Texas Roadhouse Inc (TXRH) 2020 Q2 法說會逐字稿

Good evening, and welcome to the Texas Roadhouse second quarter earnings conference call. Today's call is being recorded. (Operator Instructions)

I would now like to introduce Ms. Tonya Robinson, the Chief Financial Officer of Texas Roadhouse. You may begin your call.

Thank you, April, and good evening, everyone. By now, you should have access to our earnings release for the second quarter ended June 30, 2020. It may also be found on our website at texasroadhouse.com in the Investors section.

Before we begin our formal remarks, I need to remind everyone that part of our discussion today will include forward-looking statements. These statements are not guarantees of future performance and, therefore, undue reliance should not be placed upon them. We refer all of you to our earnings release and our recent filings with the SEC. These documents provide a more detailed discussion of the relevant factors that could cause actual results to differ materially from those forward-looking statements, including factors related to the COVID-19 outbreak. In addition, we may refer to non-GAAP measures. If applicable, reconciliations of the non-GAAP measures to the GAAP information can be found in our earnings release.

On the call with me today is Kent Taylor, Founder and Chief Executive Officer of Texas Roadhouse. Following our remarks, we will open the call for questions.

Now I'd like to turn the call over to Kent.

Thanks, Tonya. Legendary food and legendary service. It's a simple mission statement that has guided Texas Roadhouse for over 27 years. And despite the events over the last 4.5 months, these words have remained the cornerstone of our culture and philosophy. From pivoting to To-Go only back in March to now executing limited capacity in outdoor dining, along with traditional and curbside pickup, our managing partners deserve a huge thank you. They continue to work tirelessly to make sure they take care of every guest, while at the same time, providing a safe environment for our Roadies. Their jobs have never been more difficult as they now have the added responsibility of ensuring compliance with local capacity guidelines for operating their dining rooms while managing through a unique set of circumstances that has seen their restaurants To-Go volumes remain well above historical levels.

Despite this, our operators continue to find creative ways to adapt to the daily challenges they face. And the upward momentum of our sales show that their efforts are paying off. Through it all, taking care of our employees has remained a top priority. As we have previously talked about, early on, we provided PPE to our employees and since then have added symptom surveys, temperature checks and partitions in our dining rooms. I'm particularly proud to note that in the second quarter of 2020, we spent approximately $4.7 million on added compensation, sick pay and benefits for our frontline folks, and we will continue to focus on their safety, both near and long term. This quarter showed us that our guests remain loyal to our brand and were willing to adapt.

As our dining rooms reopened through the quarter, we saw our sales volumes increase. And as our sales improved, we also saw improved financial results with a return to positive restaurant margin and cash flow in June. With our cash position stabilized and over 95% of our company restaurants operating their dining rooms in a limited capacity, we have moved forward with some of the new restaurant development that had been placed on hold in March. During the second quarter, we opened 2 Texas Roadhouses, one Bubba's 33. In addition, we have opened 2 additional Texas Roadhouse locations in July. We plan to open 4 restaurants during this quarter and are moving forward with construction on 8 additional sites that could open before the end of the year, including one Jaggers.

While it is too early to get specific on development for the next year, we expect to continue opening new restaurants in 2021. We have also been working on potential changes to our building prototype that could further enhance our ability to handle higher To-Go sales. We believe uncertainty and volatility will remain with us over the coming months and quarters. Regardless of what comes our way, I have full confidence in the ability of our operators and restaurant roadies to respond and adapt. I also know that our dedicated sports center, Roadies, will continue to make sure that our operators are taken care of and have the resources they need. At the end of the day, it's about us remaining focused on legendary food and legendary service.

Now Tonya will provide a financial update.

Thanks, Ken. We were pleased to see the reopening of dining rooms throughout the second quarter and the resulting sales improvement, which continued into July. Average weekly sales for all company restaurants climbed from about $55,000 in April to nearly $89,000 in June. And the 499 restaurants operating under a limited capacity dine-in model generated average weekly sales of over $96,500 in June with To-Go sales accounting for roughly 25% of those sales. Our expectation based on recent trends, is that we will continue to see this higher level of To-Go sales for the foreseeable future. Weekly sales in July moderated slightly to just over $86,000 for all company restaurants with limited dining capacity restaurants averaging almost $88,000. July sales started off lighter compared to June due to normal seasonality, along with the negative impact of the shift of the July 4 holiday to a Saturday this year.

Additionally, with several states increasing restrictions in recent weeks, we have seen a slight moderation in sales relative to June's performance. However, this moderation has not been significant enough to have a material impact on our overall comp sales performance. On average, weekly sales at restaurants in most of these impacted states remains above our overall weekly sales average, and we are pleased to see average sales return to over $90,000 for the last week of the July period.

Comparable restaurant sales for the second quarter declined 32.8%. And by month, comparable sales decreased 46.7%, 41.9% and 14.1% for our April, May and June periods, respectively. Comparable sales for our July period were down 13%, including an approximately 1.2% negative impact from the calendar shift mentioned earlier. Restaurant margin as a percentage of total sales decreased to 2.5% in the second quarter. While this is certainly well below pre-COVID levels, we were encouraged by the monthly trajectory of our margins and pleased with the return to a positive restaurant margin in our June period. At current sales levels, we expect to generate low to mid-teen restaurant margins over the coming months.

Cost of sales as a percentage of total sales increased to 34.7% in the second quarter. This line was negatively impacted, especially earlier in the quarter by the higher To-Go sales mix as these transactions typically do not have the benefit of a higher-margin beverage attachment. Additionally, commodity inflation of approximately 2.9% for the second quarter was primarily driven by higher beef costs in the back half of the quarter due to the shutdown of many beef processing plants, and we are seeing supplies increase and prices normalize. Labor as a percentage of total sales increased to 41.1% in the second quarter. Labor dollars per store week were down 17.3% compared to the prior year period, including a decline in hours of 26.3%, partially offset by 9% of wage and other inflation. Higher wage rate is due to the increase in the number of To-Go hours, which is a non-tipped wage position. Additionally as Kent mentioned, we incurred approximately $4.7 million of labor costs in the second quarter related to Roadie relief payments and sick pay as well as additional benefits to our front-line employees.

Finally, other operating costs as a percentage of total sales was 18.9%. Other operating costs were negatively impacted by the lower sales volume as well as the added expense of purchasing gloves, masks and other personal protective equipment and supplies. Moving below restaurant margin, G&A costs for the quarter decreased $10.3 million as compared to the prior year period. The primary drivers of the decrease were a savings of $4.9 million from the cancellation of this year's managing partner conference, a $2.5 million reduction of cash bonus and equity compensation and $2 million of reduced travel and meeting expenses. We expect G&A as a percentage of revenue to return to a more normalized level in the back half of 2020 based on current sales trends.

We ended the second quarter with $282 million of cash, which is up $52 million from the end of the first quarter. The primary drivers of the increase were proceeds of $50 million under our revolver along with $40 million of cash flow from operations. These inflows were offset by $35 million of capital expenditures. The increase in cash flow from operations for the quarter included $48 million of working capital inflows. In June, we generated positive cash -- positive operating cash flow with higher sales and improved restaurant performance, and expect to do the same in July. And for the remainder of the year, assuming current capacity restrictions, we will continue to allocate capital to the development of new restaurants based on the development plan, Kent outlined earlier. However, to the extent that state and local guidelines begin to further reduce capacity in the dining rooms, we would reduce capital expenditures accordingly.

Finally, I'd like to reiterate Kent's comments about the strength of our operators and our employees. Despite the challenges we have faced, they continue to keep their heads up and stay focused on taking care of our guests and each other. Their resilience and compassion are what keeps this brand strong, not only over the course of this crisis, but also into the future.

That concludes our prepared remarks. Operator, please open the line for questions.

And your first question comes from the line of John Glass from Morgan Stanley.

My question is to do with the comp improvement you've seen recently. How much now are you experiencing just the underlying capacity dining and -- in-dining with capacity restrictions? Or do you think there's still more room to go, i.e. like shoulder periods? And can you talk about maybe the outdoor dining, I've seen the number of roadhouses that have impromptu patios, if you will, constructed in the parking lot, what kind of capacity has that added and how many restaurants is that in, in total?

John, this is...

Go ahead, Tonya. You take it, then I'll fill in the blanks afterwards.

Perfect. I was just going to give a little color on just the comps. Those limited capacity restaurants for July were up 11.2% -- I'm sorry, were down 11.2%, and we've got a pretty fair mix of 100% capacity restaurants, 75%, 50%, down to 25%. So we're seeing a lot of different results across the board. And a lot of times, this capacity levels with outdoor dining don't mean exactly 50% or 75%. So we're seeing sales improve -- higher sales levels coming in earlier in the week or a lower decline in sales earlier in the week and a little bit higher sales decline on weekends, which would be expected given how our volumes typically run across the days of the week. So we definitely see our operators taking advantage of shoulder. Those shoulder opportunities opening a little bit earlier, having that outdoor dining, different things like that, as they're working to get as much sales to them as they can.

This is Kent. And then, a lot of it's weather-related too. Like we were able to do some outdoor dining in Texas, now it's 100 degrees so it's a little different. California that has been effectively shut down except for outdoor dining, we're doing better there. And then you have places up in -- like Minnesota, Michigan, where it's working well, so it just depends on weather in a lot of cases.

Your next question comes from the line of Brian Bittner from Oppenheimer.

It looks like your To-Go sales are steadying out at around 25% of sales and it sounds like you expect this to continue moving forward. And as it relates to the To-Go business, can you just help us understand the profitability or the margins of the To-Go business versus your core dine-in business?

Sure, Brian. This is Tonya. Yes, typically, the To-Go is going to be about $4 less from a PPA perspective. Because you do lose that alcohol, that -- a beverage attachment overall, not just alcohol, but soft beverage attachment, which has a higher margin. So typically, that's what you're going to see. Now from a To-Go perspective, you typically need less labor hours on a To-Go transaction, but you are paying out higher wages because that is a minimum-waged position versus a tipped-waged position inside the restaurant, so you are going to have a little bit -- from a higher wage perspective from that. But we've been really looking at those transactions pretty carefully, understanding where there are some opportunities to gain efficiencies and Kent might want to speak a little bit to the prototype that we're looking at, where we're taking advantage of those higher To-Go sales and making some changes there. We're looking at some things from a technology standpoint to help make those transactions just easier to try to reduce, maybe reduce the labor impact a little bit more.

Yes. This is Kent. Our operators have been awesome at figuring out how to take either all or part of our waiting rooms and put a door on it, put a sliding window on it, curbside, walk up to the window, 6-feet away from the next window. So we've really adapted our buildings to take on this additional volume. And as you've said, we believe that this additional volume will continue even as stores get back to 50% or even 75%.

And your next question comes from the line of Peter Saleh from BTIG.

Congrats on the sales improvement. I just want to ask about -- Tonya about the free cash flow comment. It sounds like at this level, you're self-funding. Does that include maintenance CapEx and growth CapEx? Did I hear that correctly or you're self-funding at these levels in terms of growth?

Yes. That's true, Peter. That's what we're seeing, that's what we saw in June. With our higher sales volumes, we were able to -- our operators were able to create enough cash flow from operations to help us from that perspective. So we expect to kind of see that going forward. We did have some working capital inflows that benefited us too in June just from a timing perspective. So -- but that does include offsetting CapEx from a development, new store and also maintenance of existing assets.

Great. And then just on the To-Go business, when you look at this in totality, are these new customers that you think you're capturing in this 25% of sales? Or are these your existing guests just coming in and using you a different way?

This is Kent. I would say it's mostly existing guests, but I've gotten some letters, interestingly enough, specifically more in the March-April time frame from people that had not been regular guest of ours that said they really appreciate everything we've done and how safe we've made it, and they are not going back to whatever restaurant they might had mentioned before, but they're going to stay with us so I think, absolutely, we've made a lot of new friends.

Next question comes from the line of David Tarantino from Baird.

Kent, my question is basically about the unit growth outlook. It seems like you're thinking about really restarting that effort after taking a bit of a pause. But I wonder if you could talk about what you're seeing from a real estate perspective and whether you think there are more opportunities coming to you that you can take advantage of in 2021 and 2022 and what that might mean for the pace of growth as you look out beyond this year?

Sure. So we'll be like 2021 this year, we would have been over 30. So we've kind of -- we pushed, say 10-plus over to next year. And next year was already looking 30 plus. So we're seeing, which of those stores we can now push to '22. So to be honest with you, we haven't really been chasing a lot of new stuff because we can't tell the people we're buying it from that we will build or leasing it from that we will build within the next 12 months. But there's a lot of people like calling us and saying, this is opened, this restaurant closed or this business closed. So yes, I would say that the availability is definitely on the increase.

And is that -- is your comment meant to imply that next year could be a more normal year on development? You mentioned the 30 number. Or do you think you can maybe surpass that number as you think about the next few years, given the range of opportunities you're seeing?

Well, if you could tell us what our occupancy is going to be for the next 4 months, that would be great. And then I can give you an answer.

Fair enough. And then, Tonya, can I ask a question about the margin. So you mentioned low to mid-teens at the current sales level. What would that imply if you were to recapture 100% of the sales you used to have, would that get you back into that 17% restaurant margin range that you were in, in 2018 and 2019? Or would it be higher than that?

I think a lot would depend on what the mix of sales were, how much were To-Go versus dine-in because, as I mentioned earlier, that To-Go transaction has a little bit different margin profile than maybe a dine-in transactions. So I think a lot would depend on that. And then our ability maybe to have that To-Go transaction be a little more profitable would certainly help from that perspective. So that would probably -- that would certainly be a goal of ours to get back to more in that 17% to 18% range where we've been and maybe even be able to move it further. But I think it's just -- a lot's going to depend kind of on how things play out with just the mix of sales and things like that.

Your next question comes from the line of Jeffrey Bernstein from Barclays.

Great. Kent, I'm just wondering, I think you mentioned in your prepared remarks that you see some changes in the new unit prototype as you mentioned earlier in terms of the unit growth in the back half of this year, '21, '22. I'm just wondering if you can give any context behind that. I know it's all about keeping energy in the building, but it seems like more of the sales are going to be To-Go, so you think of smaller boxes or maybe just a whole different pickup delivery potential opportunity or outdoor dining? Any kind of thoughts on the changes from the pandemic in terms of the core Texas brand?

Sure. Basically, we're just taking our waiting rooms. And in some cases where we've got an outdoor overhang, call it, where we had some outdoor waiting before. We're pushing that wall out and that way, we have more space to do To-Go curbside in that area. And then on the other half of that prior waiting room, call it, we can now store To-Go supplies, but we're going to put, call it, a barn door that goes towards our lobby, and then you can slide that door, and it can become on-deck seating or waiting for elderly folks as an example, that would be spaced to 6-feet apart. So we'll have that ability for that room to pivot depending on what's going on at the time.

Got it. And then there was no mention of Bubba's in the prepared remarks. I'm just wondering if any thoughts on the future unit growth there. I don't know if there's anything during the pandemic that would leave you more or less excited about the brand. But it seem like it's a little tougher because there's less alcohol sales and less sports and whatnot, but any changes you might consider there?

Well, believe it or not, they're probably our best group of putting tents and outdoor seating in. And because of the garage doors we have in the bar, we can create kind of that outdoor component in our bar area as well. And then we've got some outdoor patios, of which some are covered and some aren't. And then, we'll look to maybe cover some more. And then you can put fans out there and TVs, and as you may recall or not, we have music videos as an option plus Chive TV and the Bubba's. And when there's no sports on, we just have more TVs on the music videos. And so when you come in to get some amazing food, you can like stand up by your table and dance just as long as you stay 6-feet away from the next table.

That sounds like it would be hard to do, but -- so this doesn't sound like there's any change in terms of the enthusiasm for Bubba's on the heels of the pandemic?

Not at all. More so.

Your next question comes from the line of Jeff Farmer from Gordon Haskett.

Just curious, what the last 6 to 7 weeks have looked like in states like Florida, Texas, and I guess more recently, Ohio, in terms of the jump in COVID case counts, have you seen consumer behavior change? Have customers pivoted to off-premise? Anything you can provide would be helpful.

Sure, Jeff. This is Tonya. In some situations, in certain states, we did see a slight moderation, as I mentioned, though, it wasn't anything significant from a comp perspective. It's interesting in Ohio. We've seen really strong performance from a lot of those restaurants. They came out of the gate, open a 100%, with the partitions and we've had some stores in Ohio with positive sales year-over-year. So I think that's pretty positive. So overall, a little bit of a moderation again, but nothing at this point that's too significant.

And then, Tonya, just as a follow-up, you did touch on it, but G&A dollars decreased materially year-over-year for the first 2 quarters. How should we be thinking about that for the back half of 2020 and into 2021?

Sure. I think with the current sales levels we're seeing, assuming those kind of continue into the back half of the year, I would expect G&A as a percentage of total revenue to get to a little more normalized level, which is kind of in that 5.5% range is what we would expect to see. So we do continue to look at G&A, look for ways to reduce costs, things like that, all the time, but it feels like just from a normalized perspective, that's where we could be for the back half of the year. And looking ahead, I think we've learned some things so far, and we'll continue to learn things this year that we'll be able to carry over into 2021, and maybe, even be able to keep -- continue to keep G&A a little bit more moderated. So that would be our goal.

Your next question comes from the line of Dennis Geiger from UBS.

Just wondering if you could talk a bit more about further gains from here. Kent and Tonya, you gave good color on shoulder period, downturn dining, et cetera. But beyond increased consumer mobility and willingness to dine out and restrictions easing, maybe if you could just kind of frame the biggest opportunities from here to continue this recovery, is it expanding outdoor dining? Anything else to drive shoulder periods or greater capacity days of the week, partitions? Just kind of curious how you're looking at the biggest drivers within the context of current restrictions?

It's Kent. Well, we've definitely learned about outdoor dining, and I would tell you that I could see us adding a little more outdoor dining to some specific locations as a lot of our guests seem to like that. And then we mentioned that To-Go rooms converting to help us be more efficient and quicker at the To-Go, which makes the guests might want to come back more because they can have a quicker experience with us. And then, Bubba's, same kind of thing, so those are the big things. Partitions, we did all of our restaurants. It took us 6 weeks, and we put these partitions separating the booze and separating diners from the other booze on the other side of a wall, so we've done that in all of our existing restaurants, and we are now adding those partitions to new restaurants. So Tonya, if I've missed something, take it away.

No. I think you hit on just about everything. We have seen party size reduce slightly on average. It kind of makes some sense when you think about folks coming into the restaurants. So the table sizes and things like that potentially could -- there may be some opportunity there. We did a pretty good job of that though really pre-COVID and see utilization and things like that, that would be the only one I might mention as a possibility.

Your next question comes from the line of Chris O'Cull from Stifel.

I had a question just about new store performance. Kent, I was wondering, it seem like the new stores are probably opening at softer honeymoons, what are the implications of opening stores at with softer honeymoons?

Well, I would tell you that we've got some new stores that have opened that are like even outdoor dining and To-Go only that are doing quite well. So I don't think there's any trends. It's just one location might be doing fair, and the next one is doing amazing. Our newest location at Bubba's is still doing amazing. So it's just all over the Board. I don't think you can say there's a specific trend unless, Tonya, you have a thought on that.

No. I don't think there's any implications necessarily from opening restaurants right now. I think there's a lot of good learnings that come into play. And so that is with those lower volumes, it gives the store a chance to really get its legs underneath it. It doesn't get slammed with those higher volumes right out of the gate. So you can maybe see that as a little bit of a positive. And they build good brand awareness in the community. I think you certainly have folks out there looking for places to go right now and I think that maybe -- could even help them out a little bit, too.

Just one last one, Kent. How long do you think it will take the real estate market to start to recognize the need for different pricing or lease terms for restaurants?

Well, we're seeing some folks approaching us now with that thought pattern. So we haven't cut any deals specifically yet, but I would say, yes, they're already been a little more flexible.

And your next question comes from the line of Lauren Silberman from Crédit Suisse.

Well, restaurants open at limited capacity, they seem to be sustaining offset of volumes at 3x pre-COVID levels. So as on-premise continues to return, do you think you can get average weekly sales ahead of prior or pre-COVID level with some incremental off-premise volume?

I think it could be a possibility. I think we're going to learn a lot here in the back half of the year as capacities, hopefully fingers-crossed, begin to increase and we learn more about what these To-Go volumes look like. But I'll tell you whether it's 100 capacity -- a 100% capacity store or 25% capacity. Feels like that 25% To-Go holds pretty well across the board. We don't see any fall off from that with a higher capacity restaurant. So I think, again, it will -- I think we can continue with all the things we're doing from a To-Go perspective, the focus we have, I think we can continue to build those sales along with the dining room.

Great. And in an environment where you're committed to do 100% capacity, how do we think about the dining room yields in an environment of social distancing requirements? And I guess the genesis of that is the greater bottleneck at this point capacity restrictions or demand to get the pre-COVID sales?

Well, 100% doesn't always mean 100% because you don't have all your bar seats; and with the social distancing, you may not have all of your tables available to you. So a lot of times, you're not at a 100%. Now if they have outdoor dining, that could be helping them increase their capacity that we -- even with the stores, whether it's 100% or even down to 50%, we've got stores that are beating their prior year sales numbers in July. So that's pretty encouraging to see for sure. So I think we remain positive on being able to grow those sales.

Yes. This is Kent. And yes, a 100% easily means closer to 80%, 85%.

Your next question comes from the line of Andy Barish from Jefferies.

Just a couple of quick ones. First, on the people side. Any staffing issues with reopening? And should we expect any of the sort of extra level of payments continuing into the 3Q?

This is Kent. Yes, it's been tough staffing specifically through July with the extra $600 as that kind of rolls off, and we don't know what's going to happen with the government on that. We hope that some -- more people will be motivated to come back to work, so we will see that in the next few weeks. It's hard to understand what that will look like until we've experienced another 4 weeks here.

And anything just financially we should look at, in terms of payments or COVID-related costs continuing into the 3Q?

Right now, not at the time, I think, we're going to continue -- we'll just continue to watch, I think, with the dining rooms reopening and getting back to a little bit of higher levels of capacity, doesn't feel like at this time, but we'll continue to evaluate it as we go forward.

Yes, the folks that are serving people inside and in the parking lot are making tips, so it's quite a different ball game at this point.

Excellent. And then one quick To-Go follow-up. Just I think you've kept the family meals and ready-to-grill in a lot of places and the full menu. Can you kind of give us a sense of what a typical To-Go order, the mix looks like in terms of your regular menu items or family packs and things like that?

Sure. Ready-to-grill is only in a few stores. And then Tonya, if you know the mix between family pack and that To-Go, I don't know that recently.

Yes. Family packs are really less than 1% of the total mix right now, what we're seeing currently. So pretty small numbers.

Your next question comes from the line of Andrew Strelzik from BMO.

First question for me. There's been a lot of conversation in the industry about independent restaurants. And so I was curious if you could comment on what you're seeing in some of your markets. And if you're positioning to do anything kind of incremental to maybe capture some of that market share should it arise?

Yes, it's hard to tell. I really feel bad for those folks and the independents, a lot of them are -- don't have the outdoor area that say, we have, or the parking lot that we have. So it really kind of varies city to city. So I don't really have any insight on that.

Okay. And you mentioned beef prices kind of normalizing now. I'm just curious if you could comment on how the supply chain is holding up? Have you been able to extend any coverage on beef or just kind of how base dynamics have kind of shifted as the prices have been so volatile, that will be great?

Sure. This is Tonya. Yes, our purchasing team has done a phenomenal job working with all of our suppliers. So after the beef plants got back up and running, we really haven't seen any disruptions at all from our suppliers. They've just been great partners. So as we look out ahead, I don't want to comment too much on what we think the outlook for beef is. But it certainly seems right now that supplies are good. We don't foresee any issues there. If there's any opportunity that we have to lock something up where we feel like we can get pricing that is beneficial compared to maybe what we think is going to happen, we're certainly doing that. But we're not giving any color today on any additional locking up of prices or anything like that. But so far, feels -- it feels really good. The prices feel good. The demand will continue to improve, we believe, and that seems great.

And your next question comes from the line of John Ivankoe from JPMorgan.

Actually, a follow-up on the partitions, if I may. There seems to be so many different kind of local rules and enforcements, whether the partition can actually override the need for 6-feet or whatever the number may be, distancing. Do you have a sense in your restaurants, kind of what kind of capacity those barriers or those partitions actually give? And -- but just because you're seeing this on a day-to-day basis, I mean, what is the overall trend in that -- in those regulations as, Tonya, it's been happening?

Yes. This is Kent. You're correct. Every state views them differently and even various cities within a state will also view them differently. But the biggest positive is just our guests, I think, feel more comfortable knowing that somebody at the next booth, the air movement from them to the next booth is trapped by these partitions. And so to me, the biggest takeaway has been the positive comments from our guests.

Definitely, and I've seen that. I mean, do you know on a local level, is that something that you guys are kind of measuring on a consolidated basis? And which way is that trend going in terms of regulation? Or whether at a state level or local level?

Boy, it's so much all over the board. You think it's moving like the positive direction and then all of a sudden, the state shuts you down inside, so hard to tell at this point.

Definitely hard to tell. It's why, I asked. So I know it was a tough question.

(Operator Instructions)

Your next question comes from the line of Jared Garber from Goldman Sachs.

Most of them have been answered, but I did want to get a sense of if you're thinking about unit growth here any differently maybe than you had been prior, just as it relates to maybe some of those smaller market rural locations you've been targeting prior to COVID? And if there's any change in the strategy there?

This is Kent. Knowing that when you pick a site, it's almost 1.5 years these days before you open, we're still going to in a lot of these smaller markets that we picked like 1 year, 1.5 years ago. And as I'm looking at the development report, yes, there's definitely still a bunch on the books for 2021, and we've been very pleased at the sales on those smaller cities.

And if I could just have 1 follow-up. Tonya, could you help us contextualize maybe the margin difference of sort of a dine-in order, To-Go order. Any orders of magnitude or just kind of a relative delta between the two? That would be very helpful.

Yes. Probably the biggest piece of information is really just -- there's about a $4 difference on PPA. To-Go is about $4 lower than what you would see on a dine-in PPA. Again, typically, you're going to have less hours, it should be a lower labor cost, but you are paying a higher wage on those To-Go. So really, the labor, you don't really get any benefit on the labor side as it stands. And then a lot of times, the cost of sales is going to be higher on those To-Go transactions because you're losing that beverage attachment, that tends to be a higher margin. So you're going to be spending a little bit more from a cost of sales perspective typically on those To-Go. Because typically what you see on To-Go is, they tend to stay away from bigger stakes. You tend to not see as much from a combo perspective. And apps, usually, you don't have as much occurrences on appetizers. So some of that just being higher-margin items just kind of impacts that transaction a little bit more also. So those would be the things, Jared, I would mention. It really just depends at the end of the day on the labor side.

Your next question comes from the line of Brian Vaccaro from Raymond James.

Great. On the capacity front, could you share what percentage of units are currently operating at the different levels of indoor capacity restrictions? And then on the outdoor dining piece, also, what percentage of the units currently offering expanded outdoor dining? And how much of an incremental sales layer has that contributed on average?

Brian, I'll tell you on the outdoor dining. We don't have a firm count on the number of stores with outdoor dining. Because a lot of times, the number of seats really varies. You may have one location with just a couple of tables because that's really all that they can accommodate versus some that will have big tents with picnic tables and different things like that. So we haven't really gone far to trying to quantify that outdoor dining, the number of seats or the volume there. They're just bringing those up as dining room sales right now. So that's -- from that perspective. On the breakdown kind of a capacity, really, the bigger number is in the 50% capacity bucket, that's a little over 330 restaurants -- 332 restaurants to be exact based on today's numbers. And then you have about 115 would be the next biggest group that fall in a 100% capacity. You've got about 68 that are in the 25% and then 27 in the 75%. And then you get into single digits at that point in the other groups.

Yes, but remember that a 100% is really more like 80%, 85%. And that, as Tonya also mentioned, where you might fill up a 6-top before with 6 people that might be closer to 4 now. So that's...

Yes. And that is -- yes, when you add those numbers up, you're going to get more than just company-owned, that is system-wide, our system-wide domestic restaurants.

Okay. That's helpful. And sorry if I missed it earlier, but do you have an updated 2020 CapEx target range?

No. We have not done that yet. Go ahead, Kent.

No. We don't know, obviously, because we're moving and shaking and changing as things go. As we just saw, based on the strength of June and July, we let loose some more stores that we had not planned on. So really, each month, as we reevaluate our cash flow then we kind of let 1 or 2 or 3 or 4 go. So that's kind of how it's working these days.

And we have no further questions at this time. I'd like to turn the call over to the management team.

Thanks, April. Thanks, everybody, for joining us tonight. I hope you all are doing well. If you have any other questions, please reach out and let us know. Have a great night.

This concludes today's conference call. Thank you for your participation. You may now disconnect.