef lack we had in place for much of the quarter. While we continue to monitor costs across our basket, we are beginning to experience higher protein prices. We expect our second quarter food and beverage costs to increase between 150 basis points and 200 basis points compared to 2020, primarily driven by beef. Our restaurant-level margin, which we define as restaurant sales plus food and beverage expenses and restaurant operating expenses improved this quarter driven by 710 basis points in labor versus 2020 and 310 basis points versus 2019.

For our 40 restaurants that operated with open dining rooms all quarter, we saw 250 basis points of labor savings versus 2019. We expect that between 100 basis points and 150 basis points of labor efficiency will remain as we recover to 2019 average unit volume. Marketing and advertising costs were 2.3% of revenue, and G&A decreased $0.8 million to $7.2 million compared to the first quarter of 2020, primarily due to an increase in compensation-related expenses. Turning to liquidity, at the end of the quarter, we had $112.3 million in cash and net debt of $2.7 million down from a net debt position of $19.6 million at the end of 2020. Subsequent to the end of the first quarter, the company paid down $10 million on our credit facility.

As of May 5th, our cash balance was $115.8 million, and our outstanding debt was $105 million. I would like to reiterate the management team's confidence and the strength and resiliency of our business. Along with the foundational technology investments we are making, we know that leveraging the vast amount of data we currently have in our many systems, along with modernizing the restaurant and marketing tech stack, will enable our team members to make rapid and precise decisions that provide seamless experiences for our guests, ultimately leading to increased revenue through frequency and check growth. We also believe that building a stronger back of house toolset will enable us to further realize margin savings as we augment our team members' everyday tasks with intelligent recommendations and automation powered by machine learning. Due to the continued uncertainty in the operating environment, we'll not be providing further sales or restaurant-level operating guidance today.

Marketing expenses are expected to be between $12 million and $14 million for the full-year. And general and administrative expenses are expected to be between $30 million and $32 million, reflecting a decrease of between 9.8% and 3.8%, respectively, versus 2020. Total capital expenditures are expected to be between $20 million and $25 million. With that let me turn the call back to Cheryl.

Cheryl Henry: Thanks, Kristy.

There's no doubt in my mind that the demand for the experience we provide is alive and well. People are yearning to get together and celebrate birthdays, anniversaries and graduations safely in group's shoulder-to-shoulder. It may take a few more months to get there, but is happening. Furthermore, we have seen a recent uptick in inquiries about business events. Much like families and loved ones, companies large and small are looking to reconvene socially reestablish ties and celebrate a return to normalcy.

In closing, I would say that Ruth's Chris is uniquely positioned to capture the pent-up celebration and gathering savings as our country continues opening. Strategically and operationally, we have a great plan. We are experienced at executing it. And we have a time tested capital allocation model geared towards creating value for all stakeholders. With that, we'll open the line up for questions.

Operator: Thank you. We will now be conducting a question-and-answer session. [Operator Instructions]. Our first question is comes from the line of James Rutherford with Stephens. Please proceed with your question.

James Rutherford: Okay, good morning, Cheryl, and Kristy. I hope you're both doing well. Just looking here, at this raised outlook for unit development, specific to that three to four new company-owned units in 2022 that that kind of organic unit growth would be the best we've seen from Ruth's in a number of years. What are you seeing in your restaurant today that gives you the confidence to increase that target? And also, will the new builds have any key differences from your existing portfolio?

Cheryl Henry: Yes. Thanks for the question.

So just to remind everyone, we had growth in the pipeline when COVID hit. So some of this is seeing that those units through. But to your point, we spent some time looking at the market than the marketplace where these units were and working with the landlords. And we have confidence that these locations are valid. Moving forward and what we've -- what's been indicated, as we mentioned as markets have reopened that the demand for the experience that Ruth's is expertly has provided for 55 years is in high demand.

And so we have a great level of competence in bringing this pipeline to fruition. What was outside, James? What the second piece of your --?

James Rutherford: Yes, the second part was just on whether the new units will look any different than existing.

Cheryl Henry: So interestingly, we have done some work. And I think I mentioned it on a previous call around what the footprints may look like going forward and things like expanding our bars and expanding our outside patios. And we could not have foreseen the demand for that, but these units generally has started to be designed around that that new footprint.

James Rutherford: Okay, great. And then as a follow-up, in regards to the 100 basis points to 150 basis points of ongoing labor efficiency, just if you could kind of enumerate for us again where that's -- where the source of that is? And whether you think you can still kind of meet guest expectations with the modified steps of service that you have in place, as guests are starting to return to the dining room, whether you think that's still kind of a viable path forward. Thanks very much.

Cheryl Henry: Great. So we do believe that the 100 basis points to 150 basis points is the right level for us going forward.

We've taken a look at our 40 restaurants that were operating during the full quarter to validate some of those assumptions. I will say that, we think that that's more of a floor. We wanted to provide you a guidance overall, as we kind of get to this more certain sales recovery. And we know that we need to keep our restaurant staff to that they achieve 2019 volumes. We've built in a little bit of an expectation that will add some more labor back into the restaurants as we do that.

However, savings -- the savings that we're seeing within the restaurants that have been opened for the full quarter were coming from efficiency and utilization effectiveness. And so we do believe that that will stay throughout as we continue to reopen to 2019 levels.

Operator: Thank you. Our next question is comes from the line of Brian Vaccaro with Raymond James. Please proceed with your questions.

Cheryl Henry: Brain?

Operator: Brian, are you able to -- you may be muted Brian. Brian, are you there? If not, you can rejoin the queue. Oh, there you are, Brian. Thank you. Okay, Brian, please rejoin the queue.

Our next question is comes from the line of Nicole Miller with Piper Sandler. Please proceed with your questions.

Nicole Miller: Thank you. Good morning. It seems like you're doing about 75% of pre-pandemic or normalized sales on about 50% capacity.

Can you talk about if that's very even across the days of the week or day parts, I'm thinking now there's lunch and brunch in many of the stores in addition to dinner, and maybe the consumers favoring one day or day part over another.

Cheryl Henry: Thanks, Nicole. So just to kind of how that's coming in, I think not surprisingly, given the lower demand for private and group dining, earlier week is a little bit softer. And we again, as I mentioned, expect some of that to come back as more people feel comfortable gathering in groups and towards the back half of the year. As far as day part, they're really -- we generally across the system are not open for lunch.

We're dinner-only business. We do have some markets that are open for lunch that has not been a significant or notable swing for us yet. So dinner really remains the focus. And again, there's a bit of weakness from private dining events in early week, but really seeing that demand come in on the weekends and later days of the week.

Nicole Miller: Great.

And then you had talked about last time, last call, and also I think you made reference about corporate business, and it's quite healthy. So I imagine a lot of that's local without travel. Do they consume the same similar amount of entrees, alcohol spend, et cetera? Essentially, it seems like you don't necessarily need the traveling corporate guest; is that fair?

Cheryl Henry: Yes. So a couple of notes about our business guests, if you will, so the way we think about is really in two parts. And you mentioned that as the local business and then we have seen some of that return, especially in markets it's not surprising like Florida and Texas.

And we -- the private dining, if you will, the group dining piece that's generally either an organization or some of the travel piece, right. And that’s how we think about that business. And so, yes, some of the local businesses are coming back. The -- I guess the good sign around what might happen around group dining and private dining for the back half is I mentioned also in the last call that we were out in the market, doing some research, talking to our guests and trying to understand when they will feel comfortable about group dining and business dining with not with family members necessarily. And what we found is that really upticks towards the back half of the year.

And so we're -- we have some confidence in that starting to rebuild again as well. We have seen to your point about what's happening as far as check, we've seen in the list and checks. So we're starting to see some of that spend go up. Your point around alcohol checks, we're not necessarily seeing the same that we would, private dining is running at full capacity early in the week. So that is yet to return for us.

Nicole Miller: And then just the last question on digital, how do you define your -- define, just so we technically understand. I mean I'm assuming order had picked up and some delivery application, but walk through the definition of digital or off-premise? And what should it be for your brand, because there's clearly an experiential angle. I mean that's really what this is about is hospitality. And I imagine that's what the consumer is going to come back to enjoy. And yet, they've also decided to have everything delivered.

Cheryl Henry: It's been really interesting to speak with everything I have, I get personal notes and people saying, how do I get the blue cheese off the chop salad, because I want to order it every night. And so there really has been this interesting mix of maintaining this high hospitality, high touch experience. But overlay that with this absolute demand from people that they have the same type of frictionless experience around ordering and delivery. And so for us, number one is that going all the way back to root, that experiential relationship building that takes place in our dining rooms, in our bars between our guests and our team members in the restaurant. Having said that, even that experience is where we find opportunity to use data and technology to enhance it.

And I think I said from the beginning, it's about doing it in authentic ways. So it's not necessarily about the things you might see in putting technology directly into the guests' hands as they're in the restaurant. But more about using data and knowing the guests and making sure they understand that we understand them and their needs. And we believe that's where some of the opportunity is. The other piece is really behind the scenes.

It's how we enable the team members to use technology, new programs, new processes, to really be efficient and productive at what they're doing. So when we talk about data and digital, it's really kind of this tiered approach from enhanced guest experience, removing friction, as well as making sure we have sustainability in our workforce who wants to work in different way with new information and could be more effective and productive in doing it.

Operator: Thank you. Our next question is come from the line of Brian Vaccaro with Raymond James. Please proceed with your questions.

Brian Vaccaro: Hi, thank you, and sorry about the tech issues earlier. On the quarter to-date average weekly sales, I appreciate the disclosure around the 101,000 the last three weeks. And -- but can you share what would it be if you included the Easter week just to make sure we're all on the same page kind of where the business is including that week quarter-to-date, think that the higher sales weeks typically.

Cheryl Henry: Right. Easter was a 115,000 sales for the quarter for those first four weeks is about 105,000.

Brian Vaccaro: Okay, great. Thank you. And you mentioned that 700 basis point drag from Boston, Manhattan and Hawaii, how many units does that include? And is there a way you could help us sort of what would at AWS be excluding those units?

Cheryl Henry: So I can tell you, its 7 units, and we'll have to get back to you on what the AWS would be excluding those.

Brian Vaccaro: Okay, okay. That's helpful.

We can circle back offline on that. And sorry, if I missed it, the -- what was the off-premise sales mix in the first quarter, and where are dollars settling out in the last month or two in this higher sales environment?

Cheryl Henry: So off-premise sales were about 12% of average weekly sales, so about $10,000 per week. And we see it landing between 5% and 7% going forward. So I'm sorry, I might have missed part of your question, Brian.

Brian Vaccaro: No, I was just asking about.

So around $10,000 and it sounds like that dollar volume is holding pretty steady, March and April. Is that what you said?

Cheryl Henry: Yes. I think as restaurants fully reopen with California, we're starting to see the percentage come down. So I would anchor more towards a 5% to 7% go-forward percentage versus 10%. And the dollar gap is around $10,000.

Brian Vaccaro: Okay, great.

Kristy Chipman: Brian, as a reminder, pre-COVID that was 1% to 2%.

Brian Vaccaro: Sure, sure. Yes, yes. Okay.

And I wanted to ask about food costs, if I could, I think you said you expect Q2 to be up a 150 to 200 bps. And just to make sure we're on the same page. Are you comparing that to Q2 2020, which you were a shade under 30% even? Or are you talking about closer to 29% for the year that you saw in 2020?

Cheryl Henry: Yes, that's versus 2020, Brian.

Brian Vaccaro: Okay, okay. And what does that embed in terms of your food inflation expectations in your basket also be specifically in Q2? And how do you -- what are your expectations for the year as well on the food inflation front?

Cheryl Henry: Yes.

So overall, it is primarily related to beef. Beef is increasing 15% to 20% versus prior year for the second quarter. The rest of the basket, while we're seeing some pressure on other proteins, particularly seafood items like lobster and crab, there are some offsets in there. And so the majority of the pressure that you're going to see in that line is the beef that we called out. The rest of it relatively offsets within that range of the -- for the 150 to the 200 would be inclusive of everything.

Brian Vaccaro: All right, that's helpful. And then last one for me just on the plan to accelerate unit growth. Could you walk through the economics, are the targets you are underwriting sort of on average for those units? What's the average cash investment that you expect per unit?

Cheryl Henry: Yes, Brian, it's in line. So I think that everyone's probably thinking about is there inflation around construction, just given some of the supply chain issues. We're still targeting our standard $3 million to $4 million in capital expenditures for those units.

That will do the work needed to make sure we're staying on target there.

Operator: Thank you. Our next question is come from the line of Andy Barish with Jefferies. Please proceed with your question.

Andy Barish: Hey guys, really impressive results, especially some of those state numbers you threw out there.

How do you drive those 20%, 40% increases in Florida and Texas, with the six-foot spacing I guess limiting capacity or what kind of true capacity utilization do you think you have in places like Florida and Texas better wide open?

Cheryl Henry: Yes. So great question, Andy. Capacity is a bit of a moving target just from a standpoint of it matters. There's so many variables in it from how many tables for booth versus freestanding tables you have in a restaurant. So one restaurant can do a higher percentage, because in a six-feet separation standpoint, you can't put people back-to-back in booth.

So it really does differ across the system. I think one of the ways that teams have done just a fantastic job, and especially to your point, some of the Florida and Texas restaurants is, we generally still we're at 50% capacity. And I'll explain that in a moment. What they've been able to do is expand the number of turns we're getting in the restaurant. And so some of that the partnership with the guests, they're willing to come a little bit earlier and dine a little bit later.

We've seen that trend continue as we open. The other piece is really around, how we staff and move people through the restaurant, utilizing the private dining space. For all of carte dining, and really make sure we're optimizing every seat that we can in the restaurant. One of the things that has somewhat kept us at that 50% averages from the beginning, we talked about health and safety of our guests and employees. So we have been, greatly following the guidance that we received.

And so even when you hear, up until this week, Florida was open, but the majority of our jurisdictions in Florida were still requiring six-feet of separation. So it does limit you right in that 50% range around capacity. Now, Florida this week has officially required local jurisdictions do not have their own requirements around spacing. But I think you're going to start to see more and more of that as we work our way through Q2 and into Q3 from different states as well as local municipalities and counties and so forth. So, I give credit to the team and how they're utilizing their books.

I would agree with that. What I think you're saying is, there is a cap at some point of how many people at 50% capacity was not being able to see people back-to-back in booth and you will hit that cap. I think what we're seeing though is simultaneous later, starting to release some of the spacing requirements that have kept us at that 50%.

Andy Barish: Right, very helpful. And then how should we think about the seasonality here in the 2Q? I would imagine it, drifts a little bit lower as you go through the quarter in terms of an awes, but obviously, celebratory times seems to be celebrated even more enthusiastically these days, Mother's Day, graduations and Father's Day coming up and things like that.

How should we kind of think of the rest of the 2Q?

Cheryl Henry: Yes. So if you look back at historical average weekly sales Q1 tends to be higher than Q2 to the tune of, I'll call it $4,000 to $5,000 per week on average, but that's going to shift. We'll see how that plays out with the pandemic, because of the geography and the AUEs [ph] and as things open. But that's generally how you should think Q1 is a stronger average weekly sales volume for us compared with Q2.

Andy Barish: Got you.

And, yes, thanks for the color on kind of some of the tougher markets. Have you guys sort of slice and diced it like a suburban versus urban same store sales number?

Cheryl Henry: Yes, Andy. So we have looked at it and probably not. I think, generally, let me say this, and Kristy can give a little more color. From the beginning, we've seen the suburban markets, and we're about just to remind you, we're about 60% of mid-market suburban, have outperformed to a premium to the urban market.

That has maintained and I mentioned Manhattan, specifically, even Boston, there's one market, one restaurant in Boston, that's still at 25% capacities with some limited by consumer mindset in the marketplace, but also by local requirements around spacing and so forth. But generally speaking, we've seen that maintain and Kristy can give a little more color on the numbers.

Kristy Chipman: Yes. And while you really start to see it come to fold as in April, right because throughout the quarter, we had the operating restrictions and the local issues, but when you start to look at April, our mid-market and suburban restaurants, which we calculate to the tune of about 40 are outperforming the rest of the portfolio by about 10% to 15%. And that's been pretty consistent.

And that's been pretty consistent.

Andy Barish: And is that part of the reason why the franchise comps outperformed?

Cheryl Henry: Yes, excellent point, it is. And it's really based on similar to what we're seeing domestically. So part of it was California, we had the impact of California through the quarter, which is a completely company-owned market. But yes, to your point, some of those locations, especially those seasonal tourism markets that just fall outside the urban areas and then more secondary markets and more drive market, vacations, really, really felt the positive impact.

Operator: Thank you. [Operator Instructions]. Our next question is comes from the line of Todd Brooks with CL King. Please proceed with your question.

Todd Brooks: Hey, good morning to you both, and congratulations.

Question on outdoor dining, which you had a lot of success during the pandemic kind of creating outdoor spaces to handle customer traffic, I guess. If you look at the demand environment inflecting here, and I'm guessing landlords kind of willing this last year to set up those outdoor spaces. Is that something you plan to do again this year? I'm just trying to get a sense of what outdoor seating capacity looks like now versus fiscal 2019, because we're comparing back to that level.

Cheryl Henry: Yes. So let me say this, and I'll turn to Kristy for a little more detail.

But majority of our restaurants actually have outdoor patio. So that worked out well for us. To your point, we were able to add some outdoor construct, if you will outdoor dining room. As California opened and the demand was still there for that outdoor dining. We really kept that opportunity for our guests, because I think we're still in that in between phase of people enjoy being outside and they want to be outside and dine.

And so where we've had an opportunity, I'll use Marina del Rey, as an example. The landlord there was extremely cooperative and a real partnership to allow us to take on more space. And as the demand has required it, we've kept that. So yes, some people are moving inside, and they're ready to move inside. But it's also an very enjoyable experience to be outside.

So we're kind of taking that as a case-by-case as we go and letting the guests really guide us as to where they want to dine.

Todd Brooks: Okay, great. And then more strategic question, when I look at average unit volumes back in 2019 and I'm just wondering internally as you're structuring goals for what routes productivity should be now. This whole concept of building back better so layering in an incremental 500 basis points depending on where off-premise settles out, and customers and restaurants being more skilled in driving traffic to shoulder day parts. I guess what do you think or what are you targeting for return to over time, not with any clock on it for out of weekly sales volumes with all these incremental streams that have been developed during the pandemic and learnings from the pandemic.

Thank you.

Cheryl Henry: Thanks for the question, Todd. I think it's a little early just given still the volatility by geography and how markets. So it'd be hard to make a statement across the system and not really understanding, for example, when internationals coming back. Hawaii, which is a major, very high new market for us, the same as Boston, the same as Manhattan.

So I think so to your point, we are absolutely looking at this business and making sure that those things that we -- that were successful during COVID that allowed us to be more productive to drive more revenue through table turns, et cetera, stay in the business. So we're -- as we reopen each market, we have a set plan and set target to understand kind of what the new business model and how we expect that business to run. So some of the numbers you heard from Kristy reflect that those assumptions going forward.

Kristy Chipman: Yes. And I'll just add, as Cheryl mentioned in her script, we are starting to exceed 2019 levels -- versus 2019 right.

So we are seeing a comeback aided by the Ruth's Anywhere platform. So there is still opportunity for further growth. I think the timing of when that growth comes is what we're still kind of watching closely.

Todd Brooks: And it's a return to those type of volumes without a full return of the business customer segment as well. That's --

Cheryl Henry: Yes.

Todd Brooks: I'm starting to piece things together. And it paints a pretty bullish picture for where average weekly sales settle out in the new normal.

Cheryl Henry: Yes. And I think that’s the question still is, so I love doing research and hearing that there's the back of the year potential demand around private events, and then they have to actually come to fruition. But to your point, that's an opportunity that's not fully returned yet for us.

And do we believe that there will be a desire to gather in groups and celebrate occasions and have business meetings, we do. And so I think as we go back and start looking at the pieces of the business and the channels Ruth's Anywhere is with us. And it's -- I think it’s been clear, and even as we reopen restaurants that there will be a demand for that. And again, it's a little early to say exactly where that will settle out. Because some of that just gets behavior.

And that the guests deciding when they're going to order and when they want to have an indoor dining experience with us. So a little early to give specifics, but we certainly think they're viable channels. We think the private dining is a viable channel going forward and we think that Ruth's Anywhere is a viable channel.

Operator: Thank you. Our next question is comes from the line of Brian Vaccaro with Raymond James.

Please proceed with your question. Brian, could you check if you're on mute?

Brian Vaccaro: A rough morning, sorry, it's been a long earning season. So just two quick follow-ups if I could. So the tightness in the labor market, I was curious if you're seeing any challenges bringing back servers as sales have really surged in since mid-March? Or is there a dynamic where server income and tips are so much higher for your business that it really hasn't been much an issue? Can you just frame what you're seeing there?

Cheryl Henry: Yes. You kind of answered the question for me, Brian, because you're right.

I think we are fortunate to work in a space where the wage of our front of the house with Texas is fairly high. And it's been sustainable. And as an hourly wages is very much above what you would normally see in the industry. So I think that's helped us in retaining. And then keep in mind, there were efforts, the tenure of our workforce, whether management and hourly is important to us.

It's how we deliver that consistent experience over and over again. And so this wasn't just a post pandemic outreach to our team to make sure that they want to come back. But really some of the things the foundation we laid with our team members pre-pandemic and then pre-outbreak and then as we went through each change, healthcare benefits and their premiums for them through this as well as offering up grants from the refund to make sure people said, so all of those efforts around how we manage our people, I think helps us retain that level of workforce going forward.

Brian Vaccaro: All right, that's helpful. And on the marketing front, it looks like you're planning to increase the spend here relatively soon.

Maybe just walkthrough your thinking there relative to the strong pent-up demand we're currently seeing. And maybe give some context on where you plan to deploy those dollars across digital versus traditional channels.

Cheryl Henry: Yes, great question, Brian. And so that is the investment we talked about related to data and digital strategy and ensuring we're building that platform. So some of that is an investment for the future and you'll see it in the marketing line and some in the CapEx line as well.

Brian Vaccaro: Got it, makes sense. Thanks very much.

Kristy Chipman: Hey Brian, before you go, I just want to circle back on your question related to how the seven restaurants that are operating in some of the – in the Boston and Hawaii, Manhattan affected AWS. So those seven restaurants lowered system-wide AWS by $3,000 during the four weeks of April.

Operator: Thank you.

There are no further questions at this time. I would like to turn the call back over to Cheryl Henry for any closing remarks.

Cheryl Henry: Thank you, everyone, for joining us this morning and I look forward to speaking with you again soon. Stay safe.

Operator: Thank you for your participation.

This does conclude today's teleconference. You may disconnect your lines at this time. Have a great day.